New Pueblo Constructors, Inc. v. Lake Patagonia Recreation Ass'n

• Decision Date: 31 March 1970
• Docket Number: No. 2,CA-CIV,2
• Citation: 467 P.2d 88,12 Ariz.App. 13
• Parties: NEW PUEBLO CONSTRUCTORS, INC., an Arizona corporation, Appellant, v. LAKE PATAGONIA RECREATION ASSOCIATION, INC,, a nonprofit Arizona corporation, Appellee. 781.
• Court: Arizona Court of Appeals

Page 88

467 P.2d 88

12 Ariz.App. 13

NEW PUEBLO CONSTRUCTORS, INC., an Arizona corporation, Appellant, v. LAKE PATAGONIA RECREATION ASSOCIATION, INC,, a nonprofit Arizona corporation, Appellee.

No. 2 CA-CIV 781.

Court of Appeals of Arizona, Division 2.

March 31, 1970.

Rehearing Denied May 4, 1970.

Review Denied June 2, 1970.

Robertson & Pickett, P.C., by Peter Johnson, Tucson, for appellant

John S. Schaper, Phoenix, Karam & Martin, by Nasib Karam, Nogales, for appellee.

HOWARD, Chief Judge.

On September 25, 1967 the appellee, hereinafter referred to as Lake Patagonia or the Owner, and the appellant, hereinafter referred to as New Pueblo or the Contractor, entered into a contract for the construction of a dam on Sonoita Creek in Santa Cruz County, Arizona.

Paragraph 26 of the contract provides in part as follows:

'ADJUSTMENT OF DISPUTE. All questions or controversies which may arise between the Contractor and the Owner, under or in reference to this contract, shall be subject to the decision of some competent person to be agreed upon by the Owner and the Contractor, and his decision shall be final and conclusive upon both parties. Should the Owner and Contractor be unable to agree upon such person, a board of three arbitrators shall be chosen, one by the Owner, one by the Contractor, and the third by the two so chosen, and the decision of any two of said arbitrators shall be final and binding upon the parties. * * *'

In the fall of 1968, a dispute arose as to whether the dam had been completed by New Pueblo within the time specified by the contract, and whether Lake Patagonia was entitled to liquidated damages. In addition, New Pueblo contended that the project engineer had miscalculated certain quantities of material supplied by New Pueblo to the project and therefore miscalculated the amount of money due and owing to New Pueblo.

On January 29, 1969 the engineer certified that the work covered by the contract had been completed and accepted. The engineer certified what the total amount earned by the Contractor was and further certified that the sum of $81,972.52 was then due to the Contractor. New Pueblo filed a mechanics lien on January 10th and On April 18, 1969 New Pueblo, pursuant to paragraph 26 of the contract, sent a letter to Lake Patagonia requesting arbitration of the dispute as to the amount due. ¹

17th, 1969 and claimed that over $124,800.00 was due.

On April 21, 1969 Lake Patagonia filed a complaint in the superior court and two days later counsel for Lake Patagonia refused to concur with the request for arbitration.

On April 25, 1969 Lake Patagonia filed an application in the Santa Cruz County Superior Court for an order to stay arbitration. New Pueblo filed a response to the application to stay arbitration and affirmatively moved for an order to compel arbitration. New Pueblo also moved the court for an order staying the action filed in the superior court. ²

Pursuant to A.R.S. § 12--1502 the court granted the stay of arbitration and refused to issue an order requiring arbitration. ³

Appellant presents the following questions for review: Whether the trial court erred in denying New Pueblo's motion for an order compelling arbitration, erred further in denying New Pueblo's motion to stay the action pending arbitration, and further erred in granting Lake Patagonia's application to stay arbitration. The appellee, Lake Patagonia, contends that the above questions should be answered in the negative because 1) the superior court still retains jurisdiction over issues not related to the demand for arbitration and 2) the matter raised and the demand of New Pueblo is not subject to arbitration.

NO ARBITRABLE MATTERS

It is Lake Patagonia's contention that the only matter as which New Pueblo has sought arbitration by virtue of the letter of April 18, 1969 is the amount of money which New Pueblo claims to be due. It therefore reasons that any determination in this case as to the arbitrability of that issue Referring to the theory of arbitration generally, our Supreme Court has stated:

has nothing to do with its quiet title action, the right of Lake Patagonia to sue for damages for malicious filing of the liens and its right to liquidated damages resulting from New Pueblo's failure to complete the work covered by the contract. It contends that since none of these issues are within the demand for arbitration, then resolution of the said issues are completely beyond the authority of any arbitrator. Lake Patagonia cites no authority for this contention, and we have found none.

'Broadly speaking, arbitration is a contractual proceeding, whereby the parties to any controversy or dispute, in order to obtain an inexpensive and speedy final disposition of the matter involved, select judges of their own choice and by consent submit their controversy to such judges for determination, in the place of the tribunals provided by the ordinary processes of law.' Gates v. Arizona Brewing Co., 54 Ariz. 266, 95 P.2d 49 (1939).

Therefore, in order to accomplish this purpose, arbitration clause should be construed liberally and any doubts as to whether or not the matter in question is subject to arbitration should be resolved in favor of arbitration. Metro Industrial Painting Corp. v. Terminal Construction Co., 287 F.2d 382 (2nd Cir. 1961); United Steelworkers of America v. Warrior and Gulf Navigation Co., 363 U.S. 574, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960); Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402 (2nd Cir. 1959); Lundell v. Massey-Ferguson Services N.V., 277 F.Supp. 940 (N.D. Iowa 1967); Southern Bell Telephone & Telegraph Co. v. Louisiana Power and Light Co., 221 F.Supp. 364 (D.La.1963); Firestone Tire & Rubber Co. v. United Rubber Workers of America, Local Union No. 100, AFL-CIO, 168 Cal.App.2d 444, 335 P.2d 990 (1959); Bewick v. Mecham, 26 Cal.2d 92, 156 P.2d 757 (1945).

The federal courts have adopted what could be termed the 'positive assurance' test which requires arbitration unless it can be said with 'positive assurance' that the arbitration clause does not cover the dispute:

* * * * * *

'An order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.' United Steelworkers of America v. Warrior and Gulf Navigation Co., supra. ⁴

Turning our attention to the contract in the instant case, we find that the parties agreed that:

'All questions or controversies which may arise between the Contractor and Owner, Under or in reference to this contract, shall be subject to the decision of some competent person to be agreed upon by the Owner and the Contractor. * * *' (Emphasis added.)

We think it can be clearly said that all the matters raised in Lake Patagonia's complaint are matters which have their basis in the contract. Lake Patagonia's contention that the trial court still has jurisdiction because the matters set forth in its complaint were not covered in the demand letter of April 18, 1969 is entirely without merit. The only matter that can fairly

be said not to be within the letter is Lake Patagonia's claim for liquidated damages as the result of New Pueblo's alleged failure to complete the work on time. New Pueblo's motion in the court to require arbitration of the matters set forth in Lake Patagonia's complaint is sufficient demand for arbitration of the matter of the right to liquidated damages.

ARE DECISIONS OF THE ENGINEER ARBITRABLE?

Lake Patagonia next contends that the matters set forth in its complaint in the trial court are not subject to arbitration because of the fact that the contract excludes from arbitration the decisions of the engineer. This contention is based upon paragraphs 14 and 20 of the contract between the parties. ⁵

Lake Patagonia takes the position that these paragraphs make the engineer the sole judge of the amount due and payable under the contract, that his judgment is therefore final and conclusive and not subject to the arbitration clause. The type of provisions as provided in paragraphs 14 and 20 of the contract at issue have been held as making the engineer the sole and final judge of the quality, quantity and acceptability of the Contractor's work. Guarantee Title & Trust Co. v. Willis, 38 Ariz. 33, 297 P. 445 (1931); Gillespie Land & Irrigation Co. v. Hamilton, 43 Ariz. 102, 29 P.2d 158 (1934); Massman Const. Co. v. Lake Lotawana Ass'n, 240 Mo.App. 469, 210 S.W.2d 398 (1948).

If it were not for other provisions in the contract, we would have to agree with Lake Patagonia that the questions involved have been excluded from arbitration. However, the contract must be construed so that every part of it is given effect. Sligh v. Watson, 69 Ariz. 373, 214 P.2d 123 (1950). The courts will adopt such construction as will harmonize all parts of the contract and conflicting provisions will be reconciled by a reasonable interpretation in view of the entire instrument. Hamberlin v. Townsend, 76 Ariz. 191, 261 P.2d 1003 (1953). Turning to paragraph II, B, 2, page 3 of the special conditions of the contract, we find that they provide in part as follows:

'The Owner's representative and the Contractor's representation shall be present during the classification of material excavation. Upon written request of the Contractor a statement of quantities and calssification of excavation in designated locations will be furnished to Contractor within 10 days of the receipt of such request. This statement shall be considered as satisfactory to the Contractor unless specific objections thereto, with reasons therefor, are filed with the This paragraph indicates to us that it was never intended that the decision of the negineer would be final and conclusive on the matters that are at issue. Why give the contractor a right to a claim based on alleged erroneous...