Stanford Law School - Robert Crown Law Library

Filed 2/10/11

IN THE SUPREME COURT OF CALIFORNIA

TARRANT BELL PROPERTY, LLC et al., )

Petitioners,
S179378
v.
Ct.App. 1/4 A125496
THE SUPERIOR COURT OF ALAMEDA )
COUNTY,
Alameda County
Respondent.
Super. Ct. No. HG08418168
REYNALDO ABAYA et al., Real Parties
in Interest.

SPANISH RANCH I, L.P.,
Petitioner,
S179378
v.
Ct.App. 1/4 A125714
THE SUPERIOR COURT OF ALAMEDA )
COUNTY,
Alameda County
Respondent.
Super. Ct. No. HG08418168
REYNALDO ABAYA et al., Real Parties
in Interest.

We granted review in this case to decide whether, under Code of Civil
Procedure section 638,1 a trial court has discretion to refuse to enforce a

1
All further unlabeled statutory references are to the Code of Civil
Procedure.

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predispute agreement providing that, in the event of dispute, a referee may hear
and decide certain contested issues. The Court of Appeal held that a trial court has
such discretion and that the trial court here properly exercised that discretion on
the facts of this case. We agree with the Court of Appeal‟s holding and affirm its
judgment.

FACTUAL BACKGROUND

In October 2008, 120 current and former lessees and residents of a
mobilehome park in California (real parties in interest) sued the park‟s current and
former owners (defendants) for failing properly to maintain the park‟s common
areas and facilities and for otherwise subjecting park residents to substandard
living conditions. The lease agreements between defendants and about 100 of the
real parties in interest provide: (1) the parties will submit to arbitration any
tenancy dispute (with certain exceptions for actions by the owner), including
claims regarding maintenance, condition, nature, or extent of the facilities,
improvements, services, and utilities provided to the space, park, or common areas
of the park; and (2) “[i]f these arbitration provisions are held unenforceable for
any reason . . . all arbitrable issues in any judicial proceeding will be subject to
and referred on motion by any party or the court for hearing and decision by a
referee (a retired judge or other person appointed by the court) as provided by
California law, including” section 638.2
In December 2008, defendants moved to compel arbitration under section
1281.2 or, in the alternative, for appointment of a referee to hear the dispute under
section 638, which provides in relevant part: “A referee may be appointed . . .
upon the motion of a party to a written contract . . . that provides that any

2
The parties disagree as to the number of real parties in interest whose lease
agreements contain these provisions. The precise number is not material here.
2

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controversy arising therefrom shall be heard by a referee if the court finds a
reference agreement exists between the parties: [¶] (a) To hear and determine any
or all of the issues in an action or proceeding, whether of fact or of law, and to
report a statement of decision. [¶] (b) To ascertain a fact necessary to enable the
court to determine an action or proceeding.” Real parties in interest opposed the
motion, arguing that the arbitration provision was unenforceable for various
reasons and that, because some of their lease agreements did not provide for
arbitration or reference, the court should deny defendants‟ motion as to all real
parties in interest in order to avoid the risk of conflicting rulings on common
issues of law and fact.
The trial court agreed with real parties in interest and refused to compel
arbitration or appoint a referee under section 638. Regarding the latter
determination, it first noted the possibility of “inconsistent judgments” were it to
order reference only as to real parties in interest who had signed a predispute
reference agreement, but, citing Greenbriar Homes Communities, Inc. v. Superior
Court (2004) 117 Cal.App.4th 337 (Greenbriar), found that that circumstance was
“not a proper basis for denying a motion for general reference.” Nevertheless, as a
matter of discretion, the court refused to appoint a referee, reasoning: “[I]n this
case the purposes of section 638 would not be promoted by a general Reference of
some claims and not others. [¶] Ordering two groups of real parties in interest to
try their cases in separate but parallel proceedings would not reduce the burdens
on this court or the parties, result in any cost savings, streamline the proceedings,
or achieve efficiencies of any kind. The parties would be required to conduct the
same discovery, litigate[,] and ultimately try the same issues in separate but
parallel forums. A general reference would thus result in a duplication of effort,
increased costs, and potentially, delays in resolution. Moreover, it would not
reduce any burden on this Court, which would almost certainly have to hear, and
decide, all of the same issues.”
3

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Defendants petitioned for a writ of mandate seeking to vacate the denial of
their motion to appoint a referee.3 The Court of Appeal denied relief, finding that
the trial court had discretion to refuse to enforce the reference provisions because
of the “possibility of conflicting rulings on a common issue of law or fact” and
“other circumstances related to considerations of judicial economy,” specifically,
“the duplication of efforts, increased costs, potential delays in resolution, and an
unmitigated burden on the superior court.”
We then granted defendants‟ petition for review.
DISCUSSION

As they did in the Court of Appeal, defendants argue here that, under
section 638, where the moving party shows the existence of a valid reference
agreement, a trial court has no discretion to deny a reference motion based on
concerns about judicial economy or the possibility of conflicting rulings on a
common issue of law or fact. For reasons explained below, we disagree.
The starting point for determining this issue of statutory interpretation —
“the statutory language” (People v. Cole (2006) 38 Cal.4th 964, 975) — does not
support defendants‟ argument. As set forth above, section 638 provides that a
referee “may be appointed” if, upon motion, a court finds that a reference
agreement exists between the parties “that provides that any controversy arising
therefrom shall be heard by a referee.” (Italics added.) Under “well-settled
principle[s] of statutory construction,” we “ordinarily” construe the word “may” as
permissive and the word “shall” as mandatory, “particularly” when a single statute
uses both terms. (Common Cause v. Board of Supervisors (1989) 49 Cal.3d 432,
443.) In other words, “[w]hen the Legislature has, as here, used both „shall‟ and

3
Defendants separately appealed from the denial of their motion to compel
arbitration. (§ 1294, subd. (a).) The Court of Appeal recently affirmed the trial
court‟s decision. (Abaya v. Spanish Ranch I, L.P. (2010) 189 Cal.App.4th 1490.)
4

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„may‟ in close proximity in a particular context, we may fairly infer the
Legislature intended mandatory and discretionary meanings, respectively.” (In re
Richard E. (1978) 21 Cal.3d 349, 353-354.) Thus, the statutory language does not
support defendants‟ view that section 638 required the trial court here to grant
their motion and appoint a referee.
Nevertheless, as we have explained, in determining whether the Legislature
intended a statute to be mandatory or permissive, use in the statute of “may” or
“shall” is merely indicative, not dispositive or conclusive. (Jones v. Tracy School
Dist. (1980) 27 Cal.3d 99, 118.) Therefore, we may properly consider other
indicia of legislative intent, including relevant legislative history. (Ibid; People v.
Ledesma (1997) 16 Cal.4th 90, 95.)
As the Court of Appeal concluded, the legislative history of section 638
unmistakably shows a legislative intent to give trial courts discretion not to
enforce valid reference agreements. Before 1982, section 638 provided in relevant
part that “[a] reference may be ordered upon the agreement of the parties filed
with the clerk, or judge, or entered in the minutes or in the docket.” (Stats. 1951,
ch. 1737, § 93, p. 4117.) This provision was understood to authorize judicial
enforcement only of postdispute reference agreements, i.e., those the parties enter
into after the onset of litigation. (Legis. Counsel‟s Dig., Assem. Bill No. 3657, 6
Stats. 1982 (1981-1982 Sess.) Summary Dig., p. 152.) In 1982, to address
enforcement of predispute reference agreements, an amendment to section 638
was proposed in the Legislature that would have added a new subdivision
providing: “Parties to a written contract or lease may provide that any controversy
arising therefrom will be heard by a reference and any party to such an agreement
may move the court to compel the reference. If the court finds a reference
agreement existing between the parties, the reference shall be ordered.” (Assem.
Bill No. 3657 (1981-1982 Reg. Sess.) (Assem. Bill No. 3657), as introduced Mar.
18, 1982, italics added.) A legislative analysis of this proposed amendment
explained that, under “[e]xisting law,” a court “may” appoint a referee “upon
5

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agreement of the parties to civil litigation,” and that the proposed amendment
“would require a court to compel a reference if there is a pre-dispute agreement to
refer.” (Assem. Com. on Judiciary, Analysis of Assem. Bill No. 3657, as
introduced, p. 1.) In a “Staff Comments” section, the analysis then posed these
questions: “Should not the court have the discretion to decide that, despite the
existence of the pre-dispute agreement, the issues would be more properly or
efficiently decided by the judge? Therefore, should not this bill create a
presumption that a court should compel a reference when parties have
contractually agreed to one, thereby permitting the court to determine that such a
reference would be inappropriate?” (Id., pp. 1-2, italics added.)
A few weeks later, the proposed new subdivision was deleted; in its place,
after the then-existing introductory language — “[a] reference may be ordered
upon the agreement of the parties filed with the clerk, or judge, or entered in the
minutes or in the docket” — the Legislature added the clause, “or upon the motion
of a party to a written contract or lease which provides that any controversy arising
therefrom shall be heard by a reference if the court finds a reference agreement
exists between the parties.” (Assem. Amend. to Assem. Bill No. 3657, May 10,
1982.) A legislative analysis of the amended bill, after noting that under
“[e]xisting law,” a court “may” appoint a referee “upon consent of the parties to
civil litigation,” explained: “This bill would provide that the court could also
order a reference upon the motion of a party to a written contract or lease that
provided that any controversy arising from its terms would be heard by reference.
[¶] The purpose of this bill is to aid courts in enforcing reference agreements.”
(Sen. Com. on Judiciary, Analysis of Assem. Bill No. 3657, as amended May 10,
1982, pp. 1-2, italics added.) The analysis also explained that, in the view of the
amendment‟s “source,” courts “should be empowered to compel a reference if one
party unilaterally decides not to abide by a prior reference agreement.” (Id. at p. 2,
italics added.) This legislative history shows that the Legislature, in amending
section 638 in 1982, consciously rejected language that would have imposed on
6

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courts a mandatory duty to enforce predispute reference agreements, and instead
consciously chose permissive language — which is, in relevant part, substantively
identical to the language of the current statute — that would give courts discretion
to refuse to enforce such agreements.4 It therefore confirms the conclusion the
statutory language suggests: section 638 does not require a court to appoint a
referee simply because the parties have entered into an otherwise valid predispute
reference agreement.
This legislative history also confirms the Court of Appeal‟s conclusion that
the trial court, in refusing to enforce the predispute reference agreements, did not
abuse its discretion in considering the risk of inconsistent rulings and
considerations of judicial economy. As explained above, the legislative history
shows that in revising the language of section 638‟s 1982 amendment to make
appointment of a referee under section 638 permissive rather than mandatory, the
Legislature was responding to the suggestion that courts should “have the
discretion to decide that, despite the existence of the pre-dispute agreement, the
issues would be more properly or efficiently decided by the judge.” (Assem. Com.
on Judiciary, Analysis of Assem. Bill No. 3657, supra, pp. 1-2.) The legislative
history also shows that the Legislature amended the statute to relieve “court
congestion” by “empower[ing]” courts “to compel a reference if one party
unilaterally decides not to abide by a [predispute] reference agreement.” (Sen.

4
Revisions to the Legislative Counsel‟s Digest for the 1982 amendment
further reflect the Legislature‟s conscious decision to make judicial enforcement
of predispute reference agreements permissive rather than mandatory. The digest
of the amending bill as introduced stated that, under the proposed amendment, “if
the court finds a reference agreement existing between the parties, the reference
shall be ordered.” (Legis. Counsel‟s Dig. of Assem. Bill No. 3657 (1981-1982
Reg. Sess.) as introduced Mar. 18, 1982, italics added.) The digest for the bill as
passed explained that, under the amended statute, a court “may order . . . a
reference” pursuant to a valid predispute reference agreement. (Legis. Counsel‟s
Dig., Assem. Bill No. 3657, 6 Stats. 1982 (1981-1982 Sess.) Summary Dig., p.
152.)
7

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Com. on Judiciary, Analysis of Assem. Bill No. 3657, supra, p. 2; see also Treo @
Kettner Homeowners Assn. v. Superior Court (2008) 166 Cal.App.4th 1055, 1066
[1982 amendment “was an attempt to lessen judicial delays that were at the time a
serious problem”].) Given these circumstances, the trial court acted well within its
discretion in basing its refusal to appoint a referee on the risk of inconsistent
rulings and considerations of judicial economy.
In arguing otherwise, defendants rely on Greenbriar, supra, 117
Cal.App.4th 337, and Trend Homes, Inc. v. Superior Court (2005) 131
Cal.App.4th 950 (Trend Homes). In the former, because only 43 of 69 plaintiffs
had signed predispute reference agreements, the trial court denied the defendant‟s
motion to appoint a referee, explaining that granting the motion “ „would cause [a]
multiplicity of lawsuits.‟ ” (Greenbriar, supra, at pp. 341-342.) The Court of
Appeal reversed, finding no “statutory authorization” for refusing to enforce a
predispute reference agreement because “of other pending or multiple actions.”
(Id. at p. 348.) Similarly, in Trend Homes, where only 11 of 50 plaintiffs had
signed predispute reference agreements, the Court of Appeal held that “the risk of
multiple actions proceeding in different forums” was not a basis for denying the
defendant‟s motion to appoint a referee. (Trend Homes, supra, at p. 964.)
Neither decision is persuasive. In finding no “statutory authorization” for
refusing to enforce a predispute reference agreement because “of other pending or
multiple actions” (Greenbriar, supra, 117 Cal.App.4th at p. 348), the court in
Greenbriar failed to consider either the language or legislative history of section
638. This omission perhaps resulted from the plaintiffs‟ apparent failure in
Greenbriar to rely on these considerations; as far as appears from the Greenbriar
opinion, the plaintiffs there argued only that a court‟s discretion to refuse to
enforce a predispute reference agreement “derive[s] from analogous statutory
authority given courts under . . . section 1281.2 to refuse to enforce arbitration
agreements pending a court action between a party to the arbitration agreement
and a third party.” (Greenbriar, supra, at p. 346, italics added.) Whatever its
8

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cause, this failure to consider section 638‟s language and legislative history
renders Greenbriar of little assistance. Trend Homes is even less helpful; there, in
finding that courts lack discretion to refuse to enforce predispute reference
agreements based on the risk of multiple actions, the court simply quoted
Greenbriar and noted the plaintiffs‟ failure to cite any supporting authority.
(Trend Homes, supra, 131 Cal.App.4th at p. 964.) For these reasons, defendants‟
reliance on these decisions fails.5
DISPOSITION
For the reasons explained above, we affirm the Court of Appeal‟s
judgment.
CHIN, J.
WE CONCUR:

CANTIL-SAKAUYE, C.J.
KENNARD, J.
WERDEGAR, J.
MORENO, J.
CORRIGAN, J.
SIMONS, J.*

5
We disapprove Greenbriar Homes Communities, Inc. v. Superior Court,
supra, 117 Cal.App.4th 337, and Trend Homes, Inc. v. Superior Court, supra, 131
Cal.App.4th 950, to the extent they are inconsistent with our conclusion.

_____________________________
* Associate Justice of the Court of Appeal, First Appellate District, Division Five,
assigned by the Chief Justice pursuant to article VI, section 6 of the California
Constitution.
9

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See next page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Tarrant Bell Property, LLC v. Superior Court
__________________________________________________________________________________

Unpublished Opinion

Original Appeal
Original Proceeding
Review Granted XXX 179 Cal.App.4th 1283
Rehearing Granted

__________________________________________________________________________________

Opinion No.

S179378
Date Filed: February 10, 2011
__________________________________________________________________________________

Court:

Superior
County: Alameda
Judge: George C. Hernandez, Jr.

__________________________________________________________________________________

Counsel:

Hart King & Coldren, Robert S. Coldren, Robert G. Williamson, Jr., Daniel T. Rudderow; Carlson
Calladine & Peterson and Asim Kishore Desai for Petitioners Tarrant Bell Property, LLC, and Monterey
Coast, LP.

Gray • Duffy, John J. Duffy and Frank J. Ozello, Jr., for Petitioner Spanish Ranch I, L.P.

No appearance for Respondent.

Endeman, Lincoln, Turek & Heater, James Allen, Henry E. Heater and Linda B. Reich for Real Parties in
Interest.

Milstein, Adelman & Kreger, Mark A. Milstein, Fred M. Adelman and Mayo L. Makarczyk for Consumer
Attorneys of California as Amicus Curiae on behalf of Real Parties in Interest.

June Babirack Barlow and Neil Kalin for California Association of REALTORS® as Amicus Curiae on
behalf of Real Parties in Interest.

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Counsel who argued in Supreme Court (not intended for publication with opinion):

Robert G. Williamson, Jr.
Hart King & Coldren
200 Sandpointe, Fourth Floor
Santa Ana, CA 92707
(714) 432-8700

Henry E. Heater
Endeman, Lincoln, Turek & Heater
600 B Street, Suite 2400
San Diego, CA 92101
(619) 544-0123

11

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Petition for review after the Court of Appeal denied a petition for peremptory writ of mandate. This case presents the following issue: Does the trial court have discretion to deny a motion under Code of Civil Procedure section 638 to refer a dispute to a referee in accordance with the pre-dispute agreement of the parties?

Opinion Information

Date:	Citation:	Docket Number:	Category:	Status:
Thu, 02/10/2011	51 Cal. 4th 538, 247 P.3d 542, 121 Cal. Rptr. 3d 312	S179378	Review - Civil Appeal	submitted/opinion due

Opinion Authors
Opinion	Justice Ming W. Chin

Dockets
Jan 11 2010	Petition for review filed Petitioner: Tarrant Bell Property, LLCAttorney: Robert S. Coldren
Jan 12 2010	Record requested   via email - both records: A125496 and A125714
Jan 14 2010	Received Court of Appeal record   one accordian folder/appendixes
Jan 28 2010	Answer to petition for review filed Real Party in Interest: Abaya, ReynaldoAttorney: Henry E. Heater
Feb 9 2010	Reply to answer to petition filed Petitioner: Tarrant Bell Property, LLCAttorney: Robert S. Coldren   crc.8.25(b)
Feb 18 2010	Petition for review granted   Baxter, J., was recused and did not participate. Votes: George, C.J., Kennard, Werdegar, Chin, Moreno, and Corrigan, JJ.
Mar 3 2010	Certification of interested entities or persons filed   Raynaldo Abaya, real party in interest by Henry Heater, counsel
Mar 4 2010	Certification of interested entities or persons filed   Tarrant Bell Property, petitioner by Robert S. Coldren, counsel
Mar 8 2010	Request for extension of time filed   Tarrant Bell Property, LLC, et al., - petitioner's requesting extension until April 21, 2010 to file opening brief on the merits. by Robert G. Williamson, counsel
Mar 8 2010	Certification of interested entities or persons filed   Spanish Ranch, Interest Entity/Party by Frank Joseph Ozello, Jr., counsel
Mar 25 2010	Extension of time granted   On application of petitioners and good cause appearing, it is ordered that the time to serve and file the opening brief on the merits is extended to and including April 21, 2010.
Apr 9 2010	Request for extension of time filed   Tarrant Bell Property, LLC, et al., - petitioner's requesting extension until May 21, 2010 to file opening brief on the merits. by Robert G. Williamson, counsel
Apr 20 2010	Extension of time granted   On application of petitioners and good cause appearing, it is ordered that the time to serve and file the Opening Brief on the Merits is extended to and including May 21, 2010.
May 18 2010	Request for extension of time filed   Petitioner - Tarrant Bell Property requesting extension until June 21, 2010 to file opening brief on the merits. by Robert G. Williamson, counsel
May 20 2010	Extension of time granted   On application of petitioners and good cause appearing, it is ordered that the time to serve and file the opening brief on the merits is extended to and including June 21, 2010.
Jun 18 2010	Request for extension of time filed   Petitioner requesting extension until July 21, 2010 to file opening brief on the merits. by Robert G. Williamson, counsel
Jun 22 2010	Received:   respondents' objection to petitioners' fourth application for extension of time to file opening brief. by Henry Heater, counsel
Jun 23 2010	Extension of time granted   On application of petitioner and good cause appearing, it is ordered that the time to serve and file the opening brief on the merits is extended to an including July 21, 2010. No further extensions are contemplated.
Jul 22 2010	Opening brief on the merits filed Petitioner: Tarrant Bell Property, LLCAttorney: Robert S. Coldren Petitioner: Monterey Coast, LPAttorney: Robert S. Coldren   crc.8.25(b)
Aug 3 2010	Request for extension of time filed   Real Party in Interest requesting extension until September 20, 2010 to file answer brief on the merits. by Henry E. Heater, counsel
Aug 3 2010	Application to file amicus curiae brief filed   California Association of Realtors by Neil Kalin, counsel
Aug 4 2010	Extension of time granted   On application of real party in interest and good cause appearing, it is ordered that the time to serve and file the answer brief on the merits is extended to and including September 20, 2010.
Aug 9 2010	Permission to file amicus curiae brief granted   The application of California Association of Realtors for permission to file an amicus curiae brief in support of petitioners is hereby granted. Any party may file a single consolidated answer to all amicus curiae briefs within twenty (20) days after the last date tha an application to file an amicus curiae brief may be filed under rule 8.520(f).
Aug 9 2010	Amicus curiae brief filed Amicus curiae: California Association of RealtorsAttorney: Neil D. Kalin
Sep 1 2010	Request for extension of time filed   real party in interest requesting second extension until October 20, 2010 to file answer brief on the merits. by Linda B. Reich, counsel
Sep 8 2010	Extension of time granted   On application of real party in interest and good cause appearing, it is ordered that the time to serve and file the answer brief on the merits is extended to and including October 20, 2010.
Oct 19 2010	Answer brief on the merits filed Real Party in Interest: Abaya, ReynaldoAttorney: Linda B. Reich
Oct 19 2010	Request for judicial notice filed (Grant or AA case) Real Party in Interest: Abaya, ReynaldoAttorney: Linda B. Reich
Nov 9 2010	Reply brief filed (case fully briefed) Petitioner: Tarrant Bell Property, LLCAttorney: Robert S. Coldren   (joint reply brief)
Nov 9 2010	Private note:   counsel for Spanish Ranch, LLP to send original signature page, joining in reply brief. (8.25(b))
Nov 16 2010	Application to file amicus curiae brief filed   Consumer Attorneys of California
Nov 17 2010	Received:   Original signature page from counsel for Spanish Ranch, LLP.
Nov 18 2010	Permission to file amicus curiae brief granted   The application of Consumer Attorneys of California for permission to file an amicus curiae brief in support of real party in interest is hereby granted. An answer thereto may be served and filed by any party within 20 days of the filing of the brief.
Nov 18 2010	Amicus curiae brief filed Amicus curiae: Consumer Attorneys of CaliforniaAttorney: Fred Matthew Adelman   Consumer Attorneys of California in support of real party in interest.
Nov 22 2010	Justice pro tempore assigned   Hon. Mark B. Simons First Appellate District, Division Five (Baxter, J., recused)
Dec 1 2010	Case ordered on calendar   to be argued Wednesday, January 5, 2011, at 1:30 p.m., in San Francisco
Dec 27 2010	Request for judicial notice granted   The request for judicial notice, filed on October 19, 2010, is granted.
Jan 5 2011	Cause argued and submitted
Feb 9 2011	Notice of forthcoming opinion posted   To be filed Thursday, February 10, 2011 at 10 a.m.

Briefs
Jul 22 2010	Opening brief on the merits filed Petitioner: Tarrant Bell Property, LLCAttorney: Robert S. Coldren Petitioner: Monterey Coast, LPAttorney: Robert S. Coldren
Aug 9 2010	Amicus curiae brief filed Amicus curiae: California Association of RealtorsAttorney: Neil D. Kalin
Oct 19 2010	Answer brief on the merits filed Real Party in Interest: Abaya, ReynaldoAttorney: Linda B. Reich
Nov 9 2010	Reply brief filed (case fully briefed) Petitioner: Tarrant Bell Property, LLCAttorney: Robert S. Coldren
Nov 18 2010	Amicus curiae brief filed Amicus curiae: Consumer Attorneys of CaliforniaAttorney: Fred Matthew Adelman

Brief Downloads
s179378-1-petitioners-petition-for-review.pdf (380222 bytes) - Petitioners Petition for Review
s179378-2-real-parties-answer-to-petition-for-review.pdf (164565 bytes) - Real Parties Answer to Petition for Review
s179378-3-petitioners-and-answer-to-petition-for-review.pdf (148533 bytes) - Petitioners Answer to Petition for Review
s179378-4-petitioners-brief-on-the-merits.pdf (487072 bytes) - Petitioners Brief on the Merits
s179378-5-real-parties-answer-brief-on-the-merits.pdf (515011 bytes) - Real Parties Answer Brief on the Merits
s179378-6-real-parties-in-interest-judicial-notice.pdf (1707374 bytes) - Real Parties in Interest Judicial Notice
s179378-7-petitioners-reply-brief-on-the-merits.pdf (366305 bytes) - Petitioners Reply Brief on the Merits

If you'd like to submit a brief document to be included for this opinion, please submit an e-mail to the SCOCAL website

May 10, 2011 Annotated by alexis orenstein

Facts: One hundred and twenty current and former residents of the Spanish Ranch Mobilehome Park sued the current and former owners for failing to maintain the park’s infrastructure and common facilities. The complaint alleged, among other things, that a failing sewage system caused repeated backups of raw sewage near the mobilehomes. About 100 of the lease agreements contained an arbitration provision to resolve disputes (the precise number was disputed but was not material to the outcome). The lease agreements further stated that if the arbitration provision were unenforceable, then all arbitrable issues arising in a judicial proceeding would be submitted to a referee, on a motion by any party to the agreement. (A referee is a retired judge or other person appointed by the court.) The owners moved to compel arbitration, or in the alternative, to compel the appointment of a referee. The residents opposed both motions. The trial court denied the motion to compel arbitration on the grounds that the agreements impermissibly waived the residents’ right to bring a civil action and because arbitration created a risk of conflicting rulings on common issues of fact and law. It denied the motion to compel reference reasoning that splitting the action between the court and a referee would defeat the purpose of the reference statute by duplicating costs and increasing efforts. Procedural History: The plaintiffs (residents) filed suit in October 2008. In December 2008, the defendants (owners) moved to compel arbitration under Code of Civil Procedure section 1281.2, or in the alternative, to appoint a referee under Code of Civil Procedure section 638. In March 2009, the trial court denied the arbitration motion and in May 2009, it denied the motion to compel judicial reference. In August 2009, petitioners (owners) filed a Petition for a Writ of Mandate with the Court of Appeals seeking to vacate the trial court’s order denying reference. (The owners appealed separately from the decision to deny arbitration.) In December 2009, following oral argument, the Court of Appeals affirmed the trial court’s decision. Issue: Does the trial court have discretion to deny a motion under Code of Civil Procedure section 638 to refer a dispute to a referee in accordance with the pre-dispute agreement of the parties? Holding: Yes; the plain language and the legislative history of section 638 support the conclusion that trial courts have discretion not to enforce valid pre-dispute reference agreements. Analysis: (1) Section 638 states that a referee may be appointed if the court finds a reference agreement exists between the parties and provides that any controversy arising from the agreement shall be heard by a referee. Under well-settled rules of statutory construction, “may” is ordinarily construed as permissive and “shall” as mandatory, particularly when a single statute uses both terms. Here, it was also fair to infer that the Legislature intended different meanings since the two terms were used in such close context. Nevertheless, the terms “shall” and “may” are only indicative of whether the Legislature intended a statute to be mandatory or permissive, not conclusive, so the Court may consider other evidence of legislative intent. (2) The legislative history of section 638 reveals that in the early 1980s, the Legislature consciously rejected language that would have imposed a mandatory duty on courts to enforce pre-dispute agreements. The Legislature chose permissive language that is virtually identical to the relevant part of the current statute. The legislative history also demonstrates that trial court did not abuse its discretion in taking into account the risk of inconsistent rulings and judicial economy considerations because the Legislature specifically amended parts of the statute to alleviate court congestion and to empower courts. Ruling: Affirmed the judgment of the Court of Appeal. Greenbriar Homes Communities, Inc. v. Superior Court, 117 Cal.App.4th 337 and Trend Homes, Inc. v. Superior Court, 131 Cal.App.4th 950 are overruled to the extent they are inconsistent. Dissent: None. Links: California Code of Civil Procedure section 638 (http://law.justia.com/codes/california/2010/ccp/638-645.2.html) Tags: Arbitration California Code of Civil Procedure section 638 Legislative intent Judicial discretion Mobilehome, Mobile home Reference, Referee Statutory construction Annotation by Alexis Orenstein.