Liberty Builders, Inc. v. Horton, 3039.

Decision Date23 August 1999
Docket NumberNo. 3039.,3039.
CourtSouth Carolina Court of Appeals
PartiesLIBERTY BUILDERS, INC., Appellant, v. Barbara C. HORTON, as Personal Representative of the Estate of William Gregory Horton, and Andrew G. Horton, Respondents. Liberty Builders, Inc., Third-Party Plaintiff, v. Triple E. Sales and Surplus, Inc., d/b/a Jefferson Lumber Company, and USCO, Incorporated, Third-Party Defendants.

Lex A. Rogerson, Jr., of Lexington, for appellant.

James I. Redfearn, of Chesterfield, for respondents.

HEARN, Judge:

This is an appeal from an order denying a motion to stay this action pending arbitration. We affirm.

FACTS

On July 27, 1993, Liberty Builders, Inc. contracted to build a house for William Gregory Horton and Andrew G. Horton. The construction contract provided for arbitration as follows: "All disputes hereunder shall be resolved by binding arbitration in accordance with rules of the American Arbitration Association."1 Disputes arose near the end of construction regarding certain change orders. When the Hortons refused to pay for these changes, Liberty filed for a mechanics' lien. Liberty then filed this action to foreclose on that mechanics' lien on January 31, 1995.

Liberty amended its complaint on November 2, 1995. The Hortons answered and counterclaimed on March 19, 1996. Because the Hortons' counterclaim alleged Liberty used defective materials in construction, Liberty brought a third-party suit against suppliers on March 29, 1996. The third-party suit was dismissed pursuant to a consensual summary judgment, and the complaint was again amended in late 1997 to include a cause of action for breach of contract.

The parties pursued this litigation for two and one-half years before Liberty moved, on June 5, 1997, to stay the circuit court action in favor of arbitration. In an order filed February 23, 1998, the circuit judge concluded Liberty's delay prejudiced the Hortons and Liberty therefore waived its right to arbitrate. Liberty appeals.2

DISCUSSION

Liberty contends the circuit judge erred by finding Liberty waived its right to arbitrate arguing the parties contractually stipulated that participation in litigation would not be deemed a waiver. We disagree and hold the circuit judge correctly ruled that Liberty waived its right to arbitrate.

Standard of Review

While we found no South Carolina case specifically addressing the standard of review applicable to an order denying a motion to stay an action pending arbitration, we believe the circuit judge's factual findings should be given some deference. This conclusion accords with the standard of review applied in other pretrial motions. See, e.g., City of Chester v. Addison, 277 S.C. 179, 182, 284 S.E.2d 579, 580 (1981)

(reviewing an appeal from a pretrial motion attacking a city ordinance's constitutionality and stating: "As a general rule, appellate courts will be bound by [the factual findings of a lower court made in response to motions preliminary to trial] where there has been conflicting evidence or where the findings are supported by evidence and not clearly wrong or controlled by error of law."), cited in Askins v. Firedoor Corp. of Florida, 281 S.C. 611, 615, 316 S.E.2d 713, 715 (Ct.App. 1984) (reviewing a trial court's personal jurisdiction assessment and noting that "as a general rule, appellate courts will be bound by the factual findings of the trial court made in response to motions preliminary to trial where there has been conflicting evidence").

Other jurisdictions have specifically addressed the issue of what standard of review to apply to a trial judge's findings on motions to stay litigation and compel arbitration, arriving at different, but nonetheless deferential, standards. The federal courts decide motions to stay under the Federal Arbitration Act. 9 U.S.C.A. § 3 (1999). "The federal circuits are united in holding that the ultimate determination of waiver is reviewed de novo, as a matter of law," but the factual findings of the lower court are accorded some deference and reviewed for substantial evidence, a standard analogous to the clear error test. J.L. Steele v. Lundgren, 85 Wash.App. 845, 935 P.2d 671, 674 (1997) (emphasis added); see also Baltimore & Ohio Chicago Terminal R. Co. v. Wisconsin Cen. Ltd., 154 F.3d 404, 408 (7th Cir.1998) (noting an appellate court may only reverse a district court's ruling on a demand for arbitration when the district court acts unreasonably), cert. denied, ___ U.S.___, 119 S.Ct. 1254, 143 L.Ed.2d 351 (1999); Price v. Drexel Burnham Lambert, Inc., 791 F.2d 1156, 1159 (5th Cir.1986); In re Liquidation of Inter-American Ins. Co. of Ill., 303 Ill.App.3d 95, 236 Ill.Dec. 490, 707 N.E.2d 617, 620 (1999) ("Under the [Federal Arbitration] Act, the decision of whether a party has waived arbitration is reviewed under the clear error standard." (citing St. Mary's Med. Ctr. v. Disco Alum. Prods. Co., 969 F.2d 585, 588 (7th Cir.1992))).

The state courts have generally followed the federal courts.3 See, e.g., D.M. Ward Constr. Co. v. Electric Corp. of Kansas City, 15 Kan.App.2d 114, 803 P.2d 593, 597 (1990)

(citing federal cases to support the standard of review used in Kansas state courts); J.L. Steele, 935 P.2d at 674 n. 5 (citing federal cases to support the standard of review used in Washington state courts). The most widely accepted standard of review for decisions on motions to stay litigation and compel arbitration is best stated as follows: "`[A] finding that a party has waived its right to arbitration is a legal conclusion subject to our plenary review, but ... the findings upon which the conclusion is based are predicate questions of fact, which may not be overturned unless clearly erroneous.'" D.M. Ward Constr.,

803 P.2d at 597 (quoting Price, 791 F.2d at 1159).4

Some jurisdictions employ different language in defining the applicable standard of review yet grant similar deference to a lower court's findings. See Engalla v. Permanente Med. Group, Inc., 15 Cal.4th 951, 64 Cal.Rptr.2d 843, 938 P.2d 903, 923 (1997) ("Whether there has been a waiver of a right to arbitrate is ordinarily a question of fact, and a finding of waiver, if supported by sufficient evidence, is binding on an appellate court." (internal citations omitted)); United Nuclear Corp. v. General Atomic Co., 93 N.M. 105, 597 P.2d 290, 300 (1979) (holding a factual determination that a party intentionally waived its right to arbitrate should be affirmed if supported by substantial evidence); Dallas Cardiology Assocs. v. Mallick, 978 S.W.2d 209, 212 (Tex.App.1998) ("[W]e review the trial court's decision under a `no evidence' standard.").

Still other jurisdictions make no explicit distinction between the ultimate legal question of waiver and the underlying factual findings of prejudice. See, e.g., Shultz v. Lujan, 86 Hawai'i 137, 948 P.2d 558, 560 (1997)

("A lower court's ruling on a motion to compel arbitration is reviewed de novo."); Wesley Retirement Servs., Inc. v. Hansen Lind Meyer, Inc., 594 N.W.2d 22, 29 (Iowa 1999) (finding the state statutory scheme mandatory with no district court discretion and thus only reviewing "for correction of errors of law").5

A final group of jurisdictions apply the strictest standard of review and require the reviewing court to accept the trial court's findings and decision unless it amounts to an abuse of discretion.6See Companion Life Ins. Co. v. Whitesell Mfg., Inc., 670 So.2d 897, 899 (Ala.1995)

(applying an abuse of discretion standard to review the trial court's order denying Companion's motion to compel arbitration); Brooks v. Cigna Prop. & Cos. Cos., 299 Ill.App.3d 68, 233 Ill.Dec. 344, 700 N.E.2d 1052, 1054 (1998) ("The standard is whether the trial court abused its discretion in granting or denying the motion to compel."); Kostakos v. KSN Joint Venture No. 1, 142 Ill.App.3d 533, 96 Ill.Dec. 862, 491 N.E.2d 1322, 1325 (1986).7

We now join the majority of jurisdictions granting deference to a circuit judge's factual findings made when deciding a motion to stay an action pending arbitration. We acknowledge that determining whether a party waived its right to arbitrate is a legal conclusion subject to de novo review; nevertheless, the circuit judge's factual findings underlying that conclusion will not be overruled if there is any evidence reasonably supporting them.8

Law/Analysis

It is generally held that the right to enforce an arbitration clause may be waived. Hyload, Inc. v. Pre-Engineered Prods., Inc., 308 S.C. 277, 280, 417 S.E.2d 622, 624 (Ct.App.1992) ("A party may waive the right to arbitrate given by a contract."); Cencula v. Keller, 152 Ill.App.3d 754, 105 Ill.Dec. 712, 504 N.E.2d 997, 999 (1987); Home Gas Corp. of Mass., Inc. v. Walter's of Hadley, Inc., 403 Mass. 772, 532 N.E.2d 681, 683 (1989). But see Goldstein, 717 A.2d at 1066 ("If a valid arbitration agreement exists between parties and appellant[`]s claim is within the standard of the agreement, the controversy must be submitted to arbitration." (citations omitted)). "Waiver is the voluntary and intentional relinquishment of a known right." Provident Life & Accident Ins. Co. v. Driver, 317 S.C. 471, 478, 451 S.E.2d 924, 929 (Ct.App.1994).

In order to establish waiver, a party must show prejudice through an undue burden caused by delay in demanding arbitration. Sentry Eng'g & Constr., Inc. v. Mariner's Cay Dev. Corp., 287 S.C. 346, 351, 338 S.E.2d 631, 634 (1985). "There is no set rule as to what constitutes a waiver of the right to arbitrate; the question depends on the facts of each case." Hyload, Inc., 308 S.C. at 280, 417 S.E.2d at 624.

The circuit judge found Liberty's delay in asserting its right to arbitrate prejudiced the Hortons.9 We agree.

The Hortons were forced to answer Liberty's complaint and respond to discovery in the circuit court, most of which would not have been necessary or available if Liberty...

To continue reading

Request your trial
30 cases
  • Dean v. Heritage Healthcare of Ridgeway, LLC
    • United States
    • United States State Supreme Court of South Carolina
    • June 18, 2014
    ...Rhodes v. Benson Chrysler–Plymouth, Inc., 374 S.C. 122, 125, 647 S.E.2d 249, 251 (Ct.App.2007) (citing Liberty Builders, Inc. v. Horton, 336 S.C. 658, 665, 521 S.E.2d 749, 753 (Ct.App.1999)). However, the FAA requires courts to resolve “any doubts concerning the scope of arbitrable issues .......
  • Wilson v. Willis
    • United States
    • Court of Appeals of South Carolina
    • March 2, 2016
    ...what constitutes a waiver of the right to arbitrate; the question depends on the facts of each case.” Liberty Builders, Inc. v. Horton, 336 S.C. 658, 665, 521 S.E.2d 749, 753 (Ct.App.1999) (quoting Hyload, Inc. v. Pre–Engineered Prods., Inc., 308 S.C. 277, 280, 417 S.E.2d 622, 624 (Ct.App.1......
  • Thornton v. TRIDENT MEDICAL CENTER, 3706.
    • United States
    • Court of Appeals of South Carolina
    • December 8, 2003
    ...482 (Ct.App. 2003); Evans v. Accent Manufactured Homes, Inc., 352 S.C. 544, 575 S.E.2d 74 (Ct.App.2003); Liberty Builders, Inc. v. Horton, 336 S.C. 658, 521 S.E.2d 749 (Ct.App.1999). The question of the arbitrability of a claim is an issue for judicial determination, unless the parties prov......
  • Rich v. Walsh, 3699.
    • United States
    • Court of Appeals of South Carolina
    • November 24, 2003
    ...of a motion to compel arbitration, based on a finding of waiver, is reviewed on appeal de novo. Liberty Builders, Inc. v. Horton, 336 S.C. 658, 664-65, 521 S.E.2d 749, 753 (Ct.App.1999). The appellate court will, however, grant deference to the trial court's factual findings underlying its ......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT