APPEAL from a judgment of the Superior Court of Los Angeles County, Barbara M. Scheper, Judge. (Los Angeles County Super. Ct. No. BS132814)
The opinion of the court was delivered by: Willhite, J.
CERTIFIED FOR PUBLICATION
Appellant Mouris Ahdout appeals from a judgment entered following the superior court's denial of his petition to vacate an arbitration award and its grant of a petition to confirm the award filed by respondents Majid Hekmatjah aka Michael Braum (Braum), Hekmatjah Family Limited Partnership (Hekmatjah), and Braum Investment & Development, Inc. (BIDI). Ahdout and respondent Hekmatjah were the sole members of 9315 Alcott, LLC (the Company), a limited liability company they formed for the purpose of developing a condominium project, with respondent Braum designated as manager of the Company.
Disputes between the parties were submitted to binding arbitration. Ahdout argued that BIDI, the general contractor owned by Braum that was hired to construct the Project, was not licensed and thus was required to disgorge all compensation for its contracting services pursuant to Business and Professions Code section 7031, subdivision (b).*fn1 The arbitrators' denial of Ahdout's claims based on section 7031 underlies Ahdout's petition to vacate the award.
The trial court concluded that the arbitrator's decision was not reviewable, and thus denied the petition to vacate the award. We find that Ahdout's claims under section 7031 fall within the "public policy" exception to the general prohibition of judicial review of arbitration awards, because section 7031 constitutes a clear-cut and explicit legislative expression of public policy mandating the disgorgement of compensation received by an unlicensed contractor. Thus, the trial court erred in deferring to the arbitrator's finding that section 7031 does not apply. We remand the matter to the trial court to conduct a de novo review.
The Operating Agreement for the Company
Ahdout and Hekmatjah owned adjoining parcels of real property, at 9311 and 9315 Alcott Avenue, respectively. In 2002, Ahdout and Hekmatjah formed the Company, the purpose of which was to acquire both parcels (the Property) and to build a 14-unit condominium project there (the Project). Ahdout and Hekmatjah were the sole members of the Company. They entered an Operating Agreement for the Company (the Agreement) that included the following terms, among others:
For initial capital, Ahdout was to contribute the property at 9311 Alcott and Hekmatjah was to contribute the property at 9315 Alcott. A capital account for each member was credited with $565,000, based on the fair market value of each property.
Profits resulting from the Project were to be allocated in accordance with the profit and loss sharing percentages of each member. Section 3.10 provides for the profit and loss sharing percentages of each members to be determined as follows: "After the Project has been completed the costs of construction (both hard and soft costs) shall be determined and HEKMATJAH shall be credited with an amount equal to 25% thereof and AHDOUT and HEKMATJAH shall each be credited with an amount equal to 50% of said construction costs. The total amount credited to both AHDOUT and HEKMATJAH shall be determined and the percentage of profits and losses of each of AHDOUT and HEKMATJAH shall be the percentage that the total amount credited to each Member bears to the total amount credited to both Members." The Agreement provides an example, assuming that the total costs of construction were $3 million:
$565,000 capital contribution
750,000 25% of construction costs
1,500,000 50% of construction costs
$565,000 capital construction
1,500,000 50% of construction costs
$2,065,000 $2,815,000 = $4,880,000
Percentage of profits and losses ...