Layne-Minnesota Co. v. Regents of University of Minn.

CourtSupreme Court of Minnesota (US)
Citation266 Minn. 284,123 N.W.2d 371
Decision Date16 August 1963
Docket NumberNo. 38811,LAYNE-MINNESOTA,38811
PartiesCOMPANY, Appellant, v. The REGENTS OF the UNIVERSITY OF MINNESOTA, Respondent.

Syllabus by the Court.

Upon application to compel arbitration pursuant to the provisions of the Uniform Arbitration Act (Minn.St. c. 572), where the intention of the parties concerning the scope of the arbitration clause of their contract is clearly expressed or ascertainable, the issue of arbitrability shall be determined by the court. Where such intention cannot be ascertained or is reasonably debatable, § 572.09 limits judicial interference and requires that the scope of the arbitration clause be initially determined by arbitration, subject to review by the court at the instance of any contracting party.

Carlsen, Greiner & Law, Minneapolis, for appellant.

Walter F. Mondale, Atty. Gen., Donald R. Bundlie, Sp. Asst., Minneapolis, R. Joel Tierney, Minneapolis, for respondent.


Appeal from an order denying plaintiff's motion to compel arbitration under Minn.St. 572.09 of the Uniform Arbitration Act adopted by Minnesota in 1957. 1

On March 9, 1961, plaintiff, a contractor, after acceptance of its bid, entered into a construction contract with the defendant to construct caisson foundations for two buildings to be erected on the west campus of the University of Minnesota.

'* * * A caisson is a column of concrete and steel upon which the building rests. The contract called for a total of 56 caissons with varying diameters of 4, 5 or 6 feet. Each caisson extends from the ground surface to whatever depth was necessary to get an 8-inch penetration into bedrock which was approximately 25 feet below the surface. After excavation to bedrock was completed the holes were filled with concrete and reinforcing steel to form a set of reinforced concrete legs upon which the buildings would rest.' 2 Attached to the specifications, pursuant to which the plaintiff made its bid, were reports on preconstruction borings which had been conducted for defendant by the Minnesota Test Boring Company. These reports were provided for what value they might have to the contractor but were not guaranteed by defendant as accurate or indicative of all soils at the site. The contract included a modification clause and an arbitration clause hereafter quoted. During the course of the construction plaintiff encountered boulders, limestone slabs, and underground water in amounts and at locations not indicated by the plans and specifications. Plaintiff claims that a requested modification of the contract and a claim for additional compensation was made and denied. We are not informed whether this occurred before or after completion of the work. 3 Defendant does not deny that a request was made, but the particulars concerning the time, nature, and manner of the request, and of defendant's denial, are not disclosed by the record. We assume that the request was denied and that plaintiff completed the work notwithstanding this controversy. 4 In any event, after a denial, the plaintiff, on February 8, 1962, served a written request for arbitration of the claim for additional compensation because of unanticipated difficulties. Defendant refused this request on the ground that such claim was not a dispute intended to be referable to arbitration under the language of the arbitration clause of the contract. The controversy as to whether the claim of the contractor was a dispute subject to arbitration apparently continued and remained unresolved until April 24, 1962, on which date the defendant commenced a declaratory judgment action seeking a construction of the provisions of the contract relating to arbitration. Thereafter, pursuant to § 572.09(a) of the Uniform Arbitration Act, plaintiff made application for an order compelling arbitration and staying the declaratory judgment action until its motion to compel arbitration was heard and determined. Under § 572.09(d) of the act, the parties agreed to stay the action for declaratory judgment, and the plaintiff's application was heard and denied. The court held that the dispute involved was not one within the meaning of section 1--23 of the contract. This appeal from the order denying an application to compel arbitration is expressly authorized by § 572.26, subd. 1(1) of the act.

The pertinent provisions of the contract are as follows:

'Section 1--16 CHANGES, EXTRAS, ETC.

'* * * Should the Contractor find at any time during the progress of the work that in his judgment existing conditions demand or make desirable or beneficial a modification in the requirements covering any particulars or items, it shall be his duty and he is required to promptly report in writing each such matter to the Supervising Engineer for his decision and instruction.'

'Section 1--23 DISPUTES.

'If during progress of the work, any disputes, claims or questions arise between the owner and the contractor concerning the work, the architect/engineer shall be consulted and his decision shall be final. However, decision may be submitted to arbitration.'

'Section 1--24 ARBITRATION.

'All disputes, claims or questions subject to arbitration under this contract shall be submitted to arbitration in accordance with the provisions, then obtaining of the Uniform Arbitration Act. Chapter 633, Laws of Minnesota, 1957, and 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. It is mutually agreed that the decision of the arbitrators shall be a condition precedent to any right of legal action that either party may have against the other.'

Essentially the question presented to the trial court and here is whether or not the parties intended by their contract to submit to arbitration a dispute arising over a claim for additional compensation occasioned by unanticipated difficulties in performing the work required by the contract.

As the question was submitted to the trial court and here, the arguments of the parties were primarily directed toward seeking a final judicial determination of whether the claim presents an issue referable to arbitration. We are urged, as was the trial court, to decide the question under the rules relating to the construction of contracts without reference to any specific provisions of the Uniform Arbitration Act. This emphasis overlooks section 1--24 of the contract which makes the act an integral part of the contract, thereby requiring a consideration of those provisions of the act which were intended to apply and control a judicial determination of the very question presented.

One of the fundamental objectives of the act was to encourage and facilitate the arbitration of disputes by providing a speedy, informal, and relatively inexpensive procedure for resolving controversies arising out of commercial transactions, including the labor -management field. The language of the act emphasizes an intention to change the common-law policy of judicial hostility toward arbitration to one favoring arbitration. Contrary to decisions found in many states, it specifically makes a written agreement to arbitrate effective whether relating to existing or future disputes. 5 By invoking the aid of courts, the legal rights of parties to such an agreement are protected. Summary procedures are provided to compel 6 or prevent 7 arbitration and to review awards with express provisions relating to judicial vacation, 8 modification, and correction of awards, 9 as well as for the enforcement of the results of the arbitration process. 10 Even though resort to courts is authorized, the basic intent of the act is to discourage litigation and to foster voluntary resolution of disputes in a forum created, controlled, and administered by the written agreement. Thus, contracting parties, desiring to avail themselves of the benefits of arbitration, retain control over the arbitration process by the language of their agreements. In contracts providing for arbitration of future controversies, the parties may narrowly limit arbitrability or they may comprehensively provide that all disputes, whether arising under the terms of the contract or growing out of their relationship--even though not cognizable in a court of law or equity--may be referable to arbitration. 11 Where the intention of the parties in this respect is not clearly expressed, problems relating to judicial interference with the arbitration process inevitably arise. 12

In this case the plaintiff vigorously contends that its claim for additional compensation is a controversy which arose during the progress of the work; that it concerns the work; and is one which the parties clearly agreed to arbitrate. Defendant, with equal vigor, contends that the claim is not a controversy concerning the work, and that it is clearly not one intended to be arbitrable. These conflicting contentions demonstrate most forcibly that the language of the contract does not clearly express the intention of the parties. Moreover, our determination would have to be based solely on the language of the contract since no other evidence relevant to the question presented was submitted to the trial court. We conclude that from the language alone a reasonable basis exists for arguing either contention. This the parties concede.

We believe that where upon application to compel arbitration the court is unable to ascertain the clear intent of the parties as to the scope of the arbitration clause in a contract, the sole issue is whether or not an agreement to arbitrate exists. Minn.St. 572.09 provides:

'(a) On application of a party showing an agreement described in section 572.08, 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...

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