D.M. Ward Const. Co., Inc. v. Electric Corp. of Kansas City

• Decision Date: 28 December 1990
• Docket Number: No. 64824,64824
• Citation: 803 P.2d 593,15 Kan.App.2d 114
• Parties: D.M. WARD CONSTRUCTION COMPANY, INC., et al., Appellant, v. ELECTRIC CORPORATION OF KANSAS CITY, Appellee.
• Court: Kansas Court of Appeals

Page 593

803 P.2d 593

15 Kan.App.2d 114

D.M. WARD CONSTRUCTION COMPANY, INC., et al., Appellant, v. ELECTRIC CORPORATION OF KANSAS CITY, Appellee.

No. 64824.

Court of Appeals of Kansas.

Dec. 28, 1990.

Review Denied March 14, 1991.

Syllabus by the Court

1. K.S.A. 5-402(a) clearly requires a trial judge to stay court proceedings and compel arbitration when the parties have entered into a binding agreement to arbitrate disputes.

2. The conduct of a party that is inconsistent with the treatment of a contractual arbitration provision, or conduct that a court could reasonably construe as evidencing a lack of intent to take advantage of an arbitration provision, may amount to the waiver of a right to arbitrate.

3. The scope of review by an appellate court on the issue of whether a party has waived its right to arbitration is limited. A finding by the trial court that a party has waived its right to arbitration is a legal conclusion subject to plenary review by the appellate court; however, the findings upon which the conclusion of waiver is based are predicate questions of fact which may not be overturned by the appellate court unless such findings are clearly erroneous.

4. The essential issue in determining whether a party has waived its right to arbitration is not whether the moving party's actions have been consistent with arbitration, but rather, whether prejudice would occur to the party opposing arbitration.

5. Factors to be considered by the court in determining whether a party has waived the right to arbitration are: (1) whether the party's actions are inconsistent with the right to arbitrate; (2) whether the litigation machinery has been substantially invoked and the parties are well into preparation of a lawsuit before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) whether important intervening steps (e.g., taking advantage of judicial discovery procedures not available in arbitration) had taken place; and (6) whether the delay affected, misled, or prejudiced the opposing party.

6. It is a general rule of law that uncontroverted evidence which is not improbable or unreasonable cannot be disregarded by the trial court unless it is shown to be untrustworthy, and such uncontroverted evidence should ordinarily be regarded as conclusive.

7. Testimony may be controverted by the testimony of any competent witness or the admission of any relevant evidence.

Bruce Keplinger, of Payne & Jones, Chartered, Overland Park, for appellant.

Patrick D. McAnany and Douglas M. Greenwald, of McAnany, Van Cleave & Phillips, P.A., Lenexa, for appellee.

Before LARSON, P.J., DAVIS, J., and RICHARD W. WAHL, District Judge Retired, Assigned.

RICHARD W. WAHL, District Judge Retired, Assigned:

This is a contract dispute between Electric Corporation of Kansas City (Electric Corp.) and D.M. Ward Construction Co., Inc., (Ward). Ward appeals the trial court's judgment refusing to compel arbitration of this dispute and refusing to grant Ward a setoff from the judgment entered for Electric Corp.

In 1985, Ward, a general contractor, contracted with Distron, Inc., a division of Burger King Corporation, to build a warehouse-distribution center in Kansas City, Kansas. Ward selected Electric Corp. as the electrical contractor for the project, and the parties entered into a written subcontract on September 30, 1985. Ward supplied the American Institute of Architects standard form subcontract agreement that the parties used. The subcontract contained a provision stating: "All claims, disputes and other matters in question arising out of, or relating to, this subcontract ... shall be decided by arbitration."

The warehouse was to contain office space, storage space, and large drive-in refrigerator and freezer units which occupied approximately 30 or 40 percent of the floor space of the warehouse. The refrigerated portions of the warehouse were to be cooled by a computerized ammonia cooling system, which included a sensitive ammonia detection system.

During construction, Electric Corp. was called upon to perform several tasks which were not included in the subcontract with Ward. Ward also requested Electric Corp. to install temperature control wiring for the ammonia system, believing such wiring to be part of Electric Corp.'s subcontract. Electric Corp. disputed this claim, arguing the only temperature control wiring it agreed to install was that relating to the heating and cooling systems for the office area. Electric Corp. believed the temperature control wiring for the ammonia system was the responsibility of the refrigeration contractor, Preston Refrigeration. Ward eventually hired another electrical contractor, Broadway Electrical Construction (Broadway), to install the ammonia system wiring.

Electric Corp. completed its work on the warehouse on January 14, 1987, but as of March 23, 1987, had not been paid the full contract price or for the extra work performed, so Electric Corp. filed a mechanic's lien against the property. Ward made further payments to Electric Corp. after the lien was filed, but still owed Electric Corp. approximately $20,000 a year later. Electric Corp. brought suit against Ward and Burger King in March 1988 to collect the balance due. Ward filed an answer on April 11, 1988, but the answer did not mention the arbitration clause of the subcontract.

In December 1988, following discovery, the court set the matter for trial on January 10, 1989, then on December 21, 1988, reset trial for February 7, 1989. On January 3, 1989, Ward filed a motion to compel arbitration and stay the trial court's proceedings pursuant to K.S.A. 5-402(a). The appearance docket indicates the trial court denied this motion on January 20, 1989, but no journal entry was filed.

Ward's defenses at trial were that Electric Corp. had not adequately performed under the contract, that it did not promptly submit some of the bills for the extra work in a timely manner as required by the subcontract, and that Electric Corp.'s labor charges were unreasonable. Ward also claimed a setoff for amounts paid to Broadway to complete the temperature control wiring for the ammonia system.

The trial court found the subcontract was ambiguous on whether Electric Corp. was required to install the ammonia system temperature control wiring and construed the contract strictly against Ward. The trial court also found Electric Corp.'s charges were reasonable and its billings were timely submitted, except for two items which were billed late. The trial court found, however, the late billing on these items did not prejudice Ward and thus allowed Electric Corp. to recover for them. The trial court entered judgment in favor of Electric Corp. for $23,932.46.

Ward filed a post-trial motion to alter or amend the judgment, alleging K.S.A. 5-402(a) required the trial court to compel arbitration when it was requested by Ward. Ward also argued that the trial court erred in not allowing a setoff based on the undisputed evidence at trial that the parties had a clear understanding of what the term "temperature control wiring" meant. The trial court denied Ward's motion in total and Ward timely appeals.

On appeal, Ward argues the trial court erred in refusing to compel arbitration because: (1) the subcontract requires arbitration of all disputes; (2) K.S.A. 5-402(a) requires the trial court to compel arbitration when requested by a party; (3) arbitration agreements are statutorily recognized and their enforceability supported by Kansas case law; and (4) Ward did not waive its right to arbitration. Electric Corp. contends Ward's tardy attempt to compel arbitration was barred by waiver, estoppel, or laches.

Waiver is "an intentional renunciation of a claim or right and exists only where there has been some absolute action or inaction inconsistent with that claim or right." Proctor Trust Co. v. Neihart, 130 Kan. 698, 705, 288 P. 574 (1930). Waiver of a contract right " 'implies a voluntary and intentional renunciation of it, and some positive act or positive inaction inconsistent with the contract right is necessary to create a waiver. [Citations omitted.]' " 130 Kan. at 705, 288 P. 574. See Rice v. Hillenburg, 13 Kan.App.2d 155, 161, 766 P.2d 182 (1988), rev. denied 244 Kan. 738 (1989).

There is no journal entry in the record denying Ward's motion to compel arbitration. However, the trial court explained its reason for denying the motion in its decision denying Ward's post- trial motion to alter or amend the judgment. The journal entry provides:

"[T]he court originally denied the defendant's request for arbitration, due to the fact that the trial was set to commence on February 2, 1989, and the motion to compel arbitration was not filed and brought to the attention of the court until January 3, 1989. The court found at that time that provisions for arbitration are generally included in contracts so that matters might be settled in shorter periods of time, and to grant arbitration in this case would have the effect of actually delaying the process of adjudication of the dispute. The court finds no sufficient reason to disturb that prior ruling on this issue."

K.S.A. 5-402(a) clearly requires a trial judge to stay court proceedings and compel arbitration when the parties have entered into a binding agreement to arbitrate disputes. In this respect, Kansas law is virtually identical to the provisions of the Federal Arbitration Act. See 9 U.S.C. §§ 2, 3 (1988). In Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 218, 105 S.Ct. 1238, 1241, 84 L.Ed.2d 158 (1985), the Court held that, where parties have agreed to arbitrate disputes, district courts have no discretion to refuse to enforce arbitration clauses...