Title: Allstate v. Stinebaugh

State: maryland

Issuer: Maryland Supreme Court

Document:

IN THE COURT OF APPEALS OF
MARYLAND
No. 81
September Term, 2002
ALLSTATE INSURANCE COMPANY
v.
JOHN C. STINEBAUGH
Bell, C.J.
Eldridge
Raker
Wilner
Cathell
Harrell
Battaglia,
JJ.
Opinion by Battaglia, J.
Filed:    May 12, 2003
In this appeal from the denial of a motion to compel arbitration, we must decide two
issues.  First, whether it is for courts, or for arbitrators, to determine if a particular dispute
is for the courts or arbitrators to decide when parties enter into a general arbitration
agreement, but subsequently bind themselves to a Consent Order that contemplates judicial
resolution of a particular controversy.  Second, what is the legal effect of an agreement that
contemplates judicial resolution of a particular dispute, upon a prior, general arbitration
agreement.  As to the first issue, we conclude that courts, not arbitrators, should decide
whether a prior agreement to arbitrate disputes applies when a subsequent agreement calls
for a judicial resolution of the particular controversy.  With respect to the second issue, we
conclude, under the facts of this case, that the subsequent Consent Order called for a judicial
resolution of the dispute at issue and, therefore, discharged the prior arbitration agreement
with reference to the liability issue in controversy.
I.  Background
On May 19, 1996, Constance Lee was riding as a passenger in a vehicle operated by
Charles Kirkpatrick, which was involved in an accident in Ocean City, Maryland.  The
Kirkpatrick vehicle was stopped at a traffic signal in a left turn lane on Coastal Highway.
A second vehicle, stopped directly behind the Kirkpatrick vehicle, was operated by John
Stinebaugh, who was insured by Nationwide Mutual Insurance Company.  A third vehicle,
operated by an unknown person (hereinafter “phantom vehicle”), was stopped to the right of
the Kirkpatrick vehicle in a second left turn lane.  When the traffic light turned green,
Kirkpatrick attempted to complete the left turn but was cut off by the phantom vehicle.
1
Nationwide was not included as a party defendant in the present litigation, but
Allstate, Kirkpatrick’s uninsured motorist carrier, was a party defendant.  Kirkpatrick was
removed from the lawsuit as he died sometime before trial.  
-2-
Kirkpatrick applied his brakes to avoid hitting the phantom vehicle, but when he did so, his
vehicle was struck from behind by the vehicle operated by Stinebaugh. 
On April 26, 1999, Lee filed a complaint in the Circuit Court for Worcester County
against Kirkpatrick, Stinebaugh, and Allstate Insurance Company, Kirkpatrick’s uninsured
motorist carrier, seeking damages for injuries allegedly arising out of the automobile
accident.  Prior to trial, the parties reached an agreement which was memorialized in an April
10, 2001 Consent Order.  That Order states that, “by agreement of all parties, Plaintiff’s
claim against all Defendants is hereby settled for the amount of Forty Thousand Dollars
($40,000.00), to be split evenly between Defendants Allstate Insurance Company and John
Stinebaugh (Nationwide Mutual Insurance Company) . . . .”1  With respect to each insurer’s
rights against the other, however, the Consent Order states, “each insurer’s contribution
towards the settlement shall be subject to reimbursement and indemnification from the other
insurer pending final determination of liability of the Defendants pursuant [to] Fireman’s
Fund Insurance Co. v. Bragg, 76 Md. App. 709, 548 A.2d 151 (1988) . . . .”  Specifically, the
Order states that “the Cross-claims between Defendants shall remain at issue and subject to
resolution on the currently scheduled trial date of May 17, 2001, or may be resolved by other
means mutually agreed to by all Defendants.”
Within three weeks after the Consent Order was filed, Allstate filed a Motion to
2
Section 3-202 states:
An agreement providing for arbitration under the law of the
State confers jurisdiction on a court to enforce the agreement
and enter judgment on an arbitration award.
For the text of Sections 3-206 and 3-307, see the discussion later in this opinion, infra,
Part II.
-3-
Compel Arbitration, pursuant to Maryland Code, §§ 3-202, 3-206, and 3-207 of the Courts
and Judicial Proceedings Article (1974, 1998 Repl. Vol.).2  In that motion, Allstate stated that
it was “the automobile liability carrier for Defendant Estate of Charles Kirkpatrick” and that
it was also “a party to the above-captioned case as a result of the uninsured motorist claims
of Plaintiff, Constance Lee, which assert[s] that the automobile collision in the case at bar
was caused by an unknown motorist” and that Nationwide and Allstate had “resolved claims
filed by Plaintiff Constance Lee” by “each contributing 50% toward the settlement” of Lee’s
claim, but asserted that they still “dispute[d] liability as between themselves pursuant to
Fireman’s Fund v. Bragg, 76 Md. App. 709, 548 A.2d 151 (1988).”  Allstate further asserted
that, “[c]urrently and since the date of the occurrence [of] this lawsuit, Nationwide and
Allstate have been signatory members of Arbitration Forums Inc., a special Arbitration forum
for disputes arising between automobile liability insurers who transact business in the State
of Maryland.”  According to Allstate, “[p]ursuant to the terms of the Arbitration Agreement
signed by Nationwide and Allstate, Allstate and Nationwide agreed to submit all disputes
arising between signatory members to arbitration,” but Nationwide, according to Allstate,
refused to arbitrate, despite Allstate’s written demand to do so.  Thus, Allstate requested the
3
The portions of the arbitration agreement that Allstate deemed to be relevant were
attached to its M otion to Compel Arbitration, and state in part:
WHEREAS, signatory companies have endorsed the principle
of arbitration for the purpose of resolving certain disputes on
claims in which two or more signatory companies are involved,
and 
WHEREAS, it is the desire of the said companies to encourage:
(a)
the prompt settlement of all meritorious claims and suits;
(b)
voluntary resolution of policy coverage disputes between
several insurers of the same insured.
NOW, therefore, signatories to this Agreement hereby bind
themselves as follows:
ARTICLE FIRST
To forego litigation and arbitrate unresolved disputes between
two or more signatories wherein each has issued:
(a) a policy of casualty insurance covering one or more of a
number of parties each asserted to be legally liable for an
accident or occurrence out of which a claim or suit for bodily
injury or property damage, or a first party payment arises, or as
a self-insured has been alleged to be legally liable for an
accident or occurrence; or
(b) separate policies of casualty insurance to the same party or
parties asserted to cover an accident or occurrence out of which
a claim or suit for bodily injury or property damages or first
party repayment arises.
With respect to the amount, if any, which each signatory shall
ultimately pay toward a consummated settlement of any such
claim or suit, provided such signatories have agreed on the
overall settlement value of such claim or suit or first party
repayment, it is recommended that each signatory pay an equal
share of such settlement, but the settlement of a case in any ratio
is made without prejudice to any party to the arbitration
proceeding.
-4-
Circuit Court “to Order arbitration between Allstate and Nationwide in accordance with the
terms of the Arbitration Agreement . . . .” 3
In opposition to the motion to compel arbitration, Stinebaugh argued, among other
4
Allstate challenges the Circuit Court’s reasoning, arguing that even though Stinebaugh
was not a party to the insurance companies’ arbitration agreement, the issue of negligence
had to be submitted to arbitration because Stinebaugh’s insurer, Nationwide, became a “real
party in interest” in the lawsuit “by virtue of its settlement payment on behalf of Stinebaugh.”
We need not reach Allstate’s “real party in interest” argument, however, because, as
discussed below, we conclude that the legal effect of the April 10, 2001 Consent Order was
that the liability issue was to be resolved in court, rather than in arbitration.
-5-
things, that the April 10, 2001 Consent Order required that the case remain in the Circuit
Court unless all parties had mutually agreed otherwise, and that no such agreement had been
made with respect to him.  Initially, on May 7, 2001, Judge Groton of the Circuit Court
granted Allstate’s Motion to Compel Arbitration.  Thereafter, however, Stinebaugh filed a
motion for reconsideration, which Judge Groton granted on August 3, 2001, thereby
rescinding his earlier order compelling arbitration, and ordering that the matter be set “for
trial on the merits on the parties’ cross-claims.”  In granting Stinebaugh’s motion for
reconsideration, Judge Groton opined that because Stinebaugh was “the party to the suit” and
because Stinebaugh had not himself signed the insurer’s arbitration agreement, Stinebaugh
could not “be forced [in]to arbitration.” 4  
Despite the Circuit Court’s ruling, Allstate initiated arbitration with Arbitration
Forums, Inc., a company that Allstate and Nationwide had agreed to use for the arbitration.
Over Nationwide’s objection, Arbitration Forums determined, notwithstanding Judge
Groton’s order to the contrary, that it had the authority to decide the merits of the case.
Armed with that arbitrational determination, on March 13, 2002, Allstate filed a motion with
the Circuit Court requesting that it reconsider its August 3, 2001 order granting Stinebaugh’s
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motion for reconsideration and denying its motion to compel arbitration. 
The Circuit Court denied Allstate’s motion for reconsideration on  March 18, 2002,
the same day that the jury trial commenced.  In denying Allstate’s motion, Judge Groton
explained:
There was also a motion for reconsideration for arbitration, and
in chambers we discussed that matter.  My ruling was based on
the order that was passed April the 10th of 2001, in which the
last paragraph of that particular order indicated that the cross
claims between the Defendant shall remain at issue and subject
to resolution on the currently scheduled trial date of May 17th,
although the issue was brought up, in fact, that the trial date
wasn’t conducted May 17th, the important wording in that
particular part of the sentence is “trial date.”  That, in fact, the
order, the way I read it, contemplated that the matter would be
resolved by a trial, or may be resolved by other means mutually
agreed by all Defendants.  There has been no mutual agreement
by the Defendant subsequent to this agreement. [Allstate’s]
position was that there was an agreement that was signed by
both parties in general and prior to that date.  My ruling is based
on the fact that this order would take precedent over that
because of the fact that it was signed subsequent to the
agreement, and contained the phrase ‘may be resolved by other
means mutually agreed to by all Defendants,’ meaning it would
be subject to the agreement signed April the 10th.
The jury returned a special verdict on March 18, 2002, finding that the operator of the
phantom vehicle was negligent and that Stinebaugh was not negligent.  The Circuit Court
entered judgment in the amount of $20,000 in favor of Stinebaugh and against Allstate.  On
July 14, 2002, Arbitration Forums reaffirmed its position that it had the power to decide the
merits of the dispute and determined that Stinebaugh had been negligent.
Allstate appealed to the Court of Special Appeals, arguing that the Circuit Court erred
-7-
in rendering judgment against it because the parties had agreed to have the dispute resolved
in arbitration.  This Court, on its own initiative and prior to any proceedings in the Court of
Special Appeals, issued a writ of certiorari, Allstate v. Stinebaugh, 371 Md. 613, 810 A.2d
961 (2002).
Before this Court, Allstate presents the following question:
In light of the Consent Order of April 10, 2001, was jurisdiction
to determine the liability between Co-Defendants Allstate
Insurance Company and John Stinebaugh on their Cross-Claims
vested in the Circuit Court for Worcester County, or with
Arbitration Forums, Inc?
For the reasons discussed herein, we hold that the Circuit Court did not err in
addressing the issue of the effect the Consent Order had upon the prior arbitration agreement.
We further hold that the Circuit Court correctly concluded that, pursuant to the Consent
Order, the liability issue was to be resolved in court rather than in arbitration. We shall,
therefore, affirm.
II.
Discussion
Allstate contends that “the trial court erred by conducting an inquiry into whether the
April 10, 2001 [Consent] Order took precedence over the arbitration agreement” because
once the court acknowledged the existence of the insurance companies’ arbitration
agreement, the issue of arbitrability “was within the exclusive province of the arbitrator.”
In support of that contention, Allstate relies upon our decisions in Holmes v. Coverall North
America, Inc., 336 Md. 534, 649 A.2d 365 (1994), and Gold Coast Mall, Inc. v. Larmar
-8-
Corp., 298 Md. 96, 468 A.2d 91 (1983).  
Stinebaugh, on the other hand, contends that the Circuit Court “properly applied
principles of contract interpretation” to find that the prior arbitration agreement “had been
superceded by a later specific agreement between the parties to resolve the pending cross-
claims” in court.  In support of this contention, Stinebaugh asserts that the determination of
whether an arbitration agreement exists is for the court, not the arbitrator, and further claims
that the court correctly concluded that the Consent Order superseded the arbitration
agreement because the Consent Order was more recent and specifically addressed the liability
issue.  For the reasons discussed below, we conclude that Allstate’s reliance on Holmes and
Gold Coast Mall is misplaced and that its contention is without merit. 
In Holmes, Gold Coast Mall, and other decisions, we have recognized that the
Maryland Uniform Arbitration Act expresses the legislative policy favoring enforcement of
agreements to arbitrate.  Holmes, 336 Md. at 546, 649 A.2d at 371 (recognizing “the
legislative intent to favor arbitration”); Gold Coast Mall, 298 Md. at 103, 468 A.2d at
95(acknowledging that the Arbitration Act embodies a “legislative policy in favor of the
enforcement of agreement to arbitrate); see also Crown Oil & Wax Co. v. Glen Constr. Co.,
320 Md. 546, 558, 578 A.2d 1184, 1189 (1990) (stating that “Maryland courts have
consistently stated that the [Arbitration Act] embodies a legislative policy favoring the
enforcement of executory agreements to arbitrate”); Charles J. Frank, Inc. v. Associated
Jewish Charities, Inc., 294 Md. 443, 448, 450 A.2d 1304, 1306 (1982)(recognizing that the
-9-
Arbitration Act “embodies a legislative policy favoring enforcement of executory agreements
to arbitrate”).  The original Arbitration Act was enacted in 1965, and at the time of the
proceedings below, was found in Maryland Code, §§ 3-201 through 3-234 of the Courts and
Judicial Proceedings Article (1974, 1998 Repl. Vol.). 
Section 3-206(a) of the Arbitration Act provides that:
A written agreement to submit any existing controversy to
arbitration or a provision in a written contract to submit to
arbitration any controversy arising between the parties in the
future is valid and enforceable, and is irrevocable, except upon
grounds that exist at law or in equity for the revocation of a
contract.
Section 3-207 applies when a party denies the existence of an arbitration agreement, and
states:
(a)  Refusal to arbitrate. – If a party to an arbitration agreement
described in § 3-202 refuses to arbitrate, the other party may file
a petition with a court to order arbitration.
(b) Denial of existence of arbitration agreement. – If the
opposing party denies existence of an arbitration agreement, the
court shall proceed expeditiously to determine if the agreement
exists.
(c) Determination by court. – If the court determines that the
agreement exists, it shall order arbitration.  Otherwise it shall
deny the petition.
Section 3-210, which we have interpreted as prohibiting “the court from inquiring into the
merits of a claim,” Crown Oil, 320 Md. at 557, 578 A.2d at 1189, states:
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
fides; or
-10-
(2) Because a valid basis for the claim sought to be arbitrated
has not been shown.
We have held, therefore, that the role of the court in deciding a motion to compel
arbitration is limited to determining one question: “[I]s there an agreement to arbitrate the
subject matter of a particular dispute?”  Gold Coast Mall, 298 Md. at 103-04, 468 A.2d at
95 (stating that “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”); Holmes, 336 Md. at 546, 649 A.2d at 370-71 (“The scope
of the court’s involvement extends only to a determination of the existence of an arbitration
agreement”); Crown Oil, 320 Md. at 557, 578 A.2d at 1189 (recognizing that § 3-210
prohibits a court from inquiring into the merits of a claim, and that “under §§ 3-207 and 3-
208 the sole question before the court is whether there exists an agreement to arbitrate”).
In Crown Oil, this Court interpreted Gold Coast Mall as laying down “the rules for
determining whether court or arbitrator determines arbitrability where the arbitrability issue
is the scope of the arbitration clause and its applicability to the dispute at hand.”  320 Md.
at 559, 578 A.2d at 1190.  First, in Gold Coast Mall,  we declared that if an arbitration clause
is clear, it is initially for the courts to determine whether the subject matter of a dispute falls
within the scope of the arbitration clause. 298 Md. at 104, 468 A.2d at 95.  Second, we
explained that in determining whether a dispute falls within the scope of an arbitration
clause, arbitration should be compelled if the arbitration clause is broad and does not
“expressly and specifically exclude[]” the dispute. Id.  Third, we concluded that if an
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arbitration clause is unclear “as to whether the subject matter of the dispute falls within the
scope of the arbitration agreement,” the question of arbitrability ordinarily should be left to
the arbitrator.  Id. 298 Md. at 107, 468 A.2d at 97.
The specific issue in Gold Coast Mall was whether a court or an arbitrator initially
should determine whether a rental payment dispute arising from a lease agreement containing
an arbitration clause was arbitrable. Id. at 99, 468 A.2d at 93.  The lease agreement contained
a clear, broad arbitration clause that required “both parties to arbitrate any and all disputes
arising out of the agreement.”  Id. at 107, 468 A.2d at 97.  “No type of controversy [was]
expressly or specifically excluded from the requirement to arbitrate.”  Id. at 107-08, 468 A.2d
at 97.  Other provisions of the same agreement, however, provided the landlord with rights
and remedies other than arbitration.  Id. at 108, 468 A.2d at 97.  We determined that,
although the broad arbitration provision was clear when standing alone, it became unclear
when juxtaposed against the other clauses within the same lease agreement that provided
rights and remedies other than arbitration so that the arbitrator was the appropriate decision-
maker.  Id.  
In Gold Coast Mall, there were conflicting clauses within the same contract – a broad
arbitration clause required the parties to arbitrate any disputes arising out of the contract, yet
other clauses in the contract provided the landlord with rights and remedies other than
arbitration.  It was because of these internally inconsistent clauses that we concluded the
scope of the arbitration clause was unclear, and therefore for the arbitrator to initially decide.
5
At the time of our decision in Holmes, the Maryland Franchise Registration and
Disclosure Act was located in Maryland Code, §§ 14-201 et. seq. of the Business Regulation
Article (1992).
-12-
The present case is distinguishable because we are not faced with internally
inconsistent clauses.  To the contrary, here we have two wholly separate agreements: the
former contains language that may or may not have required the liability dispute to be
arbitrated; the latter contains language that clearly calls for a judicial resolution of the same
dispute.  Indeed, even if the arbitration agreement was broad, it is clear that the liability
controversy was “expressly and specifically excluded” by the subsequent settlement
agreement.  The arbitration agreement here clearly was limited by the terms of the subsequent
settlement agreement, unlike in Gold Coast Mall, where conflicting provisions within the
same contract created ambiguity.  Thus, the issue of arbitrability in the instant case was for
the court to decide, and the Circuit Court did not err in doing so.
In Holmes, we addressed the issue of whether, in a dispute over a franchise agreement,
courts, or arbitrators, should decide a breach of contract claim based on fraudulent
inducement and violations of the Maryland Franchise Registration and Disclosure Act.5  336
Md. at 541, 649 A.2d at 368.  We concluded that because the validity of the arbitration clause
itself was not in dispute, the dispute was for the arbitrator.  Id. at 547, 649 A.2d at 371.  In
so concluding, we explained that “an arbitration clause is severable from the entire contract,”
and that in “adjudicating a petition for an order of arbitration or a stay pending arbitration,
the consideration of the existence of an arbitration agreement is severable.” Id. at 545-46,
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649 A.2d at 370.  We also observed that the role of the courts in deciding a motion to compel
arbitration “extends only to a determination of the existence of an arbitration agreement.”
Id. at 546, 649 A.2d at 370-71.  Finally, the petitioner’s allegations of fraudulent inducement
and violations of the Franchise Registration and Disclosure Act, we noted, “run to the merits
of the dispute between the parties and do not suggest a [dispute] as to the actual existence of
an arbitration agreement between the parties.” Id. at 546, 649 A.2d at 371.
The resolution of the issue in the present case, unlike in Holmes, does not require that
a court delve into the merits of the dispute, i.e. which insurer was liable.  The debate in the
present case is over the applicability of the prior arbitration agreement in light of the
subsequent settlement agreement embodied in the court-approved Consent Order.  As such,
it is a dispute as to the existence of an agreement to arbitrate the issue of negligence, and was
therefore, as discussed in Holmes, within the “scope of the court’s” authority in determining
a motion to compel arbitration.  Id. at 546, 649 A.2d at 370.  Other cases decided by this
Court also support this conclusion.
In Steven L. Messersmith, Inc. v. Barclay Townhouse Assocs, 313 Md. 652, 547 A.2d
1048 (1988), for instance, we concluded that a court should employ a de novo standard of
review when an “arbitration award is attacked for lack of jurisdiction” on the ground that no
agreement to arbitrate existed.  Id. at 664, 547 A.2d at 1053-54.  In so concluding, we
stressed that, “it is beyond dispute that, absent an arbitration agreement between the parties,
an arbitration panel cannot validly assert jurisdiction to decide a dispute between them.”  Id.
-14-
at 658, 547A.2d at 1051.  Consequently, “because the existence of an agreement to arbitrate
is a threshold issue, the courts must have authority to assess, independently of the arbitrator’s
point of view, whether or not the parties ever reached such an agreement.”  Id. at 660, 547
A.2d at 1052.  Similarly, in the present case, the issue of the effect of the subsequent Consent
Order upon the prior arbitration agreement goes to the existence of an agreement to arbitrate
the liability dispute and was for the court to decide.
Also, in Chesapeake Beach v. Pessoa Constr. Co., 330 Md. 744, 625 A.2d 1014
(1993), we observed that, “we have consistently held that timeliness of the demand for
arbitration is for the courts and not the arbitrators.”  
Id. at 747-48, 625 A.2d at 1016 (citations
omitted).  We explained that timeliness of a demand for arbitration is for the courts to decide
“because the existence of an agreement to arbitrate is conditioned on the making of a timely
demand; in the absence of a timely demand, there is no agreement to arbitrate.”  Id. at 748,
625 A.2d at 1016.  This is so, we noted, because “an inappropriate delay in demanding
arbitration acts as a relinquishment of the contractual right to compel such a proceeding . .
. .” Id. at 748-49, 625 A.2d at 1016 (quoting Stauffer Constr. v. Bd. of Educ., 54 Md. App.
658, 688, 460 A.2d 609 (1983)).  Similarly, the effect of a subsequent agreement addressing
judicial resolution of a particular dispute and not specifically mentioning arbitration, upon
an earlier general arbitration agreement that may have required that the dispute be arbitrated,
goes to the existence of an agreement to arbitrate the specific dispute and is, therefore, proper
for the court to decide.  
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Having determined that the Circuit Court properly considered the effect of the
Consent Order upon the prior arbitration agreement, we now turn to evaluate whether the
Circuit Court erred in concluding that the issue of liability was to be resolved in court,
because the Consent Order superseded the arbitration agreement.
Although no Maryland appellate decisions have addressed this issue, at least one other
state supreme court has opined.  In Shawnee Hosp. Auth. v. Dow Constr., 812 P.2d 1351
(Okla. 1990), the Supreme Court of Oklahoma was called upon to decide whether a
contract’s arbitration clause was enforceable to resolve claims unresolved by a subsequent
settlement agreement.  Id. at 1352.  In that case, Dow Construction entered into a contract
with Shawnee Hospital Authority that contained an arbitration clause.  A dispute arose
prompting the Hospital to bring a breach of contract claim against Dow.  In the midst of trial,
the parties entered into a court-approved settlement agreement.  That agreement terminated
Dow’s obligations under the construction contract “with respect to any further performance
obligations” but reserved Dow’s obligations regarding “hidden or latent defects in the
contract work heretofore completed . . . .”  Id. at 1354 n.16.  The settlement agreement also
stated, “The court shall retain jurisdiction to reopen the case, if necessary, to conclude this
litigation by non-jury trial or to enforce the terms” of the settlement agreement.  Id.  Five
months after settlement, the Hospital filed a claim seeking damages for latent defects in the
construction work.  Id. at 1352.  In response, Dow filed a motion to compel arbitration, which
the trial court denied. Id.
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In affirming the trial court’s denial of Dow’s motion to compel arbitration, the
Oklahoma Supreme Court looked to the following principles of contract law:
Before full performance, contractual obligations may be
discharged by a subsequent agreement whose effect is to alter,
modify, or supersede the terms of the original agreement or to
rescind it altogether.  A claim under an earlier contract will be
governed by a later agreement if the latter operates to supersede
or rescind the former.  Where not expressly stated, the legal
effect of the later contract on the former must be gathered from
a four-corners’ examination of the contractual instrument in
question. 
Id. at 1353-54 (footnotes omitted).  Employing these principles, the Court concluded that the
Hospital’s latent defect claim was not subject to arbitration. Id. at 1355.  The Court explained
that, although the settlement agreement “extinguished Dow’s obligation to continue its
performance under the construction contract,” it did not discharge Dow from its obligation
to remedy latent defects. Id. at 1354.  Moreover, the settlement agreement contained no
arbitration provision with respect to such claims.  Thus, the Court held that the settlement
agreement superseded the construction contract, and that the earlier construction contract’s
arbitration clause, therefore,  was not enforceable to resolve the latent-defect claims.  Id. at
1355. 
We have embraced legal tenets similar to those employed by our sister state regarding
arbitration and contract law.  Arbitration is “consensual; a creature of contract.”  Curtis G.
Testerman Co., 340 Md. at 579, 667 A.2d at 654 (quoting Thomas J. Stipanowich,
Arbitration and the Multiparty Dispute: The Sarch for Workable Solutions, 72 IOWA L. REV.
6
Nationwide, although not named as a party defendant in the litigation at issue, has
admitted that it was nonetheless bound by the Consent Order entered into by Stinebaugh,
Nationwide’s insured.  We further note that pursuant to the terms of the Consent Order,
Nationwide did pay Lee $20,000 to settle her claims.  
7
Executory accords are closely related to substituted contracts.  With a substituted
contract, however, the parties intend “the new agreement itself to constitute a substitute for
the prior claim” thus, “immediately discharg[ing] the original claim.” Clark v. Elza, 286 Md.
-17-
473, 476 (1987)(citation omitted)).  As such, “[a] party cannot be required to submit any
dispute to arbitration that it has not agreed to submit,” id. (quoting Gold Coast Mall, 298 Md.
at 103, 468 A.2d at 95), and “[t]he intention of the parties controls on whether there is an
agreement to arbitrate.”  Crown Oil, 320 Md. at 558, 578 A.2d at 1189.  Further, like
Oklahoma, we have recognized that rights and obligations under contracts may be discharged
by subsequent agreements.  See, e.g., Calabi v. Government Employees Ins. Co., 353 Md.
649, 653, 728 A.2d 206, 208 (1999)(stating that a settlement agreement is “an agreement to
discharge a preexisting claim”); Linz v. Schuck, 106 Md. 220, 234, 67 A. 286, 290 (1907)
(stating that modification is “an abandonment of the original contract and the creation of a
new contract”).  A consent order in Maryland, like an arbitration agreement, is a matter of
contract.  Long v. State, 371 Md. 72, 82, 807 A.2d 1, 7 (2002)(stating that a consent order is
a hybrid, “having attributes of both contracts and judicial decrees”).  The contractual aspect
of a consent order is the settlement agreement that the consent order memorializes.6  Calabi,
353 Md. at 653, 728 A.2d at 208.  A settlement agreement is “an agreement to discharge a
preexisting claim.”  Id.  Unless there is “clear evidence to the contrary,” a settlement
agreement in Maryland is “regarded as an executory accord.”7  Clark v. Elza, 286 Md. 208,
208, 214, 406 A.2d 922, 926 (1979).  Consequently, with a substituted contract, “since the
original claim is fully extinguished at the time the agreement is made, recovery may only be
had upon the substituted contract.”  Id. 
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215, 406 A.2d 922, 926 (1979).  In Clark, we adopted the following definition of an
executory accord:
The term ‘accord executory’ is and always has been used to
mean an agreement for the future discharge of an existing claim
by a substituted performance.  In order for an agreement to fall
within this definition, it is the promised performance that is to
discharge the existing claim, and not the promise to render such
performance.
Id. at 214, 406 A.2d at 925 (quoting 6 Arthur Linton Corbin, Corbin on Contracts § 1268 at
71 (1962)). 
In the present case, there is no dispute that the terms of the April 10, 2001 Consent
Order were fully executed.  Thus, the effect of a consent order in M aryland, like in
Oklahoma, is that it may discharge an existing claim by a substituted performance. 
The plain, unambiguous language of the April 10, 2001 Consent Order which
memorialized the settlement agreement states that, “each insurer’s contribution towards the
settlement shall be subject to reimbursement and indemnification from the other insurer
pending final determination of liability of the Defendants . . . .”  The Consent Order clearly
indicates where the liability determination was to occur – “The Cross-claims between
Defendants shall remain at issue and subject to resolution on the currently scheduled trial
date of May 17, 2001, or may be resolved by other means mutually agreed to by all
8
The language of the Consent Order in the present case made no reference to the
insurers’ prior arbitration agreement.  Therefore, because we have recognized that, “where
a writing refers to another document, that other document is to be interpreted as part of the
writing,” Wheaton Triangle Lanes, Inc. v. Rinaldi, 236 Md. 525, 531, 204 A.2d 537, 540
(1964), the arbitration agreement in the instant case was not incorporated into the Consent
Order.  See Powell v. Board of Sch. Dirs., 349 A.2d 879, 881 (Vt. 1975)(stating that if an
extrinsic writing is not “connected by specific reference” and was “foreign to the minds of
the parties at the time of their undertaking, it is clearly irrelevant as an aid to
interpretation”)(quoting, Newton v. Smith Motors, Inc., 175 A.2d 514, 516 (1961)).
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Defendants.”  The latter language is prospective in character.8  Thus, the Consent Order
clearly superseded the arbitration agreement and discharged any right Allstate may have had
to arbitrate the negligence controversy.
We would note further that the Consent Order could be viewed as modifying the prior
arbitration agreement.  Allstate and Nationwide entered into an executory arbitration
agreement in which they agreed to arbitrate “certain disputes on claims in which two or more
signatory companies are involved.”  They were subsequently bound by a Consent Order in
which claims were settled by each of the insurance companies paying one half of a settlement
amount.  That Consent Order did not contain any provision regarding arbitration of the
liability issue.  To the contrary, as previously discussed, the Consent Order clearly indicated
that the negligence claim was to be resolved in court.  “It is . . . well settled that an earlier
agreement may be modified by a later one, by mutual consent.”  Thomas v. Hudson Motor
Car Co., 226 Md. 456, 460, 174 A.2d 181, 183 (1961); see also II E. Allen Farnsworth,
Farnsworth on Contracts § 7.2 at 214 & n.15 (2nd ed. 1998)(recognizing that, “[a]ny contract
. . . can be discharged or modified by subsequent agreement of the parties”)(quoting Arthur
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L. Corbin, The Parol Evidence Rule, 53 YALE L.J. 603, 607 (1944)(also noting that
“Restatement Second § 213 expresses this thought by stating that the latter written agreement
‘discharges prior agreements’”); Linz v Schuck, 106 Md. at 234, 67 A. at 286 (stating that
modification is “an abandonment of the original contract and the creation of a new
contract”). 
Thus, we conclude that the Circuit Court was correct in refusing to compel arbitration.
JUDGMENT OF THE CIRCUIT COURT
FOR WORCESTER COUNTY AFFIRMED.
COSTS TO BE PAID BY APPELLANT.