Hanover Insurance Co. v. Kiva Lodge Condominium Owners' Ass'n

221 So. 3d 446, 2016 Ala. LEXIS 123, 2016 WL 6135201
CourtSupreme Court of Alabama
DecidedOctober 21, 2016
Docket1141331
StatusPublished
Cited by3 cases

This text of 221 So. 3d 446 (Hanover Insurance Co. v. Kiva Lodge Condominium Owners' Ass'n) is published on Counsel Stack Legal Research, covering Supreme Court of Alabama primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hanover Insurance Co. v. Kiva Lodge Condominium Owners' Ass'n, 221 So. 3d 446, 2016 Ala. LEXIS 123, 2016 WL 6135201 (Ala. 2016).

Opinion

MURDOCK, Justice.

The Hanover Insurance Company (“Hanover”), Hudak & Dawson Construction Co., Inc. (“Hudak”), and Don Colvin d/b/a Colvin Plastering (“Colvin”) (hereinafter collectively referred to as “the appellants”) appeal from the Baldwin Circuit Court’s order granting a motion to stay, pending arbitration, the action filed against them by the Kiva Lodge Condominium Owners’ Association, Inc. (“Kiva Lodge”). We affirm the judgment of the trial court.

I. Facts

Kiva Lodge is an Alabama nonprofit corporation formed for the purpose of administering and maintaining the Kiva Dunes Clubhouse and • Condominium (“Kiva Dunes”) located in Gulf Shores. On’ March 28, 2009, Kiva.Lodge contracted with Hu-dak to be the general contractor for the [448]*448remediation of deficiencies in Kiva Dunes buildings that were allowing water to enter the buildings.1 Hudak subcontracted the stucco and/or sealant portion of the work to Colvin. Hanover, as surety for Hudak, issued to Kiva Lodge a performance bond ensuring and/or securing the full performance of Hudak’s contractual obligations. Both Hanover’s performance bond and Colvin’s subcontract incorporated by reference the provisions of the contract between Kiva Lodge and Hudak.

The contract between Kiva Lodge and Hudak included a form contract entitled “General Conditions of the Contract for Construction, AIA[2] Document A201-1997” (“the form contract”). The form contract included two paragraphs that constituted the arbitration provision. Those paragraphs provided:

“§ 4.6.1 Any Claim arising out of or related to the Contract ... shall, after decision by the Architect after submission of the Claim to the Architect, be subject to arbitration. Prior to arbitration, the parties shall endeavor to resolve disputes by mediation in accordance with the provisions of Section 4.5.
“§ 4.6.2 Claims not resolved by mediation shall be decided by arbitration, which, unless the parties mutually agree otherwise, shall be in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect. The demand for arbitration shall be filed in writing with the other party to the Contract and with the American Arbitration Association, and a copy shall be filed with the Architect.”

(Emphasis added.)

Kiva Lodge and Hudak also executed an “Addendum to General Conditions of Owner-Contractor Agreement” (“the addendum”). The opening paragraph of the addendum expressly stated:

“This Addendum shall modify, delete from and add and replace by substitution to the ‘General Conditions of the Contract for Construction,’ AIA Document A201, 1997 between Kiva Lodge Condominium Owners’ Association, Inc. as Owner and Hudak and Dawson Construction Co., Inc. as Contractor. ... If and to the extent that this Addendum is inconsistent with the Standard Form of Agreement between Owner and Contractor, any attachments thereto, the Specifications and Contract Documents, and the Supplementary Conditions, this Addendum shall control.”

With regard to the arbitration provision in the form contract, the addendum provided for the following changes:

“4.6.1 Delete the word ‘shall’ in the second line and substitute in lieu thereof the words ‘may at the election of either party.’ Delete the second sentence in its entirety.
“4.6.2 Delete the word ‘shall’ in the first line and substitute in lieu thereof the words ‘may at the election of either party.’”

Accordingly, §§ 4.6.1 and 4.6.2, as modified by the addendum, read:

“§ 4.6.1 Any Claim arising out of or related to the Contract ... may at the [449]*449election of either party after decision by the Architect after submission of the Claim to the Architect, be subject to arbitration....
“§ 4.6.2 Claims not resolved by mediation may at the election of either party be decided by arbitration, which, unless the parties mutually agree otherwise, shall be in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect. The demand for arbitration shall be filed in writing with the other party to the Contract and with the American Arbitration Association, and a copy shall be filed with the Architect.”

(Emphasis added.) In addition, the addendum added a new paragraph to the form contract—designated paragraph 20—which stated:

“Notwithstanding anything in this Addendum to the contrary, either party may pursue any claim or dispute in a court of law, or through mediation and arbitration. This Agreement shall be governed by the laws of the State of Alabama.”

(Emphasis added,)

In May 2010, Hudak’s remediation work was deemed to be substantially complete by Kiva Lodge’s representative. In May 2010, Colvin issued a five-year warranty in favor of Kiva Lodge warranting that the stucco work was performed with “proper materials, workmanship, and arrangement.” On September 16, 2010, Hudak issued a five-year warranty in favor of Kiva Lodge, warranting that the labor and materials were in compliance with the contract and with applicable specifications.

In September 2012', Kiva Lodge informed Hudak and Colvin of leaks and bubbling in the stucco exterior of the buildings at Kiva Dunes caused by water intrusion. Kiva Lodge alleges that Hudak and Colvin failed to determine and/or disclose the course of the problems and the proper scope of repairs necessary. It also alleges that Hanover breached the terms of its performance bond by failing to promptly remedy the default, complete the work within the scope of the contract in accordance with the terms and conditions, or arrange for payment of an alternative contractor to complete the work.

On April 16, 2015, Kiva Lodge sued the appellants in the Baldwin Circuit Court. The complaint asserted claims of breach of warranty, negligence, and fraud/suppression. The complaint requested that Kiva Lodge’s claims be “referred to arbitration before the American Arbitration Association for an award of damages against [the appellants].”

On April 23, 2015, Kiva Lodge filed a motion to stay the proceedings pending arbitration of its claims. In support of its motion, Kiva Lodge submitted, the form contract, together with the addendum, along with an affidavit from Kiva Lodge’s president, Jim Edgemon, in which he asserted that the form contract evinced transactions involving interstate commerce.

On May 15, 2015, Hanover filed a motion to dismiss Kiva Lodge’s claims against Hanover on the ground that, under its performance bond, any claim must be initiated within two years following the date on which final payment to the contractor became due and Kiva Lodge had not met this deadline. Therefore, Hanover argued, all of Kiva Lodge’s claims against Hanover were time-barred pursuant to the terms of the performance bond.

Also in May 2015, Hudak and Colvin filed answers to the complaint opposing the motion to stay on the basis of the language in the addendum and denying the- substantive allegations of the complaint. In July 2015, Hanover filed an an[450]*450swer.

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221 So. 3d 446, 2016 Ala. LEXIS 123, 2016 WL 6135201, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hanover-insurance-co-v-kiva-lodge-condominium-owners-assn-ala-2016.