Judge: Mark H. Epstein, Case: SC125609, Date: 2023-03-02 Tentative Ruling

Case Number: SC125609    Hearing Date: March 2, 2023    Dept: R

Plaintiffs Holy Shirts and Pants, LLC, Early Bird Restaurant, LLC and Marcelo Caraveo (“plaintiffs”) filed this action against various defendants for issues arising out of plaintiffs’ purchase of luxury vehicles from defendant O’Gara Coach Company, LLC.  Currently before the court is defendants O’Gara’s, TD Auto Finance, LLC’s, and Ally Financial, Inc.’s motion to dismiss due to plaintiffs’ failure to bring the action to trial within five years.  Defendant Porsche Financial Services, Inc. filed a joinder.  Plaintiffs oppose.

Defendants’ request for judicial notice in reply is GRANTED.  It does not change the outcome, however.  The court sua sponte judicially notices all the records in this action.

Defendants contend that this action must be dismissed because plaintiffs failed to bring the action to trial within five years pursuant to Code of Civil Procedure section 583.310.  (Defendants assert that the cross-complaint, having been brought later, survives.  The court notes, though, that if that is the case all of plaintiffs’ causes of action might be live as potential offsets.  Just as the statute of limitations often does not bar an offset, it might be that section 583.310 does not bar such an offset either.)  “Section 583.310 states, ‘An action shall be brought to trial within five years after the action is commenced against the defendant.’  ‘An action shall be dismissed by the court on its own motion or on motion of the defendant, after notice to the parties, if the action is not brought to trial within the time prescribed . . . .’  (§ 583.360, subd. (a).)  This dismissal requirement is mandatory and ‘not subject to extension, excuse, or exception except as expressly provided by statute.’  (Id., subd. (b).)  ‘Under the press of this statutory requirement, anyone pursuing an ‘action’ in the California courts has an affirmative obligation to do what is necessary to move the action forward to trial in timely fashion.’  (Tanguilig v. Neiman Marcus Group, Inc. (2018) 22 Cal.App.5th 313, 322.)  [¶]  Section 583.340 states, ‘In computing the time within which an action must be brought to trial pursuant to this article, there shall be excluded the time during which any of the following conditions existed: [¶] (a) The jurisdiction of the court to try the action was suspended.  [¶] (b) Prosecution or trial of the action was stayed or enjoined.  [¶] (c) Bringing the action to trial, for any other reason, was impossible, impracticable, or futile.’  ‘Because the purpose of the dismissal statute  “is to prevent avoidable delay, . . . [section 583.340, subdivision (c) (§ 583.340(c))] makes allowance for circumstances beyond the plaintiff's control, in which moving the case to trial is impracticable for all practical purposes.” ’ (Tanguilig, supra, 22 Cal.App.5th at p. 323.)  Section 583.130 instructs that ‘the policy favoring trial or other disposition of an action on the merits [is] generally to be preferred over the policy that requires dismissal for failure to proceed with reasonable diligence in the prosecution of an action in construing the provisions of this chapter.’  ‘Accordingly, the tolling provisions of Code of Civil Procedure section 583.340 must be liberally construed consistent with the policy favoring trial on the merits.’  (Dowling v. Farmers Ins. Exchange (2012) 208 Cal.App.4th 685, 693.)”  (Seto v. Szeto (2022) 86 Cal.App.5th 76, 85, parallel citations omitted.)

This action was filed on March 24, 2016.  The original deadline to bring the case to trial was March 24, 2021.  But, as defendants concede, the entire case was stayed pending an appeal of the court’s ruling on the motion to disqualify Ra’s counsel.  The stay lasted from January 18, 2018 to April 10, 2019, which is 448 days.  (Defendants state it is 447 days, but that excludes April 10, 2019, which is the last day the case was stayed.)  That extended plaintiffs’ time to bring the case to trial to June 15, 2022.  As defendants also concede, Emergency Rule 10(a) afforded plaintiffs an additional 6 months, resulting in a deadline of December 15, 2022.  Trial has not yet commenced and therefore the action is facially subject to mandatory dismissal, at least as to the moving defendants.

Plaintiffs raise a number of arguments in opposition. One is successful and there is therefore no need to address the remaining arguments.

Plaintiffs assert that trial was stayed pending the discharge of Ra’s bankruptcy.  This argument, if successful, would exclude the time the trial was stayed from the computation of time within which to bring this action.  “In computing the time within which an action must be brought to trial pursuant to this article, there shall be excluded the time during which any of the following conditions existed: (b) Prosecution or trial of the action was stayed or enjoined.”  (Code Civ. Proc., § 583.340, subd. (b), emphasis added.)

As defendants correctly point out, the entire case was not stayed due to Ra’s bankruptcy, either as a matter of law or a matter of discretion.  “Significantly, ‘the automatic stay of judicial proceedings against a debtor in bankruptcy does not apply to nondebtor codefendants.’  (Cross v. Cooper (2011) 197 Cal.App.4th 357, 365, fn. 2; accord, Danko v. O'Reilly (2014) 232 Cal.App.4th 732, 748 [‘ “automatic stay does not . . . apply to nondebtor entities such as . . . codefendants” ’].)  As a general rule, therefore, because ‘the automatic stay protects only the debtor,’ the ‘[b]ankruptcy of one defendant in a multidefendant case does not stay the case as to the remaining defendants.’  (March et al., Cal. Practice Guide: Bankruptcy (The Rutter Group 2016) ¶ 8:100, p. 8(I)-8, ¶ 8:125, p. 8(I)-11 [citing federal authorities].)”  (Higgins v. Superior Court (2017) 15 Cal.App.5th 973, 979–980, parallel citations omitted.)  Accordingly, Ra’s bankruptcy does not act as a general stay.  That is especially so in that defendants sought such a stay and plaintiffs opposed it with partial success.

Plaintiffs’ argument, however, is that even though the entire case was not stayed, the trial was stayed pursuant to Judge Gross’ February 11, 2020, order concerning defendant O’Gara’s motion for a stay.  (COE, Exh. 11 [2/11/20 MO].)  That order stated: “The Motion for Stay of Proceedings filed by O'Gara Coach Company on 05/07/2019 is Granted in Part.  [¶] The Court does not set the case for trial, pending defendant, Joseph Ra's bankruptcy.  [¶] Discovery remains open, except that it may be limited under the bankruptcy law as to defendant, Joseph Ra.”  (Ibid.)

It is true that the minute order does not use the word “stay.”  However, a later minute order, dated July 8, 2020, does.  That order states “There is a stay on the case as to the trial only.”  This supports plaintiffs’ argument that at least the trial was stayed.  The question becomes whether that is enough to stop the statutory clock.

In making that determination, the court looks to Gaines v. Fidelity National Title Ins. Co. (2016) 62 Cal.4th, 1081.  There, our Supreme Court held that “[t]o decide whether section 583.340(b) applies, we must distinguish between a stay of the trial and a continuance.  Under section 583.340(b), a stay of the trial halts the running of the five-year period.  (Bruns, supra, 51 Cal.4th at p. 725.)  By contrast, a continuance generally does not . . .  [¶] The label the trial court uses is not dispositive of the inquiry.  (Holland v. Dave Altman's R.V. Center (1990) 222 Cal.App.3d 477, 482.)  What matters is whether the order is functionally in the nature of a stay, which implicates the legislative purposes behind tolling the five-year period, or whether it is functionally in the nature of a continuance, which does not.  Accordingly, we do not read too much into the trial court's declaration that the trial date is being ‘struck,’ as opposed to ‘continued’ or ‘stayed.’ ”  (Id., at pp. 1091-1092, parallel citations omitted.)

Defendants cite a different part of Gaines (the summary of the ruling), but not the discussion quoted above.  Notably, defendants argue that only a stay of the entire case qualifies under section 580.340.  But in doing so, they misread another ruling by our Supreme Court.  Defendants rely on Bruns v. E-Commerce Exchange, Inc. (2011) 51 Cal.4th 717, for support for their view that the stay must be all or nothing.  Specifically, they quote the portion of the opinion stating “[w]e conclude subdivision (b) of section 583.340 governs only complete stays that are ‘used to stop the prosecution of the action altogether.’  (Black's Law Dict., supra, at p. 1267, col. 1.)”  (Id., at p. 730.)  But Bruns was only concerned with the “prosecution” language in section 580.340, not the “trial” stay, and the Court made that distinction expressly.  “Only when the ‘prosecution’ or ‘the trial’ of the ‘action’ is stayed does running of the five-year period halt under 583.340(b).  The trial was never stayed in this case; we therefore focus on the meaning of the word ‘prosecution.’ ”  (Id. at p. 725.)  The Gaines Court elaborated on this point.

The long-standing judicial understanding of the term stay in the context of the five-year statute is that it refers to those postponements that freeze a proceeding for an indefinite period, until the occurrence of an event that is usually extrinsic to the litigation and beyond the plaintiff's control.  Holland, supra, 222 Cal.App.3d 477, provides an example.  There, the plaintiff appealed the trial court's order quashing service on one of the defendants.  (Id. at p. 479.)  The plaintiff filed an ‘ “Ex Parte Motion for Continuance of Defendant's Motion for Summary Judgment, Trial Date, Mandatory Settlement Conference, and Demand for Designation of Expert Witnesses.” ’ (Id. at p. 481.)  The trial court ordered that ‘ “the trial date set for March 17, 1987 . . . be continued until the pending appeal has been decided.” ’ (Ibid.) The minute order reflected that the trial date was vacated and the case was ‘ “off calendar”’ ‘ “pending ruling on appeal.” ’  (Ibid.)  A subsequent minute order additionally stated: ‘ “Mandatory settlement conference and trial to be reset in Department NWA after ruling of appellate court.” ’  (Id. at p. 482.)  The appeal was ultimately resolved against the plaintiff over a year later, on March 29, 1988.  (Id. at p. 480.)

The appellate court concluded that, notwithstanding the use of the term ‘ “continue,”’ the order amounted to a stay of the trial under section 583.340(b).  (Holland, supra, 222 Cal.App.3d at p. 482.)  The court reasoned that ‘it is plain . . . the court did not intend to postpone trial to any known date.  Instead, it put the trial over indefinitely, until the happening of a designated event: determination of the . . . appeal.  The legal effect of this order was to stay, rather than to continue the trial.’  (Ibid; accord, Ocean Services Corp. v. Ventura Port Dist. (1993) 15 Cal.App.4th 1762, 1773–1774 [stay pending appeal of order disqualifying plaintiff's counsel in related action]; Rosenthal v. Wilner (1988) 197 Cal.App.3d 1327, 1331, 1333–1334 [appellate court's order directing trial court to stay all proceedings pending resolution of related appeal that would affect issues such as proximate cause and damages tolled the proceedings under § 583.340(b)]; Hughes v. Portsmouth Square, Inc. (1982) 135 Cal.App.3d 170, 173 [under former § 583, the filing of a petition in bankruptcy qualifies for tolling because it operates as a stay on the commencement or continuation of any action against the bankrupt party]; cf. Spanair S.A. v. McDonnell Douglas Corp. (2009) 172 Cal.App.4th 348, 358–359 [removal of case to federal court suspended trial court's jurisdiction]; Bergin v. Portman (1983) 141 Cal.App.3d 23, 25–26 [appeal of motion for summary judgment suspended trial court's jurisdiction].)

(Gaines, supra, 62 Cal.4th at pp. 1092–1093.)

Here, the court’s action on February 11, 2020 constituted a stay of the trial date as to the entire case pending completion of Ra’s bankruptcy.  That proceeding was outside plaintiffs’ and defendants’ control and trial was not continued to a date certain.  While discovery and litigation went forward, the court blocked the case from being set for trial.  That stay was lifted on either April 13, 2021 (4/13/21 MO [“All stays imposed by Judge Epstein are hereby lifted”]) or May 28, 2021 (5/28/21 MO [trial dates set]).  (There is an argument to be made that the stay was actually not lifted until November 2021, but that argument seems weak in light of the May 2021 minute order setting the case for trial.  (See 11/2/21 MO [“The Court and counsel confer regarding the status of the case and Defendant Joseph Ra's bankruptcy.  The Court orders all Los Angeles Superior Court stays lifted”].)  Taking the earlier of the two potential dates, then trial was stayed pursuant to section 580.340 for 428 days.  That gives plaintiffs an additional 428 days within which to bring the case to trial.  Importantly, there is no overlap with the dates the case was on appeal, meaning that there is no double counting of time.  That means they have until February 16, 2024 to bring this action to trial.

Defendants contend that the doctrine of judicial estoppel precludes plaintiffs from relying on this argument.  Plaintiffs opposed the motion for stay on the basis of Ra’s bankruptcy.  They won, but only in part.  Their opposition to a stay of the case was successful.  However, a stay of trial was granted.  That fact pattern does not invoke judicial estoppel.  Plaintiffs’ opposition here is successful because there is a statutory basis to exclude time from the computation.  The court is not granting the motion on plaintiffs’ argument that Ra is indispensable and therefore bringing the action to trial in that time was impossible, impracticable, or futile.  Had the court based its decision on that argument, the judicial estoppel argument might have been dispositive.  But regardless whether Ra was in fact an indispensable party, trial was stayed by the court.  (Ra is currently in default.)

The motion to dismiss is DENIED.