Opinion
G031234.
10-8-2003
SOUTHERN CALIFORNIA LABOR/MANAGEMENT OPERATING ENGINEERS CONTRACT COMPLIANCE COMMITTEE, Plaintiff and Appellant, v. CITY OF YORBA LINDA, Defendant and Respondent.
Law Offices of Carroll & Scully, Donald C. Carroll and Charles P. Scully II for Plaintiff and Appellant. Best Best & Krieger, Jeffrey V. Dunn, Sonia R. Carvalho and Nicole G. Minkow for Defendant and Respondent.
INTRODUCTION
The superior court sustained a demurrer to a petition for writ of mandate seeking to force the City of Yorba Linda (City) to impose a penalty against Environmental Golf, Inc., a City contractor, for violation of the Subletting and Subcontracting Fair Practices Act (the Act). (Pub. Contract Code, § 4100 et seq.) The court determined the Act gave the City the discretion to impose certain penalties, or to impose no penalty.
On appeal, petitioner argues the language of the statute is mandatory, not discretionary, and the demurrer should have been overruled. For the reasons explained below, we conclude the Act gives contracting governmental entities the discretion to cancel the contract at issue, impose a monetary penalty, or impose no penalty. Because the City had the discretion to impose a penalty or not to impose a penalty, the superior court could not issue a writ of mandate to compel any particular action by the City. Therefore, the court correctly sustained the demurrer and we affirm the judgment.
Facts
On July 5, 2000, the City awarded a contract to Environmental Golf, Inc., to build the Black Gold Golf Course in the City. In performing the contract, Environmental Golf used the services of Valley Crest Landscape, a subcontractor. Environmental Golf had not listed Valley Crest Landscape as a subcontractor in its bid. The use of a subcontractor who is not listed in the bid for any significant portion of the work violates Public Contract Code section 4106. (All further statutory references are to the Public Contract Code, unless otherwise noted.)
Southern California Labor/Management Operating Engineers Contract Compliance Committee (the Committee) is a joint committee of labor and management created through collective bargaining. The Committees purpose is to "secur[e] compliance with laws and regulations including those contained in the California Public Contract[] Code and in the California Labor Code so that California employers may compete on a level field and so that California citizens and workers may enjoy the benefits of such laws." On multiple occasions, the Committee requested that the City enforce section 4110, which authorizes a contracting entity to impose a penalty against a prime contractor for violation of the Act. The City did not impose a penalty against Environmental Golf, despite its alleged violation of section 4106.
The Committee filed a first amended petition for a peremptory writ of mandate, asking the superior court to order the City to exercise its discretion under section 4110 to cancel Environmental Golfs contract or assess it a monetary penalty for failing to list Valley Crest Landscape as a subcontractor, in violation of section 4106. The City demurred to the first amended petition, claiming the remedies under section 4110 are discretionary, and the City therefore could not be compelled to cancel the contract or impose a monetary penalty. The superior court sustained the demurrer with leave to amend.
The Committees second amended petition made two minor additions. The City again demurred, and the superior court again sustained the demurrer, but without leave to amend. Judgment was entered and the Committee appealed.
Discussion
We review the complaint de novo to determine whether it alleges facts sufficient to state a cause of action. (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415.) "In determining whether plaintiffs properly stated a claim for relief, our standard of review is clear: `"We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed." [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.] And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff." (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.)
Section 4104 requires a prime contractor to identify in the bid all subcontractors who will perform a portion of the work in an amount of more than one-half of 1 percent of the total bid. Under section 4106, if the prime contractor subcontracts work to a subcontractor not identified in the bid, after the award of the contract, other than for exceptions under section 4106 not relevant here, "the prime contractor shall be subject to the penalties named in Section 4111." Violation of the Act is grounds for a disciplinary action by the Contractors State License Board, pursuant to section 4111.
Section 4110 gives a public entity the right to impose certain penalties for any violation of the Act, not just for a violation of section 4106. "A prime contractor violating any of the provisions of this chapter violates his or her contract and the awarding authority may exercise the option, in its own discretion, of (1) canceling his or her contract or (2) assessing the prime contractor a penalty in an amount of not more than 10 percent of the amount of the subcontract involved, and this penalty shall be deposited in the fund out of which the prime contract is awarded. In any proceedings under this section the prime contractor shall be entitled to a public hearing and to five days notice of the time and place thereof." (§ 4110.)
Here, the case turns on whether the imposition of one of the remedies provided by section 4110 for a violation of section 4106 is mandatory or discretionary. Section 4110 uses the language "may exercise the option, in its own discretion." We therefore consider the meaning of that language.
"Words used in a statute or constitutional provision should be given the meaning they bear in ordinary use. [Citations.] If the language is clear and unambiguous there is no need for construction, nor is it necessary to resort to indicia of the intent of the Legislature . . . . [Citations.] [¶] But the `plain meaning rule does not prohibit a court from determining whether the literal meaning of a statute comports with its purpose or whether such a construction of one provision is consistent with other provisions of the statute. The meaning of a statute may not be determined from a single word or sentence; the words must be construed in context, and provisions relating to the same subject matter must be harmonized to the extent possible. [Citation.] Literal construction should not prevail if it is contrary to the legislative intent apparent in the statute. The intent prevails over the letter, and the letter will, if possible, be so read as to conform to the spirit of the act. [Citations.] An interpretation that renders related provisions nugatory must be avoided [citation]; each sentence must be read not in isolation but in the light of the statutory scheme [citation]; and if a statute is amenable to two alternative interpretations, the one that leads to the more reasonable result will be followed [citation]." (Lungren v. Deukmejian (1988) 45 Cal.3d 727, 735.)
The ordinary meaning of "may" is discretionary. "Ordinarily, the word `may connotes a discretionary or permissive act; the word `shall connotes a mandatory or directory duty. This distinction is particularly acute when both words are used in the same statute." (Woodbury v. Brown-Dempsey (2003) 108 Cal.App.4th 421, 433, fns. omitted.) S ection 4110 includes both the words "may" and "shall," demonstrating the Legislature used the word "may" in its ordinary sense. "This contrast in word selection within the same subdivision demonstrates the Legislature knew the difference between the discretionary `may and the mandatory `shall, and intended them to have such different meanings." (Decker v. U.D. Registry, Inc. (2003) 105 Cal.App.4th 1382, 1389; see also 86 Ops.Cal.Atty.Gen. 90, 92, fn. 3 (2003).)
The Committee argues that once a statutory violation occurs, the City does not have the discretion to assess no penalty under section 4110, but only the discretion to determine which penalty to impose. The Committee argues if the City has the discretion not to assess a penalty, the Act will not be enforced. In addition to the penalties provided under section 4110, however, the City may sue the contractor (§ 4103, subd. (b)), and the Contractors State License Board may institute disciplinary proceedings (§ 4111). Thus, the Citys failure to impose a penalty under section 4110 will not necessarily result in a violation of the statute going unpunished.
The Committee also points to the language of section 4105 in support of its claim section 4110 requires the City to assess a penalty against Environmental Golf. Section 4105 provides that violation of section 4104, regarding the listing of subcontractors, "shall subject that prime contractor to the penalties set forth in Sections 4110 and 4111." (§ 4105.) The Committee interprets the language of section 4105 to reflect "the Legislatures obvious expectation that a prime contractor `shall be subject to at least one of the penalties in § 4110." But no violation of section 4105 is alleged here. A prime contractor who violates section 4106 "shall be subject to the penalties named in Section 4111 [license board disciplinary proceedings]." The City could impose penalties under section 4110 for a violation of section 4106; by its terms, section 4110 applies to any violation of the Act. But the Committees argument that imposition of a penalty under section 4110 is mandatory in this case because section 4105, which is not at issue here, requires imposition of a penalty under sections 4110 and 4111 is unpersuasive.
The Committees argument is further undermined by a recent opinion from the California Attorney General. The Attorney General was asked whether a public entity could accept a construction bid that violated section 4104. (86 Ops.Cal.Atty.Gen. 90 (supra ).) In reaching the conclusion the public entity had the discretion to accept the bid, the Attorney General stated: "The terms of section 4110 are permissive. The awarding authority is not required to cancel the contract or impose a penalty but `may do so in the exercise of `its own discretion." (Id. at p. 93.) The Attorney General has thus rejected the argument a violation of sections 4104 and 4105 makes imposition of penalties under section 4110 mandatory. The extension of the Committees argument to a violation of section 4106 must also be rejected.
We conclude the City had the discretion to impose either of the penalties specified in section 4110, or neither of them. The superior court properly sustained the demurrer, since mandamus cannot be used to compel a discretionary act. (State of California v. Superior Court (1974) 12 Cal.3d 237, 247; People ex rel. Younger v. County of El Dorado (1971) 5 Cal.3d 480, 491; Parker v. Dumke (1981) 117 Cal.App.3d 237, 243; Litzius v. Whitmore (1970) 4 Cal.App.3d 244, 250.)
In its reply brief and at oral argument, the Committee argued the City was required to hold a hearing to investigate whether a violation of section 4106 occurred and whether to impose penalties. No such requirement exists in the Act. Section 4110 requires a public entity to notify the prime contractor and conduct a public hearing before imposing one of the penalties authorized by that statute. Neither section 4110 nor any other provision of the Act contains any additional requirement for another hearing to determine whether the discretionary remedies of section 4110 should be imposed. We will not read into the Act a requirement the Legislature has not chosen to place there.
Merco Constr. Engineers, Inc. v. Los Angeles Unified School Dist. (1969) 274 Cal.App.2d 154 (Merco), an opinion interpreting former Government Code section 4110, the predecessor of section 4110, bolsters our opinion. In Merco, the court determined former Government Code section 4110 was unconstitutional because it failed to provide for notice or a hearing before the awarding authority could assess a penalty against a contractor. (Merco, supra, at p. 166.) Of interest here is the Merco courts conclusion that the awarding authority had the discretion to assess one or both of the penalties specified in former Government Code section 4110, or no penalty. "In the case at bar the penalty assessed was the monetary maximum of $77,000. In addition, defendant could have cancelled the prime contract. On the other hand it could have assessed no penalty whatever. The proceeds of the penalty went to defendant. Having in mind the frequent squabbles between contractors and awarding authorities, such a power to be lenient or stern, assumes rather alarming proportions. That, however, is perhaps a matter of legislative judgment." (Merco, supra, at p. 166, italics added.) Although this statement is dicta, the Legislature did not undertake to correct any possible judicial misunderstanding of the statute when it amended the language of section 4110 to add requirements of notice to the affected prime contractor and a hearing prior to imposition of penalties.
Because the superior court properly sustained the demurrer on the ground it could not compel the City to perform a discretionary act, we need not address the issue of the Committees failure to join the prime contractor, Environmental Golf, as a defendant.
DISPOSITION
The judgment is affirmed. The City shall recover its costs on appeal.
WE CONCUR: RYLAARSDAM, ACTING P. J. and IKOLA, J. --------------- Notes: The language of section 4110 is virtually identical to that of former Government Code section 4110, which read: "A prime contractor violating any of the provisions of this chapter violates his contract and the awarding authority may exercise the option, in its own discretion, of (1) canceling his contract or (2) assessing the prime contractor a penalty in an amount of not more than 10 percent of the amount of the subcontract involved, and this penalty shall be deposited in the fund out of which the prime contract is awarded, or (3) both canceling the contract and assessing the penalty." (Stats. 1963, ch. 2125, § 11, p. 4413.) There are three main distinctions between former Government Code section 4110 and the current version of section 4110: (1) the statute now uses gender inclusive terminology; (2) the statute now includes provisions for notice to the prime contractor and a hearing in proceedings under the section; and (3) the awarding authority no longer has the option of both canceling the contract and assessing a penalty.