CHARLES DUNN COMPANY, INC. v. SEE MYUN KYMM

No. G041985.

CHARLES DUNN COMPANY, INC., Plaintiff and Respondent, v. SEE MYUN KYMM as Trustee, etc., et al., Defendants and Appellants.

Court of Appeals of California, Fourth District, Division Three.

Filed May 13, 2010.


Attorney(s) appearing for the Case

Jeffrey B. Singer for Defendants and Appellants.

Ryan & Associates, Gregory R. Ryan and Ellen S. Kornblum for Plaintiff and Respondent.

Defendants See Myun Kymm (Mr. Kymm) and Ock Ja Kymm (Mrs. Kymm) appeal from a judgment confirming an arbitration award for plaintiff Charles Dunn Company, Inc. They contend the arbitration clause in the underlying contract between plaintiff and the Kymm Family Trust is unenforceable because only Mr. Kymm signed the contract.


NOT TO BE PUBLISHED IN OFFICIAL REPORTS

OPINION

IKOLA, J.

We affirm. Substantial evidence supports the court's finding Mr. Kymm was authorized to submit the parties' dispute to arbitration. Moreover, defendants forfeited any lack of authority by participating in the arbitration without raising the issue.

FACTS

Plaintiff filed a petition to confirm an arbitration award. It attached a contract entitled "Standard Owner-Agency Agreement for Sale or Lease of Real Property" (listing agreement), whereby "Kymm See H [sic]/Ock J Trust" retained plaintiff to broker the sale of an industrial building in Westminster. The listing agreement contains an arbitration clause providing that any disputes arising out of or relating to it will be resolved by binding arbitration. The contract was signed by Mr. Kymm as "`OWNER.'"

The petition also attached the arbitration award. The award states that "Ock Ja Kymm (herein sometimes `Mrs. Kymm') and Seemyun Kymm (herein sometimes `Mr. Kymm'), Trustees, were represented by Bruce W. Wagner, Esq. The parties stipulated to the admission into evidence of the exhibits offered by both sides." The exhibits included the listing agreement. The arbitrators found "the parties signed" the listing agreement, "which Mr. Kymm signed on behalf of Mrs. Kymm, co-trustee, and the Kymm Family Trust," and "Mr. Kymm was authorized by the Trust to sign listing and sale documents in order to bind [defendants]." The arbitrators rejected defendants' contentions that various conditions precedent were not met, plaintiff waived any breach by defendants, and plaintiff breached fiduciary duties to defendants. The award provides that "Ock Ja Kymm and Seemyun Kymm, Trustees, shall pay to [plaintiff] the sum of $416,000" as its commission pursuant to the listing agreement.

Defendants opposed the petition and offered supporting declarations. Mr. Kymm stated the listing agreement provided that the Kymm Family Trust was the owner of the building at issue and party to the listing agreement; he and Mrs. Kymm are cotrustees of the trust; the declaration of trust provides that the cotrustees must act collectively; he signed the listing agreement in his individual capacity and not as a cotrustee; Mrs. Kymm did not authorize him to sign the listing agreement on her behalf as a cotrustee; and he did not have authority to bind the trust. Mrs. Kymm stated she did not sign the listing agreement or authorize Mr. Kymm to sign it on her behalf as a cotrustee.

Defendants also offered the declaration of trust and the certificate of trust. The declaration of trust provides Mr. and Mrs. Kymm are the trustors, and that "[d]uring their lifetime, the Trustors shall collectively act as the Trustee of this trust." It further provides, "Any individual . . . serving as Co-Trustee . . . may delegate any or all of such Co-Trustee's powers . . . to one or more of the others serving as Co-Trustee by an instrument in writing delivered to the other Co-Trustee . . . ." The certificate of trust provides Mr. and Mrs. Kymm are the trustees and "[e]ither Trustee acting alone may take any action on behalf of the trust as provided under paragraph B of the section of the Trust entitled `SUCCESSOR TRUSTEES.'"

Defendants' arbitration attorney, Bruce Wagner, also offered his declaration. He stated the declaration of trust was not offered into evidence at the arbitration; only the certificate of trust was admitted into evidence.

In support of the petition on reply, plaintiff offered a declaration from its arbitration attorney. He stated he examined Mr. and Mrs. Kymm at the arbitration, and neither one claimed Mr. Kymm's signature on the listing agreement did not bind Mrs. Kymm or the trust. He noted defendants stipulated to admitting the listing agreement into evidence. He also attached a letter from defendant's attorney to plaintiff's counsel, which was admitted into evidence at the arbitration. Defendant's attorney stated, "As per the attached [certificate of trust], See Myun Kymm and Ock Ja Kymm are trustees, and either trustee acting alone may take any action on behalf of the trust."

After a hearing, the court granted the petition. It found "Mr. Kymm appears to have had implied authority to enter the agreement given that Mrs. Kymm participated in the dealings of the parties without raising her husband's lack of authority." The court entered judgment accordingly for plaintiff and against defendants as trustees of the trust.

DISCUSSION

Defendants contend the arbitration award cannot be confirmed because Mrs. Kymm did not sign the listing agreement containing the arbitration clause. They note the declaration of trust provides Mr. and Mrs. Kymm "shall collectively act as the Trustee of this trust," and conclude the listing agreement — including its arbitration clause — is unenforceable without Mrs. Kymm's signature.1

The issue raised by the motion to confirm is whether defendants agreed to arbitrate, not whether the listing agreement is enforceable. "[A]rbitration clauses . . . are `separable' from the contracts in which they are embedded." (Prima Paint v. Flood & Conklin (1967) 388 U.S. 395, 402.) "[I]n the absence of a specific attack on an arbitration agreement, such agreement generally must be enforced even if one party asserts the invalidity of the contract that contains it." (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1198.) If defendants agreed to arbitrate, the enforceability of the listing agreement is a question for the arbitrators — one they resolved in favor of enforcement.

We discussed the confirmation of arbitration awards in Toal v. Tardif (2009) 178 Cal.App.4th 1208, 1217 (Toal). "After arbitration has resulted in an award, the Arbitration Act permits a party to petition `the court to confirm, correct or vacate the award.' [Citation.] The opposing party may respond to such a petition by requesting `the court to dismiss the petition or to confirm, correct or vacate the award.' [Citations.] The proponent of the arbitration award (whether it be the petitioner or the respondent) must recite or attach a copy of the arbitration agreement. [Citations.] A court presented with such a petition or response is empowered only to confirm, correct, or vacate the award or to dismiss the proceeding. [Citation.] If the court confirms the award, it shall enter judgment accordingly." (Id. at p. 1220.) "`On appeal from an order confirming an arbitration award, we review the trial court's order (not the arbitration award) under a de novo standard. [Citations.] To the extent that the trial court's ruling rests upon a determination of disputed factual issues, we apply the substantial evidence test to those issues.'" (Id. at p. 1217.)

We also analyzed the required evidentiary showing of an agreement to arbitrate. "`[T]here is no policy compelling persons to accept arbitration of controversies which they have not agreed to arbitrate and which no statute has made arbitrable.'" (Toal, supra, 178 Cal.App.4th at p. 1220.) "[T]he party seeking to enforce an award must prove by a preponderance of the evidence that a valid arbitration contract exists. The court may not confirm an award without first finding the parties agreed in writing to arbitrate their dispute, unless a judicial determination of the issue has already been made (e.g., by a court considering a petition to compel arbitration). [¶] The burden upon the award's proponent to prove the existence of a valid agreement, and the court's duty to determine the issue, are reflected in the statutory requirement that the proponent recite or attach the contract." (Ibid.) "In sum, before a court may confirm an arbitration award, the court must first find the existence of a valid arbitration agreement." (Id. at p. 1221.)

While Toal provides the analytical framework for this case, it is distinguished on the facts. In Toal, the only evidence of an agreement to arbitrate was a post-dispute arbitration agreement signed by the attorney, not the client. (Toal, supra, 178 Cal.App.4th at pp. 1213-1214.) But attorneys do not have implied authority to submit their clients' claims to binding arbitration. (Id. at p. 1221.) Clients whose attorneys agree to arbitration are bound only if they consent to or ratify the arbitration. (Ibid.) And the record in Toal, such as it stood, lacked substantial evidence that the client had so consented or ratified. (Id. at p. 1223.) The client had complained about the arbitration to his attorney, who responded by "call[ing] [him] a `"big cry baby."'" (Id. at p. 1215.) And the court did not consider whether the client had subsequently consented to or ratified the arbitration. (Ibid.) Accordingly, we reversed the order confirming the arbitration award and remanded the matter for an evidentiary hearing on the issues of consent and ratification. (Id. at p. 1224.)

In contrast to Toal, the court here has already made the relevant factual finding on defendants' consent to arbitrate. It found "Mr. Kymm appears to have had implied authority to enter the agreement given that Mrs. Kymm participated in the dealings of the parties without raising her husband's lack of authority." "Ostensible authority is such as a principal, intentionally or by want of ordinary care, causes or allows a third person to believe the agent to possess."2 (Civ. Code, § 2317.)3 "`[W]here the principal knows that the agent holds himself out as clothed with certain authority, and remains silent, such conduct on the part of the principal may give rise to liability.'" (Gulf Ins. Co. v. TIG Ins. Co. (2001) 86 Cal.App.4th 422, 439 (Gulf).) "We must accept the trial court's findings on agency as conclusive if supported by substantial evidence, whether contradicted or uncontradicted." (Ibid.)

Substantial evidence supports the court's finding Mr. Kymm was ostensibly authorized to bind Mrs. Kymm to arbitration. The arbitration award and the declaration of plaintiff's attorney show both defendants participated in the arbitration. Nothing suggests defendants objected to the arbitration on the ground Mrs. Kymm had not signed the listing agreement. To the contrary, plaintiff's attorney states neither defendant asserted Mr. Kymm's purported lack of authority to enter into the listing agreement, let alone his authority to bind defendants to arbitration. The arbitration award addresses defendants' contract defenses, which do not include Mr. Kymm's purported lack of authority. The letter from defendant's attorney asserting either defendant could bind the other, which defendants stipulated was admissible, further suggests defendants did not dispute Mr. Kymm's authority to bind Mrs. Kymm. In sum, the record shows Mr. Kymm held himself out as though his signature on the listing agreement bound Mrs. Kymm to arbitrate, and Mrs. Kymm participated in the arbitration without disputing his authority. Her silence during the arbitration sufficiently supports the court's finding. (See § 2317; Gulf, supra, 86 Cal.App.4th at p. 439.)

Defendants contend the arbitration award cannot be confirmed because the absence of Mrs. Kymm's signature rendered the listing agreement "illegal." (See Loving & Evans v. Blick (1949) 33 Cal.2d 603, 609 [court cannot confirm arbitration award enforcing illegal contract].) But the listing agreement is not illegal; no law barred defendants from retaining plaintiff as a real estate broker. At most, the lack of Mrs. Kymm's signature would render the listing agreement unenforceable pursuant to the terms of the trust, which arguably require Mrs. Kymm to grant authority to Mr. Kymm "by an instrument in writing delivered to the other Co-Trustee . . . ." But "[a]n agency is either actual or ostensible." (§ 2298.) Even if Mrs. Kymm did not actually authorize Mr. Kymm to enter into the listing agreement by complying with the trust's requirements, she ostensibly authorized Mr. Kymm to submit the dispute to arbitration through her silence. (See § 2317; Gulf, supra, 86 Cal.App.4th at p. 439.)

And as plaintiff correctly contends, defendants forfeited the purportedly "illegal" lack of authority by failing to assert it in the arbitration. Illegality must be raised "before the arbitrator. Any other conclusion is inconsistent with the basic purpose of private arbitration, which is to finally decide a dispute between the parties. Moreover, we cannot permit a party to sit on his rights, content in the knowledge that should he suffer an adverse decision, he could then raise the illegality issue in a motion to vacate the arbitrator's award. A contrary rule would condone a level of `procedural gamesmanship' that we have condemned as `undermining the advantages of arbitration.'" (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 30 (Moncharsh).) "The forfeiture rule exists to avoid the waste of scarce dispute resolution resources, and to thwart game-playing litigants who would conceal an ace up their sleeves for use in the event of an adverse outcome. The proper criterion for dividing the sheep from the goats [citation] is a litigant's knowledge of a defense to the jurisdiction of the arbitrator. Those who are aware of a basis for finding the arbitration process invalid must raise it at the outset or as soon as they learn of it so that prompt judicial resolution may take place before wasting the time of the adjudicator(s) and the parties." (Cummings v. Future Nissan (2005) 128 Cal.App.4th 321, 328-329, fn. omitted (Cummings).) "[A] party who knowingly participates in the arbitration process without disclosing a ground for declaring it invalid is properly cast into the outer darkness of forfeiture." (Id. at p. 329.)

Defendants fail to show they raised Mr. Kymm's purported lack of authority during the arbitration. The arbitration award addressing defendant's contract defenses and the declaration of plaintiff's attorney suggest otherwise. Indeed, defendants concede they did not offer the declaration of trust into evidence at the arbitration, thus "conceal[ing] [that] ace up their sleeves for use in the event of an adverse outcome." (Cummings, supra, 128 Cal.App.4th at p. 328.) Courts need not countenance such wasteful gamesmanship. (See Moncharsh, supra, 3 Cal.4th at p. 30.) Thus, forfeiture provides an additional basis (see D'Amico, supra, 11 Cal.3d at p. 19) for confirming the arbitration award.

DISPOSITION

The judgment is affirmed. Plaintiff shall recover its costs on appeal.

WE CONCUR.

BEDSWORTH, ACTING P. J.

FYBEL, J.

FootNotes


1. Defendants do not challenge the merits of the arbitration award itself.
2. The court referred to the doctrine of implied authority instead of ostensible authority, and plaintiff likewise addresses the agency issue without using the term "ostensible." We review only the court's ruling, not the label it attached to its reasoning, and affirm if correct on any ground. (D'Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 19 (D'Amico).)
3. All further statutory references are to the Civil Code.

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