Newman v. Valleywood Associates, Inc.

• Decision Date: 15 June 2005
• Docket Number: No. 2002-674-APPEAL.,2002-674-APPEAL.
• Citation: 874 A.2d 1286
• Parties: John B. NEWMAN et al. v. VALLEYWOOD ASSOCIATES, INC.
• Court: Rhode Island Supreme Court

874 A.2d 1286

John B. NEWMAN et al. v. VALLEYWOOD ASSOCIATES, INC.

No. 2002-674-APPEAL.

Supreme Court of Rhode Island.

June 15, 2005.

Michael Kiselica, Warwick, for plaintiff.

Robert E. Bollengier, Warwick, for defendant.

Present: WILLIAMS, C.J., GOLDBERG, FLAHERTY, SUTTELL, and ROBINSON, JJ.

OPINION

WILLIAMS, Chief Justice.

The defendant, Valleywood Associates, Inc. (defendant), appeals the denial of its petition to arbitrate a contractual dispute between it and the plaintiffs, John B. Newman and Linda A. Newman (collectively plaintiffs). A Superior Court motion justice determined that the defendant's motion to arbitrate would be granted only if the defendant released its mechanic's lien on the subject real property within two weeks. For the reasons discussed below, we hold that the motion justice erred in ultimately denying the defendant's motion to arbitrate.

I Facts and Travel

The defendant agreed in 2001 to construct a one-family home for plaintiffs in Lincoln, Rhode Island. The seven-page written and signed agreement included provisions governing both mechanics' liens and binding arbitration.¹ A dispute arose between the parties, which plaintiffs attribute to defendant's "substandard, unsatisfactory, and defective" work.

The defendant filed a notice of intention in accordance with the Rhode Island Mechanics' Lien Law found at G.L.1956 chapter 28 of title 34. The plaintiffs then posted a bond of $58,113 to discharge that lien, which allowed them to close on a home mortgage. Then plaintiffs also filed a complaint against defendant in Superior Court, asserting a host of counts ranging from breach of contact to slander of title.

Based entirely on the binding arbitration provision in the contract, defendant moved to dismiss the complaint, asserting that the court lacked subject-matter jurisdiction, personal jurisdiction, and that venue was improper, under Rules 12(b)(1), (2) and (3) of the Superior Court Rules of Civil Procedure, respectively. The motion justice granted defendant's motion to dismiss upon the condition that defendant release the mechanic's lien within two weeks, otherwise defendant's motion would be denied. When defendant failed to release that lien, the motion justice denied the motion to dismiss. The defendant appeals, asserting that the motion justice's refusal to allow defendant to file a mechanic's lien while arbitrating that dispute constituted reversible error.

II Analysis

A Propriety of the Appeal

General Laws 1956 § 10-3-19 provides the scope of appellate review of decisions pertaining to arbitration. Bradford Dyeing Association, Inc. v. J. Stog Tech GmbH, 765 A.2d 1226, 1233 n. 12 (R.I.2001). A party may appeal to this Court "upon the entry of any final order provided in § 10-3-3, or an order confirming, modifying or vacating an [arbitration] award." Section 10-3-19.² In this case, rather than request a stay of litigation pursuant to § 10-3-3, defendant, in a curious move, fashioned its petition for arbitration in conjunction with a motion to dismiss plaintiffs' complaint. The motion justice's subsequent order, however, presented defendant with a Hobson's choice: release the lien and proceed to arbitrate or maintain the lien and waive its right to arbitration. In the context of the strict choice imposed on defendant in this case, we will view the denial of defendant's petition to arbitrate as the equivalent of an order denying a motion to stay litigation under § 10-3-3 and consider the appeal as properly before us pursuant to § 10-3-19.

B Arbitration and Mechanics' Liens

The primary question presented on appeal is whether defendant may first file a mechanic's lien to protect its interest in allegedly unpaid services and then arbitrate the underlying contractual dispute. Since subject-matter jurisdiction is "an indispensable requisite in any judicial proceeding," we review the question de novo. Zarrella v. Minnesota Mutual Life Insurance Co., 824 A.2d 1249, 1256 (R.I.2003)

.

As a preliminary matter, we note that the contract signed by the parties does not limit the parties' ability to arbitrate a contractual dispute. The contract's broad language stating that disputes "shall be submitted to binding arbitration" comports with the statutory requirement that an arbitration agreement be "clearly written and expressed." Section 10-3-2. The arbitration clause does not expressly provide that defendant would waive its contractual right to arbitration if it filed a mechanic's lien on the property.³ In fact, the arbitration clause does not cross-reference the provision pertaining to mechanics' liens. In light of this fact, we must determine whether, as a matter of contract law, defendant waived its right to arbitrate the contractual dispute when it filed a mechanic's lien.

The gravamen of plaintiffs' argument on appeal is that defendant's filing of a mechanic's lien constituted a waiver of any contractual right to arbitrate the dispute because it manifested a willingness to litigate rather than arbitrate. The defendant offers that neither the Arbitration Act nor the Mechanics' Lien Law prevents a party from filing a mechanic's lien and then arbitrating the underlying contractual dispute and, therefore, urges us to read the two statutes in pari materia. Since this precise question is an issue of first impression in this jurisdiction, we briefly will review the applicable statutes and caselaw governing both arbitration agreements and mechanics' liens.

Chapter 3 of title 10, entitled "The Arbitration Act," states arbitration agreements generally are "valid, irrevocable, and enforceable." Section 10-3-2. In giving force to that legislative mandate, we have declared, "[a]rbitration is a desirable method of dispute resolution that has long been favored by the courts." Soprano v. American Hardware Mutual Insurance Co., 491 A.2d 1008, 1011 (R.I.1985). The statute provides for a stay of litigation while the parties arbitrate their claims. Section 10-3-3. It states:

"If any suit or proceeding be brought upon any issue referable to arbitration under an agreement in writing for arbitration, the court in which the suit is pending, upon being satisfied that the issue involved in the suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties, stay the trial of the action until the arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with the arbitration." Section 10-3-3.

This favored method of dispute resolution, however, can be waived when a party "manifest[s] a willingness, if not a desire, to have the courts resolve the controversy." North Smithfield Teachers Association v. North Smithfield School Committee, 461 A.2d 930, 934 (R.I.1983). When determining the precise point at which a party has manifested that willingness to litigate, we are mindful that "`general formulations of what constitutes a waiver in a particular case are of limited usefulness, as the decision normally turns not on some mechanical act but on all of the facts of the case.'" Id. at 933.

Intended to prevent unjust enrichment, the purpose of the Mechanics' Lien Law is to "`afford a liberal remedy to all who have contributed labor or material towards adding to the value of the property to which the lien attaches.'" Gem Plumbing & Heating Co. v. Rossi, 867 A.2d 796, 803 (R.I.2005). To achieve this end, any contractual agreement barring the filing or enforcement of a mechanic's lien "is against public policy and is void and unenforceable." Section 34-28-1(b). Furthermore, the remedy provided by the Mechanics' Lien Law is not exclusive; "[e]xcept as otherwise specified, nothing in this chapter shall be construed to limit the right of any person, whether he or she have [sic] a valid lien hereunder or not, to remedies otherwise available to him or her under law * * *." Section 34-28-33.

A claimant perfects a lien on the property to which he or she has contributed labor or materials by mailing a notice of intention to the property owner and then filing that notice of intention in the land evidence records within 120 days after completing the work. Section 34-28-4(a); see also Gem Plumbing & Heating Co., 867 A.2d at 802-05 (outlining the Mechanics' Lien Law). Beyond providing a procedural mechanism to secure payment for services or materials rendered, multiple sections of the statute require that notice be given to the world of the dispute between the parties: § 34-28-4 requires a claimant to file a notice of intention in the land evidence records of the local municipality; § 34-28-10 further requires the claimant to file a notice of lis pendens in the records of land evidence of the local municipality; and § 34-28-14 requires that the petition for a mechanic's lien be published in a local newspaper.

With this understanding of the relevant statutes, the need to read these statutes in pari materia becomes readily apparent. First, § 34-28-33, in expressly assuring that a party's rights to other remedies will not be limited by the filing of a mechanic's lien, supports a conclusion that the filing of a mechanic's lien does not waive arbitration. Second, § 10-3-3, in allowing for a stay of a Superior Court action while the matter is referred to arbitration, provides the procedural mechanism that would allow parties to proceed to arbitration while a mechanic's lien has been placed on the property.

The recent case of Aponik v. Lauricella, 844 A.2d 698 (R.I.2004), directly refutes plaintiffs' argument that allowing the parties to arbitrate a dispute with a mechanic's lien on the property unjustly transfers jurisdiction over a mechanic's lien action from the Superior Court to the arbitrator, thereby allowing defendant to "have its cake and eat it too." In Aponik, a buyer and a contractor voluntarily agreed to arbitrate a dispute after the contractor had filed a mechanic's lien...