Lehman v. Eugene Matanky & Associates, Inc.

• Citation: 438 N.E.2d 614,107 Ill.App.3d 985,63 Ill.Dec. 683
• Decision Date: 09 July 1982
• Docket Number: No. 81-1061,81-1061
• Court: United States Appellate Court of Illinois
• Parties: , 63 Ill.Dec. 683 Phillip LEHMAN, et al., Plaintiffs-Appellees, v. EUGENE MATANKY & ASSOCIATES, INC., an Illinois corporation, Defendant- Appellant.

Page 614

438 N.E.2d 614

107 Ill.App.3d 985, 63 Ill.Dec. 683

Phillip LEHMAN, et al., Plaintiffs-Appellees, v. EUGENE MATANKY & ASSOCIATES, INC., an Illinois corporation,

Defendant- Appellant.

No. 81-1061.

Appellate Court of Illinois,

First District, Fifth Division.

July 9, 1982.

[63 Ill.Dec. 685] Hollobow and Taslitz, Chicago (Barry B. Kreisler, Alan B. Castator, Chicago, of counsel), for defendant-appellant

Krause & Krause, Mount Prospect (David S. Krause, Carolyn H. Krause, Mount Prospect, of counsel), for plaintiffs-appellees.

LORENZ, Justice:

Defendant appeals from the entry of an order granting summary judgment to plaintiffs and raises the following issues: (1) whether a dispute concerning the termination of the contract was within the scope of the arbitration clause so that the cause should have proceeded to arbitration and, in the alternative, (2) whether genuine issues of material fact remain concerning the termination of the listing agreement which precluded the entry of summary judgment in favor of plaintiffs.

Material to our disposition are the following facts. On September 18, 1979, plaintiffs entered into a written real estate brokerage agreement whereby they employed Matanky as their exclusive sales agent to secure a buyer for the property located at 500 W. Touhy Avenue in Des Plaines, Illinois. The subject property was owned by Lehman Mobile Homes Park, Inc., an Illinois corporation, all of whose stock was owned in joint tenancy by the plaintiffs.

This agreement provided that Matanky's employment as plaintiffs' exclusive agent was "to extend for a period of not less than six months with authority to offer for sale, to advertise, to place a sign thereon and to sell said property * * *."

The brokerage contract also contained a notice requirement for termination of the exclusive agency relationship and a generic arbitration clause. The notice requirement stated that "This agreement shall remain in effect for the period above specified and thereafter until terminated by me or you in writing, giving the other party thirty (30) days prior notice."

The generic arbitration clause provided in pertinent part that: "Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration in accordance with the rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof." The subject property was placed on the market for an asking price of $1,200,000. The brokerage contract was executed by the Lehmans and by Ken Baldwin and Grace Stample as agents for defendant.

On February 11, 1980, plaintiffs' attorney Carolyn Krause sent a letter to the defendant's office, notifying it that "in accordance with the Real Estate Listing Agreement dated September 18, 1978, we are hereby giving you notice that the said agreement shall terminate on March 18, 1980."

Ken Baldwin replied to the Lehmans on February 13, 1980 acknowledging receipt of their letter "terminating our exclusive as of March 18, 1980." The letter further stated: "We will keep the property listed in our cooperative sales agency until the expiration date, and meanwhile will continue our efforts to sell the property even after the exclusive expires unless you advise us otherwise or until it is sold."

On March 19, 1980, plaintiffs' attorney mailed a rough draft of a proposed real estate contract between the plaintiffs and Patrick Lasco and Charles Drew. The rough draft was not signed by any of the named parties.

On April 4, 1980, Ken Baldwin submitted an offer to purchase the subject property to the plaintiffs which was on the same form as the March 19 draft. However, the terms of the original offer had been altered to For reasons not revealed in the record, neither sale was consummated nor did the Lehmans ever accept either offer by signing a contract.

[63 Ill.Dec. 686] provide, inter alia, that the Lehmans would pay a broker's commission to the defendant in the amount agreed to in the exclusive brokerage agreement. The April 4th offer was signed by a new prospective purchaser, Henry Criz, in place of Lasco and Drew, whose names have been deleted.

On July 5, 1980, the American Arbitration Association notified the Lehmans that Matanky had filed a demand for arbitration of the issue of the $84,000 brokerage commission. The Lehmans protested that filing, and contested the jurisdiction of the American Arbitration Association by claiming that the brokerage agreement which provided for arbitration had been properly terminated and no longer compelled arbitration of the issue.

Plaintiffs subsequently filed this lawsuit seeking to enjoin defendant from proceeding to arbitration. Following cross motions for summary judgment, the trial court ruled in favor of plaintiffs, and it is from this order that defendant appeals.

OPINION

Defendant initially contends that the trial court erred in finding that the parties had not agreed to arbitrate a dispute concerning the termination of the contract.

Section 102(a) of the Uniform Arbitration Act (Ill.Rev.Stat.1977, ch. 10, par. 101, et seq.) provides:

"(a) On application of a party showing an [arbitration] agreement * * *, 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 arbitrate, the court shall proceed summarily to the determination of the issue so raised and shall order arbitration if found for the moving party, otherwise, the application shall be denied."

Under the Uniform Arbitration Act, adopted in Illinois in 1961, the trial court is authorized to determine arbitrability if one of the parties denies it has agreed to arbitrate. The chief effect and benefit of the 1961 Act is that it grants legal enforceability to arbitration agreements to settle future as well as existing disputes. Flood v. Country Mut. Ins. Co. (1967), 89 Ill.App.2d 358, 232 N.E.2d 32, rev'd on other grounds, 41 Ill.2d 91, 242 N.E.2d 149.

However, it is well settled that since arbitration is a matter of contract, a party cannot be required to arbitrate any dispute which he had not agreed to arbitrate (Butler Products Co. v. Unistrut Corporation (1966), 367 F.2d 733; Atkinson v. Sinclair Refining Co. (1962), 370 U.S. 238, 241, 82 S.Ct. 1318, 1320, 8 L.Ed.2d 462) and it is for the courts to determine whether the claim is "on its face" covered by the contract. United Steelworkers v. American Manufacturing Co. (1960), 363 U.S. 564, 568, 80 S.Ct. 1343, 1346, 4 L.Ed.2d 1403.

Thus, we note initially that the issue as to whether the brokerage contract in the present case required arbitration by its terms was properly decided by the trial court and not by an arbitrator. Board of Trustees of Junior College District # 508 v. Cook County College Teachers Union Local 1600 (1980), 87 Ill.App.3d 246, 42 Ill.Dec. 317, 408 N.E.2d 1026.

As for the proper perspective to apply, Illinois courts have developed a much stricter standard of review for arbitration of disputes which arise in the context of a commercial undertaking, in contrast to the more liberal standard preferred by the courts in the delicate sphere of collective bargaining agreement disputes. Croom v. City of DeKalb (1978), 71 Ill.App.3d 370, 27 Ill.Dec. 583, 389 N.E.2d 647.

The applicable standard of review for a commercial arbitration dispute provides, in essence, that the parties are only held bound to arbitrate those issues which must be "stated in the contract between the parties in crystal clear language unextended and unenlarged either by construction or by implication." (Blades, Inc. v. Jarman Memorial Hospital Building Fund, Inc. (1969), 109 Ill.App.2d 224, 226, 248 N.E.2d 289, 290; Flood v. Country Mutual Ins. Co. (1968), 41 Ill.2d 91, 94, 242 N.E.2d 149, 151.) As one author has commented, "This has almost led to the requirement that the settling of a dispute by the method of arbitration must be spelled out expressis verbis in the contract in order to give it effectiveness." Herzog, Judicial Review of Arbitration Proceedings--A Present Need, 5 DePaul L.Rev. 14 (1955).

We turn now to consider defendant's argument that the issue of termination should have been decided by the arbitrator and not by the trial court. In the present case the brokerage agreement of September 18, 1979, provided for arbitration of any dispute arising in connection with the agreement, but also contained a provision for the termination of this agreement after six months had elapsed and proper notice had been given.

Relying primarily upon Beider v. Eugene Matanky & Associates, Inc. (1977), 55 Ill.App.3d 354, 13 Ill.Dec. 334, 371 N.E.2d 29, defendant contends that the issue of termination of the arbitration agreement was within the scope of the arbitration clause and therefore should have been decided by the arbitrator. We do not agree.

In Beider, the generic arbitration provision and the notice requirement involved were identical to the instant case inasmuch as the same defendant in the present action was also a party to that suit. The Beider contract, however, gave Matanky authority for a period of not less than three months to offer the property for sale. There, the 30 day notice period, calculated from February 16, 1973, expired on March 18, 1973. However, on March 16, 1973, defendant procured an offer to purchase the property which plaintiff accepted on ...