TILFORD CONTRACTORS, INC. v. STEWART SERVICES, INC.
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RENDERED: March 26, 1999; 10:00 a.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
1997-CA-003059-MR
TILFORD CONTRACTORS, INC.
APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE ELLEN EWING, JUDGE
ACTION NO. 97-CI-04170
v.
STEWART SERVICES, INC.
APPELLEE
OPINION
VACATING AND REMANDING
** ** ** ** **
BEFORE:
COMBS, DYCHE, and SCHRODER, Judges.
COMBS, JUDGE:
The appellant, Tilford Contractors, Inc.
(Tilford), appeals from the order of the Jefferson Circuit Court
granting the motion by the appellees, Stewart Services, Inc.
(Stewart) to stay arbitration proceedings between the parties.
After reviewing the record, we vacate and remand.
This action arises from a dispute as to the scope of an
arbitration clause contained in a subcontract into which Tilford
had entered with Stewart.
Western Baptist Hospital undertook an
expansion project of its hospital facilities in McCracken County,
Kentucky, and hired Centex-Rodgers Construction Company (CentexRodgers) as the general contractor for the
project.
Centex-
Rodgers contracted a portion of this project to Stewart.
Stewart
then entered into a subcontract with Tilford for the installation
of the plumbing and mechanical systems for its portion of the
expansion project.
Tilford alleged that during the course of
construction, it was required to make approximately 1500
additions and deletions to the work that it had performed under
the parties’ subcontract.
Stewart disputed Tilford’s claim for
the costs of this additional work.
On April 21, 1997, Tilford filed a claim for
arbitration with the American Arbitration Association in
Louisville, Kentucky, to resolve the dispute with Stewart over
the costs of the extra work that it had performed.
Subsequently,
on July 25, 1997, Stewart filed a motion with the Jefferson
Circuit Court to stay the arbitration proceedings, arguing that
it had not agreed to the arbitrate the issue presented by Tilford
in its demand for arbitration.
Stewart asserted that pursuant to
the parties’ subcontract, it had agreed to arbitrate only those
disputes arising from the costs associated with “change orders"
and that Tilford was inappropriately attempting to force it to
arbitrate a “delay/impact claim.”
Conversely, Tilford claimed
that Article 12.1.7 of the parties’ agreement provided that any
disputes over the costs of any additional work were to be
resolved by arbitration.
On September 25, 1997, the court entered an order
denying Stewart’s motion to stay arbitration.
Stewart
subsequently filed a motion to amend, alter, or vacate the
court’s order.
After conducting a hearing, the court entered an
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order vacating its previous order of September 25, 1997, and
staying arbitration.
The court held that the Article 12.1.7 of
the parties’ subcontract applied only to disputes over the
pricing of change orders issued by Stewart and that the claim
presented by Tilford for arbitration did not fall within the
scope of Article 12.1.7.
This appeal followed.
The parties addressed the issue of additional work and
changes in the nature and extent of the work that might arise
during the course of performance of the contract by Tilford.
They focused on Articles 9 and 12 of their agreement.
provides in pertinent part as follows:
Article 9
Article 9 Subcontractor Rights and
Responsibilities
9.8
Changes in Work
9.8.1
Requests for adjustment to the
Subcontract amount for changes in work shall
be recognized only if recognized and paid for
by the Owner.
9.8.2
The Subcontractor may be ordered in
writing by the Contractor, without
invalidating this Subcontract, to make
changes in the Work within the general scope
of this Subcontract consisting of additions,
deletions or other revisions, the Contract
Sum and the Contract Tine being adjusted
accordingly. The Subcontractor, prior to the
commencement of such changed or revised Work,
shall submit promptly to the Contractor
written copies or any claim for adjustment to
the Contract Sum and Contract Time for such
revised Work in a manner Consistent with the
Contract Documents. No extra work or changes
will be recognized or paid for unless agreed
to in writing prior to performance.
9.8.3
In the event that the Owner,
Architect or Engineer authorizes additional
work on this project, the Subcontractor
mentioned above is obligated to perform that
part of the work and shall receive as payment
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therefore, a sum not to exceed 85% of that
amount received by Contractor from the Owner,
due and payable upon receipt of the payment
from the Owner or Architect. Subcontractor
has the obligation to provide such
information that validates his cost on the
extra work order in a timely fashion or
within seven days after work was performed.
If Contractor requests quotation on work
before it is performed, quotation shall be
given within 48 hours after request. Should
the Subcontractor be directed by the
Contractor to provide additional work, the
mark-up on the additional work shall not
exceed 15%. The 15% shall include all office
overhead and job supervision, and cost shall
be considered only direct cost applicable to
the work authorized.
Additionally, Article 12 of the subcontract states in pertinent
part:
Article 12
12.1
Changes in Work
Change Orders
12.1.1 The Contractor may, without affecting
any other Contract Document or terms or
conditions thereof, issued [sic] a Change
Order for extra work or other changes in the
work by altering adding to or deducting the
existing work or conditions.
12.1.2 The amount to be paid to or deducted
from the Subcontractor shall be determined as
hereinafter set forth; provided, however,
that upon receipt of a written order
describing the work the Subcontractor shall
promptly proceed with the revised work as
described, even though the amount of any
resultant increase or decrease in the
Contract sum has not yet been determined.
All changes in the Work shall be performed in
accordance with Contract Documents.
*
*
*
12.1.7 If the parties are unable to finally
agree to a fair dollar amount for additions
or deletions to the scope of work, said
disputes shall be brought before the American
Arbitration Society for review and
settlement. Payment for said services shall
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be borne equally by both parties. Such
arbitration proceedings shall occur at a
place to be decided on in Louisville,
Kentucky. Said disputes, however, shall not
be justification by the Subcontractor to
refuse to proceed with the work any changes
(“Change Orders”) in the work of said
Contract. Subcontractor agrees to proceed
with all work, change orders included, in a
timely manner and to resolve any questions or
problems as herein before established.
While the parties agree that Article 12.1.7 provides
for the resolution of certain disputes through arbitration, they
disagree as to its scope.
Stewart argues that Article 12.1.7
applied only to “change orders,” a term of art which should be
given its technical meaning; i.e., a formal, written order issued
by the contractor or architect authorizing a change in the work
or in the scope of the work.
Construction.1
Dictionary of Architecture &
Stewart reasons that Tilford’s demand for
arbitration was based upon a claim for additional costs and
extensions of time — items not falling within the scope of
12.1.7.
Stewart thus contends that since the dispute between the
parties was not related to formal "change orders" issued to
Tilford, the court properly stayed the arbitration proceedings.
Tilford, however, argues that the Article 12.1.7 requires the
parties to arbitrate any dispute over costs for additions or
deletions to the scope of work and that arbitration is not
limited only to disputes arising from formal change orders.
We
are compelled to agree with Tilford’s reading of Article 12.1.7.
“Any contract or agreement must be construed as a
whole, giving effect to all parts and every word in it if
1
See Brief for Appellee, Stewart Services, Inc.
-5-
possible.”
(1986).
City of Louisa v. Newland, Ky., 705 S.W.2d 916
However, when words are used as technical terms in a
transaction between parties knowledgeable in a technical field,
such words are to be given their technical meanings.
Cook
United, Inc. v. Waits, Ky., 512 S.W.2d 493 (1974).
While we agree that “change order” as used in Article
12 is a term of art which should be ascribed its technical
meaning, we do not agree that the arbitration clause contained in
the subcontract applies only to “change orders.”
The unambiguous
language of Article 12.1.7 requires the parties to submit to
arbitration when they are “unable to agree to a fair dollar
amount for additions or deletions to the scope of work.”
(Emphasis added).
The clear wording of this clause is not
restricted only to disputes over formally drafted change orders.
In light of the subcontract as a whole, it is clear that the
parties fully anticipated and made provisions for any changes in
the scope of the work that Stewart had subcontracted to Tilford —
including change orders or other “additions, deletions or other
revisions.”
Article 9.8.2.
The arbitration clause is physically positioned at the
very end of the subcontract, impliedly encompassing disputes
arising not only as to "additions or deletions to the scope of
the work" immediately preceding it at Article 12.1.7 but also as
to the "additions, deletions or other revisions" alluded to at
Article 9.8.2.
The term "change orders" also appears at Article
12.1.7, and there is no specific restriction or limitation, or
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clarification that the arbitration clause is to pertain to
"change orders" as distinguished from "additions or deletions."
Articles 9 and 12 reflected and assured the parties’
intent that work on the expansion project might proceed
uninterrupted by disputes over extra costs.
Both articles
contain language that Tilford was to proceed with all work
(including additions and change orders) and that they were to
resolve any disputes over costs through arbitration — not by
cessation of work.
We hold that the court erred in ordering a
stay of arbitration proceedings between the parties as we
construe the arbitration clause as governing the resolution of
the dispute at issue in this case.
For the foregoing reasons, we vacate the order of the
circuit court staying arbitration and remand for further
proceedings consistent with this opinion.
ALL CONCUR.
BRIEFS AND ORAL ARGUMENT FOR
APPELLANT:
BRIEF AND ORAL ARGUMENT FOR
APPELLEE:
Robert C. Fields
Frankfort, KY
Thomas E. Roma, Jr.
Louisville, KY
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