Case Title: SCHERER v. SCHULER CUSTOM HOMES CONSTRUCTION, INC.

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 2004-09-22T00:00:00Z

Document:
SCHERER v. SCHULER CUSTOM HOMES CONSTRUCTION, INC.2004 WY 10998 P.3d 159Case Number: 03-147Decided: 09/22/2004
APRIL 
TERM, A.D. 2004

 

                                                                                                            

 

TIM 
SCHERER,

 

Appellant(Plaintiff) 
,

 

v.

 

SCHULER 
CUSTOM HOMES

CONSTRUCTION, 
INC.,  a 
Wyoming

corporation

 

Appellees(Defendants) 
.

 

 

Appeal 
from the District Court of Natrona County

The 
Honorable W. Thomas Sullins, Judge

 

Representing 
Appellant:

            
Mark W. Gifford, Casper, Wyoming. 

 

Representing 
Appellee:

            
Stephen R. Winship of Winship & Winship, Casper, Wyoming. 

 

 

Before 
HILL, C.J., and GOLDEN, LEHMAN, KITE, and VOIGT, JJ.

 

 

KITE, 
Justice.

 

[¶1]      Appellant Tim 
Scherer ("Mr. Scherer") appeals from the district court's order granting a 
summary judgment in favor of Schuler Custom Homes Construction, Inc. ("Schuler 
Custom Homes").  The district court 
dismissed Mr. Scherer's complaint ruling that a clause in the parties' 
construction contract, which provided for resolution of disputes over the 
contract by mediation and/or arbitration, was "applicable and should be 
enforced."  We conclude that Schuler 
Custom Homes waived alternative dispute resolution, and, therefore, reverse and 
remand for further court proceedings.  

 

 

ISSUES

 

[¶2]      Mr. Scherer presents the following issues on 
appeal:

 

1          
Whether a mediation/arbitration provision in a construction contract is 
enforceable where the general contractor abandons the construction project, 
thereby repudiating the contract.

 

2.         
If the mediation/arbitration provision is enforceable, whether the 
general contractor waived the mediation/arbitration provision when it refused to 
participate in arbitration.

 

3.         
Whether the district court abused its discretion in denying Appellant's 
motion for leave to file an amended complaint to add claims for fraud in the 
inducement and negligent misrepresentation.

 

[¶3]      Schuler Custom 
Homes phrases the appellate issues as follows:

 

1.         
Whether the lower court erred in enforcing the parties' agreement to 
submit their disputes to alternative dispute resolution.

 

2.         
After determining that there was no jurisdiction because of the parties' 
agreement to submit their disputes to alternative dispute resolution, did the 
lower court abuse its discretion in denying Appellant's motion to amend his 
Complaint[?]

 

 

 

FACTS

 

[¶4]      On October 14, 
2002, Mr. Scherer and Schuler Custom Homes entered into a contract for 
construction of a home at the base of Casper Mountain.  The contract contained the following 
provision:

 

            
A.        
Mediation and Arbitration:  
The parties agree that if a dispute arises between them relating to this 
agreement, they will not file litigation, but will informally resolve the 
dispute between themselves or submit the dispute to mediation or 
arbitration.  When a dispute arises 
which the parties are unable to resolve between themselves, the parties shall 
proceed in good faith to jointly appoint an acceptable mediator and will share 
equally in the cost of such mediator.  
The mediation shall be privileged and confidential as provided by Wyoming 
law.  In the event the mediation 
fails to resolve the matter within forty-five (45) calendar days from the date 
the dispute arises, the parties agree that the matter shall be submitted to 
binding arbitration.  The 
arbitration shall be governed by the Wyoming Uniform Arbitration Act as now in 
effect or later amended, and, absent agreement of the parties to the contrary, 
each party shall select an arbitrator within fifteen (15) days of the failure of 
mediation and the two arbitrators shall name a third arbitrator.  Unless otherwise decided by the 
arbitration panel, the parties shall share equally in the cost of such 
arbitrators. 

 

[¶5]      Shortly after 
construction commenced, Mr. Scherer notified Schuler Custom Homes of defects in 
its workmanship and requested that the parties execute certain change orders to 
the project.  Schuler Custom Homes 
did not address these issues to Mr. Scherer's satisfaction, and the business 
relationship between the parties deteriorated.  On February 4, 2003, the parties had a 
meeting regarding the project, which culminated in an argument.  At that meeting Mr. Scherer told Schuler 
Custom Homes that, unless the defects were corrected, he was going to terminate 
the contract.  Mr. Scherer also told 
Schuler Custom Homes that he would expect a refund of some of the nearly 
$150,000 he had already paid for construction of the home.   

 

[¶6]      On February 6, 
2003, Mr. Scherer delivered a letter to Schuler Custom Homes, outlining the 
outstanding problems and demanding that Schuler Custom Homes proceed with the 
construction according to the contract.  
In response to Mr. Scherer's letter, Schuler Custom Homes verbally 
communicated that it was terminating the contract and would not refund any of 
the money that Mr. Scherer had paid.  
Although Schuler Custom Homes did attempt some repair work the next day, 
it did not perform any additional work on the project after February 7, 
2003.  Mr. Scherer personally 
secured the site to prevent damage to the structure and hired other contractors 
to complete construction of the home.  

 

[¶7]      On February 10, 
2003, Mr. Scherer filed a complaint against Schuler Custom Homes alleging breach 
of contract.  Schuler Custom Homes 
filed a motion to dismiss the lawsuit claiming that the parties were required to 
submit their disagreement to alternative dispute resolution.  On March 17, 2003, Mr. Scherer sent a 
letter to Schuler Custom Homes demanding arbitration and proposing an 
arbitrator.  That letter referenced 
a February 26, 2003, letter in which Mr. Scherer stated that he was willing to 
stipulate to a stay of the pending litigation to arbitrate the dispute.  On March 24, 2003, Schuler Custom Homes 
responded to Mr. Scherer's arbitration proposal by stating that it was unwilling 
to stipulate to a stay of the pending litigation and suggesting the parties 
should try to mediate their disagreement.  
The letter did not, however, contain any specifics on the mediation 
proposal, such as the suggestion of a mediator or a schedule for conducting the 
mediation.  

 

[¶8]      Without making 
any further effort towards alternative dispute resolution, Schuler Custom Homes 
simply filed an amended motion to dismiss the complaint.  On May 15, 2003, Mr. Scherer withdrew 
his offer to arbitrate because Schuler Custom Homes had failed to nominate an 
arbitrator.  Mr. Scherer filed a 
response to Schuler Custom Homes' motion to dismiss and a motion for leave to 
amend its complaint to add claims for fraud in the inducement, intentional 
and/or negligent misrepresentation, and piercing of the corporate veil.    

 

[¶9]      The district 
court held a hearing on the parties' pending motions.  Because the parties submitted materials 
apart from the pleadings, the district court properly converted Schuler Custom 
Homes' motion to dismiss to a motion for summary judgment.  At the conclusion of the hearing, the 
district court granted summary judgment in favor of Schuler Custom Homes, ruling 
that the alternative dispute provision of the agreement was applicable and 
should be enforced.  The district 
court further ordered that Mr. Scherer's motion for leave to file an amended 
complaint was rendered moot by its summary judgment ruling.  Mr. Scherer appealed. 

 

 

DISCUSSION

 

 

            
1. 
        
Jurisdiction

 
[¶10]   After reviewing the record and the 
parties' briefs, we became concerned that this Court might not have jurisdiction 
over this appeal because the district court's ruling did not finally decide the 
parties' dispute.  We, therefore, 
raise the jurisdiction issue sua 
sponte.  See e.g., Terex Corp. v. Hough, 2002 WY 112, ¶ 6, 
50 P.3d 317, ¶ 6 (Wyo. 2002); Ahearn v. 
Anderson-Bishop Partnership, 946 P.2d 417, 422 (Wyo. 1997).  

 

[¶11]   Wyoming Rule of Appellate Procedure 
1.05 defines an appealable order as:

 

  (a) An order affecting a 
substantial right in an action, when such order, in effect, determines the 
action and prevents a judgment; or

 

  (b) An order affecting a 
substantial right made in a special proceeding; or

 

  (c) An order made upon a 
summary application in an action after judgment; or

 

  (d) An order, including a 
conditional order, granting a new trial on the grounds stated in Rule 59(a)(4) 
and (5), Wyo. R. Civ. P.; if an appeal is taken from such an order, the judgment 
shall remain final and in effect for the purposes of appeal by another party; 
or

 

  (e) Interlocutory orders 
and decrees of the district courts which:

 

  (1) Grant, continue, or modify 
injunctions, or dissolve injunctions, or refuse to dissolve or modify 
injunctions; or

 

  (2) Appoint receivers, or issue orders 
to wind up receiverships, or to take steps to accomplish the purposes thereof, 
such as directing sales or other disposition of property.

 

[¶12]   The district court granted summary 
judgment in favor of Schuler Custom Homes and dismissed Mr. Scherer's 
complaint.  An order granting 
summary judgment is generally an appealable order because it ends a 
proceeding.  See e.g., Hutchins v. Payless Auto Sales, Inc., 
2004 WY 22,  85 P.3d 1010 (Wyo. 
2004); Ahrenholtz v. Laramie Economic Development Corp., 2003 WY 149, 79 P.3d 511 (Wyo. 2003).  In this case, 
however, the district court's order did not decide the parties' underlying 
dispute, but simply dismissed the case and ordered the parties to resolve their 
disagreement outside of the traditional court process.  The matter was not stayed and the 
district court did not maintain oversight authority over the alternative dispute 
resolution process.  Consequently, 
any future appeal from an arbitration decision would have to be commenced in a 
new and separate action. Wyoming's version of the Uniform Arbitration Act 
specifically allows for the parties to commence a new action to review an 
arbitrator's decision.  Wyo. Stat. 
Ann. §§ 1-36-101 (LexisNexis 2003), et.  
seq.  Thus, it is clear 
that the district court's summary judgment ruling finally ended this particular 
action. 

 

[¶13]   Furthermore, the issues raised in 
this appeal concern the applicability and enforceability of the alternative 
dispute resolution clause in the first instance.  If we deny review of that question at 
this juncture, we would be requiring the parties to undertake the time and 
expense of mediation and/or arbitration without a final determination of whether 
such a proceeding is even required by the contract.  It promotes a wise use of resources to 
issue a final ruling on whether alternative dispute resolution is required at 
this point.  We, therefore, conclude 
that the district court's order granting a summary judgment in favor of Schuler 
Custom Homes is a final order pursuant to W.R.A.P. 1.05 and this court has 
jurisdiction to review it.

 

 

2.         
Enforceability of Arbitration Clause  

 

[¶14]   The district court granted summary 
judgment in favor of Schuler Custom Homes, ruling that the alternative dispute 
resolution provision was applicable and should be enforced.  Mr. Scherer presents two arguments in 
support of his position that the alternative dispute resolution provision is not 
enforceable:  1) Schuler Custom 
Homes repudiated the contract; and 2) Schuler Custom Homes waived its right to 
alternative dispute resolution.  Our 
decision on the waiver issue is dispositive; consequently, we will not address 
Mr. Scherer's argument that Schuler Custom Homes repudiated the 
contract.

 

[¶15]   Summary judgment 
is appropriate when there are no genuine issues of material fact  and the moving party is entitled to 
judgment as a matter of law.  Owsley v. Robinson, 2003 WY 33, ¶ 7, 65 P.3d 374, ¶ 7 (Wyo. 2003).  See 
also, W.R.C.P. 56(c).  The material facts relating to Mr. Scherer's 
argument that Schuler Custom Homes waived its right to alternative dispute 
resolution are not in dispute.  
Consequently, our inquiry focuses on applying the law of waiver to those 
undisputed facts.  Accord, Ryel v. Anderies, 4 P.3d 193, 195 
(Wyo. 2000).  We review 
questions of law de novo without 
giving any deference to the district court's determinations.  Hasvold v. Park County School Dist. No. 6, 
2002 WY 65, ¶ 11, 45 P.3d 635, ¶ 11 (Wyo. 2002).   

 

[¶16]   This Court favors arbitration or 
other forms of alternative dispute resolution.  Stewart Title Guaranty Co. v. Tilden, 
2003 WY 31, ¶ 7, 64 P.3d 739, ¶ 7 (Wyo. 2003);  Simon v. Teton Board of Realtors, 4 P.3d 197, 201 (Wyo. 2000).  Alternative 
dispute resolution allows parties to resolve their differences in a less 
expensive and more timely manner than traditional litigation does.  Stewart Title Guaranty Company, ¶ 
7.  In deference to our policy of 
encouraging arbitration, we will not lightly infer a claim that alternative 
dispute resolution was waived.  Jackson State Bank, 837 P.2d  at 
1086.  Nevertheless, "we have 
recognized that a contractual right to arbitration may be waived either 
expressly or implicitly."  Id.; See also, Garaman, Inc. v. Williams, 912 P.2d 1121, 1126-27 (Wyo. 1996).  The 
traditional elements of waiver are:  
"(1) an existing right; (2) knowledge of that right; and (3) an intent to 
relinquish it."  Jackson State Bank, 937 P.2d 1086.  We also look to factors which are 
specific to waiver of a contractual right to arbitration, including whether the 
party seeking arbitration has: (1) previously taken action inconsistent with the 
intent to participate in arbitration; (2) unreasonably delayed in seeking 
arbitration; or (3) has acted in bad faith or with willful misconduct.  Id. at 1086-87, citing, Christensen v. Dewor Developments, 
661 P.2d 1090, 1091 (Cal. 1983).  

 

[¶17]   In this case, Schuler Custom Homes 
was obviously aware of its right to invoke alternative dispute resolution.  The agreement clearly provided for 
resolving disagreements through mediation and/or arbitration.  The plain language of the agreement 
stated that the parties should try to mediate their differences and, if that 
failed, then they would submit their differences to binding arbitration.  The alternative dispute resolution was 
to take place within a short period of time after the dispute developed.  

 

[¶18]   Mr. Scherer's decision to file his 
complaint within days after the dispute developed was, obviously, 
premature.  We cannot, however, 
ignore the fact that, after Schuler Custom Homes filed its motion to dismiss the 
litigation claiming that the matter should be submitted to alternative dispute 
resolution under the terms of the contract, Mr. Scherer offered to stay the 
litigation pending arbitration.  On 
March 17, 2003, Mr. Scherer reiterated his offer to stay the litigation while 
arbitration was pending and even nominated an arbitrator.  When Schuler Custom Homes finally 
responded to Mr. Scherer's arbitration proposals on March 24, 2003, it stated 
that it was unwilling to stay the litigation and made some vague remarks about 
mediation.  Schuler Custom Homes did 
not, however, suggest a mediator or an arbitrator or present any concrete 
options for alternative dispute resolution.  Notably, the contractual deadline for 
mediation, which required that disputes be mediated within forty-five days after 
they arose, had already expired when Schuler Custom Homes proposed 
mediation.  On May 1, 2003, Schuler 
Custom Homes renewed its motion to dismiss the litigation without taking any 
steps to further alternative dispute resolution or asking the district court to 
intervene and compel alternative dispute resolution.  On May 15, 2003, more than three months 
after the dispute arose, Mr. Scherer withdrew his offer to arbitrate.  

 

[¶19]   In light of these facts, we are led 
to the inescapable conclusion that Schuler Custom Homes' strategy was to delay 
resolution of this matter and not to exercise its rights under the contract for 
alternative dispute resolution.  
When faced with a direct request for alternative dispute resolution, it 
chose to ignore that request.  
Although Schuler Custom Homes stated that the parties should resolve 
their dispute through mediation, it made its suggestion after the forty-five day 
deadline had already expired and it took no affirmative action to advance 
mediation or any other form of alternative dispute resolution.  

 

[¶20]   Under Wyoming's version of the 
Uniform Arbitration Act, Schuler Custom Homes could have requested that the 
district court order the parties to proceed with arbitration.  Wyo. Stat. Ann. § 1-36-104 (LexisNexis 
2003).  Schuler Custom Homes did not 
take advantage of that option and, in fact, resisted Mr. Scherer's efforts to 
move forward with alternative dispute resolution.  When faced with a similar situation in 
the Garaman case, we concluded that 
Garaman waived his right to have the parties' disputes arbitrated by failing to 
request that the district court order the parties to arbitrate their differences 
under § 1-36-104.  Garaman, 
912 P.2d  at 1126-27. 

 

[¶21]   It is clear, therefore, that 
Schuler Custom Homes' only goal was to have the litigation dismissed.  Schuler Custom Homes' conduct did not 
comport with the spirit of the alternative dispute resolution provision of the 
agreement, which created a mechanism for a prompt resolution of the parties' 
differences.  We conclude, 
therefore, that Schuler Custom Homes waived its right to alternative dispute 
resolution.   This case is 
reversed and remanded to the district court for further proceedings in the 
district court, including a determination of Mr. Scherer's motion for leave to 
amend his complaint, as that motion is no longer moot.  

 

[¶22]   Reversed and remanded.