Arrow Overall Supply Co. v. Peloquin Enterprises

• Decision Date: 23 August 1982
• Docket Number: No. 8,Docket No. 63928,8
• Citation: 414 Mich. 95,323 N.W.2d 1
• Parties: ARROW OVERALL SUPPLY COMPANY, Plaintiff-Appellee, v. PELOQUIN ENTERPRISES, Defendant-Appellant. Calendar414 Mich. 95, 323 N.W.2d 1
• Court: Michigan Supreme Court

Page 1

323 N.W.2d 1

ARROW OVERALL SUPPLY COMPANY, Plaintiff-Appellee, v. PELOQUIN ENTERPRISES, Defendant-Appellant.

Docket No. 63928.

Calendar No. 8.

414 Mich. 95, 323 N.W.2d 1

Supreme Court of Michigan.

Argued May 6, 1981.

Decided Aug. 23, 1982.

Cohn & Murphy by Timothy P. Murphy, Detroit, for plaintiff-appellee; Patricia A. Streeter, Detroit, on brief.

Rickel, Urso, Wokas, Earle & Robb by Randall M. Wokas, Detroit, for defendant-appellant.

KAVANAGH, Justice.

The issue in this case is whether the defense of "no valid agreement to arbitrate" may be raised in an action to confirm or enforce an arbitration award. We hold that it may.

Plaintiff's petition, brought pursuant to GCR 1963, 769.8, alleged that an arbitration award in the amount of $2,351.71 had been entered by the commercial arbitration tribunal of the American Arbitration Association on August 4, 1977, and asked that the award be confirmed.

On March 31, 1978, at a hearing in Wayne Circuit Court, defendant filed an answer and supporting affidavit specifically denying that the arbitrator had been appointed pursuant to law and that Furney Simpson, a former employee of defendant, had been authorized to execute any contracts on behalf of defendant. No representative of defendant had appeared at the arbitration hearing. Neither notice of submission of the claim to arbitration nor receipt of the arbitrator's award is disputed by defendant. The court affirmed the award and judgment was entered thereon.

The Court of Appeals affirmed, concluding that defendant had not timely raised the invalidity of the arbitration agreement.

We disagree.

The defense of "no valid agreement to arbitrate" is a direct attack on the exercise of jurisdiction of both the arbitrator and the circuit court. The decision to submit disputes to arbitration is a consensual one. "Arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." J. Brodie & Son, Inc. v. George A. Fuller Co., 16 Mich.App. 137, 145, 167 N.W.2d 886 (1969), quotingAtkinson v. Sinclair Refining Co., 370 U.S. 238, 82 S.Ct. 1318, 8 L.Ed.2d 462 (1962). It follows that a valid agreement must exist for arbitration to be binding.

GCR 1963, 769 describes proceedings in the circuit court to confirm, enforce or vacate an arbitration award. It is applicable only to statutory arbitrations under M.C.L. Sec. 600.5001 et seq.; M.S.A.27A.5001 et seq. M.C.L. Sec. 600.5025; M.S.A. Sec. 27A.5025 provides:

"Upon the making of an agreement described in section 5001, the circuit courts have jurisdiction to enforce the agreement and to render judgment on an award thereunder. The court may render judgment on the award although the relief given is such that it could not or would not be granted by a court of law or equity in an ordinary civil action."

Since M.C.L. Sec. 600.5025; M.S.A. Sec. 27A.5025 is the jurisdictional basis on which the court may enter judgment on an award, the presence of a binding agreement is a condition precedent to exercise of the court's jurisdiction. Without such agreement, a dispute would not fall within the scope of GCR 1963, 769, ¹ and none of its provisions would apply.

Whenever the jurisdiction of an arbitrator is questioned, it must be determined in order to make an award on arbitration binding. ² The existence of a contract to arbitrate and the enforceability of its terms is a judicial question which cannot be decided by an arbitrator. ³

The Court of Appeals, citing American Motorists Ins. Co. v. Llanes, 396 Mich. 113, 240 N.W.2d 203 (1976), as authority, held that defendant did not raise the issue of "no valid agreement to arbitrate" at the earliest opportunity and thereby waived the defense.

Llanes must be distinguished. The dispute there was over the scope of an acknowledged agreement to arbitrate. Here the dispute is not over the scope but rather the existence of an agreement to arbitrate. The insured in Llanes submitted a claim to arbitration. The insurer participated in the proceeding without raising the issue of the arbitrability of such claim. After a ruling on that claim adverse to it, the insurer first raised the issue of arbitrability of the claim in the circuit court upon a motion to confirm the award.

Llanes stands for the proposition that a party may not participate in an arbitration and adopt a "wait and see" posture, complaining for the first time only if the ruling on the issue submitted is unfavorable.

Defendant here did not participate in the arbitration, but directly raised the issue of the existence of an agreement to arbitrate in defense of a motion to confirm in circuit court.

GCR 1963, 769.2 provides for the parties to either compel or stay arbitration proceedings. The provisions of the court rule are not mandatory. They provide for discretionary application to the court for a preliminary decision as to the existence of an agreement to arbitrate. If plaintiff proceeds without moving the court to compel arbitration, he risks spending time, money and effort, only to have an award vacated or held unenforceable on a later finding that no arbitration agreement was in existence. If a party denying the existence of an agreement fails to seek a stay of the proceedings, he risks a later...