Case Name: Rui Zhang, et al. v. Cindy Pham, et al.
Case No.: 2015-1-CV-280502

Demurrer by Defendants Cindy Pham and Huong Nguyen to the Complaint of Plaintiffs Rui Zhang and Xin Guo

Factual Background

This is an action for breach of contract, arising out of a dispute over an agreement to sell real property. Defendants Cindy Pham and Huong Nguyen (collectively, “Sellers”) are the owners of 460-462 Clifton Avenue, San Jose, California (the “Property”). Defendants Pacificwide Real Estate & Mortgage (“Pacificwide”), a real estate broker, and Jennifer D. Nguyen (“Nguyen”), Pacificwide’s agent and employee, were Sellers’ real estate agent and broker. On or about March 23, 2015, plaintiffs Rui Zhang and Xin Guo (collectively, “Plaintiffs”) and Sellers entered into a Residential Income Property Purchase Agreement and Joint Escrow Instructions (the “Contract”), whereby Sellers agreed to sell the Property to Plaintiffs for $785,000. Plaintiffs performed all of their obligations under the Contract, except depositing into escrow the balance of the funds required for the purchase of the Property. Sellers allegedly breached the Contract by failing and refusing to close escrow and convey the Property to Plaintiffs.

Procedural History

On May 12, 2015, Plaintiffs filed the operative complaint against Sellers, Pacificwide, and Nguyen, alleging causes of action for: (1) specific performance of real estate purchase contract; (2) breach of contract; (3) breach of implied covenant of good faith and fair dealing; (4) declaratory relief; (5) fraud and deceit; and (6) breach of fiduciary duty and duty to exercise reasonable skill and care.

Three months later, Pacificwide and Nguyen filed a petition to compel arbitration of the action in its entirety. The petition to compel arbitration was initially set for hearing on October 6, 2015, but later continued to January 21, 2016, to allow Pacificwide and Nguyen additional time to serve Sellers with the petition. Pacificwide and Nguyen later filed proofs of service with the Court on November 30, 2015, indicating that Sellers were personally served with the petition on November 16, 2015.

Before the hearing on Pacificwide and Nguyen’s petition to compel arbitration, on December 16, 2015, Sellers filed a motion to quash service of summons for lack of personal jurisdiction. Plaintiffs subsequently filed proofs of service with the Court on December 29, 2015, demonstrating that Sellers were personally served with the summons and complaint on November 16, 2015.

Thereafter, a court order granting Pacificwide and Nguyen’s petition to compel arbitration was executed on January 26, 2016, and filed on January 28, 2016. In its order, the Court stated “[a]ll proceedings in this Court are hereby stayed pending completion of the arbitration proceedings.”

Despite the fact that the case was stayed as of January 26, 2016, by virtue of the court order on the petition to compel arbitration, a court order denying Sellers’ motion to quash service of summons was executed on February 18, 2016, and filed the following day.

Most recently, on March 15, 2016, the Court executed what appears to be amended order on Pacificwide and Nguyen’s petition to compel arbitration. In its order, the Court reiterated that “[a]ll proceedings in this Court are hereby stayed pending completion of the arbitration proceedings.”

Sellers filed the instant demurrer to the complaint on March 21, 2016. Plaintiffs filed papers in opposition to the demurrer on April 19, 2016. Pacificwide and Nguyen filed a joint response to the demurrer on April 20, 2016.

Discussion

As is apparent from the procedural history set forth above, all proceedings in this civil case were stayed as of January 26, 2016, and are currently stayed pending completion of the arbitration proceedings. Consequently, the filing of the demurrer was improper.

In their moving papers, Sellers contend that they “are not subject to the court’s ruling regarding [a]rbitration” because they “were not yet in the case … when the Petition to Compel Arbitration was heard” and “they had no opportunity to oppose the Petition.” (Mem. Ps. & As., p. 3:12-16.) Sellers also assert that Plaintiffs have waived their right compel arbitration by propounding discovery on them. (Reply, p. 3:10-28.)

These arguments are not well-taken. A demurrer is not the proper avenue to challenge the validity or effect of the court order on the petition to compel arbitration. Moreover, Sellers’ arguments fail to acknowledge that the case, in its entirety, is stayed pending arbitration. Once a case has been ordered 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. … The arbitrator, and not the court, decides questions of procedure and discovery.” (Titan/Value Equities Group, Inc. v. Superior Court (1994) 29 Cal.App.4th 482, 487-88.) “The trial court may not 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.” (Id., at p. 489.) Thus, the Court cannot rule on the instant demurrer. (Id., at p. 487 [“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.”].)

Accordingly, Sellers’ demurrer is OFF CALENDAR.