Opinion
B190114
5-10-2007
PEDRO MARTINEZ and ANA MARTINEZ, Plaintiffs and Respondents, v. JOSE DANIEL MARTINEZ, Defendant and Appellant.
Law Offices of Hal D. Long, Hal D. Long for Plaintiffs and Respondents. Benedon & Serlin, Gerald M. Serlin, Douglas G. Benedon, and Kelly R. Horwitz for Defendant and Appellant.
NOT TO BE PUBLISHED
INTRODUCTION
Plaintiffs and respondents Pedro Martinez and Ana Martinez (plaintiffs) sued defendant and appellant Jose Daniel Martinez (defendant) for specific performance of an agreement to convey real property. The parties stipulated in the trial court to submit the dispute to binding arbitration pursuant to the arbitration clause in their agreement, but defendant thereafter refused to cooperate in the selection of an arbitrator. After nine months of delay in the arbitration, plaintiffs filed in the trial court a request to enter defendants default with respect to an amended complaint, and the clerk entered a default. After several more months of delay by defendant, the trial court scheduled and held a hearing on plaintiffs motion for entry of judgment, granted the motion, and entered judgment on the default against defendant in the amount of $ 327,121.
Plaintiffs are not related to defendant.
On appeal from various orders and the judgment of the trial court, defendant contends, inter alia, that the trial court lacked the "jurisdiction" to enter a default judgment against him because the parties had stipulated to arbitrate their dispute pursuant to the arbitration clause in their agreement. We hold that once the parties stipulated to arbitrate their dispute and the trial court enforced that stipulation by referring the matter to arbitration, it lacked the power to enter a default judgment against defendant. We therefore reverse the order granting plaintiffs motion to enter judgment and the judgment based on that order.
PROCEDURAL BACKGROUND
Plaintiffs in a complaint against defendant asserted a single cause of action for specific performance of a written "Residential Purchase Agreement" (Agreement) under which "Plaintiffs agreed to buy and Defendant agreed to sell [a residential property located in Sylmar]." They alleged, inter alia, that the Agreement provided for "a mandatory mediation and/or arbitration of all disputes between the parties . . . ." Plaintiffs attached to the complaint and incorporated a copy of the Agreement that contained the arbitration clause requiring arbitration under the procedures set forth in the California Arbitration Act, found in Code of Civil Procedure section 1280, et. seq. Plaintiffs alleged that the arbitration clause excluded from arbitration "a court action to enable the recording of a Notice of Pending Action which shall not constitute a waiver of the mediation and arbitration provisions." Plaintiffs also stated that they would concurrently "initiate a mediation/arbitration . . . ." On April 29, 2004, defendant answered the complaint and admitted, among other things, the allegations of paragraph 12 concerning mediation and arbitration.
All further statutory references are to the Code of Civil Procedure unless otherwise stated.
On June 3, 2004, the trial court held a case management conference. According to the minute order, "[b]oth counsel stipulate[d] to binding arbitration." The minute order also states that the trial court set the matter for an order to show cause hearing regarding "dismissal after binding arbitration" (OSC re dismissal). The reporters transcript of that conference reflects that plaintiffs counsel twice represented to the trial court that the parties had a binding arbitration agreement and that, in response, the trial court stated, "Why dont I give you a date way in the future for an OSC Re Dismissal. You do what you have to do during that time. [¶] . . . [¶] Why dont we give [the parties] a six-month period for [an] OSC Re Dismissal."
On September 28, 2004, the parties appeared at the hearing on the OSC re dismissal. Plaintiffs counsel informed the trial court that the parties had participated in mediation and that during the mediation they determined there was an unrecorded deed from a remote grantor in defendants chain of title. As a result, the parties stipulated that plaintiffs could file a first amended complaint to add the remote grantor as a party. Plaintiffs counsel again confirmed for the trial court that their dispute with defendant was subject to binding arbitration. He also informed the trial court that the parties were "hoping to bring [the remote grantor — Sandra Tamayo] in and include her in [the arbitration]." Plaintiffs counsel further informed the trial court that a related case had been filed concerning the same property that was at issue in plaintiffs complaint. In response, the trial court stated, "That may be true. Unless it is in the arbitration, I am not going to worry about it. [¶] . . . [¶] It may be there. It will be handled separately unless they join the arbitration." Based on the information provided by the parties, the trial court then continued the hearing on the OSC re dismissal to December 14, 2004.
On December 14, 2004, the parties appeared at the continued hearing on the OSC re dismissal. The parties informed the trial court that defendant was in the process of retaining new counsel. The trial court therefore continued the hearing on the OSC re dismissal to March 9, 2005. On March 1, 2005, plaintiffs counsel filed a "Request for Entry of Default" against defendant on the first amended complaint that named the remote grantor, Sandra Tamayo, as a defendant. The clerk entered the default that same day.
Defendant, having dismissed his counsel of record, appeared in propria persona.
On March 9, 2005, defendant again appeared in propria persona, and again informed the trial court that he was in the process of retaining new counsel. In response to the trial courts inquiry about whether there was "supposed to be binding [arbitration] in this case," plaintiffs counsel stated, "Yes, your honor. It was originally sent to mediation/arbitration and just after the mediation was when [defendant] relieved his former counsel and that is when the case went into — I dont know what you would call it. It has not been good." The trial court continued the hearing for two weeks to March 23, 2005.
At the March 23, 2005, continued hearing, defendant appeared represented by counsel. Plaintiffs counsel advised the trial court that "[defendants new attorney] and I will, after the court hearing, agree on an arbitrator, [and] get the matter under way." In response, the trial court continued the matter for an "OSC re dismissal because hopefully by that time arbitration will be completed and we will be on our way." No mention was made of the default at either the March 9 or March 23 hearings.
At the July 22, 2005, continued hearing on the OSC re dismissal, the defendant again appeared in propria persona. Plaintiffs counsel informed the trial court that a default had been entered against defendant on the first amended complaint, as well as against Sandra Tamayo, the remote grantor. He requested that the trial court allow plaintiffs "to proceed by way of default prove-up. . . ." In response, the trial court set the matter for a "Default Hearing" on October 25, 2005.
On August 19, 2005, defendant filed in propria persona a motion to vacate the default. On October 25, 2005, the trial court heard and denied defendants motion. The trial court then set the matter for a default hearing on January 24, 2006.
On January 18, 2006, the trial court heard and granted codefendant Sandra Tamayos motion for relief from the default that had been entered against her. The trial court also advanced the hearing on the default prove-up against defendant, granted the request to enter default judgment, and entered a judgment against defendant in the amount of $ 327,121.
A different judge, Barbara Scheper, presided over the January 18, 2006, hearing and all subsequent proceedings.
Defendant filed a notice of appeal on March 20, 2006. He filed his opening brief on December 14, 2006. On March 27, 2007, plaintiffs filed a motion for summary reversal of the judgment, apparently in lieu of filing their respondents brief. On March 29, 2007, we denied that motion.
March 27, 2007, was the last day upon which plaintiffs could have filed their respondents brief pursuant to our March 2, 2007, order.
DISCUSSSION
A. Standard of Review
The dispositive issue is whether the trial court had the power to enter a default judgment against defendant once the matter had been referred to arbitration. That is a legal issue that can be raised for the first time on appeal and decided on undisputed facts. (Blake v. Ecker (2001) 93 Cal.App.4th 728, 738, fn. 9, overruled on other grounds in Le Francois v. Goel (2005) 35 Cal.4th 1094, 1107, fn. 5.)
B. The Trial Courts Limited Power to Act
Defendant contends that the parties stipulation to resolve their dispute through binding arbitration deprived the trial court of "jurisdiction" to enter a default judgment against him. We agree that once the dispute was referred to binding contractual arbitration, the trial court lacked the power to enter a default judgment against defendant.
As the court in Bosworth v. Whitmore (2006) 135 Cal.App.4th 536, we construe defendants argument that the trial court lacked "jurisdiction" to be that "the trial court lacked the power or authority to make certain orders, not that the court lacked subject matter jurisdiction. `The principle of subject matter jurisdiction relates to a courts inherent authority to deal with the case or matter before it. In contrast, a court acts in excess of jurisdiction where, even though it has subject matter jurisdiction, it has no jurisdiction or power to act except in a particular manner, or to give certain kinds of relief, or to act without the occurrence of certain procedural prerequisites. [Citation.] (Law Offices of Ian Herzog v. Law Offices of Joseph M. Fredrics (1998) 61 Cal.App.4th 672, 680 .)" (Id. at p. 545, fn. 9.) In this case, the trial court had subject matter jurisdiction. Plaintiffs sued defendant in the trial court for specific performance of the Agreement to convey real property, and the parties stipulated to binding arbitration pursuant to the terms of that Agreement. Therefore, defendants "true claim is that the trial court lacked the power to grant relief" to plaintiffs because the matter had been submitted to arbitration. (Ibid.)
The parties stipulated before the trial court to resolve their dispute in binding contractual arbitration pursuant to the arbitration clause in the Agreement. "This being so, the controversy was removed from the procedures applicable to trials." (Elden v. Superior Court (1997) 53 Cal.App.4th 1497, 1508, citing Severton v. Williams Construction Co. (1985) 173 Cal.App.3d 86, 90-91 ["The parties to this litigation voluntarily agreed to submit their controversy to [the arbitration] process and thereby remove it from the procedures applicable to trial"].) "The trial court may not step into a case submitted to arbitration and tell the arbitrator what to do and when to do it: it may not resolve procedural questions, order discovery, determine the status of claims before the arbitrator or set the case for trial because of a partys alleged dilatory conduct. It is for the arbitrator, and not the trial court, to resolve such questions." (Titan/Value Equities Group, Inc. v. Superior Court (1994) 29 Cal.App.4th 482, 489 (Titan/Value).)
This principle was articulated in Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790 (Brock). As in this case, the parties in Brock stipulated to participate in a binding contractual arbitration pursuant to their contract. (Id. at p. 1793.) The parties also agreed that the action at law was stayed pending the outcome of the arbitration. (Id. at pp. 1793-1794.) The trial court entered an order enforcing the stipulation by submitting the dispute to arbitration and by staying the action at law. (Id. at p. 1794.) Five years later, the defendants filed a motion in the trial court to dismiss the action and the arbitration on the grounds that more than five years had elapsed since the matter had been referred to arbitration. (Ibid.) The trial court granted the motion and entered a judgment of dismissal. (Ibid.) In reversing the judgment, the court in Brock held that "[o]nce a court grants a petition to compel arbitration and stays the action at law, the action at law sits in the twilight zone of abatement with the trial court retaining merely a vestigial jurisdiction over matters submitted to arbitration. This vestigial jurisdiction over the action at law consists solely of making the determination, upon conclusion of the arbitration proceedings, of whether there was an award on the merits (in which case the action at law should be dismissed because of the res judicata effect of the arbitration award [Citations.].)" (Brock, supra, 10 Cal.App.4th at p. 1796.)
In Titan/Value, supra, 29 Cal.App.4th at pp. 487-488, the court elaborated upon the basic principle articulated in Brock, supra, 10 Cal.App.4th 1790: "Section 1281.4 requires a court to stay an action submitted to arbitration pursuant to an agreement of the parties. Beyond that, the courts role is fairly limited. . . . [Citation.] During that time, under its `vestigial jurisdiction, a court may: appoint arbitrators if the method selected by the parties fails (§ 1281.6); grant a provisional remedy `but only upon the ground that the award to which an applicant may be entitled may be rendered ineffectual without provisional relief (§ 1281.8, subd. (b)); and confirm, correct or vacate the arbitration award (§ 1285). Absent an agreement to withdraw the controversy from arbitration, however, no other judicial act is authorized. [Citation.] [¶] In the interim, the arbitrator takes over. It is the job of the arbitrator, not the court, to resolve all questions needed to determine the controversy. [Citations.] The arbitrator, and not the court, decides questions of procedure and discovery. [Citations.] It is also up to the arbitrator, and not the court, to grant relief for delay in bringing an arbitration to resolution. [Citations.] . . . `When it has been determined that arbitration should be pursued and all judicial proceedings have been suspended until completion of the arbitration, it would be wholly incompatible with established policies of the law to permit the court thereafter to intervene in, and necessarily to interfere with, the arbitration ordered. In large measure, it would not only preclude the parties from obtaining "an adjustment of their differences by a tribunal of their choosing," but it would also recreate the very "delays incident to a civil action" that the arbitration agreement was designed to avoid." (Fns. omitted.)
In this case, it is undisputed that the Agreement contained an arbitration clause, and the parties admitted in their respective pleadings that they were bound by that clause. At the initial case management conference, the parties stipulated to resolve the dispute in arbitration and the trial court implicitly recognized and enforced that stipulation by referring the matter to arbitration and setting a hearing on an OSC re dismissal "after binding arbitration." Although it does not appear that a formal stay order was expressly sought or entered, the trial court implicitly suspended proceedings in the action at law until completion of the arbitration by initially setting and then repeatedly continuing the hearing on the OSC re dismissal, thereby deferring resolution of the merits of the dispute to the arbitration process agreed upon by the parties.
The parties also admitted in their respective pleadings that the only exception to the arbitration requirement in the Agreement was the filing of a court action to enable plaintiffs to record a lis pendens. And that was the only apparent purpose of the original complaint because it specifically provided that the filing of such a court action would not operate as a waiver of the arbitration requirement, and that plaintiffs would commence arbitration concurrently with the filing of the court action. The parties subsequent stipulation to proceed to arbitration, during their first appearance in the trial court, is consistent with the conclusion that the original complaint was filed solely to enable plaintiffs to record a lis pendens, not to obtain any form of relief on the merits from the trial court.
As a result, plaintiffs were required to resolve their dispute in arbitration; and to the extent defendant thereafter frustrated plaintiffs efforts to arbitrate the dispute, by employing dilatory tactics, plaintiffs remedy was to bring a motion under section 1281.6 for an order appointing an arbitrator. Once the trial court appointed an arbitrator, defendants delay tactics could have been brought to that arbitrators immediate attention and remedied. (See Blake v. Ecker, supra, 93 Cal.App.4th at p. 738 ["rather than seek relief from the trial court for plaintiffs failure to proceed, defendants should have sought relief in the arbitration proceeding, by pursuing the remedies available under the arbitration agreement and the rules of the arbitration association designated therein"].)
Because the arbitration clause did not contain any provision regarding an arbitration completion date, plaintiffs also could have moved the trial court for an order setting an arbitration completion date under section 1283.8. (Bosworth v. Whitmore, supra, 135 Cal.App.4th at p. 550.)
Because the controversy was never formally withdrawn from arbitration by stipulation of the parties or by a motion and court order, the trial court had no power to enter a default or grant plaintiffs motion to enter a default judgment. Therefore, the order granting that motion, as well as the judgment based on that order, must be reversed.
DISPOSITION
The trial courts order granting plaintiffs motion to enter judgment and its judgment based on that order are reversed. No costs are awarded.
We concur:
TURNER, P. J.
KRIEGLER, J.