Case Handyman v. Schuele
| Decision Date | 31 October 2008 |
| Docket Number | No. 2134 September Term, 2007.,2134 September Term, 2007. |
| Parties | CASE HANDYMAN AND REMODELING SERVICES, LLC, et al. v. Judith SCHUELE, et al. |
| Court | Court of Special Appeals of Maryland |
Lee B. Rauch (Toyja E. Kelley, Tydings & Rosenberg, LLP, on the brief), Baltimore, MD, for Appellants.
Thomas J. Minton (Lara K. Simon, Goldman & Minton, P.C., on the brief), Baltimore, MD, for Appellees.
Panel: SALMON, WOODWARD and GRAEFF, JJ.
Appellants, Case Handyman and Remodeling Services, LLC, and Case Design/Remodeling, Inc. (collectively, "Case Handyman"), appeal from an order of the Circuit Court for Baltimore County denying their motion to compel arbitration with appellees, Judith and Albert Schuele ("the Schueles"). On appeal, Case Handyman presents the following two issues for our review, which we have reworded and reorganized as follows:
1. Did the circuit court err in denying the motion to compel arbitration where the Schueles are suing Case Handyman in connection with a contract containing a mandatory arbitration clause that covers "[a]ny controversy/claim" arising from or related to the contract?
2. Did the circuit court err in denying the motion to compel arbitration without holding a hearing?1
For the reasons that follow, we hold that the trial court erred in denying the motion to compel arbitration.
On November 21, 2006, the Schueles entered into a home improvement contract with Shaun Arnold, a Baltimore County contractor and franchisee of Case Handyman.2 Both Case Handyman and the Schueles refer to Mr. Arnold's home improvement company as Professional Home Repair, Inc. (PHR).3 PHR signed the contract as "Case Handyman Services." At the bottom of each page of the contract was a street address in Hunt Valley, Maryland, and the phrase "Independently Owned and Operated."
Pursuant to the agreement, PHR agreed to perform "remodeling and/or repair work" on the Schueles' home in Towson, Maryland, which included the construction of "a second story structure" containing "two bedrooms [and] two full bathrooms ...." For this work, the Schueles agreed to pay $165,000, of which they paid 20 percent, or $39,800, at signing. The Schueles wrote two checks to Case Handyman, one in the amount of $39,800 for the down payment, and the other for $2,700 for "written plans." The former check was made out to "Case Handyman Remodeling," while the latter was payable to "Case Handyman Services." Case Handyman Services endorsed and deposited both checks.
The eight-page contract set forth a payment draw schedule and described the work to be performed by the contractor. It also incorporated a "General Conditions" section, which contained an arbitration clause providing as follows:
2. CLAIMS—Any controversy/claim arising out of or relating to this contract or its breach thereof, shall be settled by final and binding arbitration before a single arbitrator in the Baltimore metropolitan area in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.
(Emphasis in original.)
In March, 2007, Arnold informed the Schueles that "he no longer had their funds, and that he would not begin work." He added that he was considering filing for bankruptcy protection. The Schueles assert in their complaint that Arnold later filed a "personal bankruptcy, but no corporate franchise with the `Case' name is listed as a party in that bankruptcy matter." On June 6, 2007, after PHR failed to commence work on the project, and after Arnold filed for personal bankruptcy, the Schueles filed a class action complaint against Case Handyman in the Circuit Court for Baltimore County.4 The complaint alleged breaches of contract (Counts I and II); fraud (Counts III through V); violations of the Maryland Consumer Protection Act (Count VI); and negligence (Count VII). In response, on August 15, 2007, Case Handyman filed a "Motion to Dismiss, or in the Alternative, to Compel Arbitration and Stay Proceedings," along with a memorandum of law in support of its motion, and a request for a hearing. The circuit court, in an order dated September 7, 2007, granted Case Handyman's motion to dismiss or compel arbitration, without explanation. The order stated that it was issued "[u]pon consideration of ... any hearing," and noted that "[n]o response [was] filed" by the Schueles. The record indicates, however, that the Schueles filed an opposition to Case Handyman's motion on August 31, 2007, and, according to Case Handyman, the court held no hearings on its motion.
The docket entries reflect that, on September 17, 2007, the circuit court struck its September 7 order and denied Case Handyman's motion to dismiss or compel arbitration. No September 17, 2007 order is in the record, and Case Handyman stated in its Motion to Alter or Amend Judgment that "[t]here is no written order" explaining the basis for the September 17 ruling. The docket entries reflect the following:
0007000 Open Court Proceeding 09/17/07 09/17/07 000 JGT
September 14, 2007 Hon. John G. Turnbull, II
Order dated 9/7/07 to be stricken, answer was filed. Motion to
dismiss or Compel (Paper 4000) — Denied
0008000 Ruling from Judge Turnbull — Strike 9/14/07 09/18/07 000 TBA
Order of 9/7/07 (Answer[] was filed)
Motion to dismiss or compel, Denied. Notices sent
The parties agree that, despite the language referring to an "Open Court Proceeding," no hearing was held.
On September 24, 2007, Case Handyman filed a Motion to Alter or Amend Judgment and a Request for Hearing, and the Schueles filed an Opposition to Defendants' Motion to Alter or Amend Judgment on October 11, 2007. By order filed on October 18, 2007, the circuit court denied Case Handyman's motion. It further denied Case Handyman's request for a hearing, citing Maryland Rule 2-311.5 This appeal followed.
The issue presented in this appeal is whether the circuit court erred in denying Case Handyman's motion to dismiss or compel arbitration. Case Handyman offers several reasons why the circuit court erred in denying its motion. Initially, it argues that the arbitration provision in the home improvement contract is enforceable against the Schueles under the doctrine of "equitable estoppel," for two reasons: (1) their claims are predicated on the contract; and (2) the claims raise allegations of "`substantially interdependent and concerted misconduct'" by PHR and Case Handyman. Moreover, Case Handyman maintains that the court's ruling denying the motion to compel arbitration contravenes Maryland's public policy favoring the enforcement of arbitration agreements. Finally, Case Handyman contends that the court erred by "completely dispos[ing] of a claim" after Case Handyman had requested a hearing, in violation of Maryland Rule 2-311(f).
In response, the Schueles argue that the circuit court correctly denied Case Handyman's motion because they "never agreed to arbitrate any disputes with Case, and Case never entered into any agreement with the Schueles." In their view, Case Handyman is not entitled to enforce the arbitration provision under the doctrine of equitable estoppel because Case Handyman's liability is premised upon "its duties under Maryland common law and statutes, not by PHR's contractual duties." Moreover, the Schueles argue that Case Handyman has not shown detrimental reliance, a required element of equitable estoppel. Additionally, the Schueles contend that the arbitration provision is unenforceable on the ground that it violates "the provisions of the Code of Maryland Regulations specifically addressing arbitration clauses in home improvement contracts." With respect to the argument that the circuit court erred in denying the motion without a hearing, the Schueles maintain that Case Handyman "had an adequate opportunity to be heard" in the proceedings below, as the "`hearing' required under Rule 2-311 need not include oral argument."
We hold that the doctrine of equitable estoppel is applicable here because the Schueles' claims against Case Handyman are predicated on the contract, which contains a broad arbitration clause, requiring arbitration for "[a]ny controversy/claim arising out of or relating to the contract or its breach thereof...." Accordingly, the Schueles are estopped from refusing arbitration with Case Handyman. We also hold that the contract was in substantial compliance with the Code of Maryland Regulations ("COMAR") 09.08.01.25, and that, given the state policy favoring arbitration agreements, any deviation from the requirements in COMAR does not defeat the arbitration provision of the contract here.
Maryland Code (2006 Repl.Vol.), § 12-301 of the Courts and Judicial Proceedings Article ("C.J."), authorizes an appeal of a final judgment. "`[A] trial court's order either compelling or denying arbitration is a final judgment under C.J § 12-301.'" Harris v. Bridgford, 153 Md. App. 193, 201, 835 A.2d 253 (2003) (quoting RTKL Assocs. v. Balt. County, 147 Md. App. 647, 655, 810 A.2d 512 (2002)). Accordingly, it is an appealable order. See Essex Corp. v. Susan Katharine Tate Burrowbridge, LLC, 178 Md.App. 17, 30, 940 A.2d 199 (2008) ().
With respect to the standard of review to be applied, the theory of arbitrability is critical. Generally, courts review the grant or denial of arbitration de novo. See Questar Homes of Avalon, LLC v. Pillar Const., Inc., 388 Md. 675, 684, 882 A.2d 288 (2005) (); Patten Grading & Paving, Inc. v. Skanska USA Building, Inc., 380 F.3d 200, 204 (4th Cir. 2004) (...
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