Straus v. North Hollywood Hospital, Inc.

This is an appeal by North Hollywood Hospital, Inc. (hereinafter designated “the EEospital”), from a money judgment entered upon an arbitration award in favor of Dr. Eeuben Straus, and from an order (1) confirming the arbitration award to Dr. Straus, and (2) denying the Hospital’s motion to vacate that award.

The sole question presented is whether the arbitrators exceeded their powers in making a cash award to Dr. Straus.

About a year and a half after the execution of the above agreement, differences between the parties became sufficiently acute for invocation of the arbitration provision. In October, 1955, they entered into an agreement for submission to arbitration pursuant to which three arbitrators were selected. The submission agreement provided in essence that the matters to be arbitrated were: (1) whether Dr. Straus had conformed to the contract; (2) whether Dr. Straus had abandoned the contract; (3) whether the Hospital is relieved of any responsibility to Dr. Straus “under the terms of said agreement for his failure to carry out the terms thereof”; (4) “A consideration of each and every breach of the aforesaid written contract on the part of the hospital. The relief sought by Dr. Straus under this issue is that the hospital be directed and compelled to specifically perform this contract; that Dr. Straus be awarded such damages compensatory and punitive, to which he may be entitled by law ; and that Dr. Straus be awarded such other and further relief to which he may be entitled by law. . . .” (5) An accounting of money due Dr. Straus to determine whether the Hospital paid him the correct amounts due him in accordance with the contract.

The basic contract having provided that the arbitrators should have the power to terminate the agreement, that provision was automatically imported into the submission agreement, along with such questions as whether Dr. Straus might compel specific performance or recover compensatory damages to which he might be entitled at law. The arbitrators found that Dr. Straus had substantially conformed with his contract with the Hospital. That contract was a property right, for it was not only the demise of a leasehold (Beckett v. City of Paris Dry Goods Co., 14 Cal.2d 633 , 638 [ 96 P.2d 122 ]) but also granted Dr. Straus the sole and exclusive privilege of doing all laboratory and pathology work in and for the Hospital for the term of the agreement, which still had over three years to run before the expiration date. Inasmuch as the contract involved personal services and continuous acts by both sides, the arbitrators determined, despite the fact that Dr. Straus had rendered substantial. performance, that the agreement was not specifically enforceable under the circumstances. Presumably because of

Contrary to the Hospital’s assertion, such an award was within the scope of the submission agreement and is agreeable with prevailing principles of law. The parties having conferred upon the arbitrators the power to terminate the contract, it may reasonably be supposed the parties contemplated that such power would be exercised justly and with due regard for the equities of the situation. Stipulations which are necessary to make a contract reasonable are implied in respect to matters as to which the contract manifests no contrary intention. (Brandenstein v. Jacking, 99 Cal.App. 438 , 445 [ 278 P. 880 ].) A fair and reasonable interpretation of a contractual provision, rather than one leading to harsh, unreasonable or inequitable results, is always preferred. (Disney v. Disney, 121 Cal.App.2d 602 , 615 [ 263 P.2d 865 ] ; Bergin v. van der Steen, 107 Cal.App.2d 8 , 14 [ 236 P.2d 613 ].) Of two possible constructions of a contract, the one which avoids forfeiture of property rights must be made if it is at all reasonable. (Ballard v. MacCallum, 15 Cal.2d 439 , 444 [ 101 P.2d 692 ] ; Milovich v. City of Los Angeles, 42 Cal.App.2d 364 , 374 [ 108 P.2d 960 ].)

As indicated, Dr. Straus had substantially performed under his contract, which gave him a leasehold interest and the exclusive right to operate a pathology department. In support of the arbitration award, it may be inferred that Dr. Straus had devoted time and effort to develop this branch of the hospital service, and that his exclusive right to conduct this operation was a valuable one. Clearly, the effect of the termination of the agreement was to cancel such right and to annul the leasehold. The termination also effected a reversion of the leasehold and the exclusive privilege of operating the pathology laboratory to the Hospital, though there was no serious default on the part of Dr. Straus. To have worked such a result without just compensation to Dr. Straus would have been to sanction a forfeiture, as well as to suffer the Hospital to be unjustly enriched at his expense. These are consequences which the law seeks assiduously to prevent. It is hornbook law that compensation and not forfeiture is :a favorite maxim of both law and equity. A forfeiture

The judgment and orders are affirmed.

Moore, P. J., and Ashburn, J., concurred.