Opinion
G037466
4-20-2007
HARRY CHOWBEY, Defendant and Appellant, v. VICTORVILLE AEROSPACE, LLC, Plaintiff and Respondent.
Turner Green Afrasiabi & Arledge, Peter R. Afrasiabi and Todd A. Green for Defendant and Appellant. Michael J. Perry for Plaintiff and Respondent.
NOT TO BE PUBLISHED
Harry Chowbey appeals from an order denying his motion to compel arbitration of a breach of contract claim contained in a lawsuit filed by Victorville Aerospace, LLC (hereafter VAL). We find the court correctly interpreted the contract, and affirm the order.
I
In 2004, VAL began looking for investors. Leading Edge, a company that paints commercial aircraft, expressed an interest in acquiring VAL and its assets. When an agreement could not be reached, Chowbey, a senior officer of Leading Edge, expressed an interest in investing. In June 2005, Chowbey and his partner, Joshua Singh, presented a written commitment, representing their intent to provide VAL $1.5 million in operating capital. VAL appointed Chowbey as its president, and he took control of VALs financial activities.
By November 2005, VAL maintains it realized Chowbey would not be able to make the capital contribution he promised, and VAL began seeking alternative investors. It negotiated a sale of 50.2 percent of the business to William Graven for $ 2.5 million. Graven prepared a letter outlining the terms of the agreement, which the parties all signed, including Chowbey. When it came time to close the transaction, VAL maintains Chowbey convinced Graven to terminate the agreement.
VAL immediately terminated its relationship with Chowbey, and asked him to vacate the premises. VAL alleges it soon discovered Chowbey had embezzled a substantial sum of money from VALs bank account before leaving. Its lawsuit contains causes of action against Chowbey for: (1) fraud (intentional misrepresentation);
(2) conversion; (3) breach of written contract; (4) intentional interference with prospective economic advantage; (5) negligent interference with prospective economic advantage; and (6) breach of fiduciary duty. Chowbey filed a cross-complaint against VAL and three of its members.
Chowbey filed a motion to compel arbitration of the third cause of action for breach of contract. He conceded none of the other causes of action were subject to any arbitration clauses. However, Chowbey argued the breach of contract action related to Gravens written agreement, which contained the following arbitration provision: "Any matters that cannot be settled in the ordinary course of business will be submitted to arbitration prior to the commencement of any legal action."
VAL opposed the motion stating the parties did not intend to resolve the claim by binding arbitration, but rather agreed some sort of mediation would be utilized. This interpretation is bolstered by the contracts reference to legal action commencing after arbitration, as well as a second provision stating, "This Agreement shall be governed according to the laws of the State of California and if required in a [c]ourt of competent jurisdiction in the City of Victorville."
After considering the parties arguments, the court denied the motion for the reasons stated in its tentative ruling: "Notably absent [from the contract provision at issue] is any reference to the waiver of the parties right to a jury trial. `In light of the importance of the jury trial in our system of jurisprudence, any waiver thereof should appear in clear and unmistakable form. This agreement does not present such a waiver. We cannot elevate judicial expedience over access to the court and the right to a jury trial in the absence of a clear waiver. (Titan Group, Inc. v. Sonoma Valley County Sanitation Dist. (1985) 164 Cal.App.3d 1122, 1129 (Titan Group)."
II
Citing Californias strong public policy in favor of arbitration, Chowbey asserts the court should have granted his motion because: (1) the reference to the commencement of a legal action does not render the word "arbitration" ambiguous;
(2) omission of the word "binding" does not change an arbitration into a nonbinding mediation; and (3) the court should not have considered VALs extrinsic evidence because it was interpreting an unambiguous contract provision. We find his contentions lack merit.
"Code of Civil Procedure section 1281.2 states, in pertinent part: `On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, . . . (Italics added.) `The clear purpose and effect of [Code of Civil Procedure] section 1281.2 is to require the superior court to determine in advance whether there is a duty to arbitrate the controversy which has arisen. The performance of this duty necessarily requires the court to examine and, to a limited extent, construe the underlying agreement. [Citation.] The question here, therefore, is whether `the party resisting arbitration [i.e., [VAL]] in fact agreed to arbitrate. [Citation.]" (Titan Group, supra, 164 Cal.App.3d at pp. 1126-1127.)
"`"An appellate court is not bound by [the trial courts] construction of the contract based solely upon the terms of the written instrument . . . where there is no conflict in the evidence . . . ." [Citation.] In the absence of conflicting extrinsic evidence, the interpretation of a contract becomes a question of law and an appellate court `must make an independent determination of the meaning of the contract. [Citation.]" (Titan Group, supra, 164 Cal.App.3d at p. 1127.)
We turn first to the argument an arbitration not clearly labeled as "binding" should be viewed as really meaning mediation or deemed ambiguous. This issue has been decided by the California Supreme Court in Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9-10. It is now settled that in the absence of a clear indication the parties desire nonbinding arbitration, they will be bound by the arbitrators decision. (Ibid.) "[I]t is the general rule that parties to a private arbitration impliedly agree that the arbitrators decision will be both binding and final. Indeed, `The very essence of the term "arbitration" [in this context] connotes a binding award. [Citations.]" (Ibid., fn. omitted.)
But, the above legal analysis does not warrant a reversal. Although both the court and VAL discussed the absence of the word "binding," the crux of VALs opposition (below and on appeal) is that the agreement specifically refers to the commencement of litigation (1) after arbitration, and (2) in the City of Victorville. VAL argues, and the court agreed, this additional language concerning a right to "legal action" makes it unclear whether the parties agreed to waive their right to a jury trial. As correctly noted by the trial court, "In light of the importance of the jury trial in our system of jurisprudence, any waiver thereof should appear in clear and unmistakable form." (Titan Group, supra, 164 Cal.App.3d at p. 1129.)
Chowbey argues the above argument "is silly" because "[t]here is almost always some legal action in court after arbitration. Pursuant to Code of Civil Procedure section 1285, `Any party to an arbitration in which an award has been made may petition the court to confirm, correct or vacate the award. . . . Indeed, one must get an arbitration award confirmed in order to obtain an enforceable judgment. [Citing Code of Civil Procedure section 1287.4]. So the reference to `legal action does not render the term `arbitration ambiguous. And it certainly does not compel an interpretation of `arbitration to mean mediation." Not so.
We apparently need to remind Chowbey that "[i]n determining whether an enforceable arbitration agreement exists, the initial burden is on the party petitioning to compel arbitration. `Because the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence. [Citations.]" (Villacreses v. Molinari (2005) 132 Cal.App.4th 1223, 1230.) Here, Chowbey offered no evidence other than the two-page written document to support his petition. Like the trial court, we find there is a fundamental problem with a provision specifying legal action in a Victorville court will commence after the arbitration.
Applying basic rules of contract interpretation, the clear and plainly stated "legal action" language is not consistent with the conclusion the parties unequivocally agreed to waive their right to a jury trial. Their agreement, if any, depends on what the parties understood the words "legal action" to encompass. Was it simply meant to reassure the lawyers they could confirm the arbitration award or file a petition in Victorville? Or, was it intended to address the laypersons understanding of "legal action" which would mean a jury trial was a viable option.
The phrase is not defined anywhere in the agreement. We found the dictionary defines the adjective "legal" very broadly to include anything "of or relating to law." (Websters 3d New Internat. Dict. (1981) p. 1290.) For the term to be defined narrowly (as including only petitions and motions relating to the arbitration award), Chowbey had the burden of providing relevant extrinsic evidence which would support his technical interpretation. Given his failure to do so, we reach the same conclusion as the trial court. The agreements provision for "legal action" following "arbitration" is neither a clear nor unmistakable waiver of the right to a jury trial.
The order is affirmed. Respondent shall recover its costs on appeal.
We concur:
MOORE, J.
FYBEL, J.
Chowbeys concerns about the admissibility of VALs extrinsic evidence require little discussion. During the hearing, the trial court indicated it did not need to consider the extrinsic evidence, or its admissibility, but rather its interpretation was based on the plain meaning of the language contained in the "four corners of the contract." We reach the same conclusion. VALs extrinsic evidence was not needed as Chowbey failed to meet his burden of proving the existence of a valid binding arbitration agreement.