Opinion
D057368
01-05-2012
LISA SLAGTER, Plaintiff and Respondent, v. MAURICE MAIO, Defendant and Appellant.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Super. Ct. No. 37-2009-00098050-CU-BC-CTL)
APPEAL from an order of the Superior Court of San Diego County, Jeffrey B. Barton, Judge. Affirmed.
Maurice Maio appeals from an order denying his petition to compel arbitration of this action arising from a profit sharing agreement (PSA) with Lisa Slagter. Because there was substantial evidence that Maio waived his right to arbitrate, we affirm the trial court's order.
FACTUAL AND PROCEDURAL BACKGROUND
The parties are well aware of the facts underlying their dispute and because these facts are not relevant to the issue presented on appeal, we do not set them forth in detail.
Maio and Slagter had a business and a romantic relationship that began in 2000 and ended in early 2009. In April 2004, they prepared and executed the PSA to share profits derived from the sale and leasing of certain real property. The PSA contained a binding arbitration clause whereby the parties agreed to arbitrate "any dispute" under the agreement. The parties dispute whether the PSA is still in effect. Slagter also alleges that she drafted and that Maio signed, a handwritten agreement giving her a life estate in one of the properties. Maio disputes the validity of the handwritten agreement.
Slagter filed this action on September 10, 2009. Later that month, after hearing argument from the parties, the trial court denied Slagter's ex parte application for a temporary restraining order (TRO). In October 2009, the trial court denied Slagter's renewed request for a TRO after hearing from both sides. At that time, the court set a hearing for a preliminary injunction and noted that Slagter's counsel had been unsuccessful in serving Maio with the summons and complaint. Later that month, Slagter served Maio with the summons and complaint. In November 2009, Maio demurred to the complaint asserting that the parties' rights to the properties were governed by the PSA. He also filed a cross-complaint alleging breach of the PSA.
At the December 2009 hearing denying Slagter's motion for a preliminary injunction, Maio argued that nothing in the PSA gave Slagter the right of possession. At that time the court set expert designation and discovery and motion cut-off dates, and calendared the matter for trial in March 2010. After Slagter filed a lis pendens against all of Maio's properties, Maio filed an ex parte application to expunge the lis pendens or for an order shortening time. At the January 13, 2010 hearing, Maio's counsel mentioned his desire to file a motion to compel arbitration should any of Slagter's claims survive demurrer, with the trial court questioning why counsel did not bring the motion as his "first move." (Unless otherwise designated, all further dates are in 2010.)
Slagter filed a first amended complaint, mooting Maio's demurrer. Thereafter, Maio sought to continue the trial date to allow the court to rule on a demurrer to the amended complaint, and his motions to expunge the lis pendens and compel arbitration. In March, the trial court denied the motion to compel arbitration, finding that based on the facts, Maio had waived his right to compel arbitration and that Slagter had been prejudiced by the delay. In April, the trial court granted Maio's motion to expunge the lis pendens, sustained the demurrer with leave to amend as to one cause of action, and overruled the demurrer as to the rest of the causes of action. The following month, Maio timely appealed the order denying his motion to compel arbitration.
DISCUSSION
A trial court may deny a petition to compel arbitration on the ground of waiver. (Code Civ. Proc., § 1281.2, subd. (a).) Relevant factors to consider in assessing waiver claims include: " ' "(1) whether the party's actions are inconsistent with the right to arbitrate; (2) whether 'the litigation machinery has been substantially invoked' and the parties 'were well into preparation of a lawsuit' before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) 'whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place'; and (6) whether the delay 'affected, misled, or prejudiced' the opposing party.(Saint Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1196 (Saint Agnes).)
The question of waiver is one of fact, and our function is to review a trial court's findings regarding waiver to determine whether they are supported by substantial evidence. (Berman v. Health Net (2000) 80 Cal.App.4th 1359, 1363.) We may not reverse the trial court's finding of waiver unless the record, as a matter of law, compels finding nonwaiver. (Ibid.) If more than one reasonable inference may be drawn from undisputed facts, the substantial evidence rule requires indulging the inferences favorable to the trial court's judgment. (Davis. v. Continental Airlines, Inc. (1997) 59 Cal.App.4th 205, 211.)
As a threshold matter, it appears that the essential facts of what took place in the litigation before Maio sought to compel arbitration are undisputed; however, more than one reasonable inference may be drawn from these undisputed facts. In this situation we are required to indulge the inferences favorable to the trial court's judgment. (Davis. v. Continental Airlines, Inc., supra, 59 Cal.App.4th at p. 211.)
Maio asks us to affirm the trial court's purported finding that a valid arbitration agreement existed. However, the issue whether the parties rescinded the PSA containing the arbitration clause is a hotly contested factual matter. To resolve this issue the trial court could have, but did not, hold an evidentiary hearing. (Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal.App.4th 754, 762 [trial court can hear oral testimony and allow cross-examination].) Significantly, the trial court's order did not make an express finding on this factual issue and it may have simply assumed the validity of the PSA and the arbitration clause contained therein and proceeded to the waiver issue. Even assuming the trial court found a valid arbitration agreement existed, we need not address this factual issue to resolve the appeal. Rather, we shall assume, without deciding that a valid arbitration clause existed and address the trial court's factual finding that Maio waived any right he had to arbitration.
Maio complains that Slagter's "hyper-aggressive litigation tactics" required his participation in the litigation and that his participation, as a matter of law, did not constitute a waiver of his right to compel arbitration because it occurred before he was required to file a responsive pleading. We disagree.
Maio cited no authority to support the proposition that a party wishing to compel contractual arbitration can freely participate in the litigation until a responsive pleading is due. Moreover, the Code of Civil Procedure provides a solution for parties desiring arbitration that are faced with aggressive litigation tactics. Such parties may seek a stay of pending litigation either by itself, or in conjunction with a petition to compel arbitration, and the trial court must grant a stay if the motion to compel arbitration has not yet been ruled upon. (Code Civ. Proc., § 1281.4.) The statute anticipates that a party desiring contractual arbitration in lieu of litigation will move to compel arbitration and, upon request of that party, requires that the trial court stay the litigation until the motion is heard. (Twentieth Century Fox Film Corp. v. Superior Court (2000) 79 Cal.App.4th 188, 192.)
Thus, Maio could have avoided a waiver of his right to compel arbitration by promptly seeking to compel arbitration and stay the action. Instead of doing so, Maio chose to take part in this action, filed a cross-complaint seeking affirmative relief, and waited about four months before even mentioning the existence of the arbitration clause to the trial court. Maio's delay required him to seek ex parte relief to continue the trial date in order to have his motion to compel arbitration heard. Significantly, even when Maio finally filed his motion to compel arbitration he never requested that the action be stayed. Even after the trial court denied the motion to compel arbitration he did not immediately appeal the ruling to stay the action; rather, he waited a month to allow the trial court to rule on his demurrer and motion to expunge the lis pendens.
While Saint Agnes does not require that all six factors be present to support a finding of waiver, most, if not all, of the factors are present here. (Saint Agnes, supra, 31 Cal.4th at p. 1195 ["[N]o single test delineates the nature of the conduct that will constitute a waiver of arbitration."].) Maio's conduct unquestionably satisfied four of the six factors articulated in Saint Agnes as his actions were inconsistent with the right to arbitrate, he filed a counterclaim without asking for a stay of the proceedings, requested arbitration close to the trial date, and waited until the litigation machinery had been substantially invoked before notifying Slagter of an intent to arbitrate. (Id. at p. 1196.) Simply put, waiting four months to assert the right to compel arbitration under the circumstances of this case was not reasonable.
With respect to the last two Saint Agnes factors, i.e., whether important intervening steps, such as judicial discovery procedures not available in arbitration, had taken place and whether the delay affected, misled, or prejudiced the opposing party, the evidence demonstrates that Maio intentionally sought to litigate the merits of Slagter's claims before seeking to compel arbitration. As Maio's counsel explained to the trial court at the January 2010 hearing when arbitration was first mentioned: "Well, we think the demurrer will resolve all claims and issues, and there would be no—no need for arbitration." Thus, Maio sought to dispose of or narrow Slagter's claims through litigation before invoking his right to arbitration.
Maio's delay in exercising his right to arbitration also affected Slagter to her prejudice. His delay and use of the litigation process substantially undermined the important public policy favoring arbitration as a speedy and relatively inexpensive means of dispute resolution. (Saint Agnes, supra, 31 Cal.4th at p. 1204 ["Prejudice typically is found . . . where the petitioning party's conduct has substantially undermined this important public policy or substantially impaired the other side's ability to take advantage of the benefits and efficiencies of arbitration."].) As one court recently stated: "We are loathe to condone conduct by which a [litigant] repeatedly uses the court proceedings for its own purposes . . . all the while not breathing a word about the existence of an arbitration agreement, or a desire to pursue arbitration . . . ." (Adolph v. Coastal Auto Sales, Inc. (2010) 184 Cal.App.4th 1443, 1452.)
We conclude that substantial evidence supported the trial court's finding of waiver and that the order denying the motion to compel arbitration should be affirmed.
DISPOSITION
The order denying appellant's motion to compel arbitration is affirmed. Respondent shall recover her costs on appeal.
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MCINTYRE, J.
WE CONCUR: ____________
NARES, Acting P. J.
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HALLER, J.