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State Farm Mutual Auto. Ins. v. Hanover Dev.

OPINION FILED JUNE 18, 1979.

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, PLAINTIFF-APPELLANT,

v.

HANOVER DEVELOPMENT CORPORATION ET AL., DEFENDANTS-APPELLEES.



APPEAL from the Circuit Court of Du Page County; the Hon. CHARLES R. NORGLE, Judge, presiding.

MR. JUSTICE LINDBERG DELIVERED THE OPINION OF THE COURT:

This is an interlocutory appeal from the order of the Circuit Court of Du Page County granting the defendants' petition for arbitration and denying the plaintiff's motion to vacate that order. The issue presented for review is whether the trial court correctly found that all of the issues raised by the plaintiff's complaint are governed by the arbitration provision of the limited partnership agreement (article XIV) between the plaintiff, State Farm Mutual Automobile Insurance Company, hereafter State Farm, and the defendant Hanover Development Corporation. In general this article provides that all disputes and questions between the partners shall be resolved by arbitration.

By an agreement signed on July 10, 1970, the parties formed a limited partnership under the name of Northland Associates. State Farm was to be a limited partner and Hanover Development a general partner to develop and maintain certain real property owned by State Farm Life Insurance Company. The land was leased from State Farm Life by the partnership and developed into a shopping center. State Farm's complaint alleged that Hanover had wrongfully paid over to itself in excess of $212,000 from partnership funds, failed to pay in a timely manner the 1976 real estate taxes, and failed to file with State Farm operating statements as required by the agreement. State Farm sought a termination, dissolution and winding up of the partnership, an accounting and judgment for its alleged losses.

In response to this complaint, Hanover Development petitioned the court below for an order to arbitrate the dispute. The trial court entered an order June 28, 1978, granting defendants' petition for arbitration and denying the plaintiff's motion to vacate that order, and it is from this order that the issues are before us in this interlocutory appeal. Upon examining the record, relevant statutes and the limited partnership agreement and reviewing the arguments of the parties we are of the opinion that the order of the Circuit Court of Du Page County should be affirmed.

Article XIV of the parties' limited partnership agreement calls for arbitration of:

"All disputes and questions whatsoever which shall arise either during the Partnership or afterwards, between the partners or their respective representatives, or between any of the partners and the representatives of any other partner, touching these presents, or the construction or application thereof, or on any account, valuation, or division of assets, debits, or liabilities to be made hereunder, or any act or omission of any partner, or any other matter in any way relating to the Partnership business or the affairs of the Partnership, or the rights, duties, and liabilities of any person hereunder, * * *."

Section 1 of the Uniform Arbitration Act (Ill. Rev. Stat. 1977, ch. 10, par. 101) makes agreements to arbitrate "valid, enforceable, and irrevocable * * *."

• 1-3 In the case of School District No. 46 v. Del Bianco (1966), 68 Ill. App.2d 145, 215 N.E.2d 25, this court developed a three category test for determining if a commercial dispute is arbitrable:

1. if the dispute is clearly within the arbitration clause, a court should order arbitration;

2. if the dispute is clearly not within the clause "then there is no agreement to arbitrate, and the court should deny arbitration"; and,

3. where the scope of an agreement to arbitrate "is reasonably in doubt, the issue of arbitrability should be initially determined by the arbitrators, * * *." (68 Ill. App.2d 145, 154-55, 215 N.E.2d 30.)

The present dispute is in the first category. The parties have not only agreed to arbitrate disputes over the construction and application of the contract itself, but also "any act or omission of any partner, or any other matter in any way relating to the partnership business or the affairs of the partnership, or the rights, duties, and liabilities of any person hereunder." Such broad language clearly encompasses both the alleged misconduct of the defendants and State Farm's act of seeking dissolution. Arbitration is governed by agreement. (Ill. Rev. Stat. 1977, ch. 10, par. 102(a).) Here the parties have, by contract, bound themselves to arbitrate all disputes without limitation.

This is not a case like Flood v. Country Mutual Insurance Co. (1968), 41 Ill.2d 91, 242 N.E.2d 149, where the parties agreed to arbitrate only a limited number of specified issues. The instant case is also distinguishable from Harrison F. Blades, Inc. v. Jarman Memorial Hospital Building Fund, Inc. (1969), 109 Ill. App.2d 224, 248 N.E.2d 289, and Silver Cross Hospital v. S.N. Nielsen Co. (1972), 8 Ill. App.3d 1000, 291 N.E.2d 247, in that the arbitration agreement in those cases was limited to disputes "arising in connection with" the contract. In the latter two cases the courts> found that the specific disputes in question were not governed by the contract. Here, however, the agreement goes further to include not only disagreements over the meaning of the contract, but also any and all acts of a partner relating to the partnership. (For a discussion of this distinction, see Kalevitch, Arbitrability: The Uniform Arbitration Act in Illinois, 4 Loy. Chi. L.J. 23, 26, 30 (1973).)

State Farm cites the case of Goldmann Trust v. Goldmann (1965), 26 Wis.2d 141, 131 N.W.2d 902, wherein the arbitration clause in dispute was virtually identical to that in the case at bar. The dispute in Goldmann concerned an attempt by one partner to dismiss a permanent partnership employee. A specific provision of the partnership agreement required mutual consent of the partners to dismiss a permanent employee. The partner seeking to dismiss the employee sought arbitration of the question of dismissal rights. The Wisconsin Supreme Court, by a four-to-three vote, refused to uphold an order to arbitrate. The court found that the existence of a specific provision requiring mutual consent made the ...


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