Holly & Smith Architects, Inc. v. St. Helena Congregate Facility, No. 2003 CA 0481 (La. App. 2/23/2004)

• Decision Date: 23 February 2004
• Docket Number: No. 2003 CA 0481.,2003 CA 0481.
• Citation: 872 So.2d 1147
• Parties: HOLLY & SMITH ARCHITECTS, INC. v. ST. HELENA CONGREGATE FACILITY AND ST. HELENA PARISH HOSPITAL
• Court: Court of Appeal of Louisiana — District of US

Page 1

HOLLY & SMITH ARCHITECTS, INC. v. ST. HELENA CONGREGATE FACILITY AND ST. HELENA PARISH HOSPITAL

No. 2003 CA 0481.

Court of Appeal of Louisiana, First Circuit.

Judgment Rendered: February 23, 2004.

APPEALED FROM THE TWENTY-FIRST JUDICIAL DISTRICT COURT IN AND FOR THE PARISH OF ST. HELENA, STATE OF LOUISIANA SUIT NUMBER 15533, HONORABLE WAYNE RAY CHUTZ, JUDGE.

RON S. MACALUSO Hammond, LA, Counsel for Plaintiff/Appellee Holly & Smith Architects, Inc.

CRAIG L. KASTER Zachary, LA, Counsel for Defendant/Appellant St. Helena Parish Hospital.

Before: FOIL, FITZSIMMONS, and GAIDRY, JJ.

FITZSIMMONS, J.

Holly and Smith Architects, Inc. (Architects) filed a petition for (1) confirmation of an arbitration award against defendant, St. Helena Congregate Facility, Inc. (Congregate), and (2) declaratory judgment against defendant, St. Helena Parish Hospital (Hospital). In the action for declaratory judgment, Architects alleged that Congregate was the alter ego of the Hospital, and thus, the Hospital was liable for the arbitration award of $38,000.00 to Architects. Over the course of the proceedings, the Hospital filed several peremptory exceptions raising the objection of res judicata to the issues raised by Architects. The Hospital asserted that the claims between Architects and the Hospital, including the alter ego claim, had been settled in arbitration. The trial court found that the Hospital was not a party to the arbitration and denied the exceptions of res judicata.

Once the arbitration award was confirmed, the issue of alter ego proceeded to trial. After a trial on the merits, the trial court found that Congregate was incorporated solely to benefit the Hospital and to obtain

financing for the construction of the congregate facility. All meetings were conducted at the [Hospital] Board's office and were between the plaintiff and the [Hospital] Board or its chairman, Mr. Lombardo. There was never any intention that the corporation would be anything but . . . an extension of the Board. "The legal fiction of a distinct corporate entity may be disregarded when a corporation is so organized and controlled as to make it a mere instrumentality or adjunct of another corporation." Grayson v. R.B. Ammon and Associates, Inc., 99-2597 (La.App. 1 Cir. 11/3/00).

Having found those particular facts, the trial court authorized a "piercing of the corporate veil," which allowed liability to be imposed on the Hospital. By judgment dated May 16, 2002, the trial court held Congregate and the Hospital liable, and ordered them to pay Architects $38,000.00, plus cost, expenses, and interest. The Hospital appealed. We affirm.

FACTS

After years of negotiations with the Hospital, Architects entered into a written contract with Congregate to develop and build 24 congregate living units for the elderly on land owned by, and adjacent to, the Hospital. In the contract, the two parties, Architects and Congregate, agreed to an arbitration clause. The clause provided, in pertinent part, as follows:

7.1 Claims, disputes or other matters in question between the parties to this Agreement arising out of or relating to this Agreement or breach thereof shall be subject to and decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect unless the parties mutually agree otherwise.

7.3 No arbitration arising out of or relating to this Agreement shall include, by consolidation, joinder or in any other manner, an additional person or entity not a party to this Agreement, except by written consent containing a specific reference to this Agreement signed by the Owner, Architect, and any other person or entity sought to be joined. Consent to arbitration involving an additional person or entity shall not constitute consent to arbitration of any claim, dispute or other matter in question not described in the written consent or with a person or entity not named or described therein. The foregoing agreement to arbitrate and other agreements to arbitrate with an additional person or entity duly consented to by the parties to this Agreement shall be specifically enforceable in accordance with applicable law in a court having jurisdiction thereof. (Emphasis added.)

When the contract between Architects and Congregate was terminated by the Hospital, Architects filed a demand for arbitration against Congregate and the Hospital. The arbitrator found in favor of Architects and against Congregate. The Hospital asked the arbitrator for a clarification of its position in the award. By a document dated April 2, 1996, the arbitrator found that the reviewed contract between the parties, Congregate and Architects, assigned no obligations to the Hospital. The suit by Architects ensued.

In this appeal, the Hospital essentially argues that the trial court erred in its denial of the exception of res judicata, the admittance of hearsay documents, and the finding that Congregate was the alter ego of the Hospital. The Hospital asserts that the record contains no evidence that Congregate was formed solely for the benefit of the Hospital.

RES JUDICATA

The Civil Code provisions governing arbitration are contained in articles 3099, et seq. The addenda to those codal articles are found in the Civil Code ancillaries, La. R.S. 9:4201, et seq. In addition, reference should be made to the doctrine of res judicata as enunciated in La.C.C.P. art. 425 and La.R.S. 13:4231-32. The pertinent legal precepts applicable to this particular case are found in the following:

C.C. Art. 3099. Submission to arbitrate

A submission is a covenant by which persons who have a lawsuit or difference with one another, name arbitrators to decide the matter and bind themselves reciprocally to perform what shall be arbitrated.

C.C. Art. 3100. Writing Necessary

A submission must be reduced to writing. (Emphasis added.)

C.C. Art. 3102. Scope of submission

Parties may submit either all their differences, or only some of them in particular; and likewise they may submit to arbitration a law suit already instituted or only in contemplation, and generally every thing which they are concerned in, or which they may dispose of. (Emphasis added.)

C.C. Art. 3104. Power of arbitrators

The power of arbitrators is limited to what is explained in the submission.

C.C. Art. 3121. Arbitrators acting in excess of power, effect

Arbitrators can not exceed the power which is given to them; and if they exceed it, their award is null for so much.

C.C. Art. 3122. Scope of arbitrators' authority

The authority of arbitrators [extends] only to the things contained in the submission, unless it has been stated that they shall have power to decide all disputes which may arise between the parties in the course of the arbitration.

La. R.S. 9:4201. Validity of arbitration agreements

A provision in any written contract to settle by arbitration a controversy thereafter arising out of the contract, or out of the refusal to perform the whole or any part thereof, or an agreement in writing between two or more persons to submit to arbitration any controversy existing between them at the time of the agreement to submit, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. (Emphasis added.)

La. C.C.P. Art. 425. Preclusion by judgment

A. A party shall assert all causes of action arising out of the transaction or occurrence that is the subject matter of the litigation. (Emphasis added.)

La. R.S. 13:4231. Res judicata

Except as otherwise provided by law, a valid and final judgment is conclusive between the same parties, except on appeal or other direct review, to the following extent:

(1) If the judgment is in favor of the plaintiff, all causes of action existing at the time of final judgment arising out of the transaction or occurrence that is the subject matter of the litigation are extinguished and merged in the judgment. (Emphasis added.)

The same general rule applies when the judgment is in favor of the defendant. Whether a cause of action arises out of the same transaction or occurrence is determined by an examination of the facts underlying the event in dispute. See

Leon v. Moore,

98-1792, p. 5 (La.App. 1 Cir. 4/1/99), 731 So.2d 502, 505, writ denied, 99-1294 (La. 7/2/99), 747 So.2d 20 (same factual transaction underlying motion to exclude and petition for damages).

Initially, we note that the issue of alter ego did not arise under the development contract between Congregate and Architects. Rather, that issue arose via a claim concerning the liability of a third party, the Hospital. Secondly, based on the clear wording of the arbitration clause in the contract between Congregate and Architects, the arbitrator's clarification of the determinations made, and the applicable law, we find that the Hospital was not a named party to the arbitration proceeding. In addition, the issue of alter ego was not properly submitted to arbitration or ruled on by the arbitrator. Our review of the record found no evidence of a written submission, by Architects, Congregate, and the Hospital, of a new party or the issue of alter ego. The arbitrator ruled based only on the contractual obligations assumed by Congregate and Architects, and found that the Hospital owed no obligations under the written contract. Contrary to the Hospital's assertions, the clarification cannot be reasonably interpreted as a consideration and rejection of the alter ego claim that arose outside of the contract provisions. Even if the arbitrator had chosen to decide the issue, the decision on an un-submitted issue would be "null." La. C.C. art. 3121; see La. C.C. arts. 3104; 3122. As with the written contract between Architects and Congregate, the civil code and ancillaries would also require a written submission for the addition of either a non-contracting party or a new issue. La. C.C. art. 3099, 3100...