Ehrhart & Associates, Inc. v. Superior Court

185 Cal. App. 2d 1, 7 Cal. Rptr. 844, 1960 Cal. App. LEXIS 1468

Opinions

KINCAID, J. pro tem.

Footnotes

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Petitioner seeks mandate to compel the respondent Superior Court in and for the County of Los Angeles to vacate its order staying proceedings relating to petitioner’s application and petition for the appointment of an arbitrator and for an order directing arbitration, and to require the respondent court to proceed to appoint an arbitrator, or with a summary trial on the issue of whether or not the contract between petitioner and the real party in interest herein has been rescinded. Demurrer and return to such petition by respondent court and answer and return thereto by Valley Nitrogen Producers, Inc., a corporation, the real party in interest, have been filed.

The said order of the respondent court stayed proceedings relating to petitioner’s application and petition for appointment of an arbitrator and for order directing arbitration filed in the respondent court pursuant to sections 1282:1283 of the Code of Civil Procedure during the pendency of an action for rescission of a contract between petitioner and the real party in interest, Valley Nitrogen Producers, Inc., or until further order of the respondent court.

The basic questions presented are whether the respondent court refused to perform a positive, statutory act or duty which it was under obligation to perform, and whether it was guilty of an abuse of discretion in so staying and continuing such arbitration proceedings.

Petitioner and Valley Nitrogen Producers, Inc. (hereinafter called “Valley”) originally entered into a contract whereby petitioners contracted to bnild an ammonium sulphate plant in Fresno County for Valley.¹

Subsequently, in February 1960, a dispute having arisen between the parties over the alleged failure of Valley to make progress payments called for under the contract and to pay certain other invoices, petitioner elected to submit the matter to arbitration and appointed one of three arbitrators as provided for in the contract.

The contract contained an arbitration clause which provided in essence that controversies should be submitted to arbitration upon written request of either party; that within five days after such request, each party should appoint one arbitrator ; that the two arbitrators should appoint a third arbitrator and that the three should proceed to determine the dispute, make awards, and assess the costs and expenses of arbitration.

Valley also appointed an arbitrator but the two arbitrators thereafter failed to agree upon the appointment of a third arbitrator. No third arbitrator was or has been named.

On May 31, 1960, and before the filing of petitioner’s application and petition for appointment of arbitrator and for order directing arbitration, Valley gave oral and written notice to petitioner that it was rescinding the contract on account of alleged material breach thereof by petitioner.

Thereafter, on June 3, 1960, petitioner filed in the respondent court its aforementioned petition for appointment of an arbitrator and for an order directing arbitration and, on June 6, 1960, filed and served on Valley notice of motion for order appointing arbitrator and directing that arbitration proceed.

In its said petition and motion, petitioner in addition to alleging the aforementioned making of the contract, the dispute and controversy, its election to submit the matter to arbitration, the appointment of the two arbitrators and the failure of the two arbitrators to name a third arbitrator, further alleged that the naming of the third arbitrator and the arbitration had been prevented by acts of Valley. Petitioner also alleged that, in addition to the dispute over Valley’s alleged failure to make the stipulated progress payments under the contract, dispute and controversy had arisen as to various other matters including controversy as to whether or not Valley was entitled to rescind the contract.

Valley answered said petition and filed affidavits in opposi tion to petitioner’s said motion. Its countershowing so made included denial that it had prevented arbitration as to dispute over the alleged failure to make the progress payments and contained averments that no dispute existed at the time the arbitration was requested except as to alleged failure to make progress payments; that the contract was to be performed in Fresno County; that all of its records are in Fresno County and the principal witnesses reside in Fresno County.

In addition, Valley affirmatively declared that it had rescinded the contract on May 31, 1960, and had filed complaint for rescission in the Superior Court of Fresno County of June 8, 1960; i.e., within five days after petitioner had filed its said application in the respondent Superior Court of Los Angeles County and within two days after petitioner had filed its aforementioned motion in the respondent court. Valley asserted that the key issue as to whether the contract had been rescinded was involved and could only be determined in the plenary suit pending in Fresno County.

The respondent court, after considering the conflicting issues of fact raised by the verified pleadings and the respective affidavits of the parties, stayed proceedings relating to the petition for arbitration during the pendency of the rescission action so filed in Fresno County, or until its further order. In its said stay order, the respondent court specifically stated that it was not basing its determination on convenience of the parties or upon ruling as to the county in which the arbitration matter should ultimately be tried.

We have reached the conclusion, for the reasons hereinafter stated, that the respondent court had a discretionary power to stay or continue the arbitration proceedings so filed in Los Angeles County during the pendency of the rescission action filed in Fresno County, or until its further order; and that no abuse of discretion has been shown or appears herein.

It will be noted that we are here confronted with a question relating to the trial court’s broad power to grant a continuance or stay of proceedings, rather than with the narrow question of whether a prior action can be abated by a subsequent action. No abatement is involved but only power to grant continuance or stay. (Smith v. Smith, 134 Cal. 117, 119, 120 [66 P. 81]; 12 Cal.Jur.2d, 134, 135; 2 Witkin, California Procedure, 1751; see also generally, California C. Mach. Co. v. Superior Court, 3 Cal.2d 606, 609 [44 P.2d 1046].)

The factual situation here presented is not equivalent to that before the court in Scott v. Industrial Acc. Com., 46 Cal.2d 76 [293 P.2d 18], wherein two separate tribunals each had concurrent jurisdiction over the same parties and subject matter, and each such tribunal was seeking to assert its jurisdiction, thus presenting the possibility of conflicting judgments, the court holding that the tribunal in which jurisdiction first attached is entitled to retain it. In granting prohibition in that ease the court additionally pointed out, however (p. 90), that such a writ is addressed to the jurisdiction of the court whereas the granting of a stay of proceedings in such a case is not a matter of jurisdiction but calls for exercise of judicial discretion which would not affect the jurisdiction, as such, of either court.

In our instant case the court, in considering the conflicting evidence before it, was entitled to exercise its discretion to grant a continuance or stay of the arbitration proceedings pending determination of controlling issues in another action even though such other action was commenced subsequently. Authorities relied upon by petitioner fail to support its position to the contrary. Kalmus v. Kalmus, 103 Cal.App.2d 405, 414, 415 [230 P.2d 57] and Perkins v. Benquet Consol. Min. Co., 55 Cal.App.2d 720, 763, 764 [132 P.2d 70], only establish that an order denying continuances requested in part because a subsequent action involving like issues had been filed, will not be disturbed. They do not hold, and they are not authority for holding, that an order granting a continuance under such circumstances and for such reason, can or should be set aside by a reviewing court and mandate issued to compel the lower court to proceed.

We recognize that sections 1282-1283 of the Code of Civil Procedure afford a summary remedy and procedure. However, this consideration need not operate to divest a trial court of its inherent power to grant continuances or stays under proper circumstances.

The trial court herein was confronted with the problem that issue existed as to whether or not the contract could be and had been rescinded. It was doubtful whether anything could be validly or effectively accomplished by appointing an arbitrator and directing arbitration, since the equitable issue of rescission had been raised. As pointed out in Drake v. Stein, 116 Cal.App.2d 779 [254 P.2d 613], upon the issue of rescission being raised, it became the duty of the court to make a judicial finding on that issue. (P. 784.) “In any proceeding for the enforcement of a contract for an arbitration of a dispute arising under it, a claim that the contract is invalid or that it has been rescinded places the controversy on the conscience of the court which must then determine the equitable issues raised by the defendant.” (See also Wetsel v. Garibaldi, 159 Cal.App.2d 4, 9, 10 [323 P.2d 524].)

In support of petitioner’s contention that respondent court is required to forthwith proceed with the arbitration proceedings our attention is directed to a trend of decisions reflected by the note in 3 American Law Reports 2d 425: “A group of more recent cases, mainly decided by the New York courts, have developed a principle that a party claiming to rescind a contract, including an arbitration clause therein contained, because of a breach or asserted breach of the contract by the other party or for similar cause arising out of acts of the parties themselves, cannot, by setting up such claim for rescission or to rescind at the time when his opponent seeks to compel arbitration in accordance with such clause, eliminate it or obviate its effect.”

In our instant ease the discretionary action of the trial court in ordering a sta3r of the arbitration proceedings pending determination of the rescission action did not result in abating, eliminating or obviating the effect of such proceedings but only in postponing them pending determination of the more inclusive equitable action.

The ammonium sulphate plant, the building of which is the subject matter of the contract in question, is located in Fresno County; the issues presented by the rescission action are more inclusive in scope than are those in the arbitration proceedings; an arbitration of progress payments only may well become moot by adjudication of the rescission and other issues and a multiplicity of suits may unnecessarily result by compelling the Los Angeles County proceedings to go forward either in advance of or simultaneously with the Fresno County action. Under such circumstances a stay of the arbitration proceedings is not a matter of right but is within the sound discretion of the court. As pointed out in Farmland Irrigation Co. v. Dopplmaier, 48 Cal.2d 208, 215 [308 P.2d 732]: “In exercising its discretion the court should consider the importance of discouraging multiple litigation designed solely to harass an adverse party, and of avoiding unseemly conflicts with the courts of other jurisdictions. It should also consider whether the rights of the parties can best be determined by the court of the other jurisdiction because of the nature of the subject matter, the availability of witnesses, or the stage to which the proceedings in the other court have already advanced. ’ ’

In view of the evidence before it the trial court was faced with the problem of whether to proceed to determine a portion of the issues in summary proceedings under Code of Civil Procedure, section 1282, or to stay the Los Angeles County proceeding until the more inclusive issues were determined in the plenary action pending in Fresno County.

It is our conclusion that, in taking the latter course, the court exercised a proper and legal discretion.

The alternative writ heretofore issued in this proceeding is accordingly discharged, the demurrer is sustained and petition for peremptory writ of mandate is denied.

Fox, P. J., concurred.

Assigned by Chairman of Judicial Council.

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Petitioner and Valley are both California corporations having principal places of business respectively in Los Angeles and Fresno Counties.