Exber, Inc. v. Sletten Const. Co.

• Decision Date: 22 December 1976
• Docket Number: No. 8236,8236
• Citation: 558 P.2d 517,92 Nev. 721
• Parties: EXBER, INC., a Nevada corporation, dba El Cortez Hotel, Appellant, v. SLETTEN CONSTRUCTION COMPANY, a Montana Corporation, et al., Respondents.
• Court: Nevada Supreme Court

Page 517

558 P.2d 517

92 Nev. 721

EXBER, INC., a Nevada corporation, dba El Cortez Hotel, Appellant, v. SLETTEN CONSTRUCTION COMPANY, a Montana Corporation, et al.,

Respondents.

No. 8236.

Supreme Court of Nevada.

Dec. 22, 1976.

George Rudiak, Las Vegas, for appellant.

W. Owen Nitz and Albright & McGimsey, Las Vegas, for respondents.

OPINION

MOWBRAY, Justice:

This is an appeal from a summary judgment in favor of Respondent Sletten Construction Company (Sletten), Cheyenne Construction, Inc. (Cheyenne), and Garcia/Case, Inc. (Garcia), ordering Appellant Exber, Inc., dba El Cortez Hotel (Exber), to submit to arbitration a construction contract dispute with its general contractor, Sletten.

This appeal is also taken from the district judge's postjudgment order denying Exber's motion under N.R.C.P. 52, wherein Exber asked that the summary judgment be amended by denying the oral motion for summary judgment made by Cheyenne and Garcia and by declaring that such summary judgment does not obligate Exber to arbitrate with the subcontractors, Cheyenne and Garcia, and by further declaring that Exber would not be bound by any arbitral award made in arbitration between Sletten and its subcontractors.

1. The Facts.

So far as pertinent to this appeal, the following are the admitted facts. On October 9, 1972, Exber entered into a construction contract with Sletten as general contractor for the construction of an addition to the El Cortez Hotel in Las Vegas. The contract incorporates by reference American Institute of Architects Document A201, entitled 'General Conditions of the Contract for Construction.' Subparagraph 7.10.1 provides in part:

'All claims, disputes and other matters in question arising out of, or relating to, this Contract or the breach thereof, . . . shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association . . . This agreement to arbitrate shall be specifically enforceable under the prevailing arbitration law. . . .' ¹

On October 12, 1972, Sletten entered into subcontracts with Cheyenne and Garcia. Article 8 of each of the subcontracts obligated the subcontractor '(t) o be bound to the Contractor by the terms of the general conditions of the specifications and addenda, and to conform to and comply with the drawings and specifications and addenda, and to assume toward the Contractor all the obligations and responsibilities that the Contractor assumes in and by the aforesaid documents toward the owner, in so far as they are applicable to this particular subcontract.' And Article C of each of the subcontracts provided for arbitration as follows: 'That where arbitration or (sic) disputes is granted the Contractor under the terms of his contract on the project covered by this agreement, such right of arbitration shall be extended to the Sub-Contractor.'

Hard rock, commonly known as 'caliche', was encountered by Cheyenne soon after excavation of the building site was commenced. On February 13, 1973, Sletten presented to the architect a claim seeking compensation for extra work resulting from the encountering of the caliche, Cheyenne having previously made such a demand on Sletten, as provided in Subparagraphs 12.1.6 ² and 12.2.1 ³ of the General Conditions.

The architect denied the claim for additional compensation by letter dated April 27, 1973, which letter was received by Sletten on April 30, 1973; on that date, Sletten notified Cheyenne that the claim had been denied. Cheyenne, on May 29, 1973, made a written demand on Sletten that the claim be submitted for arbitration. ⁴ On June 4, 1973, Sletten made a demand for arbitration upon Exber. The arbitration proceeding instituted by Cheyenne included Sletten and Exber; Garcia later joined therein. Consequently, the owner and the general contractor and its two subcontractors were all joined in a single arbitration proceeding before the American Arbitration Association. On August 4, 1973, Exber informed Sletten that it declined to participate in the arbitration for the reasons set forth in its letter of that date, which included the fact that Sletten had failed to make a timely demand for arbitration within 30 days after receiving the architect's written decision rejecting its request for additional compensation, as provided by Subparagraph 2.2.11 of the General Conditions. ⁵ Exber filed on September 14, 1973, its complaint for declaratory relief and to stay arbitration. Sletten subsequently filed a motion for summary judgment, on the ground that the district court was without jurisdiction to decide whether the demand for arbitration was timely. On April 2, 1974, Garcia, without objection, joined in the motion. On May 14, 1974, the district court filed a written decision holding among other things that '(h)ere, all the parties, including the subcontractors, Garcia/Case and Cheyenne Construction, were parties to an agreement to arbitrate' and ordering that arbitration proceed. Judgment to the same effect was entered on June 10, 1974.

On June 24, 1974, Exber filed a Rule 52 motion to alter or amend the judgment, asking that summary judgment be denied as to Cheyenne and Garcia and that the court declare that Exber had no contractual duty to arbitrate with Cheyenne or Garcia and therefore would not be bound by any arbitral award rendered in arbitration between Sletten and its subcontractor. On January 28, 1975, an order was entered denying Exber's motion to alter or amend judgment.

2. The Issues.

The issues to be determined fall into two categories:

First, whether the district court erred in ruling that there had been substantial compliance by Sletten, the general contractor, with the condition precedent necessary to enable it to invoke the covenant to arbitrate contained in the construction contract between Exber and Sletten.

Second, whether the district court erred in ordering a consolidated arbitration between Exber and both the general contractor, Sletten, and Sletten's subcontractors, Cheyenne and Garcia.

A. Thirty-four days after Exber denied Sletten's claim for extra compensation, Sletten demanded arbitration. Exber contends that the delay violates the 30-day time limit prescribed in Subparagraph 2.2.11 of the General Condition, supra. Sletten urged, and the district court so found, that the 30-day period never began to run, because the architect's written denial did not state that it was 'final but subject to appeal,' as required by Subparagraph 2.2.11 of the General Conditions.

Exber argued in the court below that the issue of timeliness constituted a condition precedent to the agreement to arbitrate and was therefore an issue to be decided by the district court. Sletten urged that this was a dispute arising under the contract and should be resolved by arbitration.

We believe and so hold that the question of the timeliness of the demand for arbitration should have been resolved by arbitration and that the court should not have entered the order staying arbitration.

Both parties have cited the court to cases supporting their respective positions. An examination of these cases reflects a split of authority. Most of the cases discussing this issue have been collected in an A.L.R. annotation, 'Waiver of, or Estoppel to Assert, Substantive Right or Right to Arbitrate as Question for Court or Arbitrator'. Annot., 26 A.L.R.3d 604 (1969, [92 Nev. 728] Supp.1975). However, the annotation describes the majority rule as vesting the arbitrator with jurisdiction to decide this question of the timeliness of the demand for arbitration. Id., at 617. The justification for the rule is based on the breadth of the language ordinarily utilized in arbitration agreements (such as in the instant case, where the parties have agreed to arbitrate all disputes arising under the contract), indicating that matters of procedural compliance are issues for arbitration. In M. Domke, 'The Law and Practice of Commercial Arbitration,' § 15.02, at 148 (1968), the author discusses contractual time limits for demanding arbitration and concludes that compliance with said limits is an issue to be resolved by arbitration: 'The question here is not how the arbitrator will apply the time limits--both contractual and statutory--but whether the arbitrator should have the competence to do so. That should be answered in the affirmative.' (Emphasis in original.)

Exber, the owner, refused to arbitrate and sought to stay the arbitration proceeding, not because the arbitrability of the substantive issues was questioned, but rather because of a dispute as to whether the demand for arbitration had been timely made. The identical question has been resolved by the United States Supreme Court in a suit brought by a labor organization to compel arbitration under § 301 of the Labor Management Relations Act. In John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964), the company alleged in had no duty to arbitrate a dispute found by the court to be arbitrable, because the union had failed to comply with certain of the procedural prerequisites to arbitration required by the governing collective bargaining agreement. There, the High Court said, at 556--557, 84 S.Ct. at 918:

'We think that labor disputes of the kind involved here cannot be broken down so easily into their 'substantive' and 'procedural' aspects. Questions concerning the procedural prerequisites to arbitration do not arise in a vacuum; they develop in the context of an actual dispute about the rights of the parties to the contract or those covered by it. . . .

'. . . It would be a curious role which required that intertwined issues of 'substance' and 'procedure' growing out of a single dispute and raising the same questions on the same facts had to be carved up between two different forums, one deciding after the other. Neither logic nor considerations of policy compel such a result.

'Once it is determined, as we have,...