Filed 10/3/17 Stevens v. Coastal CA1/5

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FIVE

In this consolidated appeal, Sigaford Stevens appeals adverse rulings in two lawsuits against respondent Coastal Realty Business Trust (Coastal Realty). We affirm in the first appeal and dismiss the second.

BACKGROUND

The First Action: Coastal Realty’s Breach Of Contract Lawsuit

In February 2015, Coastal Realty filed a breach of contract lawsuit against Stevens (the First Action).[1] The complaint attached the contract, an agreement for the purchase of certain shares of stock, which included the following provision: “Purchaser and Seller agree that any dispute, claim, or controversy arising out of or related to this agreement for a purchase of Shares shall be resolved by binding arbitration in San Francisco, California . . . . If both parties waive their right to arbitrate, then any dispute or claim arising out of or related to this agreement will be subject to the exclusive jurisdiction of Contra Costa County Superior Court for the State of California. In any such action, Purchaser and Seller expressly submit and consent to the exclusive jurisdiction of Contra Costa County Superior Court and waive all defenses to jurisdiction and venue.”

Stevens, specially appearing, filed a motion to quash service of the summons and complaint on the ground that the court lacked personal jurisdiction. Stevens’s motion argued he was not a California resident; he had insufficient contacts with California to warrant jurisdiction; and the contract was invalid because a condition precedent to formation had never been completed and Stevens lacked the capacity to contract. Coastal Realty did not file a response to Stevens’s motion. In April 2015, the trial court issued the following order: “[Stevens’s] unopposed motion to quash service of summons and complaint is hereby granted. See CCP §418.10(a) (1). [¶] The Action is dismissed as to [Stevens] pursuant to CCP §581(h).”[2]

In the months following the dismissal, arbitration proceedings with JAMS commenced. Stevens contested the arbitrability of the dispute, and the parties filed briefs on arbitrability with the arbitrator. Stevens argued, inter alia, that res judicata barred the arbitration: he contended the dismissal order in the First Action rested on a final determination that the contract was invalid, and Coastal Realty was therefore estopped from relitigating the issue of contract validity.

The Second Action: Stevens’s Petition and Complaint

On December 14, 2015, Stevens filed a complaint and a petition “on” the complaint (the Second Action).[3] The pleadings included Stevens’s argument that res judicata barred relitigation of the issue of contract validity, and alleged in the alternative that the contract was invalid and that Coastal Realty had waived its arbitration rights. The petition and complaint sought declaratory relief; an order enjoining Coastal Realty from pursuing arbitration; and, in the alternative, the rescission or invalidation of the contract. Stevens obtained a temporary stay of the arbitration pending a decision on his petition, and Coastal Realty subsequently filed a cross-petition to compel arbitration.

In March 2016, the trial court issued an order denying Stevens’s petition and dissolving the temporary stay of arbitration. The order included a lengthy explanation of the court’s reasoning. First, the court noted it “has grappled with ascertaining the nature of this proceeding.” The court stated it “is not aware of any statutory authorization for filing a ‘petition on verified complaint’ ” and, “while the CAA [California Arbitration Act] authorizes the filing of a petition to compel arbitration, a petition to confirm an arbitration award, or a petition to vacate or correct an arbitration award, the Court finds no statutory authority for filing a stand-alone petition to permanently enjoin a pending arbitration. The statute cited by [Stevens], section 1281.2 . . . , authorizes a temporary stay of arbitration as ancillary relief when deciding a petition to compel arbitration . . . . And of course, the CAA does not authorize the filing of a petition ‘for declaratory relief,’ or a petition ‘for rescission.’ ”

Turning to the complaint, the court noted it was “comprised of 527 paragraphs,” “is structured as a memorandum of points and authorities,” and appears to be “also intended to serve as a motion to quash, and as a motion for consolidation of this proceeding with the underlying limited jurisdiction action. However, [Stevens] cites no legal authority supporting the proposition that one can file a complaint ‘to quash service of’ an arbitration demand. [Stevens] also cites no legal authority supporting the proposition that one can consolidate a petition brought under the CAA with a dismissed limited jurisdiction action.” The court concluded, “the nature of this proceeding is a petition brought under the CAA . . . . Viewing the proceeding as such, the Court denies the petition on the ground that there is no statutory authority under the CAA for filing a stand-alone petition to permanently enjoin a pending arbitration.”

The order clarified that “[t]his purely procedural ruling shall not prejudice any right [Stevens] may have to commence a regular civil action by filing an intelligible stand-alone complaint stating recognizable causes of action, but it would have to be a new action with a new action number. This ruling also shall not prejudice any right [Stevens] may have to raise defenses in the following procedural contexts: (a) the JAMS arbitration . . . ; (b) an opposition to any petition to confirm the arbitration award, once the pending JAMS arbitration is concluded, and; (c) a petition to vacate the arbitration award.” The order included the trial court’s “preliminary assessment” that “the primary relief [Stevens] seeks - enjoining the JAMS arbitration - is likely not warranted” because the defense is one for the arbitrator to decide and because the court was “highly skeptical” that the motion to quash ruling in the First Action should be afforded preclusive effect. The court underscored, however, that “the Court cannot reach the merits of [Stevens’s] claim for relief in its present form.”

On the same day, the trial court denied Coastal Realty’s cross-petition to compel arbitration as moot in light of the pending JAMS arbitration. Judgment dismissing the action issued in April 2016. Stevens’s appeal from this judgment is the first appeal at issue here.

The Third Action: Stevens’s Complaint

In April 2016, following the dismissal of the Second Action, Stevens filed a new complaint (the Third Action). The complaint’s causes of action—for declaratory and injunctive relief and, in the alternative, rescission or invalidation of the contract—are identical to those in the complaint filed in the Second Action.

On May 3, the arbitrator issued a decision on a number of issues relating to the arbitrability of the dispute. The decision rejected Stevens’s res judicata claim and set a date in June for the arbitration hearing.

On May 9, Stevens filed a motion in the trial court “for an order declaring rights and enjoining [Coastal Realty] from pursuing or enforcing arbitration against Stevens.” His motion sought “a decision on the merits” on whether the ruling in the First Action precluded relitigation of the issue of contract validity or, alternatively, whether Coastal Realty had waived arbitration. Coastal Realty filed a cross-petition to compel arbitration.

In June, the trial court issued a lengthy order requesting supplemental briefing on several issues relating to Stevens’s motion. One of the issues pertained to the Second Action, which the court noted sought “the same relief now sought in [the Third Action]. While [the bench officer in the Second Action] denied plaintiff’s petition on procedural grounds, plaintiff has filed an appeal from the resulting judgment, and the appeal remains active . . . . [¶] It is not clear to the Court that this new civil action should proceed while [the Second Action] is pending on appeal. . . . The Court requests briefing on whether this action should be abated, pending the outcome of the appeal.” The court also requested additional briefing on whether Stevens’s challenges to the contract’s validity were for the court or the arbitrator to decide and on the merits of his res judicata claim, noting that “[e]ven if plaintiff’s attack on the parties’ contract raises issues for the Court to decide, the Court is not persuaded that the ruling on the motion to quash in [the First Action] has any res judicata effect.” Finally, the court requested additional briefing on the criteria for granting a preliminary injunction.

Meanwhile, the arbitration concluded and on June 30 the arbitrator issued an interim award for Coastal Realty. The amount of fees and costs remained pending before the arbitrator, with a final award to issue after that determination was made.

In July, the trial court issued an order denying Stevens’s motion. The court noted Stevens’s supplemental brief clarified he was seeking “a permanent injunction,” yet he “cite[d] no legal authority supporting the proposition that the Court has jurisdiction to make such a final determination on the merits of this action in the context of a motion made at the inception of the action.” The court concluded: “[Stevens] is in effect seeking summary adjudication, but (l) before the case is at issue, (2) before discovery has been conducted, and (3) without the safeguards of the summary adjudication procedure. The court denies [Stevens]’s unauthorized motion for a final determination of the merits.”

On the same day, the court issued an order denying Coastal Realty’s petition to compel arbitration because the arbitration was nearly complete, rendering the petition “superfluous.” The court continued: “the Court does have inherent judicial authority to stay this action, pending the resolution of other proceedings. . . . [¶] This action is stayed, pursuant to the Court’s inherent judicial authority. Either side may move to lift the stay once the appeal in [the Second Action] has been decided, or when a final arbitration award has been entered in the underlying arbitration proceeding. It simply makes no procedural sense to have two civil actions and an arbitration all moving forward simultaneously.” The court offered the following comments: “At this late date, the path to an orderly resolution of the issues seems clear: [Coastal Realty] will likely petition the Court to confirm the final arbitration award, and plaintiff Stevens may choose to file a separate petition to correct or vacate the award. . . . A final Superior Court judgment would be entered, and the Court’s rulings could then be appealed. The Court assumes that [Stevens] would dismiss the appeal from the judgment entered in [the Second Action], so that all remaining issues could be decided in a single new appeal. [¶] Plaintiff has failed to persuade the Court that any other approach makes sense in the current procedural context. However, the parties should do their own independent research concerning their procedural options, and the due dates for exercising those options; the Court is here stating only its expectation as to how matters may proceed.” Stevens appealed from this order.

DISCUSSION

I. Appeal in the Second Action

The trial court dismissed the Second Action on the ground that (1) Stevens’s pleading was effectively a petition to permanently enjoin an arbitration under the California Arbitration Act (§ 1280 et seq.; CAA), and (2) the CAA does not authorize such petitions.

We address the second issue first. The statute relied upon in Stevens’s petition was section 1281.2, which provides: “On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it” makes certain determinations, including that “[a] party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.” (§ 1281.2, subd. (c).)

Stevens argues that relief under this provision is not limited to cases involving actions with third parties, and instead extends to cases involving actions between the same parties about issues not subject to arbitration. But this argument does not address the court’s conclusion that the statute does not authorize a petition to permanently enjoin an arbitration, regardless of the grounds. The statutory provision begins, “On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy . . . .” The statute thus authorizes petitions to compel arbitration, but Stevens points to no authority that the CAA also provides for petitions to permanently enjoin arbitrations.

We next turn to the first aspect of the trial court’s ruling, its characterization of Stevens’s pleading as a petition under the CAA. Stevens argues his “combined” petition and complaint was proper or, if it were not, he should have been granted leave to amend.[4] Stevens fails to demonstrate he was prejudiced by any error. (Cal. Const., Art. VI, § 13 [“No judgment shall be set aside . . . unless, after an examination of the entire cause, . . . the court shall be of the opinion that the error complained of has resulted in a miscarriage of justice.”].) He claims prejudice from having to defend himself in the arbitration, but the dismissal expressly provided it was without prejudice to his ability to file a new complaint, and Stevens promptly did so by filing the Third Action. The Third Action alleged identical causes of action as the complaint in the Second Action, and Stevens does not argue the delay engendered by the new filing was substantial, nor does he claim any other prejudice from the requirement that he file a new action, for example, expiration of any statute of limitations. Because Stevens has failed to demonstrate both error and prejudice, we affirm the judgment in the Second Action.[5]

II. Appeal in the Third Action

The appealed-from order in the Third Action denied on procedural grounds Stevens’s motion to permanently enjoin the arbitration and stayed the action pending the finality of either the appeal in the Second Action or the arbitration.

Stevens argues this order is appealable as “an order . . . refusing to grant . . . an injunction.” (§ 904.1, subd. (a)(6).) However, despite this provision, “an order refusing to enjoin arbitration is tantamount to an order compelling arbitration” and “[n]either order is appealable.” (Melchor Investment Co. v. Rolm Systems (1992) 3 Cal.App.4th 587, 592 (Melchor); accord, International Film Investors v. Arbitration Tribunal of Directors Guild (1984) 152 Cal.App.3d 699, 704.)[6] Moreover, “[a]n order granting a stay is not appealable.” (Brunzell Constr. Co. v. Harrah’s Club (1967) 253 Cal.App.2d 764, 772, fn. 3.)

Stevens’s additional arguments on appealability are unpersuasive. He contends the delay caused by the ruling effectively amounts to a denial of his effort to enjoin the arbitration. As noted above, such rulings are nonappealable. (Melchor, supra, 3 Cal.App.4th at p. 592.) Stevens also argues he is prejudiced by the ruling because his res judicata defense will be adjudicated in the context of a petition to confirm an arbitration award. He cites no authority that any such prejudice alone renders an order appealable. Moreover, although the trial court opined that determining all issues in the context of a petition to confirm or vacate the arbitration award would be the most logical procedure, it did not definitively rule it was the exclusive procedure, and invited the parties to do their own research about procedural options. Finally, Stevens argues the stay order “imposes a final refusal of the request for declaratory relief in favor of confirmation proceedings.” Again, to the extent he is arguing the order effectively constituted a denial of his motion to enjoin the arbitration, the ruling is nonappealable. To the extent he is arguing the trial court ruled the issues must be decided in a petition to confirm or vacate the arbitration award, he is incorrect.

Stevens asks, if this court determines the order is not appealable, that we treat the appeal as a petition for writ relief. “We have the power to do so, but ‘we should not exercise that power except under unusual circumstances.’ ” (San Joaquin County Dept. of Child Support Services v. Winn (2008) 163 Cal.App.4th 296, 300.) The trial court’s ruling was based solely on procedural grounds and the arbitration Stevens sought to avoid had already taken place, with the amount of attorney fees as the only outstanding issue at the time the trial court’s order issued. The trial court made no final ruling on the procedural context in which Stevens’s defenses shall be adjudicated. Stevens has not demonstrated unusual circumstances warranting writ relief are present here.

III. Res Judicata

The parties’ briefs includ extensive discussions on the merits of Stevens’s res judicata claim. We have affirmed the judgment in the Second Action on procedural grounds and found the order in the Third Action nonappealable. “ ‘[O]rdinarily, when an appellate court concludes that affirmance of the judgment is proper on certain grounds it will rest its decision on those grounds and not consider alternative grounds which may be available. [Citations.] [¶] However, appellate courts depart from this general rule in cases where the determination is of great importance to the parties and may serve to avoid future litigation [citations], or where the issue presented is of continuing public interest and is likely to recur.’ ” (Western States Petroleum Assn. v. Board of Equalization (2013) 57 Cal.4th 401, 409 (Western States).) Stevens’s res judicata claim “presents a question of law, it has been thoroughly briefed, and it is a matter of considerable importance to the parties . . . .” (Id.) Resolving it now will avoid future litigation of the issue, and we exercise our discretion to do so.

Stevens argues the trial court’s dismissal of the First Action constitutes direct estoppel on the issue of contract validity; in other words, he claims the trial court in the First Action determined that the contract is invalid and Coastal Realty is precluded from relitigating this issue. We disagree.

In “the issue preclusion component of res judicata . . . ‘ “[t]he prior judgment is not a complete bar, but it ‘operates as an estoppel or conclusive adjudication as to such issues in the second action as were actually litigated and determined in the first action.’ [Citation.]” [Citation.] Most commonly, issue preclusion arises from successive suits on different claims; this is referred to as collateral estoppel. If, however, the second action is on the same claim [(i.e., same cause of action or primary right)], . . . issue preclusion based on the earlier determination is described as “direct estoppel.” ’ ” (South Sutter, LLC v. LJ Sutter Partners, L.P. (2011) 193 Cal.App.4th 634, 660–661.) “Direct estoppel is determined according to certain threshold requirements: ‘First, the issue sought to be precluded from relitigation must be identical to that decided in a former proceeding. Second, this issue must have been actually litigated in the former proceeding. Third, it must have been necessarily decided in the former proceeding. Fourth, the decision in the former proceeding must be final and on the merits. Finally, the party against whom preclusion is sought must be the same as, or in privity with, the party to the former proceeding.’ ” (Id. at pp. 661–662.)

“Determining whether an issue has been actually litigated in the former proceeding can be difficult where the former judgment or order does not show on its face that the particular issue was decided. [Citation.] Where more than one issue was involved, the burden of proof is on the party asserting collateral [or direct] estoppel to show that a particular issue was adjudicated. [Citation.] ‘ “When an issue is properly raised, by the pleadings or otherwise, and is submitted for determination, and is determined, the issue is actually litigated.” ’ ” (Murphy v. Murphy (2008) 164 Cal.App.4th 376, 400–401.)

The dismissal order in the First Action identifies the reason for dismissal solely as lack of personal jurisdiction (§ 418.10, subd. (a)(1)). Stevens argues this determination actually decided the issue of contract validity because the contract was the only basis for jurisdiction asserted by Coastal Realty. Stevens’s argument misunderstands the procedure for a challenge to personal jurisdiction by means of a motion to quash.

“ ‘A defendant who takes the position that the service of summons as made upon him did not bring him within the jurisdiction of the court, may serve and file a notice of motion to quash the service. [Citation.] The effect of such a notice is to place upon the plaintiff the burden of proving the facts that did give the court jurisdiction, that is the facts requisite to an effective service.’ [Citation.] Until [the plaintiff] makes at least a prima facie showing of the validity of service and sufficient contacts with the State of California, [the defendant] may stand mute.” (Floveyor Internat., Ltd. v. Superior Court (1997) 59 Cal.App.4th 789, 793–794.) In other words, “[w]hen a defendant moves to quash service of process on jurisdictional grounds, the plaintiff has the initial burden of demonstrating facts justifying the exercise of jurisdiction.” (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 449.) “To carry this burden, [the plaintiff] s required to come forward with affidavits, declarations, and other competent evidence.” ([i]ViaView, Inc. v. Retzlaff (2016) 1 Cal.App.5th 198, 217.) “[A]n unverified complaint has no evidentiary value in determination of personal jurisdiction.” (Mihlon v. Superior Court (1985) 169 Cal.App.3d 703, 710 (Mihlon).)

When Stevens filed the motion to quash, Coastal Realty had the burden of proving jurisdictional facts. It filed no opposition to the motion and submitted no evidence at all on the issue. Although the contract was attached to the complaint, the complaint was unverified and therefore “ha[d] no evidentiary value in determination of personal jurisdiction.” (Mihlon, supra, 169 Cal.App.3d at p. 710.)[7] Thus, for purposes of the trial court’s determination of personal jurisdiction, the contract was not in evidence and the trial court could not have decided the issue of its validity. That the trial court dismissed the First Action without prejudice supports our conclusion that the court did not actually decide the issue of contract validity. Coastal Realty is not precluded from litigating the issue of the contract’s validity.

We note the parties have also briefed the issues of whether the res judicata claim is properly decided by a court or an arbitrator and whether Coastal Realty waived its right to arbitration. We decline to resolve these issues. The first is effectively moot: the parties’ arbitrator has already reached the same conclusion we do. The second involves questions of fact and is not appropriate for us to resolve in the first instance. (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1196 [“[g]enerally, the determination of waiver [of arbitration] is a question of fact”].) Stevens has also briefed a number of ancillary or alternative issues, which are not appropriate for our resolution on these appeals. (Cf. Western States, 57 Cal.4th at p. 409.)[8]

DISPOSITION

The judgment in A148238 is affirmed. The appeal in A148992 is dismissed. Respondent is awarded its costs on appeal.

SIMONS, Acting P.J.

We concur.

NEEDHAM, J.

BRUINIERS, J.