Board of Educ. Taos Mun. Schools v. The Architects, Taos

• Decision Date: 12 November 1985
• Docket Number: No. 15648,15648
• Citation: 1985 NMSC 102,103 N.M. 462,709 P.2d 184
• Parties: , 28 Ed. Law Rep. 1157 BOARD OF EDUCATION TAOS MUNICIPAL SCHOOLS, Plaintiff-Appellant, v. THE ARCHITECTS, TAOS, A. Eugene Sanchez, William A. Mingenbach, Harold R. Benson, Wolcott Ely, Defendants-Appellees.
• Court: New Mexico Supreme Court

Page 184

709 P.2d 184

103 N.M. 462, 28 Ed. Law Rep. 1157

BOARD OF EDUCATION TAOS MUNICIPAL SCHOOLS, Plaintiff-Appellant, v. THE ARCHITECTS, TAOS, A. Eugene Sanchez, William A.

Mingenbach, Harold R. Benson, Wolcott Ely,

Defendants-Appellees.

No. 15648.

Supreme Court of New Mexico.

Nov. 12, 1985.

[103 NM 462] Charles S. Solomon, Santa Fe, Tapia & Campos, Miguel P. Campos, Albuquerque, for plaintiff-appellant.

Montgomery & Andrews, Robert J. Mroz, Santa Fe, for defendants-appellees.

OPINION

SOSA, Senior Justice.

The issue presented in this case requires us to develop guidelines to establish at what point a party, by participating in litigation, has waived a contractual right to arbitration.

Plaintiff, Taos Municipal School District (Taos) originally filed suit on May 1, 1978 against Pendleton Construction Company (Pendleton) and its bonding company, the American Fidelity Fire Insurance Company (Fidelity) seeking damages for Pendleton's breach of a contract for construction of a school building. By its Second Amended Complaint, filed on July 29, 1983, Taos Schools joined as defendants the Architects, Taos, Eugene Sanchez, William Mingenbach, Harold R. Benson, and Wolcott Ely (Architects).

Architects, on November 10, 1983, answered the Second Amended Complaint, contesting or denying many of its allegations. In their first affirmative defense, Architects recited that the standard form of agreement between owner and architects, entered into by the parties, "requires plaintiff to submit all claims or disputes to arbitration." Architects raised two other affirmative defenses plus a general reservation of "the right to add additional affirmative defenses as they become known." On November 21, 1983, Architects answered the cross-claim of Pendleton. On May 21, 1984 the court set a trial date for September 10, 1984.

Architects propounded interrogatories to Taos and to Pendleton on June 15, 1984. Then on July 30, 1984, Architects filed myriad motions: to vacate the trial setting to allow time for depositions and additional discovery, with a request for a pre-trial conference; to disqualify counsel for Pendleton; for summary judgment in favor of defendant Wolcott Ely; to compel discovery; and for a judgment of dismissal and order to compel arbitration. Architects requested a hearing of four hours on all the motions.

Prior to the hearing on August 15, 1984, Architects noticed three depositions, withdrew the motion to disqualify counsel, and answered a motion for summary judgment by Taos. At the hearing, Architects requested that the motion for dismissal and to compel arbitration be heard first, as it might moot the remaining motions. The trial court ruled in favor of Architects, and Taos appeals. Neither party has demanded arbitration or filed a proceeding with the American Arbitration Association (AAA), as required in the contract at issue here.

Appellant Taos contends that the motion to dismiss and to compel arbitration was granted erroneously, because Architects had waived their right to arbitrate both by undue delay and by participation in the litigation which created a prejudicial reliance in Taos that the matter would go to trial.

Our cases which have considered the question of when to find waiver concur that the line is not easy to draw uniformly. The inquiry depends on the facts of each case, from which the court must infer the original intent of the party now asking for arbitration. There are, however, three principles which govern our review, and according to which we can formulate a general rule.

The first is a strong policy preference for arbitration as a more efficient mode of resolving disputes than litigation. Therefore "the courts hold that all doubts as to whether there is a waiver must be resolved in favor of arbitration." United Nuclear Corp. v. General Atomic Co., 93 N.M. 105, 114, 597 P.2d 290, 299 (1979). (citations omitted). Consequently, "[t]he party asserting the default in pursuing arbitration bears a heavy burden of proving waiver." Id. at 115, 597 P.2d at 300 (citations omitted).

The second principle, following from the first, is that relief will only be granted upon a showing of prejudice to the party opposing arbitration. Dilatory conduct in itself does not constitute waiver. Id. at 115, 597 P.2d 290. This court in United Nuclear characterized the inquiry as going to the intent of the party claiming waiver, upon whose objective manifestation the other party has relied. Usually this reliance takes the form of preparation for trial in the belief that the other party intends to litigate rather than to demand arbitration. Wood v. Millers National Insurance Co., 96 N.M. 525, 527, 632 P.2d 1163, 1165 (1981).

The best measure of such reliance involves the third principle, namely the extent to which the party now urging arbitration has previously invoked the machinery of the judicial system. A concern for preserving scarce judicial resources lies at the heart of the preference for arbitration in the first place. In a case finding that arbitration had not been waived, this court stated that:

The case was not at issue and since no hearings had been held, the judicial waters had not been tested prior to the time the motion for arbitration had been...