Opinion
B229897
12-05-2011
TH DEVELOPMENT, INC., et al., Plaintiffs and Respondents, v. SEAN YOSHI HANZAKI, Defendant and Appellant.
Jeffer Mangels Butler & Mitchell, Benjamin M. Reznik, Mark S. Adams and Eudeen Y. Chang for Defendant and Appellant. Cox, Castle & Nicholson and Perry D. Mocciaro for Plaintiffs and Respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. BC 367637)
APPEAL from a judgment of the Superior Court of Los Angeles County, John A. Kronstadt, Judge. Affirmed.
Jeffer Mangels Butler & Mitchell, Benjamin M. Reznik, Mark S. Adams and Eudeen Y. Chang for Defendant and Appellant.
Cox, Castle & Nicholson and Perry D. Mocciaro for Plaintiffs and Respondents.
Appellant Sean Yoshi Hanzaki appeals from the trial court's confirmation of an arbitration award against him. Respondents TH Development, Inc., and Tosei Moreno Valley, LLC (collectively, TH Development) were the claimants in the underlying arbitration and the plaintiffs in the trial court proceedings to confirm the arbitration award against Hanzaki.
Hanzaki contends that he was not a party to the arbitration agreement and did not consent to personally appear in the arbitration. He contends that he participated in the arbitration solely as a corporate representative of the entities being sued Westcoast Development Group, Inc., Westcoast Professional Development, Inc., and Westcoast Professional Group LLC (collectively, Westcoast). Hanzaki argues that the court erred in failing to independently review whether he was a proper party to the arbitration, and it further erred by answering that question affirmatively and confirming the award against him. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
1. The Underlying Lawsuit and Arbitration
TH Development filed a complaint against Westcoast and Toshio Kato, an individual, on March 9, 2007. The complaint alleged causes of action for conversion, fraud, breach of fiduciary duty, breach of contract, money had and received, and violations of RICO. Hanzaki was not named in the complaint. The complaint alleged that TH Development and Westcoast had entered into a development agreement to build and sell homes on a tract of land owned by TH Development. The gravamen of the complaint was that Westcoast fraudulently obtained reimbursements from TH Development and from the construction loan proceeds for expenditures that Westcoast never made. TH Development filed a first amended complaint on June 13, 2007, in which Hanzaki was still not named.
Racketeer Influenced and Corrupt Organizations Act. (18 U.S.C. § 1961.)
On or about May 14, 2007, Kato and Westcoast filed a motion to compel arbitration based on an arbitration provision in the development agreement. Kato had signed the development agreement on behalf of Westcoast. Hanzaki was not a party to the development agreement. The parties submitted the matter to arbitration on July 11, 2007. The joint submission letter stated that the "identities of the arbitrating parties as claimant and respondents are, respectively, the parties named as plaintiffs and defendants in the already-filed First Amended Complaint."
On or about August 24, 2007, TH Development submitted a "supplement to joint submission to arbitration" naming Hanzaki as an additional respondent in the arbitration and alleging that he was a "principal, representative, controlling person, manager, managing member, officer, director, and alter ego" of Westcoast, as well as a coconspirator with Westcoast and Kato in the wrongful acts alleged in the complaint. The proof of service for the supplement did not show service on Hanzaki personally. It showed service only on counsel for Westcoast and Kato, McGuire Woods LLP.
Thereafter, McGuire Woods made appearances ostensibly for Westcoast, Kato, and Hanzaki. For example, from around November 11, 2007, to April 2, 2008, the firm served responses to discovery requests on behalf of Hanzaki, Kato, and Westcoast; around March 12, 2008, the firm filed an opposition to a motion to compel on behalf of Hanzaki, Kato, and Westcoast; and on September 9, 2008, the firm filed an opposition to a motion to compel Hanzaki's and Kato's depositions on behalf of Hanzaki, Kato, and Westcoast.
On or about October 27, 2008, McGuire Woods filed a motion in the superior court to be relieved as counsel for Kato, Westcoast, and Hanzaki. On December 4, 2008, the superior court granted the motion. The order granting the motion identified Hanzaki, as well as Kato and Westcoast, as a "client," and it expressly found that the clients had been "personally served" with the papers in support of the motion. The respondents in the arbitration -- definitely Kato and Westcoast, but TH Development argues also Hanzaki -- proceeded in propria persona. Hanzaki was deposed on March 25, 2009.
TH Development filed its arbitration brief on or around July 20, 2009. The brief identified Hanzaki individually as a "defendant/respondent" in the arbitration, both on the cover page and in the body of the brief. The proof of service showed that the brief had been served by mail on Hanzaki at a Temecula, California address. The arbitration hearing commenced on August 28, 2009. Hanzaki and Kato both came to the hearing. The hearing was cut short that day when the arbitrator received word that Westcoast had filed a bankruptcy petition. After TH Development moved the bankruptcy court for relief from the automatic bankruptcy stay, and the relief was so granted, the arbitration hearing proceeded on November 12 and 13, 2009. Kato appeared in person on those dates, and Hanzaki appeared by telephone. Hanzaki testified at the hearing and denied any personal involvement in obtaining false reimbursements from TH Development. Counsel for TH Development requested and was granted permission from the arbitrator to inquire into Hanzaki's personal assets. Hanzaki responded to some questions regarding vehicles he owned, but he refused to answer further questions about his personal assets.
On or about December 7, 2009, the arbitrator issued his preliminary award against Hanzaki, Kato, and Westcoast. He found that the evidence established clearly and "beyond any reasonable dispute" that they had submitted requests for reimbursements of expenses when such expenses had never been incurred or paid. He awarded TH Development over $2 million in damages against Hanzaki, Kato, and Westcoast jointly and severally.
2. Hanzaki's Attempt to Amend the Arbitration Award and the Trial Court Proceedings to Confirm the Award
On or about February 17, 2010, after having retained new counsel, Hanzaki filed a request with the arbitrator to amend the preliminary arbitration award. In sum, he argued that he was not aware he was considered an individual respondent in the arbitration until he received the arbitrator's preliminary award. Until that time, he believed he was participating in the arbitration as a representative of Westcoast. He argued that the award should be amended to remove him as a party because he never consented to the arbitration, either personally or through the actions of McGuire Woods. Hanzaki filed a declaration in support of his request in which he stated that McGuire Woods never informed him that he was a party to the arbitration, nor did they ask for or obtain his consent to be joined in the arbitration. He asserted that he never engaged McGuire Woods to represent him, and that after the firm withdrew as counsel for Kato and Westcoast, he continued to participate in the arbitration as a representative and to support the interests of Westcoast. For example, when he was deposed, he believed he was appearing as a witness, not as a party. As for the arbitration brief filed by TH Development identifying Hanzaki as a party, he stated that, although he resided at the Temecula address earlier in the year, at the time the brief was served there, he was not residing at that address, nor was he otherwise receiving mail at that address.
In support of their opposition to Hanzaki's request, on March 5, 2010, TH Development filed a declaration from Kato. According to him, Hanzaki's statements that he did not know he was a party and did not authorize McGuire Woods to represent him were untrue. Kato said that he jointly participated with Hanzaki in written and verbal communications with McGuire Woods, including discussing that Hanzaki was participating personally in the arbitration as a party. He stated further that McGuire Woods sent him and Hanzaki copies of papers specifying that the firm was filing them on behalf of Hanzaki individually (as well as Kato and Westcoast). After McGuire Woods withdrew, Kato said he and Hanzaki discussed on numerous occasions that they were both being pursued for personal liability in the arbitration, and therefore it was important for them both to participate in the arbitration hearing.
Hanzaki argued in reply that Kato's declaration was not credible. He maintained that Kato had an interest in ensuring Hanzaki remained jointly and severally liable for the award. Hanzaki submitted evidence of a settlement offer Kato had sent to TH Development, wherein Kato offered to stipulate to a judgment against his business entities and assist TH Development in collecting against Hanzaki, and in exchange Kato would be dismissed personally from the case.
In the arbitrator's written ruling on Hanzaki's request, issued on May 7, 2010, he recognized that Hanzaki appeared to be reserving his right to have the court determine whether he submitted to arbitration. He noted that an adverse ruling would "simply be re-presented to the Superior Court." He determined that one course might be to decline to rule on the issue, but thought the better course was to issue a ruling with the understanding that it would be "reconsidered" by the court. The arbitrator ruled as follows: "Based upon the evidence in the motion papers and other papers filed in the arbitration, plus the observed conduct of the parties in the arbitration proceedings both before and during [the] evidentiary hearing, including and especially the conduct of Mr. Hanzaki, the finding here is that the evidence preponderates that Mr. Hanzaki knew he was participating, and fully intended to participate, in the arbitration proceedings as a respondent party." The arbitrator issued his final award confirming Hanzaki was a party and was jointly and severally liable with Kato and Westcoast for over $2 million in damages.
The superior court did, indeed, review the issue. On or about July 13, 2010, TH Development filed a petition to confirm the arbitration award. Hanzaki opposed TH Development's petition to confirm the arbitration award and requested the court "correct" the award by removing him as an individual party, making the same arguments he made to the arbitrator. The competing declarations of Hanzaki and Kato were again submitted (along with other voluminous evidence). The court heard argument on the petition on September 20, 2010, and ultimately granted it. The court entered judgment in favor of TH Development on November 3, 2010, and Hanzaki's timely appeal followed.
DISCUSSION
Hanzaki contends that the arbitration award against him is invalid because he did not consent to be a party in the arbitration through either his own acts or those of McGuire Woods. As we discuss below, his knowing participation in the arbitration proceedings would typically be enough to establish consent. But this case is complicated by his argument that he participated in the arbitration only as a corporate representative of Westcoast, and he never knew he was a named respondent until too late. We find Hanzaki's argument unavailing and hold the trial court did not err.
1. The Trial Court Correctly Reviewed the Question of Hanzaki's Participation in the Arbitration
Preliminarily, Hanzaki argues that the trial court erred because it did not independently determine his status as a party to the arbitration, but instead allowed the arbitrator's ruling to influence the court's decision and adopted the arbitrator's findings. We note the irony of Hanzaki arguing that the arbitrator inappropriately "interposed his irrelevant opinions into the fray and poisoned the well." The situation was one of his own making. The arbitrator ruled on the issue of Hanzaki's status only because Hanzaki submitted the issue for the arbitrator's consideration by filing the request to amend the preliminary award. In any event, we disagree with Hanzaki's argument on the merits.
An arbitrator has no power to determine the rights and obligations of one who is not a party to the arbitration. (American Builder's Assn. v. Au-Yang (1990) 226 Cal.App.3d 170, 179.) The question of whether a nonsignatory to an arbitration agreement is a party to the arbitration is one for the trial court in the first instance. (Ibid; see also Lovret v. Seyfarth (1972) 22 Cal.App.3d 841, 859 ["Whether a particular person is a party to an arbitration is a matter for the court rather than the arbitrator to determine"].)
Here, the trial court did exactly that -- it decided the question independently, without "abdicating" its role to the arbitrator or adopting the arbitrator's findings, as Hanzaki contends. The trial court made evident at the hearing on the petition that it considered the issue de novo, apart from the arbitrator's ruling on Hanzaki's request to amend the arbitration award. The court stated that it "look[ed] at all of the evidence that's been presented here as a whole," and TH Development "ha[d] established, by at least a preponderance of the evidence, that Mr. Hanzaki did knowingly participate in the arbitration proceedings on his own behalf." The court further stated: "With respect to Justice Zebrowski [the arbitrator], without looking at what Justice Zebrowski did, I think there's sufficient evidence to establish, by a preponderance, that there was a knowing -- willing participation by Mr. Hanzaki as an individual. [¶] So I -- so -- but as -- as an independent ground, I would not defer [to] Justice Zebrowski. Meaning, I will not say, well, Justice Zebrowski has decided the issue and, therefore, under the norms of applying the law of what we do with arbitrations, that I would simply defer to it. But I'll note that as the person who is involved in the proceedings, Justice Zebrowski made certain findings. And those are [in the record] before me. And that those findings are consistent with what I have concluded based on my independent review of the materials."
2. The Trial Court Did Not Err in Confirming the Arbitration Award
We turn next to the core issue on appeal -- whether the trial court erred in confirming the award against Hanzaki personally. We review a trial court's order confirming an arbitration award under a de novo standard. (Toal v. Tardif (2009) 178 Cal.App.4th 1208, 1217.) To the extent the court's ruling rests on a determination of disputed factual issues, however, we apply the substantial evidence test to these issues. (Ibid.) The question of whether Hanzaki knew he was a party and therefore consented to the arbitration is a disputed factual issue -- indeed, the parties hotly dispute the issue. We therefore apply the substantial evidence standard to the trial court's findings on the issue. Applying the above standards, we find no error.
Personal jurisdiction must exist over any person against whom an arbitration award is made, because once confirmed, the arbitration award leads to a judgment that has the same force and effect as a judgment in a civil action. (Ikerd v. Warren T. Merrill & Sons (1992) 9 Cal.App.4th 1833, 1842.) Personal jurisdiction requires due process, including compliance with statutory requirements of service. (Ibid.) However, a party "who makes a general appearance without objecting to personal jurisdiction acquiesces in the court's exercise of jurisdiction and forfeits any future challenge to the court's power over him or her." (Mt. Holyoke Homes, LP v. California Coastal Com. (2008) 167 Cal.App.4th 830, 844; see also Code Civ. Proc., § 410.50, subd. (a).) "A general appearance occurs where a party, either directly or through counsel, participates in an action in some manner which recognizes the authority of the court to proceed. It does not require any formal or technical act." (Mansour v. Superior Court (1995) 38 Cal.App.4th 1750, 1756.) A person's participation in a hearing such as a case management conference, for example, can constitute a general appearance. (Ibid.) Moreover, if a person, either personally or through an attorney, is physically present at the trial and participates, this will amount to a general appearance. (2 Witkin, Cal. Procedure (5th ed. 2008) Jurisdiction, § 213, p. 822.)
Arbitration is a matter of contract and, ordinarily, a person not a party to the arbitration agreement cannot be compelled to arbitrate. (Toal v. Tardif, supra, 178 Cal.App.4th at pp. 1218, 1221.) But "one who voluntarily joins an arbitration becomes a party to it. [Citations.] One also may lose his right to a determination of whether he is a party to an arbitration by waiver or estoppel." (Lovret v. Seyfarth, supra, 22 Cal.App.3d at p. 859.) "The basic rationale is that „[a] claimant may not voluntarily submit his claim to arbitration, await the outcome, and, if the decision is unfavorable, then challenge the authority of the arbitrators to act.'" (Id. at p. 860, quoting Ficek v. Southern Pacific Company (9th Cir. 1964) 338 F.2d 655, 657.)
Here, there can be no serious dispute that Hanzaki participated in the arbitration proceedings. For instance, Hanzaki was deposed. According to a declaration from counsel for TH Development, before the deposition, Hanzaki and Kato participated in a conference call with the arbitrator and TH Development in which Hanzaki and Kato were ordered to appear for depositions. By this time, McGuire Woods had withdrawn and Hanzaki and Kato participated personally. (Hanzaki does not dispute the declaration's statement of events.) More importantly, Hanzaki attended the arbitration hearing in person when it commenced in August 2009, and he participated in the continued hearing by telephone in November 2009, including by giving testimony. If Hanzaki knew that he was personally named as a respondent in the arbitration, these acts of participation are sufficient to say that Hanzaki voluntarily consented to arbitration and personal jurisdiction, and therefore the award against him is valid.
We hold there was substantial evidence to support the trial court's determination that Hanzaki knew he was an individual party to the arbitration and participated as such. First, there was Kato's declaration that Hanzaki knew he was an individual party and that McGuire Woods had permission to represent Hanzaki and prepare documents on his behalf. Kato's statements were supported by the discovery responses and briefs filed by McGuire Woods, identifying the firm as counsel for Hanzaki. Also, when McGuire Woods sought to withdraw as counsel, it identified Hanzaki as an individual client. The trial court recognized that it had a competing declaration from Hanzaki, and that Hanzaki was arguing the Kato declaration was unreliable. It found that Kato's declaration was "more comprehensive and believable." The trial court was entitled to make that credibility determination, and we are not persuaded to disturb it.
Second, documents sent to Hanzaki identifying him as an individual party also support that he knowingly participated in the arbitration. After the conference call in which the arbitrator ordered Hanzaki and Kato to appear for depositions as well as produce documents, TH Development mailed a formal order to Hanzaki memorializing this. The order identified "Defendants/Respondents, including Messrs. Kato and Hanzaki." Hanzaki does not dispute receiving this order. TH Development also served Hanzaki with its arbitration brief right before the merits hearing, clearly identifying Hanzaki as an individual party. While Hanzaki's declaration stated that he no longer resided at the address to which it was sent, notably, the declaration did not state that he failed to receive the brief.
Hanzaki proffers for the first time on appeal another declaration from Kato. This new declaration states that everything in Kato's prior declaration was untrue, and Hanzaki never knew he was an individual party in the arbitration until it was over. Kato states that he did not realize his prior declaration was untrue because his English is so poor, and the prior declaration was prepared by counsel for TH Development. Hanzaki requests that we issue a writ of coram vobis directing the trial court to consider this new Kato declaration. We decline to do so.
"An appellate court can issue a writ of error coram vobis directing the trial court to reconsider its decision based on new evidence discovered after its decision that would have been grounds for granting reconsideration or a new trial." (In re Rachel M. (2003) 113 Cal.App.4th 1289, 1295-1296.) The writ is a drastic remedy that will only be issued if a number of requirements are met, including: (1) no other remedy is available; (2) the new evidence will either compel or make probable a different result; (3) the new evidence was not presented to the trial court for reasons other than the fault or negligence of the proffering party, and it was unknown to the proffering party at any time substantially earlier than the request for the writ; (4) the new evidence is not presented on an issue already adjudicated in the trial court, because factual issues that have been adjudicated cannot be reopened except on motion for new trial or reconsideration; and (5) the new evidence was unavailable to the petitioner because of extrinsic fraud that prevented the proffering party from having a meaningful hearing on the issue in question. (Id. at p. 1296.) Hanzaki fails to satisfy several of the requirements for issuance of the writ. First, he did not proffer Kato's second declaration to the arbitrator or the trial court, even though he was aware of Kato's prior declaration when TH Development first opposed his request to amend the arbitration award in March 2010. His explanation for why he could not file the second declaration until now is that he did not speak to Kato for months because he could not understand why Kato submitted the first declaration. In other words, Hanzaki has only his own lack of diligence or his own "fault or negligence" to blame for not obtaining the declaration at the trial court level. Second, the statements in the declaration cannot be said to be new evidence that was "unknown" to Hanzaki at an earlier time. The declaration essentially repeats Hanzaki's own declaration about his state of mind during the arbitration. Third, the declaration constitutes evidence on an issue already adjudicated in the trial court -- whether Hanzaki knew he was a party and participated knowingly in the arbitration.
In sum, sufficient evidence supported the trial court's determination that Hanzaki knowingly participated in the arbitration as an individual party. The trial court did not err in confirming the award against Hanzaki.
DISPOSITION
The judgment is affirmed. Respondents to recover costs on appeal.
FLIER, J. WE CONCUR:
RUBIN, Acting P. J.
GRIMES, J.