Gold Coast Mall, Inc. v. Larmar Corp.

• Decision Date: 08 December 1983
• Docket Number: No. 119,119
• Citation: 468 A.2d 91,298 Md. 96
• Parties: GOLD COAST MALL, INC. v. LARMAR CORPORATION. Sept. Term 1982.
• Court: Maryland Court of Appeals

Page 96

298 Md. 96

468 A.2d 91

GOLD COAST MALL, INC. v. LARMAR CORPORATION.

No. 119 Sept. Term 1982.

Court of Appeals of Maryland.

Dec. 8, 1983.

Robin R. Cockey and Fulton P. Jeffers, Salisbury (Hearne & Bailey, P.A., Salisbury, on the brief), for appellant.

Victor H. Laws, III, Salisbury (Long, Laws, Hughes & Bahen, Salisbury, on the brief), for appellee.

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

DAVIDSON, Judge.

This case presents two questions. The first question is whether a court or an arbitrator should initially determine whether a dispute concerning the payment of rent, arising under a lease agreement containing an arbitration clause, is arbitrable. The second question is whether a party to a dispute against whom a claim is asserted, waives the right to arbitrate when the lease requires that arbitration be initiated by the appointment of an arbitrator by each of the parties, but does not expressly place the initial obligation to initiate arbitration on either of the parties and neither party to the dispute has appointed an arbitrator.

In 1976, the petitioner, Gold Coast Mall, Inc. (tenant), leased property from the respondent, Larmar Corporation (landlord), upon which an enclosed shopping mall known as Gold Coast Mall (mall) is located. The lease agreement (agreement) contained a clause that provided that disputes arising under the agreement be submitted to arbitration. The agreement required that in the event of a disagreement an arbitrator be appointed by each party within 15 days after a 60-day period of negotiation. The agreement did not expressly place the initial obligation to initiate arbitration by appointing an arbitrator on either of the parties.

On 9 June 1980, a dispute arose between the landlord and the tenant concerning the interpretation of a clause in the agreement requiring the tenant to pay the landlord a percentage of the rentals received from its subtenants in the mall (percentage rental dispute). On 18 December 1980, in the Circuit Court for Worcester County, the landlord filed a suit against the tenant seeking a declaratory judgment construing the percentage rental clause and injunctive or monetary relief. On 11 March 1981, the tenant filed a motion raising a preliminary objection on the ground that the agreement required arbitration of the percentage rental dispute. The trial court continued the landlord's suit pending the filing of a petition to compel arbitration by the tenant.

On 7 April 1981, the tenant filed a petition to compel arbitration. The landlord filed a motion for summary judgment. In an oral opinion, the trial court said:

"In essence, what was created by this Lease Agreement, appears to the Court, was an option on the part of the landlord to choose arbitration if he chose to do so, and a requirement from the tenant to arbitrate his disputes rather than go to court. It may be one sided, but it was entered into by the parties."

Thus, the trial court concluded that, although under the agreement the tenant was required to arbitrate the percentage rental dispute, the landlord was not. Additionally, in its oral opinion, the trial court said "So, the Court finds further that the arbitration agreement provided for a sixty-day negotiating period following the rise of any dispute. The Court finds that dispute arose no later than the 9th day of June, 1980, upon the writing of that letter by Mr. Brown and concluded--sixty-day period concluded on the 9th of August, and the 15-day period, after which arbitration should have been invoked, expired on the 25th day of August, and accordingly, the Petition for Arbitration at this time is untimely, untimely in the opinion of the Court."

Thus, the trial court concluded that the tenant had waived its right to arbitrate by failing timely to demand arbitration. On 6 November 1981, the trial court issued an order that granted the landlord's motion for summary judgment, denied the tenant's petition to compel arbitration, and entered a final judgment in favor of the landlord.

The tenant appealed to the Court of Special Appeals. That Court assumed without deciding that the tenant "had a right to seek arbitration." It affirmed the judgment of the trial court on the sole ground that the tenant had waived the right to arbitrate by failing to properly initiate arbitration. Gold Coast Mall, Inc. v. Larmar Corp., No. 1732, September Term, 1981, filed 4 August 1982 (per curiam).

The tenant filed a petition for a writ of certiorari that we granted. We shall reverse the judgment of the Court of Special Appeals.

The relevant provisions of the agreement between the landlord and the tenant are Section 27, the arbitration clause, Section 20, the distraint clause, and Section 22, the cumulative remedies clause.

Section 27, the arbitration clause, provides in pertinent part:

"Arbitration. In the event of disagreement between the parties during the term hereof which they are unable to resolve within sixty days by negotiation between them, then it is agreed that such disagreement shall be submitted by the parties to 'informal three-man arbitration', as hereinafter defined.

" 'Informal three-man arbitration', if required hereunder, shall mean the following procedure: Each party to the disagreement, within fifteen (15) days after the 60-day negotiation time, shall appoint one arbitrator to represent him; the two arbitrators thus appointed shall, within fifteen (15) days after the second of them is appointed, jointly appoint a disinterested, mature and competent person as the third arbitrator; and within fifteen (15) days after said third arbitrator is thus designated, the three arbitrators, by majority vote, shall settle and decide the disagreement...." (Emphasis added.)

Section 20, the distraint clause, provides:

"Distraint and Other Remedies. If the rent agreed to be paid, including all other sums of money which under the provisions hereof may be considered as additional rent, shall be in arrears in whole or in part for thirty or more days after written notice Landlord may distrain therefor in accordance with legal process. If Tenant shall violate any convenants, including the covenant to pay rent, made by it in this Lease Agreement and shall fail to comply or commence compliance with said covenant within thirty days after being sent written notice of such violation by Landlord, Landlord may, at its option, reenter the premises and declare this lease and the tenancy hereby created terminated; and Landlord shall be entitled to the benefit of all provisions of the public local laws of Worcester County or the public general laws of Maryland respecting the speedy recovery of lands and tenements held over by Tenants or proceedings in forcible entry and detainer. Tenant further agrees that notwithstanding such reentry Tenant shall remain liable for any rent or damages which may be due or sustained prior thereto." (Emphasis added.)

Section 22, the cumulative remedies clause, provides:

"Remedies Cumulative. No mention in this Lease Agreement of any specific right or remedy shall preclude Landlord from exercising any other right or from having any other remedy or from maintaining any action to which it may otherwise be entitled either at law or in equity, and the failure of Landlord to insist in any one or more instances upon a strict performance of any covenant of this Lease Agreement or to exercise any option or right herein contained shall not be construed as a waiver or relinquishment for the future of such covenant, right or option, but the same shall remain in full force and effect unless the contrary is expressed in writing by Landlord." (Emphasis added.)

I

Arbitration is the process whereby parties voluntarily agree to substitute a private tribunal for the public tribunal otherwise available to them. Arbitration is a matter of contract which the parties should be allowed to conduct in accordance with their agreement. Charles J. Frank, Inc. v. Associated Jewish Charities of Baltimore, Inc., 294 Md. 443, 448, 450 A.2d 1304, 1306 (1982); C.W. Jackson & Associates v. Brooks, 289 Md. 658, 666, 426 A.2d 378, 382 (1981). A party cannot be required to submit any dispute to arbitration that it has not agreed to submit. United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83, 80 S.Ct. 1347, 1353, 4 L.Ed.2d 1409 (1960); see C.W. Jackson & Associates, 289 Md. at 666, 426 A.2d at 382.

The Maryland Uniform Arbitration Act, enacted in 1965, Maryland Code (1974, 1980 Repl.Vol. & 1983 Cum.Supp.) §§ 3-201 through 3-234 of the Courts and Judicial Proceedings Article, embodies a legislative policy favoring enforcement of executory agreements to arbitrate. Charles J. Frank, Inc., 294 Md. at 448, 450 A.2d at 1306; Aetna Casualty & Surety Co. v. Insurance Commissioner, 293 Md. 409, 421, 445 A.2d 14, 19 (1982); Maietta v. Greenfield, 267 Md. 287, 291, 297 A.2d 244, 246 (1972). In accord with this legislative policy, the Act strictly confines the function of the court in suits to compel arbitration to the resolution of a single issue--is there an agreement to arbitrate the subject matter of a particular dispute. § 3-207. ¹ See United Steelworkers of America v. American Manufacturing Co., 363 U.S. 564, 567-68, 80 S.Ct. 1343, 1346, 4 L.Ed.2d 1403 (1960). Where the language of the arbitration clause is clear, and it is plain that the dispute sought to be arbitrated falls within the scope of the arbitration clause, arbitration should be compelled. If it is apparent, on the other hand, that the issue sought to be arbitrated lies beyond the scope of the arbitration clause, the opposing party should not be compelled to arbitration, since there is no agreement to arbitrate. E.g., Bel Pre Medical Center, Inc. v. Frederick Contractors, Inc., 21 Md.App. 307, 321, 320 A.2d 558, 566 (1974), modified on other grounds, 274 Md. 307, 334 A.2d 526 (1975); Atcas v. Credit Clearing Corp. of...