BILL ANALYSIS Ó AB 1927 Page 1 Date of Hearing: April 10, 2012 ASSEMBLY COMMITTEE ON JUDICIARY Mike Feuer, Chair AB 1927 (Jones) - As Amended: April 9, 2012 PROPOSED CONSENT SUBJECT : Easements: Maintenance: Arbitration KEY ISSUE : Should the owner of an easement be permitted to apply to a smalls claim court to recover proportionate costs of maintaining the easement from other owners? FISCAL EFFECT : As currently in print this bill is keyed non-fiscal. SYNOPSIS Sponsored by the Conference of California Bar Associations, this bill would permit an easement owner who seeks reimbursement for maintenance costs from easement co-owners to seek a judgment from small claims court, if the amount in controversy is within the jurisdiction of the small claims court. Existing law states that an easement owner "may" apply to "any court" of competent jurisdiction for the appointment of an impartial arbitrator to apportion the liability of each easement co-owner. If any party disputes the arbitrator's award, it may ask the court for a judgment apportioning the liability of the co-owners. The statute as drafted appears to permit an owner to bring an action in either a small claims court or a superior court, and the permissive "may" arguably leaves open the possibility that a party could seek a judgment directly from the court without going through the arbitration process. An appellate court, however, concluded that despite the seemingly permissive language, the only option available under existing law is to apply to superior court for the appointment of an arbitrator. According to the author, however, these cases often involve modest demands that could easily be handled in small claims court and without the higher costs and fees associated with superior court and mandatory arbitration. This bill would authorize an easement owner to seek a judgment in small claims court, assuming the amount of the demand is within the jurisdictional amount of the small claims court. It would clarify, consistent with existing law, that where the AB 1927 Page 2 application is not made to small claims court, it may be made to superior court for the appointment of an impartial arbitrator to apportion costs. This change would only apply where the parties have not made a prior agreement on how to apportion costs. There is no known opposition to this bill. SUMMARY : Authorizes the owner of a right-of-way easement to seek a judgment from a small claims court determining proportionate liability of each owner for maintenance costs, if the amount of controversy is within the jurisdictional limits of the small claims court. If the application is not made in small claims, then the owner may, consistent with existing law, seek the appointment of an impartial arbitrator in superior court. EXISTING LAW : 1)Requires the owner of an easement in the nature of a private right-of-way, or of land to which the easement is attached, to maintain the easement in repair. (Civil Code Section 845.) 2)Provides that if an easement is owned by more than one person, or is attached to parcels of land under different ownership, the costs of maintaining the easement shall be shared by each owner pursuant to the terms of any agreement entered into by the owners. Specifies that if any owner who is a party to the agreement refuses to contribute to the costs, an action for specific performance may be brought against that owner in a court of competent jurisdiction by the other owners, either jointly or severally. (Civil Code Section 845 (b).) 3)Authorizes, in the absence of an agreement, any owner of an easement, or land to which the easement is attached, to apply to any court where the right-of-way is located, and that has jurisdiction over the amount in controversy, for the appointment of an impartial arbitrator to apportion the costs. (Civil Code Section 845 (c).) 4)Specifies that the above provisions do not apply to rights-of-way held or used by railroad common carriers subject to the jurisdiction of the Public Utilities Commission. (Civil Code Section 845 (e).) 5)Provides that small claims courts have jurisdiction for an action brought by a natural person, if the amount of the demand does not exceed $10,000. (Code of Civil Procedure AB 1927 Page 3 Section 116.221.) COMMENTS : Existing law requires the owner of a right-of-way easement, or in the land to which the easement attaches, to maintain the easement. Where the easement is owned by more than one person, all owners are expected to contribute to the costs of maintaining the easement. Sometimes the distribution of these costs is provided for by agreement between the owners, and if one owner refuses to pay his or her share, the other owners can bring an action for specific performance of the agreement. Where there is no prior agreement, however, existing law makes a presumption that the costs of maintenance shall be shared in proportion to the use made by each owner. In the latter case, where there is no agreement, existing law authorizes an owner of the easement to apply to a court of competent jurisdiction for the appointment of an impartial arbitrator to apportion the costs. Although the language of existing law is permissive, some courts have interpreted this to mean that the owner must apply to superior court for the appointment of an arbitrator, and therefore an owner is precluded from seeking a judgment directly from a small claims court, even if the amount in controversy is within the jurisdictional limit of the small claims court. Because the arbitrator's award is non-binding, any owner who is unhappy with the award may ask the court to enter a judgment determining the proportional liability of each owner. According to the author, however, in many cases these disputes involve relatively small amounts that could be determined more efficiently and cost effectively by a small claims court. For example, the author notes that a $500 dispute might require owners to file in superior court (which is more expensive) and then go through an arbitration process with a court-appointed arbitrator. If any owner disagrees with the arbitrator's award, that owner can force the superior court to determine the proportional liability of each owner. The author believes that in appropriate cases, it would make more sense for an owner or owners to seek a judgment directly from the small claims court - especially given that, even after going through the arbitration process, the court may be required to determine the proportional share of each owner anyway. The intent of this bill is to give an owner the option of seeking a judgment from small claims court where the amount in controversy is within the jurisdiction of the small claims AB 1927 Page 4 court, but where the amount in controversy is more than the limits of the small claims court, this bill would preserve the option of applying to superior court the appointment of an impartial arbitrator to apportion the costs. Existing case law and the scope of the problem: On its face, the language of the existing statute arguably already permits an owner to apply to either a small claims court or a superior court - that is, it states that an owner may apply to "any court . . . that has jurisdiction over the amount in controversy." (Civil Code Section 845.) The reference to "any court" and the "amount in controversy" would certainly suggest that the drafters of this statute anticipated filings in small claims court. However, existing law also seems to require that any application to a court could not be for a judgment, per se, but only for the appointment of an impartial arbitrator. Even though the existing statute uses the word "may," the only remedy authorized by Section 845 is for the appointment of an arbitrator. This interpretation is reinforced by case law. For example, the California Court of Appeal for the Sixth District held that "section 845 requires that an arbitrator apportion costs before the matter reaches court." (Healy v. Onstott (1987) 192 Cal. App. 3d 612 at 616. Emphasis added.) In other words, the court held, only if the arbitration award is not accepted by all of the owners, may the court determine and enter a judgment on the proportionate liability of the owners. Yet, this same court conceded just prior to making this holding that the statute was not exactly "a model of clarity." (Id. at 615.) According to the sponsor, by reading the statute to require appointment of an arbitrator - instead of seeking a judgment in the first instance - the courts have also effectively required that application be made in superior court, as opposed to small claims court, because the latter generally do not appoint arbitrators. That is, existing law not only limits the jurisdiction of the small claims court as to amount of controversy, it also generally limits the remedies that it may provide to awarding money judgments; for example, existing law expressly prohibits small claims for providing equitable relief unless expressly authorized by statute. (Code of Civil Procedure Section 116.220 et seq.) Whether or not a small claims court could appoint an arbitrator may be debatable, but according to the sponsor, they generally do not do so, thereby making the requirement to apply for the appointment of an AB 1927 Page 5 arbitrator effectively a requirement to make the application in superior court, even where the amount in controversy is within the jurisdiction of the small claims court. This bill would make it clear that, for amounts that are within the jurisdiction of the small claims court, an owner may seek a judgment (as opposed to the appointment of an arbitrator) from a small claims court. However, this bill does not require an owner to file in small claims court. Regardless of the amount in controversy, if the owner elects not to file in small claims court, he or she may still apply to superior court for the appointment of an impartial arbitrator, and the case will only go to trial for a judgment if a party rejects the arbitrator's determination. It should also be stressed that the change made by this bill only applies where co-owners have not entered into a prior agreement on apportionment of the costs. Where there is an agreement, the law will be unchanged: if an owner fails to pay his or her share, then the other owners, jointly or severally, may bring an action for specific performance in any court of competent jurisdiction. ARGUMENTS IN SUPPORT : According to the sponsor, the Conference of California Bar Associations (CCBA), this bill will make it much less expensive and time-consuming for the owner of an easement to recover maintenance costs from all owners who are liable for those costs. The existing process requires the owner to apply to superior court for the appointment of an arbitrator; if one of the owners objects to the arbitrator's award, the dispute will end up going to court anyway. The costs of this extended process, CCBA maintains, often exceeds the owner's underlying demand. For example, the sponsor writes: Filing in Superior Court requires a larger filing fee, and brings into play full Superior Court rules on discovery. The paying landowner must file a Petition asking the Court to appoint at an arbitrator. The arbitrator is appointed and the arbitration held. If the defendant doesn't like the decision of the arbitrator, the defendant can request and the court must provide a full trial on the issue. As a result, a $500.00 dispute can easily end up in Superior Court, go through non-binding arbitration, and then go through a full court trial. The cost to the paying landowners is thousands of dollars in attorney fees and costs, to collect from one or more recalcitrant landowners . . . In these small amount cases, the Small Claims AB 1927 Page 6 procedure is faster, costs far less, and gives the defendants the opportunity to have their "day in court". . . with a decision that is binding unless a losing defendant elects to appeal to the Superior Court. On the other hand, if the amount in controversy is close to the jurisdictional limits of the Small Claims Court, the Petitioner may elect to file in Superior Court. This flexible system, which AB 1927 will make possible, works to the benefit of all concerned. REGISTERED SUPPORT / OPPOSITION : Support Conference of California Bar Associations Opposition None on file Analysis Prepared by : Thomas Clark / JUD. / (916) 319-2334