Stauffer Construction Co. v. Board of Education

Wilner, J., delivered the opinion of the Court. On September 20, 1976, the parties entered into a construction contract under which appellant was to do certain rehabilitation and renovation work at the Bethesda-Chevy Chase High School complex. They are now embroiled in a dispute over that contract, which appellant sought to have arbitrated. Upon motion of appellee, however, the Circuit Court for Montgomery County stayed the arbitration proceeding, concluding, on summary judgment, that appellant had waived its right to arbitration by failing to present its claims to the architect in a proper and timely fashion.

We are asked in this appeal whether: (1) The court had the authority to make that determination; (2) It should, in any event, have made it upon summary judgment; and (3) By failing to print a proper appendix or record extract, appellant has forfeited its right to appeal the circuit court judgment. The first two questions are obviously related, and we shall consider them together. But we shall turn our attention initially to the third issue. Motion To Dismiss This is appellant’s third attempt to perfect an appeal in this case, 1 and once again it is faced with a motion to dis ⁶⁶⁰ miss.

This time, appellee complains of appellant’s failure to print some seven pounds of documents as part of its appendix. With great force, and with real or feigned dismay, it tells us that, absent these 135 pages of documents (which, we are advised would have cost about $3,000 to print), we shall be unable to address properly the issues raised by appellant. Considering that appellee has seen fit to print only two of those documents in its own appendix and that it has managed quite well to respond fully to appellant’s arguments without reference to the other 133 pages of documents, we think that its complaint, though having a partly legitimate basis, is a bit overstated. We shall deny the motion to dismiss.

In so doing, we do not mean to suggest that appellant’s appendix is entirely adequate; it is not. At the very least, appellee’s amended petitions for stay of arbitration and its motion for summary judgment should have been printed, as well as those portions of the record that appellant itself has found necessary to refer to (improperly) in its brief. We think, however, that such of the record as is printed in the two appendices suffices to permit us to adjudicate the issues raised by appellant, and that, in the interest of justice, we ought to do so. Background The contract called for the work to be undertaken and completed in designated stages, with final completion by August 1, 1978, after which liquidated damages at the rate of $100 a day were specified.

The total contract price was $4,044,910. ⁶⁶¹ Attached to the contract, and forming a part of it, was AIA Document A201, General Conditions of the Contract for Construction. Four provisions, or categories of provisions, in those general conditions are relevant here: Article 2, describing the function and authority of the architect; § 8.3, dealing with delays and extensions of time; article 12, concerning changes in the work; and § 7.10, providing for arbitration of disputes. We shall return to these provisions shortly. Appellant did not complete the work within the time set by the contract.

On November 27,1979, some fifteen months after the August, 1978, deadline, appellee declared a default. It terminated the contract and called upon appellant’s surety to complete the work in accordance with its bond. The surety took over the job, but, with appellee’s consent, arranged for appellant to continue the actual work. Under this new arrangement, appellant remained on the job, working for the surety, until April 17, 1980, when, for whatever reason, its connection with the job was fully and finally terminated by the surety.

On May 12,1980, appellant filed a demand for arbitration. The relevant part of its dispute with appellee was defined as follows: "As a result of changes in the work directed by the respondent, design deficiencies, owner-directed alterations in the specified sequence of work and other delays and interruptions caused by the owner, the claimant incurred substantial additional costs of performance, including extra work and delay and impact costs, and became entitled to extensions of contract time equal to its progress on the work. Notwithstanding these circumstances, the respondent default terminated the claimant [sic] on November 27, 1979, at which time claimant was 99.6% complete and was on the job working towards final completion. Although the default termination was without justification and claimant protested same, the respondent called upon claimant’s per ⁶⁶² formance bond surety to complete the remaining work.” As relief, appellant sought $235,499 allegedly due under the contract plus $547,852 for "additional delay and impact costs.” It sought as well an adjudication that "the default termination was without justification under the contract,” that it is not responsible for any additional costs incurred by the surety over what it reasonably would have cost appellant to complete the work, and that appellee is not entitled to assess liquidated damages.

Appellee responded to this demand with a petition in the Circuit Court for Montgomery County seeking to stay the arbitration proceeding. In its initial petition, filed June 6, 1980, appellee raised three defenses to the arbitration: (1) that appellant’s demand for arbitration was not timely filed; (2) that appellant was not entitled to arbitrate its claim for the balance of the contract price where it had been removed from the job and did not perform the work upon which the claim is based; and (3) that any dispute over completion costs incurred by the surety is not within the scope of the arbitration agreement. By subsequent amendments to its petition, appellee added two more defenses: that appellant waived its right to arbitration by filing a lawsuit against appellee; 2 and that "the claims which are the subject of the demand for arbitration were not presented to [appellee] or its architect within the time required by the agreement between the parties.” After extensive discovery, each party filed a motion for summary judgment. In addition to the various depositions and answers to interrogatories (and exhibits thereto), there were before the court two affidavits of Dr. H. Philip Rohr, on ⁶⁶³ behalf of appellee, and the affidavit of Bruce E. Stauffer, president of appellant, on behalf of appellant.

The major thrust of the Stauffer affidavit was that, by their course of conduct, the parties in effect had ignored, and thus waived, the requirements that claims be submitted to and ruled upon by the architect. Cf. Southern Md. Hosp. v. Edw. M. Crough, Inc., 48 Md. App. 401 , cert. den. 290 Md. 721 (1981).

On September 9,1981, the court granted appellee’s motion on the narrow issue of whether appellant "compl[ied], substantially, with the time provisions of the contract pertaining to presentment of claims.” It concluded that appellant had "totally failed to meet the time restrictions agreed to by the parties in A201 Paragraphs 8.3.1 and 8.3.2.” (Emphasis supplied.) That was the sole stated basis for the court’s decision, upon which judgment staying the arbitration was ultimately entered. The other defenses raised by appellee — in particular the timeliness of the demand for arbitration as opposed to the timeliness of appellant’s presentment of its claim to the architect and the effect of the "protective” lawsuit filed by appellant — were not discussed or ruled upon by the court. Nor did the court address the arbitrability of appellant’s claims that the default termination was without justification, that it was entitled to the unpaid balance of the contract price, that it was not liable for the increased costs incurred by the surety, and that it was not liable for liquidated damages. Finally, with respect to the claims for additional compensation due to extra work or delays caused by appellee, the court omitted any mention of the asserted failure of appellant to comply with the requirements of articles 2 and 12 of the general conditions.

Discussion Appellant presents a number of arguments in this appeal as to why the court erred, one of which has merit. Although it may have been possible for the court to determine whether arbitration should be stayed by addressing and resolving the ⁶⁶⁴ effect of (1) any delay in demanding the arbitration (§ 7.10), or (2) any failure by appellant to make a timely presentation of its claims to the architect under article 2 (authority of architect), or (3) the lawsuit filed by appellant, it was not appropriate for the court, on summary judgment, to stay arbitration proceedings by virtue of noncompliance with § 8.3 (extensions of time). Md. Code Ann. Courts art., § 3-206 (a) provides that a written agreement to submit to arbitration any controversy arising between the parties in the future is valid and enforceable. When such an agreement exists, or is alleged to exist, the courts are generally enjoined by the statute from interfering with the arbitration process.

Indeed, the court’s jurisdiction may properly be invoked in but two limited contexts — to compel arbitration or to stay it. Under § 3-207, if a party to the alleged agreement refuses to submit to arbitration, the party demanding the arbitration may petition the court to enforce the agreement by ordering the arbitration. The only issue in such a proceeding is whether the alleged agreement to arbitrate exists. This is explicitly stated in § 3-207 (c): "If the court determines that the agreement exists, it shall order arbitration.

Otherwise it shall deny the petition.” Section 3-208 permits a party who "denies the existence of the arbitration agreement” to "petition a court to stay commenced or threatened arbitration proceedings.” As with a petition to compel arbitration under § 3-207, the sole issue in such a proceeding, according to the statute, is whether the agreement exists. Section 3-208(c) provides: "If the court determines that existence of the arbitration agreement is in substantial and bona fide dispute, it shall try this issue promptly and order a stay if it finds for the petitioner. If the court finds for the adverse party, it shall order the parties to proceed with arbitration.” The limited nature of either proceeding, under §§ 3-207 or 3-208, is confirmed by § 3-210: ⁶⁶⁵ "An order for arbitration shall not be refused or an arbitration proceeding stayed: (1) On the ground that the claim in issue lacks merit or bona tides; or (2) Because a valid basis for the claim sought to be arbitrated has not been shown.” These statutory pronouncements appear to be simple and direct: in an action to compel or to stay arbitration, the court should consider but one thing — is there in existence an agreement to arbitrate the dispute sought to be arbitrated? Unfortunately, the seeming simplicity is deceptive.

This Court and the Court of Appeals addressed one aspect of the problem in Bel Pre Med. v. Frederick Contr., 21 Md. App. 307 (1974), aff'd but modifíed Frederick Contr. v. Bel Pre Med., 274 Md. 307 (1975). That case had a somewhat complex procedural history, but it ultimately came to us from an order of the circuit court enjoining an arbitration proceeding. The dispute there, as here, was between an owner and a contractor operating under the AIA Form A201 General Conditions. When the owner failed to make final payment on the contract, the contractor filed a mechanic’s lien which it promptly sought to enforce.

The owner attempted to block the mechanic’s lien proceeding by demanding arbitration under the agreement and claiming that the contractor had forfeited its right to the lien by failing itself to demand arbitration. The contractor, on the other hand, sought to enjoin the arbitration on the basis that the owner had waived its right to that remedy by failing to make a timely demand for it. The circuit court rejected the owner’s defense to the lien proceeding, found that the owner’s demand for arbitration was not timely, and enjoined the arbitration. We did not consider the issue as one of "substantive arbitrability” — i.e., whether the claims and counterclaims between the parties were subject to arbitration under the agreement.

That, indeed, was not really contested. Rather, we regarded the "precise issue” as "whether the question of ⁶⁶⁶ compliance with the procedural prerequisite of a timely demand growing out of the arbitrable dispute should be determined by the arbitrator or a court.” 21 Md. App. at 323 . Relying principally upon John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543 (1964), which involved the arbitration provisions in the Labor Management Relations Act ( 29 U.S.C., § 185 ), we concluded that that issue was for the arbitrators to resolve, not the court. For that reason, we vacated the injunction.

The Court of Appeals reached a different conclusion, but the same result. Rejecting the approach taken in the labor relations cases, as set forth in John Wiley & Sons, Inc., the Court concluded that "[i]n the final analysis, it is for the courts and not the arbitrators to determine the timeliness of a demand for arbitration.” 274 Md. at 314 . The "timeliness of a demand for arbitration,” it continued at p. 315, "is a threshold question, which is, in the first instance, for the courts. . .” . Having established that principle, and without mentioning the fact that the trial court had specifically found that the demand by Bel Pre was not made within a reasonable time (see 21 Md. App. at 313-14 ), the Court held, presumably as a matter of law, that the demand "was made within the reasonable time stipulated by § 7.10.2 of the General Conditions.” 274 Md. at 315 .

Although the Court of Appeals made a passing reference to Maryland’s version of the Uniform Arbitration Act ( 274 Md. at 314 ), it did not attempt to relate the principle which it established to that Act, in