Creekside Const. Co. v. Dowler

• Decision Date: 16 August 2005
• Docket Number: No. COA04-1225.,COA04-1225.
• Citation: 616 S.E.2d 609
• Parties: CREEKSIDE CONSTRUCTION COMPANY, Plaintiff, v. John DOWLER and wife, Carla Dowler, Defendants.
• Court: North Carolina Supreme Court

616 S.E.2d 609

CREEKSIDE CONSTRUCTION COMPANY, Plaintiff, v. John DOWLER and wife, Carla Dowler, Defendants.

No. COA04-1225.

Court of Appeals of North Carolina.

August 16, 2005.

Appeal by plaintiff and defendants from judgment entered 5 April 2004 by Judge J.D. Hockenbury in Carteret County Superior Court. Heard in the Court of Appeals 20 April 2005.

Richard L. Stanley, Beaufort, for plaintiff.

Julie E.D. Shepard, for defendants.

CALABRIA, Judge.

Creekside Construction Company ("plaintiff") and John and Carla Dowler ("defendants") appeal from the entry of judgment confirming an arbitration award. We affirm in part and reverse and remand in part.

Defendants are the owners of a condominium unit located in Carteret County. Defendants sought bids concerning desired renovation work to the condominium unit. Plaintiff's initial estimate for the work to be performed was approximately $35,000.00 but did not include estimates for plumbing fixtures. Subsequent meetings between plaintiff and defendants resulted in changes to the work to be performed, and the parties agreed that the contract work would be done "on a cost plus 15%" basis. Based on the scope of work at that time, the estimate for the work to be performed was in the low to mid-$50,000.00 range. On 4 September 2002, Barry E. Snipes ("Snipes"), as President on behalf of plaintiff, executed a construction contract ("contract") with defendants for renovations of defendants' condominium unit in accordance with certain specifications. In addition, the contract contained the following arbitration clause:

14. Arbitration. Any disagreements arising out of this Contract or the application of any provisions hereunder shall be submitted to binding arbitration by three arbitrators who shall be licensed general contractors in the State of North Carolina. Owner and Contractor shall each select one, and the two arbitrators shall then agree as to the third arbitrator. Any decision reached by a majority vote of the three shall be binding on the parties hereto and shall have the weight as a legal decision on any difference arising herein. Either party may invoke the process of arbitration by giving the other party notice in writing that the arbitration procedures herein are being instituted. Thereafter each party shall have five working days to select his arbitrator, and the two so selected shall have a period of five working days thereafter in which to select the third arbitrator. The three arbitrators shall then have a period of fourteen days thereafter in which to investigate this matter and to render their decision concerning any disagreements. The cost of the arbitration shall be borne equally between Owner and Contractor.

As renovation work progressed, plaintiff alleged defendants continued to make changes to the scope of work to be performed and plaintiff complied with the requested changes, all of which fell under the payment provisions in the contractual agreement of cost plus fifteen percent. At the completion of the renovation, the total billing for the project came to $92,848.03. Defendants paid $38,228.04 but refused to pay the balance. Defendant and plaintiff initially agreed to arbitrate the matter, and plaintiff appointed an arbitrator. Defendants, thereafter, refused to appoint an arbitrator, and plaintiff filed a claim of lien as well as an action to foreclose the lien. In addition, plaintiff's complaint contained a cause of action for breach of contract and a request for an order compelling arbitration. Finally, plaintiff changed the locks on the condominium unit to prevent defendants' access.

Defendants answered the complaint and alleged several counterclaims, including trespass, fraud, and unfair and deceptive trade practices. Defendants asserted in their answer that the arbitration clause was unenforceable and that plaintiff failed to properly assert it. At the 17 November 2003 hearing, the trial court heard arguments from the parties, received documents, briefs, affidavits, and considered the pleadings. Defendants argued that the contract containing the arbitration clause had been procured by fraud and the trial court had to conduct a jury trial on the factual issues concerning fraud before it could proceed to compel arbitration.

On 15 December 2003, the trial court entered findings of fact and conclusions of law in an order compelling arbitration. The matter went before a panel of three arbitrators chosen in accordance with the contract. In a document signed by all three arbitrators and dated 4 March 2004, plaintiff was awarded "the total sum of $67330.00 . . . less $38228.04 already paid by [defendants] for a balance due of $29101.96[.]" An undated document signed by all three arbitrators on 5 March 2004 and entitled "Arbitrator's Decision," listed the following: (1) plaintiff did not commit fraud, did commit an unfair trade practice, and did trespass; and (2) both plaintiff and defendants breached the contract. For each wrongdoing, the arbitrators found "nominal or actual damages" in the amount of $1.00. Thus, this document purportedly set forth net "nominal or actual" damages to defendants in the amount of $2.00. Yet another document, signed by the three arbitrators and indicating a date of 18 March 2004 was entitled "Arbitration Award." This document contained the arbitration panel's request that the trial court "confirm this award and adopt the same as the judgment of the Court." Recapitulating the reasoning contained in the document of 4 March, the "arbitration award" awarded plaintiff $29,101.96 and noted that the award "is over and above all other issues and nominal damages which have been considered or awarded by the panel." The "arbitration award" stated nothing with respect to the "arbitrator's decision" that specified the panel's findings with respect to each wrongdoing by the parties and that awarded damages of $1.00 for each wrongdoing the panel found to have occurred. In addition, the "arbitrator's award" contained additional language not in the 4 March 2004 document as follows:

[T]his award shall draw interest at the legal rate as allowed by North Carolina law, and the judgment and award as confirmed by the Court should order the sale of the property owned by the Defendants under the provisions of Chapter 44A of the North Carolina General Statutes in order to satisfy Plaintiff's lien and this award.

On 12 March 2004, defendants filed a motion for treble damages and an of award attorney fees based on the arbitral determination of the unfair trade practice. Defendants argued that the difference between the amount claimed by plaintiff to be owed under the contract (approximately $96,000.00) and the arbitral award to plaintiff ($67,330.00) constituted damages awarded by the arbitral panel to defendants on their counterclaims. At the hearing, plaintiff asked the trial court to confirm the "arbitration award" document. With respect to the three documents produced by the arbitration panel, the trial court disregarded the "arbitrator's decision" and gave it no effect. The trial court further noted that the "arbitration award" was "not part of the order that is in the file" and that it was "not part of their order."

In an order entered 5 April 2004, the trial court confirmed the monetary award of $67,330.00, which accorded with both the 4 March 2004 document and the monetary award in the "arbitration award." The trial court denied defendants' motion to treble damages and award attorney fees. From that order, defendants appeal, asserting the trial court erred in (1) compelling arbitration due to the lack of an opportunity to present evidence concerning the invalidity of the arbitration clause and (2) confirming the arbitration award. Plaintiff appeals the trial court's failure to provide that the real property should be sold under Chapter 44A of the North Carolina General Statutes to enforce plaintiff's lien as set forth in the "arbitration award."

I. Order Compelling Arbitration

In their first assignment of error, defendants assert the trial court erred in compelling arbitration because they were deprived of an opportunity to present evidence of the invalidity of the arbitration clause. Specifically, defendants argue the contract was induced by fraud concerning the disparity between the original bid on the renovation project and the final total cost of the project. At the hearing, defendants argued they were entitled to a jury trial on the issue of whether the arbitration clause was enforceable on the grounds that the contract was induced by fraud. On appeal, defendants have abandoned that argument, and we note that such argument is supported by neither statutory nor case law. See N.C. Gen.Stat. § 1-567.3 (2001) (emphasis added) (providing that "if the opposing party denies the existence of the agreement to arbitrate, the court shall proceed summarily to the determination of the issue . . .")¹; Barnhouse v. American Express Fin. Advisors, Inc., 151 N.C.App. 507, 508, 566 S.E.2d 130, 131-32 (2002) (observing that "the court may . . . properly resolve preliminary issues surrounding the agreement, such as whether or not the agreement was induced by fraud").

Instead, defendants argue the trial court deprived them of the opportunity to present evidence of the invalidity of the arbitration clause. However, the trial court expressly noted in its order compelling arbitration that it reviewed and considered "evidence and documents presented by the parties, the pleadings, briefs, and affidavits [as well as] the arguments and contentions of counsel[.]" After considering such evidence, the trial court entered an order compelling arbitration supported by findings of fact and conclusions of law, none of which defendants have assigned as error on appeal. Moreover, defendants offer no suggestion as to what specific evidence they were precluded from offering at trial in their brief to this Court and make no argument why the evidence before ...