Trustees of Asbury United Methodist Church v. Taylor & Parrish, Inc.

• Decision Date: 13 January 1995
• Docket Number: 940166,Nos. 940162,s. 940162
• Citation: 452 S.E.2d 847,249 Va. 144
• Court: Virginia Supreme Court
• Parties: TRUSTEES OF ASBURY UNITED METHODIST CHURCH v. TAYLOR & PARRISH, INC. TAYLOR & PARRISH, INC. v. TRUSTEES OF ASBURY UNITED METHODIST CHURCH. Record

Page 847

452 S.E.2d 847

249 Va. 144

TRUSTEES OF ASBURY UNITED METHODIST CHURCH v. TAYLOR & PARRISH, INC.

TAYLOR & PARRISH, INC. v. TRUSTEES OF ASBURY UNITED METHODIST CHURCH.

Record Nos. 940162, 940166.

Supreme Court of Virginia.

Jan. 13, 1995.

N. Leslie Saunders, Jr., Richmond (Gary B. Patterson, Saunders, Cary & Patterson, on briefs), for appellant, in No. 940162.

Charles L. Williams, Richmond (John B. Thompson, Butler, Macon, Williams, Pantele & Lowndes, Thompson & McMullan, on brief), for appellee in No. 940162.

Charles L. Williams, Richmond (John B. Thompson, Butler, Macon, Williams, Pantele & Lowndes, Thompson & McMullan, on briefs), for appellee in No. 940166.

N. Leslie Saunders, Jr., Richmond (Gary B. Patterson, Saunders, Cary & Patterson, on brief), for appellee in No. 940166.

Present: All the Justices.

KEENAN, Justice.

In these appeals, we consider whether the trial court erred in confirming an arbitration award that required payment to a construction contractor, under the doctrine of quantum meruit, for work performed by the contractor under an invalid change order to a construction contract.

On November 16, 1988, Taylor & Parrish, Inc. (Taylor), as "Contractor," agreed to construct a project located in Chesterfield County and designated in the contract as "New Sanctuary and Education Building." The contracting "Owner" was "Asbury United Methodist Church" (the Church).

The contract provided for a "guaranteed maximum cost" to the Owner of $2,370,943, subject to adjustment for changes in the work as provided by the contract. In addition, the contract contained an arbitration clause, Paragraph 7.9.1, which provided in material part:

All claims, disputes and other matters in question between the Contractor and the Owner arising out of, or relating to, the Contract Documents 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.

On November 2, 1990, Taylor submitted a Demand for Arbitration pursuant to the arbitration clause. Taylor alleged that the Church had made numerous changes to the construction work by a change order dated June 29, 1990 (the June 1990 change order), which increased the guaranteed maximum cost of the work. Taylor alleged that it was owed $362,462.28 as a result of the change order "under the [c]ontract," and that the Church had "breached the [c]ontract" by failing to tender this additional amount.

On December 4, 1990, the "Trustees of Asbury United Methodist Church" (the Trustees) filed a motion for declaratory judgment in the trial court. The Trustees alleged they "own[ed]" the real estate on which the construction work was done and that, at a duly held church conference meeting, they had been authorized to encumber the property and contract with Taylor for the improvements. ¹ The Trustees further alleged, however, that Taylor was entitled only to the "guaranteed maximum cost," as adjusted, and they asked the trial court to declare that the June 1990 change order under which Taylor claimed additional charges was invalid, because it had been signed without the authority of the church congregation.

Taylor replied to the declaratory judgment action by seeking an order compelling arbitration, pursuant to Code § 8.01-581.02(A). The trial court ordered the parties to arbitrate, ruling that the arbitration clause was broad enough to encompass the parties' dispute regarding the validity of the June 1990 change order.

The arbitrator, Orran Lee Brown, conducted two days of hearings and issued a "Decision of Arbitrator" dated August 19, 1991. Brown found that the June 1990 change order had been signed by two of the trustees for the Church who had no actual or apparent authority to bind the Church. Citing Code § 57-15 and other authority, Brown concluded that, in order for any change order to be valid, Taylor was required to obtain the congregation's authorization and a circuit court's approval to bind the Church contractually for improvements to the Church's property. Thus, Brown ruled that the Church was not obligated by the terms of the June 1990 change order "as a contractual matter." However, Brown also stated that Taylor could seek recovery based on quantum meruit for the value of its services, and he granted Taylor leave to arbitrate such a claim.

The Trustees asked the trial court to confirm the arbitrator's ruling that the June 1990 change order was invalid, but to vacate that portion of the arbitrator's decision holding that Taylor could assert a request for quantum meruit relief. The Trustees contended that this ruling exceeded the arbitrator's powers, because it was outside the scope of the matters submitted to him by the trial court's order compelling arbitration. By order dated January 7, 1992, the trial court granted the Trustees' request confirming in part and vacating in part the arbitrator's decision. In its order, the trial court also referred the matter back to the arbitrator for apportionment of fees and costs.

Thereafter, Taylor obtained leave from the arbitrator to file an Amended Demand for Arbitration. In the Amended Demand, Taylor asserted claims based on theories of breach of contract and quantum meruit, stated in the alternative, against both the Church and several "Individual Respondents[,] in their individual rather than representative capacities," who were members of the Church's board of trustees. The arbitrator later dismissed the individual respondents as parties to the arbitration.

The Trustees opposed the Amended Demand in the trial court by seeking to enjoin Taylor from "proceeding in any manner to raise any issue other than that provided for in the Court's Order of January 7, 1992," because, they said, Taylor's Amended Demand went beyond the scope of the hearing on apportionment of fees and costs that had been ordered by the trial court.

Taylor, however, continued to seek arbitration of its Amended Demand. Pursuant to Code § 8.01-581.02(A), Taylor again applied to the trial court for an order compelling arbitration.

The trial court granted Taylor's motion and ordered arbitration. In an opinion letter dated February 12, 1992, the trial court stated,

[A]lthough defendant's original Demand For Arbitration did not include the issue of quantum meruit, defendant did allege a breach of contract by plaintiff. Defendant's Amended Demand again alleges a breach of contract by plaintiff, among other allegations. Breach of contract has not been addressed by the arbitrator.

The issues included in defendant's Amended Demand are arbitrable, therefore the Court hereby grants defendant's Application to Stay Proceeding and to Compel Arbitration.

On April 10, 1992, the trial court denied the Trustees' request for an injunction and ordered the parties to arbitrate "the matters set forth in the Amended Demand."

Brown, the arbitrator, then stated that "[t]he remaining [arbitration] hearing will not address the breach of contract claim, as that has been disposed of previously. The hearing will concern the claimant's allegation that Asbury has been unjustly enriched and the claimant should recover $362,462.28 an [sic] extracontractual quatum meriuit [sic] recovery."

Brown conducted hearings on the request for quantum meruit relief in October 1992 and January 1993. The transcripts of those hearings show that Brown ruled that, since there was no express and enforceable contract as to the claims for work performed under the invalid change order, a claim would lie for quantum meruit relief for the reasonable value of that work. On March 26, 1993, Brown issued an Award of Arbitrator (the March 1993 award), stating in part:

ASBURY UNITED METHODIST CHURCH shall pay to TAYLOR & PARRISH, INC. the sum of TWO HUNDRED SIXTY-THREE THOUSAND THREE HUNDRED TEN DOLLARS AND NINETY-SEVEN CENTS ($263,310.97)....

The administrative fees and expenses of the American Arbitration Association and fees for the remuneration of the arbitrator shall be borne equally by the parties....

This Award is in full settlement of all claims submitted to this arbitration.

Taylor asked the trial court to enter an order confirming the March 1993 award and entering judgment in its favor. In opposition to this request, the Trustees asked the trial court to confirm the arbitrator's decision of August 19, 1991, and to vacate the March 1993 award. The Trustees argued that the arbitrator had exceeded his powers, had misapplied the law, and did not have authority to consider quantum meruit relief.

The trial court rejected the Trustees' arguments. In an opinion letter dated October 13, 1993, the trial court held that the arbitration clause in the contract was broad enough to encompass the issue of quantum meruit relief because that claim "arises out of, or relates to, the contract." The trial court further stated that the arbitrator had not exceeded the scope of the issues submitted to him by the order granting a second arbitration.

The trial court declined to enter a proposed order in which Taylor requested judgment against the Trustees and the Church, jointly and severally. Instead, the trial court's order of November 2, 1993, recited that judgment was entered in favor of Taylor "against ASBURY UNITED METHODIST CHURCH" in the amount of $263,310.97, plus interest and one half of the fees and expenses of the American Arbitration Association and the fees of the arbitrator. Both Taylor and the Trustees have appealed from this order.

I. The Trustees' Appeal

The Trustees contend that the trial court erred in confirming the March 1993 award. They argue that the trial court was required to vacate the award under Code § 8.01-581.010(3), because the arbitrator exceeded his powers in allowing recovery on a quantum meruit basis. The Trustees assert that the remedy of quantum meruit is available only when there is no express contract...