State v. Stremick Const. Co., 10799

• Decision Date: 03 July 1985
• Docket Number: No. 10799,10799
• Citation: 370 N.W.2d 730
• Parties: STATE of North Dakota, Duane R. Liffrig, State Highway Commissioner, Plaintiffs and Appellees, v. STREMICK CONSTRUCTION COMPANY, & Arthur L. Dahlin, as Arbitrator for Stremick Construction Company, Defendants and Appellants. Civ.
• Court: North Dakota Supreme Court

Page 730

370 N.W.2d 730

STATE of North Dakota, Duane R. Liffrig, State Highway Commissioner, Plaintiffs and Appellees, v. STREMICK CONSTRUCTION COMPANY, & Arthur L. Dahlin, as Arbitrator for Stremick Construction Company Defendants and Appellants.

Civ. No. 10799.

Supreme Court of North Dakota.

July 3, 1985.

Karl F.A. Lindquist [argued], of Massee, Leonard & Lindquist, East Grand Forks, for defendants and appellants.

Myron L. Bothun, Asst. Atty. Gen., Bismarck, for plaintiffs and appellees.

GIERKE, Justice.

Defendant Stremick Construction Company [Stremick] appeals from the issuance and continuation of a temporary restraining order which prevents Stremick and its arbitrator, Arthur L. Dahlin, from attempting to arbitrate claims under two construction contracts entered into between the defendant and the North Dakota State Highway Department [the State]. We conclude that the restraining order should be dissolved and the issue of timeliness of the demand as discussed herein should be referred to the arbitration board for resolution.

The State and Stremick entered into two contracts for the improvement and construction of certain public highways. The first contract dated June 13, 1979, involved Federal-aid Project No. DPF-FG-1-083(19)111, Contract No. 1, on U.S. 83 from Washburn south in McLean County. The second contract was executed on August 14, 1980, and was described as Federal-aid Project No. F-6-002(15)318, on U.S. 2 from near Niagara east in Grand Forks County.

Stremick encountered several problems with rock excavation, excavation shrinkage, and water supply in trying to construct the two highways according to the contracts. The parties attempted to resolve their disputes through negotiations, but the negotiations produced no satisfactory settlement.

On September 19, 1983, Stremick wrote to the State reporting that all work on the two projects would be fully performed on September 30, 1983. The State replied by letter dated October 10, 1983, that Project No. DPG-FG-1-083(19)111, Contract No. 1, had been completed by Stremick on November 16, 1981, and accepted by the State on that same date. The State asserted further that Project No. F-6-002(15)318 had been completed on November 10, 1982, and accepted on January 10, 1983. On April 6, 1984, Stremick demanded arbitration to settle a dispute regarding the amount due on the two projects. ¹ The State responded on May 3, 1984, by instituting an action for declaratory judgment. The State asked the trial court to declare that Stremick was not entitled to arbitration because its demand was untimely. The State also requested and received the issuance of a temporary restraining order which prohibited Stremick from proceeding with arbitration. Stremick requested the dismissal of the State's action and the removal of the restraining order. The court refused to dismiss the action and continued the temporary restraining order pending determination of whether Stremick was entitled to arbitration.

Stremick appeals from the district court's denial of its motion to dismiss the action and the continuation of the restraining order. The question for this court is whether the district court or the arbitration board is the proper forum to determine the timeliness of the demand for arbitration.

As a matter of federal policy, arbitration is strongly favored. Southland Corp. v. Keating, 465 U.S. 1, 104 S.Ct. 852, 858, 79 L.Ed.2d 1 (1984); Gateway Coal Co. v. United Mine Workers of America, 414 U.S. 368, 377-378, 94 S.Ct. 629, 636-637, 38 L.Ed.2d 583 (1974); United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 596, 80 S.Ct. 1358, 1360, 4 L.Ed.2d 1424 (1960). The federal policy has been recognized by this court. Scherbenske Excavating, Inc. v. North Dakota State Highway Department, 365 N.W.2d 485 (N.D.1985); West Fargo Public Sch. Dist. v. West Fargo Ed., 259 N.W.2d 612, 616 (N.D.1977).

The question of whether the court or the arbitration board is the proper forum to determine the timeliness of a demand for arbitration has been examined by courts at all levels. The question often arises at the federal level in labor cases. The leading federal case on the issue is John Wiley & Sons v. Livingston, 376 U.S. 543, 555-559, 84 S.Ct. 909, 917-919, 11 L.Ed.2d 898 (1964), wherein the United States Supreme Court held that once it has been determined that the parties are obligated to submit their dispute to arbitration, procedural questions growing out of the dispute are for the arbitrator to decide.

Prior to the decision in Wiley, supra, there was a sharp split among the federal courts on whether a question of timeliness is an issue for the court or for the arbitrator. The First and Seventh Circuit Courts of Appeal held that the issue was for the court, while the Second, Third, Fifth, and Sixth Circuits decided that the issue was one for the arbitrator. See Annot., 26 A.L.R.3d 604 (1969), and cases cited therein. Federal courts which have rendered decisions subsequent to Wiley have generally held that timeliness of the demand is an issue for the arbitrator. Local 81, American Federation of Technical Engineers, AFL-CIO v. Western Electric Co., Inc., 508 F.2d 106, 109 (7th Cir.1974); Local 542 Int. U. of Op. Eng. v. Penn. State Const., Inc., 356 F.Supp. 512, 513-514 (D.Pa.1973). The decisions are for the most part labor law cases, or those subject to the provisions of the Federal Arbitration Act, 9 U.S.C. Secs. 1-14. Notwithstanding that fact, federal case law is persuasive on the point raised in the instant case.

The construction contract in the instant case is silent on a time limitation for demanding arbitration. The matter is governed entirely by statutory law. Chapter 24-02, N.D.C.C.

Section 24-02-26, N.D.C.C., provides that all controversies arising out of contracts entered into for the construction or repair of highways shall be submitted to arbitration. The section further states that: "Any person who voluntarily enters into a contract for the construction or repair of highways shall be considered as having agreed to arbitration of all controversies arising out of such contract". That the arbitrators shall determine all controversies growing out of the contract is specifically provided for in Sec. 24-02-31, N.D.C.C.

Section 24-02-30, N.D.C.C., sets forth the procedural mandates for demanding arbitration:

"24-02-30. Conditions precedent to demand for arbitration against commissioner.--No right shall exist to demand arbitration against the commissioner until the conditions specified in this section shall have been complied with. The contractor must give the commissioner notice in writing that he claims the contract has been or will be performed fully on a day stated, which shall not be less than ten days after the giving of such notice. At the time stated in the notice the commissioner shall cause the work to be inspected, and if he claims the work has not been completed, he, with all reasonable dispatch, having regard to the early completion of the work, shall specify the particulars in which it is incomplete and shall direct that it be completed accordingly, or if he considers further work necessary to bring the project up to the desired standard for acceptance either by him or the United States public roads administration, even though he considers such contract complete, he likewise may specify any such additional work. The contractor must proceed with all reasonable dispatch, having due regard to weather conditions, with the performance of all such additional work with a view to a speedy completion of the project. When the contractor claims in good faith, supported by affidavit furnished to the commissioner, that he has completed such additional work according to the specifications furnished to him, and the commissioner fails for ten days to accept such work as completed, he shall have the right to institute proceedings under this chapter."

Further, Sec. 24-02-32, N.D.C.C., provides that arbitration must be commenced "within six months after the right thereto has arisen".

Appellee contends that the court is the proper forum for deciding the issue of timeliness and relies on our court's holding in Lamb v. Northern Imp. Co., 71 N.D. 481, 3 N.W.2d 77 (1942). The Lamb case is not directly in point. In Lamb, supra, Northern Improvement received an award against the State Highway Department [Lamb] through arbitration. Judgment was entered in district court in favor of Northern Improvement. Lamb then sought to vacate the award and succeeded. Northern Improvement appealed, but the court affirmed the vacation of the award because the demand had been filed too late. Lamb, supra 3 N.W.2d at 82.

One significant difference between the instant case and Lamb is that the facts were stipulated to in Lamb regarding the date of completion and the date of acceptance. Lamb, supra 3 N.W.2d at 80. Thus, the handling of the timeliness issue by the court in Lamb is not particularly useful to us in the instant case. In this case, the parties dispute the dates of completion and acceptance. Resolution of these matters is within the purview of the arbitrators. Once the dates of completion and acceptance have been determined, the authority contained in Lamb should guide the arbitrators in determining whether the demand was timely made. According to this court's decision in Lamb, the right to arbitration arises upon completion and acceptance of the project by the State. Lamb, supra 3 N.W.2d at 80.

Generally, state court decisions on the issue presented here have determined that the issue is one for the arbitrators. Nevada, Arizona, Minnesota, Michigan, and Maryland are among 26 States which have adopted the Uniform Arbitration Act, U.L.A. Sec. 1 (Supp.1985). The general principles behind the Act are the enforcement of arbitration agreements and the efficient and expeditious resolution of contractual disputes. Dean Witter Reynolds, Inc. v. Byrd; --- U.S. ----, 105...