Appeal by defendant from order entered 5 January 2005 and
amended order entered 14 January 2005 by Judge C. Thomas Edwards in
Catawba County District Court. Heard in the Court of Appeals 22
March 2006.
J. Steven Brackett Law Office, by J. Steven Brackett, for
plaintiff-appellee.
Crowe & Davis, P.A., by H. Kent Crowe, for defendant-
appellant.
GEER, Judge.
Defendant Charles Steven Kiell appeals from an order denying
his motion to compel arbitration and concluding that plaintiffJulie Eriksson Kiell is entitled to a jury trial regarding whether
any arbitration agreement was fraudulently induced or was waived by
virtue of a breach of contract. It is well established under North
Carolina law that, when a party denies the existence of an
arbitration agreement, the trial court shall proceed summarily to
determine whether or not an agreement to arbitrate exists, and it
is reversible error for a trial court to fail to do so before
ruling upon a motion to compel arbitration. Barnhouse v. Am.
Express Fin. Advisors, Inc., 151 N.C. App. 507, 508, 566 S.E.2d
130, 131 (2002). Plaintiff has cited no authority _ and we have
found none _ that suggests she has a constitutional right to a jury
trial on the preliminary issues regarding the existence of an
enforceable arbitration agreement. Accordingly, we reverse the
order below and remand for a determination by the trial court
regarding whether an enforceable arbitration agreement exists
between the parties.
Facts
The parties were married in 1993, had no children, and later
permanently separated. In August 2003, the parties entered into an
agreement entitled "North Carolina Collaborative Family-Law
Agreement" (the "Collaborative Agreement"), which provided that the
Kiells "have chosen to use the principles of Collaborative Law to
settle the issues arising from the dissolution of the their [sic]
marriage." Additionally, the Collaborative Agreement provided that
the parties "commit . . . to settling [their] case without courtintervention" and went on to include the following passage under
the heading "Special Dispute Resolution (Arbitration/Mediation)":
Should . . . an issue or issues arise [about
which agreement cannot be reached], we agree
to submit the matter to mediation,
mediation/arbitration, or binding arbitration
under the North Carolina Family Law
Arbitration Act, rather than submitting the
problem to the Courts. . . . This provision
is a binding arbitration clause, to be used
rather than submitting the matter to Court.
Despite this Collaborative Agreement, in August 2004,
plaintiff filed her complaint in Catawba County District Court,
seeking divorce from bed and board, post-separation support,
alimony, attorneys' fees, and equitable distribution. The
complaint also included a "Claim to Rescind and Invalidate any
Purported Collaborative Law Agreement Between the Parties."
Plaintiff alleged that she had been fraudulently induced to enter
into the Collaborative Agreement and that, even if the
Collaborative Agreement was binding, defendant had breached the
Collaborative Agreement, thereby entitling her to rescission.
On 13 September 2004, defendant moved to compel arbitration
pursuant to the Collaborative Agreement under N.C. Gen. Stat. § 50-
43(a) (2005). The trial court denied defendant's motion,
concluding that plaintiff had a right to a jury trial on her
fraudulent inducement and breach of contract claims for the
following reason:
Since the Plaintiff's underlying claims for
fraud and breach of contract existed at the
time of the adoption of the 1868 Constitution,
Plaintiff's right to jury trial on those
issues must take precedence over any statutory
limitation thereon. The Plaintiff'sconstitutional entitlement to trial by jury on
her claims for fraud and breach of contract
supercedes the provisions of North Carolina
General Statute Chapter 50, Article 3 insofar
as said provisions may attempt to abrogate the
Plaintiff's right to trial by jury.
Based on this determination, the trial court ruled that plaintiff
was entitled to a trial by jury on her claims of fraud and breach
of contract and stayed all further proceedings "until those issues
are tried by a jury."
Discussion
[1] On appeal, defendant argues that the trial court erred by
concluding that the provisions of both the North Carolina Uniform
Arbitration Act ("UAA"), N.C. Gen. Stat. §§ 1-567.1 to 1-567.29
(2001) (repealed 2003),
(See footnote 1)
and the North Carolina Family Law
Arbitration Act("FLAA"), N.C. Gen. Stat. §§ 50-41 to 50-63 (2005)
_ that require the trial judge to determine whether a valid
arbitration agreement exists _ are unconstitutional as applied to
plaintiff's actions for fraudulent inducement and breach of the
Collaborative Agreement. We note as an initial matter that "[a]n
order denying arbitration, although interlocutory, is immediately
appealable because it involves a substantial right which might be
lost if appeal is delayed."
Miller v. Two State Constr. Co., 118N.C. App. 412, 414, 455 S.E.2d 678, 679 (1995) (internal quotation
marks omitted).
[2] When a party moves to compel arbitration under the UAA and
"the opposing party denies the existence of the agreement to
arbitrate, the court shall proceed summarily to the determination
of the issue so raised and shall order arbitration if found for the
moving party . . . ." N.C. Gen. Stat. § 1-567.3(a). This Court
has specifically held that "[b]y its plain terms, the statute
requires the court to summarily determine whether a valid
arbitration agreement exists. Failure of the court to determine
this issue, where properly raised by the parties, constitutes
reversible error."
Barnhouse, 151 N.C. App. at 508, 566 S.E.2d at
131 (internal citations omitted). As part of this determination,
"the court may also properly resolve preliminary issues surrounding
the agreement, such as whether or not the agreement was induced by
fraud, or whether the doctrines of
res judicata or waiver apply."
Id., 566 S.E.2d at 132 (internal citations omitted).
The applicable provision of the FLAA likewise states that,
upon a party's motion to compel arbitration, "[i]f an opposing
party denies existence of an agreement to arbitrate, the court
shall proceed summarily to determine whether a valid agreement
exists and shall order arbitration if it finds for the moving party
. . . ." N.C. Gen. Stat. § 50-43(a). Although our appellate
courts have yet to interpret this provision, the FLAA is meant to
be consistent with other North Carolina law governing arbitration,
including the UAA.
See N.C. Gen. Stat. § 50-41(a) ("[T]he purposeof this Article is to provide for arbitration as an efficient and
speedy means of resolving these disputes, consistent with Chapters
50, 50A, 50B, 51, 52, 52B, and 52C of the General Statutes and
similar legislation . . . ."); N.C. Gen. Stat. § 50-62(a) ("Certain
provisions of this Article have been adapted from the [UAA] in
force in this State . . . . This Article shall be construed to
effect its general purpose to make uniform provisions of th[is]
Act[] . . . ."). We, therefore, hold that opinions construing
identical provisions of the UAA are controlling with respect to the
FLAA.
Here, instead of summarily determining whether the
Collaborative Agreement contained a valid arbitration clause, the
trial court concluded that, because Plaintiff's "underlying claims
for fraud and breach of contract existed at the time of the
adoption of the 1868 Constitution, Plaintiff's right to [a] jury
trial on those issues must take precedence over any statutory
limitation thereon." The trial court and plaintiff point to the
North Carolina Constitution's provision that "[i]n all
controversies at law respecting property, the ancient mode of trial
by jury is one of the best securities of the rights of the people,
and shall remain sacred and inviolable." N.C. Const. art. I, § 25.
This Court has, however, repeatedly held that the enforcement
of arbitration agreements does not violate a party's constitutional
right to a jury trial. The Court specifically addressed the
fraudulent inducement argument made here in
Creekside Constr. Co.
v. Dowler, 172 N.C. App. 558, 562, 616 S.E.2d 609, 612 (2005): [D]efendants assert the trial court erred in
compelling arbitration because they were
deprived of an opportunity to present evidence
of the invalidity of the arbitration clause.
Specifically, defendants argue the contract
was induced by fraud . . . . At the hearing,
defendants argued they were entitled to a jury
trial on the issue of whether the arbitration
clause was enforceable on the grounds that the
contract was induced by fraud. On appeal,
defendants have abandoned that argument, and
we note that such argument is supported by
neither statutory nor case law.
(Emphasis added.) Likewise, in
Miller, this Court held: "An
agreement to arbitrate a dispute is not an unenforceable contract
requiring waiver of a jury . . . . [T]here is no constitutional
impediment to arbitration agreements." 118 N.C. App. at 416-17,
455 S.E.2d at 681.
See also Carteret County v. United Contractors
of Kinston, Inc., 120 N.C. App. 336, 341, 462 S.E.2d 816, 820
(1995) (holding that "there is no constitutional impediment to
arbitration agreements" with respect to the constitutional right to
a jury trial);
Bentley v. N.C. Ins. Guar. Ass'n, 107 N.C. App. 1,
10, 418 S.E.2d 705, 711 (1992) (holding that an appraisal clause
did not violate the insured's constitutional right to a trial by
jury).
Further, our Supreme Court has held that the right to trial by
jury applies "only to actions respecting property in which the
right to jury trial existed either at common law or by statute at
the time of the adoption of the 1868 Constitution."
State ex rel.
Rhodes v. Simpson, 325 N.C. 514, 517, 385 S.E.2d 329, 331 (1989).
If the action existed at the time of the adoption of the 1868
Constitution, then the court "determine[s] whether the remedysought is one at law respecting property."
Id. at 518, 385 S.E.2d
at 332. The Supreme Court recently reaffirmed that the remedy
sought must be one "respecting property."
See Rhyne v. K-Mart
Corp., 358 N.C. 160, 174, 594 S.E.2d 1, 11 (2004) ("[W]e do not
agree with plaintiffs' argument that the 'respecting property'
language of Article I, Section 25 is mere surplusage and that
determining whether a right to a trial by jury exists should
only
involve an examination of whether [the cause of action existed]
prior to 1868.").
The trial court, in holding that plaintiff had a right to a
jury trial on the preliminary issues of fraudulent inducement and
breach of contract with respect to the Collaborative Agreement,
relied exclusively on the fact that such causes of action existed
at the time of the adoption of the 1868 Constitution. It never
addressed whether "the remedy sought" was one "respecting
property." Likewise, plaintiff, on appeal, makes no argument that
the remedy or relief she seeks _ rescission of the Collaborative
Agreement _ meets that requirement. She identifies no property
right that will be vindicated if the Collaborative Agreement,
specifying the manner in which the parties intended to resolve
their family law disputes, is rescinded.
In addition, the trial court directed a jury trial on
preliminary issues and not as a means of resolving the ultimate
merits of the underlying claims. Our Supreme Court long ago held
that when the issues upon which a jury trial is sought "form no
part of the ultimate relief sought [and] do not affect the finalrights of the parties," then "the power of the judge to make them
is constitutionally exercised without the intervention of the
jury."
Peele v. Peele, 216 N.C. 298, 300, 4 S.E.2d 616, 618 (1939)
(concluding that trial court properly decided, without a jury,
whether a wife was entitled to alimony
pendente lite).
Since the factual questions regarding whether an enforceable
arbitration agreement exists do not relate to the ultimate relief
sought by the parties, and do not affect the final rights of the
parties with respect to their family law dispute, plaintiff is not
entitled to have those issues resolved by a jury. Consequently,
without expressing any opinion on the enforceability or scope of
the Collaborative Agreement's arbitration provisions, we reverse
and remand to the trial court for proceedings in accordance with
the UAA and the FLAA.
Reversed and remanded.
Judges McGEE and McCULLOUGH concur.
Footnote: 1