Ruffin Woody And Associates, Inc. v. Person County

• Decision Date: 06 December 1988
• Docket Number: No. 889SC279,889SC279
• Citation: 374 S.E.2d 165,92 N.C.App. 129
• Court: North Carolina Court of Appeals
• Parties: RUFFIN WOODY AND ASSOCIATES, INC. v. PERSON COUNTY and American Arbitration Association.

Page 165

374 S.E.2d 165

92 N.C.App. 129

RUFFIN WOODY AND ASSOCIATES, INC. v. PERSON COUNTY and American Arbitration Association.

No. 889SC279.

Court of Appeals of North Carolina.

Dec. 6, 1988.

Jackson, Hicks & Fitzgerald by Alan S. Hicks, Roxboro, for plaintiff-appellant.

George K. Freeman, Jr., and Goldsboro, and Tolin & Long by James W. Tolin, Jr., Roxboro, for defendant-appellee Person County.

PARKER, Judge.

Plaintiff first assigns error to the trial court's denial of its motion to enjoin the arbitration on the grounds that there was no valid agreement to arbitrate. Plaintiff next assigns error to the trial court's granting of defendant's motion to confirm the award prior to the expiration of the ninety-day period prescribed in G.S. 1-567.13(b). Plaintiff's third and fourth assignments of error are that the trial court erred in denying plaintiff's motion to depose the arbitrators or alternatively to vacate the award on the grounds that the neutral arbitrator failed to disclose prior business dealings with defendant.

Before considering plaintiff's argument in support of its first assignment of error, we must address defendant's contention that plaintiff waived its right to challenge the arbitrability of defendant's claims by participating in the arbitration. One who participates in an arbitration hearing without objection may not raise an objection after the award is entered. McNeal v. Black, 61 N.C.App. 305, 300 S.E.2d 575 (1983). In this case, however, plaintiff's objection was filed before the hearing was commenced. Moreover, plaintiff followed the correct procedure by applying for a court order to stay the arbitration proceeding. G.S. 1-567.3. Once the trial court refused to enjoin the arbitration, plaintiff had no choice but to participate in the proceeding. The specific instances in which an appeal may be taken from an arbitration order are set out in G.S. 1-567.18, and the statute does not permit an appeal to be taken from the denial of an application to stay arbitration.

Defendant contends that plaintiff's limited participation in the arbitration before it filed its amended answer was sufficient to operate as a waiver of its right to object. General Statute 1-567.3(b) provides, however, that, upon a showing that there is no agreement to arbitrate, "the court may stay an arbitration proceeding commenced or threatened." This provision clearly contemplates that objections to arbitration proceedings may be raised after the institution of the proceedings. Plaintiff in this case raised its objection before the hearing on the merits and before the selection of arbitrators was complete. Therefore, the objection was timely.

Defendant also contends that plaintiff should be bound by the admission in its initial answer that the claims were subject to arbitration. This argument is without merit. By filing its amended answer, plaintiff raised the issue of arbitrability. Nothing in the record indicates that defendant objected to the filing of the amended answer, and both the AAA and the trial court considered the merits of the issue. Accordingly, we hold that plaintiff has not waived its right to object to arbitration on the grounds that there was no agreement to arbitrate.

Plaintiff contends that defendant's claims are not arbitrable because the terms of the contract provide that the architect's decision as to the acceptability of the work is binding and conclusive. The determination of whether a particular claim is arbitrable is controlled by the language of the parties' agreement. Rodgers Builders v. McQueen, 76 N.C.App. 16, 23-24, 331 S.E.2d 726, 731 (1985), disc. rev. denied, 315 N.C. 590, 341 S.E.2d 29 (1986). Plaintiff relies on the following provision of the EDA General Conditions:

35. ARCHITECT/ENGINEER AUTHORITY

The Architect/Engineer shall give all orders and directions contemplated under this contract and specifications relative to the execution of the work. The Architect/Engineer shall determine the amount, quality, acceptability, and fitness of the several kinds of work and materials which are to be paid for under this contract and shall decide all questions which may arise in relation to said work and the construction thereof. The Architect/Engineer's estimates and decisions shall be final and conclusive, except as herein otherwise expressly provided. In case any question shall arise between the parties hereto relative to said contract or specifications, the determination or decision of the Architect/Engineer shall be a condition precedent to the right of the Contractor to receive any money or payment for work under this contract affected in any manner or to any extent by such question.

General Condition 35 clearly designates the architect as the final authority on questions concerning the work performed by the contractor. Our courts have held that such a provision is binding on the parties to a construction contract. Heating Co. v. Board of Education, 268 N.C. 85, 150 S.E.2d 65 (1966); Elec-Trol, Inc. v. Contractors, Inc., 54 N.C.App. 626, 284 S.E.2d 119 (1981), disc. rev. denied, 305 N.C. 298, 290 S.E.2d 701 (1982).

Article 14 of AIA Document A107, however, provides:

All claims or disputes arising out of this Contract or the breach thereof shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then obtaining unless the parties mutually agree otherwise....

Article 8 of Document A107 includes the following provision:

8.5 The Architect will be, in the first instance, the interpreter of the requirements of the Contract Documents. He will make decisions on all claims and disputes between the Owner and the Contractor. All his decisions are subject to arbitration.

The additional AIA General Conditions further provide:

2.2.12 Any claim, dispute or other matter in question between the Contractor and the Owner referred to the Architect, except those relating to artistic effect as provided in Subparagraph 2.2.11 and except those which have been waived by the making or acceptance of final payment as provided in Subparagraphs 9.9.4 and 9.9.5, shall be subject to arbitration upon the written demand of either party....

Thus, there is a clear conflict between EDA General Condition 35 which provides that the architect's decisions are final and conclusive, and the AIA documents, which provide that most decisions of the architect are subject to arbitration.

Plaintiff contends that General Condition 35 is controlling because EDA General Condition 41 states: "Any provision in any of the contract documents which may be in conflict or inconsistent with any of the paragraphs in these General Conditions shall be void to the extent of such conflict or inconsistency." Plaintiff argues that this condition overrides the AIA provisions for arbitration of the architect's decisions. Defendant, however, contends that the AIA provisions should be given effect because General Condition 35 states that the architect's decisions are final and conclusive "except as herein otherwise expressly provided." Defendant argues that the AIA provisions come within this exception. Plaintiff's counter-argument is that the word "herein" in the exception indicates that the exception was intended only to include other provisions in the EDA General Conditions and not other documents incorporated into the contract.

We agree with plaintiff's interpretation of the contract. The EDA General conditions are set out in a separate, self-contained document. Although separate documents forming a single contract are normally construed as a single instrument, such a construction should not operate to avoid essential contract terms. See Trust Co. v. Processing Co., 242 N.C. 370, 377, 88 S.E.2d 233, 238 (1955) (quoting Howell v. Howell, 29 N.C. 491, 494 (1847)). The word "herein" in General Condition 35 clearly refers to the other EDA general conditions as opposed to any additional contract documents. If the provisions in the AIA documents are given effect, then only those decisions of the architect regarding "artistic effect" would remain conclusive and General Condition 35 would be rendered meaningless. Because General Condition 41 expressly provides that the EDA conditions should take precedence over any other contract documents, the AIA arbitration provisions are not effective to the extent that they conflict with General Condition 35.

In support of this construction, we note that the Appellate Court of Illinois reached the same result when construing a contract which contained provisions identical to those at issue in this case. Roosevelt Univ. v. Mayfair Constr. Co., 28 Ill.App.3d 1045, 1057-61, 331 N.E.2d 835, 844-48 (1975). The Roosevelt court concluded that matters within the scope of General Condition 35 were not arbitrable. Id.

Although we agree with the contract interpretation urged by plaintiff and adopted in Roosevelt, supra, other considerations require us to hold that, under the facts of this case, defendant's claims against plaintiff are arbitrable. General Condition 35 makes the architect's decisions final as between the owner and the contractor, but the EDA General Conditions are silent as to disputes concerning the architect's performance.

Even where the contract provides that the decisions of the architect are conclusive, his decisions may be attacked if there is evidence of fraud or failure to exercise honest judgment. Our Supreme Court has stated the rule as follows:

[W]here the parties stipulate, expressly or in necessary effect, that the determination of the architect or engineer shall be final and conclusive, both parties are bound by his determination of those matters which he is authorized to determine, except in case of fraud or such gross mistake as would necessarily imply bad faith or a failure to exercise an honest judgment.

Heating Co. v. Board of Education, 268 N.C. at 90, 150 S.E.2d at 68 (quoting 13 Am.Jur.2d Building...