A. C. Beals Co. v. Rhode Island Hospital

• Decision Date: 27 June 1972
• Docket Number: No. 1438-M,1438-M
• Parties: A. C. BEALS COMPANY, Inc. v. RHODE ISLAND HOSPITAL v. The BABCOCK AND WILCOX COMPANY. P.
• Court: Rhode Island Supreme Court

Page 865

292 A.2d 865

110 R.I. 275

A. C. BEALS COMPANY, Inc. v. RHODE ISLAND HOSPITAL v. The BABCOCK AND WILCOX COMPANY.

No. 1438-M.P.

Supreme Court of Rhode Island.

June 27, 1972.

Jordan, Hanson & Curran, A. Lauriston Parks, Providence, for plaintiff A. C. Beals Co., Inc

Edwards & Angell, Stephen A. Fanning, Jr., Paul F. Greene, Providence, for Rhode Island Hospital.

Higgins, Cavanagh & Cooney, Joseph V. Cavanagh, Providence, for third-party defendant The Babcock and Wilcox Co.

OPINION

PAOLINO, Justice.

The Babcock and Wilcox Company, third-party defendant in the above-entitled case and hereinafter referred to as petitioner, brought this petition for certiorari to review an order entered in the Superior Court denying the petitioner's motion to enforce an arbitration agreement. The plaintiff, A. C. Beals Company, Inc., filed a stipulation in this court stating it took no position with regard to this petition. The petitioner and the Rhode Island Hospital, hereinafter referred to as the defendant, filed memoranda of law in accordance with our provisional Order No. 3. After examining the same we ordered the writ to issue and pursuant thereto the pertinent record has been certified here.

The record shows the following pertinent facts. In 1967 defendant engaged plaintiff as the general contractor for a construction project on defendant's premises in Providence. In July of 1970 plaintiff filed a civil action against defendant in which it sought recovery of $146,504, which it claimed was due from defendant for material and labor. The defendant denied liability.

The defendant then brought a third-party action against petitioner alleging an agreement made in January of 1967, whereby petitioner agreed to furnish and erect certain boilers and related equipment in connection with the construction project in question. In its third-party complaint defendant claims that petitioner failed to perform or negligently performed that agreement and was therefore liable to indemnify defendant for any recovery against it by plaintiff.

The petitioner filed a motion to dismiss the third-party complaint without prejudice on the ground that the Superior Court lacked jurisdiction of the subject matter, or, in the alternative, to stay further proceedings in the third-party action pending hearing and determination by the arbitrators. The motion states that it is based on the arbitration agreement of the parties as set forth in the affidavit attached to the motion. This affidavit was executed by petitioner's sales engineer, one John W. Swan, in support of petitioner's motion to dismiss or to stay.

The contract between petitioner and defendant resulted from a series of documents and correspondence between defendant's Providence office and petitioner's office in Boston. These documents and correspondence are part of the record, having been admitted as exhibits in the Superior Court. In order to understand the issues raised by this proceeding it is necessary to refer in some detail to the factual background which precipitated this dispute. For this reason we refer to Mr. Swan's affidavit and to the documents and correspondence between these parties.

On or about October 6, 1966, petitioner received in its Boston office a letter from defendant enclosing specifications and soliciting bids for the purchase of two steam-generating units. This letter is dated October 5, 1966. The specifications include an arbitration clause in paragraph 6 of 'General Provisions G4.' In its brief petitioner states that defendant failed to position the arbitration clause as required by G.L.1956 (1969 Reenactment) § 10-3-2, as amended by P.L.1939, ch. 659, sec. 2. ¹ In response to defendant's solicitation petitioner prepared its bid and by letter dated November 9, 1966, submitted to defendant its bid and written proposal No. P8-6349 for supplying the boilers f.o.b. nearest rail siding and, for an additional amount, delivering them to the jobsite, erecting the equipment and installing the necessary piping. The petitioner's written proposal contained specifications for the boilers it was offering to sell to defendant and the terms of the offer. Those terms found in the part of the proposal labeled 'General Conditions' include an arbitration provision ² requiring the parties to settle by arbitration any controversy or claim arising out of the contract. This arbitration clause appears before the testimonium clause and is separated from it by a sentence which reads: 'The Contract Price shall be as per letter or letters from Company to Purchaser, dated November 10, 1966.'

Mr. Swan's affidavit continues as follows. Subsequent to the November 9, 1966 letter petitioner engaged in discussions of its offer with defendant's engineers. As a result of those discussions and correspondence between petitioner and defendant's engineers, defendant revised, in part, the specifications of its proposal and bid. By letter dated December 20, 1966, petitioner submitted its revised bid. The revised bid did not include any changes in the general conditions of the offer, including the arbitration provision.

On or about December 29, 1966, petitioner received at its Boston office a purchase order prepared by defendant's engineers and approved by defendant referring to petitioner's bid, written proposal and subsequent revisions. This purchase order, as drafted by defendant, contains a statement immediately above its signature, namely, 'Terms as specified in Vendor's Proposal of November 9, 1966.'

Pursuant to petitioner's offer and defendant's purchase order defendant had the option of having petitioner deliver the boilers to the jobsite, erect the equipment and install the necessary piping for a price in addition to the price of the boilers. By letter dated January 6, 1967, petitioner wrote to defendant quoting a reduced price for that optional work.

By letter dated January 12, 1967, petitioner resubmitted its bid and its proposal to defendant, revised as of December 22, 1966, reflecting the reduced price and the prior revisions. No change was made in the terms of the offer found in the 'General Conditions,' including the arbitration provision.

By letters dated January 26, 1967 and January 30, 1967, defendant changed its purchase order to reflect the reduced price quoted for delivery of the boilers to the jobsite, erection of the equipment and installation of the necessary piping and exercised its option to have petitioner perform that work.

Mr. Swan further alleges in his affidavit that pursuant to that agreement petitioner built the boilers, delivered them to the jobsite, erected the equipment and installed the necessary piping; that it had performed all parts of its agreement; that defendant had made only partial payment of the agreed price and had refused to pay the balance of $42,254 of that price; and that as a result of defendant's failure to provide adequate engineering supervision, petitioner was forced to spend in excess of $40,000 in time and money, beyond that originally contemplated by the parties to complete the agreement.

In paragraph 17 of the affidavit Mr. Swan states that petitioner demands arbitration and asks that judgment be entered dismissing the third-party action so that arbitration may proceed. Because we believe that the substance of paragraph 17 is pertinent here, we quote it in full. It reads as follows:

'Pursuant to said agreement, B & W hereby demands arbitration of the entire controversy between it and Rhode Island Hospital which arises out of said agreement, including the third-party claim herein, payment of the unpaid portion of the agreed price and payment of the extra expenses incurred by B & W and asks that judgment be entered dismissing this action so that arbitration may proceed.'

In paragraph 8 of its petition for certiorari petitioner alleges that defendant, through its attorney, by letter dated May 4, 1970, ³ requested petitioner to arbitrate the dispute which is the subject matter of the third-party complaint. The petitioner further alleges therein that defendant based such request upon the arbitration clause contained in the contract between defendant and petitioner. ⁴

As noted above petitioner based its motion to dismiss the third-party action on the ground that the parties were bound by the arbitration clause in their contract and therefore the Superior Court lacked jurisdiction of the subject matter of the dispute. We do not have the benefit of a transcript of the hearing in the Superior Court or of the decision of the trial justice. The order entered in that court states that the petitioner's motion was denied. The petitioner claims the trial justice erred in so ruling and has brought this petition to test the validity of such ruling.

Before considering the questions raised by petitioner it may be helpful to discuss briefly the governing statute. Section 10-3-2, reads as follows:

'Agreements to arbitrate subject to chapter.-When clearly written and expressed and contained in a separate paragraph placed immediately before the testimonium clause or the signatures of the parties, a provision in a written contract to settle by arbitration a controversy thereafter arising out of such contract, or out of the refusal to perform the whole or any part thereof, or an agreement in writing between two or more persons to submit to arbitration any controversy existing between them at the time of the agreement to submit, shall be valid, irrevocable and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract; provided, however, that the provisions of this chapter shall not apply to collective contracts between employers and employees, or between employers and associations of employees, in respect to terms or conditions of employment.'

We had occasion to consider this statute in 1967 in the case of Donahue v. Associated Indemnity Corp., 101 R.I. 741, 227 A.2d 187 (1967). We there pointed out...