Bloch v. Bloch

CATHELL, Judge. Gilbert Bloch, appellant, was granted an absolute divorce from Ruth Bloch, appellee, on July 5, 1995. The parties’ Voluntary Separation and Property Settlement Agreement provided for, inter alia, the payment of alimony by appellant to appellee. On January 16, 1996, appellee filed, due to the cessation of alimony payments, a Petition for Contempt Citation and/or to Enforce Property Settlement Agreement in the Circuit Court for Baltimore County.

Appellant filed a timely Notice of Appeal, following the entry of a judgment in favor of appellee for alimony arrearage in the amount of $21,600, plus counsel fees. Appellant presents one question for our consideration: Did the trial court err as a matter of law in refusing to order the alimony dispute between Mr. and Mrs. Bloch to be decided by final and binding arbitration as was contemplated by Paragraph 3.F. of their Voluntary Separation and Property Settlement Agreement?] We shall hold that the circuit court erred in not ordering the matter to be resolved by arbitration; accordingly, we shall vacate the court’s judgment and remand the matter for further proceedings. The Relevant Facts Appellant is the principal stockholder and chief operating officer of Inter Sign National, Inc. (ISN). Instead of a requirement that appellant pay alimony directly to appellee, the parties’ Voluntary Separation and Property Settlement Agreement (the Agreement) provided for the payment of a “salary” by ISN to appellee, despite the fact that she did no work for the company.

In pertinent part, paragraph 3 of the Agreement provides: B. Wife’s Salary. Husband [appellant] agrees that Wife [appellee] shall be paid as a salaried employee of Inter Sign ³⁷¹ National, Inc. (“ISN”) according to the following terms and conditions: (1) As of the date of this Agreement and continuing until Wife attains the age of sixty-three (68) on May 24, 2000, ISN shall pay Wife the gross weekly salary of Nine Hundred Dollars ($900.00) less all necessary and appropriate deductions. C. Wife’s Alimony. If, at any time, ISN shall be financially unable to pay the salary outlined in Paragraph 3.B., Husband shall pay to Wife on or before the fifteenth day of each month, as alimony in lieu of ISN salary, ... a sum of money comparable to what ISN would have paid Wife in salary.

E. Termination of Support. Salary/alimony shall continue until the first to occur of (a) Wife’s remarriage; (b) the death of Husband or Wife; (c) Wife attaining the age of sixty-five (65); (d) Husband’s incapacity or financial inability to pay either the salary or alimony. F. Nonmodifiability.... If there is a disagreement by the parties concerning Wife’s claim for an increase in support solely attributable to her increased financial needs, or concerning Husband’s claim of inability to pay the described salary/alimony, such dispute shall be resolved by resorting to final and binding arbitration. [Emphasis added.] From July of 1995 through October of 1995, ISN made the contemplated “salary” payments to appellee.

On October 31, 1995, ISN filed a petition for bankruptcy, and, thus, was no longer able to pay a salary to appellee, an “employee” who performed no work for the company. Consequently, the burden to pay alimony shifted to appellant under paragraph 3.C. of the Agreement. It appears that, in November 1995, appellant made an alimony payment of $600 to appellee. Thereafter, he filed his own individual bankruptcy petition, and all further payments ceased. ³⁷² On January 16, 1996, appellee filed, together with a Show Cause Order, a Petition for Contempt Citation and/or to Enforce Property Settlement Agreement (the Petition) in the Circuit Court for Baltimore County.

In the Petition, appellee requested an order finding appellant in contempt and “punish[ment]” therefor, “enforee[ment]” of the Agreement, 1 a judgment for alimony arrearage, and counsel fees. In his Answer to Show Cause Order and Counterpetition for Arbitration, appellant advised the court that both he and ISN were currently undertaking bankruptcy proceedings and then alleged that his “obligation to pay alimony terminated pursuant to paragraph 3.E.(d) [of the Agreement] upon [his] financial inability to pay either the salary or alimony.” Appellant then pronounced “that he is financially [un]able to pay the alimony.” Additionally, appellant stated: The Agreement — Paragraph 3 F. — provides that any dispute concerning the Husband’s claim of inability to pay the described salary/alimony ... shall be resolved by resorting to final and binding arbitration. Gilbert Bloch [appellant] petitions this Court for an Order directing this dispute to final and binding arbitration. In response, in her Answer to Counterpetition for Arbitration, appellee averred that she oppose[d] referral of this matter to arbitration as the parties[’] Voluntary Separation and Property Settlement Agreement fails to define the powers and/or duties of an arbitrator, fails to provide a mechanism for appointing an arbitrator and fails to define the criteria an arbitrator must use in order to make a decision.

Subsequently, on April 8, 1996, a hearing was conducted before the circuit court. As a preliminary matter, the court found that the provision calling for arbitration was “very, very vague,” and, thus, unenforceable, after which the court decided, “I am going to take jurisdiction^] and we are going to have ³⁷³ a hearing on it today.” Following testimony by both parties, the court found that there had been no change to appellant’s financial situation since the divorce that would render him unable to pay the alimony that was agreed to. The court, therefore, reduced the alimony arrearage, $21,600, to a judgment and further ordered appellant to pay appellee’s counsel fees, $2,013.70, under paragraph 14.E. of the Agreement. The court also denied appellant’s Counterpetition for Arbitration.

The circuit court’s judgment, encompassing all of the above findings, was filed on April 23, 1996. Appellant noted a timely appeal therefrom. Discussion Appellant avers that, despite the exclusion of several material terms from the arbitration provision that relate to the manner in which the arbitration is to be conducted, it is enforceable. He argues: As stated by the Maryland Uniform Arbitration Act (Section 3-211(c) [of the Courts and Judicial Proceedings Article] ), if an agreement does not provide how an arbitrator shall be appointed, the court appoints the arbitrator.

Furthermore, if an arbitration agreement does not provide for the payment of an arbitrator’s expenses, fees, and any other expense incurred in the conduct of the arbitration, Section 3-221(a) of the Maryland Uniform Arbitration Act provides that the arbitrator determines such questions. The court’s denial of Mr. Bloch’s [appellant’s] right to have the issue of his inability to pay contractual alimony decided by an arbitrator, frustrated the parties’ contractual intent and, equally important, violated the public policy of this state which unambiguously favors arbitration as a means of resolving disputes between litigants. We agree. We begin by noting that “[arbitration is the process whereby parties voluntarily agree to substitute a private tribunal for the public tribunal otherwise available to them....

Th[e] [C]ourt [of Appeals] has recognized that arbitration is a matter of contract which the parties should be allowed to ³⁷⁴ conduct in accordance with their agreement.” Charles J. Frank, Inc. v. Associated Jewish Charities, Inc., 294 Md. 443, 448 , 450 A.2d 1304 (1982) (citations omitted); see also Gold Coast Mall, Inc. v.' Larmar Corp., 298 Md. 96, 103 , 468 A.2d 91 (1983); C.W. Jackson & Assocs. v. Brooks, 289 Md. 658, 666 , 426 A.2d 378 (1981); Rosecroft Trotting & Pacing Ass’n v. Electronic Race Patrol, Inc., 69 Md.App. 405, 408 , 518 A.2d 137 (1986). The legislative policy of this State favors enforcement of executory agreements to arbitrate. See Croton Oil & Wax Co. v. Glen Constr. Co., 320 Md. 546, 558 , 578 A.2d 1184 (1990), and cases cited therein.

Section 3-207 of the Courts and Judicial Proceedings Article, part of the Maryland Uniform Arbitration Act, provides for the situation when a party to an arbitration agreement refuses to arbitrate. “If the opposing party denies existence of an arbitration agreement, the court shall proceed expeditiously to determine if the agreement exists.” Md.Code (1973, 1995 Repl.Vol.), § 3-207(b) of the Courts & Judicial Proceedings Article (CJ). When an arbitration agreement exists, or is alleged to exist, the court’s jurisdiction may properly be invoked in two limited contexts; that is, to compel arbitration or to stay it. See Petals Factory Outlet, Inc. v. EWH & Assocs., 90 Md.App. 312, 316 , 600 A.2d 1170 (1992). Section 3-210 specifically prohibits a court from refusing to order arbitration “[o]n the ground that the claim in issue lacks merit or bona fides; or [b]ecause a valid basis for the claim sought to be arbitrated has not been shown.” CJ §§ 3— 210(1) — (2).

Thus, the “Act strictly confines the function of the court in suits to compel arbitration to the resolution of a single issue — is there an agreement to arbitrate the subject matter of a particular dispute.” Gold Coast Mall, 298 Md. at 103-04 , 468 A.2d 91 (citation omitted); see also Stauffer Constr. Co. v. Board of Educ., 54 Md.App. 658, 664 , 460 A.2d 609 , cert. denied, 297 Md. 108 (1983) (holding that sole issue before circuit court is whether the alleged agreement to arbitrate exists); Bel Pre Medical Ctr., Inc. v. Frederick Contractors, Inc., 21 Md.App. 307, 320 , 320 A.2d 558 (1974), modified, 274 Md. 307 , 334 A.2d 526 (1975). Furthermore, when, as here, ³⁷⁵ the parties are in dispute as to whether the arbitration provision is enforceable, the resolution of that issue is for the court. Mayor of Baltimore v. Baltimore Fire Fighters, Local 734, 93 Md.App. 604, 610 , 613 A.2d 1023 (1992), cert. denied, 329 Md. 337 , 619 A.2d 547 (1993); accord Stephen L. Messersmith, Inc. v. Barclay Townhouse Assocs., 313 Md. 652, 661 , 547 A.2d 1048 (1988).

All doubts, however, are to be resolved in favor of submitting the dispute to arbitration. See Mayor of Baltimore, 93 Md.App. at 610 , 613 A.2d 1023 . In the case sub judice, upon the filing of appellant’s Counterpetition for Arbitration, the nature of the case below became an action to compel arbitration. In her response, although she acknowledged the inclusion of the arbitration clause in the Agreement, appellee argued that the provision was unenforceably vague.

This constituted a refusal to submit the dispute to arbitration. At that point, the initial issue to be decided by the trial court was whether the arbitration agreement was enforceable. The circuit court found that the provision was “very, very vague”; stated otherwise, the court found the provision to be unenforceable because it failed to specify certain key terms relating to the conduct of the arbitration itself. In doing so, the court erred.

We explain. During the course of the hearing, the court expressed its concerns about arbitration between the parties: “[W]ho would be the arbitrator, who is going to pay for the arbitration and when [will it] be taking placet?] ... [W]ho is going to pay for it?” Although it would have