THIS OPNION HAS NO PRECEDENTIAL
VALUE. IT SHOULD NOT BE CITED OR RELIED ON AS
PRECEDENT IN ANY PROCEEDING EXCEPT
AS PROVIDED BY RULE 239(d)(2), SCACR.
THE STATE OF SOUTH CAROLINA
In The Court of Appeals
Lawrence M. Ridgeway, Respondent,
v.
The Litchfield Company of South Carolina Limited Partnership and The
Litchfield Company Inc., Defendants, Of whom The Litchfield Company of
South Carolina Limited Partnership is the, Appellant.
Appeal From Georgetown County
J. Michael Baxley, Circuit Court Judge
Unpublished Opinion No. 2004-UP-631
Heard October 12, 2004 Filed December
15, 2004
AFFIRMED
Joseph C. Wilson, IV, of Charleston, for Appellant.
Saul Gliserman, of Charleston, for Respondent.
HEARN, C.J.: The Litchfield Company of South Carolina Limited
Partnership (Litchfield) appeals the circuit courts denial of its motion to
compel arbitration. We affirm.
FACTS
The relevant facts are not in dispute. On September 18, 1999, Lawrence
M. Ridgeway, as grantee, entered into a purchase agreement with Heritage-Litchfield,
Inc., as grantor, to purchase condominium unit 20-101 in the Avian Forest development
in Georgetown. [1] The purchase agreement contained
an arbitration clause, which provided as follows:
ARBITRATION In the event that a dispute or claim shall arise with respect
to any of the terms or provisions of this Master Deed, or a dispute between
the Grantor or any contractors employed by the Grantor, and any one or
more Unit Owners, such claims to include but not be limited to claims for
negligent or improper construction, failure to meet specifications, and other
claims related to structural improvements, all disputes or claims shall
be resolved by Binding Arbitration pursuant to Title 15, Chapter 48 (Uniform
Arbitration Act) of the Code of Laws of South Carolina. All resulting awards
and determinations made by the arbitrators pursuant to the provisions of this
section shall be conclusively binding upon all parties hereto and judgment may
be rendered thereon.
(Emphasis added.) Litchfield was involved with the sale of the unit
solely as the real estate broker for Heritage-Litchfield and marketing company
for the Avian Forest development.
Shortly after purchasing unit 20-101, Ridgeway discovered
that the unit was infested with toxic mold. Ridgeway asserted the mold rendered
the unit uninhabitable. Ridgeway further asserted that the development lacked
several promised amenities and the grounds contained several abandoned or derelict
buildings. According to Ridgeway, the mold infestation and other deficiencies
have rendered the unit without meaningful market value.
Ridgeway
instituted an action against Litchfield alleging that he would not have purchased
the Avian Forest unit but for the tortious conduct of Litchfield, which caused
Ridgeway to believe that Litchfield, as opposed to Heritage-Litchfield, was
the developer of the Avian Forest project. Ridgeway asserted causes of action
arising from the marketing and promotion of Avian Forest, including unfair trade
practices, negligent misrepresentation, constructive fraud, fraud, promissory
estoppel, and civil conspiracy. Litchfield filed an answer and motion to compel
arbitration based upon the arbitration clause in the purchase agreement entered
into by Heritage-Litchfield and Ridgeway. Litchfield concedes that it was neither
a party nor a signatory to the purchase agreement or arbitration clause. [2] The circuit court denied Litchfields
motion to compel arbitration. This appeal followed.
STANDARD OF REVIEW
Whether a claim is subject to arbitration is an issue for judicial
determination, unless the parties have agreed otherwise. Vestry and Church
Wardens of Holy Cross v. Orkin Exterminating Co., 356 S.C. 202, 207, 588
S.E.2d 136, 138 (Ct. App. 2003) (citation omitted). In deciding whether the
parties have agreed to submit a particular grievance to arbitration, the court
should not rule on the merits of the underlying claims. Zabinski v. Bright
Acres Assocs., 346 S.C. 580, 596, 553 S.E.2d 110, 118 (2001). A motion
to compel arbitration made pursuant to an arbitration clause in a written contract
should only be denied where the clause is not susceptible to any interpretation
which would cover the asserted dispute. Id.
Determinations of arbitrability are subject to de novo review.
Vestry and Church Wardens of Holy Cross, 356 S.C. at 207, 588 S.E.2d
at 138. However, the factual findings of the trial court will be overruled
only if there is no evidence reasonably supporting them. Deloitte &
Touche, LLP v. Unisys Corp., 358 S.C. 179, 182, 594 S.E.2d 523, 525 (Ct.
App. 2004).
LAW/ANALYSIS
In the
case before us, we are not asked to determine whether the arbitration clause
would be valid and enforceable as between Ridgeway and Heritage-Litchfield because
Heritage-Litchfield does not seek arbitration. Instead, Litchfield, a non-signatory
to the arbitration clause, seeks to compel arbitration against Ridgeway.
Arbitration is contractual by nature. See Zabinski v. Bright
Acres Assocs., 346 S.C. 580, 596, 553 S.E.2d 110, 118 (2001); Tritech
Elec., Inc. v. Frank M. Hall & Co., 343 S.C. 396, 399, 540 S.E.2d 864,
865 (Ct. App. 2000). Therefore, a party cannot be required to submit to arbitration
any dispute that he has not agreed to arbitrate. See United Steelworkers
of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960); Zabinski,
346 S.C. at 580, 553 S.E.2d at 118. There is strong state and federal public
policy favoring arbitration agreements; however, such agreements must not be
so broadly construed as to encompass claims and parties that were not intended
by the original contract. See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,
Inc., 473 U.S. 614, 626 (1985); Towles v. United Healthcare Corp.,
338 S.C. 29, 37, 524 S.E.2d 839, 844 (Ct. App. 1999). However, arbitration
rests on the agreement of the parties, and the range of issues that can be arbitrated
is restricted by the terms of the agreement. Zabinksi, 346 S.C. at
596-597, 553 S.E.2d at 118. In determining whether an agreement to arbitrate
exists, the court should apply ordinary state-law principles that govern the
formation of contracts. Towles, 338 S.C. at 37, 524 S.E.2d at 844
(citation omitted).
Litchfield argues the trial judge erred in refusing to compel arbitration
because, despite its lack of contractual relationship with Ridgeway, it can
compel arbitration: (1) as a contractor under the arbitration clause of the
purchase agreement, and (2) as an agent of Heritage-Litchfield. We disagree.
I.
Litchfield is a not contractor as intended by the arbitration clause.
The arbitration clause of the purchase agreement provides for arbitration
of disputes between any contractors employed by the Grantor, and any one or
more Unit Owners, such claims to include but not be limited to claims for negligent
or improper construction, failure to meet specifications, and other claims related
to structural improvements. Litchfield asserts that the term contractor,
according to Blacks Law Dictionary (4th ed. 1979), is strictly applicable
to any person who enters into a contract, but is commonly reserved to designate
one who, for a fixed price, undertakes to procure the performance of works or
services on a large scale. . . . [3] Litchfield contends that it is a contractor
by definition and therefore entitled to compel Ridgeway to arbitrate its dispute.
We agree with the trial court that the definition of contractor asserted
by Litchfield is correct in the broadest sense of the term, but that it is not
the definition intended by the parties in the arbitration clause. The construction
of a clear and unambiguous contract is a question of law for the court. Hawkins
v. Greenwood Dev. Corp. 328 S.C. 585, 592, 493 S.E.2d 875, 878 (Ct.
App. 1997) (citation omitted). Whether a contract is ambiguous is to be determined
from the entire contract and not from isolated portions of the contract. Farr
v. Duke Power Co. 265 S.C. 356, 362, 218 S.E.2d 431, 433 (1975)
(citation omitted). Common sense and good faith are the leading touchstones
of the inquiry. Id. at 362, 218 S.E.2d at 434.
It is
clear, considering the purchase agreement as a whole, that the term contractor
found in the arbitration clause was intended to include only those parties to
a contract responsible for furnishing labor and materials for the construction
of Ridgeways condominium unit. The entire body of the purchase agreement concerned
only the sale of an Avian Forest condominium unit, and the agreement stated
that Heritage-Litchfield shall cause the Property to be constructed substantially
in accordance with the Plan and Specifications previously reviewed by the purchaser
. . . . The arbitration clause lists the types of disputes between Ridgeway
and contractors to include but not be limited to claims for negligent or improper
construction, failure to meet specifications, and other claims related to structural
improvements . . . . The purchase agreement did not contemplate any other
type of contractor besides those responsible for furnishing labor and materials
for construction. Therefore, Litchfield cannot enforce the arbitration clause
as a contractor because it did not furnish labor or materials for construction.
II.
Litchfield cannot compel arbitration solely as an agent of Heritage-Litchfield.
Litchfield
argues that under the principles of agency, a non-signatory may invoke an arbitration
clause as an agent of the signatory. South Carolina courts have yet to address
the issue of whether a non-signatory can invoke an arbitration clause solely
as an agent of the signatory.
Litchfield cites South Carolina Public Service Authority v. Great
Western Coal, Inc., 312 S.C. 559, 437 S.E.2d 22 (1993) in support of the
proposition that South Carolina allows non-signatories to an arbitration agreement
to compel arbitration against a signatory. In Great Western Coal, the
South Carolina Public Service Authority contracted with Great Western Coal,
including an agreement to arbitrate. The Public Service Authority initiated
an action against Great Western Coal and its president, Clyde E. Goings, in
his individual capacity. The court held Goings was entitled to demand arbitration
of the Public Service Authoritys claims even though he did not sign the arbitration
clause. Great Western Coal relies on the Sixth Circuit Court of Appeals
in Arnold v. Arnold Corp., 920 F.2d 1269 (6th Cir. 1990) for this proposition,
stating: [A] party should not be allowed to avoid an arbitration agreement
by naming nonsignatory parties in his complaint, or signatory parties in
their individual capacity because this would nullify the rule requiring
arbitration. Id. at 563, 437 S.E.2d at 24-25 (emphasis in original).
Thus, Great Western Coal permits only non-signatories who are alter egos
of a signatory to compel arbitration. In this case, Litchfield cannot compel
arbitration because it is not an alter ego of the signatory, Heritage-Litchfield,
Inc.
Moreover, the other jurisdictions that allow a non-signatory to compel
arbitration under the agency theory have done so only in instances where the
action against the agent is within the scope of the arbitration agreement as
contemplated by the signing parties. See, e.g., Long v. Silver,
248 F.3d 309, 320-21 (4th Cir. 2001) (holding non-signatory could compel arbitration
because the claims against the non-signatory parent corporation fell within
the scope of the arbitration clause signed by the employee); Sunkist Soft
Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753, 758 (11th Cir. 1993)
(holding that because claims against the non-signatory were intimately founded
in and intertwined with a contract containing an arbitration clause, signatory
was estopped from refusing to arbitrate those claims); J.J. Ryan & Sons,
Inc. v. Rhone Poulenc Textile, S.A., 863 F.2d 315, 320-21 (4th Cir. 1988)
(holding that when allegations against a parent company and its subsidiary
are based on the same facts and are inherently inseparable, a court may refer
claims against the parent to arbitration even though the parent is not formally
a party to the arbitration agreement); Norcom Elecs. Corp. v. CIM USA Inc.,
104 F.Supp.2d 198, 203 (S.D.N.Y. 2000) (quoting Smith/Enron Cogeneration
Ltd. Pship. v. Smith Cogeneration Int'l, Inc., 198 F.3d 88, 97-98 (2d Cir.
1999)) ([T]he U.S. Court of Appeals for the Second Circuit and other circuits
have been willing to estop a signatory from avoiding arbitration with a nonsignatory
when the issues the nonsignatory is seeking to resolve in arbitration are intertwined
with the agreement that the estopped party has signed.); First American
Title Ins. Corp. v. Silvernell, 744 So.2d 883, 887-88 (Ala. 1999)
(holding that non-signatory real estate agent had no right to compel arbitration
of purchasers claim of conspiracy by agents because the arbitration clause
defined arbitrable matters as controversies between the insurer and the insured
purchaser, and the insurer was not part of the conspiracy).
In this case, the arbitration clause applies to disputes between Ridgeway
and contractors responsible for furnishing labor and materials for construction.
Thus, Ridgeways claims for unfair trade practices, negligent misrepresentation,
constructive fraud, fraud, promissory estoppel, and civil conspiracy against
Litchfield would not fall within the scope of the arbitration clause. Accordingly,
even if we were to apply an agency theory to allow a non-signatory to enforce
an arbitration clause, Litchfield would not be permitted to compel arbitration
because Ridgeways causes of action do not fall within the scope of the arbitration
clause. The order of the circuit court refusing to compel arbitration is therefore
AFFIRMED.
HUFF and KITTREDGE, JJ., concur.
[1] Heritage-Litchfield has declared bankruptcy.
There is on-going separate litigation between Ridgeway and the Heritage-Litchfield
insurers.
[2] Subsequent to oral argument, the court received
correspondence from counsel for Ridgeway stating for the first time that an
agent of Litchfield was a signatory to the purchase agreement and therefore
the arbitration clause. Contrarily, both parties asserted the exact opposite
in front of the trial judge and in their briefs on appealthat Litchfield
was a non-signatory to the purchase agreement. Despite the revelations of
counsel for Ridgeway following oral argument, we are bound by the record on
appeal. Rule 210(a), SCACR. Because the record on appeal conclusively determines
that Litchfield was a non-signatory to the purchase agreement and arbitration
clause for purposes of our review, we must treat Litchfield as such.
[3] We note that this definition has been amended
to read 1. A party to a contract. 2. More specif., one who contracts to do
work or provide supplies for another. Blacks Law Dictionary (8th
ed. 2004).