Holm Development & Management, Inc. v. Superior Court

778 P.2d 1272, 161 Ariz. 376, 35 Ariz. Adv. Rep. 28, 1989 Ariz. App. LEXIS 160
CourtCourt of Appeals of Arizona
DecidedJune 1, 1989
DocketNo. 1 CA-SA 88-195
StatusPublished

This text of 778 P.2d 1272 (Holm Development & Management, Inc. v. Superior Court) is published on Counsel Stack Legal Research, covering Court of Appeals of Arizona primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Holm Development & Management, Inc. v. Superior Court, 778 P.2d 1272, 161 Ariz. 376, 35 Ariz. Adv. Rep. 28, 1989 Ariz. App. LEXIS 160 (Ark. Ct. App. 1989).

Opinion

OPINION

KLEINSCHMIDT, Judge.

In this special action we address the effect of filing an appeal from an order denying a motion to compel arbitration. We hold that such an appeal divests the trial court of jurisdiction over the case for every purpose except that of entering orders in furtherance of the appeal or of entering orders to perpetuate the testimony of witnesses pursuant to Rule 27(b), Arizona Rules of Civil Procedure.

The petitioners are a developer, a development company, and an architectural firm. The respondent real parties in interest, whom we will refer to as respondents, are a general contractor, an electrical contractor, and a materials supplier. The respondent general contractor commenced an action for breach of contract against the petitioner in the superior court and joined the other respondents as defendants under a lien foreclosure claim. The details of this suit are unimportant except for the fact that the petitioners, purportedly relying upon the provisions of the contract and of A.R.S. section 12-1502, filed a motion to compel arbitration. The trial court denied the motion, and the petitioners appealed to this court in an action titled Stevens/Leinweber/Sullens, Inc. v. Holm Development & Management, Inc., No. 1 CA-CIV 88-548. This appeal, which was filed on September 8, 1988, is still pending. It has not yet been considered by this court, and its merits are irrelevant to the resolution of this special action. After the petitioners filed their appeal, the respondents served them with a notice of deposition and subpoena duces tecum seeking the production of the petitioners’ bank records. When the petitioners’ motion for a protective order was denied, this special action ensued. . We accepted jurisdiction, granted relief, and stayed all further proceedings in the trial court pending disposition of the appeal.

The petitioners argue that the perfection of an appeal generally divests the trial court of jurisdiction to enter any orders except those in furtherance of the appeal. Castillo v. Industrial Comm’n., 21 Ariz. App. 465, 467, 520 P.2d 1142, 1144 (1974). They contend that the effect of perfecting an appeal from an order denying a motion to compel arbitration is no exception to this general rule. They point out that the rule’s purpose is to prevent the trial court from taking an action that might moot the issue on appeal or alter the rights of the parties in the underlying action in such a way that a just remedy will not be available when the appeal is eventually resolved. See Whitfield Transp., Inc. v. Brooks, 81 Ariz. 136, 141, 302 P.2d 526, 529 (1956); Gotthelf v. Fickett, 37 Ariz. 413, 416-17, 294 P. 837, 840-41 (1931). In this regard, they assert that they may be deprived of some of the benefits of arbitration if the underlying action is allowed to proceed while the appeal is pending. They note that arbitration avoids the burden and expense of ordinary discovery and trial procedures and that it permits the resolution of complex construction problems by industry experts.

The respondents’ counterargument is that A.R.S. section 12-2101.01(B) provides that an appeal from an order denying a motion to compel arbitration “shall be taken in the manner and to the same extent as from orders or judgments in a civil action.” They reason that an order denying a motion to compel arbitration is tantamount to an order denying a request for a mandatory injunction. The trial court generally does not lose jurisdiction when an appeal is taken from a denial of a mandatory injunction. See State ex rel. Corbin v. Tolleson, 152 Ariz. 376, 379, 732 P.2d 1114, 1117 (App.1986). It follows, the respondents say, that an appeal from a denial of a motion to compel arbitration does not stay proceedings in the trial court. The respondents cite the following three cases in support of this proposition: Ohio-Sealy Mattress Manufacturing Co. v. Duncan, 714 F.2d 740 (7th Cir.1983), cert. denied, 464 U.S. 1044, 104 S.Ct. 712, 79 L.Ed.2d 176 [378]*378(1984); Nesslage v. York Securities, Inc., 107 F.R.D. 389 (E.D.Mo.1985); and Local 344 v. Singer Co. Piecework Control Systems, 84 F.R.D. 424 (N.D.Ill.1979).

The respondents also observe that the trial court’s order was limited to allowing discovery. They maintain that the petitioners should have invoked Rule 62(c), Arizona Rules of Civil Procedure, if they believed that proceeding with discovery jeopardized their rights. Rule 62(c) provides that when an interlocutory appeal is taken from an order granting or denying an injunction, the trial court may “suspend, modify, restore, or grant an injunction during the pendency of the appeal upon such terms as to bond or otherwise as it considers proper for the security of the rights of the adverse party.”

The respondents make a further argument based upon practicality. They point out that if discovery is not allowed to proceed pending appeal, witnesses may be denied access to the construction site and evidence may be lost. They also note that the parties will be entitled to engage in discovery even if the petitioners win their appeal and this matter is referred to arbitration. They therefore contend that the petitioners will lose nothing if discovery proceeds while the appeal is pending.

In reply, the petitioners argue that a motion to compel arbitration is not a request for a mandatory injunction. On this basis, they assert that the Rule 62 “injunction exception” to the general rule that an appeal divests the trial court of jurisdiction does not apply in this case. They further argue that Matterhorn, Inc. v. NCR Corp., 763 F.2d 866 (7th Cir.1985), which held that a motion to compel arbitration is not a request for an injunction, undermines two of the cases that the respondents rely upon, Ohio-Sealy and Local 344• The petitioners do not discuss the practical problems that may ensue if discovery is not allowed to proceed pending the appeal of the order denying the motion to compel arbitration.

It is to some degree true that an order granting or denying a motion to compel arbitration has features in common with an order granting or denying a mandatory injunction. Since damages at law are inadequate for the breach of an agreement to arbitrate, specific performance—an order compelling the parties to arbitrate—is the remedy of choice. D. Dobbs, Handbook on the Law of Remedies § 12.27, at 939 (1973). In granting specific performance, the court may order a party to do or not to do something, just as it does when it grants an injunction. For the purposes of determining the trial court’s jurisdiction to proceed with litigation while an appeal is pending, however, this similarity between an order granting or denying a motion to refer to arbitration and an injunction is not controlling.

In a breach of contract action, an order concerning arbitration has more in common with orders that direct and supervise the conduct of the case than it does with decisions, orders, and judgments that address the substantive merits of the litigation.

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Bluebook (online)
778 P.2d 1272, 161 Ariz. 376, 35 Ariz. Adv. Rep. 28, 1989 Ariz. App. LEXIS 160, Counsel Stack Legal Research, https://law.counselstack.com/opinion/holm-development-management-inc-v-superior-court-arizctapp-1989.