Opinion ID: 1931213
Heading Depth: 1
Heading Rank: 3

Heading: Arbitration and Mechanics' Liens

Text: The primary question presented on appeal is whether defendant may first file a mechanic's lien to protect its interest in allegedly unpaid services and then arbitrate the underlying contractual dispute. Since subject-matter jurisdiction is an indispensable requisite in any judicial proceeding, we review the question de novo. Zarrella v. Minnesota Mutual Life Insurance Co., 824 A.2d 1249, 1256 (R.I.2003). As a preliminary matter, we note that the contract signed by the parties does not limit the parties' ability to arbitrate a contractual dispute. The contract's broad language stating that disputes shall be submitted to binding arbitration comports with the statutory requirement that an arbitration agreement be clearly written and expressed. Section 10-3-2. The arbitration clause does not expressly provide that defendant would waive its contractual right to arbitration if it filed a mechanic's lien on the property. [3] In fact, the arbitration clause does not cross-reference the provision pertaining to mechanics' liens. In light of this fact, we must determine whether, as a matter of contract law, defendant waived its right to arbitrate the contractual dispute when it filed a mechanic's lien. The gravamen of plaintiffs' argument on appeal is that defendant's filing of a mechanic's lien constituted a waiver of any contractual right to arbitrate the dispute because it manifested a willingness to litigate rather than arbitrate. The defendant offers that neither the Arbitration Act nor the Mechanics' Lien Law prevents a party from filing a mechanic's lien and then arbitrating the underlying contractual dispute and, therefore, urges us to read the two statutes in pari materia. Since this precise question is an issue of first impression in this jurisdiction, we briefly will review the applicable statutes and caselaw governing both arbitration agreements and mechanics' liens. Chapter 3 of title 10, entitled The Arbitration Act, states arbitration agreements generally are valid, irrevocable, and enforceable. Section 10-3-2. In giving force to that legislative mandate, we have declared, [a]rbitration is a desirable method of dispute resolution that has long been favored by the courts. Soprano v. American Hardware Mutual Insurance Co., 491 A.2d 1008, 1011 (R.I.1985). The statute provides for a stay of litigation while the parties arbitrate their claims. Section 10-3-3. It states: If any suit or proceeding be brought upon any issue referable to arbitration under an agreement in writing for arbitration, the court in which the suit is pending, upon being satisfied that the issue involved in the suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties, stay the trial of the action until the arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with the arbitration. Section 10-3-3. This favored method of dispute resolution, however, can be waived when a party manifest[s] a willingness, if not a desire, to have the courts resolve the controversy. North Smithfield Teachers Association v. North Smithfield School Committee, 461 A.2d 930, 934 (R.I.1983). When determining the precise point at which a party has manifested that willingness to litigate, we are mindful that `general formulations of what constitutes a waiver in a particular case are of limited usefulness, as the decision normally turns not on some mechanical act but on all of the facts of the case.' Id. at 933. Intended to prevent unjust enrichment, the purpose of the Mechanics' Lien Law is to `afford a liberal remedy to all who have contributed labor or material towards adding to the value of the property to which the lien attaches.' Gem Plumbing & Heating Co. v. Rossi, 867 A.2d 796, 803 (R.I.2005). To achieve this end, any contractual agreement barring the filing or enforcement of a mechanic's lien is against public policy and is void and unenforceable. Section 34-28-1(b). Furthermore, the remedy provided by the Mechanics' Lien Law is not exclusive; [e]xcept as otherwise specified, nothing in this chapter shall be construed to limit the right of any person, whether he or she have [ sic ] a valid lien hereunder or not, to remedies otherwise available to him or her under law   . Section 34-28-33. A claimant perfects a lien on the property to which he or she has contributed labor or materials by mailing a notice of intention to the property owner and then filing that notice of intention in the land evidence records within 120 days after completing the work. Section 34-28-4(a); see also Gem Plumbing & Heating Co., 867 A.2d at 802-05 (outlining the Mechanics' Lien Law). Beyond providing a procedural mechanism to secure payment for services or materials rendered, multiple sections of the statute require that notice be given to the world of the dispute between the parties: § 34-28-4 requires a claimant to file a notice of intention in the land evidence records of the local municipality; § 34-28-10 further requires the claimant to file a notice of lis pendens in the records of land evidence of the local municipality; and § 34-28-14 requires that the petition for a mechanic's lien be published in a local newspaper. With this understanding of the relevant statutes, the need to read these statutes in pari materia becomes readily apparent. First, § 34-28-33, in expressly assuring that a party's rights to other remedies will not be limited by the filing of a mechanic's lien, supports a conclusion that the filing of a mechanic's lien does not waive arbitration. Second, § 10-3-3, in allowing for a stay of a Superior Court action while the matter is referred to arbitration, provides the procedural mechanism that would allow parties to proceed to arbitration while a mechanic's lien has been placed on the property. The recent case of Aponik v. Lauricella, 844 A.2d 698 (R.I.2004), directly refutes plaintiffs' argument that allowing the parties to arbitrate a dispute with a mechanic's lien on the property unjustly transfers jurisdiction over a mechanic's lien action from the Superior Court to the arbitrator, thereby allowing defendant to have its cake and eat it too. In Aponik, a buyer and a contractor voluntarily agreed to arbitrate a dispute after the contractor had filed a mechanic's lien on the property. [4] Id. at 701. We held that a prevailing party in an arbitrated mechanic's lien action may not seek costs and attorney's fees, in accordance with § 34-28-19 of the Mechanics' Lien Law, on a motion to enforce the award in the Superior Court, because [a]ny claim that may have been available to plaintiff under the mechanics' lien statute was available to him under the arbitration process. Aponik. 844 A.2d at 706. In stating that an arbitrator can hear all claims provided for under the Mechanics' Lien Law, we already have recognized that these two statutes can function cohesively. We hold that a party does not waive its right to arbitrate a contractual dispute, as a matter of law, by filing a notice of intention to claim a mechanic's lien. Thus, a party may proceed to arbitration after first encumbering the subject real estate with a mechanic's lien. Any holding to the contrary would frustrate the purposes of both statutes because it would require potential litigants to choose between arbitration and filing a mechanic's lien. Under that view, any arbitration agreement would obstruct the public policy outlined in § 34-28-1, which prohibits a contractual release of the right to file mechanics' liens. Also, under that rule of law, any claimant seeking to avail itself of the liberal remedy afforded by the Mechanics' Lien Law would forfeit an often-preferred alternative to litigation. We see no reason to envision the road leading to the resolution of contractual disputes as containing such a pronounced fork. This holding does not contradict our caselaw governing waiver of arbitration. Of all the binding authority to which plaintiffs cite for the proposition that defendant waived its contractual right to arbitration, none addresses the precise question of whether the filing of a notice of intention to claim a mechanic's lien constituted a waiver of arbitration. Brissette v. Potter, 560 A.2d 324, 326 (R.I.1989) (holding the right to arbitrate waived by a party who submitted the case to a justice on an agreed statement of facts); Soprano, 491 A.2d at 1010-11 (holding the right to arbitrate waived by a party who proceeded with discovery); North Smithfield Teachers Association, 461 A.2d at 933 (holding the right to arbitrate waived by a party who engaged in various judicial proceedings such as propounding interrogatories); Associated Bonded Construction Co. v. Griffin Corp., 438 A.2d 1088, 1091 (R.I.1981) (holding the right to arbitrate waived by a party who failed to plead arbitration as an affirmative defense). The plaintiffs argue by analogy that, if the parties in the above cases all manifested a willingness to litigate, then so did defendant by filing a mechanic's lien. We reiterate that a determination of whether a party has waived its contractual right to arbitration is based on `all of the facts of the case' rather than on `general formulations of what constitutes a waiver.' North Smithfield Teachers Association, 461 A.2d at 933. In accordance with the need to read these statutes in pari materia, we decline plaintiffs' invitation to rule that the filing of a notice of intention to claim a mechanic's lien constitutes a waiver of a party's contractual right to arbitrate the underlying dispute. [5] Finally, this holding should not be read as prohibiting parties, who agree to arbitrate contractual disputes, from expressly providing that any right to arbitration is waived by the filing of a mechanic's lien, thereby requiring a party to choose one remedy or the other.