Judge Peter A. Hernandez, Case Number: 24PSCP00010, Date: 2024-03-01 Tentative Ruling

Defendant, Southern California School of Theology dba Claremont School of Theology’s Cross-Petition to Vacate Arbitration Award is DENIED.

Plaintiff, The Claremont Colleges, Inc.’s Petition to Confirm Arbitration Award is GRANTED.

Plaintiff Southern California School of Theology dba Claremont School of Theology (“CST”) alleges as follows:

On June 5, 1957, Defendant Claremont Graduate University fka Claremont College and Claremont University Center (“CGU”) conveyed approximately 16.4 acres of land contiguous to The Claremont Colleges (“Parcels 1 and 2”) to CST in exchange for $107,500.00 via a grant deed (the “1957 Deed”). The 1957 Deed contained two restrictions: (1) a First Option Clause (“FOC”) and (2) an educational use restriction, both of which were enforced by a power of termination. On June 5, 1957, CGU and CST entered into an “Agreement between Claremont College and Southern California School of Theology” (“1957 Agreement”), containing the procedure for establishing a purchase price in the event the FOC is triggered. Per Code of Civil Procedure § 885.030 of the Marketable Record Title Act (“MRTA”), the power of termination in the 1957 Deed expired in 1987, as no Notice of Preservation was recorded on Parcels 1 and 2; accordingly, the restrictions became unenforceable.

In or around August 2015, CST told CGU and Defendant Claremont University Consortium (“Consortium”) that it was considering selling a portion of Parcels 1 and 2. CGU and Consortium, in response, asserted that they still had a right under the 1957 Deed and related 1957 Agreement to purchase Parcels 1 and 2 at a price substantially below current market value based upon the pricing formula in the 1957 Agreement. Additionally, in 1972 CGU conveyed a 60-foot parcel of property (“60 Foot Parcel”) to CST (“1972 Deed”) which afforded CST additional access to the property covered by the 1957 Deed. The 1972 Deed contains an option by which CGU and Consortium have a right of first refusal to purchase the 60 Foot Parcel. When CST informed CGU and Consortium that it was considering a sale of Parcels 1 and 2, it also informed CGU and Consortium that the sale would have to include the 60 Foot Parcel. CGU and Consortium demand that the 60 Foot Parcel be valued separately and sold to them even if a third party would ultimately purchase Parcels 1 and 2.

In 2001, Consortium and CST entered into an “Agreement between Claremont University Consortium and Southern California School of Theology” (“2001 Agreement”), stating therein that Consortium and CST “are currently parties” to the 1957 Agreement and that they desired to “amend and reaffirm” the 1957 Agreement. The 2001 Agreement was made based on the mistaken assumption that the powers of termination had not expired and that Consortium was a party to the 1957 Agreement. The 2001 Agreement also lacked consideration.

On November 30, 2016, CST filed a First Amended Complaint, asserting causes of action against CGU, Consortium and Does 1-50 for:

On April 20, 2018, CGU and Consortium filed a Second Amended Cross-Complaint, asserting causes of action against CST for:

This case proceeded to court trial on September 24, 2018. On December 18, 2018, the “Statement of Decision” was filed. On January 23, 2019, the “Amended Final Judgment and Permanent Injunction” was filed.

On November 15, 2019, CGU and Consortium filed another Notice of Appeal (i.e., of the court’s November 5, 2019 order on attorney’s fees).

On July 6, 2021, a second remittitur was issued (reversed) as to the attorney fee award.

On September 9, 2021, the court related this case with Case No. 21PSCV00241. On October 29, 2021, the court related this case with Case No. 21PSCV00726.

Plaintiff The Claremont Colleges, Inc. dba The Claremont Colleges Services fka Claremont University Consortium (“Consortium”) alleges that CST, after the trial of Claremont I, secretly entered into a sale agreement with Yalong Investment Group, LLC (“Yalong”) which represents a violation of Consortium’s right to purchase the property under the FOC if the judgment is reversed, or the First Right of Refusal (“FROR”) if the judgment in Claremont I is affirmed. Consortium alleges that the sales agreement also constitutes a violation of the Educational Use Restriction.

On October 23, 2019, the “Order Denying Plaintiff The Claremont Colleges, Inc.’s Motion for Preliminary Injunction” was filed. On December 5, 2019, the court sustained CST’s demurrer to Consortium’s First Amended Complaint, without leave to amend; the court took the matter under submission “[a]s to the Educational Use Restriction.” On December 17, 2019, the court sustained the demurrer as to the Educational Use Restriction, without leave to amend.

On December 26, 2019, Consortium filed a Second Amended Complaint (“SAC”), asserting causes of action against Defendants CST, Yalong and Does 1-50 for:

On December 31, 2019, an “Order Regarding Defendant Southern California School of Theology, dba Claremont School of Theology’s (1) Demurrer; (2) Motion to Strike and (3) Motion for Sanctions” was filed. On January 24, 2020, judgment was filed; on January 31, 2020, a “Notice of Entry of Judgment” was filed. On February 4, 2020, Plaintiff filed a “Notice of Appeal.”

On October 8, 2020, the court sustained Yalong’s demurrer to the fourth, fifth, and eighth through tenth causes of action in the SAC; the court stayed Consortium’s request for leave as to the fourth, eighth and ninth causes of action pending resolution of issues and denied leave as to the fifth and tenth causes of action.

On August 5, 2021, remittitur was issued (reversed in part, affirmed in part). The Court of Appeal reversed the trial court’s order denying Consortium’s motion for preliminary injunction and reversed the trial court’s order sustaining CST’s demurrer as to the FAC’s first through third, sixth and ninth causes of action and affirmed the trial court’s order sustaining CST’s demurrer as to the FAC’s seventh and tenth causes of action.

On October 15, 2021, Consortium filed a Third Amended Complaint (“TAC”), asserting causes of action against Defendants CST, Yalong, Education Tomorrow, Inc. (“Education Tomorrow”), Henry Appenzeller University (“HPU”), Mpire, Inc dba California Academy (“Mpire”), Western University of Health Sciences and Does 1-50 for:

On January 7, 2022, an “Order Granting Plaintiff’s Motion for Preliminary Injunction Against Defendants Southern California School of Theology and Yalong Investment Group, LLC” was entered.

On January 20, 2022, HPU’s default was entered. On January 24, 2022, Education Tomorrow’s default was entered.

On April 20, 2022, Yalong filed a cross-complaint, asserting causes of action against CST and Roes 1-20 for:

On January 18, 2024, the court related Case Nos. KC068691, 19PSCV00419, 21PSCV00241, 21PSCV00726 and 24PSCP00010; Case No. KC068691 was designated as the lead case.

On January 18, 2024, CST dismissed its second, seventh and eighth causes of action against Yalong, without prejudice.

The Final Status Conference is set for July 30, 2024. Trial is set for August 13, 2024.

CST seeks a judicial determination and declaration that the FROR and educational use equitable servitudes created by the trial court in Claremont I are not enforceable because of a change of conditions. CST also alleges that Defendant The Claremont Colleges, Inc. (“Claremont Colleges”) breached the 1957 and 2001 Agreements by terminating CST’s affiliation and its use of certain facilities and equipment. CST seeks an injunction preventing Claremont Colleges from “land banking” in violation of the educational use equitable servitude.

On June 9, 2021, CST filed a First Amended Complaint (“FAC”), asserting causes of action against Claremont Colleges and Does 1-50 for:

On January 10, 2022, the court sustained Claremont Colleges’ demurrer to CST’s FAC, without leave to amend.

On January 21, 2022, “Judgment Following Demurrer” was entered. On March 3, 2022 and March 7, 2022, CST filed a “Notice of Appeal.”; on July 20, 2022 and August 23, 2022, remittiturs were issued (appeals dismissed).

On January 18, 2024, the court related Case Nos. KC068691, 19PSCV00419, 21PSCV00241, 21PSCV00726 and 24PSCP00010; Case No. KC068691 was designated as the lead case.

Plaintiff Western University of Health Sciences (“Plaintiff”) alleges as follows:

On or about June 3, 2021, Plaintiff and CST entered into a “Revocable License Agreement for Certain Premises that Comprise a Portion of the Claremont School of Theology Campus” (“License”), which was for access, use and occupation of a portion of the premises located at 1325 North College Avenue, Claremont, California (the “Premises”). Per the License, the Base License Fee for the initial term of the License (i.e., 11 months) was a total of $1 million, which consisted of $100,000.00 payable on or before the Possession Date set forth therein, $600,000.00 payable on or before August 1, 2021 and $300,000.00 payable on or before December 31, 2021. Plaintiff made the $100,000.00 payment and was thereafter permitted to occupy the Premises. Before the $600,000.00 payment came due, Claremont Colleges informed CST that CST was not in rightful possession of the Premises and that it would seek a preliminary injunction, including against Plaintiff, relating to CST’s entitlement to license the Premises or otherwise allow Plaintiff to occupy the Premises. CST and Claremont Colleges have made conflicting demands upon Plaintiff for payment.

On September 1, 2021, Plaintiff filed a Complaint in Interpleader against CST, Claremont Colleges and Does 1-100.

On September 9, 2021, the court related this case with Case No. KC068691. On October 29, 2021, the court related this case with Case Nos. KC068691, 19PSCV00419 and 21PSCV00241.

On January 18, 2024, the court related Case Nos. KC068691, 19PSCV00419, 21PSCV00241, 21PSCV00726 and 24PSCP00010; Case No. KC068691 was designated as the lead case.

On January 4, 2024, Claremont Colleges filed a “Petition to Confirm Contractual Arbitration Award.”

On January 18, 2024, the court related Case Nos. KC068691, 19PSCV00419, 21PSCV00241, 21PSCV00726 and 24PSCP00010; Case No. KC068691 was designated as the lead case.

“Any party to an arbitration in which an award has been made may petition the court to confirm, correct or vacate the award. The petition shall name as respondents all parties to the arbitration and may name as respondents any other persons bound by the arbitration award.” (Code Civ. Proc., § 1285.)

“If a petition or response under this chapter is duly served and filed, the court shall confirm the award as made, whether rendered in this state or another state, unless in accordance with this chapter it corrects the award and confirms it as corrected, vacates the award or dismisses the proceeding.” (Code Civ. Proc., § 1286.)

A petition to confirm arbitration “shall: (a) Set forth the substance of or have attached a copy of the agreement to arbitrate unless the petitioner denies the existence of such an agreement. (b) Set forth the names of the arbitrators. (c) Set forth or have attached a copy of the award and the written opinion of the arbitrators, if any.” (Code Civ. Proc., § 1285.4)

“A response to a petition under this chapter may request the court to dismiss the petition or to confirm, correct or vacate the award.” (Code Civ. Proc., § 1285.2).

“[T]he court shall vacate the award if the court determines any of the following: . . . (4) The arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted. . .” (Code Civ. Proc., § 1286.2, subd. (a).)

Plaintiff/Petitioner The Claremont Colleges, Inc. (“Claremont Colleges”) moves this court to confirm the Arbitrator’s December 14, 2023 “Arbitration Award.” Defendant/Respondent Southern California School of Theology dba Claremont School of Theology (“CST”) seeks to vacate said award pursuant to Code of Civil Procedure § 1286.2, subdivision (a)(4).

Claremont Colleges has attached a copy of the written agreement dated June 5, 1957 (the “1957 Agreement”), which contains an arbitration provision. (Petition, Attachment 4(b), 1957 Agreement, ¶ 2(f)[1].) A dispute arose between the parties as to the price to be paid in connection with the repurchase of real property pursuant to a Final Judgment Following Appeal entered in Case No. KC068691 (i.e., “Claremont I”). Paragraph 2(c) of the 1957 Agreement states the following regarding a repurchase:

This matter proceeded to arbitration, which was held on October 23-27, 2023 via Zoom before Arbitrator the Honorable Ann Kough (“Ret.”) (“Arbitrator”) of JAMS. Claremont Colleges has attached a copy of the arbitration award (“Award”), which was made on December 14, 2023. (Petition, Attachment 8(c).) Arbitrator concluded that “the appropriate repurchase price under [clause 2(c)(2) of the 1957 Agreement (“the Formula”)] is capable of being calculated, that it is less than [CST’s] unreliable fair market value calculation, and, therefore, the repurchase price is $7,706,553.00.”

CST seeks to vacate the Award. “[A]rbitration awards are generally subject to extremely narrow judicial review[.] Courts will not review the merits of the controversy, the validity of the arbitrator’s reasoning or the sufficiency of the evidence supporting the arbitrator’s award.” (Hoso Foods, Inc. v. Columbus Club, Inc. (2010) 190 Cal.App.4^th 881, 887). “A trial court may vacate an award interpreting a contract if and only if it ‘rests on a “completely irrational” construction of the contract [citations] or ... amounts to an “arbitrary remaking” of the contract[.]’” (Cal. Dept. of Human Resources v. Service Employees Internat. Union, Local 1000 (2012) 209 Cal.App.4th 1420, 1430, quoting Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4^th 362, 376-377).

CST contends that Arbitrator exceeded her power under Code of Civil Procedure § 1286.2(a)(4) because she “changed the language of the Formula in the 1957 Agreement” in making the Award. (Vacate Award, 12:20-21). More specifically, CST argues that Arbitrator “confirmed that she wholly relied on the changed language of the Formula in the 1957 Agreement” “[o]n page four of the Arbitration Award (second paragraph from the bottom)” and that Arbitrator “admits that no individual could provide testimony as to the meaning of the actual language in the 1957 Agreement. (Id., 12:7-9 and 12:14-16). CST, however, fails to cite or discuss any part of that paragraph. On the contrary, in that very paragraph, the Arbitrator stated that she “f[ound] that the terms of the Formula are not ambiguous and [that] no interpretation is necessary. See State of California v. Continental Ins. (2012) 55 Cal.4th 186.”

CST’s cross-petition to vacate the award is denied. Claremont Colleges’ petition to confirm is granted.

[1] Paragraph 2(f) reads as follows: “Should College and School be unable to agree upon the price, or on any of the calculations relating thereto, then the question shall be submitted to arbitration, said arbitration to be conducted in accordance with, and to have the validity and effect provided by, the provisions on arbitrations of the Code of Civil Procedure of the State of California as then in force.”