Lundgren v. Freeman
| Citation | 307 F.2d 104 |
| Decision Date | 27 June 1962 |
| Docket Number | No. 17232.,17232. |
| Parties | James LUNDGREN, dba Pacific Construction Company, Appellant, v. Claude FREEMAN, Sydney B. Hayslip and Stewart Tuft, Co-partners, dba Freeman, Hayslip and Tuft, Appellees. SCHOOL DISTRICT NO. 5, Appellant, v. James LUNDGREN, dba Pacific Construction Company, Appellee. |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
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Reinhardt, Coblens & Stoll and Justin N. Reinhardt, Portland, Or., for appellant Lundgren.
Banta, Silven, Horton & Young and David C. Silven, Baker, Or., for appellant School Dist. No. 5.
Koerner, Young, McColloch & Dezendorf, Oglesby H. Young, and James H. Clarke, Portland, Or., for appellees.
Before JERTBERG, KOELSCH and DUNIWAY, Circuit Judges.
Lundgren, a building contractor, appeals from an order and a summary judgment, and School District No. 5 of Baker, Oregon, ("school district") appeals from two judgments, in an action brought by Lundgren against school district and the architectural firm of Freeman, Hayslip and Tuft ("architects"). We are affirming as to all matters appealed, except the time as of which interest is allowed, and the summary judgment in favor of architects. As to these, we are reversing.
On August 7 and September 29, 1950, Lundgren entered into written contracts with school district to construct a high school and shop and a swimming pool and bathhouse. On June 27, 1952, a month after Lundgren had notified architects that the high school and shop were about ready for final acceptance, school district notified Lundgren that it was terminating his employment because of total breach. This was done on the advice of architects, who claim to have acted pursuant to Article 19 of the General Conditions of both contracts between Lundgren and school district.1
School district refused to pay Lundgren the amount claimed by him to be due on the contract, $55,834.01. It also refused to pay the amount claimed due on the swimming pool and bathhouse contract, $9,776.35, although a certificate of final acceptance had been issued for this contract. Lundgren sued school district for the unpaid balances ($65,610.36), for losses due to defects in plans and specifications and having to do work uncalled for by the contracts and to redo work done strictly in accordance with the contracts ($100,000), and for loss of his "normal builder's fee" ($67,000). He joined a claim against architects for wilfully and maliciously interfering with his performance of the contracts and inducing school district to breach and claimed the same damages against them as he did against school district, together with damage to reputation because of architects' claim that he had failed to substantially perform his contracts, damage to credit standing with subcontractors, materialmen and bonding companies because of architects' failure to make prompt payments ($150,000), and for punitive damages ($50,000). School district had two counterclaims, one for damages for faulty construction on both projects ($250,000), and the other for miscellaneous heating and electricity costs. School district set off $16,626.35, the cost of completing the high school after Lundgren's employment was terminated. The district court had jurisdiction under 28 U.S.C. § 1332.
Lundgren's claim against school district was submitted to arbitration by stipulation on April 3, 1953, as agreed to in Article 292 of the General Conditions of both the high school and swimming pool contracts. The stipulation provided that "the issues between the parties * * * will be arbitrated in accordance with the Federal Arbitration Statute * * *." On December 8, 1953 the arbitrators awarded $58,039.81 to Lundgren. The award included the unpaid balances, plus losses due to defects in plans and specifications and having unnecessarily to do and redo work, less the cost to school district for satisfactory completion. It also included "extras" not agreed to by customary written change orders. The arbitrators allowed school district the cost of heating and electricity, but denied its counterclaim for faulty construction. In their award, the arbitrators made the following statement:
The district court, acting under 9 U. S.C. § 9 (the Federal Arbitration Act) confirmed the award on June 17, 1954 and revised it on March 21, 1957. It allowed Lundgren interest on the award at 6% per annum as of June 26, 1952, the date when school district terminated Lundgren's employment. On April 22, 1957, the court reformed the high school contract so as to give Lundgren an additional amount for installing a sound system and lockers, again allowing interest as of June 26, 1952.3 On December 15, 1958, the district court ordered that in spite of the reservation of the issue of breach by the arbitrators, no issue remained between Lundgren and school district.
Lundgren's suit against architects was never submitted to arbitration. On November 7, 1960, the district court entered a summary judgment for the architects (F.R.Civ.P. Rule 56, 28 U.S.C.).4 School district appeals from the judgments of June 17, 1954 (as revised on March 21, 1957) and April 22, 1957, and Lundgren appeals from the order of December 15, 1958, and the summary judgment of November 7, 1960 in favor of architects.5
1. The claim that "points of law" were reserved.
School district contends that the trial court erroneously confirmed the arbitrators' allowance to Lundgren of "extras" and losses caused by defects in the plans and specifications. It says that when the parties stipulated to arbitration they meant to reserve "points of law" to the court and that, as shown by exchanges between arbitrators and counsel in the arbitration proceedings, the arbitrators, in fact, intended to reserve all "points of law", in spite of a contrary recitation in their award, and that both the matter of "extras" and the matter of errors in the plans and specifications present "points of law". The record does not support these contentions.
The arbitrators in their award specifically said that they had considered "contentions of fact and of law". The Federal Arbitration Act provides only four grounds on which a court may vacate an arbitration award (see 9 U.S.C. § 10), the one relevant here being that the arbitrators exceeded their powers. This must be clearly shown. (E. g., see Textile Workers Union of America v. American Thread Co., 4 Cir., 1961, 291 F.2d 894.) By considering "contentions of law" the arbitrators were not exceeding their powers. The scope of the arbitrators' power rests ultimately on the agreement of the parties (e. g., Metro Industrial Painting Corp. v. Terminal Const. Co., 2 Cir., 1961, 287 F.2d 382; Local 205, United Electrical Radio and Machine Workers of America v. General Electric Co., 1 Cir., 1956, 233 F.2d 85, affd. 353 U.S. 547, 77 S.Ct. 921, 1 L.Ed. 2d 1028). The policy of the Arbitration Act is that the agreement be liberally construed in favor of arbitration. (E. g., Metro Industrial Painting Corp. v. Terminal Const. Co., supra, 2 Cir., 1961, 287 F.2d 382; see Local 201, International Union of Electrical, Radio and Machine Workers v. General Electric Co., 1 Cir., 1959, 262 F.2d 265).
The original arbitration agreement is broadly framed; it provides that "all disputes, claims or questions subject to arbitration under this contract shall be submitted * * *". Shortly after the stipulation to arbitrate, Lundgren's attorney on April 27, 1953 wrote the school district's attorney asking for confirmation of Lundgren's understanding that "the award made by the arbitrators * * * shall constitute the award upon which the court in pending litigation shall enter judgment; said award being subject to attack or review only as provided in the federal arbitration statute * * *". There was no reply. In the arbitration hearings themselves there is evidence that counsel for both sides may have assumed that "points of law" would be reserved to the court, but there is no evidence that the parties actually agreed to modification of the arbitration agreement in the sense that both intentionally agreed to change the agreement so that "points of law" were not to be arbitrated (see, e. g., American Locomotive Co. v. Chemical Research Corp., 6 Cir., 1948, 171 F.2d 115; 9 U.S.C. § 2).6
The scope of review given the courts in overseeing arbitration proceedings under the Federal Arbitration Act is limited. It does not include reviewing questions of law. Section 9 of the Act provides only that the court shall enter judgment on the award, Section 10, that the court may vacate the award for fraud in procurement, corruption, misconduct or exceeding of powers, and Section 11, that the court may correct the award for material miscalculations, exceeding of powers, and imperfection in form. (9 U.S.C. §§ 9, 10, ...
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