Title: Tarrant Bell Property v. Super. Ct.

State: california

Issuer: California Supreme Court

Document:

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. 
2 
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. 
3 
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.” 
4 
 
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.)  
5 
„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 
6 
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 
7 
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.) 
8 
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 
9 
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. 
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. 
 
 
 
11 
 
 
 
 
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