Case Number: BC541004    Hearing Date: October 06, 2014    Dept: 46

Case Number: BC541004
TORRENCE ARCHITECTS ET AL VS LAURA ESTHER TRASK ET AL
Filing Date: 03/28/2014
Case Type: Othr Breach Contr/Warr-not Fraud (General Jurisdiction)
Status: Pending
Future Hearings

Plaintiffs, Torrence Architects and Torrence Workshop motion to compel arbitration. Defendant Laura Esther Trask, individually and as trustee of the Laura Esther Trask Trust, dated December 13, 2013 in opposition.

TENATIVE RULING: Motion to compel arbitration is DENIED pursuant to CCP §1281.5. Plaintiffs have waived any right to arbitrate this matter

This tentative ruling is posted at 3:35 p.m. on 10/03/2014 and the matter is set for hearing on 10/06/2014 at 8:30 a.m. / If there are no parties other than Plaintiff/Petitioner, then Plaintiff/Petitioner may submit to the tentative without appearance by telephonic notification to the clerk of Dept. 46 between 8:00 a.m. and 4:30 p.m. on a date prior to the hearing or morning prior to the hearing by calling (213) 974-5665, and the court will issue the tentative ruling as the final ruling. If the other parties have appeared in the action, then the parties must first confer and all agree that the tentative ruling will be the final ruling on the matter. If the parties to the matter before the court all agree, a representative of the parties may call the clerk and submit without an appearance, and the court will issue the tentative ruling as the final ruling. If an order is required, it should be lodged directly in Dept. 46 with a copy to adverse/other parties, if any.

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Code of Civil Procedure section 1281.5 provides that:

“(a) Any person who proceeds to record and enforce a claim of lien by commencement of an action pursuant to Chapter 4 (commencing with Section 8400) of Title 2 of Part 6 of Division 4 of the Civil Code, does not thereby waive any right of arbitration the person may have pursuant to a written agreement to arbitrate, if, in filing an action to enforce the claim of lien, the claimant does either of the following:

(1) Includes an allegation in the complaint that the claimant does not intend to waive any right of arbitration, and intends to move the court, within 30 days after service of the summons and complaint, for an order to stay further proceedings in the action.

(2) At the same time that the complaint is filed, the claimant files an application that the action be stayed pending the arbitration of any issue, question, or dispute that is claimed to be arbitrable under the agreement and that is relevant to the action to enforce the claim of lien.

(b) Within 30 days after service of the summons and complaint, the claimant shall file and serve a motion and notice of motion pursuant to Section 1281.4 to stay the action pending the arbitration of any issue, question, or dispute that is claimed to be arbitrable under the agreement and that is relevant to the action to enforce the claim of lien. The failure of a claimant to comply with this subdivision is a waiver of the claimant’s right to compel arbitration.

(c) The failure of a defendant to file a petition pursuant to Section 1281.2 at or before the time the defendant answers the complaint filed pursuant to subdivision (a) is a waiver of the defendant’s right to compel arbitration.”

Pursuant to section 1281.5, the simple act of filing an action to enforce a claim of lien on a work of improvement does not constitute a waiver of any right to arbitrate under a written arbitration agreement. However, in order to preserve the right, the claimant must assert in the complaint that the claimant does not intend to waive any right of arbitration and intends to timely move the court for a stay, or at the same time that the complaint is filed, the claimant applies for a stay of the action pending arbitration. (Code Civ. Proc. §1281.5 subd. (a).) The claimant must then file and serve the motion to stay the action pending the arbitration, and a failure to do so will constitute a waiver of the claimant’s right to compel arbitration. (Code Civ. Proc. §1281.5 subd. (b).) A mechanics’ lien claimant’s failure to request that its action to enforce the lien be stayed pending arbitration as provided may constitute a waiver of the claimant’s contractual right to arbitration even though the defendant’s counsel has indicated the defendant’s intent to arbitrate the dispute if the plaintiff has not prejudicially changed position in reliance on the statement. (R. Baker, Inc v. Motel 6 Inc. (1986) 180 Cal.App.3d 928, 931 [defendant not estopped from asserting waiver where former counsel made the statement regarding intent to arbitrate after the complaint was filed].)

In order to preserve the right to arbitrate, a mechanic’s lien claimant must “simultaneously” with the filing of an action to enforce the mechanic’s lien present an application to the court to stay judicial proceedings pending arbitration. In Kaneko Ford, the court held that the mere filing of the application by the mechanic does not stay the litigation. The mechanic must serve the summons, complaint and application for a stay within a reasonable time. The sole effect of filing the application is to preclude a waiver, but if the mechanic delays in prosecuting the application, and the other party suffers prejudice from the delay, the mechanic may waive the right to arbitrate. There, the mechanic delayed months while the other party participated in settlement negotiations and answered the complaint, thus expending time and costs, before the mechanic notified the defendant of the intent to arbitrate the dispute. The court held that the mechanic had waived the right to arbitrate the dispute. (Kaneko Ford Design v. Citipark, Inc. (1988) 202 Cal.App.3d 1220, 1226-1227.)

In this case, when plaintiffs filed the complaint on March 28, 2014, they did not include an allegation that they intended to compel arbitration or simultaneously file an application that the action be stayed pending the arbitration. As such, the Court finds that plaintiffs did not preserve the right to compel arbitration, as required by Code of Civil Procedure section 1281.5 subdivision (a).

Pursuant to a proof of service filed by plaintiffs on July 15, 2014, the summons, complaint, lis pendens and other relevant documents were substitute-served on defendant on June 30, 2014. As part of the substitute service, the documents were mail thereafter on July 1, 2014. Pursuant to Code of Civil Procedure section 415.20 subdivision (a), service of a summons in this manner is deemed complete on the 10th day after mailing. Thus, service was completed as to TRASK, an individual, on July 11, 2014.

On August 6, 2014, plaintiffs filed a First Amended Complaint which, for the first time, alleges that plaintiffs do not waive or intend to waive their rights to proceed with arbitration and intent to move to compel arbitration within 30 days. (FAC ¶¶8, 15.) Defendants filed a demurrer to the First Amended Complaint on August 11, 2014, which is scheduled to be heard on January 16, 2015. Also on August 11, 2014, the parties appeared and participated in a case management conference and plaintiffs filed this motion to compel arbitration. Plaintiffs argue that the motion to compel arbitration is timely and they did not waive the right to compel arbitration because it was served on August 11, 2014, 30 days after completion of service of the summons and complaint on July 11, 2014.

Kaneko Ford Design v. Citipark, Inc. (1988) 202 Cal.App.3d 1220 (Kaneko) and R. Baker, Inc. v. Motel 6, Inc. (1986) 180 Cal.App.3d 928 (Baker) are the only reported cases that interpret the waiver provision of section 1281.5, subdivision (a). The plaintiff in Kaneko filed an action for foreclosure of mechanics lien and related causes of action, and concurrently filed an application to stay the proceedings pending arbitration. (Kaneko, supra, at p. 1223.) The court returned a copy of the application to plaintiff with a notation indicating it had been rejected because it was not accompanied by a memorandum of points and authorities and was not an ex parte matter. The plaintiff served the defendants with the complaint, but not the application to stay the action, and took no other action in the matter until about four months later, when it filed a motion requesting a stay of the action pending arbitration or, alternatively, an order compelling arbitration. (Id. at p. 1224.) The court denied both requests, finding, among other things, that the plaintiff waived its right to arbitrate because it had unreasonably delayed in seeking arbitration and the defendants were prejudiced by the delay. (Id. at p. 1225.)

One of the issues the Court of Appeal considered in Kaneko was whether under section 1281.5 a plaintiff’s filing an application for a stay pending arbitration concurrently with a complaint to foreclose a mechanics lien automatically stays the action pending arbitration. Kaneko held the mere filing of an application for a stay under section 1281.5 does not create a stay; to actually create the stay the plaintiff must obtain a court order by bringing a noticed motion after serving the complaint on the defendant(s). ( Kaneko, supra, 202 Cal.App.3d at p. 1226.) Kaneko explained:

“Section 1281.5 contemplates that a motion be made to the court for an order granting a stay of the action to enforce a mechanics’ lien pending arbitration; however, that section does not specify when that motion should be made. The section requires that an application for such stay be presented to the court at the same time that the action to enforce the claim of lien is filed. It is obvious that the notice of motion and motion for such stay cannot be served and filed until the action is commenced and service of the summons and complaint on the opposite party is accomplished. We hold that section 1281.5 requires that the summons and complaint in the action to enforce the claim of lien, and the application for stay, be served on the opposite party or parties within a reasonable time after the action is commenced, considering the facts and circumstances of each case, and that the notice of motion and motion to stay such action pending arbitration must be served on the opposite party or parties, and filed, as promptly thereafter as is reasonably possible.” (Kaneko, supra, at p. 1227.)

Plaintiffs contend that a plaintiff does not waive the right to contractual arbitration by failing to file an application for a stay concurrently with a mechanics lien foreclosure action as long as the plaintiff files the application within a reasonable time after filing and serving the complaint. However, first, plaintiffs’ argument ignores the requirements of section 1281.5 subdivision (a). If a mechanic’s lien claimant were allowed to forego those requirements simply by filing a motion to compel arbitration within 30 days of service of the summons and complaint, regardless of how long that occurred after the complaint was filed, it would render subdivision (a) a nullity. Second, the Court finds that Kaneko does not support that proposition; it reaffirms Baker’s conclusion that a plaintiff must present the application for a stay to the court at the same time the complaint for foreclosure of mechanics lien is filed to avoid waiver of the right to contractual arbitration under section 1281.5. No authority to the contrary has been provided by plaintiffs. Under Baker, Kaneko and the plain language of section 1281.5, subdivision (a), plaintiffs waived the right to contractual arbitration by filing their complaint without concurrently presenting to the court an application to stay the action pending arbitration or including in the original complaint an allegation that the filing of the action does not constitute such a waiver.

Baker held that section 1281.5 “means what it says: A party who files an action to enforce a mechanic’s lien, but who does not at the same time request that the action be stayed pending arbitration, waives any right to arbitration.” (Baker, at p. 929.) Since the waiver provisions of section 1281.5 that specifically apply to an action for foreclosure of mechanics lien supersede any inconsistent case law rules regarding waiver of arbitration, the Court finds that an order denying the motion to compel arbitration is appropriate. Plaintiffs’ argument that Baker and Kaneko predated several amendments to section 1281.5 is inconsequential since those cases are still good law and were based on the same requirements set forth in section 1281.5.

As to plaintiffs’ other arguments, the Court finds that, even if TRASK knew since August 6, 2014, that plaintiffs’ were going to seek to compel arbitration, that does not support an argument that she is estopped from arguing waiver. Further, as occurred in Kaneko, TRASK already filed a responsive pleading (demurrer to the FAC), the parties have engaged in settlement discussions and the matter has been set for trial.

Therefore, the motion to compel arbitration is denied.