Opinion
NO. 2017-C-1036
06-06-2018
CATHERINE ALFORD v. CB CONSTRUCTION & DEVELOPMENT, LLC
PETER J. WANEK TREVOR C. DAVIES CHRISTINE M. BERGER McCRANIE, SISTRUNK, ANZELMO, HARDY, McDANIEL & WELCH, LLC 909 Poydras Street, Suite 1000 New Orleans, Louisiana 70112 COUNSEL FOR DEFENDANT/RELATOR RAYMOND A. PELLETERI, JR. CLAUDETTE L. BIENVENU PELLETERI & WIEDORN, L.L.C. 636 Carondelet Street New Orleans, Louisiana 70130 COUNSEL FOR PLAINTIFF/RESPONDENT
NOT DESIGNATED FOR PUBLICATION
APPLICATION FOR WRITS DIRECTED TO CIVIL DISTRICT COURT, ORLEANS PARISH
NO. 2016-09705, DIVISION "C"
Honorable Sidney H. Cates, Judge
JAMES F. MCKAY III CHIEF JUDGE
(Court composed of Chief Judge James F. McKay III, Judge Terri F. Love, Judge Joy Cossich Lobrano, Judge Rosemary Ledet, Judge Sandra C. Jenkins) LOBRANO, J., DISSENTS AND ASSIGNS REASONS
LEDET, J., DISSENTS PETER J. WANEK
TREVOR C. DAVIES
CHRISTINE M. BERGER
McCRANIE, SISTRUNK, ANZELMO, HARDY, McDANIEL & WELCH, LLC
909 Poydras Street, Suite 1000
New Orleans, Louisiana 70112
COUNSEL FOR DEFENDANT/RELATOR RAYMOND A. PELLETERI, JR.
CLAUDETTE L. BIENVENU
PELLETERI & WIEDORN, L.L.C.
636 Carondelet Street
New Orleans, Louisiana 70130
COUNSEL FOR PLAINTIFF/RESPONDENT
WRIT GRANTED
The Defendant, CB Construction & Development, LLC ("CBCD"), seeks review of the trial court ruling overruling its dilatory exception of prematurity. The underlying action arises from allegations of breach of contract concerning Plaintiff, Catherine Alford's ("Alford") alleged failure to adhere to the December 17, 2015 Contractor Agreement, which provides that all disputes be resolved through arbitration. For the reasons that follow, we grant the writ and reverse the trial court's ruling.
FACTS
On December 17, 2015, the parties entered into a Contractor Agreement for the purpose of work to be performed at 3961 Laurel Street on Alford's property. Pursuant to the provisions of Article 5 of the Contractor Agreement, the parties agreed that "[a]ll disputes hereunder shall be resolved by binding arbitration in accordance with the rules of the American Arbitration Association." On March 3, 2016, the parties entered into a "Deadline Agreement" which listed various incomplete items with projected completion dates. This agreement did not include an arbitration clause. These two agreements are at the core of the issue before us.
On September 23, 2016, despite the Arbitration Clause contained in the Contractor Agreement, Alford filed suit in the underlying suit, without submitting her claim to arbitration. Alford alleged that the work performed under the Contractor Agreement was defective and incomplete, and further alleged that under the Deadline Agreement, CBCD failed to meet deadlines and performed work in a defective manner. Based on Alford's failure to seek arbitration first, CBCD filed its exception of Prematurity, arguing that the Contractor Agreement required the parties to submit all claims to arbitration, thus, Alford's suit was premature.
The trial court denied CBCD's Dilatory Exception of Prematurity. This writ followed.
ASSIGNMENT OF ERROR
The trial court erred in denying CBCD's Dilatory Exception of Prematurity because Alford failed to submit her claim to arbitration in accordance with the Contractor Agreement executed by the parties.
STANDARD OF REVIEW
In Jefferson Door Co., Inc. v. Cragmar Const., L.L.C., 2011-1122, p. 3 (La. App. 4 Cir. 1/25/12), 81 So.3d 1001, 1004, this Court recognized:
A suit is premature if it is brought before the right to enforce it accrues. La.C.C.P. Art. 423; see also Moreno v. Entergy Corp., 10-2268, p. 3 (La.2/18/11), 64 So.3d 761, 763, citing La.C.C.P. Art. 926 (The dilatory exception of prematurity questions whether the cause of action has matured to the point where it is ripe for judicial determination.) "Prematurity is determined by the facts existing at the time the suit is filed." Sevier v. U.S. Fidelity & Guar. Co., 497 So.2d 1380, 1382 (La.1986). Evidence may be introduced to support or controvert the exception, when the grounds do not appear from the petition. La. Code Civ. Proc. Art. 930. We review a judgment sustaining a dilatory exception of prematurity for manifest error. See Pinegar v. Harris, 08-1112, p. 10 (La. App. 1 Cir. 6/12/09), 20 So.3d 1081, 1088.
This Court has also recognized that a determination regarding whether to stay or compel arbitration is a question of law, which is reviewed de novo. See Saavedra v. Dealmaker Developments, LLC, 2008-1239, p. 6 (La. App. 4 Cir. 3/18/09), 8 So.3d 758,762.
DISCUSSION
CBCD argues that the trial court erred by overruling its Dilatory Exception of Prematurity because Alford failed to submit her claim to arbitration in accordance with the Contractor Agreement. Instead, Alford chose to file suit, alleging that the work performed under the Contractor Agreement was defective and incomplete, and further alleged that under the Deadline Agreement, CBCD failed to meet deadlines and performed work in a defective manner. CBCD maintains that the arbitration clause in the Contractor Agreement is unambiguous, and nothing in the Deadline Agreement suggests that it was intended to substitute or extinguish the Contractor Agreement. The Deadline Agreement provides as follows:
This agreement is a result of several missed deadlines and failures to communicate on the part of the contractor. Failure to comply with the deadlines and the procedures set forth in this document will constitute non-performance of this and all preceding contracts between Contractor and Client. Remedies for non-compliance may include bad reviews, reports to the Better Business Bureau and legal action. [emphasis added]
For direction, we look to the Louisiana Civil Code articles on Novation. To wit;
La. C.C. art. 1879. Extinguishment of existing obligation:
Novation is the extinguishment of an existing obligation by the substitution of a new one.
La. C.C. art. 1880. Novation not presumed:
The intention to extinguish the original obligation must be clear and unequivocal. Novation may not be presumed.
La. C.C. art 1881. Objective novation:
Novation takes place when, by agreement of the parties, a new performance is substituted for that previously owed, or a new cause is substituted for that of the original obligation. If any substantial part of the original performance is still owed, there is no novation.
Novation takes place also when the parties expressly declare their intention to novate an obligation.
Mere modification of an obligation, made without intention to extinguish it, does not effect a novation. The execution of a new writing, the issuance, or renewal of a negotiable instrument or the giving of new securities for the performance of an existing obligation are examples of such a modification.
CBCD cites La. R.S. 9:4201 and the Federal Arbitration Act in arguing that arbitration agreements are favored, are liberally enforced, and that all of Alford's claims fall within the scope of the Contractor Agreement. Thus, CBCD contends that Alford's filing constitutes a violation of the arbitration requirement, triggering La. R.S. 9:4202. CBCD also cites the well-settled principles of arbitration law in Louisiana, noting the strong presumption in favor of arbitration.
La. R. S. 9:4201 provides:
A provision in any written contract to settle by arbitration a controversy thereafter arising out of the contract, or out of the refusal to perform the whole or any part thereof, or an agreement in writing between two or more persons to submit to arbitration any controversy existing between them at the time of the agreement to submit, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
9 U.S.C.A. § 2 provides:
A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
La. R.S. 9:4202 provides:
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 in the suit or proceedings is preferable 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.
Alford argues that the Deadline Agreement clearly and unambiguously modified the Contractor Agreement, and by signing the Deadline Agreement, CBCD waived its right to enforce the arbitration clause. Alford further asserts that under La. C.C art. 1983, contracts have the effect of law between the parties, contending that the Deadline Agreement, which specifically provides the parties with the right to pursue "legal action" upon breach, became the law between them. In support for this assertion Alford cites La. C.C. art. 2046, which provides, "[W]hen the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent."
In reply, CBCD argues that Alford offers no support for her contention that "legal action" as referenced in the Deadline Agreement does not constitute arbitration, noting that courts have referred to arbitration as a quasi-legal proceeding. CBCD reiterates the argument that the Deadline Agreement contains no provision indicating that the parties intended to waive the valid and enforceable arbitration clause in the Contractor Agreement.
In Potier v. Morris Bart, L.L.C., 2016-0879, pp. 7-9 (La. App. 4 Cir. 3/15/17), 214 So.3d 116, 121-22, this Court recently recognized:
Arbitration is favored under both the Louisiana and the United States jurisprudence. Regions Bank [v. Weber] [20]10-1169, p. 3 [(La. App. 4 Cir. 12/15/10)], 53 So.3d [1284] at 1286. In Lakeland Anesthesia, Inc. v. United Healthcare of Louisiana, Inc., [20]03-1662, p. 8 (La. App. 4 Cir. 3/17/04), 871 So.2d 380, 387, we stated:
Louisiana courts have recognized a strong presumption in favor of arbitration. Moore v. Automotive
Protection Corp., 97-0623, p. 2 (La. App. 4 Cir. 5/21/97), 695 So.2d 550, 551 ... Both the federal and state jurisprudence hold that any doubt as to whether a controversy is arbitrable should be resolved in favor of arbitration.
The Louisiana Supreme Court in International River Center v. Johns-Manville Sales Corp., [20]02-3060, p. 6 (La. 12/3/03), 861 So.2d 139, 143, acknowledged that the arbitration statute requires that a lower court shall order arbitration "once [the court] finds that there has been an agreement to arbitrate and a failure to comply therewith." Put differently, the "threshold inquiry a court must decide is whether the parties agreed to arbitrate their dispute, which is a two-fold inquiry: (1) whether there is a valid arbitration agreement, and (2) whether the dispute in question falls within the scope of that agreement ... Under the FAA, any doubt concerning the scope of which disputes are arbitrable should be resolved in favor of arbitration." Saavedra v. Dealmaker Developments, LLC, [20]08-1239, p. 7 (La. App. 4 Cir. 3/18/09), 8 So.3d 758, 763 (internal citations omitted). See also Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).
***
The Supreme Court, in Aguillard v. Auction Management Corp., [20]04-2804, p. 7 (La. 6/29/05), 908 So.2d 1, 7 interpreted La. R.S. 9:4202, stating "that if any suit or proceedings are brought upon any issue referable to arbitration, the court in which suit is pending shall stay the trial of the action pending arbitration." (emphasis added). "Accordingly, even when the scope of an arbitration clause is fairly debatable or reasonably in doubt, the court should decide the question of construction in favor of arbitration." Aguillard, 04-2804 at 908 So.2d at 25. "The weight of this presumption is heavy and arbitration should not be denied unless it can be said with positive assurance that an arbitration clause is not susceptible of an interpretation that could cover the dispute at issue." Id. Louisiana's statutory provisions echo the Federal Arbitration Act, 9 U.S.C. § 1 et seq., and Louisiana courts look to federal law in interpreting the Louisiana arbitration statutes. Firmin v. Garber, 353 So.2d 975, 977 (La. 1977); Regions Bank, 10-1169, p. 5, 53 So.3d at 1286.
In this case, whether there was a valid arbitration agreement is not disputed. Alford does not contend that the dispute falls outside of the agreement. Rather, Alford argued that the Deadline Agreement modified and/or extinguished the Contract Agreement such that the arbitration clause therein was waived.
The Louisiana Supreme Court, in the case of Rebel Distributors Corp., Inc. v. LUBA Workers' Comp., 2013-0749, pp. 21-22 (La. 10/15/13), 144 So.3d 825, 840, opined:
Novation is never presumed. Isaacs v. Van Hoose, 171 La. 676, 131 So. 845, 847 (1930). Article 1881 discourages the finding of a novation in the absence of a clear indication that a new obligation has been contracted and the original obligation has been extinguished. La. C.C. art. 1881, Revision Comments-1984, comment (a). The intent of the parties is the key factor deciding whether a novation occurred. See Isaacs, 131 So. at 847 ("The intention [to novate] must clearly result from the terms of the agreement or by a full discharge of the original debt."); Pike Burden Printing, Inc. v. Pike Burden, Inc., 396 So.2d 361, 365 (La. App. 1 Cir.1981) ("Novation may also occur where the intent of the parties, the character of the transaction, the facts and circumstances surrounding the transaction and the terms of the agreement itself reveal a desire to effect a novation.").
Here, the trial court implicitly found that the parties intended for the Deadline Agreement to substitute for the Contractor Agreement, although the Deadline Agreement did not explicitly indicate that it superseded the Contractor Agreement. The trial court erred in reading an intent of the parties to have the Deadline Agreement supersede the Contractor Agreement where it is not evident in the wording of the agreements.
Although the Contractor Agreement is referenced in the Deadline Agreement, it does not specifically reference the arbitration agreement. The Deadline Agreement does not specifically provide that it is replacing the Contractor Agreement; it simply indicates that failure to complete the work by the deadlines provided would constitute non-performance of the Deadline Agreement "and all preceding contracts." (emphasis added). Additionally, as counsel for CBCD noted at the hearing, the Deadline Agreement does not include any price. Alford did not rely upon any evidence (other than the contracts themselves) in support of the argument that the parties intended for the Deadline Agreement to replace the Contractor Agreement. Thus, the parties' intent can only be determined from the contracts.
Ostensibly, the trial court's interpretation and extinguishment of the Contractor Agreement would lead to absurd results, as the alleged breaches arise out of both the December 17, 2015 Contractor Agreement and the March 3, 2016 Deadline Agreement. The record is void of any evidence of the parties' intent to extinguish the Contract Agreement in favor of the Deadline Agreement or to substitute the Contractor Agreement with the Deadline Agreement. Additionally, Louisiana law is well-settled that a strong presumption in favor of arbitration exists. Therefore, any doubts concerning the scope of arbitration should be resolved in favor of arbitration.
Based upon the above and forgoing, we grant the writ and reverse the trial court's ruling.
WRIT GRANTED