Case Name: F J SILLER & COMPANY v. CITY OF HART
Court: Michigan Supreme Court
Jurisdiction: Michigan
Decision Date: 1977-07-18
Citations: 400 Mich. 578
Docket Number: Docket No. 58318
Parties: F J SILLER & COMPANY v CITY OF HART
Judges: Kavanagh, C. J., and Williams, Levin, Coleman, Fitzgerald, and Blair Moody, Jr., JJ., concurred.
Reporter: Michigan Reports
Volume: 400
Pages: 578–584

Head Matter:
F J SILLER & COMPANY v CITY OF HART
Docket No. 58318.
Decided July 18, 1977.
On application by the defendant for leave to appeal the Supreme Court, in lieu of granting leave to appeal, reversed the decision of the Court of Appeals.
F. J. Siller and Company brought a complaint in Oceana Circuit Court against the City of Hart for payment for work completed under a contract. The plaintiffs claim had been arbitrated under the contract with an award in favor of the defendant. The circuit court, Harold Van Domelen, J., granted accelerated judgment for the defendant. The Court of Appeals, Danhof, P. J., and D. E. Holbrook and Allen, JJ., reversed on the ground that a contract provision that arbitration is a "condition precedent” to filing of an action in any court does not preclude the commencement of an action inconsistent with the arbitration award (Docket No. 25073). Defendant applies for leave to appeal. Held:
The finality of statutory and common-law arbitration agreements depends upon the intent of the parties, which is ascertained by the usual rules of interpretation of agreements. Here, both parties agreed to arbitrate, and agreed to the specific arbitrator, site, procedure, and manner of arbitration; nine hours of proofs were presented at the hearing, and attorneys represented both parties. A fair interpretation of the agreement is that the parties intended to preclude a court action regarding disputes within the scope of the arbitration clause independent of the award. The plaintiffs remedy, if any, is limited to a challenge to the validity of the arbitration award; it may not contest ab initio in a court the merits of the contract dispute.
Justice Ryan, dissenting, would construe this agreement of the parties to submit to common-law arbitration as a condition precedent, a mandatory prelude, to the mutual right of resort to the courts. Judicial policy preferences encouraging binding arbitration to help preclude "legal pollution” and jammed civil court dockets should not interfere with the Court’s duty to give effect to the intent of the parties to an arbitration agreement as they expressed it in their own language.
References for Points in Headnotes
5 Am Jur 2d, Arbitration and Award §§ 14, 29, 142, 146-149.
5 Am Jur 2d, Arbitration and Award §§ 20, 36, 90.
5 Am Jur 2d, Arbitration and Award § 15.
Reversed.
68 Mich App 265; 242 NW2d 547 (1976) reversed.
Opinion of the Court
1. Arbitration and Award — Finality—Intent.
The finality of statutory and common-law arbitration agreements depends upon the intent of the parties, which is ascertained by the usual rules of interpretation of agreements.
2. Arbitration and Award — Finality—Conditions Precedent.
An agreement to submit to arbitration as a "condition precedent” to the filing of an action in any court is fairly interpreted as intending to preclude a court action independent of the award where both parties agreed to the specific arbitrator, site, procedure and manner of arbitration, nine hours of proofs were presented, and attorneys represented both parties at the hearing; having agreed to arbitrate, the parties may not contest ab initio in a court the merits of the contract dispute.
Dissenting Opinion
Ryan, J.
3. Arbitration and Award — Common Law — Finality.
An agreement to submit to common-law arbitration "as a condition precedent to the Sling of an action in any court” should be construed as a condition precedent, a mandatory prelude, to the mutual right of resort to the courts rather than an intention to submit the parties’ disputes to the binding and irrevocable decision of an arbitrator.
4. Arbitration and Award — Agreements—Finality.
Judicial policy preferences encouraging binding arbitration to help preclude "legal pollution” and jammed civil court dockets should not interfere with the court’s duty to give effect to the intent of the parties to an arbitration agreement as they expressed it in their own language.
Allaben, Massie, Vander Weyden & Timmer for plaintiff.
Sikkenga, Prince, Barecki & Nicholas for defendant.

Opinion:
Per Curiam.
The Court of Appeals found a contract provision that arbitration as a "condition precedent" to the filing of a court action does not preclude the commencement of an action inconsistent with the arbitration award. We disagree and, pursuant to GCR 1963, 853.2(4), in lieu of leave to appeal, reverse the Court of Appeals.
The defendant City of Hart needed sewage treatment facilities. Plaintiff agreed to perform the necessary work. The contract contained this language:
"Both parties to this contract agree that as conditions precedent to the filing of an action in any court involving the amount or rate of payment or settlement for work performed by the contractor under these contract documents, and as a condition precedent to the liability of the owner for any amount other than contained in the estimates approved by the engineer shall be referred to arbitration for decision and award. The arbitrator or board of arbitration shall have authority only to pass upon questions involving compensation to the contractor for work actually performed but not allowed by the engineer, and its authority shall not extend to the interpretation of the plans and specifications or the determination of the qualities or materials or workmanship furnished, nor shall it have authority to set aside or modify the terms or requirements of the contract."
A dispute arose about the payment for installing a clay lining during reconstruction of the sewage treatment facilities. Plaintiff claimed it was owed $85,103. The claim went to arbitration. An arbitrator rendered an award for the city and assessed $900 costs. Within a month, plaintiff sued in circuit court for the $85,103. Defendant won an accelerated judgment. The Court of Appeals reversed because the contract provided that arbitration is a "condition precedent" to the filing of a court action and did not provide for entry of a judgment on an award or specifically bar post-arbitration court action. 68 Mich App 265; 242 NW2d 547 (1976).
Plaintiff argues that while the contract required arbitration as a condition precedent to the filing of an action, it did not indicate that the arbitrator's decision would be final. Therefore, the court suit was not barred by the arbitrator's decision.
Although statutory arbitration is available in Michigan, Frolich v Walbridge-Aldinger Co, 236 Mich 425, 429; 210 NW 488 (1926), makes it clear that statutory arbitration and common-law arbitration coexist in this state. See Stadel v Granger Brothers, Inc, 4 Mich App 250; 144 NW2d 609 (1966); EE Tripp Excavating Contractor, Inc v Jackson County, 60 Mich App 221, 235; 230 NW2d 556 (1975), lv den 394 Mich 834 (1975). In either case, the parties' intent regarding the finality of arbitration should be ascertained by the usual rules of interpretation and given effect. Acme Cut Stone Co v New Center Development Corp, 281 Mich 32, 49; 274 NW 700 (1937).
Here, both parties agreed to arbitrate, agreed to a specific arbitrator, and agreed to the site, procedure, and manner of arbitration. Nine hours of proofs were presented. Attorneys represented both parties at the hearing. Yet, the Court of Appeals reading of the "condition precedent" language would deprive that provision and the arbitration hearing conducted of any effect. The plaintiff's contention that the provision as construed retains effect by bringing "the parties together in one room for a day" and by being a "valid tool for compromise" is unconvincing. Arbitration would be just a warmup, binding on no one. Such a result is unreasonable in light of the rather extensive arbitration hearing held.
A fair interpretation would be, and we so hold, that the parties intended the condition precedent language to preclude a court action regarding disputes within the scope of the arbitration clause independent of the award. Having agreed to arbitrate, plaintiffs remedy, if any, is limited to a challenge to the validity of the arbitration award; it may not contest ab initio in a court the merits of the contract dispute.
The Court of Appeals is reversed, and the judgment of the circuit court is reinstated. Costs to the defendant.
Kavanagh, C. J., and Williams, Levin, Coleman, Fitzgerald, and Blair Moody, Jr., JJ., concurred.
MCLA 600.5001; MSA 27A.5001; GCR 1963, 769.