Opinion ID: 2638692
Heading Depth: 2
Heading Rank: 3

Heading: An Agreement to Arbitrate Exists in this Case

Text: Under Colorado law, contractual conditions may be express or implied. E.g., Goodson v. American Standard Ins. Co., 89 P.3d 409, 414 (Colo.2004); Cary v. United of Omaha Life Ins. Co., 68 P.3d 462, 466 (Colo.2003)(addressing implied contractual duty of good faith and fair dealing). When interpreting a contract, we consider the facts and circumstances attending its execution, so as to learn the intentions of the parties. Eisenhart v. Denver, 27 Colo.App. 470, 478, 150 P. 729, 732 (1915), aff'd, 64 Colo. 141, 170 P. 1179 (1918). In contractual settings, we can look to the circumstances surrounding the contract's formation in construing the contract, in order to carry out the intent of the contracting parties. Lazy Dog Ranch v. Telluray Ranch Corp., 965 P.2d 1229, 1235 (Colo.1998). Furthermore, the substance, main objective, and purpose of the contractual agreement control over the form of the contract. 17A Am.Jur.2d Contracts § 336 (2006). Accordingly, contractual conditions may be implied by law, the purpose of the contract, or the intent of the parties. Mumblow v. Monroe Broad., Inc., 401 F.3d 616, 622 (5th Cir.2005). Conditions are implied in fact when those conditions are necessarily inherent in the actual performance of the contract. Bergman v. Commerce Trust Co., 35 Kan.App.2d 301, 129 P.3d 624, 628 (2006) (citing 13 Williston on Contracts § 38.11 (4th ed.2000)). In the case before us, the parties to the real estate referral fee agreement alleged to exist in this case had previously consented to arbitrate disputes arising among themselves while each was a member of the professional organization. They had not rescinded their consents to arbitrate when the disputes between them arose. Each was still a member of the professional organization that set forth guidelines and procedures for such arbitration. These undisputed facts and the extensive documentary evidence in the record spelling out this duty to arbitrate were the basis for the district court's order compelling arbitration and for our legal conclusion in this case upholding the district court's arbitration order. The district court did not abuse its discretion. An articulated purpose and objective of joining the REALTOR® organization is to facilitate the resolution of disputes through arbitration. This duty to arbitrate is a condition of their membership agreements and, consequently, of their professional relationship while members. When members of the organization subsequently enter into agreements among themselves, such as the alleged referral fee agreement in this case, and have not rescinded their previously-executed consents to arbitration, those consents become an implied condition of doing business with each other and of their contractual performance. By the plain language of the membership applications they signed, Urgitus and Calhoun each consented to binding arbitration should a dispute arise between them during the time they were members of the DMCAR. The notice contained in the applications concerning this duty to arbitrate is explicit and is repeated three times on the face of the signature page above each of their signatures. The record in this original proceeding demonstrates that arbitration is both a benefit and duty that DMCAR REALTOR® professionals undertake to receive and perform from, for, and with each other. Incorporated by reference in the signed applications are the ethical code, standards, and arbitration manual of these interconnected local and national organizations that spell out clearly and unambiguously this reciprocal duty to arbitrate. This duty to arbitrate applies to all disputes concerning compensation that arise among members of DMCAR, which is affiliated with the interconnected REALTOR® organizations. The primary defense to the existence of an arbitration agreement in this case is that there is no direct written agreement among Urgitus and Lane or Calhoun and Lane; thus, there can be no enforceable agreement to arbitrate in this case pursuant to Colorado's arbitration act. We disagree. Pursuant to Article XVIII, section 3 of the Colorado Constitution, the General Assembly's enactment of the Uniform Arbitration Act, sections 13-22-201 to -239, provides a uniform statutory framework for arbitration in order to encourage the settlement of disputes. All doubts as to whether a dispute is arbitrable are to be resolved in favor of arbitration. In re Marriage of Popack, 998 P.2d at 467; Farmers Ins. Exch. v. Taylor, 45 P.3d at 761. Thus, the General Assembly intended that Colorado's arbitration act would encompass all forms of contract and contract conditions that expressly or impliedly include a duty to arbitrate. Under Colorado law, contractual conditions may be express or implied. Goodson v. American Standard Ins. Co., 89 P.3d at 414; Cary v. United of Omaha Life Ins. Co., 68 P.3d at 466. We may look to the circumstances surrounding the contract's formation in construing the contract, in order to carry out the intent of the contracting parties. Lazy Dog Ranch v. Telluray Ranch Corp., 965 P.2d at 1235. When the record of the agreement we are called upon to construe or enforce consists of documentary evidence, we may base our legal conclusion upon that documentary evidence and do not depend upon a trial court's factual findings or interpretation of that evidence. Winslow Constr. Co. v. City & County of Denver, 960 P.2d 685, 692 (Colo.1998); M.D.C./Wood, Inc. v. Mortimer, 866 P.2d 1380, 1382 (Colo.1994) (stating that when facts are presented to the trial court by stipulation, or uncontested documentary evidence, that an appellate court may draw its own conclusions); see also Archangel Diamond Corp. v. Lukoil, 123 P.3d 1187, 1195 (Colo.2005) (We review documentary evidence de novo.). As demonstrated by the case before us, an agreement to arbitrate can take the form of previously-executed consents to arbitrate that become an implied condition of subsequent agreements the members of the professional organization make among themselves. Section 13-22-206(1) of Colorado's arbitration act provides that [a]n agreement contained in a record to submit to arbitration any existing or subsequent controversy arising between the parties to the agreement is valid, enforceable, and irrevocable except on a ground that exists at law or in equity for the revocation of a contract. The litigants here are sophisticated business persons who agreed to abide by a set of governance rules and ethical standards that included professional commitments beyond those otherwise required by Colorado law and the regulations of the Colorado Real Estate Commission. Economic advantage to each other as fellow DMCAR REALTORS® is clearly a benefit of belonging to the national and local organizations. Valid contractual duties can arise out of a network of agreements involving commercially sophisticated parties who are able to bargain for an allocation of risks, duties, and remedies. See, e.g., BRW, Inc. v. Dufficy & Sons, Inc., 99 P.3d 66, 73 (Colo.2004). As clearly shown by the present case, REALTOR® members are encouraged to refer real estate transactions to each other, to contract with each other for a fee for such referrals, and to avoid a course of contested litigation should a dispute arise while they are members. Our court of appeals has held that arbitration provisions and procedures contained in a voluntary membership organization of real estate professionals are binding on its members. Jorgensen Realty, Inc. v. Box, 701 P.2d 1256, 1257-58 (Colo.App.1985). We observe that the Jorgensen case and other professional real estate organization cases like it arise when the contracting parties to professional agreements attempt to avoid enforcement of their prior unrescinded arbitration consents. Other jurisdictions are in accord with our holding here, particularly when addressing REALTOR® organization members and the duty to arbitrate. The Oklahoma Court of Civil Appeals applied Jorgensen to REALTOR® members who had a real estate sales commission dispute between themselves. Rogers Realty, Inc. v. Smith, 76 P.3d 71, 72 (Okla.Civ.App.2003). See also Topolski v. Helena Ass'n of Realtors, Inc., 303 Mont. 224, 15 P.3d 414, 414 (2000) (holding that terms of brokers' membership in association required them to arbitrate dispute with client, even though they had not entered into any other contract or agreement with client to arbitrate disputes with her); King v. Larsen Realty, Inc., 121 Cal.App.3d 349, 357, 175 Cal.Rptr. 226 (1981) (holding that members of the California Association of Realtors are bound to arbitrate when they have contracted to abide by the Association's bylaws, and those bylaws impose a duty to arbitrate); Bastone v. Dial-A-House, 100 Misc.2d 1026, 1027, 420 N.Y.S.2d 467 (1979) (holding that realtor, by virtue of his membership, was bound by the duly enacted provisions of the constitution and bylaws of the local board of realtors); Elbadramany v. Stanley, 490 So.2d 964, 966 (Fla.App.1986) (holding that a provision in the constitution, charter or by-laws of voluntary association which requires that disputes between members be submitted to arbitration constitutes a binding agreement between such members to submit future disputes to arbitration); Van C. Argiris & Co. v. Pain/Wetzel & Assocs., Inc., 63 Ill.App.3d 993, 20 Ill.Dec. 616, 380 N.E.2d 825, 828 (1978) (holding that bylaws of real estate brokers' organization constitute contractual agreement between members to arbitrate and dispute between said members relating to matters arising out of their business as brokers or agents is subject to arbitration). Here, the DMCAR applications for membership signed by Urgitus and Calhoun incorporate by reference the terms of the  Code of Ethics of the National Association of REALTORS®, including the duty to arbitrate business disputes in accordance with the Code of Ethics and Arbitration Manual of the Board and the Constitutions, Bylaws, and Rules and Regulations of [DMCAR or the Denver Board], the Colorado Association and the National Association. The referenced Code of Ethics requires arbitration when a dispute arises out of the parties' relationship as REALTORS®. In the event of contractual disputes or specific non-contractual disputes as defined in Standard of Practice 17-4 between (principals) associated with different firms, arising out of their relationship as REALTORS®, the REALTORS® shall submit the dispute to arbitration in accordance with the regulations of their Board or Boards rather than litigate the matter. National Association of REALTORS®, Code of Ethics and Standards of Practice, Article 17, in Manual at 12. [8] Neither Urgitus, nor Calhoun, may defeat the arbitration of transactions and fee disputes that arose during their membership in the REALTOR® organization by withdrawing from membership after the disputes with Lane arose. The plain language and meaning of the REALTOR® documents in this original proceeding, incorporated by reference in the signed application for memberships, requires arbitration of disputes arising when the disputants were members. This lawsuit addresses only such disputes. If they entered into the referral fee agreement as alleged in the complaint, which is a factual matter for determination in the arbitration under section 13-22-206(3), C.R.S. (2006), then Urgitus and Lane became bound by the implied condition to arbitrate that is enforceable under Colorado's arbitration act. A valid arbitration provision of a contract divests a trial court of jurisdiction over all questions that are to be submitted to arbitration, pending conclusion of arbitration. The district court did not err in ordering arbitration in this case. [9] Because the district court should have stayed the lawsuit pending arbitration pursuant to section 1322207(7), rather than dismissing it, we set aside the district court's dismissal order, and order the lawsuit stayed pending arbitration.