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07/18/89 Kurland Steel Company, v. Carle Foundation Hospital

July 18, 1989

KURLAND STEEL COMPANY, PLAINTIFF-APPELLANT

v.

CARLE FOUNDATION HOSPITAL ET AL., DEFENDANTS-APPELLEES



APPELLATE COURT OF ILLINOIS, FOURTH DISTRICT

541 N.E.2d 862, 185 Ill. App. 3d 624, 133 Ill. Dec. 651 1989.IL.1114

Appeal from the Circuit Court of Champaign County; the Hon. John G. Townsend, Judge, presiding.

APPELLATE Judges:

JUSTICE KNECHT delivered the opinion of the court. LUND and SPITZ, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE KNECHT

This is an interlocutory appeal from an order of the circuit court of Champaign County dismissing for failure to state a cause of action a complaint for preliminary injunction to stay arbitration proceedings. We affirm.

On April 20, 1987, the defendant, Carle Foundation Hospital (Carle), as owner, entered into a contract with English Brothers Company (English Brothers), as general contractor, to remodel a portion of Carle's building. The contract contained a clause stipulating all disputes arising out of and relating to the contract were to be decided by arbitration.

English Brothers entered into a subcontract with the plaintiff, Kurland Steel Company (Kurland), which provided Kurland would furnish and erect steel for the Carle project. The subcontract contained an indemnification clause in favor of English Brothers; however, it did not include an agreement to arbitrate. Kurland ordered certain specified steel plates for the project from Robinson Steel Company (Robinson). After the receipt and installation of the plates, it was discovered the steel did not meet the agreed-upon carbon content specifications. Consequently, the defective steel plates were removed and replaced by and at the expense of Kurland.

By reason of delay caused by the removal and reinstallation of the steel plates, Carle has claimed damages and demanded English Brothers submit to binding arbitration pursuant to the parties' construction contract. The matter is set for arbitration before the American Arbitration Association. Neither Kurland nor Robinson is designated as a party to the arbitration. Relying on the subcontract, English Brothers has demanded Kurland defend and indemnify it from the damage claims Carle has advanced.

On February 22, 1989, Kurland filed a complaint for declaratory judgment. Count I of the complaint requested the court (1) issue a preliminary injunction staying arbitration between Carle and English Brothers and (2) resolve in a court of law the rights and obligations of all the parties involved. Carle filed a motion to dismiss for failure to state a cause of action (Ill. Rev. Stat. 1987, ch. 110, par. 2-615(a)), arguing count I failed to allege lack of an agreement to arbitrate as required by the Uniform Arbitration Act (Ill. Rev. Stat. 1987, ch. 10, par. 102(b)).

On May 2, 1989, the trial court granted Carle's section 2-615 motion to dismiss, finding count I of the complaint filed by Kurland was substantially insufficient in law. The court relied on J&K Cement Construction, Inc. v. Montalbano Builders, Inc. (1983), 119 Ill. App. 3d 663, 456 N.E.2d 889, and its progeny. A contrary holding by the Fifth District Appellate Court in J.F. Inc. v. Vicik (1981), 99 Ill. App. 3d 815, 426 N.E.2d 257, was specifically rejected by the trial court. The trial court found there was no just reason to delay enforcement or appeal. 107 Ill. 2d R. 304(a).

The sole question 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." (Kelso-Burnett Co. v. Zeus Development Corp. (1982), 107 Ill. App. 3d 34, 41-42, 437 N.E.2d 26, 31.) Here the trial court denied Kurland's petition for an injunction to stay arbitration between Carle and English Brothers. We conclude Kurland's failure to allege the parties lacked a contractual agreement to arbitrate in the event of a dispute constituted a sufficient showing to sustain the order of the trial court.

In Illinois, contractual arbitration agreements are construed in light of the Uniform Arbitration Act (Act). (Ill. Rev. Stat. 1987, ch. 10, par. 101 et seq.) Section 2(b) of the Act provides "[on] application, the court may stay an arbitration proceeding commenced or threatened on a showing that there is no agreement to arbitrate." (Ill. Rev. Stat. 1987, ch. 10, par. 102(b).) None of the parties involved in this case deny a valid arbitration agreement exists between Carle and English Brothers. In its petition to stay the arbitration proceedings between Carle and English Brothers, Kurland failed to allege the former parties did not agree to arbitrate their disputes. Instead, Kurland argued the policy of joinder supported the issuance of a permanent injunction enjoining such arbitration so the common rights and interests of all the parties could be decided by a court of law. Kurland maintained a single legal proceeding joining all of the interested parties and determining the cause of Carle's damages would avoid a multiplicity of lawsuits and inconsistent results. Kurland presents the same arguments on appeal.

Kurland relies heavily on J.F. Inc. v. Vicik (1981), 99 Ill. App. 3d 815, 426 N.E.2d 257, to support its theory the arbitration proceedings between the owner and general contractor in this case should be stayed because the contract dispute is closely intermingled with the disputes between multiple parties, some of which are not subject to binding arbitration. In Vicik, the owners contracted with a general contractor for the construction of a home. When a contract dispute arose between the principal parties, the subcontractors and material men filed suit to foreclose their mechanic's liens. The general contractor filed a motion to compel arbitration of its dispute with the owner under the provisions of its contract with them. The subcontracts lacked arbitration clauses. The owners moved to ...


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