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Bolingbrook Park Dist. v. Nat'l-ben Franklin Ins.





APPEAL from the Circuit Court of Will County; the Hon. THOMAS W. VINSON, Judge, presiding.


Rehearing denied June 3, 1981.

This appeal involves a dispute between parties to a construction contract. The Bolingbrook Park District (hereinafter referred to as the Park District) brought suit for breach of contract against the defendants, John D. Gotta, and William Kapustka, individually and doing business as J.D. Gotta and Associates (hereinafter referred to as the Contractor). National-Ben Franklin Insurance Company was surety for the Contractor's bonds and was sued by the Park District in that capacity. The trial court granted defendants' motions to dismiss the complaint. It found all the issues alleged in the complaint clearly within the scope of the arbitration clause of the contract; arbitration was ordered. The Park District now appeals that ruling.

The Park District and the Contractor executed a contract on September 17, 1976, under which the Contractor was to construct a handball/racquetball facility. Certain provisions of the contract require arbitration of any disputes arising thereunder. The arbitration clause reads as follows:


6.10.1 All claims disputes and other matters in question arising out of, or relating to, this Contract or the breach thereof, except for claims which have been waived by the making or acceptance of final payment as provided by Subparagraphs 8.7.5 and 8.7.6, shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then obtaining 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.

6.10.2 Notice of the demand for arbitration shall be filed in writing with the other party to the Contract and with the American Arbitration Association, and a copy shall be filed with the Park District.

6.10.3 The Contractor shall carry on the Work and maintain the progress schedule during any arbitration proceedings, unless otherwise agreed by him and the Park District in writing."

The date for completion of the project under the contract terms was March 1, 1977. The facility was constructed but a dispute arose concerning performance of the terms of the contract. On May 20, 1977, the Park District terminated the contract alleging default and substantial violations of the contract by the Contractor.

On June 28, 1977, the Contractor filed a notice of demand for arbitration seeking money due under the contract and damages for wrongful termination of contract by the Park District.

On August 9, 1977, the Park District filed a suit in Will County Circuit Court to recover damages against the Contractor and the surety for breach of contract. The Contractor responded with a motion to dismiss based on the theory the contract's arbitration clause covered the matters in issue and an arbitration proceeding was already pending. The surety subsequently filed a motion to dismiss on the same grounds.

By letter dated April 16, 1979, the Contractor made a proposal to the Park District. The Contractor agreed to withdraw its arbitration demand and proceed in a judicial forum with their contract disputes if the Park District released the balance of a certain escrow account and paid additional damages. The Park District found these terms unacceptable; they so notified the Contractor by letter dated April 24, 1979. On November 2, 1979, the Park District informed the American Arbitration Association that the Contractor's letter of April 16, 1979, made it clear that Contractor had withdrawn its arbitration demand and would proceed in the pending lawsuit in Will County.

On July 2, 1980, the trial court granted the motions to dismiss the complaint. The issues presented in the complaint were ordered to arbitration.

• 1, 2 The Park District presents five issues for review. Initially, the Park District asserts that the Contractor by its letter of April 16, 1979, agreed to submit the dispute to a judicial forum and waived its right to arbitrate the matters in dispute. We agree that the parties may mutually agree to forego arbitration. However, such was not the case here. The trial court found the letter of April 16, 1979, was an offer to withdraw the arbitration demand if the Park District would release certain escrow funds and pay damages. The trial court was correct. The letter of April 16, 1979, is clearly conditional in its terms. The conditions of the offer were unacceptable to the Park District. They so advised the Contractor by letter dated April 24, 1979. Thus, no mutual agreement was reached. The Contractor remained free ...

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