Opinion
No. 98-CA-2097.
September 22, 1999.
APPEAL FROM CIVIL DISTRICT COURT, PARISH OF ORLEANS, NO. 90-12180, STATE OF LOUISIANA, DIVISION "F", HONORABLE NADINE M. RAMSEY, JUDGE.
ANTHONY J. RUSSO, JR., DEAN JOSEPH FAVRET, FAVRET, DEMAREST, RUSSO LUTKEWITTE, 1515 POYDRAS STREET, SUITE 1400, NEW ORLEANS, LOUISIANA 70112. COUNSEL FOR PLAINTIFFS/APPELLEES.
JAMES A. GRAY, II, GRAY GRAY, SUITE 1460, ENERGY CENTRE, 1100 POYDRAS STREET, NEW ORLEANS, LOUISIANA 70163. COUNSEL FOR DEFENDANT/APPELLANT.
(Court composed of Judge Joan Bernard Armstrong, Judge Moon Landrieu, Judge Michael E. Kirby)
This case arises from the alleged breach of a contract to build a house. The plaintiffs, the owners of the house, allege that the defendant built the house defectively. After trial, judgment was rendered in favor of the plaintiffs. The appeals and among other things, argues that, pursuant to the arbitration clause of the contract, the matter should have been arbitrated rather than proceeding in court. We agree that, under the plain terms of the contract, the plaintiffs' claims should have been arbitrated. Accordingly, we are compelled to vacate the judgement of the trial court and remand so that the matter may be arbitrated. We of course do not address the merits of this case. Rather, the merits are to be addressed by the arbitrator.
Plaintiffs Hendrick Thomas and Lois Thomas contracted with defendant Desire Community Housing Corporation ("DCHC") for the construction of their house. The plaintiffs first filed suit (not the present action) against DCHC in 1989. DCHC filed an exception of prematurity, based upon an arbitration clause in the contract and the fact that there had not been any arbitration and the trial court granted that exception. The plaintiffs made a writ application to this court which, like the trial court, held that the plaintiffs' claims must be arbitrated. The plaintiffs' counsel then wrote a letter to DCHC's counsel requesting arbitration. DCHC's counsel wrote back stating, among other things, that the request for arbitration was untimely. The plaintiffs then filed the present action. DCHC responded once again with an exception of prematurity based upon the arbitration clause in the contract and the fact that there still had not been any arbitration. The trial court overruled that exception of prematurity. The plaintiffs argue that DCHC had waived the right to arbitrate.
If a party seeks to arbitrate, and the other party fails or refuses to do so, then the party seeking arbitration can obtain a court order directing the other party to arbitrate. La.R.S. 9:4203. See also Musso's Corner, Inc. v. A + R Underwriters, Inc., 539 So.2d 915, 917 (La.App. 4th Cir. 1989).
"Once the court finds an agreement to arbitrate and a failure to comply therewith, the court shall order arbitration."Matthews-Mc Cracken Rutland Corp. v. City of Plaquemine, 414 So.2d 756, 757 (La. 1982) (emphasis in original). Therefore, even if the letter from DCHC's counsel to the plaintiffs' counsel is interpreted as a refusal to arbitrate, the plaintiffs had a clear statutory remedy to compel arbitration. Moreover, the issue of whether the plaintiffs had lost their arbitration rights by delay (as alleged by DCHC) is one to be decided in the first instance by the arbitrator. The relevant clauses of the contract provide as follows:
A copy of the letter from DCHC's counsel to plaintiffs' counsel is attached as Appendix "A".
2.2.9 Claims, disputes and other matters in question between the contractor and the owner relating to the execution or progress of the Work or the interpretation of Contract Documents shall be referred initially to the Architect for decision which he will render in writing within a reasonable time.
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2.2.12 Any claim, dispute or other matter in question between the Contractor and the Owner referred to the Architect, except those relating to artistic effect as provided in Subparagraph 2.2.11 and except those which have been waived b the making or acceptance of final payment as provided in Subparagraphs 9.9.4 and 9.9.5, shall be subject to arbitration upon the written demand of either party. However, no demand for arbitration of any such claim, dispute or other matter may be made until the earlier of (1) the date on which the Architect has rendered a written decision, or (2) the tenth day after the parties have presented their evidence to the Architect or have been given a reasonable opportunity to do so, if the Architect has not rendered his written decision by that date. When such a written decision of the Architect states (I) that the decision is final but subject to appeal, and (2) that any demand for arbitration of a claim, dispute or other matter covered by such decision must be made with in thirty days after the date on which the part making the demand receives the written decision, failure to demand arbitration within said thirty days; period will result in the Architect's decision becoming final and binding upon the Owner and the Contractor. If the Architect renders a decision after arbitration proceedings have been initiated, such decision may be entered, as evidence by will not supersede any arbitration proceedings unless the decision is acceptable to all parties concerned.
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7.4.1 Should either party to the Contract suffer injury or damage to person or property because of any act or omission of the other party or of any of his employees, agents or others for whose acts he is legally liable, claim shall be made in writing to such other party within a reasonable time after the first observance of such injury or damage.
7.9.1 All claims, disputes and other matters in question between the Contractor and the Owner arising out of, or relating to, the Contract Documents or the breach thereof, except as provided in Subparagraph 2.2.11 with the respect to the Architect's decisions on matters relating to artistic effect, and except for claims which have been waived by the making or acceptance of final payment as provided by Subparagraphs 9.9.4 and 9.9.5, shall be decided by arbitration in accordance with the construction Industry Arbitration rules of the American Arbitration Association then obtaining unless the parties mutually agree other wise. No arbitration arising out of or relating to the Contract Documents shall include, by consolidation, joinder or in any other manner, the Architect, his employees or consultants except by written consent containing a specific reference to the Owner-Contractor Agreement and signed by the Architect, the Owner, the Contractor and any other person sought to be joined. No arbitration shall include by consolidation, joiner or in any other manner, parties other than the Owner, the Contractor and any other persons substantially involved in a common question of fact or law, whose presence is required if complete relief is to be accorded in the arbitration. No person other than the Owner or Contractor shall be included as an original third party or additional third party to an arbitration whose interest or responsibility is insubstantial. Any consent to arbitration involving an additional person or persons shall not constitute consent to arbitration of any dispute not described therein. The foregoing agreement to arbitrate and any other agreement to arbitrate with an additional person or persons duly consented to by the parties to the Owner Contractor Agreement shall be specifically enforceable under the prevailing arbitration law. The award rendered by the arbitrators shall be final, and judgement may be entered upon it in accordance with applicable law in any court having jurisdiction thereof.
7.9.2 Notice of the demand for arbitration shall be filed in writing with the other party to the Owner-Contractor Agreement and with the American Arbitration Association, and a copy shall be filed with the Architect. The demand for arbitration shall be made within the time limits specified in Subparagraph 2.2.12 where applicable, and in all other cases within a reasonable time after the claim, dispute or other matter in question has arisen, and in no event shall it be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable state of limitations.
An arbitration clause and issues analogous to those of the present case were considered in Conagra Poultry Co. v. Collingsworth, 30,155 (La.App. 2 Cir. 1/21/98), 705 So.2d 1280, 1282-83. In that case, the court of appeal held that the question of whether the party seeking arbitration had waited too late to do so was to be decided by the arbitrator rather than the court.See also Bartley, v. Jefferson Parish School Board, 302 So.2d 280 (La. 1974) (claim that demand for arbitration was premature because claim had not first been referred to architect must be decided by arbitrator, not court); Ragusa v. St. John The Baptist Parish School Board, 629 So.2d 1302, 1304 (La.App. 4th Cir. 1993) (questions of "procedural arbitrability" must be decided by arbitrator rather than court).
Additionally, the issue of whether DCHC waived its right to arbitrate is also an issue to be determined by the arbitrator rather than by the court. Bartley, 302 So.2d 280. Furthermore, in those instances when the courts have addressed the issue of waiver of arbitration, they have emphasized that "[t]here is a strong presumption in favor of arbitration and against finding a waiver or default" Moore v. Automotive Protection Corp., 97-0623 (La.App. 4 Cir. 5/21/97), 695 So.2d 550, 551. Accord Raucher Pierce Refsnes, Inc., 93-1672 (La.App. 4th Cir 2/11/94), 632 So.2d 807-810. "Because of the strong policy favoring arbitration, a party's otherwise explainable conduct should be construed against waiver of the right, and courts have found waiver only in extreme cases. "Electrical + Instrumentation Unlimited, Inc., v. Mc. Dermott International, Inc. 627 So.2d 702, 703 (La.App. 4th Cir. 1993). Accord Mathews-Mc Cracken Rutland Corp. v. City of Plaquemines, 414 So.2d 756 (La. 1982). In the present case, the DCHC conduct at issue (the letter of counsel asserting that the request for arbitration is untimely) could be explainable as an attempt to point out to the plaintiffs alleged weakness in the merits of the plaintiffs' position rather than as a waiver of arbitration in favor of court proceedings. Nothing in the letter at issue suggests that DCHC refused to waive arbitration in favor of court proceedings. Rather the letter suggests that if the plaintiffs proceed, they will lose. Thus, the letter by DCHC's counsel did not constitute a waiver of arbitration.
The plaintiffs argue that, because DCHC did not immediately appeal the trial court's decision overruling DCHC's exception of prematurity, nor take writs from that decision, DCHC cannot now challenge on appeal the trial court's overruling of the exception. The trial court's decision overruling the exception was not a final, appealable judgement because it did not decide the merits but, instead, only decided preliminary matters. La. Code Civ.Proc. Art. 1841. Further, while it may have beenpermissible for DCHC to apply for supervisory writs with respect to the trial court's decision overruling DCHC's exception, plaintiffs cite no legal authority, nor are we aware of any, which required DCHC to apply for supervisory writs rather than raising the issue as part of an appeal from a final judgment. See La. Code Civ.Proc. Art. 2201.
The plaintiffs also argue that DCHC waived its right to arbitrate by "voluntarily" participating in the litigation including pleadings, discovery and trial. We disagree. DCHC is the defendant and its exception of prematurity by which it sought arbitration was overruled. (DCHC's dilatory exception of prematurity was the proper procedure to raise the arbitration issue. Moore v. Automotive Protection Corp., 97-0623 (La. 5/21/97), 695 So.2d 550, 551). Thus, DCHC's participation in the litigation was not "voluntary."
For the foregoing reasons, we vacate the judgment of the trial court and remand with instructions that the trial court order the parties to arbitration and stay proceedings in court pending the completion of the arbitration.
VACATED AND REMANDED
APPENDIX "A"
JAMES A. GRAY, II ATTORNEY-AT-LAW A PROFESSIONAL LAW CORPORATION Suite 2304 1001 Howard Ave. New Orleans, LA 70113
June 11, 1990
Mr. Edward J. Rivera Attorney at Law 925 Common St., 11th Floor New Orleans, Louisiana 70112
RE: Hendrick Thomas, et al v. Desire Community Housing Corp., et al
Dear Mr. Rivera:
I think we still have a dispute about which AIA Document A201 applies. That probably doesn't matter, however, since I believe that your claim has prescribed under both.
My client wants to sue your client for malicious prosecution. I will urge them to drop it if you will drop your suit. But if you insist, we will go all the way to judgment if pushed.
You have the following problems:
a. The suit came after prescription
b. You have to complain to the architect within a reasonable time or within 21 days depending on the A201 that applies. Your client did neither.
c. Your request for arbitration comes too late. It would have been late if made on the day you filed suit. But I know of no authority that says erroneously filing suit stops the running of time to ask for arbitration. I think that you especially have a problem considering the delay even after you were put on notice about arbitration.
d. Your client does not have a contract with Mrs. Francois. I am not agreeing to engage in arbitration or anything else with you about her personally. After you dismiss her with prejudice, I will move forward.
Please give me your thoughts on these issues.
Sincerely,
James A. Gray, II Bar No. 6262
JAGII:gj cc: Mrs. Delories P. Francois
I respectfully dissent. I believe defendant waived the right to arbitration. I would amend the judgment to delete the $15,000 amount awarded for non-pecuniary damages and affirm as amended.