Sherwin-Williams Co. v. Culotta
| Decision Date | 02 May 2012 |
| Docket Number | 2011 CA 1929 |
| Parties | THE SHERWIN-WILLIAMS COMPANY v. FRANK J. CULOTTA AND FRANK CULOTTA CONTRACTOR, INC. |
| Court | Court of Appeal of Louisiana — District of US |
NOT DESIGNATED FOR PUBLICATION
ON APPEAL FROM THE TWENTY-THIRD JUDICIAL DISTRICT COURT
NUMBER 93,304, DIVISION E, PARISH OF ASCENSION
STATE OF LOUISIANA
Francis R. White, III
Covington, Louisiana
Counsel for Plaintiff-Appellee
The Sherwin-Williams Company
Steven B. Loeb
Jordan T. Faircloth
Jennifer Sims
Baton Rouge, Louisiana
Counsel for Defendant-Appellant
Frank J. Culotta, Jr.
BEFORE: WHIPPLE, KUHN, AND GUIDRY, JJ.
The defendant-appellant, Frank. J. Culotta, Jr. (Culotta), appeals a summary judgment holding him liable to plaintiff-appellee, The Sherwin-Williams Company (Sherwin-Williams), under a written guaranty for goods and services supplied by Sherwin-Williams to Frank Culotta Contractor, Inc. (FCC). For the following reasons, we affirm.
In June 2004, Culotta executed and signed a commercial credit application with Sherwin-Williams on behalf of FCC, of which he was a shareholder. The document signed by Culotta included a guaranty that he would individually pay for all goods, wares and merchandise supplied to him or FCC by Sherwin-Williams. Subsequently, in 2005, Culotta retired and transferred his entire interest in FCC to his son through the sale of his shares therein. He contends that he has had no affiliation with FCC since that time.
In November 2007, FCC and Sherwin-Williams executed two "Purchase Order/Subcontract" agreements, pursuant to which FCC supplied floor covering and carpet to FCC for a construction project on which it was the general contractor. The purchase agreements contained clauses providing that all disputes arising out of or related to the contracts were to be decided by arbitration, if the contractor [FCC] so agreed. Culotta was not a party or signatory to these purchase orders.
FCC failed to fully pay Sherwin-Williams for the goods and services supplied pursuant to the purchase orders; in July 2009, Sherwin-Williams filed suit against FCC and Culotta, as a personal guarantor of FCC's debt, for the amounts due. FCC did not answer the suit, and a default judgment was entered against it in favor of Sherwin-Williams. In his answer to the suit, Culotta made noreference to arbitration. However, after Sherwin-Williams filed a motion for summary judgment, Culotta filed a motion in June 2010 to stay the proceedings pending arbitration, relying on the arbitration clauses in the purchase orders as the basis for the requested stay. Following a hearing, the trial court denied the motion to stay, and Culotta filed a writ application seeking review of that ruling. This Court denied the application. See The Sherwin-Williams Company v. Frank J. Culotta and Frank Culotta Contractor, Inc., 10-2285 (La. App. 1st Cir. 1/31/11) (unpublished).
Thereafter, the trial court granted summary judgment in favor of Sherwin-Williams ordering Culotta to pay the principal amount of $50,375.73, plus attorney fees of $3,500.00, interest, and court costs. The summary judgment specified that the award against Culotta was in solido with the award previously rendered against FCC. Culotta now appeals the summary judgment, arguing in two assignments of error that the trial court erred in failing to stay the proceedings pending arbitration and in granting summary judgment for Sherwin-Williams when its employees knew that Culotta no longer had an ownership interest in, or was affiliated with, FCC.
On appeal, Culotta contends the trial court erred in refusing to grant his motion to stay based on the court's erroneous conclusion that arbitration was not required in this matter. Culotta argues that a stay was required because Sherwin-Williams did not submit this matter to arbitration prior to filing suit, as required by the unambiguous terms of the purchase orders. In so arguing, Culotta relies, in part, on La. R.S. 9:4202, which provides that:
If any suit or proceedings be brought upon any issue referable to arbitration under an agreement in writing for arbitration, the court in which suit is pending, upon being satisfied that the issue involved inthe suit or proceedings is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until an arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with the arbitration. [Emphasis added.]
Culotta acknowledges that he was not a signatory to the purchase orders containing the arbitration clauses. Nevertheless, he asserts that he had the same right as FCC, with whom he was held solidarily liable, to stay this matter pending arbitration under the terms of the contracts, since La. C.C. art. 30461 provides that a surety can assert all defenses available to the principal obligor. Accordingly, he contends that, since this dispute arises out of written contracts requiring arbitration, the trial court should have stayed the proceedings once he filed his motion to stay pending arbitration, particularly considering the strong public policy favoring arbitration.
Arbitration is a matter of contract and a court cannot compel a party to submit to arbitration any disputes that the party has not agreed to submit. Snyder v. Belmont Homes, Inc., 04-0445 (La. App. 1st Cir. 2/16/05), 899 So.2d 57, 63, writ denied. 05-1075 (La. 6/17/05), 904 So.2d 699; Ciaccio v. Cazayoux, 519So.2d 799, 804 (La. App. 1st Cir. 1987). The authority of an arbitrator to resolve disputes is derived from the parties' advance agreement to submit such grievances to arbitration. AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 648-49, 106 S.Ct. 1415, 1418, 89 L.Ed.2d 648 (1986). Unless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate a particular dispute is an issue for judicial determination. International River Center v. Johns-Manville Sales Corporation, 02-3060 (La. 12/3/03) 861 So.2d 139, 143, quoting Howsam v. Dean Witter Reynolds, 537 U.S. 79, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002). Thus, the determination as to whether to stay or to compel arbitration is a question of law for the trial court. On appeal, the standard of review is simply to decide whether the trial court's determination was legally correct. Arkel Constructors, Inc. v. Duplantier & Meric, Architects, L.L.C., 06-1950 (La. App. 1st Cir. 7/25/07), 965 So.2d 455, 459.
In the instant case, the obligation for which Culotta was held liable under the guaranty agreement was based on purchase orders signed by representatives of Sherwin-Williams and FCC. Those contracts include the following provision:
Subcontractor /supplier [Sherwin-Williams] agrees that any and all disputes arising out of or relating to this contract shall be decided by arbitration with the hearing location to be Baton Rouge, Louisiana. If the Contractor [FCC] agrees to arbitrate then the Contractor will decide the forum under which the arbitration will be held. However, if the Contractor elects not to arbitrate the disputes, then subcontractor/supplier specifically agrees that all litigation will take place in Baton Rouge, Louisiana.2 [Emphasis added.]
Based on our review, we conclude the trial court correctly denied the motion to stay. Given the circumstances, the contracts between the parties do notrequire arbitration in this case. Under the clear provisions of the contracts, Sherwin-Williams had the contractual right to institute litigation if FCC elected not to arbitrate their dispute. Although FCC had the option to invoke arbitration herein, it elected not to do so. Accordingly, since a written contract constitutes the law between the parties, Sherwin-Williams had the right to proceed with this lawsuit under the specific terms of the purchase orders. See La. C.C. art. 1983; Corbello v. Iowa Production, 02-0826 (La. 2/25/03), 850 So.2d 686, 693.
Culotta contends that FCC never made an election with respect to arbitration, but simply failed to take any action, which cannot be equated to an election on its part. We disagree, finding that FCC's silence and failure to take any action to invoke its right to arbitration, even after it was sued, constituted a de facto election not to arbitrate this matter.
Further, we are unpersuaded by Culotta's argument that he is entitled, due to his position as a guarantor or surety, to stay the proceedings and compel arbitration, since La. C.C. arts. 1801 and 3046 allow a surety to raise all defenses available to the principal obligor. The initial issue raised by Culotta's motion to stay is not a question of available defenses, but rather the scope of FCC and Sherwin-Williams' contractual agreement to arbitrate. Because arbitration is a matter of contract, a party cannot be compelled to arbitrate a dispute under circumstances to which he did not agree. See Snyder, 899 So.2d at 61; Ciaccio, 519 So.2d at 804. The contracts at issue grant Sherwin-Williams the right to litigate this matter if FCC elected not to arbitrate, which is exactly what occurred. Hence, the present suit was filed in accordance with the arbitration clauses contained in the contracts between Sherwin-Williams and FCC. Culotta, who was not a party to the contracts, had no right to compel arbitration contrary to the terms of these provisions.
We likewise find no merit in Culotta's contention that this Court previously has recognized a surety's right to stay a proceeding pending arbitration even though he is not a signatory to the contract containing the arbitration clauses. In making this assertion, Culotta cites Mapp Construction, LLC v. Southgate Penthouses, LLC, 09-0850 (La. App. 1st Cir. 10/23/09), 29 So.3d 548, 554 n.4, writ denied, 09-2743 (La. 2/26/10), 28 So.3d 275, and LaCour's Drapery Company,...
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