James H Bell et al vs WCCI LLC et al

Case Number

20CV02061

Case Type

Hearing Date / Time

Fri, 09/06/2024 - 10:00

Nature of Proceedings

Motion: Lift Stay

Tentative Ruling

For all reasons discussed herein, the motion of plaintiffs to lift the stay of the proceedings, remove the case from arbitration, and enter the default of defendants is denied without prejudice. Plaintiffs shall give notice of the Court’s ruling herein to defendants at all known addresses.

Background:

On June 12, 2020, plaintiffs James H. Bell and Karen M. Bell (collectively, plaintiffs) filed in this action a complaint against defendants WCCI, LLC (WCCI), Edward Corpus Reyes (Edward), Alfred Talahuron (Talahuron), and Mary Elizabeth Reyes (Mary Elizabeth) (collectively, defendants), alleging four causes of action: (1) breach of contract (against WCCI, Edward, and Talahuron); (2) fraud-intentional misrepresentation (against all defendants); (3) fraud-negligent misrepresentation (against all defendants); and (4) financial elder abuse (against all defendants). (Note: Due to common surnames, the Court will refer to certain parties by their first names to avoid confusion. No disrespect is intended.) As alleged in the complaint:

On August 15, 2018, plaintiffs employed a real estate agent to sell property located at 3091 Hidden Valley Lane in Montecito, California (the Montecito property). (Compl., ¶ 12.) Plaintiffs’ agent produced a buyer who was identified as Edward and Talahuron. (Ibid.) After completing several visits to the Montecito property, WCCI, Edward, and Talahuron (the WCCI defendants) entered into a purchase agreement on November 3, 2018, (the Purchase Agreement) to buy the Montecito property. (Id. at ¶ 12 & Exh. 1.) Mary Elizabeth was the real estate agent representing the WCCI defendants. (Id. at ¶ 12.)

At the time the Purchase Agreement was executed, defendants were informed that in order to transfer clean title, a second lien would need to be satisfied at the close of escrow which defendants ensured would be made available. (Compl., ¶ 14.) Relying on documents purporting to demonstrate the ability of the WCCI defendants to purchase the Montecito property, plaintiffs agreed to open escrow on November 15, 2018. (Id. at ¶ 15.) Based on defendants’ request for a short escrow period, escrow was set to close by December 17, 2018. (Ibid.) The WCCI defendants failed to close escrow. (Id. at ¶ 16.) Though plaintiffs agreed to several extensions of escrow based on defendants’ promises to fund the purchase price for the Montecito property, defendants failed to close escrow by the extended dates. (Id. at ¶¶ 17-21.)

On March 26, 2019, plaintiffs’ lender recorded a notice of default relating to the Montecito property. (Compl., ¶ 21.) Plaintiffs told defendants about the pending foreclosure, and defendants promised they would prevent the sale of the Montecito property and the sale of property located at 902 E. Alamar Avenue in Santa Barbara, California (the Alamar property) to the lender. (Id. at ¶ 23.) On July 31, 2019, plaintiffs’ lender conducted a trustee’s sale and the Montecito property and Alamar property were sold at foreclosure. (Id. at ¶ 25.)

Court records reflect that on September 16, 2020, the default of WCCI was entered as requested by plaintiffs.

Court records further reflect that on October 14, 2020, Mary Elizabeth responded to the complaint, generally denying its allegations and asserting twenty-three affirmative defenses. On the same date, Mary Elizabeth filed a cross-complaint against NRT West, Inc. dba Coldwell Banker Residential Brokerage and Matthew D. McCormick (collectively, Coldwell Banker), alleging causes of action for indemnity, contribution, and declaratory relief.

On October 19, 2020, plaintiffs filed a stipulation in which they and the WCCI defendants agreed to set aside the default of WCCI and to stay this matter pending the conclusion of arbitration between plaintiffs and the WCCI defendants. (Oct. 19, 2020, Stip.) Pursuant to the parties’ October 19, 2020, stipulation, the Court entered an order setting aside the default of WCCI and staying this action pending the conclusion of arbitration. (Oct. 19, 2020, Order.)

On November 23, 2020, Coldwell Banker filed an answer to the cross-complaint of Mary Elizabeth, generally denying its allegations and asserting sixteen affirmative defenses.

On November 2, 2021, the Court signed an order, upon the stipulation of the parties, finding that a settlement between plaintiffs, Mary Elizabeth, and Coldwell Banker was made in good faith, dismissing the complaint with prejudice as to Mary Elizabeth, dismissing the cross-complaint of Mary Elizabeth with prejudice, and barring all future claims for equitable comparative contribution or partial or comparative indemnity based on comparative negligence or comparative fault against Coldwell Banker, Mary Elizabeth, and New Vision Real Estate & Investments, Inc. (Nov. 2, 2021, Order.) The Court’s November 2, 2021, order was filed on November 3, 2021.

On May 26, 2022, plaintiffs filed a motion (the arbitration motion) seeking the Court’s intervention in the appointment of an arbitrator. The arbitration motion, which was not opposed by the WCCI defendants, was granted by the Court in its Minute Order issued on August 19, 2022. In the August 19, 2022, Minute Order, the Court also continued the hearing on the arbitration motion to permit the parties to discuss the list of proposed arbitrators provided by the Court.

On August 31, 2022, plaintiffs filed a stipulation in which they and the WCCI defendants agreed to select Judge Frank J. Ochoa (Judge Ochoa) as the appointed arbitrator and to coordinate with Judge Ochoa to secure an arbitration date “forthwith”. (Aug. 31, 2022, Stip.) Based on the parties’ stipulation, on August 31, 2022, the Court ordered this matter to arbitration and appointed Judge Ochoa to serve as the arbitrator. (Aug. 31, 2022, Order.)

On April 27, 2023, attorney Katherine Vescera (Vescera) filed three separate motions to be relieved as counsel for WCCI, Edward, and Talahuron. On August 23, 2023, the Court issued its separate orders granting attorney Vescera’s motions to be relieved as counsel.

On June 25, 2024, plaintiffs filed the present motion in which plaintiffs seek an order lifting the stay of this proceeding, removing the case from arbitration, and entering the default of each of the WCCI defendants. In support of the motion, plaintiffs submit the declaration of their counsel, John C. Eck (Eck). The Eck declaration includes a recitation of the procedural history of this matter as further detailed above, which need not be repeated here.

Eck states that August 31, 2022, he communicated with Judge Ochoa to coordinate the arbitration ordered by the Court. (Eck Decl., ¶ 9.) During the process of scheduling the arbitration between August 31, 2022, and November 2022, it appeared that a settlement was reached between plaintiffs and the WCCI defendants. (Id. at ¶ 10.) Eck notified Judge Ochoa by email on November 10, 2022, and the arbitration was put on hold. (Ibid.)

Thereafter, Eck prepared a proposed settlement agreement which he emailed to counsel for the WCCI defendants on November 22, 2022. (Eck Decl., ¶ 10.) In addition, on November 28, 2022, Eck emailed to the WCCI defendants’ counsel a “Stipulated Judgment in Favor of Plaintiffs and Against Defendants” and a “Stipulation and Order to Dismiss Action Without Prejudice”. (Ibid.) Having heard nothing from the WCCI defendants’ counsel regarding these documents, Eck sent a follow-up email on December 15, 2022. (Id. at ¶ 11.) In response, the WCCI defendants’ counsel informed Eck that the WCCI defendants were reviewing redline revisions which, once approved, would be sent to Eck. (Ibid.) From December 15, 2022, through January 3, 2023, Eck was continually informed by counsel for the WCCI defendants that she was working to get the revisions to the settlement documents as soon as possible, which never happened. (Ibid.)

On February 7, 2023, Eck sent another email to counsel for the WCCI defendants regarding the delay in responding to the draft documents and advising counsel that plaintiffs were proceeding with the arbitration. (Eck Decl., ¶ 11.) On the same date, the counsel for the WCCI defendants informed Eck that her firm was withdrawing as counsel of record in this matter. (Ibid.)

On February 10, 2023, Eck communicated with Judge Ochoa regarding the status of the case, and requested that the parties address the arbitration ordered by the Court. (Eck Decl., ¶ 12.) On February 15 and 21, 2023, counsel for the WCCI defendants informed Judge Ochoa that she would be withdrawing as counsel. (Ibid.)

Having heard nothing further from the WCCI defendants, Eck contacted Judge Ochoa on February 28, 2023, and requested to move forward with the arbitration due to the delays by the WCCI defendants and having not received any motion to withdraw from their counsel. (Eck Decl., ¶ 13.) On that same date, Judge Ochoa responded to Eck stating:

“I would offer this perspective on the present circumstances of this case. The parties stipulated, and Judge Geck ordered the matter into arbitration. The order directed that I be the arbitrator and that the parties coordinate with me ‘and secure the arbitration date forthwith.’ That order was entered on August 31, 2022. The parties contacted me thereafter and I presented a contract for the provision of my services as arbitrator.

“My initial response to the request was on that same day, August 31, 2022, and included my arbitration agreement proposal. There followed case information gathering efforts on my part and the making of required disclosures. On or about November 3, 2022, I received a mailed letter from your client with the signed contract and a check for the retainer amount set forth in the contract. I also received an email from defendants’ counsel indicating that her clients agreed to my serving as arbitrator in the matter. I shortly thereafter received an email from your office indicating that the matter had settled and asking that I return the retainer to your client. I promptly did so.

“I never received the signed contract nor the retainer from the Defense. It now appears as though the settlement has not, and may not be concluded. I don’t perceive myself as being in a position to schedule an event under the arbitration contract signed by only one party. The issue seems to be whether the parties have complied with the orders issued by Judge Geck. That is a matter for you to address before Judge Geck.”

(Eck Decl., ¶ 13.)

Eck further states that the WCCI defendants failed to appear at case management conferences held in this matter on November 17, 2023, and March 29, 2024. (Eck Decl., ¶¶ 17-18.) Eck provided notice of the continued case management conferences to the WCCI defendants as ordered by the Court. (Ibid.)

On March 19, 2024, Eck sent by certified mail a letter to the WCCI defendants reviewing the status of this action and advising each of plaintiffs’ intention to file a motion for an order striking their respective answers and entering default judgments against each of them. (Id. at ¶ 19 & Exh. 3.) Eck received a signed return receipt for the letter from WCCI, but the letters to Edward and Talahuron were both returned as undeliverable notwithstanding that various case management conference statements filed by plaintiffs in this matter were mailed to the same addresses for Edward and Talahuron but not returned to Eck. (Id. at ¶ 19 & Exh. 4.) Though Eck provided the WCCI defendants with a deadline of April 5, 2024, to respond before plaintiffs proceeded with filing the present motion, Eck has heard nothing from the WCCI defendants. (Id. at ¶ 19-20 & Exh. 3.)

The Court has no record of the WCCI defendants having filed any response to the present motion.

Analysis:

Though Code of Civil Proceduresection 1281.4 provides that, upon a motion by a party, a court must stay an action ordered to arbitration, “[b]eyond that, the court’s role is fairly limited. Once a petition is granted and the lawsuit is stayed, ‘the action at law sits in the twilight zone of abatement with the trial court retaining merely vestigial jurisdiction over matters submitted to arbitration.’ [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.” (Titan/Value Equities Group, Inc. v. Superior Court (1994) 29 Cal.App.4th 482, 487 (Titan).)

In the present motion, plaintiffs request that the Court dismiss the arbitration based on what plaintiffs contend is a refusal by the WCCI defendants to participate in the arbitral proceedings. Plaintiffs also request an order striking any responsive pleadings filed by the WCCI defendants, which plaintiffs state will permit them to request the entry of default judgments. As the Court has ordered arbitration of the controversy at issue in this action, the Court’s jurisdiction and involvement at this stage of the proceedings is limited for reasons discussed above. (See also Byerly v. Sale (1988) 204 Cal.App.3d 1312, 1315-1316 (Byerly).) Therefore, and notwithstanding that the Court has no record of the filing by the WCCI defendants of an answer to the complaint, the Court is not presently authorized to dismiss any responsive pleadings filed by the WCCI defendants.

Moreover, because this matter has been ordered to arbitration, the pleadings filed in this action having “fulfilled their purpose, became virtually functus officio.” (Dodd v. Ford (1984) 153 Cal.App.3d 426, 432 (Dodd).) Therefore, the parties’ agreement to arbitrate this dispute remains independently enforceable, and the Court may confirm, correct, or vacate any arbitration award, as appropriate, without regard to the pleadings. (Ibid. [also noting that dismissal of a pleading “could not bar enforcement of the agreement”].)

With respect to plaintiffs’ request for an order removing the dispute from arbitration, there exists no information or evidence showing or indicating that the parties have agreed to withdraw the present controversy from arbitration. Therefore, the Court may not remove this matter from an arbitration proceeding to which the parties have voluntarily agreed. (Byerly, supra, 204 Cal.App.3d at pp. 1314-1315; see also Dodd, supra, 153 Cal.App.3d at p. 430 [by agreeing to resolve this matter the parties “bargained away the right to a superior court trial”]; Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790, 1796 [an “assertion of a contractual arbitration agreement constitutes a ‘plea in abatement’ of the action at law].)

The Court further notes that, that once an action has been submitted to arbitration, “the arbitrator takes over. It is the job of the arbitrator, not the court, to resolve all questions needed to determine the controversy. [Citations.].” (Titan, supra, 29 Cal.App.4th at p. 488.) Relevant under the circumstances present here, “[i]t is also up to the arbitrator, and not the court, to grant relief for delay in bringing an arbitration to a resolution.” (Ibid.; see also Finley v. Saturn of Roseville (2004) 117 Cal.App.4th 1253, 1259 [“any waiver due to delay in the arbitration itself is a matter for the arbitrator to decide”].) For example, the arbitrator may “determine the status of claims before the arbitrator or set the case for trial because of a party’s alleged dilatory conduct” and proceed in their absence, or “dismiss the arbitration due to a party’s failure to proceed with reasonable diligence.” (Lew-Williams v. Petrosian (2024) 101 Cal.App.5th 97, 106, 110.)

The examples of the manner in which an arbitrator may address any alleged dilatory conduct during arbitration provided above are intended to be illustrative only. Though plaintiffs must, for all reasons discussed above, obtain redress for any purported delays by the WCCI defendants in bringing the arbitration to resolution, nothing herein shall be construed as advisory opinion as to what, if any, procedural mechanisms may be available to resolve any purported delays or other issues that may arise in the arbitration proceeding. Further, to the extent plaintiffs intend by their motion to seek the Court’s intervention with respect to questions of arbitral procedure or any relief that may be available resulting from any dilatory conduct by the WCCI defendants, the Court is not authorized to “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 party’s alleged dilatory conduct. It is for the arbitrator, and not the court, to resolve such questions.” (Titan, supra, 29 Cal.App.4th at p. 489.)

There also exist procedural questions regarding service of the motion on the WCCI defendants. In the proof of service attached to the motion, a “check” mark appears next to the section of that document describing service by an electronic filing service provider. However, a similar “check” mark does not appear next to the section describing service by mail, although a check mark appears within the mail service section purporting to describe one of two methods of service by mail. For these reasons, it is unclear to the Court whether the motion was served on the WCCI defendants by electronic methods only, or if the motion was also served by mail. As the WCCI defendants are self-represented, to the extent the motion was served on the WCCI defendants solely by electronic means, service of the present motion is improper unless the WCCI defendants, in their self-represented capacity, have affirmatively consented to electronic service. (Cal. Rules of Court, rule 2.251(c)(3)(B).)

For all reasons discussed above, the Court is without jurisdiction at this stage of the proceedings to grant the relief sought by plaintiffs in their present motion. Therefore, the Court will deny the motion without prejudice to any future procedurally and substantively appropriate motion that may be filed by plaintiffs with respect to the arbitration. The Court will further order plaintiffs to give notice of the Court’s ruling herein to the WCCI defendants at all known mailing addresses.