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J & K Cem. Constr., Inc. v. Montalbano Bldrs

OPINION FILED NOVEMBER 15, 1983.

J&K CEMENT CONSTRUCTION, INC., PLAINTIFF-APPELLEE,

v.

MONTALBANO BUILDERS, INC., DEFENDANT-APPELLANT — (JOSEPH FALBO ET AL., DEFENDANTS-APPELLEES).



Appeal from the Circuit Court of Du Page County; the Hon. John S. Teschner, Judge, presiding.

JUSTICE LINDBERG DELIVERED THE OPINION OF THE COURT:

Defendant-appellant, Montalbano Builders, Inc. (Montalbano), appeals from an order of the circuit court of Du Page County denying his motion to stay all proceedings and to compel arbitration. Montalbano and defendants-appellees Joseph and Mary Falbo (the Falbos) entered into a written contract which included an arbitration clause on October 29, 1980, for the construction of a home. The Falbos agreed to pay Montalbano $360,000 for the construction work. Montalbano entered into various contracts with subcontractors to perform the work, none of which contained an arbitration clause.

To date, the Falbos have paid $208,236.00 to Montalbano on the contract. During construction, a dispute arose between the Falbos and Montalbano, and the Falbos have refused to pay any additional sums to Montalbano until certain corrections are made. Prior to litigation, 15 subcontractors and Montalbano had filed lien claims with the office of recorder of deeds of Du Page County. Two subcontractors filed separate suits to foreclose on mechanics' lien claims against the Falbos' real property. The cases were consolidated on July 21, 1982.

The Falbos filed their answer and countercomplaint against Montalbano, alleging (1) breach of contract; (2) breach of an implied warranty of habitability; (3) precontract fraud; (4) unfair and deceptive trade practices; (5) negligence, and also petitioned the court for a general settlement under section 30 of the Mechanics' Liens Act (Ill. Rev. Stat. 1981, ch. 82, par. 30). As its responsive pleading to all complaints, Montalbano filed on September 29, 1982, a motion to stay all proceedings and for an order compelling arbitration between the Falbos and Montalbano. Prior to this motion, eight subcontractors joined the lawsuit in addition to those who had initiated the proceedings. After five more subcontractors joined this litigation, the court on November 17, 1982, denied Montalbano's motion, who then filed a timely interlocutory appeal.

After oral argument in this case, Montalbano filed on May 24, 1983, a motion to realign the parties on appeal and to suggest the mootness of objections to Montalbano's motion to compel arbitration. In his appellate motion, Montalbano asserted that it had settled and compromised the claims of nine subcontractors and was assigned their lien rights. Additionally, Montalbano stated that seven more subcontractors had withdrawn any objections to and joined in its motion to compel arbitration. On May 31, 1983, the Falbos filed their answer and supporting memorandum wherein they asserted that Montalbano's motion lacked certain procedural requisites, and did not render any issue moot. On July 20, 1983, this court granted Montalbano's motion to file a reply to the Falbos' answer and ordered that the reply be taken with this case.

• 1 Although the order appealed from in the instant case is interlocutory, we nonetheless have jurisdiction for the trial court's denial of the requested relief is analogous to the denial of an injunction. (Kelso-Burnett Co. v. Zeus Development Corp. (1982), 107 Ill. App.3d 34, 37, 437 N.E.2d 26, 28; School District No. 46 v. Del Bianco (1966), 68 Ill. App.2d 145, 152-53, 215 N.E.2d 25, 28-29.) The only question brought before a reviewing court on an interlocutory appeal is whether there was a sufficient showing to sustain the order of the trial court granting or denying the relief sought. (107 Ill. App.3d 34, 42, 437 N.E.2d 26, 31; see Ording v. Springer (1980), 88 Ill. App.3d 243, 246, 410 N.E.2d 428, 431.) We conclude that there was not a sufficient showing and therefore reverse the trial court's order denying Montalbano's motion to compel arbitration.

In Illinois, contractual arbitration provisions are construed in light of the Illinois Uniform Arbitration Act. (Ill. Rev. Stat. 1981, ch. 10, par. 101 et seq.) Illinois adopted the provisions of the Uniform Arbitration Act with minor modifications in 1961. (School District No. 46 v. Del Bianco (1966), 68 Ill. App.2d 145, 153, 215 N.E.2d 25, 29.) Prior to the enactment of the Uniform Arbitration Act, the common-law rule in many States was that agreements to arbitrate were revocable until the arbitrator rendered his decision and agreements to arbitrate future disputes were unenforceable. The Uniform Arbitration Act was established to change the common-law rule.

"One of the fundamental objectives of the act was to encourage and facilitate the arbitration of disputes by providing a speedy, informal, and relatively inexpensive procedure for resolving controversies arising out of commercial transactions, including the labor-management field. The language of the act emphasizes an intention to change the common-law policy of judicial hostility toward arbitration to one favoring arbitration. Contrary to decisions found in many states, it specifically makes a written agreement to arbitrate effective whether relating to existing or future disputes." Layne-Minnesota Co. v. Regents of the University of Minnesota (1963), 266 Minn. 284, 287-88, 123 N.W.2d 371, 374. See School District No. 46 v. Del Bianco (1966), 68 Ill. App.2d 145, 154, 215 N.E.2d 25, 29.

• 2 Both the Uniform Arbitration Act and the Federal Arbitration Act (9 U.S.C. § 1 et seq. (1976)), enacted in 1925 are patterned after the New York arbitration statute enacted in 1920. (Sonderby, Commercial Arbitration: Enforcement of An Agreement to Arbitrate Future Disputes, 5 J. Mar. J. Prac. & Proc. 72, 75-76 (1971), citing 1920 N.Y. Laws, ch. 275, originally in N.Y. Civ. Prac. Act sec. 1448-69, now in N.Y. Civ. Prac. Law & Rules sec. 7501-14 (McKinney 1963); see also Greenfield, The Contract to Arbitrate Future Disputes: A Comparison of the New Mexico Act With the New York and Federal Acts, 9 N.M.L. Rev. 71, 71-72 (1978-79).) Given the common origins of the Federal and uniform statutes, courts> interpreting State arbitration statutes patterned after the Uniform Arbitration Act look for guidance to Federal court decisions interpreting similar provision of the Federal Arbitration Act. (See Charles J. Frank, Inc. v. Associated Jewish Charities of Baltimore, Inc. (1982), 294 Md. 443, 450 A.2d 1304; Loomis, Inc. v. Cudahy (1982), 104 Idaho 106, 656 P.2d 1359; National Camera, Inc. v. Love (Colo. 1982), 644 P.2d 94; see also Northern Illinois Gas Co. v. Airco Industrial Gases (7th Cir. 1982), 676 F.2d 270 (recognizing that Federal and Illinois authorities are in accord in the law of arbitration).) Similarly, the Illinois Supreme Court has stated that judicial opinions from other jurisdictions are given greater than usual deference in construing the Uniform Arbitration Act since the purpose of the act is to make uniform the laws of those States which enact it. (Garver v. Ferguson (1979), 76 Ill.2d 1, 8.) Because of the common origin of the Federal and uniform acts, and the fact that the Illinois Uniform Arbitration Act is patterned after the Uniform Arbitration Act, we proceed to interpret our statute with the aid of decisions from other States and Federal courts>.

• 3 Section 2(a) of the Illinois Uniform Arbitration Act (Ill. Rev. Stat. 1981, ch. 10, par. 102(a)) provides:

"On application of a party showing an [arbitration] agreement * * *, and the opposing party's refusal to arbitrate, the court shall order the parties to proceed with arbitration, but if the opposing party denies the existence of the agreement to arbitrate, the court shall proceed summarily to the determination of the issue so raised and shall order arbitration if found for the moving party, otherwise, the application shall be denied."

At a hearing to stay a judicial proceeding and to compel arbitration, the trial court should concern itself solely with whether an agreement exists to arbitrate the dispute in question. Farris v. Hedgepeth (1978), 58 Ill. App.3d 1040, 1043, 374 N.E.2d 1086, 1088; Bunge Corp. v. Williams (1977), 45 Ill. App.3d 359, 362, 359 N.E.2d 844, 845.

• 4, 5 The trial court did not make a finding with respect to the existence of an agreement to arbitrate which was error. (Kelso-Burnett Co. v. Zeus Development Corp. (1982), 107 Ill. App.3d 34, 41, 437 N.E.2d 26, 31.) In their pleadings, the parties disputed whether an agreement to arbitrate existed. On appeal, Montalbano points to paragraph 22 of the typewritten standard contract agreement initialed by the parties, which states: "All claims, disputes and other matters in question arising out of, or relating to this Agreement, or the breach thereof, shall be decided by arbitration, pursuant to the Rules established by the Northern Illinois Home Builders Association for the arbitration of such disputes." Montalbano argues that this clause demonstrates each party agreed to arbitration.

On the other hand, the Falbos contend that the parties' written agreement actually contained an additional arbitration clause with a different set of governing rules, and thus, the parties could not have reached agreement on a specific arbitration procedure. The contract does refer to two arbitration clauses. While these two clauses appear to conflict, the language of the second clause contained in AIA Form No. A107 and incorporated by reference into the general conditions of the parties' contract states that it becomes operative only if the parties do not establish an alternative procedure. Here, the parties established with the inclusion of paragraph 22 an alternative arbitration procedure and thus, the parties did agree to one form of dispute resolution.

• 6 In addition to ascertaining the existence of an agreement to arbitrate, a court should order arbitration only if the dispute is arbitrable. In resisting arbitration, the Falbos argue that the issues of breach of implied warranty of habitability, precontract fraud, unfair and deceptive trade practices, negligence, and general settlement under the Mechanics' Liens Act are not subject to arbitration, but cite no authority for their position. Arbitration contracts are interpreted in the same manner and according to the same rules as are all other contracts. (See Flood v. Country Mutual Insurance Co. (1968), 41 Ill.2d 91.) The parties are bound to submit only those issues which they have agreed clearly to resolve through the arbitration mechanism and a court should not extend an agreement by construction or implication. 41 Ill.2d 91, 94.

• 7 Whether a dispute is within the scope of an arbitration clause "`should be determined at the earliest possible moment and should be controlled by judicial guidelines.'" (Farris v. Hedgepeth (1978), 58 Ill. App.3d 1040, 1043, 374 N.E.2d 1086, 1088, quoting Harrison F. Blades, Inc. v. Jarman Memorial Hospital Building Fund, Inc. (1969), 109 Ill. App.2d 224, 229, 248 N.E.2d 289, 291; see Kelso-Burnett Co. v. Zeus Development Corp. (1982), 107 Ill. App.3d 34, 40, 437 N.E.2d 26, 30.) The court and not the arbitrator should determine whether the issues in dispute are within the scope of the arbitration agreement. (Premier Electrical Construction Co. v. Ragnar Benson, Inc. (1982), 111 Ill. App.3d 855, 862, 444 N.E.2d 726, 730; Kelso-Burnett Co. v. Zeus Development Corp. (1982), 107 Ill. App.3d 34, 41, 437 N.E.2d 26, 30; Village of Carpentersville v. Mayfair Construction Co. (1981), 100 Ill. App.3d 128, 134, 426 N.E.2d 558, 564; Iser Electric Co. v. Fossier Builders, Ltd. (1980), 84 Ill. App.3d 161, 164, 405 N.E.2d 439, 441; Croom v. City of De Kalb (1979), 71 Ill. App.3d 370, 375, 389 N.E.2d 647, 651; Paschen Contractors, Inc. v. John J. Calnan, Co. (1973), 13 Ill. App.3d 485, 489, 300 N.E.2d 795, 798; see Northern Illinois Gas Co. v. Airco Industrial Gases (7th Cir. 1982), 676 F.2d 270, 275 (applying Illinois law); but see School District No. 46 v. Del Bianco (1966), 68 Ill. App.2d 145, 155, 215 N.E.2d 25, 30.) Both questions of fact and law are arbitrable pursuant to a contractually chosen arbitration forum. Applicolor, Inc. v. Surface Combustion Corp. (1966), 77 Ill. App.2d 260, 267, 222 N.E.2d 168, 171.

• 8 We believe that the parties' arbitration clause is sufficiently broad to encompass each of the Falbos' counts. In the instant case, the written contract contains a "generic" arbitration clause which does not enumerate which disputes are arbitrable. (Roosevelt University v. Mayfair Construction Co. (1975), 28 Ill. App.3d 1045, 331 N.E.2d 835.) To determine the scope of the clause, the court must examine both the wording of the particular clause and the terms of the parties' contract. (Harrison F. Blades, Inc. v. Jarman Memorial Hospital Building Fund, Inc. (1969), 109 Ill. App.2d 224, 248 N.E.2d 289.) In Roosevelt University v. Mayfair Construction Co. (1975), 28 Ill. App.3d 1045, 331 N.E.2d 835, the court held that an arbitration clause containing the language "arising out of, or relating to" the contract was very broad in scope and thus justified submitting the dispute involving damages resulting from one party's delays to arbitration even though the contract contained no express provision regarding this issue. Courts>, therefore, construe broad language in an arbitration clause as an agreement by the parties "to resolve through arbitration any and all disputes arising out of the subject matter of the contract * * *." (Ozdeger v. Altay (1978), 66 Ill. App.3d 629, 632, 384 N.E.2d 82, 85.) The language employed in the arbitration clause in the case at bar is very broad, encompassing all claims, disputes and other matters "arising out of, or relating to this Agreement, or the breach thereof * * *." From the breadth of the wording, we believe the parties intended to resolve all types of disagreements pertaining to the construction of the home.

Our conclusion that each count in the Falbos' counterclaim is arbitrable is buttressed by the drafting of the counterclaim itself. In count I, the Falbos alleged Montalbano breached his contract with the Falbos. The first 13 paragraphs of count I allege facts relating to the discussions between the parties preceding their signing of the contract, payments made by the Falbos to Montalbano and the fulfillment by the Falbos of all of their obligations under the contract. Counts II-VI reallege these identical paragraphs in support of the separate bases for liability alleged in each of these counts. Very few additional facts other than those alleged in count I are alleged in the subsequent counts of the Falbos' ...


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