Opinion
9-16-1957
William S. BECKETT, Respondent, v. KAYNAR MFG, CO., Inc., Appellant. Matter of the Arbitration between William S. Beckett and Kaynar Manufacturing Co., Inc.* Civ. 22252.
Mitchell, Silberberg & Knupp, Arthur Groman, Los Angeles, for appellant.
William S. BECKETT, Respondent,
v.
KAYNAR MFG, CO., Inc., Appellant.
Matter of the Arbitration between William S. Beckett and Kaynar Manufacturing Co., Inc.*
Sept. 16, 1957.
Rehearing Denied Oct. 8, 1957.
Hearing Granted Nov. 15, 1957.
Mitchell, Silberberg & Knupp, Arthur Groman, Los Angeles, for appellant.
William F. Clements, Los Angeles for respondent.
WHITE, Presiding Justice.
Kaynar Mfg. Co., Inc., appeals from the judgment and orders of the Superior Court, entitled 'Findings of Fact and Conclusions of Law, Order Denying Motion to Vacate Arbitration Award, Order Granting Motion to Confirm Arbitration Award, and Judgment', and reading as follows:
'Be It Remembered:
'This matter having come on regularly for hearing before the Honorable John J. Ford, Judge, presiding in Department 34 of the above entitled court on the 10th day of August, 1956, on the motion of Kaynar Mfg. Co., Inc., to vacate the arbritation award in the above matter, and on the motion of William S. Beckett to confirm the arbitration award in the above matter, and Kaynar Mfg. Co., Inc., appearing by its attorneys, Mitchell, Silberberg and Knupp and William S. Beckett, appearing by his attorney, Wm. F. Clements, and affidavits having been filed by both parties, and memoranda of authorities having been submitted to and considered by the court, and it having been stipulated by both parties through their respective counsel that the dates the arbitration hearings were held in the above matter were March 15, 1956, March 28, 1956 and April 3, 1956, and it having been further stipulated by both parties through their respective counsel that Kaynar Mfg. Co., Inc., gave no notice of rescission to William S. Beckett of the contract between them prior to the filing of the motion of William S. Beckett to confirm the arbitration award in the above matter, and issues of law and fact having been duly submitted to the court and it appearing to the court that Kaynar Mfg. Co., Inc., after learning of the facts it claims constitutes the said fraud on the part of William S. Beckett, consented in writing on June 25, 1956, to an extension of time within which the arbitrators should make their award, and it further appearing to the court that the arbitrators thereafter rendered their award on July 12, 1956, the court specifically the following findings of facts and conclusions of law: '1) That Kaynar Mfg. Co., Inc., has been guilty of laches with respect to the claim of fraud by waiting over three months, from the time it discovered the facts it claimed constituted fraud on the part of William S. Beckett, before taking any action to disaffirm or rescind the contract. '2) That Kaynar Mfg. Co., Inc., is estopped from asserting the said claim of fraud by having continued on with the arbitration after receiving information of the alleged fraud, by having consented to an extension of time in which the arbitrators should make their award, and by having waited until after an arbitration award had been rendered, and a notice of motion to confirm said award had been filed, before raising said claim of fraud. '3) That the arbitrators did not exceed the powers granted to them under the agreement for arbitration nor were they guilty of any misbehavior prejudicial to the rights of either party, or otherwise. and the motion of Kaynar Mfg. Co., Inc., to vacate the arbitration award in the above matter, is denied and the motion of William S. Beckett to confirm said arbitration award is granted; 'Now, Therefore, It Is Ordered, Adjudged And Decreed that William S. Beckett have judgment against Kaynar Mfg. Co., Inc., in the sum of Five Thousand Eight Hundred Nine and 38/100 Dollars ($5,809.38) and that Kaynar Mfg. Co., Inc., take nothing against William S. Beckett. 'The Clerk Is Ordered To Enter This Judgment. Dated: August 22, 1956.'
The record on appeal is the Clerk's Transcript only. It contains: I. Beckett's application filed July 23, 1956, for order confirming award of arbitration, which alleges that on August 5, 1955, Beckett and Kaynar entered into a written contract for the rendition of architectural services by Beckett; that said contract contained the provision next quoted: '21. Arbitration: All questions in dispute under this agreement shall be submitted to arbitration at the choice of either party. Such arbitration shall be conducted under the rules of the American Arbitration Association.' Said application further alleges: 'That a controversy having arisen out of said contract arbitrators were appointed by them; that the time within which the arbitrators should make their award was extended by a written agreement of Beckett and Kaynor on June 25, 1956; and on July 12, 1956 said arbitrators made their award of $5,809.38 to Beckett and nothing to Kaynor on its counter-claim.'
II. Beckett's notice of motion for order confirming award.
III. Kaynar's notice of motion to vacate arbitration award and objections to motion to confirm award upon the grounds:
'1. That the award was procured by fraud or undue means and is invalid because the contract from which the arbitrators derived their power to arbitrate was entered into by Kaynar Mfg. Co., Inc. in reliance on intentional and knowingly false misrepresentations made by William S. Beckett, that as a result said contract was and is invalid and unenforceable and not binding on Kaynar Mfg. Co., Inc., and the arbitrators were and are without authority to make a binding award.
'2. * * *'
At the hearing of both motions, the court had before it, in addition to the application and notices, the following affidavits:
(I) Affidavit of Kenneth Reiner in opposition to application for order of confirmation, averring--so far as relevant to the instant appeal--that he is the president of Kaynar; that he personally negotiated the contract of August 5, 1955; that the contract was made in reliance upon Mr. Beckett's assurances that 'he was well equipped to design a factory building', 'to provide natural daylight as the principal source of illumination for the factory interior'; that 'within his own organization he had all the expert assistants required to enable him to perform these and other related tasks'; 'that his office was in a position to give immediate attention to the design of the factory building for Kaynar'; that the three 'saw tooth type' designs submitted 'were his own creation and original'; 'that he had made exhaustive studies of the cost of constructing * * * and was positive that the cost figures he presented could be realistically adhered to at the time of construction'; that these representations were false; that such falsity was first discovered from Beckett's testimony at the arbitration hearing; that affiant believes that 'since Beckett procured and induced the execution of his contract of employment's by fraud and deceit, Kaynar is not bound by such contract and 'any arbitration based upon it is without jurisdiction.'
(II) Affidavit of Arthur Groman, attorney for Kaynar, which is not relevant to the issues raised on the instant appeal;
(III) Affidavit of Augustus F. Mack, Jr., the chairman of the board of arbitrators, which denies and explains the statements contained in the Groman affidavit;
(IV) Affidavit of William S. Beckett denying the statements hereinbefore quoted from the affidavit of Reiner in regard to misrepresentations by Beckett;
(V) Affidavit of William F. Clements, Beckett's attorney, which avers no facts relevant to the instant appeal and concludes with the following statement: 'That it must be presumed from the award of the arbitrators that they did not accept any of Mr. Reiner's contentions, as outlined in his affidavit as they were diametrically opposed to the contentions of Mr. Beckett.'
There can be no such presumption as claimed by Beckett's attorney, since it is conceded that the question of fraud in the inception of the agreement was not submitted to the arbitrators. It is averred by Kaynar that it first had knowledge of the falsity of Beckett's representations during the arbitration. And it is conceded that the first claim of fraud was made by Kaynar in its opposition to Beckett's motion for confirmation of the award.
In its opening brief, appellant urges that: (1) 'The Court erred in confirming the award without hearing the evidence on, and making Findings of Fact and Conclusions of Law with respect to, the issue of whether the contract had been induced by fraudulent misrepresentations; (2) The Court erred in finding that the appellant was guilty of laches; (3) The Court erred in finding that the appellant was estopped to question the validity of the contract; (4) The Court below, in effect, granted summary judgment although the affidavits of the parties were directly contrary to each other.'
Any application for confirmation of award (Code Civ.Proc. § 1287) or application for revocation of award (Code Civ.Proc. § 1288) 'shall be heard in a summary way in the manner provided by law for the making and hearing of motions, except as otherwise herein expressly provided.' Code Civ.Proc. § 1285. 'Notices must be in writing, and the notice of a motion * * * must state * * * the grounds upon which it will be made, and the papers, if any, upon which it is to be based.' Code Civ.Proc. § 1010. 'An affidavit may be used * * * upon a motion.' Code Civ.Proc. § 2009. Motions are 'usually made and determined on 29 Cal.App.2d 227, 230, 84 P.2d 155, 157. 29 Cal.App.id 227, 230, 84 P.2d 155, 157. The use and effectiveness of affidavits is not limited to strictly procedural and unopposed motions. Armstrong v. Armstrong, 81 Cal.App.2d 322, 327, 183 P.2d 905.
A litigant's right to make motions and to testify before the court and present witnesses in support thereof is not inalienable but may be exercised only in accordance with statutes. The usual practice is to support motions by presenting affidavits or depositions. People v. Albin, 111 Cal.App.2d 800, 806, 245 P.2d 660; People v. Eastman, 67 Cal.App.2d 357; 359, 154 P.2d 37; Griffith Co. v. San Diego College for Women, 45 Cal.2d 501, 507-508, 287 P.2d 476, 47 A.L.R.2d 1349.
In a matter in which an issue is tried on affidavits, the rule on appeal is that those affidavits favoring the contentions of the prevailing party established not only the facts stated therein but also all facts which reasonably may be inferred therefrom. Where there is a substantial conflict in the facts presented by the affidavits, the determination of the controverted facts by the trial court will not be disturbed on appeal. People v. Kirk, 109 Cal.App.2d 203, 207, 240 P.2d 630; Griffith Co. v. San Diego College for Women, supra.
In the consideration of an appeal from an order made upon affidavits involving the setting aside of a default judgment, the appellate court stated in Greenwell v. Caro, 114 Cal.App.2d 35, 38, 249 P.2d 573, 575, that 'the same rules apply as where oral testimony is presented'; and that 'an application for relief, such as this, is addressed to the sound discretion of the trial court and that it is the function of the trial court to weigh the evidence and resolve any conflicts between the affidavits of the opposing parties.'
On appeal from an order made on affidavits involving a decision of a question of fact, the appellate court stated in Fuller v. Lindenbaum, supra, 29 Cal.App.2d at page 230, 84 P.2d at page 157, that 'if there is any conflict in the affidavits, those in favor of the prevailing party must be taken as true, and the facts stated therein must be considered established.'
Although Section 2009 of the Code of Civil Procedure permits the use of affidavits on motions, other evidence is also admissible. Perez v. Perez, 111 Cal.App.2d 827, 829, 245 P.2d 344.
The only showing in the record on the instant appeal concerning evidence rejected at the hearing before the court is in the court's minutes of August 10, 1956, and reads as follows: '* * * The model described in the affidavit of Arthur Groman is offered in evidence on behalf of Kaynar Manufacturing Co. and counsel for petitioner objects, which objection is sustained. The model is to be marked for identification and retained in the possession of Kaynar Manufacturing Co. to be produced beofre an appellate court on request * * *.'
No offer of proof of any misrepresentations or other facts constituting fraud made by appellant in the trial court has been shown and, therefore, the hearing is presumed to have been conducted without error in the exclusion of evidence.
It is conceded by appellant that the question of fraud inducing the agreement was not raised before the arbitrators. As urged by it, since the agreement itself calls for arbitration of 'all questions in dispute under this agreement', by its terms the agreement would exclude from such arbitration the issue of the validity of the agreement, itself. Loving & Evans v. Blick, 33 Cal.2d 603, 610, 204 P.2d 23, and cases there cited.
It is appellant's contention that the issue of fraud was raised by it at the first proper occasion, by its application for revocation and its affidavit opposing respondent's motion for confirmation of the award.
Appellant relies upon the the following language quoted from Loving & Evans v. Blick, supra, 33 Cal.2d at page 609, 204 P.2d at page 26: '* * * the rules which give finality to the arbitrator's determination of ordinary questions of fact or of law are inapplicable where the issue of illegality of the entire transaction is raised in a proceeding for the enforcement of the arbitrator's award. When so raised, the issue is one for judicial determination upon the evidence presented to the trial court.' In that case, the Supreme Court reversed an order confirming an arbitration award, on the ground that it appeared by the uncontroverted affidavits filed in court in response to a motion to confirm that the contract was invalid because the contractor was not licensed as required by law.
At pages 609-610 of 33 Cal.2d, at page 26 of 204 P.2d, the court in Loving & Evans v. Blick, supra, said: 'The foregoing conclusion is entirely in harmony with the provisions of section 1288 of the Code of Civil Procedure, which recites the grounds upon which the trial court 'must make an order vacating the award.' Section (d) thereof specifies that the award must be vacated 'where the arbitrators exceeded their powers, * * *.' It seems clear that the power of the arbitrator to determine the rights of the parties is dependent upon the existence of a valid contract under which such rights might arise. (Citing cases.) In the absence of a valid contract no such rights can arise and no power can be conferred upon the arbitrator to determine such nonexistent rights. The question of the validity of the basic contract being essentially a judicial question, it remains such whether it is presented in a proceeding 'for an order directing * * * arbitration' under section 1282 of the Code of Civil Procedure or in a proceeding 'for an order confirming' or 'vacating an award' under sections 1287 and 1288 of said code * * * If it is presented in a proceeding under said section 1287 or 1288 and similar uncontradicted evidence is offered, the court should deny confirmation and should vacate any award granting relief under the illegal contract upon the ground that the arbitrator exceeded his powers in making such award.' (Emphasis added.)
Appellant, in its opening brief, argues that findings in regard to alleged fraud are essential in the instant proceeding; and quotes at length from the decision in Trubowitch v. Riverbank Canning Co., 30 Cal.2d 335, 347, 182 P.2d 182. The instant proceeding, however, is in no way analogous with the Trubowitch case and the language quoted therfrom is not applicable. The instant action is not one to enforce arbitration under said section 1282, which expressly requires findings, but comes before the court under the provisions of section 1287 et seq. after a dispute under the written agreement has been arbitrated and an award made. The application for an order confirming the award 'shall be heard is a summary way in the manner provided by law for the * * * hearing of motions.' Sec. 1285, Code of Civil Procedure. 'The universal practice in this state is not to require findings on an order made after motion.' Perez v. Perez, 111 Cal.App.2d 827, 829, 245 P.2d 344, 346.
Riccomini v. Pierucci, 54 Cal.App. 606, 202 P. 344, was an appeal from a judgment entered upon an arbitration award. At page 609 of 54 Cal.App., at page 346 of 202 P., the court said: 'It was not necessary that the court should make express findings upon the issues presented by the complaint and answer * * * In the absence of fraud or other sufficient ground for setting aside the decision of the arbitrators, it was the duty of the court * * * to enter a judgment upon the award. Under the stipulation, the award, and not findings, constituted the basis for the judgment.'
In the instant action, the award alone is sufficient basis for the judgment, unless the award was in excess of the power of the arbitrators because their power derived from a contract induced by fraud. A finding that the contract was not induced by the alleged fraud cannot be supplied by the award of arbitrators to whom the issue was not submitted and who had no power to arbitrate except that granted by the questioned agreement.
From the trial court's order confirming the award, we would ordinarily imply a finding that the agreement was not induced by the alleged fraud. Riccomini v. Pierucci, supra, 54 Cal.App. 609, 202 P. 344; Griffith Co. v. San Diego College for Women, 45 Cal.2d 501, 507, 289 P.2d 476, 47 A.L.R.2d 1349. The affidavit of Beckett denying all alleged fraud and misrepresentations would support such an implied finding. However, the trial court's 'Findings of Facts * * * and judgment', hereinbefore quoted, wherein it is recited that Kaynar gave no notice of rescission prior to the motion to confirm the award; that Kaynar after learning of the alleged fraud consented to an extension of time 'within which the arbitrators should make their award'; and wherein it is found and concluded that Kaynar 'was been guilty of laches with respect to the claim of fraud' and 'is estopped from asserting said claim's by its consent to said extension of time and its delay in 'raising said claim of fraud', in our opinion, indicates that the trial court purposely made no finding on the issue of fraud.
If its decision regarding laches and estoppel is correct, its failure to determine whether the contract was induced by fraud is neither material nor prejudicial.
The doctrine of estoppel 'is not intended to be used for the purpose of permitting one to prepetuate a fraud upon another'. Edgington v. Security-First National Bank, 78 Cal.App.2d 849, 858, 179 P.2d 640, 646. 'The equitable doctrine of estoppel can never operate to protect one from the consequences of his fraud.' John Hancock Mut. Life Ins. Co. v. Markowitz, 62 Cal.App.2d 388, 408, 144 P.2d 899, 911. If the claim of fraud in the instant action is true, the court's decision herein does protect Beckett from the consequences of his own fraud.
Fraud inducing the execution of an agreement is a defense to an action upon the agreement. One should not be estopped from defending on that ground unless every element of estoppel has been proved. The burden of proof rests upon the one relying upon the estoppel. Bear Creek Co. v. James, 115 Cal.App.2d 725, 732, 252 P.2d 723.
In the instant action, the act of appellant found to create an estoppel in favor of respondent was his consent on June 25, 1956, that the arbitrators could have fifteen days additional time within which to make an award. The arbitrators previously had heard all the evidence. Their award was due on June 27th. They had notified both parties that they would require additional time and the written extension was requested by them and signed by counsel for both parties.
It is stated by respondent, in his brief, that the contract of employment had been 'cancelled' on November 1, 1955. Consequently, in June and July of 1956 nothing, other than the arbitration, was being done under it. Respondent obviously lost nothing by awaiting the award of the arbitrators and making his motion for confirmation by the court. If appellant had started an action for rescission near the close of the arbitration, when the alleged fraud was might have been delayed until after the mighth have been delayed until after the trial in court of the issue of fraud. If the contract was rescinded, the arbitration of course could not have continued. If the court found that the contract had not been induced by respondent's alleged fraud, then the arbitration could have proceeded to an award an motion in court to confirm it. There is no reason to believe that such, or any other, procedure would have been more expeditious or less burdensome upon respondent than the course chosen by appellant for procuring a trial of the issue of fraud upon respondent's motion to confirm and his own motion to vacate the arbitration award. As was said in Loving & Evans v. Blick, supra, 33 Cal.2d at page 609, 204 P.2d at page 26, which involved a contract in violation of the contractor's license law, 'the rules which give finality to the arbitrator's determination of ordinary questions of fact or of law are inapplicable where the issue of illegality of the entire transaction is raised in a proceeding for the enforcement of the arbitrator's award. When so raised, the issue is one for judicial determination upon the evidence presented to the trial court * * *.' In the instant proceeding, if there is found to have been no fraud on the part of Beckett, the award should, of course, be confirmed. If, on the other hand, the contract is found to have been induced by respondent's fraud, the arbitration award should be revoked and the parties should be left to take whatever action they deem advisable.
Respondent urges that 'by continuing on with the arbitration to its conclusion after discovery of the alleged fraud, Kaynar waived its claim of fraud and affirmed the contract.' He cites, as authority for the statement, the following cases: Bancroft v. Woodward, 183 Cal. 99, 190 P. 445; Neet v. Holmes, 25 Cal.2d 447, 154 P.2d 854; and Gedstad v. Ellichman, 124 Cal.App.2d 831, 269 P.2d 661.
In Bancroft v. Woodward, 183 Cal. 99, at page 111, 190 P. 445, at page 450, it is said: 'The rule is too familiar to require the citation of authority that if a person entitled to rescind goes on, after the discovers the facts which give him the right and knows that he has the right, to deal with the property involved as if the contract or transaction were still in effect, he affirms the contract or transaction, and his right to rescind it is gone.' The facts which gave rise to that decision were quite different from those in the instant action. In Bancroft v. Woodward defendant claimed to have been induced by fraud to enter into a 99-year lease of a business block in San Diego, with a number of buildings thereon. He collected the rents over two years after his discovery of the alleged fraud before filing his action to rescind, and at the time of trial was still collecting rents on the property although refusing to pay the rents due from himself to the plaintiff.
In Neet v. Holmes, 25 Cal.2d 447, at page 458, 154 P.2d 854, at page 859, the court said: 'The right to rescind may be waived. (Citing cases.) It is waived by recognition of the existence of the contract after the right to rescind was created.' In that case, however, the party seeking rescission, after full knowledge of the facts and of his right to rescind, had waited about two years during which he had accepted some $26,000 in royalties under the contract.
In Gedstad v. Ellichman, supra, 124 Cal.App.2d at page 835, 269 P.2d at page 663, it is said: 'To bar an action for rescission on the ground of laches it is unnecessary to show that the defendants were prejudiced by the delay. (Citing cases.)' However, in Gedstad v. Ellichman, the person seeking rescission of a property settlement between husband and wife, had waited about a year and a half after being put upon inquiry about fraud, had then, by bringing an action on the contract and levying an unprofitable attachment, made a definite election to stand upon the contract.
These cases are not authority for respondent's statement that in the instant proceeding appellant 'waived any right it had to rescind for alleged fraud'.
'* * * The defense of laches involves much more than the element of delay. It is not the lapse of time so much as it is the consequences of the delay which goes to make up the defense of laches. Unless prejudice results from the delay the defense is not established * * *.' Hayman v. City of Los Angeles, 17 Cal.App.2d 674, 680, 62 P.2d 1047, 1050; Kimberlin v. Los Angeles City High School Dist., 115 Cal.App.2d 459, 463, 252 P.2d 344.
One who has been defrauded is not required to go into court and ask for relief. He may await an attempt to enforce the agreement against him and excuse himself from performance by proof of fraud. J. B. Colt Co. v. Freitas, 76 Cal.App. 278, 287, 244 P. 916.
We are persuaded that, under the facts of the case now engaging our attention, appellant was entitled to have to issue of fraud tried by the court upon his opposition to respondent's motion to confirm and his own motion to vacate the award of the arbitrators.
The judgment and orders are reversed.
FOURT, J., and DRAPEAU, J. pro tem., concur. --------------- * Opinion vacated 321 P.2d 749.