K. L. House Const. Co., Inc. v. City of Albuquerque, 11580

• Decision Date: 30 March 1978
• Docket Number: No. 11580,11580
• Citation: 91 N.M. 492,576 P.2d 752,1978 NMSC 25
• Parties: K. L. HOUSE CONSTRUCTION CO., INC., a New Mexico Corporation, and Western Casualty and Surety Company, a Foreign Corporation authorized to do business in New Mexico, Plaintiffs-A v. The CITY OF ALBUQUERQUE, New Mexico, a Municipal Corporation, Defendant-Appellee.
• Court: New Mexico Supreme Court

Page 752

576 P.2d 752

91 N.M. 492

K. L. HOUSE CONSTRUCTION CO., INC., a New Mexico

Corporation, and Western Casualty and Surety

Company, a Foreign Corporation

authorized to do business in

New Mexico, Plaintiffs-A v. The CITY OF ALBUQUERQUE, New Mexico, a Municipal

Corporation, Defendant-Appellee.

No. 11580.

Supreme Court of New Mexico.

March 30, 1978.

[91 NM 492] Hannett, Hannett, Cornish & Barnhart, Charles E. Barnhart, Scott Oliver, Albuquerque, for plaintiffs-appellants.

Sutin, Thayer & Browne, Irwin S. Moise, Raymond Schowers, Albuquerque, for defendant-appellee.

OPINION

PAYNE, Justice.

Appellants sought a declaratory judgment, requesting the district court to construe certain contracts and declare that appellants had fulfilled their obligations under the contracts. Upon the application of appellee, The City of Albuquerque, the district court stayed the proceedings and ordered arbitration. The arbitrators granted the City an award of $125,000. The district court confirmed the award and denied the appellants' motion to vacate, modify or correct the award. This appeal seeks a review of the district court order allowing arbitration and the subsequent order confirming the arbitration award.

In April, 1973, the City engaged K. L. House Construction Co. to perform certain additions and other work on a manufacturing plant which the City leases to industrial users. A part of this contract involved a roofing job which House subcontracted to Jack Pope, Inc. Under the contract a "forty year roof" was to be applied. The contract provided that House would give the City a one year warranty on all its work, and further provided that the roofer, Pope, would give a two year warranty running directly to the City. Appellant, Western Casualty & Surety Company, wrote performance bonds to the City in behalf of House. The work was completed and the job was accepted by the City on November 3, 1973.

The trial court entered a finding, supported by substantial evidence, that within the one year warranty period the City gave notice to House that there were some problems with the roof. Within its two year warranty period Pope made certain repairs on the roof. After the expiration of both warranty periods the City sought to have the entire roof replaced, asserting that the roofing job failed to meet the requirements of the contract. The appellants, House, Pope and Western, sought a declaratory judgment from the district court that the acceptance of the job by the City and the expiration of the warranty periods satisfied all the terms of the contract with regards to the roof. The City sought to have this issue determined under the arbitration clause in the contract which provided as follows:

7.10 ARBITRATION

7.10.1 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 then obtaining unless the parties mutually agree otherwise. This agreement so to arbitrate shall be specifically enforceable under the prevailing arbitration law. The award rendered by the arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof.

Appellants claim that arbitration is inappropriate because the dispute did not arise out of the contract but is a dispute which arose after the contract had been completed. The appellants argue that the matter should therefore be determined by a trial in district court. We cannot agree with this position.

In addition to the provisions of the arbitration clause in the contract entered into between the parties, the Uniform Arbitration Act adopted by New Mexico provides in § 22-3-9, N.M.S.A.1953 (Supp.1975) as follows:

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 at law or in equity for the revocation of any contract.

The agreement between the parties provided that "(a)ll claims, disputes and other matters in question arising out of, or relating to, this Contract or the breach thereof, . . . shall be decided by arbitration." We hold that any disputes pertaining to the performance of the contract, even if they arise after the warranty has expired, are disputes which arise out of the contract and are therefore subject to arbitration.

We adopt the reasoning of the New York Court of Appeals which said:

(T)he announced policy of this State favors and encourages arbitration as a means of conserving the time and resources of the courts and the contracting parties. . . . To this end the Legislature has assigned the courts a minimal role in...