Atkins, Kroll & Co. v. Broadway Lumber Co.

• Decision Date: 27 November 1963
• Citation: 12 A.L.R.3d 880,222 Cal.App.2d 646,35 Cal.Rptr. 385
• Court: California Court of Appeals Court of Appeals
• Parties: , 12 A.L.R.3d 880 In the Matter of Arbitration Between ATKINS, KROLL & CO., Ltd., Plaintiff and Appellant, and BROADWAY LUMBER COMPANY, Defendant and Respondent. Civ. 21198.

Page 385

35 Cal.Rptr. 385

222 Cal.App.2d 646, 12 A.L.R.3d 880

In the Matter of Arbitration Between ATKINS, KROLL & CO., Ltd., Plaintiff and Appellant and

BROADWAY LUMBER COMPANY, Defendant and Respondent.

Civ. 21198.

District Court of Appeal, First District, Division 1, California.

Nov. 27, 1963.

Graham B. Moody, McCutchen, Doyle, Brown, Trautman & Enersen, San Francisco, for appellant.

Orrick, Dahlquist, Herrington & Sutcliffe, San Francisco, for respondent.

MOLINARI, Justice.

This is an appeal by plaintiff, Atkins, Kroll & Co., Ltd., ¹ from an order quashing service of process and dismissing a proceeding to confirm an arbitration award on the ground of lack of jurisdiction over defendant, Broadway Lumber Company, a New Mexico corporation. ²

Question Presented

Did Broadway, a foreign corporation, submit to the jurisdiction of the courts of this state when it agreed to submit to arbitration under the laws of California?

The Record

On September 23, 1958, Atkins and Broadway entered into a written contract whereby the former agreed to sell to the latter certain plywood doorskins to be shipped to the Walker Door Manufacturing Co. ³ in Dallas, Texas. The said contract contained the following provision: 'This contract and all matters relating to the performance thereof shall be governed by the laws of the State of California. Any controversy or dispute respecting this contract, upon the demand of either Buyer or Seller, shall be submitted to arbitration before a committee of the Foreign Commerce Association of the San Francisco Chamber of Commerce under its rules, the decision being final and binding on both Buyer and Seller.'

On october 30, 1962, Atkins filed a petition entitled an 'Application For Order Affirming An Arbitration Award' in the Superior Court of the City and County of San Francisco. The said petition alleges the execution of said contract, a copy of which is attached thereto. The petition alleges, further, that a controversy having arisen out of said contract, Atkins made demand for arbitration pursuant to said contract; that the dispute was submitted to arbitration before the Foreign Commerce Association of the San Francisco Chamber of Commerce; that an Arbitration Committee was appointed by said Association; and that said Committee made its award on September 10, 1962, against Broadway, and in favor of Atkins, for the sum of $12,205.38, representing the unpaid amount of an invoice for plywood shipped to Walker. The petition prayed for an order confirming said award and for a judgment in conformity therewith. The hearing of said petition was noticed and a copy of said notice and of said petition were forwarded to Broadway in Albuquerque, New Mexico, by registered mail. Broadway thereupon appeared specially and moved the said superior court for an order quashing service of said petition and notice of hearing, and for an order dismissing the action. The motion was based solely upon the ground that the said superior court lacked personal jurisdiction over Broadway.

Broadway's said motion was accompanied by an affidavit which stated substantially as follows: that Broadway is a corporation with its principal place of business in Albuquerque, New Mexico; that Broadway has not had and does not currently have any offices, branches, factories, warehouses, mills or other facilities in California; that Broadway does not employ any residents of California nor are any employees designated or authorized to perform duties or engage in activities in California; that Broadway has not and is not now engaged in the solicitation of business by mail or by any other means in California; that the plywood doorskins in question were not ordered for the use of Broadway but were to be shipped to Walker for its use; that a dispute arose regarding the quality of the doorskins and their utility for the purposes of Walker; that on March 31, 1959, Atkins issued credit memorandums to Broadway in the amount of $86,046.58 for doorskins which had been delivered by Atkins to the Metro Warehouse in Dallas, but had not been used by Walker; that Atkins subsequently made demand upon Broadway for $24,419.16 for doorskins allegedly missing from the Metro warehouse, the responsibility for which is denied by Broadway; that in letters dated March 9, 1962, and March 26, 1962, Broadway Atkins did not file or submit any affidavit in opposition to that filed by Broadway. The court below granted Broadway's motion, from which order Atkins now appeals.

was advised by the Foreign Commerce Association of the San Francisco Chamber of Commerce that Atkins formally requested arbitration before the Association; that Broadway advised said Association that it did not consent to arbitration and that the Association had no jurisdiction to arbitrate; that Broadway did not appear or in any way participate in any proceedings conducted by the Association regarding this demand; that Atkins' claim is not based on any contract, but solely on the alleged shortage of material in said warehouse; and that Broadway is not a party to any arrangements between Atkins and Metro Warehouse.

CONTENTIONS

Atkins contends that an agreement to submit to arbitration under the laws of California is an agreement to submit to the jurisdiction of the courts of this state to enter judgment on an award under the agreement. Atkins asserts, further, that it was under no obligation to seek an order compelling arbitration, but that the arbitration provision in the contract was self-executing once one of the parties made a demand for arbitration.

Broadway, in turn, asserts that it has not consented to in personam jurisdiction; that it was not doing business in California; and that, in any event, the contract in question had terminated prior to the time the dispute between the parties arose. Broadway argues, moreover, that Atkins has the burden of proving the existence of facts which establish jurisdiction over Broadway, and that, by failing to present an affidavit in support of its position and in opposition to Broadway's affidavit, Atkins failed to meet its burden.

Before entering into a discussion of the applicable legal principles it should be noted that no contention is made by Atkins that Broadway is doing business in California. Jurisdiction over Broadway is claimed on the basis of the agreement to submit to arbitration under the laws of California. We need not discuss, therefore, whether Broadway is subject to local process on the basis of 'doing business in this state' as this term has been defined and interpreted by the reviewing courts.

The Agreement to Arbitrate

The immediate inquiry is whether, by agreeing to submit to arbitration under the laws of California, Broadway agreed to submit to the jurisdiction of the courts of this state. This same question was posed in Frey & Horgan Corp. v. Superior Court (1936) 5 Cal.2d 401, 55 P.2d 203, wherein the parties had entered into a contract containing the identical arbitration provisions as in the instant case, and providing for submission to arbitration before the very same committee of the Foreign Commerce Association of the San Francisco Chamber of Commerce. There, the petitioner filed its petition in the Superior Court of the City and County of San Francisco for an order directing arbitration to proceed under authority of section 1282 of the Code of Civil Procedure. ⁴ Thereafter, service was made upon the Frey & Horgan Corporation by delivery to the secretary of that corporation, in the City of New York, of a written notice, authorized by section 1282, that the application and motion for the desired order would be presented to the court at a time stated. Frey & Horgan Corporation then appeared specially to move the trial court for an order quashing service of the notice of motion. The trial court denied the motion to quash and directed that the arbitration proceed. The Frey & Horgan Corporation then petitioned the Supreme Court for a writ of prohibition commanding that the superior court desist from further proceedings. In denying the writ, the Supreme Court held that notice of a petition for an order directing arbitration to proceed constitutes 'process'; and that while, as a general rule, in personam jurisdiction may not be acquired over a defendant in an action by service of notice or other process outside the territory or state in which the forum exists (citing Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565), a contract containing provisions which stipulate that disputes arising thereunder should be submitted to arbitration before the designated committee and which provides that "[t]his contract in all respects shall be governed and construed by the laws of the State of California" (p. 403 of 5 Cal.2d, p. 203 of 55 P.2d), constitutes an agreement to submit to the jurisdiction of the California courts. The rationale of Frey & Horgan is that such a contract was an agreement to cooperate in the arbitration proceedings; that section 1282 should be read into such contract as a part thereof; and that, accordingly, it was an agreement to submit to the jurisdiction within which the arbitration must operate in order to give it the effect contemplated by the contract and by the law.

The rule of the Frey & Horgan case was codified by section 1293 of the Code of Civil Procedure in 1961, ⁵ and became effective on September 15, 1961. In view of the rule against retroactive application, unless the Legislature has expressly so declared (§ 3; see Di Genova v. State Board of Education, 57 Cal.2d 167, 172-175, 18 Cal.Rptr. 369, 367 P.2d 865), there may be some question as to whether section 1293 applies to contracts executed prior to its effective date. It is apparent, however, that the rule announced in Frey & Horgan is applicable to contracts entered into prior to September 15, 1961, and that section 1293 is but a codification of the principle declared in Frey & Horgan. It is clear, therefore that any contract entered into...