Find Legal Information

The issue on appeal is whether a party to a constructioncontract waives its contractual right to compel arbitration when itfiles a mechanics lien then requests arbitration, but subsequentlyfiles an action pursuant to section 34 of the Mechanics Lien Act(Act) (770 ILCS 60/34 (2000)) and immediately filed a stay thereof. We hold that under these circumstances it does not waive its rightto arbitrate the dispute.

In this case, Central Illinois Construction, Inc., was thecontractor and Dennis La Hood, d/b/a ATL Enterprises, Ltd., was theproperty owner who hired Central Illinois to construct a shoppingcenter. When a dispute arose regarding the project, the contractorfiled a mechanics lien against the owner's property. It then filedunder the Illinois Uniform Arbitration Act (710 ILCS 5/1 et seq.(West 2000)) to arbitrate the dispute as provided for by itscontract with the owner. Pursuant to section 34 of the Act (770ILCS 60/34 (West 2000)), the owner filed a written demand that suitbe commenced to enforce the lien. Section 34 provides owners withthis right and, if demanded, the person claiming the lien mustcommence the suit within 30 days of the written demand or the lienis forfeited. See 770 ILCS 60/34 (West 2000). In compliance withthe statute, the contractor filed suit on its lien but immediatelyfiled a motion to stay court proceedings and compel arbitrationpursuant to the contract.

The owner now complains that the contractor waived andabandoned its contractual right to arbitrate when it later filedthe mechanics lien action pursuant to section 34 of the Act. Itasserts that the contractor acted inconsistently with thearbitration clause in the parties' agreement by attempting toadjudicate the same issues in two different forums and that thetrial court's decision allowing arbitration unfairly requires it toincur the expense of defending two actions which will severelyencumber the property. In support of its position, the ownerrelies on the following cases in which the court found thatarbitration was waived: Schroeder Murchie Laya Associates, Ltd. v.1000 West Lofts, LLC., 319 Ill. App. 3d 1089, 746 N.E.2d 294(2001); State Farm Mutual Automobile Insurance Co. v. George HymanConstruction Co., 306 Ill. App. 3d 874, 715 N.E.2d 749 (1999); andYates v. Doctor's Associates, Inc., 193 Ill. App. 3d 431, 549N.E.2d 1010 (1990). In response, the contractor argues that it didnot act inconsistently with the arbitration clause because itrequested arbitration before it was forced by the owner toprosecute the mechanics lien claim and because it sought animmediate stay of the claim pending arbitration. As the facts ofthis case are undisputed and only the trial court's legalconclusion is at issue, we will consider this matter de novo.Hawrelak v. Marine Bank, Springfield, 316 Ill. App. 3d 175, 735N.E.2d 1066 (2000). But see Schroeder, 319 Ill. App. 3d at 1092, 746 N.E.2d at 296 (discussing the standard of review of a trialcourt's determination of whether a party's actions constitute awaiver of arbitration).

A contractual right to compel arbitration can be waived likeany other contractual right. Kostakos v. KSN Joint Venture No. 1,142 Ill. App. 3d 533, 491 N.E.2d 1322 (1986). Waiver occurs whena party acts in a manner that is inconsistent with the arbitrationclause in an agreement and indicates an abandonment of that right.Atkins v. Rustic Woods Partners, 171 Ill. App. 3d 373, 525 N.E.2d551 (1988). Waiver also occurs when a party submits arbitrableissues to a court for decision. Bishop v. We Care Hair DevelopmentCorp., 316 Ill. App. 3d 1182, 738 N.E.2d 610 (2000). Although theright to compel arbitration can be waived, Illinois courts favorusing arbitration as a method of settling disputes and disfavor afinding that a party has waived its right to arbitrate. Kostakos,142 Ill. App. 3d at 536, 491 N.E. 2d at 1325. Thus, a publicpolicy concern that favors arbitration will outweigh a concernregarding judicial economy, duplication of effort, or inconsistentresults. Board of Managers of the Courtyards at the WoodlandsCondominium Ass'n v. IKO Chicago, Inc., 183 Ill. 2d 66, 697 N.E.2d727 (1998).

We hold that the trial court did not err when it determinedthat the contractor in this case continued to have a right tocompel arbitration. The fact that the contractor first soughtarbitration and then filed the mechanics lien action is notinconsistent with the arbitration clause in the agreement and doesnot indicate an intent to abandon that right. Rather, the filingof the mechanics lien sensibly protected the contractor's interestin the property and was acted upon only because the owner pursuedan action under section 34 of the Act. By immediately seeking astay of the mechanics lien action pending arbitration, thecontractor preserved its right to compel arbitration.

In reaching our conclusion, we note that the cases relied uponby the owner are distinguishable from the instant case as theypresent very different fact patterns. In Schroeder, 319 Ill. App.3d at 1098, 746 N.E.2d at 302, an architectural contractor waivedits contractual right to arbitrate when it opposed a condominiumassociation's prior motion to compel arbitration, failed to filefor arbitration when given the opportunity to do so by the court, and engaged in discovery. In State Farm, 306 Ill. App. 3d at 885,715 N.E.2d at 758, a contractor waived arbitrable claims againstsubcontractors by filing a summary judgment motion against themwhile arbitration was stayed. In Yates, 193 Ill. App. 3d at 440,549 N.E.2d at 1016, a franchisor waived its right to compelarbitration under a franchise agreement when its agent initiatedforcible entry and detainer actions against franchisees as part ofthe same dispute.

In each of these cases, the claimant acted inconsistently withan intent to pursue arbitration and thereby abandoned its right. Here, the contractor first sought arbitration and then filed themechanics lien action entirely in response to the owner's statutory30-day demand, and the contractor avoided submitting anysubstantive issue to the court by requesting an immediate stay. Thus, the mechanics lien action complemented the request forarbitration, and there was no inconsistency or abandonment.

Our decision is bolstered by the language of the contractwhich provided that the parties agreed that all disputes would bedecided by arbitration in accordance with the Construction IndustryArbitration Rules of the American Arbitration Association (AAA). See AAA, Construction Industry Arbitration Rules (July 1, 2001). Rule 51(a) of those rules states: "No judicial proceeding by aparty relating to the subject matter of the arbitration shall bedeemed a waiver of the party's right to arbitrate." AAA,Construction Industry Arbitration Rules, R. 51(a) (July 1, 2001). Illinois courts have consistently applied this clause literally andrejected arguments of waiver. See State Farm, 306 Ill. App. 3d at884, 715 N.E.2d at 757. The inclusion of the specific reference tothe AAA Construction Industry Arbitration Rules, which includesRule 51(a), indicates that the parties intended to favorarbitration and, as such, we will not waive that right lightly.

For the foregoing reasons, the judgment of the circuit courtof Tazewell County is affirmed.

Affirmed.

LYTTON, P.J., and SLATER, J., concur.