In Treo @ Kettner Homeowners Association v. Superior Court of San Diego County, (— Cal.Rptr.3d —, 2008 WL 4182580, Cal.App.4 Dist., Sept. 12, 2008), a California Court of Appeal considered the validity of a requirement in a condominium project’s Covenants, Codes and Restrictions (“CC&R’s”), that all disputes between condominium owners and the developer of the project be settled not by a jury trial, but rather by a general judicial reference. The court ruled that because most condominium owners were not a party to the creation of the CC&R’s, the CC&R’s are therefore not a contract as defined in the Government Code and cannot require the right to a jury trial be waived.
Treo @ Kettner Homeowners Association (“Treo”), a homeowners association of a condominium project, sued the developer of the project, Intergulf Construction Company (“Intergulf”) for alleged construction defects. Intergulf, citing a requirement in the project’s CC&R’s that disputes between the association or individual owners and the developer be settled by a general reference pursuant to Government Code Section 638, moved for an order to have the case assigned to a general referee. The trial court granted Intergulf’s motion, and Treo appealed, claiming the CC&R’s provision was not a contract as required by Section 638, and the requirement that it forego a jury trial was not enforceable.
The court first reviewed the language of Section 638, noting that it allows parties to agree, by written contract, to settle disputes by judicial referee, rather than by a jury trial. The question here, then, was whether the CC&R’s constituted a written contract.
The court concluded the CC&R’s did not constitute a written contract because of the manner in which the “contract” between Treo and Intergulf came about. While there may have been an agreement between the parties when the CC&R’s were originally drafted, almost all of the association’s current members were later purchasers who had no alternative but to accept the already developed CC&R’s. As such, current owners cannot be required to forego a right as fundamental as trial by jury because of a prior agreement created by others in CC&R’s they had no role in shaping. “The very nature, however, of the creation of CC&R’s creates a distance in time and control between the parties that are bound by them,” the court said.
As such, Treo’s current association members cannot be judged to have entered into a written contract to waive their rights to a jury trial. The court vacated the trial court’s order directing the dispute to a judicial referee and ordered the court to deny Intergulf’s motion to do so.