McRae v. Superior Court for Los Angeles County

• Decision Date: 14 October 1963
• Citation: 221 Cal.App.2d 166,34 Cal.Rptr. 346,98 A.L.R.2d 1239
• Parties: , 98 A.L.R.2d 1239 Gordon McRAE, Petitioner, v. SUPERIOR COURT of the State of Callfornia, FOR the COUNTY OF LOS ANGELES, Respondent; Frank HALE, Individual, and Redondo Sport Fishing Co., a corporation, Real Parties in Interest. Civ. 27598.
• Court: California Court of Appeals Court of Appeals

Page 346

34 Cal.Rptr. 346

221 Cal.App.2d 166, 98 A.L.R.2d 1239

Gordon McRAE, Petitioner, v. SUPERIOR COURT of the State of Callfornia, FOR the COUNTY OF LOS ANGELES, Respondent;

Frank HALE, Individual, and Redondo Sport Fishing Co., a corporation, Real Parties in Interest.

Civ. 27598.

District Court of Appeal, Second District, Division 2, California.

Oct. 14, 1963.

Frank J. Waters and Armond M. Jewell, Los Angeles, for petitioner.

No appearance for respondent.

Hosmer & Eagleson, Donald P. Lane, Long Beach, for real parties in interest.

HERNDON, Justice.

Petitioner herein seeks a writ of mandate or prohibition to restrain respondent court from ordering the taking of petitioner's deposition for discovery purposes during the time an arbitration is pending between the parties. He also seeks to set saide an order of respondent court denying and striking his motion for the appointment of a receiver and for the issuance of a preliminary injunction.

On February 1, 1963, Frank Hale, a real party in interest herein, filed an action against petitioner seeking an accounting of an alleged partnership business formerly carried on by the parties. The complaint alleged in substance that this partnership was dissolved on May 15, 1961; that petitioner undertook to wind up its affairs; that prior to and since the dissolution petitioner had collected large sums of money and applied them to his own use and refused to account to the plaintiff for his proportionate share thereof.

On April 15, 1963, petitioner filed his answer to said complaint, in which, in addition to certain general denials, he set forth the affirmative defense that '[t]he matters, claims and disputes set forth in plaintiff's complaint are subject to arbitration as such arbitration is provided for in said written agreement dated May 15, 1961.'

On the same date, and in the same action, petitioner filed a 'Petition for Order to Arbitrate' wherein he sought to invoke the provisions of said agreement relating to arbitration. This petition also sought to extend the order to the Redondo Sport Fishing Co., a corporation. On May 23, 1963, petitioner filed a Notice of Motion for Order Appointing Receiver and for Preliminary Injunction, in which he again named the Redondo Sport Fishing Co. as a 'respondent' and in which he requested that a receiver be appointed to take over and operate its business and assets and that the company and Frank Hale be enjoined from performing numerous acts.

Although the business dealings involving the parties directly or indirectly concerned with the instant matter are exceedingly complex and subject to sharply conflicting claims, it appears that the Redondo Sport Fishing Co., a corporation, is a going business, forty per cent of which is owned by petitioner, forty per cent by Frank Hale and twenty per cent by one Presley Fiscus, who has not been made a party to any of the presently pending proceedings. Although petitioner and Hale signed the agreement of May 15, 1961, both in their individual capacities and as officers of the corporation, the paragraph therein relating to arbitration provides only that: 'If any claim or controversy shall arise between [petitioner] and Hale due to any of the provisions of this agreement, and said dispute cannot be settled by them, each shall select an arbiter who shall in turn select a third arbiter. This group of three shall act as a board of arbitration and the arbitrators shall decide the point in dispute by majority vote.'

By its minute order dated May 28, 1963, the court ordered arbitration as to petitioner and Hale and continued the hearing on the motion for the appointment of a receiver and for the issuance of preliminary injunctions to June 25, 1963. ¹ On May 29, 1963, petitioner noticed a motion for an order staying all the proceedings in the accounting action pending completion of the arbitration ordered between the parties. On June 14, 1963, the Redondo Sport Fishing Co., appearing specially, and Frank Hale filed their notices of motions to strike petitioner's motion for the appointment of a receiver. It was indicated that these motions would be based upon the fact that the corporation was not a party to the accounting action, that neither its assets nor its business activities were the subject matter of the action, and that the requested order for arbitration had not been granted as to it.

A minute order dated June 25, 1963, states that petitioner's motion to stay the accounting action was granted and that his motions for the appointment of receiver and for a preliminary injunction were argued and denied. This order also states that the motions to strike were granted and that, pursuant to stipulation, a named arbitrator was appointed 'with full powers of a Board of Arbitration.'

On July 2, 1963, Frank Hale obtained the issuance of a 'Subpena Duces Tecum re Deposition in a Special Proceeding in Arbitration' and also filed a 'Notice of Taking Deposition (in a Special Proceeding in Arbitration)' and a 'Notice of Motion for Order to Take Oral Deposition of Gordon McRae for Purpose of Discovery * * * [and] Evidence * * *.' On July 8, 1963, petitioner filed a notice of motion seeking to quash the subpoena and requesting a protective order.

By a minute order dated July 22, 1963, supported by a written opinion, the trial court denied the motion to quash and ordered the taking of petitioner's deposition 'both for purposes of discovery and for use as evidence.' As indicated, it is the alleged impropriety of this order which constitutes petitioner's first ground for seeking relief in this court. We find his contentions in this regard to be meritorious.

Title 9 of Part 3 of the Code of Civil Procedure as enacted in 1961 (Stats.1961, Ch. 461, § 2) makes comprehensive provision for all judicial proceedings relating to arbitration. Chapter 1 of this title sets forth certain definitions and general provisions relating to arbitration; Chapter 2 covers the enforcement of arbitration agreements; Chapter 3 sets forth the manner in which the arbitration itself is to be conducted; Chapter 4 relates to the methods for enforcement of the award resulting from the arbitration; and Chapter 5 sets forth general provisions relating to the judicial proceedings that are authorized in connection with the arbitration itself.

It was the position of the real party in interest in the trial court that since section 2035 of the Code of Civil Procedure provides that 'The word 'action' as used in this article is to be construed, whenever it is necessary so to do, as including a special proceeding of a civil nature', the court might order the taking of a deposition for discovery purposes in aid of arbitration although the arbitrator had not requested such action. In fact, the arbitrator is expressly denied the power to order a deposition for such purpose. (Section 1283.) Reliance also was placed upon section 2016(a) which provides that: '* * * Such depositions may be taken in an action at any time after the service of the summons or in a special proceeding after the service of the petition, * * *.'

No attempt need be made to define the meaning of the expression 'special proceeding' in order to determine that, with respect to the limited issue here presented, the arbitration itself is not a 'special proceeding' as contemplated by the provisions of the Code of Civil Procedure relating to depositions. As heretofore indicated, the 'judicial proceedings' surrounding the arbitration itself are restricted by the statute to: (1) the enforcement of the agreement to arbitrate (Chapter 2); and (2) the enforcement of the award made following arbitration. (Chapter 4.)

Section 22 of the Code of Civil Procedure provides: 'An action is an ordinary proceeding in a court of justice by which one party prosecutes another for the declaration, enforcement, or protection of a right, the redress or prevention of a wrong, or the punishment of a public offense.' Section 23 provides: 'Every other remedy is a special proceeding.'

It seems manifest that in the present setting the two sections must be read together, and thus section 23 actually provides: 'Every other remedy is a special proceeding [in a court of justice * * *].' Whether depositions might be permitted during the pendency of, and in aid of, the judicial proceedings authorized to determine whether or not an agreement should be enforced or a subsequent award confirmed we need not now decide. Here we hold only that such depositions for discovery purposes may not be ordered by the court in aid of the arbitration itself.

Historically 'an arbitration is a substitute for proceedings in court.' (Emphasis added.) (California Annual Conf. of M. E. Church v. Seitz, 74 Cal. 287, 291, 15 P. 839. Also, Rives-Strong Bldg., Inc. v. Bank of America, 50 Cal.App.2d 810, 815, 123 P.2d 942.) Though at one time viewed with disfavor, there is today a strong public policy in favor of arbitration and of settling arbitrations speedily with a minimum of court interference. (Government Employees Ins. Co. v. Brunner, 191 Cal.App.2d 334, 340, 12 Cal.Rptr. 547.)

As stated in Utah Const. Co. v. Western Pac. Ry. Co., 174 Cal. 156, 159, 162 P. 631, 632: 'The policy of the law in recognizing arbitration agreements and in providing by statute for their enforcement is to encourage persons who wish to avoid delays incident to a civil action to obtain an adjustment of their differences by a...