DAVIDSON, J., delivered the opinion of the Court.
Bel Pre Medical Center, Inc., appeals from an order of the Circuit Court for Montgomery County which, on the motion of Frederick Contractors, Inc., directed the parties to stay the arbitration of a dispute arising out of a construction contract between them. The facts are essentially undisputed.
On 4 August 1971 the parties entered into a contract entitled "Standard Form of Agreement Between Owner and Contractor" which included as a part of the contract a document entitled "General Conditions of the Contract for Construction."
The relevant portions of the contract, in the order of their importance, provide as follows:
On 12 January 1973 the architect and representatives of the owner and the contractor met to inspect the premises and to determine what items remained to be completed by the contractor. On 16 January 1973 the architect wrote a letter to the owner which stated as follows:
The "punch list" contains 58 separate minor items remaining to be done. On or about 16 January 1973, the contractor submitted written requisitions for payment. On 27 January 1973 a meeting took place between the owner and the contractor at which a dispute arose which was not then resolved.
On 22 March 1973 the contractor recorded a mechanic's lien on the subject property and on 30 April 1973 filed a bill in equity to foreclose on the lien. On 22 May 1973 the owner made a demand upon the contractor for arbitration in which he charged that the contractor:
1) failed to construct the building according to specifications;
2) failed to recognize the architect as an employee of the owner;
4) failed to obtain certificates of payment signed by the architect.
On 8 June 1973 the contractor refused to participate in the arbitration proceedings "unless ordered by the Circuit Court for Montgomery County to do so."
On 24 May 1973 the owner moved to strike the mechanic's lien on the grounds that arbitration was the sole and exclusive remedy which the contractor could utilize to enforce his rights. On 12 June 1973 this motion was denied. On 19 June the owner filed his answer to the contractor's bill of complaint. He admitted all of the contractor's allegations except the amounts in dispute, and averred that the contractor had waived his right to file a mechanic's lien by failure to demand arbitration. On 27 June 1974 the contractor applied for an ex parte injunction to stay the arbitration demanded by the owner on the ground that the owner had failed to demand arbitration within thirty days of the receipt of the architect's letter. The ex parte injunction was granted.
On 12 July a hearing was held to determine whether a permanent injunction enjoining the arbitration proceeding should issue. Judge Philip M. Fairbanks found that the question presented was "whether the provisions [¶¶ 2.2.10 and 2.2.11 of the General Conditions] requiring demand for arbitration to be made within thirty days of the architect's decision apply or whether the provisions [¶ 7.10.2 of the General Conditions] requiring demands for arbitration to be made within a reasonable time after claim or within the statute of limitations apply." Judge Fairbanks determined that the architect's letter of 16 January 1973 constituted "his decision that the work was completed and that the contractor was entitled to be paid;" that under the contract the owner was required to demand arbitration "within thirty days of the architect's letter, or at most within thirty days of January 27, 1973;" and that the owner, therefore, had sought arbitration too late. The judge further found that
The question before us concerns the effect of an arbitration clause agreed to by the owner and the contractor. Appellant-owner contends here, as he did below, that the agreement of the parties to arbitrate "all claims, disputes, and other matters in question arising out of, or relating to this contract or the breach thereof" is binding upon the parties and precludes a court from determining the amount of money due for labor and materials furnished by the contractor to the owner. He insists that by agreement of the parties this issue must be determined by the arbitrator. Appellee-contractor does not dispute the fact that the issue of the amount of money due and owing for labor and materials is arbitrable under the terms of the agreement but contends that the owner waived his right to arbitration by failing to file a timely demand for arbitration. In support of this position the contractor argues, in the alternative, either that the architect's letter of 16 January 1973 constituted an "architect's decision" within the meaning of Paragraph 2.2.10 of the agreement so that under Paragraph 2.2.11 a demand for arbitration was required to be filed within 30 days, or that a dispute arose at the meeting of 27 January 1973 so that under Paragraph 7.10.2 a demand for arbitration had to be filed within a reasonable time. The contractor asserts that in either event the demand for arbitration, made on 22 May 1973, was too late. The owner asserts that the architect's letter of 16 January 1973 is not
"Since time immemorial, governments have provided means, either in the person of the Sovereign himself, or in the form of courts, for settlement of disputes between subjects." Mullen, "Arbitration under Maryland Law," 2 Md. L. Rev. 326 (1938). Arbitration is the process whereby parties voluntarily agree to substitute a private tribunal for the public tribunal otherwise available to them. The arbitration process provides a speedy, informal, relatively inexpensive, and private procedure for resolving controversies arising out of commercial transactions, as well as a tribunal uniquely qualified to resolve such disputes. Schreiber v. Pac. Coast Fire Ins. Co., 195 Md. 639, 647, 75 A.2d 108, 111-12 (1950); Dominion Marble Co. v. Morrow, 130 Md. 255, 260, 100 A. 292, 293 (1917); California Law Revision Comm'n, A Study Relating to Arbitration G-25 (1960); M. Domke, The Law and Practice of Commercial Arbitration, § 2.01 at 10 (1968); Aksen, "Resolving Construction Contract Disputes Through Arbitration," 23 Arb. J. 141, 158 (1968); Cushman, "Arbitration and State Law," 23 Arb. J. 162 (1968). The arbitrator is not a public official imposed upon the parties by a superior authority, and he is not required to administer justice for a community which transcends the parties. Rather, he is a part of the system of self-government created by and confined to the parties and designed to serve their specialized needs. The arbitrator is usually chosen because of the parties' confidence in his knowledge of the practices of the industry which enables him to employ considerations in fashioning his judgments which may be foreign to the expertise of the courts. The
The view of courts toward the arbitration process has been somewhat ambivalent. The common law, recognizing the value of arbitration, permitted parties to agree voluntarily, that they would submit to arbitration their existing or possible future disputes. If the agreement to arbitrate was performed by the parties and an arbitrator's award obtained, the award would be enforced by the courts. Nelley v. Baltimore City, 224 Md. 1, 8-9, 166 A.2d 234, 237 (1960); Mayor and City Council of Baltimore v. Clark, 128 Md. 291, 309, 97 A. 911, 917 (1916). Indeed, suits to enforce an arbitrator's award were described as "favored" actions, Parr Construction Co. v. Pomer, 217 Md. 539, 543, 144 A.2d 69, 72 (1958); Dominion Marble Co. v. Morrow, supra; Lewis v. Burgess, 5 Gill. 129, 131 (1847); Caton v. McTavish, 10 G. & J. 192, 216-17 (1838); and the awards of arbitrators would not be set aside by the courts unless the arbitrator was guilty of fraud, misconduct or prejudice, had exceeded his authority, or had made a mistake in law or fact appearing on the face of the award. Chillum v. Button & Goode, 242 Md. 509, 517, 219 A.2d 801, 806 (1966); Parr Construction Co. v. Pomer, supra, 217 Md. at 543-44; 144 A.2d at 72; Witz v. Tregallas, 82 Md. 351, 369-70, 33 A. 718, 721-22 (1896); Roloson v. Carson, 8 Md. 208, 220-22 (1855). But at common law it was also the general rule that, in the absence of legislative direction to the contrary, an executory agreement for arbitration of the ultimate rights of the parties, such as an agreement to arbitrate all future disputes that might thereafter arise, even though resort to arbitration was specified to be a condition precedent to court action, was not
In Maryland arbitration was governed by the common law rules until 1965, the year in which the Maryland Uniform Arbitration Act, Code (1957), Art. 7, was enacted by the General Assembly.
The Maryland Act provides, in pertinent part:
The Uniform Arbitration Act constitutes a radical
In accord with the legislative policy in favor of the enforcement of executory agreements to arbitrate, 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 the dispute. What is sought in such suits is the enforcement of an agreement to arbitrate. Whether one is seeking a court order directing the parties to proceed to arbitration under § 2 (a), resisting a demand for arbitration and seeking an order staying it under § 2 (b), or seeking to stay a court action and obtain an order directing arbitration under § 2 (d), the question is always the same: is there an agreement to arbitrate?
A problem is created for the court when the language of the arbitration provision is unclear as to whether the subject matter of the dispute falls within the scope of the arbitration agreement. In such circumstances the legislative policy in favor of the enforcement of agreements to arbitrate dictates that the question should be left to the decision of the arbitrator. Whether the party seeking arbitration is right or wrong is a question of contract application and interpretation for the arbitrator, not the court, Code (1957), Art. 7, § 2 (e), and the court should not deprive the party seeking arbitration of the arbitrator's skilled judgment by
Here the parties agreed to submit to arbitration "all claims, disputes and other matters in question arising out of or relating to the contract or the breach thereof." Without first seeking arbitration the contractor filed suit to enforce a mechanic's lien for money allegedly due and owing under the agreement. Thereafter the owner made a demand for arbitration of issues concerning the amount of money, if any, that was due and owing. The contractor refused to arbitrate and sought to stay the arbitration proceeding, not because the arbitrability of the substantive issues was questioned but rather because of a dispute as to whether the demand for arbitration had been timely made. Thus the question of substantive arbitrability is not before us. The
Neither Maryland nor any other state which has adopted the Uniform Arbitration Act has decided this issue.
This rule has been consistently followed and applied by federal courts.
While the principles enunciated in Wiley do not flow from an interpretation of the Uniform Arbitration Act, the Congressional policy favoring the enforcement of agreements to arbitrate which led the Supreme Court to its resolution of this issue under § 301 are parallel to the
We are convinced that the rule enunicated in the Wiley case, applicable to arbitration under collective bargaining agreements in suits brought under § 301 of the Labor Management Relations Act, is sound and totally consistent with the intent and purposes of the Uniform Arbitration Act. The rule promotes the benefits of arbitration. It removes the "difficult task of separating related issues" from the courts and avoids duplication of effort and unjustifiable delay. We believe that the application of Wiley to commercial arbitration would properly effectuate the legislative policy in favor of the enforcement of executory agreements to arbitrate which the Uniform Arbitration Act expresses.
The trial court erred in ordering a stay of arbitration. Accordingly, we shall reverse and remand for the entry of an order to compel arbitration and to stay further proceedings in the Circuit Court for Montgomery County.
Case remanded for further proceedings in accordance with this opinion.
Costs to be paid by appellee.
The author of the article was the Chairman of the Subcommittee of the National Conference of Commissioners on Uniform State Laws which drafted the Uniform Arbitration Act.
In his excellent, extensive and persuasive discussion, Professor Pirsig strongly supports the view that the act intended questions concerning substantive arbitrability to be determined by the courts, but that in performing that function the courts should resolve all doubts in favor of arbitration. Pirsig, supra at 692-99.
Appellee further cites a number of cases in which state courts have held that where a contract provided for the exclusive remedy of arbitration and timely demand for arbitration was not made, the right to arbitration had been waived. None of these cases were decided under the Uniform Arbitration Act and in none of them did the parties raise the issue before us of whether the question of compliance with the procedural prerequisites to arbitration should be decided by the arbitrator rather than the court. In each of these cases the court was asked to decide the issue of procedural compliance and no objection was made to having the issue resolved by the court. These cases stand for nothing more than the principle that a party failing to object to litigation concerning an arbitrable issue has waived his right to arbitration. They are all inapposite.
The Court then held that the substantive law to be applied in enforcing such agreements in suits under § 301 is "federal law, which the courts must fashion from the policy of our national labor laws."
Accord, e.g., United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 1353 (1960); Trailways of New England, Inc. v. Amalgamated Ass'n of Street, E.R. & M.C. Employees, Div. 1318, supra at 818-19; Local 12298, Dis. 50, UMW v. Bridgeport Gas Co. 328 F.2d 381, 383 (2d Cir.1964); RCA v. Ass'n of Professional Eng'r Personnel, 291 F.2d 105, 109 (3d Cir.1961); Ass'n of Westinghouse Salaried Employees v. Westinghouse Elec. Corp., 283 F.2d 93, 95 (3d Cir.1960); United Textile Workers v. Newberry Mills, Inc., 315 F.2d 217, 218 (4th Cir.), cert. denied, 375 U.S. 818, 84 S.Ct. 54 (1963); Jacksonville Newspaper Printing Pressman Union, Local 57 v. Florida Publishing Com., 468 F.2d 824, 826 (5th Cir.1972), cert. denied, 411 U.S. 906, 93 S.Ct. 1531 (1973); Lodge No. 12, Dist. No. 37, Int'l Ass'n of Machinists v. Cameron Iron Works, 292 F.2d 112, 117 (5th Cir.), cert. denied, 368 U.S. 926, 82 S.Ct. 361 (1961); Local 6, Bricklayers, M. & P. v. Boyd G. Heminger, Inc., 483 F.2d 129, 131 (6th Cir.1973); Smith v. Union Carbide Corp., 350 F.2d 258, 260-61 (6th Cir.1965); Nepco Unit of Local 95, Office Employees Int'l Union v. Nekoosa-Edwards Paper Co., 287 F.2d 452, 454 (7th Cir.1961); Local 4, IBEW v. Radio Thirteen-Eighty, Inc., 469 F.2d 610, 614 (8th Cir.1972).
Accord, e.g., Atkinson v. Sinclair Refining Co., 370 U.S. 238, 241-43, 82 S.Ct. 1318, 1320-22 (1962); Proctor & Gamble Independent Union of Port Ivory v. Proctor & Gamble Mfg. Co., 298 F.2d 644, 645-46 (2d Cir.1962); Avco Corp. v. Local 787, UAW, 459 F.2d 968, 973 (3d Cir.1972); RCA v. Ass'n of Professional Eng'r Personnel, supra at 109-10; United Textile Workers v. Newberry Mills, Inc., supra at 219; Sam Kane Packing Co. v. Amalgamated Meat Cutters & B.W., 477 F.2d 1128, 1134-35 (5th Cir.), cert. denied, 414 U.S. 1001, 94 S.Ct. 355 (1973); Lodge No. 12, Dist. No. 37, Int'l Ass'n of Machinists v. Cameron Iron Works, supra at 118-19; Jefferson City Cabinet Co. v. IUE, 313 F.2d 231, 236 (6th Cir.), cert. denied, 373 U.S. 936, 83 S.Ct. 1539 (1963); Local 702, IBEW v. Central Ill. Public Service Co., 324 F.2d 920, 922-23 (7th Cir.1963); Local 4, IBEW v. Radio Thirteen-Eighty, Inc., supra at 614; Int'l Ass'n of Machinists v. Howmet Corp., 466 F.2d 1249, 1252 (9th Cir.1972); Desert Coca Cola Bottling Co. v. General Sales Drivers, D.D. & H. Local 14, 335 F.2d 198, 201-02 (9th Cir.1964); UAW v. Cardwell Mfg. Co., 304 F.2d 801, 802-03 (10th Cir.1962).
Accord, e.g., Peerless Pressed Metal Corp. v. IUE, 451 F.2d 19, 20 (1st Cir.1972); Strauss v. Silvercup Bakers, Inc., 353 F.2d 555, 557-59 (2d Cir.1965); Proctor & Gamble Independent Union of Port Ivory v. Proctor & Gamble Mfg. Co., supra at 645-46; RCA v. Ass'n of Professional Eng'r Personnel, supra at 110; H.K. Porter Co. v. Local 37, United Steel, 400 F.2d 691, 694-95 (4th Cir.1968); United Textile Workers v. Newberry Mills, Inc., supra at 218-19; Sam Kane Packing Co. v. Amalgamated Meat Cutters & B.W., supra at 1134; CWA v. Southwestern Bell Tel. Co., 415 F.2d 35, 39 (5th Cir.1969); Int'l Ass'n of Machinists v. Hayes Corp., 296 F.2d 238, 242-43 (5th Cir.1961); Hotel & Restaurant E. & B. Int'l Union v. Playboy Clubs Int'l, Inc., 454 F.2d 703, 704 (6th Cir.1972); Am. Radiator & Standard Sanitary Corp. v. Local 7, Int'l Bhd. Operative Potters, 358 F.2d 455, 458 (6th Cir.1966); Local 702, IBEW v. Central Ill. Public Service Co., supra at 923; Montana-Dakota Util. Co. v. NLRB, 455 F.2d 1088, 1092 (8th Cir.1972); Local 1327, Int'l Ass'n of Machinists v. Fraser & Johnston Co., 454 F.2d 88, 92 (9th Cir.1971), cert. denied, 406 U.S. 920, 92 S.Ct. 1775 (1972); Independent Soap Workers v. Proctor & Gamble Mfg. Co., 314 F.2d 38, 43 (9th Cir.), cert. denied, 374 U.S. 807, 83 S.Ct. 1696 (1963); Bhd. Locomotive F. & E., Lodge 844 v. Kennecott Cooper Corp., 338 F.2d 224, 226 (10th Cir.1964).