Brendsel v. Winchester

• Decision Date: 07 June 2005
• Docket Number: No. 1324,1324
• Citation: 162 Md. App. 558,875 A.2d 789
• Parties: Leland BRENDSEL, et al. v. WINCHESTER CONSTRUCTION COMPANY, INC.
• Court: Court of Special Appeals of Maryland

875 A.2d 789

162 Md. App. 558

Leland BRENDSEL, et al. v. WINCHESTER CONSTRUCTION COMPANY, INC.

No. 1324, September Term, 2004.

Court of Special Appeals of Maryland.

June 7, 2005.

Lawrence S. Greenwald (Catherine A. Bledsoe, Donald A. Rea, Gordon, Feinblatt, Rothman, Hoffberger & Hollander, L.L.C., on the brief), Baltimore, MD, for appellant.

Robert M. Wright (William P. Pearce, Whiteford, Taylor & Preston on the brief), Baltimore, MD, for appellee.

Panel: DAVIS, DEBORAH S. EYLER, THEODORE G. BLOOM (Ret'd, Specially Assigned), JJ.

DEBORAH S. EYLER, J.

In the Circuit Court for Queen Anne's County, Winchester Construction Company, Inc. ("Winchester"), the appellee, filed a petition to establish and enforce a mechanic's lien against Leland C. and B. Diane Brendsel, the appellants, owners of certain real property. Mrs. Brendsel filed a counterclaim alleging breach of the parties' construction contract and violations of the Maryland Consumer Protection Act, Maryland Code (1975, 2000 Repl.Vol.) sections 13-101 et seq. of the Commercial Law Article.

By consent of the parties, the court established an interlocutory mechanic's lien against the property in the amount sought by Winchester. Also by consent of the parties, the Brendsels engaged in discovery for a limited, defined period of time, during which Winchester agreed not to file a petition to compel arbitration under an arbitration clause in the construction contract. The day after that discovery period expired, Mrs. Brendsel filed a motion for partial summary judgment on her breach of contract claim. Winchester filed a petition to compel arbitration and to stay the court proceedings. The court granted the petition to compel arbitration and stayed further proceedings pending arbitration.

The Brendsels appeal the order compelling arbitration, asking:

"Did Winchester [] waive its contractual right to arbitrate when it elected to sue for a mechanic's lien in court rather than initiat[e] arbitration in accordance with the parties' contract?"

For the following reasons, we shall affirm the order of the circuit court.

FACTS AND PROCEEDINGS

The Brendsels are the owners of "Wye Hall," an historic plantation house and carriage house in Queen Anne's County ("the Property"). Winchester is a Maryland general contractor that specializes in historic home renovation.

On November 3, 1999, Mrs. Brendsel entered into a construction contract with Winchester to repair and renovate the Property (the "Agreement").¹ The Agreement called for Winchester to hire subcontractors and, in consultation with designated architects and engineers, perform the work requested by Mrs. Brendsel. Winchester was to submit periodical pay applications describing the work performed and itemizing the expenses incurred.

The Agreement included an arbitration clause, at Article 15, Paragraph 8, stating:

All claims or disputes between [Winchester] and [Mrs. Brendsel] arising out of or relating to the Contract Documents, or the breach thereof, shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association ["AAA"] currently in effect unless the parties mutually agree otherwise and subject to an initial presentation of the claim or dispute to the Architect as required under [the Agreement].[²] Notice of the demand for arbitration shall be filed in writing with the other party to this Agreement and with the [AAA] and shall be made within a reasonable time after the dispute has arisen.

Winchester began work and submitted its first pay application on February 25, 2000. In late 2001, disputes arose between the parties over Winchester's billing practices and the quality of its work. Lawyers for the parties met during the summer of 2002, in an effort to resolve their clients' differences. In the meantime, Winchester continued to submit pay applications, which the Brendsels did not immediately pay.

On August 1, 2002, the parties executed a Memorandum of Understanding ("MOU"), amending the Agreement.³ The MOU stated that, when Winchester submitted its final accounting of all costs, Mrs. Brendsel would have 45 days for her accountants to review the submission; and that, within seven days after the review, Mrs. Brendsel would "pay either the requested amount or the lesser amount substantiated by [her accountants]...." If Winchester disagreed with the amount paid, "the matter c[ould] be resolved by negotiation or arbitration." The MOU also provided that Mrs. Brendsel could terminate the Agreement "for her convenience." In that event, Winchester would be entitled to receive payment for "work done to the date of termination subject to any appropriate offsets."

Winchester submitted pay applications in late 2002 and early 2003. The Brendsels did not make payment and continued to dispute Winchester's billing methods and workmanship. On January 28, 2003, Mrs. Brendsel and Winchester entered into a letter agreement further amending the Agreement by reducing the fee Winchester would charge for work performed after January 10, 2003.

The Brendsels paid some but not all of the amounts in pay applications submitted by Winchester in February through mid-May 2003. On May 23, 2003, Mrs. Brendsel terminated the Agreement for convenience. In July and August of 2003, Winchester submitted pay applications, which also were not paid.

On August 13, 2003, Winchester submitted a final "Revised Payment Reconciliation," showing $815,877.27 due and owing. Sometime soon thereafter, the Brendsels and their lawyers parted company. On September 9, 2003, the Brendsels hired new counsel.

Three weeks later, on September 30, 2003, counsel for the Brendsels wrote to Winchester's lawyer, saying that a review of the final accounting was being conducted, as required by the MOU, and suggesting that, once the review was completed, they should meet "to discuss a potential resolution of the matter without resorting to litigation...." He further suggested that the parties enter into an agreement to toll the deadlines in the Agreement and the MOU.

Counsel for the parties met and, on October 1, 2003, the parties entered into an agreement "toll[ing] and suspend[ing]" all deadlines in the Agreement and the MOU, "as well as any statutory or common-law limitations periods, including statutes of limitation and common-law laches, ... until five (5) business days after written notice of either party's withdrawal from this Tolling Agreement is delivered to the other party."

Over the next six weeks, the Brendsels, through counsel, continued to seek information for their accountants to complete their review of Winchester's Revised Payment Reconciliation, and Winchester, also through counsel, continued to furnish the information as requested.

On November 14, 2003, in the Circuit Court for Queen Anne's County, Winchester filed a "Petition to Establish and Enforce Mechanic's Lien," naming the Brendsels as owners of the Property and defendants. Winchester alleged that it had furnished work, labor, and materials under the Agreement from "September [of] 1999 through June 3, 2003" and that, according to its final accounting, $815,877.27 remained due and owing. It asked the court to issue a show cause order; establish a mechanic's lien in the amount sought; order the Property sold unless payment was made on the amount due by a date specified by the court; and grant any other appropriate relief. The petition did not include a demand for arbitration or mention the arbitration clause in the Agreement.

Notwithstanding the filing of the mechanic's lien action, the parties, through counsel, continued to discuss their disputes in an effort to resolve them through negotiation. On December 10, 2003, the Brendsels' lawyer responded in writing to Winchester's Revised Final Accounting, asserting that, due to surcharges and defective work, the Brendsels were entitled to repayment from Winchester of at least $871,872.28, and suggesting that, "rather than initiat[e] an action ... at this point ... it makes sense to meet in an effort to resolve the matter."

By letter of December 24, 2003, Winchester's lawyer responded, disputing the Brendsels' claim that Winchester owed them money and seeking information about the basis for that claim. The Brendsels' lawyer responded by letter of February 2, 2004, disputing Winchester's counsel's calculations and construction of the Agreement, and suggesting that the lawyers "meet at this point to discuss the matter."

In the meantime, on January 9, 2004, Winchester filed an "Amended Petition to Establish and Enforce Mechanic's Lien."⁴ In its prayer for relief, it sought "such other and further relief as the nature of [Winchester's] cause may require, including, but not limited to, a stay of proceedings after an interlocutory lien is established pending the outcome of an arbitration proceeding between the parties hereto." (Emphasis added.)

The court issued a show cause order on February 2, 2004, directing the Brendsels to file an affidavit or a verified answer on or before March 8, stating why a mechanic's lien for the amount Winchester sought should not attach; and scheduling a probable cause hearing on the interlocutory lien request for March 15.

On March 4, 2004, the Brendsels filed a verified answer to the amended petition. Also that day, Mrs. Brendsel filed a counterclaim for breach of contract and violation of the Maryland Consumer Protection Act ("MCPA"). In the breach of contract count, she alleged that Winchester had performed defective work, directly or through subcontractors, and had charged excessively for the work it performed. In the MCPA count, she alleged that Winchester had made material misrepresentations about the quality of its work and equipment, its methods of charging for costs, and the expertise of its subcontractors. Mrs. Brendsel sought damages of "at least $1,000,000," prejudgment and postjudgment interest, costs, attorneys' fees under the...