Redemptorists v. Coulthard Services, Inc.

• Decision Date: 28 June 2002
• Docket Number: No. 0774,0774
• Citation: 145 Md. App. 116,801 A.2d 1104
• Parties: THE REDEMPTORISTS, v. COULTHARD SERVICES, INC., et al.
• Court: Court of Special Appeals of Maryland

801 A.2d 1104

145 Md. App. 116

THE REDEMPTORISTS, v. COULTHARD SERVICES, INC., et al.

No. 0774, Sept. Term, 2001.

Court of Special Appeals of Maryland.

June 28, 2002.

John M. Seeberger, Baltimore, for appellant.

Herbert H. Miller, Towson, for appellees, Coulthard Services, Inc. and Thomas J. Coulthard.

James M. Timmerman (Miles & Stockbridge, P.C., on the brief), Towson, for appellee, Dorman.

Argued before SONNER, ADKINS, and KRAUSER, JJ.

ADKINS, Judge.

In this appeal we are asked to define the scope and effect of a narrowly drafted arbitration provision on a dispute involving multiple overlapping issues, and multiple parties, some of whom are not parties to the agreement to arbitrate. We resolve the appeal by ascertaining that the parties intended to arbitrate only one issue, but recognizing the res judicata effect that arbitration of that issue may have on the overlapping non-arbitrable issues. The issues as to the non-contracting parties should be stayed pending the outcome of the arbitration.

The arbitration clause in question was contained in a contract between The Redemptorists, appellant, and Coulthard Services, Inc. ("CSI"), appellee, regarding CSI's provision of cemetery services to cemeteries owned and operated by The Redemptorists. The latter brought suit in the Circuit Court for Baltimore County against CSI, and two of its principals, appellees Thomas Coulthard and Lee Dorman.

CSI and Coulthard filed a petition to compel arbitration under the arbitration provision in the contract.¹ The court granted the petition as to both CSI and Coulthard, ordering that The Redemptorists' claims against these two parties be arbitrated. The court also stayed The Redemptorists' claims against Dorman until the conclusion of the arbitration.

The following issues are raised in this appeal of the lower court's decision:

I. Should this Court grant CSI and Coulthard's motion to dismiss this appeal as not properly before the Court?

II. Did the trial court err in granting Coulthard's petition to order arbitration when Coulthard, individually, was not a party to the contract between CSI and appellant that contained the arbitration provision?

III. Did the trial court err in finding that CSI and Coulthard had not waived their rights to arbitration?

IV. Did the trial court err in granting CSI and Coulthard's petition to order arbitration of all of the claims raised in appellant's amended complaint?

V. Did the trial court err in staying the court action as to any non-arbitrable claims, including the claims against Dorman?

Finding this appeal properly before us, we deny CSI and Coulthard's motion to dismiss the appeal. In addressing the merits of the appeal, we hold that the court erred in granting appellant Coulthard's petition to arbitrate because Coulthard was not a party to the contract containing the arbitration provision. We further hold that the trial court correctly concluded that CSI had not waived its right to arbitrate the claims against it.

We find error, however, in the trial court's determination that all of The Redemptorists' claims against CSI were arbitrable. Accordingly, we reverse the judgment in part. Because The Redemptorists' challenge to the stay of the claims against Dorman is not properly before us, we will not address it.

FACTS AND LEGAL PROCEEDINGS

The Redemptorists is a Maryland corporation with its principal office in Baltimore. The corporation is "a congregation of priests and religious [persons]" that owns and operates several cemeteries in Baltimore City, and Baltimore and Anne Arundel Counties. CSI is a Maryland corporation providing various cemetery services. Thomas Coulthard is CSI's President, while Lee Dorman is a CSI officer.²

The Redemptorists and CSI entered into a contract in 1990, whereby The Redemptorists granted CSI the "right to sell cemetery lots, monuments, markers, mausoleums, crypts, pre-need burial contracts, including vaults and liners" on the grounds of two cemeteries owned by The Redemptorists. In return, CSI agreed to pay The Redemptorists a certain percentage of the "gross sales price" of its products and services pertaining to these cemeteries. This payment was to be made on a quarterly basis. The contract term was amended in 1993 to bind the parties through August of 2000. The 1993 extension contract also provided that CSI would build mausoleum buildings at one of the cemeteries, at its own expense, and then turn the fee simple title of such buildings over to The Redemptorists. The Redemptorists would receive a certain percentage of the sales price of crypts in the mausoleum buildings. The 1993 contract incorporated all the provisions of the 1990 contract.

Under a section entitled "Grounds For Termination," the 1990 contract granted CSI the right to arbitrate certain disputes.

GROUNDS FOR TERMINATION. Anything herein to the contrary notwithstanding, the Redemptorists shall have the right to terminate this Agreement for "cause" which shall be defined as including any of the following specific grounds:

a. The refusal on the part of CSI to perform its duties under this Agreement after first having been given thirty (30) days prior written notice by the Redemptorists demanding such performance.

b. Personal gross misconduct on the part of the principals of CSI that is deemed to have a material adverse effect on the reputation and integrity of the Redemptorists, Sacred Heart of Jesus Cemetery or Most Holy Redeemer Cemetery ....

c. A material breach of this Agreement which shall include the failure of CSI for any reason, within thirty (30) days after receipt of written notice from the Redemptorists to correct, cease, or otherwise alter any insubordination, failure to comply with instructions, or other action or omission to act that in the opinion of the Redemptorists does or may materially or adversely affect its ownership and operation of its cemeteries.

d. The bankruptcy or insolvency of CSI.

In the event CSI disputes the cause associated with any such discharge, then the parties agree to submit such dispute to binding arbitration in Baltimore, Maryland, pursuant to the provisions of the Maryland Uniform Arbitration Act as set forth in the Courts & Judicial Proceedings Article of the Annotated Code of Maryland. (Emphasis added.)

All went smoothly under the contract until, in early 1999, The Redemptorists requested to review CSI's records and accounts related to the cemetery properties. Through this review, The Redemptorists allegedly discovered that CSI owed it $800,000, which it had not remitted as required under the terms of the contract. Thereafter, The Redemptorists sent a letter to CSI, giving it 30 days to cure the breach, i.e., to pay the sum allegedly owed. When this 30 day period lapsed, The Redemptorists terminated its contract with CSI under the "Grounds For Termination" provision set forth above.

On February 14, 2000, The Redemptorists filed a complaint against CSI alleging breach of contract and conversion. Based on this complaint, CSI filed a motion for a more definite statement and a motion to dismiss for lack of jurisdiction. While CSI's motions were still pending, The Redemptorists filed a First Amended Complaint ("the complaint") on July 17, 2000, in the Circuit Court for Baltimore County. The amended complaint added Thomas Coulthard and Lee Dorman, two of CSI's principals, as defendants, and alleged six separate counts rather than the two featured in the original complaint.

COUNT I alleged breach of contract against CSI.

COUNT II alleged fraud against CSI and Coulthard for misrepresenting "a) the total number and nature and extent of the sales contracts CSI had obtained related to [t]he ... cemeteries; b) the correct dollar amounts of the sales contracts CSI obtained related to [t]he ... cemeteries; c) the correct amount of monies, commissions, liabilities due to The Redemptorists; [and] d) the correct amount of perpetual care funds due The Redemptorists."

COUNT III claimed constructive fraud against CSI and Coulthard. It alleged that CSI and Coulthard had breached their fiduciary duty to The Redemptorists by "misrepresenting and failing to disclose a) the total number and nature and extent of the sales contracts CSI had obtained related to [t]he ... cemeteries; b) the correct dollar amounts of the sales contracts CSI obtained related to [t]he ... cemeteries; c) the correct amount of monies, commissions, liabilities due to The Redemptorists; and d) by failing to escrow and remit to The Redemptorists those funds due The Redemptorists...; and e) by appropriating corporate funds for the personal use of the stockholders rather than remitting monies owed to The Redemptorists."

COUNT IV claimed fraudulent conveyance against all three appellees (CSI, Coulthard, and Dorman), alleging that, instead of remitting the monies owed to The Redemptorists, a debt of which it was aware, "CSI conveyed substantial assets to ... Coulthard and Dorman thereby rendering itself unable to pay its liabilities to The Redemptorists."

COUNT V claimed unjust enrichment against all three appellees. It alleged that appellees "improperly withheld monies from The Redemptorists" and that to allow appellees to retain the benefit of this withholding would be "inequitable and unjust[.]"

COUNT VI, a conversion count against CSI and Coulthard, concerned alleged actions by appellees after the termination of the contract. It alleged that, even after its contract was terminated, CSI sold "niches" in the mausoleums without notifying The Redemptorists, which already had sold those niches to others.

Each of these counts requested the same $800,000 measure of damages.

Shortly thereafter, on August 22, CSI and Coulthard filed a Petition To Order Arbitration, asserting that the arbitration provision in the contract covered all of The Redemptorists' claims against them. On September 15, The Redemptorists filed a Petition To Stay Arbitration. After a hearing, the circuit court,...