Unpublished Disposition, 911 F.2d 737 (9th Cir. 1988)

MEMORANDUM^** 

D.L. Wirth appeals from the district court order granting Minda Feliciano's renewed motion for summary judgment. We reverse the district court decision due to lack of subject matter jurisdiction.

FACTS AND PROCEEDINGS

D.L. Wirth is a resident of California, and Minda Feliciano is a resident of Nevada. In April 1984, Wirth and Feliciano entered into an oral contract in California, whereby Wirth would lend money for repair costs and perform services on Feliciano's vessel, the "Motor Yacht Minda." The contract was reduced to writing and included an agreement to submit any disputes "before one arbitrator of the American Arbitration Association (Los Angeles)." The contract was signed in France.

Under the terms of the contract, Feliciano agreed to pay Wirth the sum of $40,980 for Wirth's services and expenses. Wirth performed services on the boat, but Feliciano failed to pay him. Wirth filed a lien and had the boat arrested in France.

Feliciano went to California and paid Wirth approximately $15,000 of what was owed in exchange for the lifting of the arrest. She entered into a Compromise Agreement which included a provision to arbitrate the balance due through the American Arbitration Association in Los Angeles, California.

On June 18, 1985, Wirth filed for arbitration of the disputed balance. On September 24, 1985, he attended the arbitration hearing in Los Angeles. Feliciano failed to appear. After the hearing, Wirth learned that Feliciano had filed under Chapter 11 that same day in a bankruptcy court in Las Vegas, Nevada. The arbitration proceedings against Feliciano were stayed pursuant to 11 U.S.C. § 362.

On July 7, 1986, the bankruptcy court held a hearing and granted a one-year third preferred ship mortgage on the Minda to a Norman Lonsdale pursuant to 11 U.S.C. § 364. The court denied Wirth a preferred ship mortgage, thereby relegating his claim to unsecured status.

After the hearing, Wirth settled his claim with Feliciano, agreeing to accept $7,500 in full satisfaction of the debt if the amount was paid within ten days. Feliciano did not pay the sum to Wirth.

On October 15, 1986, Feliciano voluntarily dismissed the bankruptcy proceedings. Shortly thereafter, Wirth contacted the arbitrator, provided him with a copy of the dismissal, and requested relief. The arbitrator awarded him $26,000 on the basis that his claim was a valid third preferred ship mortgage. Wirth filed the award with the Coast Guard in California, the home port of the Minda.

On January 26, 1987, Feliciano filed a complaint against Wirth in the United States District Court for the District of Nevada. She sought vacation of the arbitration award, compensatory and punitive damages, and declaratory relief. Wirth decided to represent himself. On February 18, 1987, he filed an answer, asserting that the Nevada district court lacked subject matter jurisdiction and personal jurisdiction.

On April 15, 1987, Feliciano filed a motion for summary judgment to be heard on May 26, 1988. Wirth was neither served with nor notified of the motion. Just prior to the hearing date, Wirth learned of the motion, and Feliciano's attorney agreed not to proceed with the original motion. The attorney stated that he would renew the motion for summary judgment to be heard at a later date.

Due to a mix-up in the district court's calendar unit, the motion was heard and granted on May 26, 1987. Upon learning of the district court's decision, Wirth filed on May 30 a declaration in opposition to the order granting Feliciano's motion for summary judgment.

Feliciano did not proceed with the district court's order granting the original motion for summary judgment but filed a renewed motion for summary judgment on June 22, 1987. Wirth received notice of the hearing, which was scheduled for October 15, 1987. On September 25, 1987, Wirth received a second notice informing him that the October 15, 1987 hearing was postponed and would be rescheduled.

On October 15, 1987, the district court, finding that no opposition to the renewed motion for summary judgment was filed, granted the motion in favor of Feliciano and awarded her $250,000 in compensatory damages. The district court entered the order on October 21, 1987. On November 10, 1987, Wirth filed a notice of appeal. On December 11, 1987, the district court held a hearing to determine punitive damages and awarded Feliciano $150,000. Feliciano does not dispute the finality of the district court's orders and the timeliness of Wirth's appeal.

ANALYSIS

The district court for the district of Nevada lacked subject matter jurisdiction to vacate the arbitration award. Section 10 of the Federal Arbitration Act clearly provides that "the United States court in and for the district wherein the award was made may make an order vacating the award upon the application of any party to the arbitration--(a) Where the award was procured by corruption, fraud, or undue means." 9 U.S.C. § 10. Since the arbitration was held at and the award was made in Los Angeles, California, the district court for the central district of California was the proper court to hear the motion to vacate the award. The district court for Nevada was without jurisdiction to set aside the award. See Sunshine Beauty Supplies, Inc. v. United States Dist. Ct., 872 F.2d 310, 312 (9th Cir. 1989) (9 U.S.C. §§ 9 & 10 limit jurisdiction to confirm or vacate award to district where award was made); Central Valley Typographical Union v. McClatchy Newspapers, 762 F.2d 741, 744 (9th Cir. 1985) (venue and jurisdiction proper in district within which arbitration hearings were held); United States v. Ets-Hokin Corp., 397 F.2d 935, 938-39 (9th Cir. 1968) (since arbitration was held and award made at San Francisco, California, district court of Arizona was without jurisdiction to vacate award).

Nor was the district court acting to protect a bankruptcy court judgment. The bankruptcy court did not resolve Wirth's claim; it merely concluded that Wirth's interest was unperfected and was therefore avoided by the trustee, leaving Wirth with "an unsecured claim in an amount to be determined at a later date." See Order Authorizing Priority Debt, July 3, 1986, at 2. Once the bankruptcy proceeding was dismissed, Wirth's claim reverted to its former status, namely a disputed unperfected secured claim. 11 U.S.C. §§ 349(b) (1) (B), (b) (3); see Armel Laminates, Inc. v. Lomas & Nettleton Co. (In re Income Property Builders, Inc.), 699 F.2d 963, 965 (9th Cir. 1982) (per curiam); 2 Collier on Bankruptcy Sec. 349.01, at 349-2.

The bankruptcy court authorized the issuance of a security interest apparently superior to defendant's. Nonetheless, because the bankruptcy proceeding was dismissed, both the propriety and relative priority of defendant's claim must be resolved under non-bankruptcy law, Armel Laminates, 699 F.2d at 965, and in the appropriate court, which in this case is the district court for the district where the arbitration award was made.

The district court's order granting the renewed motion for summary judgment and punitive damages is REVERSED and VACATED.