Charles J. Frank, Inc. v. Associated Jewish Charities of Baltimore, Inc.

• Decision Date: 07 October 1982
• Docket Number: No. 127,127
• Citation: 294 Md. 443,450 A.2d 1304
• Parties: CHARLES J. FRANK, INC. v. ASSOCIATED JEWISH CHARITIES OF BALTIMORE, INC.
• Court: Maryland Court of Appeals

Page 443

294 Md. 443

450 A.2d 1304

CHARLES J. FRANK, INC. v. ASSOCIATED JEWISH CHARITIES OF BALTIMORE, INC.

No. 127.

Court of Appeals of Maryland.

Oct. 7, 1982.

Charles Yumkas, Baltimore (Anthony P. Palaigos and Blum, Yumkas, Mailman & Gutman, P. A., Baltimore, on the brief), for appellant.

Searle E. Mitnick, Baltimore (Solomon Kaplan, Daniel S. Katz and Kaplan, Heyman, Greenberg, Engleman & Belgrad, P. A., Baltimore, on the brief), for appellee.

Argued before MURPHY, C. J., and SMITH, ELDRIDGE, COLE, DAVIDSON, RODOWSKY and COUCH, JJ.

DAVIDSON, Judge.

In 1976, the appellant, Charles J. Frank, Inc. (contractor), and the appellee, Associated Jewish Charities of Baltimore, Inc. (owner), entered into a contract for the construction of a Jewish community center (project). The construction contract contained an arbitration clause providing, among other things, that "[a]ll claims, disputes and other matters in question arising out of, or relating to, [the] Contract ... shall be decided by arbitration in accordance with the ... Rules of the American Arbitration Association...."

The contractor subcontracted the required earthwork to Consolidated Excavators, Inc. (subcontractor). The subcontract incorporated an arbitration clause identical to that contained in the construction contract.

A dispute arose between the subcontractor and the contractor as to whether the subcontractor's removal of earth from the project's football field was extra work entitling it to additional compensation. In the Circuit Court for Baltimore County, the subcontractor sued the contractor for $10,172.00 (Baltimore County case). The contractor pleaded to the merits and filed a third party claim against the owner alleging that the owner was liable to the contractor for any judgment the subcontractor might recover, as well as for an amount representing the contractor's profit on that portion of the subcontractor's work. The owner filed various pleadings to the third party claim, including a demurrer and an answer. Although the dispute was arbitrable, no party sought arbitration. Ultimately, the subcontractor, contractor, and owner settled, and on 28 January 1980, a consent judgment was entered.

Subsequently, the contractor demanded the balance of $139,579.11 due under the construction contract. The owner refused to pay because of alleged faulty construction work, unrelated to the earthwork involved in the Baltimore County case. On 31 March 1980, in accordance with the construction contract, the contractor filed a Demand for Arbitration with the American Arbitration Association.

On 15 May 1980, in the Circuit Court of Baltimore City, the owner filed a Petition to Stay Arbitration (Baltimore City case) contending that the contractor had waived its right to arbitration by litigating its third party claim against the owner in the Baltimore County case. Additionally, in the Superior Court of Baltimore City, the owner filed a declaration against the contractor, its surety, and Nelson/Salabes, Inc., the project architect (Superior Court case), seeking damages for alleged faulty construction, design, and supervision. The architect filed a third party claim against the mechanical and electrical engineers, the structural engineers, and the swimming pool designers.

On 20 April 1981, in the Superior Court case, the contractor filed a Motion to Stay Proceedings, alleging that the claims asserted by the owner were issues required to be resolved by arbitration. The contractor's motion to stay was granted, pending resolution of the Baltimore City case. Because the contract between the architect and the owner did not contain an arbitration clause, the Superior Court case against the architect was not stayed. On the same day, 20 April 1981, in the Baltimore City case, the contractor filed a Petition to Order Arbitration.

On 3 June 1981, in the Baltimore City case, the trial court initially determined that the contractor had waived its right to arbitrate those issues resolved in the Baltimore County case. The trial court specifically found that the issues in the Baltimore County case "aside from ... arising out of the same contract, [had] no connection with the Superior Court suit or [the contractor's] claim for arbitration." The trial court noted that unless the construction contract contained a clause stating that "waiver for one situation is not waiver as to another," a waiver of the arbitration clause for one purpose would constitute a waiver for all purposes. Accordingly, the trial court then held that by litigating its third party claim against the owner in the Baltimore County case, the contractor had waived the contractual arbitration clause "for all purposes under that contract" and, therefore, had waived its right to arbitrate unrelated issues arising under the same contract with the owner.

Moreover, the trial court acknowledged that were it to order arbitration of such unrelated issues, the owner might be compelled to arbitrate its claim against the contractor and to litigate its claim against the architect because, unlike the contract between the owner and the contractor, the contract between the owner and the architect did not contain an arbitration clause. Emphasizing that the owner had voluntarily entered into these particular contractual arrangements, the trial court specifically concluded that the prospect of duplicative proceedings with a potential for inconsistent results was not an appropriate basis upon which to stay arbitration. Nevertheless, having determined that the contractor had waived its right to arbitrate the unrelated issues raised in the Superior Court case, the trial court granted the owner's petition to stay arbitration and denied the contractor's petition to order arbitration.

The contractor appealed to the Court of Special Appeals. We issued a writ of certiorari before consideration by that Court. We shall reverse the judgment of the Circuit Court of Baltimore City.

The initial question here is whether the contractor, by participating as a party in a judicial proceeding that resulted in a final judgment on an issue arbitrable under its contract with the owner, has waived the right subsequently to arbitrate unrelated issues arising under the contract. Additionally, if the contractor did not waive that right, the remaining question would be whether the owner, then participating in multiparty litigation, was entitled to an order staying arbitration in order to prevent multiple proceedings with the possibility of inconsistent results.

I

Arbitration is the process whereby parties voluntarily agree to substitute a private tribunal for the public tribunal otherwise available to them. The Maryland Uniform Arbitration Act, enacted in 1965, ¹ now Maryland Code (1974, 1980 Repl.Vol.) §§ 3-201 through 3-234 of the Courts and Judicial Proceedings Article, embodies a legislative policy favoring enforcement of executory agreements to arbitrate. Aetna Casualty & Sur. Co. v. Insurance Comm'r, 293 Md. 409, 421, 445 A.2d 14, 19 (1982); Maietta v. Greenfield, 267 Md. 287, 291, 297 A.2d 244, 246 (1972); Bel Pre Medical Center, Inc. v. Frederick Contractors, Inc., 21 Md.App. 307, 320, 320 A.2d 558, 565 (1974), modified, 274 Md. 307, 334 A.2d 526 (1975).

This Court has recognized that arbitration is a matter of contract which the parties should be allowed to conduct in accordance with their agreement. C. W. Jackson & Assocs. v. Brooks, 289 Md. 658, 666, 426 A.2d 378, 382 (1981); Continental Milling & Feed Co. v. Doughnut Corp. of America, 186 Md. 669, 675, 48 A.2d 447, 450 (1946). Because the right to arbitrate is a matter of contract, it is possible for parties to waive that right. See University Nat'l Bank v. Wolfe, 279 Md. 512, 522, 369 A.2d 570, 576 (1977); Bargale Indus., Inc. v. Robert Realty Co., 275 Md. 638, 643, 343 A.2d 529, 533 (1975); see also, e.g., Dickinson v. Heinhold Sec., Inc., 661 F.2d 638, 641 (7th Cir. 1981); Tothill v. Richey Ins. Agency, Inc., 117 N.H. 449, 453, 374 A.2d 656, 658 (1977).

We have frequently considered the criteria applicable to the waiver of a contractual right. E.g., Chertkof v. Southland Corp., 280 Md. 1, 5, 371 A.2d 124, 127 (1977); Bargale Indus., Inc., 275 Md. at 643-44, 343 A.2d at 533; Fidelity & Casualty Co. of New York v. Dulany, 123 Md. 486, 494, 91 A. 574, 576-77 (1914). Thus, in Bargale Industries, Inc., this Court said:

"A waiver is the intentional relinquishment of a known right, or such conduct as warrants an inference of the relinquishment of such right, and may result from an express agreement or be inferred from circumstances. '[A]cts relied upon as constituting a waiver of the provisions' of a contract must be inconsistent with an intention to insist upon enforcing such provisions." Bargale, 275 Md. at 643, 343 A.2d at 533.

The intention to waive must be clearly established and will not be inferred from equivocal acts or language. Bargale Indus., Inc., 275 Md. at 644, 343 A.2d at 533; see, e.g., Midwest Window Systems, Inc. v. Amcor Indus., Inc., 630 F.2d 535, 536 (7th Cir. 1980); James Julian, Inc. v. Raytheon Serv. Co., 424 A.2d 665, 668 (Del.Ch.1980). Thus, whether there has been a waiver of a contractual right involves a matter of intent that ordinarily turns on the factual circumstances of each case. Chertkof, 280 Md. at 5-6, 371 A.2d at 127; see, e.g., Doers v. Golden Gate Bridge, Highway & Transp. Dist., 23 Cal.3d 180, 185, 588 P.2d 1261, 1263, 151 Cal.Rptr. 837, 839 (1979); Standard Co. of New Orleans v. Elliott Constr. Co., 363 So.2d 671, 675 (La.1978); REA Express v. Missouri Pacific R. R., 447 S.W.2d 721, 727 (Tex.Civ.App.1969).

This Court has not previously considered the question whether participation as a party in a judicial proceeding constitutes a waiver of the right to arbitrate issues raised and/or decided in that proceeding. Courts in other jurisdictions that have considered the question are divided with respect to the degree of participation...