Summary
holding that construction contractor waived its right to arbitration by actively participating in litigation
Summary of this case from Clinton Nat. Bank v. Kirk Gross Co.Opinion
Docket Nos. 80438, 80439.
Decided January 16, 1986. Leave to appeal denied, 425 Mich. 876.
Fischer, Franklin, Ford, Simon Hogg (by Ralph H. Houghton, Jr.), for Western Casualty Surety Co.
Law Offices of John W. Mason, P.C. (by John W. Mason and Mary Taylor Zick), for Joba Construction Company, Inc.
Braunlich, Russow Braunlich (by William H. Braunlich and William J. Braunlich, Jr.), for Monroe County and the Monroe County Drain Commissioner.
These appeals, here by leave granted, arise out of a construction contract dispute. The central issue is whether Joba Construction Company, Inc., waived its right to arbitration by maintaining its action in circuit court against the Monroe County Drain Commissioner. In the beginning, Joba was retained by Monroe County to construct, install, and complete water pollution control facilities. The county drain commissioner, Donald Burton, signed the contract on behalf of the county in his official capacity.
Dissatisfied with the quality of performance and the progress of the work, the Monroe County Road Commission issued a stop-work order in December, 1979. Joba thereupon filed a demand for arbitration with the American Arbitration Association pursuant to the contract, originally naming only the drain commissioner as the opposing party. However, the arbitration claim was later amended to include Monroe County as a defendant.
On October 30, 1980, Joba filed a complaint for a writ of mandamus in the Monroe County Circuit Court. The complaint also alleged Burton's tortious interference with Joba's contract. An answer and counterclaim were filed by Burton and Monroe County, although the county had not been formally added as a party. Joba simply denied the counterclaim.
Buton moved to prohibit arbitration, arguing that Joba's right to arbitrate had been waived. The motion was granted and Joba appealed to this Court. This Court vacated the order prohibiting arbitration and held that the waiver issue could only be determined by the arbitrator. Monroe County then applied for leave to appeal to the Supreme Court. The Supreme Court remanded to this Court, directing this Court to determine whether the circuit court or the arbitration tribunal is the proper forum to decide if a party has waived the right to arbitration.
In an unpublished per curiam opinion (Docket No. 59294, decided September 29, 1982) this Court found that none of the formal procedures for introducing Monroe County as a party were attempted and that the trial court erred in proceeding without correcting that problem. Turning to the waiver issue, this Court concluded that the issue was one for the circuit court to resolve.
During the pendency of the appeal, Monroe County sued Western Casualty Surety Company, seeking recovery on a performance bond issued by Western and covering the Joba construction contract. Western filed a third-party complaint against Joba, alleging an indemnification agreement.
Following remand of Joba's mandamus action to the circuit court, Monroe County was added as a defendant in that action. The mandamus action and the performance bond action were then consolidated. Western moved for accelerated judgment and summary judgment on the ground that all of the contract claims had been submitted to arbitration. The motions were denied and constitute the basis for the delayed appeal by leave in Docket No. 80439. Joba moved for accelerated judgment, arguing that the court lacked jurisdiction and that an arbitration action was pending between the parties. The circuit court denied the motion and stayed arbitration, enjoining the parties from participating in it. The denial of that Joba motion and the denial of Joba's motion for a rehearing form the basis for delayed appeal by leave in Docket No. 80438.
The contract between Joba and Monroe County provided that all "claims, disputes, and other matters in question arising out of, or relating to, the contract documents or the breach thereof * * * shall be decided by arbitration in accordance with the construction industry arbitration rules of the American Arbitration Association". Construction Industry Arbitration Rule 47 provides:
"No judicial proceedings by a party relating to the subject matter of the arbitration shall be deemed a waiver of the party's right to arbitrate.
"The AAA is not a necessary party in judicial proceedings relating to the arbitration.
"Parties to these Rules shall be deemed to have consented that judgment upon the award rendered by the arbitrator(s) may be entered in and Federal or State Court having jurisdiction thereof."
The issue is whether Joba lost its right to arbitrate by commencing its court action and by insisting on both courses of action following this Court's earlier opinion.
The contract had the necessary language to bring this matter within statutory arbitration. See MCL 600.5001 et seq.; MSA 27A.5001 et seq. The chapter on statutory arbitration, however, does not diminish or in any manner affect the equitable power of any court over arbitrators, awards, etc. MCL 600.5035; MSA 27A.3035. Thus, the judiciary has a broad role in arbitration.
A party may waive any of its contractual rights, including the right to arbitrate. A waiver may be express or it may be implied when a party actively participates in a litigation or acts in a manner inconsistent with its right to proceed to arbitration. Bielski v Wolverine Ins Co, 379 Mich. 280; 150 N.W.2d 788 (1967); Capital Mortgage Corp v Coopers Lybrand, 142 Mich. App. 531; 369 N.W.2d 922 (1985).
In this case, Joba evinced considerable behavior inconsistent with its right to proceed to arbitration. After requesting arbitration, Joba filed a complaint in circuit court, naming only Burton as defendant, asking for some of the same relief it requested in arbitration. When answering the counterclaim filed by Burton and Monroe County, Joba did not raise arbitration as a defense. In addition, Joba was involved in discovery beyond answering the interrogatories of Burton and Monroe County. Joba submitted interrogatories to Burton and the county on February 8, 1983. Pursuing discovery is regarded as being inconsistent with demanding arbitration, since discovery is not generally available in arbitration. SCA Services, Inc v General Mill Supply Co, 129 Mich. App. 224, 231; 341 N.W.2d 480 (1983), lv den 419 Mich. 895 (1984). See also DeSapio v Kohlmeyer, 35 N.Y.2d 402; 362 N.Y.S.2d 843; 321 N.E.2d 770 (1974), wherein the defendant waived the right to arbitration of a dispute involved in the judicial action by utilizing judicial discovery procedures and thereby affirmatively accepting the judicial forum.
Rule 47 should be considered as a factor. However, if it were to be interpreted to mean that no court proceeding could ever constitute a waiver of arbitration, it would run afoul of MCL 600.5035; MSA 27A.5035. In this case, Joba's conduct amounted to a waiver of arbitration despite the existence of Rule 47.
In its opinion, the lower court articulated one further reason for prohibiting arbitration in this case: judicial economy. The object of arbitration is the final disposition of differences between parties in a faster, less expensive, more expeditious manner than is available in ordinary court proceedings. 5 Am Jur 2d, Arbitration and Award, § 1, p 519. The issues involved in the judicial proceedings, with the exception of Burton's individual counterclaim for abuse of process, are essentially the same as those involved in the arbitration proceeding. There is no right to arbitration for the abuse of process claim, nor is there a right of arbitration of the issues in the action on the performance bond. Therefore, some of the claims will have to be heard in circuit court. As the lower court stated: "No purpose would be served by requiring the same evidence and presentations before both the arbitration panel and the circuit court."
Affirmed.