Rodgers Builders, Inc. v. McQueen

• Citation: 331 S.E.2d 726,76 N.C.App. 16
• Decision Date: 16 July 1985
• Docket Number: No. 8426SC1261,8426SC1261
• Parties: RODGERS BUILDERS, INC. v. James Douglas McQUEEN; McQueen Properties, Ltd. a corporation; and Parkhill Associates, a limited partnership.
• Court: Court of Appeal of North Carolina (US)

Page 726

331 S.E.2d 726

76 N.C.App. 16

RODGERS BUILDERS, INC. v. James Douglas McQUEEN; McQueen Properties, Ltd. a corporation; and Parkhill Associates, a limited partnership.

No. 8426SC1261.

Court of Appeals of North Carolina.

July 16, 1985.

Casey, Bishop, Alexander & Murphy by Hugh G. Casey, Jr., Charlotte, for plaintiff-appellant.

Jones, Hewson & Woolard by Harry C. Hewson and Hunter M. Jones, Charlotte, for defendants-appellees.

WHICHARD, Judge.

On 6 December 1982 plaintiff entered into a written contract with defendant McQueen Properties, Ltd., a corporation apparently controlled by defendant James McQueen, in which plaintiff agreed to construct a multi-unit housing project on land purportedly owned by McQueen Properties. The contract contains an arbitration clause which provides as follows, in relevant part: "All claims, disputes and other matters in question between the Contractor [plaintiff] and the Owner [McQueen Properties] arising out of, or relating to, the Contract Documents or the breach thereof, ... shall be decided by arbitration...." As plaintiff neared completion of the project, a dispute arose concerning plaintiff's alleged failure to complete the project within the time specified in the contract and McQueen Properties' subsequent refusal to pay a draw request in the amount of $177,000 submitted by plaintiff.

Plaintiff demanded arbitration of the dispute. In its demand plaintiff indicated that it sought the $177,000 due on the draw request, the owner's signature on change orders, overhead and profit in allowances, and the "[r]esolution of all claims arising under the contract." An arbitration hearing was scheduled for 14 December 1983.

Thereafter plaintiff learned that Parkhill Associates, a limited partnership in which James McQueen and McQueen Properties are the general partners, was in fact the title owner of record of the land on which the housing project had been built. Plaintiff thereupon filed an amendment to its demand for arbitration joining Parkhill Associates as an additional party. In its amendment plaintiff indicated that it sought damages in the amount of $611,326.24 caused by the owner's indecision and interference with work on the project. It is clear from the record that the "Owner" referred to in the amendment was James McQueen. Because of the late addition of Parkhill Associates as a party to the arbitration, the hearing was continued until January 1984 at the request of defendants' attorneys.

Plaintiff then instituted the present action for money owed for labor and materials, and for fraud and unfair and deceptive trade practices. Plaintiff requested that the court delay trial and entry of judgment in the action until the outcome of the arbitration. In February 1984 an award was entered "in full settlement of all claims submitted to [the] arbitration" which directed McQueen Properties and Parkhill Associates, jointly and severally, to pay plaintiff $407,259. The award was confirmed by the superior court and entered as a judgment.

Thereafter plaintiff filed an amended complaint in the present action seeking compensatory and punitive damages for fraud, unfair and deceptive trade practices, and negligent misrepresentation. In Count I of the amended complaint plaintiff set forth allegations of fraud which may be summarized as follows: In December 1980 McQueen Properties deeded the property on which the housing project was built to James McQueen. On 23 November 1982 James McQueen deeded the property to Parkhill Associates. As part of the latter transaction Parkhill Associates executed deeds of trust to First Union National Bank and James McQueen. On both deeds of trust James McQueen signed on behalf of Parkhill Associates. On 6 December 1982 James McQueen, acting individually and as agent for McQueen Properties, falsely represented to plaintiff that McQueen Properties was the owner of the property on which the housing project was to be built. Plaintiff entered the contract with McQueen Properties for the construction of the project in reliance on James McQueen's false representation. The misrepresentation materially deceived plaintiff and resulted in the late joining of Parkhill Associates as a party to the arbitration, which delayed the arbitration. This delay damaged plaintiff by causing it to incur additional interest on loans obtained because its draw requests had not been paid. The aforesaid actions by defendants were committed knowingly and willfully with the intent to deceive plaintiff and did in fact materially deceive plaintiff in its dealings with defendants. Such actions justify punitive damages of one million dollars, the amount plaintiff believes James McQueen expects to realize as profit from the housing project.

Plaintiff further alleged in Count I: James McQueen and Parkhill Associates attempted to convey condominium units in the project without informing purchasers that the units were subject to plaintiff's lien. James McQueen, acting as partner, signed warranty deeds conveying six condominium units even though he knew plaintiff had recorded a claim of lien in the amount of $439,138.79 on the property. The warranty in the above deeds was a misrepresentation. In November 1983 McQueen Properties, through its attorneys, fraudulently and without plaintiff's consent entered a cancellation of plaintiff's lien on the judgment docket. The aforesaid actions were done to defraud plaintiff as a creditor of Parkhill Associates. In December 1983 McQueen's lawyers served a "Motion To Discharge Lien" on plaintiff in a case which they knew had been voluntarily dismissed and did so on behalf of and at the direction of defendants in an attempt to dissuade plaintiff from bringing a lawsuit to perfect its claim of lien. Service of the above-mentioned motion constitutes abuse of process by defendants and was a deceit.

In Count II of the amended complaint plaintiff realleged and incorporated the allegations in Count I and further alleged the following as an unfair and deceptive practices claim: Parkhill Associates placed the deed of trust in favor of James McQueen on record in November 1982 to enable McQueen to foreclose and sell the property on which the housing project was built in the event plaintiff attempted to enforce a judgment, and did so to defraud and defeat the claims of creditors in violation of G.S. 39-15. James McQueen repeatedly interfered with and delayed work on the housing project and was abusive to plaintiff's employees and the subcontractors working on the project. Such actions by James McQueen were part of his design to delay the project so that he could assert a spurious claim for damages against plaintiff in an attempt to "bully" plaintiff into foregoing sums owed it for its work on the project. Defendants' acts injured plaintiff by forcing it to expend additional labor, material, and overhead, which finally resulted in a cost overrun on the project of approximately $300,000. The above acts of James McQueen were deceptive and in violation of G.S. 75-1.1.

In Count III plaintiff realleged and incorporated the allegations of the previous counts, and alleged that defendants' false representation that McQueen Properties was the owner of the property constitutes substantial and material negligent misrepresentation upon which plaintiff relied to its detriment, and that such misrepresentation by defendants was grossly negligent and committed with reckless disregard of plaintiff's rights and interests and entitles plaintiff to punitive damages.

Plaintiff alleged that as a result of defendants' acts it suffered general and special damages of one million dollars each and that it was entitled to punitive damages of one million dollars. Plaintiff indicated that its special damages were attributable to: interest incurred on loans it was forced to obtain because of defendants' refusal to pay draw requests; the decline in its financial worth and impairment of its bonding capacity caused by the outstanding loans; diversion of labor and materials which could have been used on other jobs to the housing project; lost profits resulting from the impairment of its capital; corresponding loss of business; and cost overrun in the amount of $300,000. Plaintiff sought to recover the above damages, as well as its costs and attorneys' fees, and requested that the court set aside as void the deed of trust executed by Parkhill Associates in favor of James McQueen. Plaintiff further requested that any damages assessed against defendants be trebled in accordance with G.S. 75-16.

In response defendants filed a motion for summary judgment based on numerous documents including the amended complaint, the judgment entered on the arbitration award, and a transcript of portions of the arbitration proceeding. The superior court granted the motion, finding "that there is no genuine issue as to any material fact which is necessary to the consideration of this motion and the entry of summary judgment in favor of the defendants and that the defendants are entitled to judgment as a matter of law." Plaintiff appeals.

Plaintiff contends the court erred in granting summary judgment for defendants. G.S. 1A-1, Rule 56(c) permits summary judgment if the materials submitted to the court show that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. The materials submitted in support of the motion here show that the claims asserted in the present action arise out of the dispute which was submitted to arbitration. Thus this appeal presents the question of whether defendants were entitled to summary judgment on the ground that plaintiff's claims are barred under the doctrine of res judicata.

The doctrine of res judicata applies to a judgment entered on an arbitration award as it does to any other final judgment. See M. Domke, Domke on Commercial Arbitration Sec. 39:04, at 510 (rev. ed., Wilner 1984); see also G.S. 1-567.15. Thus, a...