Opinion
NOT TO BE PUBLISHED
Super. Ct. No. 03AS04443
BLEASE, Acting P. J.
In this appeal from a judgment confirming a contractual arbitration award, plaintiffs claim the issues raised in their complaint were not arbitrable, and further assert that the arbitration award was wrong on the merits. An arbitration award is not subject to judicial review except on certain statutory grounds not raised here. Therefore, the sole issue we consider is whether plaintiffs’ claims were arbitrable.
This is plaintiffs’ second lawsuit, not including an adversarial action in bankruptcy, concerning a shareholder buyout agreement (the buyout agreement). The buyout agreement contained a broadly worded arbitration clause. Plaintiffs’ first action was for, inter alia, breach of the buyout agreement. The arbitrator found defendants had not breached the agreement, and affirmed the terms of the agreement. That left the contract in effect. A judgment was entered on that award, and the judgment was affirmed by the Sixth District Court of Appeal.
This action raises the same claims previously arbitrated in the first action. The trial court granted defendants’ motion to compel arbitration on the ground the action again arose out of the buyout agreement. The arbitration award was in favor of defendants. Judgment was entered on the award, and plaintiffs appeal.
The notice of appeal states it is from “the order entered July 27, 2007 confirming the arbitration award[.]” An order confirming an arbitration award is not appealable. (Cheeks v. California Fair Plan Assn. (1998) 61 Cal.App.4th 423, 424, fn. 1.) Since judgment was entered on July 27, 2007, and no prejudice resulted from the failure to appeal from the judgment, we construe this appeal as having been taken from the final judgment. (Baldwin Co. v. Rainey Construction Co. (1991) 229 Cal.App.3d 1053, 1057, fn. 2.)
Plaintiffs argue this action did not arise out of the buyout agreement because the buyout agreement merged into the 2001 judgment, extinguishing the parties’ rights under the buyout agreement. Plaintiffs also assert they are entitled to bring this action under the Uniform Partnership Act, and raise other arguments relating to the merits of the arbitration award.
We shall conclude a contract is not merged into a judgment when the judgment is in favor of the defendants on a breach of contract claim because the contract was not thereby extinguished. Plaintiff may not raise any claim that the merits of the arbitration award were incorrectly decided, and by failing to file a timely petition to vacate the award, plaintiffs have forfeited any statutory attack on the award.
FACTUAL AND PROCEDURAL BACKGROUND
In May 1991, plaintiff James Eblen and defendants Edward Johanson, Paul Eblen (James’s son) and Steve Thinglum entered into the buyout agreement. It recited that the parties had formed an association of companies in 1988 with the purpose of developing and constructing real estate projects. The buyout agreement divided the properties owned by the parties into “hold properties” and “buyout properties.” The hold properties were projects the parties intended to hold according to their percentage ownership. The buyout properties were projects to be purchased from James Eblen by the remaining parties under the terms of the buyout agreement.
Velma Eblen is a party to this action by virtue of her community property interest.
The buyout agreement provided that if defendants defaulted on the buyout payments, James’s remedy was to return to his original percentage ownership interest in the respective projects, less any payments he had received, and adjusted for additional project expenditures. James had a 29 percent interest in the association, Paul had a 21 percent interest, Johanson had a 37.5 percent interest, and Thinglum had a 12.5 percent interest. The parties agreed to remain responsible for all expenses and liabilities arising out of both the hold and the buyout properties in proportion to their percentage interests.
The buyout agreement contained an arbitration provision that provided for the arbitration of “[a]ny dispute, claim, or controversy arising out of, or connected with, the interpretation of the terms and/or conditions of this Agreement . . . .”
In 1996 James Eblen and his wife, Velma, filed an action in Santa Clara County Superior Court alleging, inter alia, breach of the buyout agreement. The court granted defendants’ motion to compel arbitration. The arbitrator issued a decision in defendants’ favor.
Plaintiffs also alleged fraud, rescission, negligent misrepresentation, breach of fiduciary duty, negligence, declaratory relief, and sought a constructive trust.
Specifically, the arbitrator addressed the defense of unclean hands, stating:
“I believe the investment group formed by James Eblen, his son, Paul Eblen, Edward Johanson, Steve Thinglum, which was later joined by Thomas Evancie, had every promise of success. However, James Eblen could not stand the fact that he was not going to be the top man in the association making all the decisions from the corner office. He forced a buy-out contract which I think could have been successfully performed, and then did everything within his power to sabotage the defendants[’] ability to successfully live up to the buy-out agreement which, in his mind, would result in his becoming 100% owner of the entire operation. To do this he enrolled the help of his wife and his attorney.”
The arbitrator found in favor of defendants on all claims. Specifically on the breach of contract claim, the arbitrator found:
“Judgment shall be entered in favor of defendants as to all claims of breach of contract. I reject plaintiffs’ construction and interpretation of the Shareholder Buyout Agreement. As the defendants argued, under the terms of the Shareholder Buyout Agreement plaintiff James Eblen is to be returned to his 29% interest in the net profits from two property rights held by the parties in May 1991, referred to in the Shareholder Buyout Agreement as ‘CGCC,’ consisting of a 25% interest in the 162 acre Ward property and a 55% interest in the 106 acre Nevis property, and not including any other or later-acquired properties. Under the Shareholder Buyout Agreement, plaintiff James Eblen’s 29% interest in the net profits of CGCC (as defined above) is to be offset by his capital account, and all amounts or values credited to him during the buyout period.”
The arbitrator awarded defendants $679,084.54, representing an amount for attorney fees, costs, and time and trouble. Judgment was entered in Santa Clara Superior Court confirming the arbitration award, and the judgment was affirmed on appeal. The appellate decision was filed on January 21, 2003. Shortly thereafter plaintiffs instituted the current action.
Unlike the original Santa Clara County complaint, the complaint in this action characterized the relationship between the parties as a partnership, and alleged seven causes of action for: (1) accounting, (2) breach of fiduciary duty, (3) declaratory relief--partnership value, (4) buyout of partnership interest, (5) winding up of partnership, (6) declaratory relief--reformation and damages, and (7) appointment of receiver.
Defendants filed a petition to compel arbitration of the first six causes of action. The seventh cause of action for a receivership was not within the province of the arbitrator. As to this cause of action, defendants requested a stay pending the arbitration of the remainder of the case. The trial court granted the petition to compel arbitration, with the exception of the seventh cause of action, which was stayed pending arbitration.
The arbitration tribunal rendered its decision in favor of defendants, and recommended to the court that the relief requested in the seventh cause of action be denied. The tribunal awarded defendants $476,927.59 in attorney fees and costs. The arbitration decision stated in part, “all of the claims made by the Eblens either were or might properly have been raised in the prior arbitration . . . .”
The trial court granted defendants’ petition to confirm the arbitration award, denied plaintiffs’ request for trial de novo, and entered judgment confirming the arbitration award.
DISCUSSION
I
The Dispute Was Subject to Arbitration
Plaintiffs argue the case should never have been arbitrated because the buyout agreement, which contained the arbitration provisions, was no longer operative. According to plaintiffs, an order compelling arbitration requires a valid agreement to arbitrate, and the buyout agreement was no longer operative because it merged into the earlier judgment.
We may address the issue of arbitrability even though plaintiffs did not timely file a petition to vacate or correct the award pursuant to Code of Civil Procedure section 1288. Failure to file a timely petition to vacate bars a party from challenging the judgment confirming the arbitration award on grounds that would have supported an order to vacate. (Berg v. Traylor (2007) 148 Cal.App.4th 809, 823; Louise Gardens of Encino Homeowner’s Assn., Inc. v. Truck Ins. Exchange, Inc. (2000) 82 Cal.App.4th 648, 659.) However, the question whether the trial court erred in ordering the matter to arbitration may be appealed even in the absence of a timely petition to vacate. (United Firefighters of Los Angeles v. City of Los Angeles (1991) 231 Cal.App.3d 1576, 1581.)
References to an undesignated section are to the Code of Civil Procedure. Section 1288 states in pertinent part:
The two cases plaintiffs cite in support of their argument the buyout agreement merged into the earlier judgment are inapplicable to this case. In Coughlin v. Blair (1953) 41 Cal.2d 587, the purchasers of a residential lot sued the sellers of the property for breach of an agreement to install gas, pavement and electricity to the property within one year of purchase. (Id. at pp. 593-594.) The purchasers sought damages in the amount of the decreased value of the property. (Id. at p. 594.) The verdict was for the plaintiffs, who were awarded the difference in the market value of the property with and without the improvements, an amount for loss of use, and an amount for increased construction costs. (Ibid.)
The sellers appealed, arguing the award allowed double recovery because they partially had performed the improvements by the time of trial, and would perform the remainder of the improvements in the future. (Coughlin v. Blair, supra, 41 Cal.2d at pp. 597-598.) In affirming the judgment, the court explained that a judgment for the plaintiff in an action for a total breach of contract absolved the defendant from any duty to perform the contract, and the judgment of damages was substituted for the defendant’s duty to perform the contract. (Id. at p. 598.)
The holding in the case was based upon the Restatement of Contracts, section 313, which distinguished between a total and partial breach of contract:
“(1) A total breach of contract is a breach where remedial rights provided by law are substituted for all the existing contractual rights, or can be so substituted by the injured party.
(2) A partial breach of contract is a breach where remedial rights provided by law can be substituted by the injured party for only a part of the existing contractual rights.”
The case is inapplicable here, because although plaintiff sued for breach of contract, the judgment was not for the plaintiffs. There was no breach of contract, and no judgment of damages for the plaintiffs which relieved defendants of their continued duty to perform the contract. Instead, the judgment was for defendants, and the final arbitration award, confirmed by judgment, specifically referenced the continuing validity of the buyout agreement when it found:
“[U]nder the terms of the Shareholder Buyout Agreement plaintiff James Eblen is to be returned to his 29% interest in the net profits from two property rights held by the parties in May 1991 . . . . Under the Shareholder Buyout Agreement, plaintiff James Eblen’s 29% interest in the net profits of CGCC (as defined above) is to be offset by his capital account, and all amounts or values credited to him during the buyout period. [¶] Also, under the Shareholder Buyout Agreement, plaintiffs are currently responsible for 29% of the Hold property expenses . . . .”
Plaintiffs also cite Tomaselli v. Transamerica Insurance Co. (1994) 25 Cal.App.4th 1766, 1770, in support of their merger claim. In that case, the Tomasellis successfully sued their insurer for refusing to pay a claim on the plaintiffs’ homeowner’s policy, and were awarded damages for breach of contract and bad faith. (Id. at p. 1768.) Rather than paying the judgment right away, the insurer appealed and posted the required bonds to stay execution on the judgment. (Id. at p. 1769.) The Tomasellis brought suit again, claiming breach of the implied covenant of good faith, bad faith denial of contract, conspiracy, and intentional infliction of emotional distress, based on the insurer’s refusal to pay the judgment. (Ibid.) Citing Coughlin v. Blair, supra, the court held: “When a party recovers a judgment for breach of contract, entry of the judgment absolves the defendant of any further contractual obligations, and the judgment for damages replaces the defendant's duty to perform the contract. [Citation.] Upon entry of judgment, all further contractual rights are extinguished, and the plaintiff's rights are thereafter governed by the rights on the judgment, not by any rights which might have been held to have arisen from the contract.” (Tomaselli, supra, 25 Cal.App.4th at p. 1770.)
In the present case, no party recovered a judgment for breach of contract. The first judgment resulted in the continuing validity of the terms of the buyout agreement. Thus, the prior judgment did not extinguish the parties’ further contractual obligations, and the contract was not merged into the judgment, as plaintiffs claim. Accordingly, the buyout agreement, including the arbitration provision, was still in effect.
II
Plaintiffs’ Remaining Claims Not Appealable
Plaintiffs’ remaining arguments are that the claims made pursuant to the California Uniform Partnership Act were not barred by res judicata, that plaintiffs were not collaterally estopped from suing on their statutory rights, that the arbitration award incorrectly determined the prior judgment entitled plaintiffs to a profits-only interest in the partnership, and that the defense of unclean hands did not justify non-compliance with California partnership statutes. None of these issues is cognizable on appeal.
The arbitration tribunal found there was no partnership, only a right to net profits as defined in the prior judgment.
“An award reached by an arbitrator pursuant to a contractual agreement to arbitrate is not subject to judicial review except on the grounds set forth in Code of Civil Procedure sections 1286.2 (to vacate) and 1286.6 (for correction).” (Malek v. Blue Cross of California (2004) 121 Cal.App.4th 44, 55.) Except for these statutory grounds, an arbitrator’s decision cannot be reviewed for errors of fact or law. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 11-12; Schlessinger v. Rosenfeld, Meyer & Susman (1995) 40 Cal.App.4th 1096, 1109.)
Section 1286.2 provides that an arbitration award may be vacated: (1) if it was procured by corruption, fraud, or undue means; (2) if there was corruption by the arbitrators; (3) if there was misconduct by the arbitrators that substantially prejudiced the rights of a party; (4) if the arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision; if the rights of a party were prejudiced by certain conduct of the arbitrators; or if the arbitrators were disqualified.
An award may be corrected only if: (1) there were certain miscalculations of figures or mistakes in description, (2) if the arbitrators exceeded their powers but the award can be corrected without affecting the merits of the decision, or (3) if the award is imperfect in form not affecting the merits. (§ 1286.6.)
None of the issues raised by plaintiffs falls within the statutory grounds for judicial review. Moreover, as previously stated, plaintiffs’ failure to file a timely petition to vacate or correct the award bars them from challenging the judgment on statutory grounds.
DISPOSITION
The judgment is affirmed.
We concur: NICHOLSON, J., RAYE, J.
Johansen, Thinglum, and Paul Eblen were the only parties to the arbitration. The other individual defendant, Thomas Evancie, joined the group after the buyout agreement was signed. Evancie and the entity defendants successfully moved to dismiss the complaint against them.
“A petition to vacate an award or to correct an award shall be served and filed not later than 100 days after the date of the service of a signed copy of the award on petitioner.”