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Grane v. Grane

OPINION FILED JANUARY 28, 1985.

WAYNE P. GRANE, PLAINTIFF-APPELLANT,

v.

HUBERT GRANE, JR., 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:

Plaintiff, Wayne P. Grane, appeals from an order of the circuit court of Du Page County denying his motion to stay arbitration and to conduct a hearing pursuant to section 2(b) of the Uniform Arbitration Act (Ill. Rev. Stat. 1981, ch. 10, par. 102(b)). Plaintiff contends the verified allegations in his second amended complaint established that he was fraudulently induced to sign the arbitration agreement. Because we conclude these allegations established a substantial and bona fide dispute as to the existence of an agreement to arbitrate, we reverse and remand the cause to the trial court for a section 2(b) hearing.

Plaintiff is the son of defendant Hubert Grane, Sr. (Grane, Sr.), and the brother of defendants Hubert Grane, Jr. (Grane, Jr.), Fred C. Grane and Daniel T. Grane. The corporate defendants are companies owned by the Grane family and Harris Bank, which is a trustee of certain Grane family trusts. The individual parties signed an agreement and understanding on December 10, 1980, which invested defendant Thomas J. Boodell, Jr. (Boodell), with the "sole authority to resolve any conflict existing between the Parties and to compromise any disputes concerning equity interests as he, in his sole judgment, after consultation with Mr. Hubert Grane, Sr., shall determine." A dispute arose concerning the division of the family businesses and plaintiff filed a complaint on June 30, 1983, seeking a declaratory judgment determining the rights, interests and liabilities of the parties in the Grane family businesses. Plaintiff also filed an ex parte petition to compel defendants to produce certain business books and records which the court granted on July 7, 1983.

In response, Grane, Jr., and certain corporate defendants filed a motion to vacate the order to compel, arguing in part that the parties had entered into an arbitration agreement requiring arbitration of all intrafamily disputes. Plaintiff thereupon filed a motion for leave to file a second amended complaint which contained a count requesting rescission of the arbitration agreement. The trial court allowed plaintiff to file the motion and the second amended complaint with the court, but reserved ruling on the decision whether to allow the motion.

Sometime during September or October 1983, Boodell began conducting an arbitration proceeding to resolve the family disputes, but plaintiff elected not to participate. On October 28, 1983, plaintiff filed a motion to stay the arbitration proceeding, contesting the validity and enforceability of the 1980 arbitration agreement, which the court denied that same day. Plaintiff filed a notice of appeal from the order denying the motion to stay on November 4, 1983. The trial court denied on November 7, 1983, plaintiff's motion to stay all court and arbitration proceedings pending appeal of this cause. On November 9, 1983, plaintiff filed a motion renewing his request that the trial court grant plaintiff leave to file his second amended complaint, which the court granted on November 10, 1983.

• 1 The first issue which this court must address is whether it has jurisdiction to entertain this appeal. Boodell contends that this appeal must be dismissed as taken from a non-appealable interlocutory order. Boodell argues that the purpose of facilitating arbitration which underlies the Illinois Uniform Arbitration Act (Ill. Rev. Stat. 1981, ch. 10, par. 101 et seq.) is thwarted by allowing appeals from orders denying motions to stay arbitration. Citing decisions from other jurisdictions holding non-appealable orders denying motions to stay arbitration, and relying on the rule that judicial decisions of other States adopting the Uniform Arbitration Act should be given great deference to encourage uniformity, Boodell requests this court to rule that the instant interlocutory order is not appealable pursuant to the Illinois Uniform Arbitration Act. Ill. Rev. Stat. 1981, ch. 10, par. 101 et seq.

Section 18 of the Illinois Uniform Arbitration Act (Ill. Rev. Stat. 1981, ch. 10, par. 118) provides that "[a]ppeals may be taken in the same manner, upon the same terms, and with like effect as in civil cases." The order entered by the trial court here is interlocutory and therefore is governed by Supreme Court Rule 307, which provides that "[a]n appeal may be taken to the Appellate Court from an interlocutory order of court (1) granting, modifying, refusing, dissolving, or refusing to dissolve or modify an injunction." (87 Ill.2d R. 307(a)(1).) The jurisdictional question thus presented is whether the trial court's denial of plaintiff's motion for a stay of arbitration is analogous to an injunction and therefore appealable as an interlocutory order.

Both parties contend and our research confirms that no Illinois court has decided this precise question. (See Annot., 6 A.L.R.4th 652 (1981).) Boodell argues that because the Illinois arbitration statute is patterned after the Uniform Arbitration Act, we should look to and follow the decisions in other States which likewise have adopted the Uniform Arbitration Act. In the three cases cited by Boodell (School Committee v. Agawam Educational Association (1977), 371 Mass. 845, 359 N.E.2d 956; Miyoi v. Gold Bond Stamp Co. Employees Retirement Trust (1972), 293 Minn. 376, 196 N.W.2d 309; Hodes v. Comprehensive Health Associates, P.A. (1983), 9 Kan. App. 36, 670 P.2d 76), however, the courts specifically based their decisions on the fact that their State arbitration statutes enumerated the orders which were appealable and did not include an order denying a motion to stay arbitration as an appealable order. Likewise, section 19(a) of the Uniform Arbitration Act on which these State statutes are based enumerates certain orders from which immediate appeals can be taken, but fails to include an order denying a motion to stay arbitration. See 7 Uniform Laws Annotated 77 (1978).

As emphasized by plaintiff, the Illinois legislature apparently elected not to adopt the language of section 19(a) of the Uniform Arbitration Act on appeals and instead adopted with some variation the language of section 19(b) of the Uniform Arbitration Act that appeals can be taken as they are allowed in civil cases (Ill. Rev. Stat. 1981, ch. 10, par. 118). Based upon the distinction between the language governing appeals in the Illinois and Uniform Acts, this court need not follow cases construing different statutory language of other State arbitration acts which are patterned after the Uniform Arbitration Act.

The most instructive Illinois decision on this question is School District No. 46 v. Del Bianco (1966), 68 Ill. App.2d 145, 215 N.E.2d 25, wherein this court considered whether an order denying a party's motion to compel arbitration and to stay court proceedings was appealable. In ruling that the order was appealable, the Del Bianco court recognized that the order was not specifically enumerated in Supreme Court Rule 31 (Ill. Rev. Stat. 1963, ch. 110, par. 101.31), the predecessor statute to Supreme Court Rule 307 (87 Ill.2d R. 307). Despite its absence from the statute, however, the order was interpreted by this court to be appealable as "amount[ing] to granting or refusing injunctive relief." (School District No. 46 v. Del Bianco (1966), 68 Ill. App.2d 145, 152, 215 N.E.2d 25, 28.) The Del Bianco rule recently has been cited favorably by this court. See J&K Cement Construction Co. v. Montalbano Builders, Inc. (1983), 119 Ill. App.3d 663, 456 N.E.2d 889; Kelso-Burnett Co. v. Zeus Development Corp. (1982), 107 Ill. App.3d 34, 437 N.E.2d 26; see also Notaro v. Nor-Evan Corp. (1983), 98 Ill.2d 268 (order denying defendant's motion to dismiss lawsuit and compel arbitration was an appealable, interlocutory order).

Boodell seeks to distinguish the Del Bianco court's analogy of a motion to stay court proceedings to an interlocutory injunction on the basis that here, the order appealed from was a denial of a motion to stay arbitration, while Del Bianco involved the denial of a motion to compel arbitration. This distinction was considered persuasive by the Court of Appeals for the Seventh Circuit in construing section 1292(a)(1) of the United States Code (28 U.S.C. § 1292(a)(1) (1976)), which authorizes the immediate appeal of orders granting or denying preliminary injunctions. (Timberlake v. Oppenheimer & Co. (7th Cir. 1984), 729 F.2d 515.) This language is nearly identical to that contained in Supreme Court Rule 307 governing interlocutory appeals of orders granting or denying injunctions. In Timberlake, the plaintiff filed suit in Federal court against the brokerage house alleging churning and joined the pendent claims under State law. The defendants moved the district court for an order compelling arbitration of the pendent claims, but staying the arbitration until the court disposed of the plaintiff's Federal claims. The court allowed the arbitration, but refused the stay order, and the defendants appealed complaining about the refusal to stay. The Seventh Circuit examined the decisions of the Federal circuit courts which were approximately evenly divided as to whether an order denying a motion to stay arbitration was appealable. Concluding that the order was not appealable, the Timberlake court cited as persuasive the distinction between orders denying motions to stay arbitration involved in that case and motions to compel arbitration.

"If a stay of arbitration is granted, the arbitration is halted, and an immediate appeal, if it leads to reversal of the stay, may actually expedite the arbitration. But if refusals to stay arbitration are appealable, then anyone who wants to appeal from an order to arbitrate need only ask for a stay of the order; the denial of this request would be appealable; and the appellant would have a shot at persuading the district court or the court of appeals to stay the arbitration pending appeal." Timberlake v. Oppenheimer & Co. (7th Cir. 1984), 729 F.2d 515, 519; see generally Note, Interlocutory Appeal Of Orders Granting Or Denying Stays Of Arbitration, 80 Mich. L. Rev. 153 (1981).

Courts which refuse to distinguish between the granting and refusing of a stay of arbitration, the Timberlake court noted, emphasize the distinction is difficult to reconcile with the wording of section 1292(a)(1) "which allows appeals indifferently from orders denying as well as granting injunctions." (729 F.2d 515, 519.) The language of Supreme Court Rule 307 likewise makes no distinction between orders granting or refusing injunctions. In interpreting the language of Rule 307, this court in School District No. 46 v. Del Bianco (1966), 68 Ill. App.2d 145, 215 N.E.2d 25, focused on the effect of the stay order and analyzed whether its effect was similar to that of an injunction. Nowhere in its opinion did this court cite as support for its conclusion that immediate appellate review of the order denying the motion to compel arbitration furthered the legislative goal of prompt private dispute resolution. Despite recognition of the laudatory goal of promoting arbitration, therefore, our determination as to the appealability of an interlocutory order cannot be premised upon whether appealability accelerates or delays the arbitration process. Rather, the proper inquiry is whether the stay order is similar to an injunction and thereby appealable pursuant to Rule 307. In Del Bianco, we held that orders denying motions to compel arbitration were appealable as analogous to an injunction. We are unable to distinguish in terms of injunctive effect between an order which denies a motion to compel arbitration and stay court proceedings (School District No. 46 v. Del Bianco (1966), 68 Ill. App.2d 145, 215 N.E.2d 25), and an order which denies a motion to stay arbitration and commence court proceedings as is involved here.

The structure of the Illinois arbitration statute further suggests that the legislature intended courts to determine at the outset whether the parties had in fact entered into an agreement to arbitrate. Section 2 states that the court shall hold a hearing to determine the existence of an agreement to arbitrate if that issue is in substantial and bona fide dispute and empowers the court to stay a pending arbitration proceeding until the existence of the agreement is established. By providing a mechanism for courts to determine if an agreement exists prior to the commencement of the arbitration process, our legislature demonstrated that the goal of promoting arbitration is not to be valued to the exclusion of all other interests. Rather, the legislature recognized as also deserving of consideration the countervailing interest that only parties who have entered into an agreement to arbitrate should be compelled to submit to arbitration. Were we to hold that an order denying a motion to stay arbitration was unappealable, the statutory mechanism of allowing a judicial determination as to the existence of an arbitration agreement prior to arbitration would in part be emasculated. A party upon a showing of a substantial and bona fide dispute could trigger a section 2 hearing, but if the trial court determined that an agreement existed, then he would be unable to obtain a final determination — appellate review — until after the arbitration was completed and the award was confirmed.

Even the goal underlying arbitration — prompt resolution of the parties' dispute — could be frustrated were this court to prevent appeal of this order until after completion of the arbitration. For example, assuming that an arbitration agreement did not exist, but that the trial court incorrectly determined otherwise, the party opposing arbitration would not be able to obtain a correct ruling until after the arbitration had ended and review was sought in the appellate court. Only upon finding no agreement to arbitrate would the reviewing court reverse the trial court's contrary ruling and void the arbitration decision. Throughout this process, both parties would have expended time and financial resources to conduct an unnecessary and unauthorized arbitration. (See Hayes v. Allstate Insurance Co. (7th Cir. 1983), 722 F.2d 1332, 1340 (Posner, J., dissenting) ("Since arbitration may be protracted * * * a plaintiff forced into arbitration against his will may be irreparably harmed, for if it later turns out that the matter should not have been submitted to arbitration he will not be able to recover his lost time and expense").) In contrast, were the trial court's order appealable pursuant to Supreme Court Rule 307, the reviewing court would have ruled on the existence of an arbitration agreement before the commencement of arbitration. Based upon this hypothetical, therefore, the immediate appealability of the trial court's order would facilitate and not delay the speedy resolution of the parties' dispute by eliminating the necessity for participating in an unauthorized arbitration proceeding. (See, e.g., Merit Insurance Co. v. Leatherby Insurance Co. (7th Cir. 1983), 714 F.2d 673, cert. denied (1983), 464 U.S. 1009, 78 L.Ed.2d 711, 104 S.Ct. 529 (arbitration proceeding lasting three years).) For these reasons, we hold that the trial court's order denying defendant's motion to stay arbitration was appealable on the authority of Supreme Court Rule 307 and therefore, we have jurisdiction to consider the merits of the parties' dispute.

• 2 Plaintiff asserts that the trial court erred in failing to hold a hearing on the existence of an agreement to arbitrate the parties' dispute. The arbitration statute in Illinois reads in pertinent part:

"On application, the court may stay an arbitration proceeding commenced or threatened on a showing that there is no agreement to arbitrate. That issue, when in substantial and bona fide dispute, shall be forthwith and summarily tried and the stay ordered if found for the moving party. If found for the opposing party, the court shall ...


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