A. Sangivanni and Sons v. F. M. Floryan & Co.

• Decision Date: 13 November 1969
• Court: Connecticut Supreme Court
• Parties: A. SANGIVANNI AND SONS v. F. M. FLORYAN AND COMPANY, Inc., et al.

Page 159

262 A.2d 159

158 Conn. 467

A. SANGIVANNI AND SONS v. F. M. FLORYAN AND COMPANY, Inc., et al.

Supreme Court of Connecticut.

Nov. 13, 1969.

John J. McGrath, Hartford, with whom were John E. Silliman, Hartford, and, on the brief, J. Read Murphy, Hartford, for appellants (defendants).

David S. Maclay, Bridgeport, with whom, on the brief, was David P. Wolf, Bridgeport, for appellee (plaintiff).

Before KING, C.J., and ALCORN, HOUSE, COTTER and RYAN, JJ.

COTTER, Associate Justice.

In this action returnable on the first Tuesday of May, 1960, the plaintiff, a sole proprietorship, sought an order directing the defendants to proceed with arbitration. The defendants formed a joint venture and entered into a construction contract with Wallingford Shopping Plaza, Inc., on March 26, 1959, in which they agreed to construct a shopping center. On March 31, 1959, the defendants and the plaintiff entered into a subcontract in which the plaintiff agreed to perform the excavation, site work and paving in accordance with the plans and specifications and the provisions of the general contract. The subcontract between the parties contained an arbitration clause. In the course of the performance of the subcontract, two principal disputes arose between the parties regarding the plaintiff's claim for extra compensation for rock excavation and the failure of the plaintiff to resume paving operations in the spring of 1960. By reason of the latter dispute, the defendants terminated the subcontract on or about April 5, 1960. The plaintiff instituted a separate mechanic's lien foreclosure action against Wallingford Shopping Plaza, Inc., the owner of the property which was the subject of the subcontract, returnable to the Court of Common Pleas for New Haven County on the first Tuesday of October, 1960, in which action the defendants were subsequently joined. The plaintiff closed the pleadings in the present action with an amended reply filed September 7, 1967. The case was discontinued on May 13, 1968, pursuant to an order of the court. Upon motion of the plaintiff, the case was restored by the court to the docket on June 17, 1968, after a hearing. Thereafter, a judgment of nonsuit was rendered on September 12, 1968, for failure of the plaintiff to appear to prosecute its complaint. On September 16, 1968, the plaintiff's attorneys, Marsh, Day and Calhoun, filed a motion to open the nonsuit on the ground that its appearance had not been printed on the September 12, 1968, list of assignments of court cases and that the firm did not therefore receive notice that the case was on the trial list. The defendants claim that failure to include the firm name of Marsh, Day and Calhoun on the printed assignment list did not excuse the failure of other attorneys who had represented the plaintiff from appearing on the day the case was assigned or from notifying Marsh, Day and Calhoun of the assignment. The court, nevertheless, granted the plaintiff's motion to open the nonsuit on September 20, 1968.

The trial court, after a trial, rendered judgment on November 18, 1968, directing the parties to proceed with arbitration of such disputes as exist between them pertaining to the contract. The defendants have appealed.

The defendants, in their answer, denied the allegations in the complaint, admitting, however, that the parties 'entered into a written agreement on or about March 31, 1959, providing for arbitration under certain conditions and circumstances, but the plaintiff's demands and the matters in controversy are clearly outside of the orbit' of the arbitration agreement. In addition, the defendants, at various times, filed nine special defenses raising issues that (1) the plaintiff will claim upon arbitration that it was induced to enter into the agreement through misrepresentation and fraud concerning the quantity of rock to be encountered under the subcontract, and that such a 'claim for fraud can only be asserted and determined in an action at law' and not in arbitration; and that no bona fide arbitrable issue exists because (2) the plaintiff abandoned the contract, (3) the plain language of the contract precludes extras for rock excavation, demolition or rock conditions encountered by the contractor at the construction site, (4) the plaintiff failed to advise the defendants in writing upon encountering rock before proceeding to blast and remove it, (5) institution of the present action was premature because the work which the plaintiff was obligated to perform was not entirely finished, (6) the plaintiff, contrary to a provision in the contract, did not obtain an interpretation from the architect as to whether or not work allegedly performed, for which the plaintiff claims or will claim extra compensation, was covered in the plans and specifications, and (7) the plaintiff failed to obtain written authorization for the performance of extra work, payment for which the defendants believe the plaintiff will make a claim upon arbitration. The defendants concluded the list of special defenses by alleging that (8) commencement of the action to foreclose the mechanic's lien constituted a waiver of whatever right the plaintiff may have had to compel arbitration and (9) the plaintiff was guilty of laches in not diligently prosecuting this action to compel arbitration.

Of the salvo of defenses interposed by the defendants relating to nonarbitrability, only one of them merits any extended discussion. That one has to do with the defendants' allegation in their first special defense that the plaintiff's claim has been, and upon arbitration will be, that the plaintiff was induced to enter into the subcontract 'by the misrepresentation and/or fraud of the defendants and/or the owner, Wallingford Shopping Plaza, Inc., regarding amounts of rock to be excavated.'

The language of the contract determines whether the arbitrability of a dispute is a question for the court or for the arbitrators. The parties are free to set the limits of the arbitrators' authority, but, once having agreed upon those limits, they cannot, except by mutual consent, vary them. Connecticut Union of Telephone Workers, Inc. v. Southern New England Telephone Co., 148 Conn. 192, 197, 169 A.2d 646. The arbitration clause in the contract before us called for arbitration '(i)n case of any disagreement pertaining to this contract' with one exception, viz., it was not to apply to the architect's interpretation of the requirements of the plans and specifications. The record does not indicate that the architect ever made an interpretation of the plans and specifications so that this exception to the arbitration clause is not material to a disposition of the issues. Whether or not the plaintiff is entitled to extra compensation for rock excavation is a disagreement 'pertaining to' the contract. The defendants assert, however, that the gravamen of the plaintiff's claim is fraudulent inducement to enter the contract and that such a claim is not arbitrable. If we assume, arguendo, that the defendants have accurately characterized the essence of the plaintiff's claim, we cannot agree with their conclusion. Fraud in the inducement of a contract ordinarily renders the contract merely voidable at the option of the defrauded party, who also has the choice of affirming the contract and suing for damages. Devidson v. O'Connell, 114 Conn. 116, 122, 158 A. 207; 37 Am.Jur.2d, Fraud and Deceit, § 327. If he pursues the latter alternative, the contract remains in force, and where the contract contains a broad arbitration clause, that clause too is binding on the parties. The mere fact that the plaintiff will or may claim fraudulent inducement does not, therefore, give the defendants any right to refuse to arbitrate a 'disagreement pertaining to' the contract. Lummus Co. v. Commonwealth Oil Refining Co., 280 F.2d 915, 927, 91 A.L.R.2d 912 (1st Cir.), cert. denied, 364 U.S. 911, 81 S.Ct. 274, 5 L.Ed.2d 225; 6A Corbin, Contracts § 1444A; note, 19 A.L.R.2d 936, 947. The question whether the plaintiff could enforce the arbitration clause if it sought rescission instead of damages is not before us. Note, 91 A.L.R.2d 936, 942. We are only required to hold under the circumstances that where rescission is not sought by the defrauded party, the arbitration clause remains enforceable.

The arbitration clause in the contract between the parties is sufficiently broad to include a claim for damages based on fraudulent inducement. The claims of the plaintiff are not excluded from that provision merely because they are alleged to have been occasioned by fraud or misrepresentation. See Merritt-Chapman & Scott Corporation v. Pennsylvania Turnpike Commission, 387 F.2d 768, 770 (3d Cir.); 5 Am.Jur.2d, Arbitration and Award, § 57.5 (Sup.1969). The defendants' claim that the plaintiff lost the right to arbitration because it stopped work owing to a dispute and therefore abandoned the contract does not constitute sufficient ground to warrant nonperformance by the defendants of the arbitration obligations. International Brotherhood, etc. v. Trudon & Platt Motor Lines, Inc., 146 Conn. 17, 20, 147 A.2d 484; Batter Building Materials Co. v. Kirschner, 142 Conn. 1, 10, 11, 110 A.2d 464.

Special defenses three through seven fail to set forth grounds which would invalidate the order of the court in the present case to compel the defendants to proceed with arbitration. We reiterate the rule which applies herein that the question of what is subject to arbitration is for the arbitrators under the broad and all-embracing language of the contract. College Plaza, Inc. v. Harlaco, Inc., 152 Conn. 707, 708, 206 A.2d 832. Specific designation of arbitrable matters is unnecessary where the language of the arbitration clause indicates an intention of the parties to include all controversies which may arise under the principal agreement between them.

The trial court concluded in ruling on the defendants' eighth special defense...