Herricane Graphics v. BLINDERMAN CONST. CO.

• Citation: 354 Ill. App.3d 151,820 N.E.2d 619,289 Ill.Dec. 843
• Decision Date: 13 December 2004
• Docket Number: No. 2-04-0125.,2-04-0125.
• Parties: HERRICANE GRAPHICS, INC., Plaintiff-Appellee and Cross-Appellant, v. BLINDERMAN CONSTRUCTION COMPANY, INC., Defendant-Appellant and Cross-Appellee.
• Court: United States Appellate Court of Illinois

820 N.E.2d 619

354 Ill. App.3d 151

289 Ill.Dec. 843

HERRICANE GRAPHICS, INC., Plaintiff-Appellee and Cross-Appellant, v. BLINDERMAN CONSTRUCTION COMPANY, INC., Defendant-Appellant and Cross-Appellee.

No. 2-04-0125.

Appellate Court of Illinois, Second District.

December 13, 2004.

Marc S. Mayer, Michael V. Marsh, Marc S. Mayer & Associates, Chicago, for Blinderman Construction Company, Inc.

Watson B. Tucker, Smith, Tucker & Brown, DeKalb, for Herricane Graphics, Inc. Justice BYRNE delivered the opinion of the court:

Defendant, Blinderman Construction Company, Inc., appeals the judgment of the circuit court of DeKalb County denying its motion to confirm an arbitration award in its favor and granting the motion of plaintiff, Herricane Graphics, Inc., to vacate the award and enter judgment in its favor in the amount of $47,163. Defendant contends that the trial court exceeded its authority in vacating the arbitrator's decision. Plaintiff cross-appeals the trial court's failure to award plaintiff interest under the State Prompt Payment Act (Payment Act) (30 ILCS 540/0.01 et seq. (2002)) and the court's failure to compensate plaintiff for the labor-related component of its work. We reverse the trial court's judgment and confirm the arbitrator's award.

FACTS

Plaintiff and defendant entered into contract negotiations for plaintiff to furnish and install signs for defendant at a construction project at Northern Illinois University (NIU). Defendant was to be the general contractor for the project, and plaintiff was to be the subcontractor.

On July 7, 1998, defendant faxed plaintiff the initial draft of its subcontract agreement. Plaintiff acknowledged receipt of the contract and agreed to the terms by letter dated July 9, 1998. However, plaintiff never sent defendant a signed version of the contract or any subsequent contract.

The initial contract contained several terms of importance to the proceedings: an arbitration clause and two clauses regarding certified payrolls. The arbitration clause provided, in relevant part, that any controversy or claim arising out of or relating to the subcontract, or breach thereof, was to be settled by arbitration. The clauses regarding certified payrolls provided, in relevant part:

"Payment will be made once each month equal to 90% of the value of the work satisfactorily completed as received from the Owner. Written request for payment must be in the hands of the Contractor not later than the 1st of each month covering work satisfactorily completed during the previous month, in a form as required by the Contractor. * * * The Subcontractor shall furnish to the Contractor a breakdown of costs of said Subcontract, showing monetary value of each item of labor and material, in accordance with terms of the General Contract, and in a form acceptable to the Contractor.

* * *

Compliance with Applicable Laws[.] * * * Subcontractor will submit required compliance reports, including weekly certified payrolls as required by federal law."

The parties modified the contract terms between the time defendant sent plaintiff the initial proposal and August 25, 1998. However, defendant alleged that the arbitration and payroll terms were never revised, amended, or excluded. During the contract modification period, plaintiff commenced installation of the signs. A significant portion of the work was fully performed prior to receipt of the August 25, 1998, contract modification. Plaintiff points out that this contract contains a rider entitled "Instructions For Subcontractors," which provides the following instruction regarding payroll certification and Equal Employment Opportunity reporting requirements:

"You are advised that the Owner has a right to order funds withheld from payments equal to the amount of the labor expended in the event that these records are not completed." (Emphasis added.)

By letters dated September 9, 1998, November 16, 1998, and March 22, 1999, defendant acknowledged to plaintiff that the owner, NIU, had approved all of plaintiff's work and had paid defendant for that work. Plaintiff alleged that approximately 90% of that work, or $47,163, represented the selling price of hardware and other goods that plaintiff had installed at the jobsite. Plaintiff alleged that the balance, $5,240, represented the labor component of plaintiff's work.

Plaintiff believed that its performance was based on a bid contract that was accepted by defendant, and plaintiff objected to the execution of the August 25, 1998, contract because it did not contain the correct scope of work. Plaintiff acknowledged that defendant was withholding the funds that defendant had received from NIU until defendant received a certified payroll from plaintiff. Plaintiff also acknowledged that the execution of the contract was a condition of payment.

Defendant alleged that, during plaintiff's performance of the contract, defendant repeatedly attempted to obtain certified payrolls from plaintiff. Defendant also alleged that it repeatedly advised plaintiff that payment would be issued only upon receipt of those certified payrolls. However, plaintiff never delivered certified payrolls to defendant. As a result, defendant refused to pay plaintiff.

In December 2002, four years after the project was completed, plaintiff sued defendant for, inter alia, breach of contract to recover for the work it performed and the material it expended on the project. Defendant subsequently filed a motion requesting the trial court to stay the suit pending arbitration. The trial court granted defendant's motion and the matter was submitted to arbitration.

The arbitrator entered an award in defendant's favor, finding that the submission of certified payrolls was a condition of payment and the failure to provide the certified payrolls prevented plaintiff's recovery of any money for either wages or material expended under the contract. Neither plaintiff nor defendant supplied this court with a record of the arbitration hearing or the memorandum of decision. We note that the materials used by plaintiff for the project constituted 90% of the total amount requested for reimbursement.

On September 8, 2003, defendant filed a motion with the trial court to confirm the arbitration award and enter judgment in its favor. Thereafter, plaintiff filed a motion objecting to the confirmation of the award. Plaintiff sought to vacate the award under section 12(a)(3) of the Uniform Arbitration Act (Arbitration Act) (710 ILCS 5/12(a)(3) (West 2002)), or in the alternative, to modify the award pursuant to section 13 of the Arbitration Act (710 ILCS 5/13 (West 2002)).

On January 29, 2004, the trial court denied defendant's motion to confirm the award, and granted plaintiff's motion to vacate the award. The trial court noted in its order that it specifically disagreed with the arbitrator's decision with respect to the materials furnished on the project and found that the value of the materials furnished by plaintiff to defendant on the construction project was 90% of the total amount of plaintiff's claim. Accordingly, the trial court entered judgment in plaintiff's favor in the amount of $47,163, representing 90% of $52,403 sought by plaintiff.

Defendant timely appeals, contending that the trial court exceeded its authority in vacating the arbitrator's decision. Plaintiff timely cross-appeals, contending that the trial court erroneously failed to award plaintiff interest under the Payment Act and failed to compensate plaintiff for the labor-related component of its work.

ANALYSIS

It is well settled that a court's review of an arbitrator's award is extremely limited (American Federation of State, County & Municipal Employees v. The Department of Central Management Services, 173 Ill.2d 299, 304, 219 Ill.Dec. 501, 671 N.E.2d 668 (1996)), in fact, more limited than appellate review of a trial court's decision. Cook County v. American Federation of State, County & Municipal Employees, District Counsel 31, Local 3315, 294 Ill.App.3d 985, 988, 229 Ill.Dec. 304, 691 N.E.2d 777 (1998). Because the parties have agreed to have their dispute settled by an arbitrator, it is the arbitrator's view that the parties have agreed to accept, and the court should not overrule an award simply because its interpretation differs from that of the arbitrator. Everen Securities, Inc. v. A.G. Edwards & Sons, Inc., 308 Ill.App.3d 268, 273, 241 Ill.Dec. 451, 719 N.E.2d 312 (1999). Furthermore, there is a presumption that the arbitrator did not exceed his authority. Tim Huey Corp. v. Global Boiler & Mechanical Inc., 272 Ill.App.3d 100, 106, 208 Ill.Dec. 697, 649 N.E.2d 1358 (1995). Thus, a court must construe an award, if possible, so as to uphold its validity. Everen Securities, 308 Ill.App.3d at 273, 241 Ill.Dec. 451, 719 N.E.2d 312. A court has no power to determine the merits of the award simply because it strongly disagrees with the arbitrator's contract interpretation. Canteen Corp. v. Former Foods, Inc., 238 Ill.App.3d 167, 179, 179 Ill.Dec. 342, 606 N.E.2d 174 (1992). Also, a court cannot overturn an award on the ground that it is illogical or inconsistent. Perkins Restaurants Operating Co., L.P. v. Van Den Bergh Foods Co., 276 Ill.App.3d 305, 309, 212 Ill.Dec. 740, 657 N.E.2d 1085 (1995). In fact, an arbitrator's award will not even be set aside because of errors in judgment or a mistake of law or fact. Roubik v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 181 Ill.2d 373, 381, 230 Ill.Dec. 1, 692 N.E.2d 1167 (1998).

The limited circumstances under which we may modify or vacate an arbitration award are set forth in the Arbitration Act (710 ILCS 5/1 et seq. (West 2002)). Section 13(a) of the Arbitration Act (710 ILCS 5/13(a) (West 2002)) allows a court to modify or correct an award where: (1) there was an evident miscalculation or an error in a description; (2) the arbitrators ruled on a matter not submitted to them, and the court is able to correct the award without...