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Vil. of Carpentersville v. Mayfair Constr. Co.





APPEAL from the Circuit Court of Kane County; the Hon. BARRY E. PUKLIN, Judge, presiding.


Rehearing denied October 19, 1981.

The Village of Carpentersville (Village) sought a determination in a declaratory judgment action that certain claims under a contract with the Mayfair Construction Company (Mayfair) for reconstruction of waste treatment facilities in the Village were nonarbitrable. The trial court found that all claims were within the arbitration clause of the contract and ordered the parties to proceed to arbitration. The Village appeals. It contends that conditions precedent to arbitration in the contract were not met and that this issue must be decided by a court rather than the arbitrator; that procedural questions relating to arbitrability are similarly matters for the court; and that certain claims of Mayfair are not within the scope of the arbitration provisions of the contract. Mayfair, in addition to its counterarguments on the merits, contends that the Village's participation in the arbitration proceeding estops it from challenging arbitrability.

A construction contract was entered into on October 4, 1976, and work commenced on the project on October 14, 1976. Following various written change orders Mayfair made claims for payment for additional work outside the scope of the contract. These claims were submitted in writing to Warren and Van Praag, the architect-engineer for the project (Architect). The first of these claims was denied by the project engineer of the Architect. Mayfair then consulted with the Architect as to the procedure for the handling of claims. It was agreed between Mayfair and the Architect that the following provision in the contract:

"135.02 The demand for arbitration shall be made within thirty days after the date on which the Architect-Engineer rendered his written decision. However, no demand for arbitration shall be made until the earlier of (a) the date on which the Architect-Engineer has rendered a written decision; or (b) the tenth day after the parties have presented their evidence to the Architect-Engineer if he has not rendered a written decision before that date. Failure to demand arbitration within the said thirty day period shall result in the Architect-Engineer's decision being final and binding on the Owner and the Contractor"

would only apply where the Architect states that a decision is a written decision within the meaning of the section and that an arbitration demand must be made within 30 days of the written decision by the Architect. The Village did not challenge this interpretation.

Thereafter, from time to time, Mayfair notified the Architect of claims for extras and submitted evidence in support of the claims. The Architect gathered evidence and reviewed the evidence with the Village engineer prior to making a decision on such claims.

On April 25, 1978, a meeting was held at which representatives of the Village, the Architect and Mayfair were present. Following the meeting several pending claims were denied in a letter from the project engineer to Mayfair dated May 5, 1978. On May 17, 1978, the project engineer sent a letter to Mayfair which advised them that "it is agreed by the Village of Carpentersville that the 30 days will begin on receipt of this letter." The initial demand for arbitration was filed by Mayfair on June 14, 1978. On June 23, 1978, the Village filed an answer in arbitration denying liability and also filed a counterclaim.

Mayfair added other claims to its arbitration demand after they were denied by the project engineer. Several of the claims were approved by the engineer but the change orders requested pursuant to a further provision of the contract, section 123.01, were rejected by the Village Board on April 2, 1979. The claims for which change orders were denied were added to the arbitration demand on April 3, 1979. A claim for the sums retained under the contract by the Village in the amount of $76,068.93 was also submitted to arbitration. Payment of the retainage had previously been approved by the Architect.

On July 23, 1979, the Village entered a special and limited appearance in the arbitration proceedings, objecting to the jurisdiction of the arbitrator. Before arbitration commenced, on August 23, 1979, the Village filed the declaratory judgment action, alleging that 15 of the 19 claims submitted to arbitration by Mayfair were not arbitrable. Mayfair filed a motion to dismiss, which was denied. Mayfair later asserted the affirmative defense of waiver and estoppel which was denied by the trial court. After trial, which primarily consisted of the submission of documentary evidence, the court found that all preconditions to arbitration had been met and denied the requested relief. It further appears of record that the trial court denied a stay to the Village and the arbitration has proceeded and has been completed before an arbitrator provided by American Arbitration Association but that no ruling has been made.

• 1 We first address Mayfair's argument based on its claim of waiver and estoppel. While the Village argues that it consistently took the position that the claims were not arbitrable, the earliest documentation in the record is the "special appearance" filed over a year after its answers and counterclaim. Nevertheless, we conclude that the objections made prior to a hearing on the merits of the arbitration proceeding was sufficient to preserve the issue.

It has been generally held that a timely objection to arbitrability preserves the right to challenge the award after participating in the arbitration proceedings. (Board of Education v. Champaign Education Association (1973), 15 Ill. App.3d 335, 341-42. See also Annot., 33 A.L.R.3d 1242 (1970).) In Board of Education, the Board contested arbitrability from the very beginning of the arbitration proceedings, including filing a motion to dismiss prior to the hearing on the merits. The court found that the plaintiff did not waive the objection to arbitrability by participating in the hearing. (15 Ill. App.3d 335, 342.) In Bisluk v. Town Realty, Inc. (1980), 90 Ill. App.3d 1039, plaintiffs appeared generally before the arbitrator and requested a continuance before filing suit to enjoin arbitration. The court rejected defendant's contention that plaintiffs' involvement in arbitration proceedings waived the challenge to arbitrability. 90 Ill. App.3d 1039, 1042.

• 2 We conclude that the Village's objection to arbitrability was timely made by bringing this action prior to a hearing on the merits before the arbitrator. See Clifton-Fine Central School Board of Education v. Wisner (1977), 59 App. Div.2d 50, 52, 397 N.Y.S.2d 208, 209.

The Village argues that the jurisdiction of the arbitrator is governed by the arbitration provisions of the contract (135.01-05) and the provisions relating to the status of the Architect-Engineer (136.02). It further argues that certain sections of the general conditions of the contract, relating to "Changes" (123.01-02), to the "Claims for Extra Compensation" (124.01) and to ...

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