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A Virgin Islands federal district court has held that payment disputes arising out of a construction contract containing an arbitration agreement are arbitrable, rendering disputes regarding foreclosure actions and liens arising out of the payment dispute arbitrable as well.
In Sunnyrock Bldg. & Design Co., Inc. v. Balch, Civ. No. 2007-121, 2007 WL 3125010 (D. V.I. Oct. 23, 2007), Sunnyrock and Balch entered into a construction contract which contained an agreement to arbitrate. A dispute over payments under the contract arose, and Sunnyrock filed a construction lien against Balch’s property.
Sunnyrock then brought a court action to foreclose on the lien. Balch responded by moving for an order voiding the lien and for damages. Balch also demanded arbitration of the underlying payment dispute. Sunnyrock stated it had demanded arbitration, and asked the court to compel arbitration of all claims, including those related to the lien.
The Court held that the payment dispute, propriety of the lien, the lien’s foreclosure, and any demand for damages should all be arbitrated. According to the Court, the payment for the construction services clearly arose out of the contract, and any dispute over payments under the contract were arbitrable.
As for the lien and its foreclosure, the Court compelled arbitration of those issues as well. According to the Court, since the obligations under the contract gave rise to the payment dispute, the payment dispute gave rise to the lien, and the lien gave rise to the foreclosure action, every dispute was inextricably interwoven and therefore subject to arbitration.
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