CBCO, Inc. v. Grani Installation, Inc.

California Court of Appeal Jul 24, 1979 No. Civ. No. 55410Published

Before: Kingsley

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Holding. The court held that the trial court erred in denying arbitration based on the presence of a non-signatory party, but also held that the contractor waived its right to unilateral arbitration by electing to seek a court order and subsequently appealing the denial. Consequently, the arbitration award obtained during the pendency of the appeal was void for lack of jurisdiction.

Issues

Whether the presence of a non-signatory party in a municipal court action precludes enforcement of an arbitration agreement between the contractor and subcontractor.
Whether a party waives the right to self-executing arbitration by seeking a court order to compel arbitration and subsequently appealing the denial of that order.

Disposition. reversed

Quotations verified verbatim against the opinion

“The order denying arbitration must be, and is, reversed.”

“When CBCO elected to seek a court order under section 1282.2, it waived its right to proceed with arbitration on the theory that the arbitration clause was self-operating.”

“Grani was correct that CBCO and the arbitrators were without jurisdiction to proceed with a unilateral arbitration until CBCO’s appeal was determined.”

Opinion

KINGSLEY, Acting P. J. We are presented with two appeals from two contradictory orders in an arbitration matter. We reverse the orders.

CBCO, Inc., as general contractor, entered into a contract with Grani Installations, Inc., to perform work on buildings being constructed for State Farm Mutual. The contract contained an arbitration clause;1 State [293]Mutual was not a party to that contract. A disagreement arose between the parties and Grani filed an action in municipal court against CBCO and State Mutual, for breach of contract. CBCO moved in municipal court for an order staying the action and directing arbitration. That motion was denied for lack of jurisdiction, but proceedings were stayed to permit CBCO to apply for such relief in superior court. Such a petition was filed resulting, after hearing, in an order denying arbitration. CBCO has appealed from that order. (Code Civ. Proc., § 1294.)

Thereafter, at the insistencies of CBCO, an arbitration was held, over the objection of Grani and without appearance by it, resulting in an award in favor of CBCO. Grani then moved for an order vacating the award on the ground that, because of the order denying arbitration, the arbitrators had no jurisdiction to act. That petition was denied and Grani has appealed.

We conclude that the first order was in error. Admittedly there was a contract between CBCO and Grani providing for arbitration which CBCO has properly invoked. Apparently the theory of the denial order, as the trial court explained it in the second order, was that the presence of State Farm in the municipal court action prevented enforcement of that agreement. We reject that theory. State Farm was, and is, liable only if CBCO is indebted to Grani for work on the State Farm building. CBCO and Grani were free to settle between themselves Grani’s liability under the construction contract. If such settlement, whether by negotiation, litigation or arbitration, resulted in liability on CBCO, State Farm will be liable, if at all, only because its building may be subject to a mechanic’s lien for work for which CBCO does not pay. If State Farm requires protection while the CBCO-Grani dispute is settled, the trial court’s action (as CBCO had requested) was to stay the municipal court action. The order denying arbitration must be, and is, reversed.

CBCO, Inc. v. Grani Installation, Inc.

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