First Condominium Development Co. v. Apex Const. and Engineering Corp.

• Decision Date: 29 June 1984
• Docket Number: No. 82-2793,82-2793
• Parties: , 81 Ill.Dec. 810 FIRST CONDOMINIUM DEVELOPMENT COMPANY, Plaintiff-Appellee, v. APEX CONSTRUCTION AND ENGINEERING CORPORATION, Defendant-Appellant, and Swann & Weiskopf, Ltd., et al., Defendants.
• Court: United States Appellate Court of Illinois

Page 932

467 N.E.2d 932

126 Ill.App.3d 843, 81 Ill.Dec. 810

FIRST CONDOMINIUM DEVELOPMENT COMPANY, Plaintiff-Appellee, v. APEX CONSTRUCTION AND ENGINEERING CORPORATION, Defendant-Appellant and Swann & Weiskopf, Ltd., et al., Defendants.

No. 82-2793.

Appellate Court of Illinois First District, Third Division.

June 29, 1984.

As Modified Upon Motion for

Clarification Sept. 5, 1984.

Robert G. Cook, Jr., Chicago, for defendant-appellant Apex Const. & Engineering Corp.

Jenner & Block, Chicago (Richard J. Gray and Darryl M. Bradford, Chicago, of counsel), for plaintiff-appellee.

McGILLICUDDY, Justice:

This is an interlocutory appeal from the granting of First Condominium Development Company's (First Condo) motion to stay arbitration and the denial of defendant Apex Construction & Engineering Corporation's (Apex) motion to stay litigation in this cause.

In January 1979 First Condo began a condominium conversion project at the University Apartments on East 55th Street in Chicago. First Condo contracted with Apex for the construction of a pool, bathhouse and health club, including general contracting, plumbing, heating, ventilation, air conditioning and electrical work, "except work shown by others on plans or specifications." The work was to be completed by May 30, 1979. Construction was actually completed on or about January 19, 1981. The contract documents which were prepared by First Condo incorporated the latest edition of the American Institute of Architects (AIA) Documents A201, General Conditions of Contract for Construction, which included a general arbitration clause at section 7.9.1.

On June 16, 1982, First Condo filed its first amended complaint against Apex and six codefendants. Count One was against Swann & Weiskopf, Ltd., James A. Swann and Malcolm S. Weiskopf (architect) based on contract. Counts Two and Three alleged wilful and wanton misconduct and misrepresentation by the architect. Count Four against Apex was based on the breach of contract between Apex and First Condo. Count Five against Apex alleged wilful and wanton misconduct. Count Six for breach of contract was brought against the pool contractor, Paddock of the Midwest, Inc. (Paddock). Count Seven charged Paddock with wilful and wanton misconduct. Count Eight charged the engineer, Jerome M. Klipp & Associates (Klipp) with breach of contract. Paddock subsequently filed a third party complaint against Trumbull Excavating Company on a subcontract. First Condo sought compensatory and punitive damages against the architect, Apex, and Paddock and compensatory damages against Klipp.

Essentially, First Condo's complaint alleged that at different times during the construction of the pool, bathhouse and indoor health club, unidentified individuals under the supervision of the architect and/or Apex and/or Paddock severed an electrical utility line (September 25, 1979), a gas utility line (October 8, 1979) and a telephone cable and conduit system (June 14, 1980). Due to these mishaps it was necessary to relocate and re-excavate the pool on at least one occasion resulting in money damages to First Condo, including construction cost overruns, the expense of obtaining zoning variances, damage to personal property, repair of utility lines, the cost of compensating the condominium association for the late opening of the pool and health club, and damage to First Condo's business reputation and good will as a condominium developer, resulting in unsold condominium units.

On March 26, 1981, Apex filed with the American Arbitration Association a demand for arbitration for the balance due under the contract, plus extras ordered and furnished, of $108,629.41. On March 27, 1981, Apex filed a motion to stay proceedings against it on First Condo's complaint in the trial court. On July 30, 1981, First Condo filed a motion to stay arbitration, denying the existence of a binding arbitration agreement between the parties. Both parties filed memoranda of law in support of their positions. The trial court found that the contract documents between First Condo and Apex included a valid arbitration clause. The court stated that the issue was whether the agreement should be enforced despite the pending multiparty litigation and third party claims. Both parties again filed memoranda. On October 20, 1982, the trial court granted First Condo's motion to stay arbitration and denied Apex's motion to stay the law proceedings. Apex appeals.

The issue before this court is whether the trial court erred in enjoining arbitration once it had determined that an enforceable arbitration agreement existed between the parties.

Sections 2(a) and (d) of the "Uniform Arbitration Act" (Arbitration Act) (Ill.Rev.Stat.1979, ch. 10, pars. 102(a) and (d)) provides:

"(a) On application of a party showing an agreement described in Section 1, and the opposing party's refusal to arbitrate, the court shall order the parties to proceed with arbitration, but if the opposing party denies the existence of the agreement to arbitrate, the court shall proceed summarily to the determination of the issue so raised and shall order arbitration if found for the moving party, otherwise the application shall be denied.

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(d) Any action or proceeding involving an issue subject to arbitration shall be stayed if an order for arbitration or an application therefor has been made under this Section or, if the issue is severable, the stay may be with respect thereto only. When the application is made in such action or proceeding, the order for arbitration shall include such stay."

Section 1 of the Arbitration Act referred to above provides as follows in pertinent part:

"Validity of arbitration agreement. A written agreement to submit any existing controversy to arbitration or a provision in a written contract to submit to arbitration any controversy thereafter arising between the parties is valid, enforceable and irrevocable save upon such grounds as exist for the revocation of any contract * * *." Ill.Rev.Stat.1979, ch. 10, par. 101.

It is well established principle that arbitration is favored by the state, Federal and common law. (Brennan v. Kenwick (1981), 97 Ill.App.3d 1040, 54 Ill.Dec. 574, 425 N.E.2d 439; School District No. 46 v. Del Bianco (1966), 68 Ill.App.2d 145, 215 N.E.2d 25, leave to appeal denied 33 Ill.2d 628.) The object of arbitration is to foster the final disposition of disputes in an easier, quicker and more economical manner than by litigation. Once a contract containing a valid arbitration clause has been executed the parties are irrevocably committed to arbitrate all disputes arising under the agreement. School District No. 46 v. Del Bianco.

In Del Bianco a school district brought suit against the general contractor, the architect and the bonding company regarding the construction of an elementary school. The architect, Del Bianco, filed a motion to stay the proceedings and compel arbitration which the trial court denied. In reversing the trial court order and ordering the parties to arbitrate, the appellate court stated that the sole issue under the Arbitration Act in a preliminary hearing to stay or compel arbitration is whether there is an agreement to arbitrate; and that the provisions of the Act militate against the argument that a party to an arbitration agreement may choose between a judicial or arbitration forum. 68 Ill.App.2d 145, 156, 215 N.E.2d 25.

In commenting favorably upon the Del Bianco decision, the U.S. Court of Appeals for the 7th Circuit stated in Galt v. Libbey-Owens Ford Glass Co. (7th Cir.1967), 376 F.2d 711 that section 2(d) of the Arbitration Act shows that the Illinois legislature contemplated arguments involving multiparty litigation and circuity of action and that consequently section 2(d) provides a court with two options: it may stay the entire proceeding pending arbitration, or, if the issue is severable, the stay may be with respect to that issue only.

Iser Electric Co. v. Fossier Builders, Ltd. (1980), 84 Ill.App.3d 161, 39 Ill.Dec. 686, 405 N.E.2d 439 was the first Illinois case to consider directly the question of whether a court may refuse to compel arbitration involving some but not all the parties to multiparty litigation. The court stated the general rule that agreements to arbitrate will be enforced despite the existence of claims by third parties or of pending multiparty litigation. In Iser the defendant-counterplaintiff, Fossier, had contracted with defendants-counterdefendants, the Carriers, to build a home. The contract contained a general arbitration clause which provided that "all claims, disputes and other matters in question between the Contractor (Fossier) and the Owner (Carriers) arising out of, or relating to, the Contract, Documents or the breach thereof * * * shall be decided by arbitration * * *." (84 Ill.App.3d 161, 162, 39 Ill.Dec. 686, 405 N.E.2d 439.) After the Carriers terminated their contract with Fossier, plaintiff Iser, an electrical subcontractor, originally hired by Fossier and later by the Carriers, sued both Fossier and the Carriers for the balance due for work performed on the premises, seeking the entire amount from each party. In response to Iser's suit, Fossier filed a counterclaim against the Carriers alleging that they had breached the contract by wrongfully terminating it. The Carriers filed a motion pursuant to section 2(b) of the Arbitration Act for an order severing the counterclaim or staying its prosecution pending arbitration, requiring Fossier to arbitrate its claim against the Carriers. The trial court denied the motion. The Carriers appealed.

In its argument on appeal Fossier relied principally upon a Minnesota case, Prestressed Concrete, Inc. v. Adolfson & Peterson, Inc. (1976), 308 Minn. 20, 240 N.W.2d 551, where a subcontractor had brought an action for damages against the owner and general contractor and the owner had brought counterclaims against its architects and...