New Hope Baptist Church v. Paragon

• Decision Date: 27 August 2008
• Docket Number: No. 4433.,4433.
• Citation: 379 S.C. 620,667 S.E.2d 1
• Parties: NEW HOPE MISSIONARY BAPTIST CHURCH, Respondent, v. PARAGON BUILDERS, and Kenneth W. Rose, Defendants, of whom Paragon Builders is the Appellant.
• Court: South Carolina Court of Appeals

667 S.E.2d 1

379 S.C. 620

NEW HOPE MISSIONARY BAPTIST CHURCH, Respondent, v. PARAGON BUILDERS, and Kenneth W. Rose, Defendants of whom Paragon Builders is the Appellant.

No. 4433.

Court of Appeals of South Carolina.

Submitted May 1, 2008.

Decided August 27, 2008.

James Mixon Griffin, of Columbia, for Appellant.

Philip E. Wright, of Lancaster, for Respondent.

THOMAS, J.

Paragon Builders appeals the trial court's denial of its motion to compel arbitration or dismiss the complaint of New Hope Missionary Baptist Church. We reverse.¹

FACTS

Paragon Builders, L.L.C. of Orangeburg, South Carolina, signed a contract with New Hope Missionary Baptist Church (Church) on or between September 30 and October 3, 2004. The two-page Contract was entitled a "Construction Management Agreement" wherein Paragon Builders avowed to help bring the construction of a new church facility "online" by working as "the chief construction advisor." Under the Contract, Paragon Builders pledged to work with the Church's architect in North Carolina, appointed church leaders, state and local building inspectors, local city and county governments, utilities, bankers and others associated with the project.

Article 2 of the Contract, entitled "Time of Completion," contained an arbitration clause stating, "[a]ll disputes hereunder shall be resolved by binding arbitration in accordance with the rules of the American Arbitration Association." The Contract also provided that the Church would pay Paragon Builders twenty-five thousand dollars ($25,000) but that "if for any reason this project is not constructed by Paragon Builders all money will remain with the contractor" and the Church "will not receive any funds back." Payment of the entire $25,000 amount was due at the signing of the Contract.

The Contract was signed by Kenny W. Rose and Emoray R. Waiters, allegedly on behalf of the Church.² At some point, a payment of twenty-five thousand dollars was made from Church funds to Paragon Builders. Thereafter, the Church filed a declaratory judgment action asking the court to determine the existence, validity, and enforceability of the Contract.

The Church's complaint raised numerous issues regarding the validity of the Contract, including the absence of any meeting of the minds, Paragon Builders' lack of consideration, and the ambiguity of the Contract with regard to Paragon Builders' obligations. The Church asserted the $25,000 payment and ensuing deposit were not authorized by the Church but was "the misguided action of the church financial secretary acting ex officio." The complaint prayed for a refund of the $25,000 payment.

The complaint contended neither Rose³ nor Waiters was a "trustee[] of the church nor were they authorized by the church to enter into any such contract." Waiters' signature was also claimed to be a forgery. The Church contended the signatures on a blank page attached to the Contract were "simply a list of people who attended a meeting regarding the contract" and did not constitute a signature page which was part of the Contract. The Church asserted the Contract "was not approved by any vote of the church or any authorized committee or organization of the church" and as such does not bind the Church.

Paragon Builders timely answered denying the Church was entitled to a declaratory judgment or a refund. The Answer also pled an affirmative defense pursuant to Rule 12(b)(6), SCRCP, that the Church failed to state a claim upon which relief can be granted, and that the Church's claims were subject to arbitration under the Contract.

On July 3, 2006, Paragon Builders filed a Motion to Compel Arbitration and Dismiss or Stay the Complaint. The motion was heard on October 9, 2006, and subsequently denied. The trial court held, "[u]nder the Federal Arbitration Act and S.C.Code Ann. § 15-48-10, before arbitration may be compelled, there must be a determination that there was an agreement between the parties," and this was the very issue the Church contested. The trial court further held, "until there is a determination by the Court as to whether or not the parties had an agreement, arbitration cannot be compelled." Paragon Builders now appeals.

STANDARD OF REVIEW

Unless the parties otherwise provide, the question of the arbitrability of a claim is an issue for judicial determination. Zabinski v. Bright Acres Assocs., 346 S.C. 580, 596, 553 S.E.2d 110, 118 (2001). Appeal from the denial of a motion to compel arbitration is subject to de novo review. Chassereau v. Global Sun Pools, Inc., 373 S.C. 168, 171, 644 S.E.2d 718, 720 (2007). Nevertheless, a circuit court's factual findings will not be reversed on appeal if any evidence reasonably supports the findings. Thornton v. Trident Med. Ctr., L.L.C., 357 S.C. 91, 94, 592 S.E.2d 50, 51 (Ct.App.2003).

LAW/ANALYSIS

Paragon Builders claims the trial court erred in denying its Motion to Compel Arbitration brought pursuant to Section 15-48-20(a) of the South Carolina Code (2005). Specifically, Paragon Builders asserts the Contract's arbitration clause requires disputes arising out of the Contract be resolved through arbitration. Pursuant to Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967), and The Housing Authority of City of Columbia v. Cornerstone Housing, L.L.C., 356 S.C. 328, 588 S.E.2d 617 (Ct.App.2003), we find the trial court erred in denying Paragon Builders' Motion to Compel Arbitration since the Church failed to specifically challenge the arbitration agreement.

Section 15-48-10(a) of the South Carolina Code (2005) states, "[a] written agreement to submit any existing controversy to arbitration or a provision in a written contract to submit to arbitration any controversy thereafter arising between the parties is valid, enforceable and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract." The Legislature also provided that:

On application of a party showing an [arbitration] agreement described in § 15-48-10, and the opposing party's refusal to arbitrate, the court shall order the parties to proceed with arbitration, but if the opposing party denies the existence of the agreement to arbitrate, the court shall proceed summarily to the determination of the issue so raised and shall order arbitration if found for the moving party, otherwise, the application shall be denied.

S.C.Code Ann. § 15-48-20(a) (2005). An order denying a motion to compel arbitration⁴ made under Section 15-48-20 is immediately appealable. S.C.Code Ann. § 15-48-200(a)(1) (2005); Towles v. United Health-Care Corp., 338 S.C. 29, 35, 524 S.E.2d 839, 842-43 (Ct.App.1999).

As a preliminary note, we find the trial court properly determined the Federal Arbitration Act ("FAA") applies to the arbitration agreement in this matter since the parties did not contract to the contrary and the arbitration agreement pertains to a transaction involving interstate commerce due to the nature of the construction project, Paragon Builders' position as chief construction advisor, and Paragon Builders' affidavit swearing the project will involve businesses and supplies from outside South Carolina. Munoz v. Green Tree Fin. Corp., 343 S.C. 531, 538-39, 542 S.E.2d 360, 363 (2001) ("Unless the parties have contracted to the contrary, the FAA applies in federal or state courts to any arbitration agreement regarding a transaction that in fact involves interstate commerce, regardless of whether or not the parties contemplated an interstate transaction."); Episcopal Hous. Corp. v. Federal Ins. Co., 269 S.C. 631, 640, 239 S.E.2d 647, 652 (1977) ("It would be virtually impossible to construct an eighteen (18) story apartment building between 1971 and 1973 with materials, equipment and supplies all produced and manufactured solely within the State of South Carolina."); Blanton v. Stathos, 351 S.C. 534, 540-41, 570 S.E.2d 565, 568-69 (Ct.App.2002) (holding Blanton's affidavit asserting the contract affected interstate commerce, Stathos's failure to dispute the affidavit, and the nature of the construction project were sufficient to uphold the decision of the circuit court that the contract evinces a transaction involving interstate commerce); Towles, 338 S.C. at 36, 524 S.E.2d at 843 ("Because interstate commerce is involved, the FAA applies and displaces South Carolina's Uniform Arbitration Act.") (citing Soil Remediation Co. v. Nu-Way Envtl., Inc., 323 S.C. 454, 459-60, 476 S.E.2d 149, 152 (1996)).

Arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed to submit. Zabinski v. Bright Acres Assocs., 346 S.C. 580, 596, 553 S.E.2d 110, 118 (2001); Aiken v. World Fin. Corp. of S. C., 373 S.C. 144, 149, 644 S.E.2d 705, 708 (2007); Chassereau v. Global Sun Pools, Inc., 373 S.C. 168, 171-72, 644 S.E.2d 718, 720 (2007). Since the Church contends a valid, enforceable contract does not exist, this is no doubt one reason why the trial court denied Paragon Builders' Motion to Compel Arbitration until the court could determine whether or not the parties had an agreement. However, further examination of case law from the United States Supreme Court and the South Carolina Supreme Court yields the surprising result that when a party argues fraud in the inducement of an entire contract, but not the arbitration agreement itself, arbitration cannot be avoided. Prima Paint, 388 U.S. 395, 87 S.Ct. 1801; S.C. Pub. Serv. Auth. v. Great Western Coal, Inc., 312 S.C. 559, 437 S.E.2d 22 (1993); Jackson Mills, Inc. v. BT Capital Corp., 312 S.C. 400, 440 S.E.2d 877 (1994); Cornerstone Hous., 356 S.C. 328, 588 S.E.2d 617 (Ct.App.2003).

In Prima Paint, 388 U.S. at 403-04, 87 S.Ct. 1801, the United States Supreme Court held that general allegations of fraud in the inducement of a contract are insufficient to prevent the invocation of a contract's arbitration clause. The court referenced Section...