Hous. Auth. of Calexico v. Multi-Housing Tax Credit Partners XXIX, L.P.

94 Cal.App.5th 1103

312 Cal.Rptr.3d 792

HOUSING AUTHORITY OF THE CITY OF CALEXICO et al., Plaintiffs and Appellants,

v.MULTI-HOUSING TAX CREDIT PARTNERS XXIX, L.P. et al., Defendants and Appellants.

D079967

Court of Appeal, Fourth District, Division 1, California.

Filed August 28, 2023

Law Office of Julie A. Herzog and Julie A. Herzog for Plaintiffs and Appellants.

Cox, Castle & Nicholson, Edward F. Quigley, Los Angeles, and Cathy T. Moses, Irvine, for Defendants and Appellants.

KELETY, J.

Housing Authority of the City of Calexico (the Housing Authority) and AMG & Associates, LLC (collectively, the plaintiffs) appeal from a judgment of the superior court confirming an arbitration award, declining to undertake a review of the award on the merits for errors of fact or law (review on the merits) and declining to grant their petition to partially reverse or vacate the award. They contend that the superior court should have undertaken a review on the merits because the parties had agreed to such a review. They further contend that, had the superior court undertaken such a review, it would have concluded that no substantial evidence supports the award and that the award is contrary to law. Additionally, the plaintiffs contend that, in denying their motion to partially reverse or vacate the award, the superior court left in place a finding by the arbitrator that not only exceeded the arbitrator's powers but works as a forfeiture against the Housing Authority.

Multi-Housing Tax Credit Partners XXIX, L.P., Multi-Housing Investments, LLC, and Highridge Costa Investors, LLC (collectively, the defendants) appeal from the same judgment, but only to the extent it upholds a portion of the arbitration award declining to award them attorneys' fees and costs.

As discussed post , we conclude the superior court erred in declining to undertake a review on the merits. In its opinion in Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334, 82 Cal.Rptr.3d 229, 190 P.3d 586 ( Cable Connection ), the California Supreme Court held that an agreement which permitted an arbitration award to be subjected to judicial review on the merits is enforceable. But the court expressed no view as to whether such review may be undertaken in the first instance by the Court of Appeal in lieu of the superior court. We conclude that, in instances in which the parties have agreed that an arbitration award may be subjected to judicial review, it is the superior court and not the Court of Appeal that has original jurisdiction to undertake that review in the first instance, that the superior court is without power to yield that original jurisdiction to the Court of Appeal, and that the superior court should thus have performed the review. On this basis, we reverse the judgment.

We further conclude that the appellate jurisdiction of the Court of Appeal empowers the Court of Appeal to undertake a review on the merits in the first instance when (as here) the superior court has failed to exercise its original jurisdiction to undertake such a review. However, for reasons expressed in the balance of this opinion, we deem it appropriate to refrain from exercising our appellate jurisdiction beyond reversing the judgment.

Hence we remand to the superior court with instructions to undertake the review on the merits that its original jurisdiction obligated it to undertake in the first instance.

I.FACTUAL AND PROCEDURAL BACKGROUND

This case involves a dispute among participants in a project to develop affordable housing within the framework of a federal low-income housing tax-credit program that has been described by some as "the most important source of financing for affordable housing ... across the nation." ( Homeowner's Rehab, Inc. v. Related Corporate V SLP, L.P. (2018) 479 Mass. 741, 99 N.E.3d 744, 748 ( Homeowner's Rehab ).) Although the tax-credit program has been discussed at some length in the parties' briefs, and in further depth in opinions from a variety of courts outside of California (see, e.g., SunAmerica Housing Fund 1050 v. Pathway of Pontiac (6th Cir. 2022) 33 F.4th 872 ; Riseboro Community Partnership v. SunAmerica Housing Fund 682 (E.D.N.Y. 2020) 482 F.Supp.3d 31 ; and Homeowner's Rehab , it will not be discussed here. This is because resolution of the present appeal does not turn on matters relating to the tax credit program. Instead, it turns on matters pertaining to judicial review of arbitration awards.

At the heart of the parties' dispute is a contract that includes an arbitration clause (the Arbitration Agreement or Agreement). Relevant to the issues in this appeal are four statements in the Agreement. First , a statement that: "The Arbitrator ... shall endeavor to decide the controversy as though the arbitrator were a judge in a California court of law." Second , a statement that: "The award ... and the findings of the Arbitrator shall be final, conclusive and binding upon the parties, and judgment upon the award and enforcement of any other judgment, decree or order of relief granted by the Arbitrator may be entered or obtained in any court of competent jurisdiction upon the application of any party."Third , a statement that: "Notwithstanding the provisions herein, the parties hereto, by submitting the controversy or dispute to arbitration, do not waive or relinquish their rights of appeal and said Partners expressly agree that each Partner shall have the right of appeal as specifically provided in accordance with the laws relating to appeals then in effect in the State of California, as the same may be amended or superseded from time to time; and for such purposes, it is hereby expressly acknowledged and agreed that the parties desire to maintain their right of appeal as an integral part of this Agreement." Fourth , a statement that: "Notwithstanding the applicable provisions of California law[,] ... the decision of the arbitrator and the [arbitrator's] findings of fact and conclusions of law shall be reviewable on appeal upon the same grounds and standards of review as if said decision and supporting findings of fact and conclusions of law were entered by a court with subject matter and present jurisdiction."

After the parties' dispute arose, the plaintiffs initiated a lawsuit by filing in the superior court a complaint asserting several claims against the defendants. Thereafter, following some procedural wrangling, the plaintiffs and defendants entered into a stipulation to submit the dispute to arbitration "pursuant to and in accordance with" the Arbitration Agreement. Then, pursuant to the terms of the stipulation, the proceedings in the superior court were ordered stayed pending conclusion of the arbitration.

While the court proceedings were stayed, the parties participated in an arbitration of the plaintiffs' claims and of counterclaims asserted by the defendants. The arbitration resulted in the issuance of an interim arbitration award, followed by a final arbitration award (the Arbitration Award or Award) denying all of the claims and counterclaims and declining to award attorneys' fees or costs. Thereafter, the plaintiffs returned to the superior court to mount a challenge to the Award. The challenge was a two-pronged challenge in which the plaintiffs filed, in the lawsuit that had been stayed (1) a notice of appeal to the superior court and (2) a petition to partially reverse and/or vacate the Award.

After briefing and oral argument on the notice of appeal and the petition to partially reverse and/or vacate, the superior court issued an order discussing and ruling on each of those two modes of challenge. Addressing the notice of appeal first, the superior court commenced its discussion by making two assertions of law. First, the court stated that "an arbitrator's award is not subject to judicial review for mistake of law or mistake of fact unless the parties have limited the arbitrator's powers not to make mistakes of law or fact." Second, the court stated that, in circumstances in which the parties have imposed such limits on the arbitrator's power, judicial review on the merits "can only be obtained when the agreement between the parties expressly provides for that review in language that is explicit and unambiguous."

The superior court then reviewed the Arbitration Agreement. So doing, it concluded not only that the language of the Agreement satisfied the "explicit and unambiguous" requirement, but that it did so in a manner that "pointed[ed] to appellate review, not review in the trial court." In the words of the superior court:

"[T]he Arbitration Agreement states the arbitrator is to act as a superior court trial judge and follow California statutes, case law, and rules of evidence. It also states that the award is binding. [The Agreement] is explicit and unambiguous in stating that either party may appeal the arbitrator's decision ‘in accordance with the laws relating to appeals then in effect in the State of California.’ [T]he explicit language in this case points to appellate review, not review in the trial court."

On the basis of this analysis (and characterizing the notice of appeal as a "petition" and a "request"), the superior court then concluded this portion of its judgment by ruling (in keeping with arguments of the defendants) that, "[inso]far as the petition requests an appeal to this court of the arbitration award, it is denied."

The court then turned its focus to the petition to partially reverse and/or vacate the Award in part. With regard to this prong of the plaintiffs' challenge, the superior court stated that:

"As the court does not have the explicit and unambiguous authority under the Arbitration Agreement to preside over an appeal of the arbitration award, the court is left with its statutory authority to review under Code of Civil Procedure § 1286.2" (Italics added).

Noting that the scope of review under section 1286.2 is "statutorily limited," the superior court then proceeded to draw what it viewed as a...