City of Ferndale v. Florence Cement

• Decision Date: 17 January 2006
• Docket Number: Docket No. 254572.
• Parties: CITY OF FERNDALE, Plaintiff-Appellant, v. FLORENCE CEMENT COMPANY and Hartford Casualty Ins Company, Defendants-Appellees.
• Court: Court of Appeal of Michigan — District of US

Page 522

712 N.W.2d 522

269 Mich. App. 452

CITY OF FERNDALE, Plaintiff-Appellant, v. FLORENCE CEMENT COMPANY and Hartford Casualty Ins Company, Defendants-Appellees.

Docket No. 254572.

Court of Appeals of Michigan.

Submitted September 7, 2005, at Detroit.

Decided January 17, 2006, at 9:15 a.m.

Released for Publication March 31, 2006.

Beier Howlett, P.C. (by P. Daniel Christ and L. Rider Brice, III), Bloomfield Hills, for the plaintiff.

Kerr, Russell and Weber, PLC (by Michael D. Carroll and James R. Case), Detroit and Ruggirello, Velardo, Novara and Ver Beek, P.C. (by Armand Velardo and Peter M. Ruggirello), Mt. Clemens, for the defendants.

Before: HOEKSTRA, P.J., and GAGE and WILDER, JJ.

WILDER, J.

Plaintiff appeals as of right the trial court's order granting defendants' motion for summary disposition pursuant to MCR 2.116(C)(7) and (C)(10). We reverse and remand.

I

Plaintiff city of Ferndale entered into a contract with defendant Florence Cement Company (Florence) to install new concrete for a roadway in the city. Defendant Hartford Casualty Insurance Company (Hartford) provided a maintenance and guarantee bond on the work performed by Florence.

Paragraph 9.11 of the parties' contract establishes an appeal process that may be invoked in the event the project engineer, Giffels-Webster Engineers, Inc. (engineer), declares work to be defective. Paragraph 9.11 provides in relevant part:

Decisions on Disputes:

9.11. ENGINEER will be the initial interpreter of the requirements of the Contract Documents and judge of the acceptability of the Work thereunder. Claims, disputes and other matters relating to the acceptability of the Work or the interpretation of the requirements of the Contract Documents pertaining to the performance and furnishing of the Work . . . will be referred initially to ENGINEER in writing. . . . Written notice of each such claim, dispute or other matter will be delivered by the claimant to ENGINEER and the other party to the Agreement promptly . . . after the start of the occurrence or event giving rise thereto, and written supporting data will be submitted to ENGINEER and the other party within sixty days after the start of such occurrence or event. . . . ENGINEER will render a formal decision in writing within thirty days after receipt of the opposing party's submittal, if any, in accordance with this paragraph. ENGINEER's written decision on such claim, dispute or other matter will be final and binding upon OWNER and CONTRACTOR unless: (i) an appeal from ENGINEER's decision is taken within the time limits and in accordance with the procedures set forth in EXHIBIT GC-A, "Dispute Resolution Agreement," entered into between OWNER and CONTRACTOR^[1]... or (ii) if no such Dispute Resolution Agreement has been entered into, a written notice of intention to appeal from ENGINEER's written decision is delivered by OWNER or CONTRACTOR to the other and to ENGINEER within thirty days after the date of such decision and a formal proceeding is instituted by the appealing party in a forum of competent jurisdiction to exercise such rights or remedies as the appealing party may have with respect to such claim, dispute or other matter in accordance with applicable Laws and Regulations within sixty days of the date of such decision, unless otherwise agreement in writing by OWNER and CONTRACTOR.

On July 12, 2001, the project manager for the engineer notified Florence that plaintiff was seeking replacement of 300 yards of concrete because of deterioration and crumbling. In a letter dated September 5, 2001, the engineer characterized the defect as substantive and structural, requesting that Florence perform full-depth repairs. Florence disagreed with the engineer's assessment, requested a site visit together with the engineer, and suggested an alternative remedy.² Approximately one week after the September 19, 2001, site visit, the engineer rejected the alternative remedy proposed by Florence on the basis that it provided only a temporary solution, thus exposing plaintiff to future expense and repairs. Accordingly, the engineer communicated that plaintiff continued to require full replacement of the concrete. Florence responded on October 3, 2001, denied responsibility for the defect, and characterized the defect as nonstructural. Once again, Florence, asserting that full-depth repairs were not necessary, offered a partial-depth solution recommended by its expert to correct the defective concrete. Plaintiff consulted its expert and, in a final demand letter dated October 9, 2001, the engineer reiterated his requirement for full-depth repairs, requesting that Florence respond by October 15, 2001.

Florence did not agree to perform full-depth repairs,³ and plaintiff hired another cement company to perform the full-depth replacement work, apparently without giving notice of the hiring to Florence.⁴ On November 27, 2002, Hartford denied plaintiff's November 28, 2001, demand and claim under the maintenance and guarantee bond. Plaintiff subsequently sent Florence an invoice in the amount of $35,361.79 for costs associated with replacing the allegedly defective concrete. Florence did not pay the invoice amount, and plaintiff filed a complaint in circuit court, alleging breach of contract against Florence and seeking payment on the maintenance and guarantee bond from Hartford.

Defendants filed a joint motion for summary disposition under MCR 2.116(C)(7) and (C)(10), arguing that under paragraph 9.11 of the contract, the engineer's determination constituted an arbitration award that plaintiff did not seek to enforce within one year of the October 9, 2001, "decision." Defendants argued that because plaintiff did not seek to enforce the decision within a one-year time frame, plaintiff's claim was time-barred pursuant to MCR 3.602(I). Plaintiff opposed summary disposition, arguing that because the engineer "ruled" in its favor, the decision became binding when Florence failed to appeal. Plaintiff further argued that the appeals process in paragraph 9.11 controlled and that MCR 3.602(I) did not apply because the parties' agreement contained no arbitration clause.

Following a hearing on defendants' motion for summary disposition, the trial court ruled that plaintiff's claim was time-barred. While acknowledging that the parties' contract did not include an arbitration clause, the trial court nonetheless concluded "this is [not] a legally significant distinction." Relying on City of Huntington Woods v. Ajax Paving Industries (After Remand), 196 Mich.App. 71, 492 N.W.2d 463 (1992), the trial court ruled that because the parties agreement provided for a contractually agreed method of alternative dispute resolution that designated the engineer's decision as "final and binding" if the appellate procedures were not followed, the engineer's ruling constituted a final arbitration award subject to the one-year limitations period in MCL 3.602(I). Plaintiff now appeals.

II

We review whether a cause of action is barred by the statute of limitations under MCR 2.116(C)(7), Bryant v. Oakpointe Villa Nursing Ctr., Inc., 471 Mich. 411, 419, 684 N.W.2d 864 (2004), and whether the cause of action is barred by the statute of limitations is a question of law that this Court reviews de novo, McKiney v. Clayman, 237 Mich.App. 198, 201, 602 N.W.2d 612 (1999). We consider all documentary evidence submitted by the parties, accepting as true the contents of the complaint unless affidavits or other appropriate documents specifically contradict it. Bryant, supra at 419, 684 N.W.2d 864.

When deciding a motion for summary disposition under MCR 2.116(C)(10), a court must consider the pleadings, affidavits, depositions, admissions, and other documentary evidence submitted in the light most favorable to the nonmoving party.⁵ Corley v. Detroit Bd. of Ed., 470 Mich. 274, 278, 681 N.W.2d 342 (2004). Summary disposition is proper under MCR 2.116(C)(10) if the documentary evidence shows that there is no genuine issue regarding any material fact and the moving party is entitled to judgment as a matter of law. A genuine issue of material fact exists when the record, giving the benefit of reasonable doubt to the opposing party, leaves open an issue on which reasonable minds could differ. West v. Gen. Motors Corp., 469 Mich. 177, 183, 665 N.W.2d 468 (2003).

III

Plaintiff contends that the trial court erred in finding that the engineer's decision constituted an arbitration award subject to the one-year limitations period for judicial confirmation of arbitration awards under MCR 3.602. We agree.

An agreement to arbitrate is a contract. Beattie v. Autostyle Plastics, Inc., 217 Mich.App. 572, 577, 552 N.W.2d 181 (1996). The cardinal rule in the interpretation of contracts is to ascertain the intention of the parties. Rasheed v. Chrysler Corp., 445 Mich. 109, 127 n. 28, 517 N.W.2d 19 (1994). The existence of an arbitration agreement and the enforceability of its terms are judicial questions for the court, not the arbitrators. Fromm v. MEEMIC Ins. Co., 264 Mich.App. 302, 305, 690 N.W.2d 528 (2004).

Under the Michigan arbitration statutes, an agreement to settle a controversy by arbitration is valid, enforceable, and irrevocable if the agreement provides that a circuit court can render judgment on the arbitration award. MCL 600.5001 and 600.5025; Tellkamp v. Wolverine Mut. Ins. Co., 219 Mich.App. 231, 237, 556 N.W.2d 504 (1996). The intent to render the award enforceable in court must be clearly indicated by a contract provision. Id.

In this case, the parties' agreement did not contain an arbitration clause or specify that any resultant award was enforceable in court. In particular, the parties did not make a "Dispute Resolution Agreement" a part of their contract.⁶ Because it is only "[u]pon the making of an agreement" that a circuit court obtains "jurisdiction to enforce the agreement and to render judgment on an award thereunder," MCL 600.5025,...