Anderson v. Federated Mut. Ins. Co.

• Decision Date: 15 January 1991
• Docket Number: No. C0-90-1456,C0-90-1456
• Citation: 465 N.W.2d 68
• Parties: Debra Lynn ANDERSON and Roger Norman, Trustees for the Heirs at Law of Cynthia Renae Norman, deceased, Respondents, v. FEDERATED MUTUAL INSURANCE CO., a corporation, Appellant.
• Court: Minnesota Court of Appeals

Page 68

465 N.W.2d 68

Debra Lynn ANDERSON and Roger Norman, Trustees for the Heirs at Law of Cynthia Renae Norman, deceased Respondents, v. FEDERATED MUTUAL INSURANCE CO., a corporation, Appellant.

No. C0-90-1456.

Court of Appeals of Minnesota.

Jan. 15, 1991.

Review Granted March 15, 1991.

Syllabus by the Court

The Minnesota Uniform Arbitration Act, Minn.Stat. Secs. 572.08-.30 (1988), supersedes common law arbitration, and therefore oral agreements to arbitrate are unenforceable in Minnesota.

Michael L. Lander, Bergeson, Lander & Megarry, P.A., Bloomington, for respondents.

Kenneth F. Johannson, Dickel, Johannson, Taylor & Rust, Crookston, for appellant.

Considered and decided by KALITOWSKI, P.J., and FOLEY and NORTON, JJ.

OPINION

FOLEY, Judge.

Respondents Debra Lynn Anderson and Roger Norman, as trustees for the heirs of their daughter, Cynthia Renae Norman, sued Donald Grahn and O.K. Machine Co. for negligently causing Cynthia's death. Appellant Federated Mutual Insurance Co., insurer for Grahn and O.K. Machine, allegedly entered into an oral agreement with Anderson and Norman to submit their claim to binding arbitration. Anderson and Norman sued for enforcement of the oral agreement. The trial court ordered the parties to submit to binding arbitration and Federated appeals. We reverse.

FACTS

On February 10, 1987, a car in which Cynthia was a passenger got stuck in a ditch. Grahn, an owner of O.K. Machine, agreed to use a truck owned by O.K. Machine to tow the car out of the ditch. On one of Grahn's attempts to pull the car out, the nylon tow rope was stretched to its limit and one end suddenly detached and whipped a metal clevis through the car's rear window, striking Cynthia in the head. She died shortly thereafter.

On March 24, 1988, Anderson, acting as trustee, sued Grahn and O.K. Machine. Norman subsequently joined the suit as co-trustee. Grahn forwarded the summons and complaint to Bob Bresnahan, a claims supervisor for Federated Mutual Insurance Company. Federated insured both Grahn and O.K. Machine.

On November 9, 1988, Martin Berg, an attorney acting on behalf of both Anderson and Norman, began to take part in ongoing settlement negotiations with Bresnahan. In his first conversation with Berg, Bresnahan asked about a stipulated maximum, or "cap," on the award if the parties agreed to arbitration. Berg said his clients would not agree to any figure less than $300,000.

Berg and Bresnahan again discussed arbitration on December 12, 1988. In a letter dated that day, Berg set out the terms of their "telephone agreement" to submit the matter to arbitration. Bresnahan's notes about the call show that he agreed to most of the terms in Berg's letter, but Bresnahan's notes conclude: "We'll confirm agreement in writing." Bresnahan called Berg on December 20, 1988, and told him that Federated would not agree to arbitration without a $100,000 cap. Bresnahan's notes do not indicate any discussion of a cap with Berg between November 9 and December 20, 1988.

Anderson and Norman sued Federated, seeking a judgment declaring the oral agreement to arbitrate the claim against Grahn and O.K. Machine to be enforceable. The trial court found there was an oral agreement to arbitrate and ordered binding arbitration under the terms of Berg's December 12, 1988 letter.

ISSUE

Is an oral agreement to arbitrate enforceable in Minnesota?

ANALYSIS

This case presents a question of law for the court that is "subject to de novo review on appeal." In re Welfare of M.J.M., 416 N.W.2d 142, 146 (Minn.App.1987) (citing Hibbing Educ. Ass'n v. Public Employment Relations Bd., 369 N.W.2d 527, 529 (Minn.1985)). The trial court's conclusions of law do not bind this court. A.J. Chromy Constr. Co. v. Commercial Mechanical Servs., Inc., 260 N.W.2d 579, 582 (Minn.1977).

The Minnesota Uniform Arbitration Act provides: "A written agreement to submit any existing controversy to arbitration * * * is valid, enforceable, and irrevocable." Minn.Stat. Sec. 572.08 (1988). Because the Minnesota Uniform Arbitration Act makes no provision for unwritten agreements, any alleged oral agreement cannot be enforced under the act. "The requirement that the arbitration clause be in writing * * * renders invalid mere oral arbitration agreements." Domke on Commercial Arbitration Sec. 6.01, at 73 (G. Wilner rev. ed.1984) [hereinafter Domke].

The parties agree there is no written agreement to arbitrate. Nonetheless, Anderson and Norman argue, and the trial court held, that an oral agreement is enforceable under Minnesota common law. We find common law arbitration has been superseded by the Minnesota Uniform Arbitration Act, Minn.Stat. Secs. 572.08-.30. We further find oral agreements to arbitrate are unenforceable in Minnesota.

This interpretation is mandated by principles of statutory construction. When legislation and the common law conflict, legislation governs "because it is the latest expression of the law." 2A Statutes and Statutory Construction Sec. 50.01, at 421 (C. Sands 4th ed.1984). For example, the Minnesota Supreme Court has ruled that a statute abrogated common law in the context of the collateral source rule for personal injury cases. Imlay v. City of Lake Crystal, 453 N.W.2d 326, 331 (Minn.1990).

The Minnesota Supreme Court has said:

In re-enacting a statute, intention to change meaning may as clearly appear from the omission of old as by adding new language.

(In re Estate of Cravens, 177 Minn. 437, 440, 225 N.W. 398, 399 (1929), quoted in Sterling Electric Co. v. Kent, 233 Minn. 31, 34, 45 N.W.2d 709, 711 (1951)); see also Garberg v. County of Hennepin, 294 Minn. 450, 455, 202 N.W.2d 220, 223 (1972). The predecessor act to the Minnesota Uniform Arbitration Act expressly preserved common law arbitration. See Minn.Stat. Sec. 572.01 (1953). The Minnesota legislature repealed the former act, including the provision for common law arbitration, when it enacted the Uniform Arbitration Act. See 1957 Minn.Laws ch. 633, Sec. 24, subd. 4. The legislature clearly expressed its intention to abolish common law arbitration by omitting all reference to it when adopting the uniform act. See Minn.Stat. Sec. 645.16(5) (1988) (when not explicit, the legislature's intention may be ascertained by considering former law).

Our decision here also is consistent with Wirig v. Kinney Shoe Corp., 461 N.W.2d 374, 377-78 (Minn.1990). If not expressly, at least by necessary implication, the common law remedy of arbitration has been abrogated. Id.; see also In re Shetsky, 239 Minn. 463, 469, 60 N.W.2d 40, 45 (1953).

This interpretation of the Minnesota Uniform Arbitration Act is further supported by consideration of the object to be attained and the mischief to be remedied by the uniform act. See Minn.Stat. Sec. 645.16(3) and (4) (1988). In most states which have adopted the Uniform Arbitration Act, one of the primary purposes given is the validation of arbitration agreements. Unif.Arbitration Act, 7 U.L.A. 1 (1986). However, agreements to arbitrate already were valid and enforceable under Minnesota statutory and common law prior to the adoption of the uniform act. See Zelle v. Chicago & N.W.R. Co., 242 Minn. 439, 446-47, 65 N.W.2d 583, 589 (1954); Park Constr. v. Independent School Dist. No. 32, 209 Minn. 182, 186-87, 296 N.W. 475, 477 (1941); Larson v. Nygaard, 148 Minn. 104, 108, 180 N.W. 1002, 1003 (1921). Therefore, validation of arbitration agreements could not have been a reason for adoption of the act in Minnesota. See Pirsig, The Minnesota Uniform Arbitration Act and the Lincoln Mills Case, 42 Minn.L.Rev. 333, 335 (1958) [hereinafter Minnesota Uniform Arbitration Act and Lincoln Mills ].

This court has held:

The primary purpose of the [uniform] act is to encourage and facilitate an informal and relatively inexpensive means of dispute resolution.

Columbia Heights Fed'n of Teachers Local 710 v. Independent School Dist. No. 13, 457 N.W.2d 775, 777 (Minn.App.1990), pet. for rev. denied (Minn. Sept. 20, 1990). The uniform act encourages and facilitates use of arbitration in Minnesota by making the law governing arbitration more definite and certain and by making the law uniform with arbitration law in other states. As Pirsig stated:

The prior Minnesota law on the subject was in a very unsatisfactory state. * * * [The former act] was of very narrow compass. It applied only to agreements to arbitrate which complied with the technical form prescribed and in practice was seldom resorted to. Agreements not within the terms of the statute were governed by common law principles.

Minnesota Uniform Arbitration Act and Lincoln Mills, supra p. 70, at 333-34.

The differences between the arbitration laws of various states also have made commercial arbitration problematic, giving rise to difficult problems in the conflict of laws.

The growing confusion in the law relative to commercial arbitration resulting from the many conflicting provisions in the statutes of the several states and territories makes the adoption of a uniform legislation by all the states imperative. Uniformity on the subject is far more important than that the law include any particular provision either substantive or procedural. * * *

* * * * * *

* * * The unsettled problems inherent in the conflict of laws field make impossible definitive advice to clients as to their rights under an arbitration provision in a contract that is to be performed in more than one jurisdiction.

Carb, The Need for Uniform Laws of Arbitration, 15 Arb.J. 65, 65-66 (1960); see also Stern, The Conflict of Laws in Commercial Arbitration, 17 Law & Contemp.Probs. 567 (1952).

These concerns are expressly addressed in the Minnesota Uniform Arbitration Act, which provides:

This chapter shall be so construed as to effectuate its general purpose to make uniform the law of those states which enact it.

Minn.Stat. Sec. 572.28 (1988). This purpose cannot be achieved as long as each state continues to develop its own common...