Joder Bldg. Corp. v. Lewis

• Decision Date: 09 November 1989
• Docket Number: No. 87-332,87-332
• Citation: 153 Vt. 115,569 A.2d 471
• Court: Vermont Supreme Court
• Parties: JODER BUILDING CORPORATION v. Leroy and Martha LEWIS.

Page 471

569 A.2d 471

153 Vt. 115

JODER BUILDING CORPORATION v. Leroy and Martha LEWIS.

No. 87-332.

Supreme Court of Vermont.

Nov. 9, 1989.

Jeremy Dworkin, South Londonderry, for plaintiff-appellee.

Timothy Martin of Carroll, George & Pratt, Rutland, for defendants-appellants.

Before ALLEN, C.J., PECK and DOOLEY, JJ., and BARNEY, C.J. (Ret.) and SPRINGER, District Judge (Ret.), Specially Assigned.

DOOLEY, Justice.

This is an action to confirm an arbitration award for plaintiff, the contractor in a construction contract dispute. Over objections by the defendants, homeowners, that they had not signed a statutorily required acknowledgement of arbitration and were improperly denied a continuance by the arbitrators, the Rutland Superior Court confirmed the arbitration award and entered judgment for plaintiff. We affirm the judgment for plaintiff.

The parties entered into a contract under which plaintiff was to provide materials and perform certain work at defendants' home in Landgrove, Vermont. In the course of construction, a dispute arose between the parties, and defendants refused to pay funds allegedly owed to plaintiff. Defendants alleged that plaintiff's design was defective and some of the work done was of poor quality.

On April 8, 1986, the parties agreed to submit their dispute to arbitration by the American Arbitration Association (AAA). The agreement outlined that the proceeding would be governed by certain rules of the AAA and stated plaintiff's claim, totaling $30,453 plus interest, and defendants' counterclaim totaling $41,785. Above the signatures, the agreement stated as follows:

We agree that we will abide by and perform any Award rendered hereunder and that a judgment may be entered upon the Award. Arbitration shall be binding and unappealable.

Problems developed in selecting arbitrators and scheduling the hearings. Potential arbitrators chosen by the parties proved to be unavailable. The AAA finally chose three arbitrators in October, 1986. By that time, defendants had increased their counterclaim by $21,500 for damages caused by plaintiff in abandoning the job prior to completion.

In November, the AAA set the arbitration hearing for December 29th and 30th. Thereafter, AAA informed the parties that one of the arbitrators could not attend on December 29th and 30th. Defendants' counsel responded by insisting on "three qualified arbitrators" and advised that his client had found additional substandard work. He stated that the cost to correct this new substandard work would not be determined until the Spring of 1987 and went on to say: "Consequently, my client will not proceed with the arbitration on December 29 and 30 and requests a postponement for an indefinite period of time."

AAA replaced the arbitrator who could not attend the December dates and submitted the request for a postponement to the new panel. The motion for postponement was denied on December 23, and the hearing went forward without defendants' participation. On January 12, 1987, defendants attempted to "rescind their agreement to arbitrate." On January 16, the arbitrators transmitted an award dated December 29th. It awarded plaintiff $27,289 plus interest and fees and found, based on the evidence, that plaintiff performed labor and delivered material in a workman-like manner.

When plaintiff moved in the superior court to confirm the award, defendants resisted, claiming for the first time that they never signed the acknowledgement required by 12 V.S.A. § 5652(b); that the arbitrators' failure to postpone the hearing prevented confirmation of the award under 12 V.S.A. § 5677(a)(4); and that the procedure used by the arbitrators also prevented confirmation. Based on cross-motions for summary judgment, the trial court ruled that the statement in the agreement above the signature was sufficient to meet the statutory requirement for an acknowledgement; that the arbitrators properly denied a postponement; and that the defendants waived objections to any other procedural irregularities. Defendants have appealed only the first two of these holdings.

The first issue involves the statutory requirement for an acknowledgement contained in 12 V.S.A. § 5652(b) as follows:

(b) Required provision. No agreement to arbitrate is enforceable unless accompanied by or containing a written acknowledgement of arbitration signed by each of the parties or their representatives. When contained in the same document as the agreement to arbitrate, that acknowledgement shall be displayed prominently. The acknowledgement shall provide substantially as follows:

"ACKNOWLEDGEMENT OF ARBITRATION.

I understand that (this agreement/my agreement with __________ of ____) contains an agreement to arbitrate. After signing (this/that) document, I understand that I will not be able to bring a lawsuit concerning any dispute that may arise which is covered by the arbitration agreement, unless it involves a question of constitutional or civil rights. Instead, I agree to submit any such dispute to an impartial arbitrator."

Although Vermont has adopted the Uniform Arbitration Act, 7 U.L.A. 4 (1978), this provision was added to the Uniform Act in the Vermont version.

We cannot agree with the trial court that the sentence in the arbitration agreement quoted supra in this opinion "substantially" embodies the statutory acknowledgement as required by § 5652(b). Most important, it fails to state clearly that signing the agreement forecloses any court remedies concerning any dispute that arises which is covered by the arbitration agreement, except as to constitutional or civil rights. We do not believe that laymen would necessarily derive this principle from the statements in the agreement that "judgment may be entered upon the award" (emphasis added) and that the arbitration is "binding and unappealable."

We also do not believe that the statement in the agreement, even if it contained the proper content, was "displayed prominently" as required by § 5652(b). A part of the statement is in the smallest type used on the agreement. The rest was typed in. No part of the statement is in bold face or is underlined and no part is oversized.

Although we cannot accept the ground relied upon by the trial court, we find another ground to affirm on this issue. See Curran v. Marcille, 152 Vt. 247, ---, 565 A.2d 1362, 1363 (1989) (Court may sustain trial court on any legal ground even though trial court based its decision on another ground). The acknowledgement provision specifies that the arbitration agreement is not "enforceable" without the acknowledgement. See 12 V.S.A. § 5652(b). A later section of the Act specifies that where a court finds "there was no arbitration agreement," it shall vacate the arbitration award as long as the party seeking relief "did not participate in the arbitration hearing without raising the objection." 12 V.S.A. § 5677(a)(5). Since the effect of making an arbitration agreement not enforceable is equal to a finding that there was no arbitration agreement, we believe that § 5677(a)(5) on vacating awards applies to claims that there was a violation of the acknowledgement provision in § 5652(b). The effect of applying § 5677(a)(5) is to make clear that one cannot participate in the arbitration hearing, without raising a defect in the acknowledgement, and then on receiving an unfavorable result challenge the award by raising the acknowledgement issue for the first time in court. See Hot Springs County School District v. Strube Construction Co., 715 P.2d 540, 546 (Wyo.1986). This waiver rule is consistent with our "strong tradition of upholding arbitration awards whenever possible." R.E. Bean Construction Co. v. Middlebury Assoc., 139 Vt. 200, 204, 428 A.2d 306, 309 (1980). Further, it helps ensure that arbitration is, in fact, an alternative dispute mechanism rather than "another expensive and time consuming layer to the already complex litigation process." Id. at 204-05, 428 A.2d at 309.

It is undisputed that defendants failed to raise the issue of the acknowledgement before the arbitrators. Their reason for not attending the hearing was the refusal of the arbitrators to give them a postponement. Following the hearing, defendants sought to rescind their agreement because the AAA did not provide a reasonable opportunity to prepare and present evidence and unreasonably declined the request for a continuance. The motion to vacate the award, filed on February 12, 1987, specified only that the arbitrators violated 12 V.S.A. § 5677(a)(4), primarily because of the denial of the continuance. The acknowledgement issue was first raised as an afterthought in a memorandum in support of defendants' motion of March 26, 1987 FN*) to dismiss the motion to confirm the award.

There remains to consider only whether defendants participated in the arbitration proceeding sufficiently to trigger the waiver rule. On this point, we note that defendants fully participated in the arbitration proceeding up until the time that their request for postponement was denied. In fact, defendants submitted a counterclaim and sought a monetary award in their favor. Further, their refusal to appear at the hearing cannot be taken as an objection to arbitration as the proper method of resolving the dispute. Under AAA Rule 30, the arbitration may proceed in the absence of a party or lawyer and the opposing party must put on such evidence as the arbitrators deem necessary to make an award. Thus, failure to appear at the hearing does not...