Summary
In Saint George Greek Orthodox Church of Southgate v. Laupman's Assoc, PC, 204 Mich. App. 278; 514 N.W.2d 516 (1994), this Court held that an arbitration award did not fall within the definition of "verdict" for the purposes of MCL 2.403(O) because the action was not proceeding to trial as required by MCR 2.403(O)(1).
Summary of this case from Jerico Construction, Inc. v. Quadrants, Inc.Opinion
Docket No. 142583.
Submitted November 2, 1993, at Detroit.
Decided March 21, 1994, at 10:05 A.M.
Law Offices of John F. Gilhool, P.C. (by John F. Gilhool), for J.S. Vig Construction Company.
Mager, Monahan, Donaldson Alber (by Lawrence M. Scott and Bruce H. Hoffman), for Spirex Structures, Inc.
Spirex Structures, Inc. appeals as of right from an order which denied any party to the suit mediation sanctions. We affirm.
In 1981, Saint George Greek Orthodox Church of Southgate contracted for design and construction of its church. Laupmanis Associates, P.C. was the architect, J.S. Vig Construction Company the general contractor, Insurance Company of North America the surety on the bond, and Steyer Roofing Company the roofer. The building developed substantial water leaks during construction. Despite efforts to correct the problem, it continued after the project had been completed.
In 1986, Saint George filed suit against Laupmanis, Vig, INA and Steyer. In 1987, Vig filed third-party complaints against five subcontractors, including Spirex Structures, Inc. Vig's contract with Spirex required that all disputes between Vig and Spirex be resolved through arbitration according to the Construction Industry Arbitration Rules of the American Arbitration Association.
In 1988, the entire case was heard before a mediation panel. On Vig's third party claim against Spirex, the mediators found for Vig in the amount of $15,000. Both Vig and Spirex rejected the mediation evaluation. In 1989, after what appears to have been considerable maneuvering by the parties, the court ordered all the parties to arbitrate. The arbitration panel concluded that Vig was liable to Saint George for $300,000 and apportioned the costs among the parties. It also concluded that Spirex was not liable to Vig.
In 1991, Vig moved to vacate, modify or correct the arbitration award pursuant to MCR 3.602(J)(1) and (K)(1). Saint George filed a motion to confirm the award and enter it as a judgment. The proposed order contained a clause stating that the order would not prejudice the rights of any party to file for mediation sanctions. The court confirmed the arbitration award but ordered that no mediation sanctions were allowed.
A
On appeal, Spirex contends that it is entitled to seek mediation sanctions pursuant to MCR 2.403(O)(1) and (2)(c). Spirex argues that a party is not prohibited from seeking sanctions, regardless of whether the case is proceeding to trial, if both parties have rejected the mediation award. Spirex also argues that an arbitration award which is confirmed and entered as a judgment by the trial court is a "verdict" within the meaning of MCR 2.403(O)(2)(c).
MCR 2.403(O) provides:
(1) If a party has rejected an evaluation and the action proceeds to trial, that party must pay the opposing party's actual costs unless the verdict is more favorable to the rejecting party than the mediation evaluation. However, if the opposing party has also rejected the evaluation, a party is entitled to costs only if the verdict is more favorable to that party than the mediation evaluation.
(2) For the purpose of this rule "verdict" includes,
(a) a jury verdict,
(b) a judgment by the court after a nonjury trial,
(c) a judgment entered as a result of a ruling on a motion filed after mediation.
The issue Spirex raises has not been considered previously by this Court. Interpretation of a court rule is subject to the same basic principles which govern statutory interpretation. Michigan Basic Property Ins Ass'n v Hackert Furniture Distributing Co, Inc, 194 Mich. App. 230, 234; 486 N.W.2d 68 (1992). A court rule should be construed in accordance with the ordinary and approved usage of the language. It should also be construed in light of its purpose and the object to be accomplished by its operation. Taylor v Anesthesia Associates of Muskegon, PC, 179 Mich. App. 384, 386; 445 N.W.2d 525 (1989). Statutory interpretation is a question of law subject to de novo review on appeal. Cardinal Mooney High School v Michigan High School Athletic Ass'n, 437 Mich. 75, 76; 467 N.W.2d 21 (1991). By analogy, interpretation of court rules is also subject to de novo review on appeal.
B
The first sentence of MCR 2.403(O)(1) contains the phrase "proceeds to trial." The phrase is not included in the second sentence. However, the two sentences should be read as a unit. The first sentence explains that a party who rejects the mediation decision must pay the opposing party's actual costs unless the verdict is more favorable to the rejecting party. The second sentence explains who may recover actual costs if both parties reject the evaluation. Nothing in the language of the court rule suggests, as Spirex contends, that the second sentence deals with situations where the action is not proceeding to trial. Efforts to assign such a meaning to the second sentence of MCR 2.403(O)(1) defy the rule's plain wording.
Moreover, arbitration is not a trial within the meaning of MCR 2.403(O)(1), as defendant claims. It is a form of alternative dispute resolution where the parties agree to forego their right to a court action and, instead, submit their dispute to a panel of arbiters. Horn v Cooke, 118 Mich. App. 740, 744; 325 N.W.2d 558 (1982). See MCR 3.602. The process which occurred here, with the case considered first in mediation and later by arbitration, cannot satisfy the language "proceeds to trial" found in MCR 2.403(O)(1).
C
"Verdict" for purposes of MCR 2.403(O)(1), is defined in MCR 2.403(O)(2) and includes "(c) a judgment entered as a result of a ruling on a motion filed after mediation." Defendant claims that confirmation of an arbitration award which is entered as a judgment is a verdict, because it facially satisfies the language of MCR 2.403(O)(2) (c). However, such an interpretation ignores the requirement that the action be proceeding to trial under MCR 2.403(O)(1). At the time Vig moved to vacate the arbitration award, although the parties were not yet in agreement, the case was not proceeding to trial.
Construing MCR 2.403(O)(2)(c) as Spirex urges also ignores a previous explanation of this rule:
[T]he [Supreme] Court intended to include those cases which are disposed of by motion following mediation but prior to the commencement of trial. [ Johnson v State Farm Mutual Automobile Ins Co, 183 Mich. App. 752, 769; 455 N.W.2d 420 (1990).]
In Johnson, the case was summarily decided after the defendant rejected a mediation award and both parties moved for summary disposition. The posture of Johnson should be distinguished from that of the instant case where the parties are still seeking to work within the framework of arbitration and the arbitration award.
In construing a statute, the court should presume that every word has some meaning and should avoid a construction which renders any part of it surplusage or nugatory. Altman v Meridian Twp, 439 Mich. 623, 635; 487 N.W.2d 155 (1992). If the interpretation defendant urges were adopted, the requirement of "proceeding to trial" in MCR 2.403(O)(1) would be rendered nugatory.
D
Furthermore, adopting defendant's interpretation would permit a party to seek sanctions in circumstances where we have previously concluded that sanctions are not appropriate. MCR 2.403 was designed to expedite and simplify the final settlement of cases to avoid a trial. Smith v Elenges, 156 Mich. App. 260, 263; 401 N.W.2d 342 (1986). A further purpose of arbitration is to avoid protracted litigation. NuVision v Dunscombe, 163 Mich. App. 674, 684; 415 N.W.2d 234 (1987). Allowing a party to seek sanctions after the arbitrator has balanced the equities simply because the court has confirmed the award by court order encourages protracted litigation.
We noted in Larson v Auto-Owners Ins Co, that the purpose of MCR 2.403, to settle cases without further litigation, would not be served by "distinguishing awards of attorney fees from sanctions that include attorney fees." Here, the purpose would not be served by permitting a party to seek sanctions when the case was not proceeding to trial and the confirmation of the mediation award was not a verdict.
Larson v Auto-Owners Ins Co, 194 Mich. App. 329, 333-334; 486 N.W.2d 128 (1992).
Affirmed.