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Roosevelt Univ. v. Mayfair Constr. Co.

APRIL 22, 1975.




APPEAL from the Circuit Court of Cook County; the Hon. DANIEL A. COVELLI, Judge, presiding.


Mr. JUSTICE HAYES delivered the opinion of the court:

This case concerns the arbitrability of several controversies which have arisen between the parties to a construction contract. Roosevelt University (plaintiff-appellant and hereafter "Roosevelt") appeals from an order of the Circuit Court of Cook County denying its motion under section 2(b) of the Uniform Arbitration Act (Ill. Rev. Stat. 1971, ch. 10, par. 102(b)) to stay arbitration, and dismissing its complaint for a declaratory judgment that none of the controversies in question was arbitrable. For a better understanding of the issues presented, a somewhat detailed description of the transaction is necessary.

On 15 August 1968, Roosevelt and Mayfair Construction Company, Inc. (defendant-appellee and hereafter "Mayfair") entered into a contract for the construction by Mayfair of a 17-story student dormitory building at 425 South Wabash Avenue in Chicago. The contract was awarded to Mayfair on the basis of a bid submitted by Mayfair on 30 July 1968; the bid in turn had been made on the basis of certain contract documents which had been submitted to Mayfair by Roosevelt through its architect. The original contract price was $4,788,300. Duly approved change orders raised the contract price to $4,908,187.53. Of that sum, about $4,600,000 has been paid. The final payment of approximately $308,000 has been withheld for reasons which will be related shortly.

The agreement between the parties consisted of several documents, collectively referred to as "Contract Documents." These documents, listed in the order of priority to which reference is made in paragraph IV of the Contract (quoted in our next sentence), are: the Contract, General Conditions, Supplementary General Conditions, Engineer's Special Conditions, Specifications, Bulletins # 1-4, Addenda # 1-9, Drawings, Contractor's Bid, and Performance-Payment Bond. Paragraph IV of the Contract provides:

"In the event of any conflict between this agreement and any of the other Contract Documents, the provisions of this instrument (Contract) shall control. The order of precedence of the other Contract Documents in the event of conflict shall be in the same order as listed above. A contract document first listed shall have precedence over a contract document following it, except as may be otherwise specifically provided in the General Conditions or the Supplementary General Conditions."

In addition, paragraph 41 of the General Conditions provides as follows:

"Any provisions in any of the Contract Documents which may be in conflict or inconsistent with any of the paragraphs in these General Conditions shall be void to the extent of such conflict or inconsistency."

Under the provisions of the Contract, the work was to be completed by 15 August 1970. The Contract recites that the 2-year construction period thus provided was agreed by the parties to be a reasonable period of time for the completion of the work and that time was of the essence. The Contract also provided for liquidated damages in specified amounts to be paid by Mayfair to Roosevelt, should the construction as a whole or as to certain stages not have been completed by 15 August 1970. Other provisions of the Contract Documents are hereinafter set forth as necessary.

Roosevelt employed the architectural firm of Mittelbusher and Turtelot (hereafter the "Architect") to design the building, to draw the plans and specifications, and to supervise the construction work.

On 20 March 1970, Mayfair orally advised Roosevelt that the work would not be completed until December, 1970. Five days later, Roosevelt, by letter advised Mayfair that the delay would cause Roosevelt hardship and financial loss, since it had previously entered into contracts with students for housing for the academic year beginning in September of 1970. Roosevelt also claimed that the inability to house students would adversely affect its enrollment. Roosevelt and the Architect subsequently denied most of Mayfair's requests for additional time in which to complete the construction without incurring liability for liquidated damages.

The work in fact was not completed until about December, 1970, at which time the Architect compiled a "punch list" of specific items in the construction work which were then defective or still uncompleted. Later, the Architect compiled a consolidated "punch list," by reason of which the Architect determined that Roosevelt was entitled to damages of $146,700 against Mayfair. This list was subsequently amended so that the "punch list" damage claim amounts to approximately $170,000.

Roosevelt also determined that Mayfair was liable for liquidated damages of $189,660 owing to its late completion of the work. Since Roosevelt felt that Mayfair's liability for the consolidated amended "punch list" items and the liquidated damages was in excess of the final installment due under the contract, Roosevelt withheld its final payment of approximately $308,000 despite Mayfair's demand. Mayfair disputed both of Roosevelt's claims.

After lengthy negotiations, on 6 April 1972, Mayfair, in addition to renewing its demand for the final payment under the contract, presented Roosevelt with claims for general damages of $243,168.82 for extra costs incurred by Mayfair owing to delays and work schedule disruptions caused by Roosevelt, for extras in the amount of $159,537.70, and for open change orders in the amount of $22,225.12.

Roosevelt denied that it was in any way liable to Mayfair, whereupon on 1 May 1972, Mayfair filed its Demand for Arbitration with the American Arbitration Association relative to the following matters:

1. Roosevelt's claim for damages based upon the Architect's consolidated amended "punch list";

2. Roosevelt's claim for liquidated damages;

3. Mayfair's claim for damages arising from a breach of the contract by Roosevelt-caused delays in construction;

4. Mayfair's claim or open change orders;

5. Mayfair's claim for extras;

6. Mayfair's claim for the final contract payment with interest from the date that it became due.

Mayfair's demand for arbitration was based upon its position that each of the claims set forth above was arbitrable under the following clauses appearing in the Supplementary General Conditions:

"65. Arbitration: *fn1

All claims, disputes and other matters in question arising out of, or relating to this Contract or the breach thereof, except as set forth with respect to the Architect's decisions on matters relating to artistic effect, and except for claims which have been waived by the making or acceptance of final payment as otherwise provided, shall be decided by arbitration in accordance with the Construction Industry Arbitration Association then obtainint [sic] unless the parties mutually agree otherwise. This agreement so to arbitrate shall be specifically enforceable under the prevailing arbitration law. The award rendered by the arbitrators shall be final and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof.

12. Administration of the Contract: *fn2

The Architect will provide general administration of the Contract, including performance of the functions hereinafter described.

The Architect will be, in the first instance the interpreter of the requirements of the Contract Documents and the judge of the performance thereunder by both the Owner and Contractor. The Architect will, within a reasonable time, render such interpretations as he may deem necessary for the proper execution or progress of the Work. Claims, disputes and other matters in question between the Contractor and the Owner relating to the execution or progress of the Work or the interpretation of the Contract Documents shall be referred initially to the Architect for a decision which he will render in writing within a reasonable time. All interpretations and decisions of the Architect shall be consistent with the intent of the Contract Documents. In his capacity as interpreter and judge, he will exercise his best efforts to insure faithful performance by both the Owner and the Contractor and will not show partiality to either. The Architect's decisions in matters relating to artistic effect will be final if consistent with the intent of the Contract Documents. Any ...

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