Appeal by defendants American Express Financial Advisors,
Inc., and American Enterprise Investment Services, Inc., from
order entered 8 December 2000 by Judge Forrest D. Bridges in
Mecklenburg County Superior Court. Heard in the Court of Appeals
23 April 2002.
Cansler Lockhart, P.A., by F. Lane Williamson, for plaintiff
appellee.
The Banks Law Firm, P.A., by R. Jonathan Charleston, for
American Express Financial Advisors, Inc., and American
Enterprise Investment Services, Inc., defendant appellants.
TIMMONS-GOODSON, Judge.
American Express Financial Advisors, Inc. and American
Enterprise Investment Services, Inc. (collectively, “defendants”)
appeal an order by the trial court denying their motion to stay
proceedings pending arbitration. For the reasons stated herein, we
reverse the order and remand this case to the trial court.
The facts pertinent to the instant appeal are as follows: On
2 December 1999, Dan D. Barnhouse (“plaintiff”) filed a complaint
against defendants and Bank of America Corporation in Mecklenburg
County Superior Court alleging negligence and breach of fiduciaryduty in the sale of certain stock owned by plaintiff. Defendants
thereafter filed a motion to stay further proceedings, alleging
that plaintiff had agreed, upon opening his account with
defendants, to submit to arbitration any dispute arising over his
account. Plaintiff denied that such an agreement to arbitrate
existed, and defendants' motion came before the trial court on 9
October 2000. After arguments by counsel, the trial court denied
defendants' motion to stay proceedings, from which order defendants
appeal.
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The dispositive issue is whether the trial court properly
denied defendants' motion to stay proceedings without first
determining whether or not an agreement to arbitrate existed
between the parties. Because we conclude that the court was
required to first resolve the issue of whether or not an agreement
to arbitrate existed before granting or denying defendants' motion,
we reverse and remand the order of the court.
We note initially that the denial of a motion to compel
arbitration, although interlocutory, is nevertheless immediately
appealable, as it affects a substantial right. See Blow v.
Shaughnessy, 68 N.C. App. 1, 12, 313 S.E.2d 868, 874, disc. review
denied, 311 N.C. 751, 321 S.E.2d 127 (1984). Defendants' appeal is
therefore properly before this Court.
Upon a motion seeking stay of a court proceeding on the
grounds that the parties had previously agreed to arbitrate the
controversy at issue and the opposing party's denial of theexistence of an arbitration agreement, the trial court “shall
proceed summarily” to determine whether or not an agreement to
arbitrate exists between the parties. N.C. Gen. Stat. § 1-567.3(a)
(2001). By its plain terms, the statute requires the court to
summarily determine whether a valid arbitration agreement exists.
See Routh v. Snap-On Tools Corp., 101 N.C. App. 703, 706, 400
S.E.2d 755, 757 (1991). Failure of the court to determine this
issue, where properly raised by the parties, constitutes reversible
error. See Burke v. Wilkins, 131 N.C. App. 687, 689, 507 S.E.2d
913, 914 (1998). In determining whether or not an agreement to
arbitrate exists, the court may also properly resolve preliminary
issues surrounding the agreement, such as whether or not the
agreement was induced by fraud, see Henderson v. Herman, 104 N.C.
App. 482, 486, 409 S.E.2d 739, 741 (1991), disc. review denied, 330
N.C. 851, 413 S.E.2d 551 (1992), or whether the doctrines of res
judicata or waiver apply. See Cyclone Roofing Co. v. LaFave Co.,
67 N.C. App. 278, 281-82, 312 S.E.2d 709, 711, reversed on other
grounds, 312 N.C. 224, 321 S.E.2d 872 (1984). Where the trial
court determines that the parties entered into an enforceable
contract providing for arbitration, the trial court “shall order
the parties to proceed to arbitration.” N.C. Gen. Stat. § 1-
567.3(b). Accordingly, where the court concludes that no agreement
to arbitrate exists, the court will grant the moving party's motion
to stay arbitration. See id.
In the instant case, there is no indication that the trial
court made any determination regarding the existence of anarbitration agreement between the parties before denying
defendants' motion to stay proceedings. The order denying
defendants' motion to stay proceedings does not state upon what
basis the court made its decision, and as such, this Court cannot
properly review whether or not the court correctly denied
defendants' motion. See CIT Grp./Sales Fin., Inc. v. Bray, 141
N.C. App. 542, 545, 539 S.E.2d 690, 692 (2000). Although it is
possible to infer from the order denying defendants' motion that
the trial court found that no arbitration agreement existed, other
possibilities are equally likely. For instance, the trial court
might have concluded that an arbitration agreement existed, but
that the doctrine of equitable estoppel precluded enforcement of
the agreement. It is also possible that the trial court made no
determination on the validity of the agreement, but denied the
motion on procedural grounds, for example. Because the trial court
failed to determine whether or not an agreement to arbitrate
existed between the parties, the trial court erred in denying
defendants' motion to stay proceedings.
(See footnote 1)
See CIT Grp./Sales Fin.,
Inc., 141 N.C. App. at 545, 539 S.E.2d at 692; Burke, 131 N.C. App.
at 689, 507 S.E.2d at 915 (both holding that the trial courts erred
where they denied motions to compel arbitration and stay
proceedings without first determining whether a valid agreement to
arbitrate existed between the parties). We therefore reverse theorder and remand to the trial court for a determination of whether
or not there exists an agreement to arbitrate between the parties.
The order of the trial court is therefore
Reversed and remanded.
Judge HUNTER concurs.
Judge GREENE dissents.
=============================
GREENE, Judge, dissenting.
Because I disagree with the majority that the trial court was
under a duty to make findings as to the existence of an agreement
to arbitrate, I dissent.
On 2 December 1999, plaintiff filed a complaint against
defendants and Bank of America Corporation (BOA) alleging
negligence and breach of fiduciary duty in the sale of his stock.
On 3 February 2000, defendants filed an unverified answer denying
plaintiff's allegations together with a motion to stay proceedings
pending arbitration. In support of the motion to stay the
proceedings, defendants alleged in their answer that plaintiff had
opened an AEFA investment management account and, in so doing,
agreed to certain written provisions, including an agreement to
arbitrate any controversies arising out of the relationship between
plaintiff and defendants. BOA filed an answer dated 4 February
2000 and a motion to compel arbitration dated 7 March 2000.
(See footnote 2)
Plaintiff submitted an affidavit stating he “never entered
into any kind of arbitration agreement with [defendants] inconnection with the purchase of . . . stock for [his] account.
[He] never discussed such an agreement with . . . AEFA and did not
even know that such a provision existed until this lawsuit
[commenced].” Defendants' attorney submitted a memorandum of law
in support of their motion to stay proceedings pending arbitration
(the memorandum) dated 9 October 2000, to which the alleged
agreement outlining the arbitration provision was attached. The
memorandum was not in the form of an affidavit and was neither
filed nor presented into evidence in the trial court.
In this case, the trial court ruled on defendants' motion to
stay proceedings pending arbitration. Accordingly, the trial court
was not required to enter any findings or conclusions unless
requested to do so by a party.
See N.C.G.S. § 1A-1, Rule 52(a)(2)
(2001). Furthermore, “[w]hen the trial court is not required to
find facts and make conclusions of law and does not do so, it is
presumed that the [trial] court[,] on proper evidence[,] found
facts to support its judgment.”
Estrada v. Burnham, 316 N.C. 318,
324, 341 S.E.2d 538, 542 (1986). As neither party requested the
trial court to enter findings and conclusions, it must be presumed
that the trial court found facts to support its order. Thus, the
majority is mistaken in its assumption that the trial court's
failure to enter specific findings in its order is equivalent to a
failure to determine whether an arbitration agreement existed
between the parties.
The dispositive issue in this case is whether defendants met
their burden of showing the existence of a written agreement toarbitrate.
Upon a motion seeking a stay of a court proceeding on the
grounds that the parties had previously agreed to arbitrate the
controversy at issue and the opposing party's denial of the
existence of an arbitration agreement, the trial court is required
to “proceed summarily”
(See footnote 3)
to determine the issue. N.C.G.S. § 1-567.3
(2001);
Routh, 101 N.C. App. at 706, 400 S.E.2d at 757. The party
seeking enforcement of an arbitration agreement has the burden of
showing the existence of that agreement,
Sciolino v. TD Waterhouse
Investor Servs.,
Inc., --- N.C. App. ---, ---, 562 S.E.2d 64, 66,
(2002), and may do so with affidavit(s) and documentary evidence
filed with or presented into evidence in the trial court and, with
the trial court's permission, the use of “oral testimony or
depositions,” N.C.G.S. § 1A-1, Rule 43(e) (2001) (permissible
evidence to be heard on motions);
see Hankins v. Somers, 39 N.C.
App. 617, 619-20, 251 S.E.2d 640, 642,
disc. review denied, 297
N.C. 300, 254 S.E.2d 920 (1979) (Rule 56(e) affidavit requirements
read into Rule 43(e)). “[A]ffidavits or other material offered
which set forth facts which would not be admissible in evidenceshould not be considered” when passing on a section 1-567.3 motion.
Borden, Inc. v. Brower, 17 N.C. App. 249, 253, 193 S.E.2d 751, 753,
rev'd on other grounds, 284 N.C. 54, 199 S.E.2d 414 (1973);
N.C.G.S. § 1A-1, Rule 56(e) (2001). Inadmissible evidence may
nonetheless “be considered by the [trial] court if not challenged
by means of a timely objection.”
Insurance Co. v. Bank, 36 N.C.
App. 18, 26, 244 S.E.2d 264, 269 (1978).
To be valid, the agreement to arbitrate must be in writing.
N.C.G.S. § 1-567.2(a) (2001).
(See footnote 4)
There is no requirement, however,
that the written agreement be signed.
See Real Color Displays v.
Universal Applied Tech., 950 F. Supp. 714, 717 (E.D.N.C. 1997)
(applying federal arbitration statute similar to this state's
statute). Thus, “parties may become bound by the terms of a
[written] contract, even though they do not sign it, where their
assent is otherwise indicated.” 17A Am. Jur. 2d
Contracts § 185
(1991) (assent indicated upon “acceptance of benefits under the
contract, or the acceptance by one of the performance by the
other”);
Daisy Mfg. Co., Inc. v. NCR Corp., 29 F.3d 389, 392 (8th
Cir. 1994) (under ordinary contract principles, parties can “become
contractually bound absent their signatures”).
In this case, defendants have not presented any competentevidence within the meaning of Rule 43(e) and thus have failed to
meet their burden of showing the existence a written agreement with
plaintiff to arbitrate the controversy at issue. Defendants'
answer states the terms of the alleged agreement, the allegations,
however, do not qualify as evidence within the meaning of Rule
43(e) because the answer was not verified.
(See footnote 5)
See Schoolfield v.
Collins, 281 N.C. 604, 612, 189 S.E.2d 208, 212-13 (1972) (verified
pleading qualifies as an affidavit under Rule 56(e)). Although
defendants' attorney attached a copy of the alleged agreement to
the memorandum submitted to the trial court, the memorandum does
not qualify as a Rule 56(e) affidavit for two reasons: it was not
sworn to, and it does not “show affirmatively that [the attorney]
is competent to testify” with respect to the agreement.
See
N.C.G.S. § 1A-1, Rule 56(e). Furthermore, the attachment to the
memorandum does not qualify as documentary evidence because the
memorandum was not filed with the trial court or otherwise
presented into evidence.
(See footnote 6)
The trial court therefore properly
denied defendants' motion to stay proceedings pending arbitration,
and I would affirm the trial court's order.
Footnote: 1