G & G Builders, Inc. v. Lawson

• Decision Date: 14 November 2016
• Docket Number: No. 15-0920,15-0920
• Citation: 238 W.Va. 280,794 S.E.2d 1
• Court: West Virginia Supreme Court
• Parties: G & G Builders, Inc., Plaintiff Below, Petitioner v. Randie Gail Lawson and Deanna Dawn Lawson, Defendants Below, Respondents

238 W.Va. 280

794 S.E.2d 1

G & G Builders, Inc., Plaintiff Below, Petitioner

v.Randie Gail Lawson and Deanna Dawn Lawson, Defendants Below, Respondents

No. 15-0920

Supreme Court of Appeals of West Virginia.

Submitted: November 1, 2016

Filed: November 14, 2016

Robert H. Sweeney, Jr., Esq., Stephen F. Soltis, Esq., Jenkins Fenstermaker, PLLC, Huntington, West Virginia, Mary K. Prim, Esq., Mary K. Prim, PLLC, Scott Depot, West Virginia, Counsel for Petitioner.

Marvin W. Masters, Esq., Kimberly K. Parmer, Esq., The Masters Law Firm LC, Charleston, West Virginia, Counsel for Respondents.

LOUGHRY, Justice:

The petitioner, G & G Builders, Inc., appeals the circuit court's order entered on August 20, 2015, through which it denied the petitioner's motion to dismiss the counterclaim filed by the respondents, Randie Gail Lawson and his wife, Deanna Dawn Lawson, and to compel arbitration in this litigation arising out of the construction of the Lawsons' home. The petitioner contends the circuit court erred when it found the arbitration provisions were not binding upon Mr. Lawson because they were set forth in a document that was never provided to Mr. Lawson, nor were they binding upon Mrs. Lawson, who was a non-signatory to the construction agreement. Upon our careful review of the parties' briefs, the arguments of counsel, the appendix record submitted, and the applicable law, we affirm the circuit court's ruling and remand this action to the circuit court for further proceedings consistent with this opinion.

I. Facts and Procedural Background

On November 18, 2010, the petitioner's representative visited the construction site of the respondents' home and presented the respondent, Randie Lawson, with a twelve-page American Institute of Architects (AIA) Document A111-1997 form agreement ("Agreement").¹ Both the petitioner's representative and Mr. Lawson signed the Agreement, which provided for the petitioner to complete the construction of the Lawsons' home begun by another builder.² Although Mr. and Mrs. Lawson were identified collectively on the Agreement as the "Owner," only Mr. Lawson signed the Agreement. Mr. Lawson avers that prior to the execution of the Agreement, his only discussions with the petitioner involved price—that arbitration was never mentioned.

Of particular import in this matter is the following statement in the right-hand margin of the first page of the Agreement: "AlA Document A20l-1997, General Conditions of the Contract for Construction, is adopted in this document by reference." While the Agreement contains references to the "AlA Document A20l-1997" ("General Conditions"), none of those references are to the arbitration provision in the General Conditions.³ Although three exhibits were attached to the Agreement,⁴ the General Conditions were neither attached nor ever provided to the Lawsons.⁵

On March 20, 2014, the petitioner instituted a civil action in the circuit court against the respondents asserting it was owed $303,686.31 under the Agreement.⁶ The petitioner alleged that Mr. Lawson breached the construction contract and that the Lawsons had been unjustly enriched. The petitioner also sought damages for payroll, overhead and administrative costs, lost profits, lost interest on amounts due, damage to the petitioner's business reputation, and annoyance and inconvenience. In addition to seeking a monetary judgment, the petitioner sought to enforce its mechanic's lien⁷ through a court-ordered sale of the respondents' home. Arbitration is not mentioned in the petitioner's complaint, nor did the petitioner simultaneously file a motion to stay the action pending arbitration.

The respondents filed their answer in the circuit court on June 13, 2014, denying the petitioner's entitlement to a judgment against them. They also asserted a counterclaim against the petitioner for breach of contract, including allegations of defects in the construction of the home and overcharges under the Agreement.

On July 2, 2014, the petitioner filed a motion to dismiss the respondents' counterclaim and to compel arbitration.⁸ The respondents opposed the motion on the basis that Mrs. Lawson, as a non-signatory to the Agreement, could not be compelled to arbitration. The respondents also asserted that the arbitration provision was not properly incorporated by reference into the parties' Agreement because Mr. Lawson was never provided a copy of the General Conditions nor advised of the requirement to arbitrate.

On March 20, 2015, the circuit court held a hearing on the petitioner's motion to dismiss and compel arbitration of the respondents' counterclaim. Through its order entered August 20, 2015, the circuit court denied the motion, finding "no agreement to arbitrate ever existed. Arbitration is a matter of contract and a party cannot be compelled to submit to arbitration unless it is clear he agreed to do so." In addressing the petitioner's argument that the General Conditions were properly incorporated by reference into the parties' Agreement, the circuit court stated that under State ex rel. U – Haul Co. of West Virginia v. Zakaib , 232 W.Va. 432, 752 S.E.2d 586 (2013), in order to uphold the validity of terms in a document incorporated by reference, it must be certain that the parties to the agreement had knowledge of the document and its terms. The circuit court found that the thirty-eight page General Conditions were not provided to Mr. Lawson when he signed the twelve-page Agreement, thus, "there can in no way be said to be a meeting of the minds on the inclusion of an arbitration provision because Mr. Lawson did not sign—or even see —the Conditions, which is the only document containing the arbitration provision." Commenting further, the circuit court stated:

[N]owhere in the Agreement is it suggested that there are additional, material, substantive contract terms buried in the Conditions. The word "arbitration" does not appear anywhere in the Agreement—which is the only document Mr. Lawson ever saw. The Court also ... note[s] ... that the AIA form documents were updated in 2007, three years prior to the parties' contract. One of the changes made was the addition of a term in the agreement not only making clear that alternative dispute resolution was a term of the agreement, but requiring the owner to check a box if intending to agree to arbitration. Clearly, this is not the first time it has been suggested that the arbitration provision in the version of the form documents used in this case is less than conspicuous.

The circuit court found there was "no basis upon which to conclude that Mr. Lawson had the requisite knowledge of the contents of the [General] Conditions to establish his consent to be bound by the arbitration provision hidden within." This appeal followed.

II. Standard of Review

The petitioner challenges the circuit court's denial of its motion to dismiss the respondents' counterclaim and to compel arbitration. As we held in Credit Acceptance Corporation v. Front , 231 W.Va. 518, 745 S.E.2d 556 (2013), "[a]n order denying a motion to compel arbitration is an interlocutory ruling which is subject to immediate appeal under the collateral order doctrine." 231 W.Va. at 519, 745 S.E.2d at 557, syl. pt. 1. Further,

[w]hen an appeal from an order denying a motion dismiss is properly before this Court, our review is de novo . See, e.g. , Syl. pt. 4, Ewing v. [Board of Educ. ], 202 W.Va. 228, 503 S.E.2d 541 [ (1998) ] ("When a party, as part of an appeal from a final judgment, assigns as error a circuit court's denial of a motion to dismiss, the circuit court's disposition of the motion to dismiss will be reviewed de novo .").

Credit Acceptance , 231 W.Va. at 525, 745 S.E.2d at 563. Our review is also plenary to the extent our analysis requires us to examine the circuit court's interpretation of a contract. Zimmerer v. Romano , 223 W.Va. 769, 777, 679 S.E.2d 601, 609 (2009) ("We apply a de novo standard of review to [a] circuit court's interpretation of [a] contract.") (citation omitted). With these principles in mind, we proceed to determine whether the circuit court erred in refusing to compel arbitration in this matter.

III. Discussion

In seeking a reversal of the circuit court's order refusing to compel arbitration of the respondents' counterclaim, the petitioner asserts that the parties' Agreement clearly referenced the intent to incorporate the General Conditions, which were described in such a way that Mr. Lawson could easily ascertain the document's identity beyond doubt. The petitioner maintains that enforcement of the arbitration provision will not result in surprise as a reasonable party, who complies with the duty to read, would have obtained all the documents comprising the contract before signing.⁹

Conversely, the respondents maintain the circuit court correctly refused to compel arbitration.

They posit that the language in the Agreement does not clearly indicate an intent to incorporate the entirety of the General Conditions. Relying upon the requirements for incorporation by reference, as adopted by this Court in State ex rel. U – Haul Co. of West Virginia v. Zakaib , 232 W.Va. 432, 752 S.E.2d 586, the respondents argue there is no basis upon which to conclude that Mr. Lawson had the requisite knowledge of the contents of the General Conditions to establish his consent to be bound by its terms. They contend the issue is not whether a party has a duty to read the contract he has signed, but whether a separate document was properly incorporated into the contract in the first instance.

We begin our examination of this matter by acknowledging that "[b]oth federal and state laws reflect a strong public policy recognizing arbitration as an expeditious and relatively inexpensive forum for dispute resolution." Parsons v. Halliburton Energy Services, Inc. , 237 W.Va. 138, ––––, 785 S.E.2d 844, 852 (2016). Importantly, however, we are also cognizant that a party cannot be compelled to arbitrate a claim or dispute...