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Schroeder Murchie Laya Associates v. 1000 West Lofts

March 16, 2001

SCHROEDER MURCHIE LAYA ASSOCIATES, LTD., PLAINTIFF AND COUNTERDEFENDANT-APPELLANT,
v.
1000 WEST LOFTS, LLC, A/K/A 1000 WEST WASHINGTON LOFTS, LLC; LASALLE NATIONAL BANK, AS TRUSTEE U/T/N 119270, AND AS TRUSTEE U/T/N 119267, DEFENDANTS, (1000 WEST LOFTS, LLC, A/K/A 1000 WEST WASHINGTON LOFTS, LLC, COUNTERPLAINTIFF-APPELLEE).



Appeal from the Circuit Court of Cook County. No. 99 CH 08572 Transferred to Municipal Honorable John G. Laurie, Judge Presiding.

The opinion of the court was delivered by: Justice Greiman

Schroeder Murchie Laya Associates, Ltd. (SML), brought the underlying action on November 18, 1999, seeking payment for work performed under a contract it had with defendant 1000 West Lofts, LLC (1000 West). In response, 1000 West filed a motion to compel arbitration and stay court proceedings pursuant to an arbitration clause in the contract and under the Illinois Uniform Arbitration Act (Act) (710 ILCS 5/1 et seq. (West 1998)). On January 20, 2000, the trial court granted 1000 West's motion to compel arbitration and entered an order dismissing the case without prejudice, but allowed for its reinstatement if within 90 days an arbitration had not been filed. After the 90 days, neither party filed a demand for arbitration, and the trial court reinstated the case.

After the case was reinstated, 1000 West filed its answer, affirmative defenses, and a counterclaim to SML's first amended complaint. The counterclaim raised the following issues: (1) breach of contract; (2) professional negligence; and (3) contribution and implied indemnity. In response to the counterclaim, SML moved to compel arbitration and stay proceedings in the trial court. 1000 West opposed the motion and asserted that SML had waived its contractual right to arbitrate when it initiated the action in the circuit court and opposed 1000 West's previous motion to compel arbitration. After hearing argument, the trial court denied the motion. Plaintiff has appealed. For the reasons that follow, we affirm.

In September of 1994, SML entered into a contract with 1000 West to provide architectural design, construction administration, and construction supervisory services for the renovation and development of residential loft condominiums located at 1000 West Washington Street in Chicago. When a dispute arose between the parties, SML filed a mechanics lien against the condominium development. Subsequently, it filed a complaint in the circuit court of Cook County seeking to foreclose its mechanics lien claim (count I). In its original complaint, SML asserted additional claims against 1000 West and the individual condominium unit owners based on a breach of contract (count II) and unjust enrichment (count III). On October 22, 1999, it voluntarily dismissed its complaint as to the individual unit owners. The case was then transferred from the chancery division to the municipal division. On November 16, 1999, SML filed its first amended complaint against 1000 West seeking to enforce the terms of the contract between the parties.

On January 5, 2000, 1000 West filed a motion to stay the judicial proceedings and compel arbitration. SML filed a brief in opposition to the motion, claiming that the request for arbitration was untimely. On January 20, 2000, the trial court dismissed the case without prejudice and granted leave to reinstate the matter if arbitration was not scheduled in 90 days. On April 20, 2000, SML filed a motion with the circuit court seeking to reinstate the case. On May 3, 2000, the court entered an order granting SML's motion to reinstate the case. 1000 West filed its answer, affirmative defenses, and counterclaim to the first amended complaint on May 17, 2000. In its counterclaim, 1000 West seeks damages against SML based upon breach of contract (count I), professional negligence (count II), and contribution and implied indemnity (count III).

In the counterclaim, 1000 West claimed in count I that SML failed to design the structural, mechanical and electrical systems and specify the required materials in accordance with the applicable building codes, and that SML failed to properly supervise the construction phase of the project pursuant to the contract. In count II, 1000 West alleged that SML breached a duty owed to 1000 West to use reasonable care in supervising the construction phase of the development and that SML failed to design the development in accordance to applicable building codes. In count III, 1000 West sought contribution and indemnity against SML to the extent that 1000 West is determined to be liable to the board of managers of the 1000 West Lofts Condominium Association.

In response to the counterclaim, on July 26, 2000, SML switched its prior position and moved to compel arbitration and stay proceedings in the trial court pursuant to the contract. On August 16, 2000, 1000 West filed its response in opposition to SML's motion to compel arbitration on the basis that SML had waived its right to arbitrate the dispute. On August 17, 2000, the trial court entered an order denying SML's motion to compel arbitration. SML has not sought a stay of the order pending appeal.

Initially, the parties disagree as to the applicable standard of review regarding the court's decision to deny SML's motion to compel arbitration. At first glance, it appears that both arguments have merit. 1000 West claims that a motion to compel arbitration is akin to a prayer for injunctive relief and that the grant or denial of such a motion is reviewable as an interlocutory appeal under Supreme Court Rule 307(a)(1). Official Reports Advance Sheet No. 16 (August 9, 2000), R. 307(a)(1), eff. July 6, 2000. Recently, we noted that "[t]he only issue before the court on interlocutory appeal of a trial court's order granting a motion to compel arbitration is whether there is a sufficient showing to sustain the trial court's order. Amalgamated [Transit Union, Local 900 v. Suburban Bus Division of the Regional Transportation Authority], 262 Ill. App. 3d [334,] at 337 (1994); Barter Exchange, Inc. v. Barter Exchange, Inc., 238 Ill. App. 3d 187 (1992). Thus, the standard of review in an interlocutory appeal generally is whether the trial court abused its discretion in granting or denying the requested relief." Bishop v. We Care Hair Development Corp., 316 Ill. App. 3d 1182, 1189 (2000).

In making its argument for a de novo standard of review, however, SML notes that the trial court entered the order at issue without holding an evidentiary hearing and without making any factual findings. Accordingly, it claims, the trial court's denial of SML's motion was made as a matter of law and is reviewable by this court without any deference to the trial court. See Amalgamated, 262 Ill. App. 3d at 337. In Amalgamated, this court specifically stated, "[t]he trial court determined this case without evidentiary hearings and without making any findings as to any factual issues. Accordingly, the trial court's finding that the grievance at issue was arbitrable was made as a matter of law and is reviewable de novo." Amalgamated, 262 Ill. App. 3d at 337, citing Manella v. First National Bank & Trust Co., 173 Ill. App. 3d 436, 442 (1988).

In its motion to compel arbitration and stay proceedings, SML included four pages of argument why its motion should be granted. In sum, it claimed that the issues raised by 1000 West's counterclaim "were not resolved through prior negotiations" and consequently, "under the language of Sections 7 and 12 [of the 1000 West-SML contract], both Schroeder and 1000 West are bound to arbitrate the issues raised in the counterclaim." In other words, it claimed the Act mandated the trial court to enter such an order compelling the arbitration of the claims asserted by 1000 West against SML.

1000 West, conversely, included four pages of argument in opposition to plaintiff's motion to compel. In short, it claimed that SML waived its right to seek arbitration of the counterclaims because: (1) it filed the underlying complaint in the circuit court; (2) it engaged in discovery at the trial court level; (3) it opposed 1000 West's earlier attempts to compel arbitration; (4) it failed to file for arbitration when the case was previously dismissed on 1000 West's motion; and (5) it then moved to reinstate the case in the circuit court.

On August 17, 2000, after the trial court heard arguments on this issue and reviewed each party's submissions, it entered an order denying SML's motion. Unfortunately, appellant did not include a transcript of proceedings, and the trial court's order denying SML's motion to compel does not explain the court's reasoning. However, given the focus of each party's submissions, we can easily infer that the trial court found that SML had waived its right to arbitrate. In any case, it is uncontested that the trial court did not engage in an evidentiary hearing or decide the merits of the action. Because of this, SML asserts that, where the facts of the case are undisputed and only the trial court's legal conclusions are at issue, review on appeal is de novo. Hawrelak v. Marine Bank, Springfield, 316 Ill. App. 3d 175 (2000). Indeed, "'[i]n ruling on a motion for such relief, controverted facts or the merits of the case are not decided.'" (Emphasis in original.) Dixon Ass'n for Retarded Citizens v. Thompson, 91 Ill. 2d 518, 524 (1982), quoting City of Chicago v. Airline Canteen Service, Inc., 64 Ill. App. 3d 417, 432-33 (1978).

However, such an assertion ignores the fact that the trial court must necessarily engage in a factual inquiry to determine if a party's actions constitute waiver, something which would have nothing to do with deciding the merits of the case. It also ignores settled case law which states that, under Rule 307(a)(1), a motion to compel arbitration is a prayer for injunctive relief that is treated like a preliminary injunction or a restraining order, and that the grant or denial of such a motion is reviewable as an interlocutory appeal. Mindful that "the scope of review in an interlocutory appeal is normally limited to determining whether the trial court abused its discretion in granting or refusing the requested interlocutory relief" (Jacob v. C & M Video, Inc., 248 Ill. App. 3d 654, 664 (1993)), this court has held that a motion to compel is also subject to the same deferential standard. Expounding upon the reviewing court's obligations, the Jacob court stated:

"'"In reviewing the discretion exercised by the trial court, an appellate court may decide only whether the petitioner has demonstrated a prima facie case that there is a fair question as to the existence of the rights claimed; that the circumstances lead to a reasonable belief that they probably will be entitled to the relief sought, if the evidence sustains the allegations of the petition; and that matters should be kept in status quo until the case can be decided on its merits. In sum, the only question before us is whether there was a sufficient showing to sustain the order of the trial court."' (Emphasis in original.) [Citation.]" Jacob, 248 Ill. App. 3d at 664. See also Bishop, 316 ...


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