Court Opinion

ID: 6350484
Source: CourtListenerOpinion
Date Created: 2022-06-16 18:01:46.134512+00
Date Added: 2024-06-11T09:15:16.347342
License: Public Domain

Filed 6/16/22 Eldereiny v. MGM Financial CA4/1

                 NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

                COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                                 DIVISION ONE

                                         STATE OF CALIFORNIA

 MISBAH ELDEREINY,                                                    D079553

           Plaintiff and Appellant,

           v.                                                         (Imperial Super. Ct.
                                                                      No. ECU001462)
 MGM FINANCIAL et al.,

           Defendants and Respondents.

         APPEAL from an order of the Superior Court of Imperial County,
Jeffrey B. Jones, Judge. Reversed and remanded for further proceedings.
         Misbah Eldereiny, in pro. per., for Plaintiff and Appellant.
         Law Office of William S. Smerdon and William Scott Smerdon for
Defendants and Respondents Ahmed Z. Fejleh and Wael Fejleh.
      Misbah Eldereiny sued brothers Ahmed and Wael Fejleh for breaching
a contract and causing emotional distress. The case was submitted to judicial

arbitration under Code of Civil Procedure1 section 1141.11, where the
arbitrator returned a defense award. Although Eldereiny did not formally
request a trial de novo within 60 days of the arbitration award (see

§ 1141.20, subd. (a); Cal. Rules of Court, rule 3.826(a) 2), the court
nonetheless set a trial date and notified the parties. Eldereiny responded by
requesting to continue trial to explore possible mediation, and the trial court
granted the continuance.
      When the clerk thereafter entered judgment pursuant to the
arbitration award (§ 1141.23), Eldereiny filed a set aside motion. Among
other contentions, he claimed he substantially complied with the requirement
to request trial de novo, rendering the judgment void. (§ 473, subd. (d).) The
court denied his motion, and Eldereiny appeals. Concluding the record
compels a finding of substantial compliance, we reverse and remand the case
for further proceedings.

               FACTUAL AND PROCEDURAL BACKGROUND
      Eldereiny invested in a date palm growing operation run by the Fejleh

brothers.3 His close friend Ahmed explained that for a $1,000 investment
per tree, he could reap returns of $5,000 in 9 or 10 years through sales of
dates and mature palm trees. In 2007, Eldereiny invested in ten trees,

1    Further undesignated statutory references are to the Code of Civil
Procedure.
2    Further undesignated rule references are to the California Rules of
Court.
3     To avoid confusion, we refer to Ahmed Fejleh by his first name and
intend no disrespect.
                                        2
offering free school tuition for Ahmed’s two children worth $10,000. Four
years later, Eldereiny invested in another 45 trees, paying $40,000 after a 5-
tree discount.
      A decade passed, but Eldereiny never received any share of the profits.
When he approached Ahmed, he was told the companies had no money.
Ahmed said that costs were higher and yields lower than expected. Eldereiny
received a $25,000 check for a “Loan Payoff,” but the check did not clear.
      Searching the internet, Eldereiny learned that the Fejlehs were selling
dates and date trees at substantial prices. He concluded he was owed
$500,000 under the joint venture agreement. Refusing a payoff of $55,000, he
sued the Fejleh brothers as well as their date growing and retail companies
(MGM Financial, MGM Farms, AYA Farm, AYA Farms, and Westmorland
Date Shake). The operative first amended complaint alleged breach of
contract, breach of fiduciary duty, intentional infliction of emotional distress,
and negligent infliction of emotional distress. Only the Fejleh brothers filed
an answer. In October 2020, the court entered default against the corporate
defendants.
      The parties appeared for a case management conference in December,
where the court referred the case to judicial arbitration. (See § 1141.11,
subds. (a)−(b); Super. Ct. Imperial County, Local Rules, rule 3.5.0.) The
arbitrator entered an award in favor of the Fejlehs on April 23, 2021,
concluding there was insufficient evidence of breach or damages.
      Roughly a month later, on May 27, Eldereiny received a copy of a court
order setting trial and a trial management conference for July 2021. In
response, he immediately filed an ex parte application to continue the trial
date, indicating that he was not ready for trial and was “deeply thinking to be
agreeable to mediation.” Counsel for the Fejlehs filed a declaration of

                                        3
nonopposition to continuing the trial date. On May 28, the court entered an
order continuing the trial date and trial management conference to December
2021.
        Somewhat inexplicably with a trial de novo date pending, on June 24
the clerk entered a judgment based on the arbitration award. (§ 1141.23.)
Within a week, Eldereiny filed a motion to vacate the judgment. He argued
he had substantially complied with the requirement to request a trial de
novo, rendering the judgment void. (§ 473, subd. (d).) In the alternative, he

claimed the judgment should be set aside for mistake or excusable neglect.4
        Opposing the motion, the Fejlehs argued the record showed at most
that Eldereiny was ignorant of the law and “took no steps to inform himself of
the law” after receiving the arbitrator’s unfavorable award. Attorney William
Smerdon filed a declaration describing the parties’ interactions throughout
the course of litigation. He stated that on May 24, he was contacted by an
attorney named Mitch Driskill. Driskill informed him that Eldereiny was
considering retaining him to help mediate the dispute and asked if the
Fejlehs were open to mediation. Smerdon confirmed with his clients and
expressed willingness to mediate. Three days later, Eldereiny called and
asked if the Fejlehs would agree to continue the trial date to facilitate
mediation; Smerdon agreed. Smerdon declared that neither Eldereiny nor

Driskill ever mentioned the arbitrator’s award.5

4    In his reply brief, Eldereiny also asserted the trial court lacked
authority to send the case to arbitration given the amount in controversy,
rendering the judgment “a nullity.”
5     Eldereiny offered additional facts in his reply brief that were not
considered by the trial court. He explained that he initially contacted
Driskill on May 24 to seek representation for trial. Driskill suggested
mediation would be cheaper, prompting Eldereiny to file an ex parte
                                        4
      Following a hearing, the court denied the set aside motion, finding that
Eldereiny failed to meet his burden to establish excusable neglect. In the
court’s view, Eldereiny’s supporting declaration made a bare allegation of
mistake, which was not enough. It made no attempt to address Eldereiny’s
argument that obtaining a continuance of a trial de novo date already set by
the court substantially complied with the requirement that he request a trial
de novo.

                                DISCUSSION
      Eldereiny reasserts the arguments raised below. As we explain, he
substantially complied with the requirement to request trial de novo,
rendering the judgment void. Because the set aside motion should have been

granted on this basis under section 473, subdivision (d), we reverse.6

A.    Judicial arbitration awards are final and binding unless a party timely
      requests trial de novo, but the resulting judgment may be set aside
      under section 473.

      “The Judicial Arbitration Act ([ ] § 1141.10 et seq.) was enacted by the
Legislature in 1978 as a means of coping with the increasing cost and
complexity of litigation in civil disputes.” (Blanton v. Womancare, Inc. (1985)

continuance request. Following the clerk’s guidance, he asked Smerdon if the
Fejlehs would consent to a continuance. In mid-June, he tried several times
to reach Driskill to begin mediation. Driskill finally called back on June 29
and indicated the intervening judgment would need to be vacated first. As
our outcome is the same without these facts, we find no need to rely on them.
6     Because we conclude there was substantial compliance, we do not reach
Eldereiny’s alternative argument that his failure to request a trial de novo
amounted to mistake or excusable neglect under section 473, subdivision (b).
We likewise do not reach his additional claims that the court lacked a basis to
require judicial arbitration (see Sharples v. Chole (1994) 29 Cal.App.4th
1213, 1220) or erred in refusing to enter default judgment as to the defaulted
corporate defendants after judgment was entered in favor of the Fejlehs.
                                       5
38 Cal.3d 396, 401, fn. omitted (Blanton).) It “mandates submission to
arbitration of certain classes of at-issue civil actions where the amount in
controversy is determined to be not in excess of a specified amount
(§ 1141.11) . . . .” (Blanton, at p. 401.) As permitted, Imperial County
adopted a local rule requiring judicial arbitration of all unlimited civil cases
in which the court believes the amount in controversy will not exceed
$50,000. (§ 1141.11, subd. (b); rules 3.811(a)(2), 3.812(d); Super. Ct. Imperial
County, supra, rule 3.5.0.) After the hearing concludes, the arbitrator must
file a written award in superior court determining “all issues properly raised
by the pleadings, including a determination of any damages.” (Rule 3.825(a);
see § 1141.23.)
      Unlike private contractual arbitration, judicial arbitration is not
necessarily binding. “Recognizing that each party has a right to trial by jury
guaranteed by article I, section 16, of the California Constitution, the
Legislature has provided that any party that is dissatisfied with the
arbitration award can elect to have a trial de novo.” (Phelps v. Stosad (1997)

16 Cal.4th 23, 29.)7 This opportunity “is what principally distinguishes
court-annexed arbitration pursuant to the Judicial Arbitration Act from
private arbitration conducted pursuant to the agreement of the parties and
subject to the arbitration statute (§ 1280 et seq.).” (Blanton, supra, 38 Cal.3d
at pp. 401–402.) Either party may elect to have a trial de novo as to both law
and facts by requesting it within 60 days after the arbitrator files the award.
(§ 1141.20; rule 3.826(a).) The Judicial Council has approved an optional
form (ADR-102) for this purpose. Although the right to trial de novo must be

7     The Act “encourage[s] parties to accept reasonable arbitration awards”
by imposing additional costs if a party elects a trial de novo following judicial
arbitration and does not obtain a more favorable judgment. (Phelps v.
Stosad, supra, 16 Cal.4th at p. 29; § 1141.21.)
                                        6
timely exercised, it is otherwise absolute. (Herbert v. Harn (1982) 133
Cal.App.3d 465, 470.)
      If a party timely requests trial de novo, the arbitrator’s award is
vacated as if it never existed. (Rule 3.826(c); see Southern Pacific
Transportation Co. v. Mendez Trucking, Inc. (1998) 66 Cal.App.4th 691, 695.)
The case proceeds as provided under any applicable case management order;
if there is no such order, a case management conference will be promptly
scheduled. (Rule 3.826(b).) But if no request is filed by the 60-day deadline,
the clerk has a ministerial duty to enter the arbitration award as a
nonappealable judgment. (§ 1141.23; rule 3.827; see Dorit v. Noe (2020) 49
Cal.App.5th 458 [“If no party requests a trial de novo after the arbitration,
the decision of the arbitrator becomes final and binding.”].)
      Although there is no right to appeal a judgment entered on a judicial
arbitration award, “an appeal does lie from certain postjudgment orders,
including . . . an order denying a motion to vacate or set aside the judgment.”
(Karamzai v. Digitcom (1996) 51 Cal.App.4th 547, 549−550.) A party may
move to vacate the judgment within six months solely “upon one of the
grounds set forth in . . . sections 473 or 1286.2(a)(1), (2), and (3).” (Rule
3.828(a).) The motion must be timely and supported by clear and convincing
evidence. (Rule 3.828(b).) As relevant here, section 473, subdivision (d)
provides a basis to set aside a void order or judgment.

B.    Eldereiny substantially complied with the statutory requirement to
      request a trial de novo following entry of the arbitration award.
      It is undisputed that Eldereiny did not formally request trial de novo
within 60 days after the arbitration award was entered. But he maintains
that his continuance request, in light of court orders already setting a date

                                         7
for a trial de novo, substantially complied with the statutory requirement.8
As we explain, we agree with Eldereiny that he substantially complied,
rendering the judgment void. (§ 473, subd. (d).)
      The concept of “substantial compliance” is grounded in case law. In
Fox Industrial, a defendant who lost at judicial arbitration filed an “at-issue
memorandum” on advice from a court clerk rather than formally request trial
de novo. (Fox Industrial Realty v. Dio Dix, Inc. (1982) 136 Cal.App.3d 787,
789 (Fox).) The clerk thereafter entered judgment based on the judicial
arbitration award, and the defendant unsuccessfully moved to vacate. (Id. at
p. 790.) In reversing that ruling, the appellate court explained that the
judgment was void and a “nullity” to the extent the defendant substantially
complied with the requirement to request trial de novo. (Id. at p. 791.)
Substantial compliance meant actual compliance in substance despite
technical shortcomings in form, and the at-issue memorandum met that
standard:
         “In the case at bench defendant utilized a form (the at-issue
         memorandum) which was designed to inform the court,
         with notice to opposing parties, that the moving party
         wished to have his case placed on the civil list for trial.
         Defendant also apprised the court and opposing counsel
         that rule 1616 was the reason underlying the request to be
         placed on the list for trial. [¶] It seems clear to us that the
         at-issue memorandum was intended to be a request for
         trial de novo and rejection of the arbitrator’s award, and
         that it achieved its purpose.” (Id. at p. 792.)

8     Although he argued below that substantial compliance rendered the
judgment void, the trial court did not reach this claim. In any event,
appellate courts independently assess whether a judgment is void. (See
Grados v. Shiau (2021) 63 Cal.App.5th 1042, 1049.)
                                        8
      Hanf v. Sunnyview Development, Inc. (1982) 128 Cal.App.3d 909 (Hanf)
reached a similar outcome. Defendants who lost in judicial arbitration filed a
document captioned “ ‘Rejection of Arbitration Award.’ ” Although they
served the filing on the plaintiff within the statutory deadline, the court
entered judgment pursuant to the arbitration award and denied defendants’
set aside motion. (Id. at pp. 911−912.) Examining the statutory scheme, the
appellate court explained that the requirement to request trial de novo would
be satisfied by a filing “which, in substance, promptly and adequately informs
both the court and any adverse party of the intent to elect a trial de novo.”
(Id. at p. 916.) The “Rejection of Arbitration Award” met that standard, as it
“sufficiently alerted both the trial court and [plaintiffs] to [defendants’]
election . . . to take the case to trial. It was promptly filed and its intent was
clear.” (Ibid.) Because the filing “substantially complied with the rules
governing a request for trial after arbitration, . . . the trial court’s entry of
judgment [was] erroneous.” (Ibid.)
      Applying those standards here, we conclude Eldereiny substantially
complied with the requirement to request a trial de novo. On May 27, about
a month after the April 23 arbitration award, he received a court order
setting a trial date of July 14. He promptly responded with an ex parte
request to continue the trial date to permit mediation. The Fejlehs received
actual notice, as evidenced by the declaration of nonopposition. On May 28,
the court continued the trial date and trial management conference to
December. On these facts, Eldereiny’s request for a continuance was
designed to inform the court, with notice to the Fejlehs, that he rejected the
arbitrator’s award and wished to proceed to trial, at least if the matter could
not be resolved by mediation. (See Fox, supra, 136 Cal.App.3d at p. 792;
Hanf, supra, 128 Cal.App.3d at p. 916.)

                                          9
      The plan to mediate a dispute and, if mediation is unsuccessful,
proceed to a trial de novo is entirely inconsistent with accepting the results of
judicial arbitration. Until the clerk entered the arbitration award into
judgment on June 28, all the parties and the court should clearly have
understood that Eldereiny intended to take his case to trial after possible
mediation. On these facts, the record compels a conclusion (on clear and
convincing evidence, see rule 3.828(b)) that Eldereiny substantially complied
with the requirement to request trial de novo.
      Challenging this result, the Fejlehs claim “[t]here was nothing in the ex
parte application for continuance expressing an intention to reject the
arbitration award.” They maintain that a continuance was requested to
permit mediation, without expressing intent to reject the arbitrator’s award
and request trial de novo. But this argument ignores the May 25 chamber
order (served on May 27) setting a trial date of July 14. On receiving this
order, the subsequent request to continue trial to permit mediation can be
viewed in no other way than as a rejection of the arbitration award and an
intent to proceed to trial. Had Eldereiny accepted the arbitrator’s award,
there would be nothing to mediate or take to trial.

                                       10
                                 DISPOSITION
      The order denying Eldereiny’s set aside motion is reversed. The clerk
of the superior court is directed to enter a new order granting the motion
under section 473, subdivision (d), vacating the judgment, and restoring the
case to the civil active list. Eldereiny is entitled to recover his costs on
appeal.

                                                                          DATO, J.

WE CONCUR:

McCONNELL, P. J.

HALLER, J.

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