Grover-Dimond Associates v. American Arbitration Ass'n

• Decision Date: 28 September 1973
• Docket Number: GROVER-DIMOND,No. 43721,43721
• Citation: 297 Minn. 324,211 N.W.2d 787
• Parties: , 64 A.L.R.3d 522 ASSOCIATES, Appellant, v. AMERICAN ARBITRATION ASSOCIATION, Defendant, Eljay Partnership, et al., Respondents, Naugle-Leck, Inc., Respondent.
• Court: Minnesota Supreme Court

Page 787

211 N.W.2d 787

297 Minn. 324, 64 A.L.R.3d 522

GROVER-DIMOND ASSOCIATES, Appellant, v. AMERICAN ARBITRATION ASSOCIATION, Defendant Eljay Partnership, et al., Respondents Naugle-Leck, Inc., Respondent.

No. 43721.

Supreme Court of Minnesota.

Sept. 28, 1973.

Syllabus by the Court

It is proper to order joint arbitration to resolve disputes between an owner and his contractor and an owner and his architect to determine responsibility for incurring unauthorized construction expenditures, where the arbitration agreements do not prohibit proceeding jointly, the same arbitrators have been selected in each matter, and no prejudice to the objecting architect has been shown.

Meagher, Geer, Markham & Anderson and O. C. Adamson, II, Minneapolis, for appellant.

Doherty, Rumble & Butler and John J. McGirl, Jr., Boyd H. Ratchye and Michael T. McKim, St. Paul, for Eljay Partnership and others.

Stringer, Donnelly, Allen & Sharood and Henry H. Cowie, Jr., St. Paul, for Naugle-Leck, Inc.

Heard before KNUTSON, C.J., and OTIS, PETERSON, and TODD, JJ.

OTIS, Justice.

The issue on this appeal is whether arbitration proceedings between a building owner and its contractor may be conducted jointly with an arbitration between the owner and its architect. The trial court denied the architect's motion to prohibit joint arbitration and the architect appeals. We affirm.

These proceedings arise out of the construction of the Capital Centre Skyway Building by the owners, Eljay Partnership and Northerly Centre Corporation, in downtown St. Paul. Northerly Centre retained as architect, Grover-Dimond Associates, Inc., under a contract which contained the following arbitration provision:

'Arbitration of all questions in dispute under this Agreement shall be at the choice of either party and shall be in accordance with the provisions, then obtaining, of the Standard Form of Arbitration Procedure of The American Institute of Architects. This Agreement shall be specifically enforceable under the prevailing arbitration law and judgment upon the award rendered may be entered in the court of the forum, state or federal, having jurisdiction. The decisions of the arbitrators shall be a condition precedent to the right of any legal action.'

The general contractor was Naugle-Leck, Incorporated, whose contract with the owners also contained an arbitration provision. It is the owners' contention that in the course of construction unauthorized expenses amounting to $1,476,759.09 were incurred by the architect and the contractors. The owners thereupon sought joint arbitration to which the contractor ultimately consented but which the architect has resisted in the trial court and in this court.

Nothing in the various arbitration provisions or in the statute expressly deals with the question of joint arbitration. The architect relies on the following provisions of Minn.St. 572.09(b):

'On application, the court may stay an arbitration proceeding commenced or threatened on a showing that there is no agreement to arbitrate. Such an issue, when in substantial and bona fide dispute, shall be forthwith and summarily tried and the stay ordered if found for the moving party. If found for the opposing party, the court shall order the parties to proceed to arbitration.'

The architect correctly points out that the right to arbitrate is governed by contract and the parties may fashion whatever agreement they wish to limit the scope of the proceedings. In opposing joint arbitration, the architect objects to requiring a party 'to arbitrate the claims of strangers and have strangers meddle in the arbitration of claims against him.' However, no party to this litigation is being required to arbitrate its claims for or against a stranger. The owners are entitled to arbitrate their dispute with the contractor and their dispute with the architect. There is no suggestion that the architect and contractor are obliged to arbitrate their differences in that proceeding. The only question is whether the two arbitration matters demanded by the owners should be heard at the same time and place or whether they should be heard separately.

Clearly, it is the policy of this state, as reflected by Minn.St. c. 572 and by our decisions, to encourage arbitration as a 'speedy, informal, and relatively inexpensive procedure for resolving controversies arising out of commercial transactions.' Layne-Minnesota Co. v. Regents of the University, 266 Minn. 284, 287, 123 N.W.2d 371, 374 (1963). We do not in this state 'intend to revive or encourage the historical common-law animosity toward arbitration in general.' Atcas v. Credit Clearing Corp. of America, 292 Minn. 334, 349, 197 N.W.2d 448, 457 (1972). While, of course, an explicit agreement by the parties prevails over the Rules of Civil Procedure, it may be noted that both joinder and consolidation are authorized under Rules 19 and 42.

Little authority on the right to joint arbitration has come to our attention. ¹ The Court of Appeals of Michigan in J. Brodie & Son, Inc. v. George A. Fuller Co., 16 Mich.App. 137, 167 N.W.2d 886 (1969), refused to approve joint arbitration where the owner's agreement with the contractor provided for arbitration and the contractor's agreement with its subcontractors had a similar provision, but no arbitration agreement existed between the owner and the subcontractors. Neither the contractor nor the owner wished joint arbitration. The court held that in the absence of any privity, the subcontractors could not bypass the contractor or even join it to arbitrate with the owner with whom they had no contractual relationship. In the instant case, the owners seek only to arbitrate with those who have agreed to do so.

The Superior Court of New Jersey in Wm. C. Blanchard Co. v. Beach Concrete Co. Inc., 121 N.J.Super. 418, 297 A.2d 587 (1972), declined to grant joint arbitration to an owner, contractor, and subcontractors in the absence of an express provision in the arbitration contracts or legislation authorizing consolidation. We believe that New York has adopted the better rule and one which we elect to follow. Matter of Adam Consolidated Industries, 6 App.Div.2d 515, 180 N.Y.S.2d 507 (1958), and Matter of...