Watkins v. Mellen
54 N.E.3d 879
Ill. App. Ct.2016Background
- In 1977 Albert and Rose Watkins created the Watkins Enterprises Land Trust/Partnership holding Marshall County farmland; a trustee holds legal title for beneficiaries who are shareholders/partners. The partnership agreement required unanimous written consent of all partners for certain actions and included an arbitration clause for disputes.
- The trust issued unequal shares to 26 beneficiaries; Robert J. Watkins has served as trustee since 1996. In 2012 a poll to sell the property at public auction produced 23 votes in favor and 3 objections.
- Watkins filed a declaratory-judgment complaint (initially also in his individual capacity) seeking court authorization to sell the trust property; defendants moved to dismiss under section 2-619(a)(2), arguing Watkins lacked authority absent unanimous shareholder consent.
- The trial court denied the motion to dismiss, ruling Watkins had standing as trustee to seek declaratory relief; defendants thereafter (after losing the motion) moved to compel arbitration under the agreement’s arbitration clause.
- The trial court denied the motion to compel arbitration without an evidentiary hearing; Watkins argued the defendants had waived arbitration by filing and litigating the section 2-619 motion. Defendants appealed the denial under Supreme Court Rule 307(a)(1).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether defendants waived their contractual right to compel arbitration by filing and litigating a section 2-619 motion to dismiss that placed contract interpretation before the court | Watkins: filing and litigating the 2-619 motion submitted arbitral issues to the court and thus waived the right to later compel arbitration | Defendants: their 2-619 motion did not waive arbitration; arbitration remained available and should have been compelled | Court: Defendants waived arbitration by placing substantive contract issues before the court via the 2-619 motion; denial of motion to compel arbitration affirmed |
Key Cases Cited
- Progressive Land Developers, Inc. v. Exchange Nat’l Bank of Chicago, 266 Ill. App. 3d 934 (Ill. App. Ct. 1994) (trustee’s fiduciary duty can require court declaratory relief when dispute exists with beneficiaries)
- State Farm Mut. Auto. Ins. Co. v. George Hyman Constr. Co., 306 Ill. App. 3d 874 (Ill. App. Ct. 1999) (party waives arbitration by submitting arbitral issues to court)
- Applicolor, Inc. v. Surface Combustion Corp., 77 Ill. App. 2d 260 (Ill. App. Ct. 1966) (filing substantive judicial motions can waive later invocation of arbitration)
- Atkins v. Rustic Woods Partners, 171 Ill. App. 3d 373 (Ill. App. Ct. 1988) (motion to dismiss based on contract interpretation can constitute waiver of arbitration)
- Kostakos v. KSN Joint Venture No. 1, 142 Ill. App. 3d 533 (Ill. App. Ct. 1986) (waiver occurs when a party’s conduct is inconsistent with the right to arbitrate)