Habitat Architectural Group, P.A. v. Capitol Lodging Corp.

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
HABITAT ARCHITECTURAL GROUP, 
P.A.,
Plaintiff-Appellant,
v.
CAPITOL LODGING CORPORATION;  No. 01-1106
CAPITOL LODGING DEVELOPMENT
CORPORATION; CAROLINA PARTNERS I,
L.L.P.,
Defendants-Appellees.

Appeal from the United States District Court
for the Middle District of North Carolina, at Durham.
William L. Osteen, District Judge.
(CA-00-620-2)
Argued: October 29, 2001
Decided: January 23, 2002
Before WILKINSON, Chief Judge, GREGORY, Circuit Judge,
and Malcolm J. HOWARD, United States District Judge for the
Eastern District of North Carolina, sitting by designation.
Affirmed by unpublished per curiam opinion.
COUNSEL
ARGUED: William Frank Maready, LAW OFFICES OF WILLIAM
F. MAREADY, Winston-Salem, North Carolina, for Appellant.
2 HABITAT ARCHITECTURAL GROUP v. CAPITOL LODGING CORP.
Christopher G. Daniel, WOMBLE, CARLYLE, SANDRIDGE &
RICE, P.L.L.C., Winston-Salem, North Carolina, for Appellees. ON
BRIEF: Celie B. Richardson, LAW OFFICES OF WILLIAM F.
MAREADY, Winston-Salem, North Carolina, for Appellant. Michael
E. Ray, WOMBLE, CARLYLE, SANDRIDGE & RICE, P.L.L.C.,
Winston-Salem, North Carolina, for Appellees.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
Appellant challenges the district court’s order compelling arbitra-
tion. For the reasons stated below, we affirm.
I.
Appellees are three interrelated corporations: Capitol Lodging Cor-
poration, Capitol Lodging Development Corporation, and Carolina
Partners I, L.L.P. (collectively "appellees"). This case asks whether
one of these corporations was party to the June 5, 1995, arbitration
agreement incorporated into a contract signed by the appellant, Habi-
tat Architectural Group ("Habitat").
In 1995, Habitat entered into an agreement to provide architectural
services for building Comfort Suite hotels in Winston-Salem, North
Carolina. Habitat drafted a letter of agreement ("letter agreement")
between the "Owner" and the "Architect" of the project. (J.A. 19-24).
The letter agreement did not designate or clarify the meaning of the
term "Owner," the other party to the agreement. However, the letter
agreement contained a section which incorporated the American Insti-
tute of Architects’ ("AIA") "Standard Form of Agreement Between
Owner and Architect." (J.A. 25-35). The AIA’s form contained an
agreement to arbitrate. (J.A. 31).
HABITAT ARCHITECTURAL GROUP v. CAPITOL LODGING CORP. 3
Habitat sent the proposed letter agreement to George R. Justus
("Justus") in the care of Capitol Lodging Corporation for Justus’s sig-
nature. Justus executed the agreement by signing his name in the "By"
line, and then in the "Title" line provided by Habitat, Justus scrawled
the abbreviation "Pres." (J.A. 24). At the time the letter agreement
was executed, Justus was president of two companies: Capitol Lodg-
ing Corporation and Capitol Lodging Development Corporation.
A dispute involving Habitat’s architectural services arose, and Cap-
itol Lodging Corporation made a demand for arbitration on June 21,
1999. (J.A. 9). Habitat originally agreed to proceed to arbitrate, but
two months later, Habitat began to voice concerns to opposing coun-
sel that Capitol Lodging Corporation was not a proper party to the
contract. In response to these concerns, appellees filed an amended
demand for arbitration adding Capitol Lodging Development Corpo-
ration and Carolina Partners, I as claimants. (J.A. 14).
On June 1, 2000, almost one year after the original demand for
arbitration was made, Habitat filed an action in state court to stay the
arbitration proceedings. Habitat maintained that none of the appellees
was a clear party to the arbitration agreement, and therefore, that none
of the appellees had the authority to force Habitat into binding arbitra-
tion.
Appellees removed the action to the United States District Court
for the Middle District of North Carolina on June 1, 2000, and filed
a motion to dismiss, or in the alternative, for summary judgment on
August 7, 2000. (J.A. 36-41). After holding a hearing, the Honorable
William L. Osteen granted appellees’ motion for summary judgment
and ordered the parties to proceed to arbitration. (J.A. 211-218).
Habitat appeals the district court’s order compelling arbitration.
For the reasons stated below, we affirm the district court’s decision.
II.
Under the Federal Arbitration Act ("FAA"), a court must stay "any
suit or proceeding" pending arbitration of "any issue referable to arbi-
tration under an agreement in writing for such arbitration." 9 U.S.C.
4 HABITAT ARCHITECTURAL GROUP v. CAPITOL LODGING CORP.
§ 3. Because ascertaining the scope of an arbitration agreement is pri-
marily a task of contract interpretation, a district court’s determination
of the arbitrability of a dispute is reviewed de novo. Cara’s Notions,
Inc. v. Hallmark Cards, Inc., 140 F.3d 566, 569 (4th Cir. 1998).
However, in applying principles of contract interpretation, the court
must give appropriate deference to the liberal federal policy favoring
arbitration. Volt Info. Sciences v. Board of Trustees, 489 U.S. 468,
475-76 (1989) (internal citations omitted); Moses H. Cone Mem’l
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). In determin-
ing whether the parties agreed to arbitrate their disputes, and hence,
whether the FAA governs the agreement, courts apply state law prin-
ciples governing contract formation. First Option of Chicago, Inc. v.
Kaplan, 514 U.S. 938, 944 (1995). Therefore, we are required to
determine whether Habitat entered into an agreement to arbitrate with
any of the appellees under North Carolina law.
The court first notes that had Habitat been overly concerned about
the owner’s identity, it could have made inquires prior to the parties’
dispute. Instead, Habitat’s interest in the owner’s identity did not sur-
face until appellees forced Habitat into arbitration, and Habitat needed
a convenient way to escape arbitration. Habitat concedes that it
agreed to arbitrate when it signed the letter agreement and that the
dispute falls within the arbitration agreement. While admitting that it
has agreed to arbitrate this dispute with someone, Habitat has failed
to provide a clear answer as to whom Habitat believes that person or
entity to be. Instead, appellant contends that the court cannot compel
arbitration because Habitat does not know with whom it agreed to
arbitrate.
During oral arguments, appellant contended that it agreed to arbi-
trate the dispute with George Justus in his individual capacity. This
argument, however, is foreclosed by both the evidence and admis-
sions by appellant’s counsel. Habitat’s letter agreement incorporating
a standardized arbitration clause contained a "Title" line which Justus
filled with the abbreviation, "Pres.," clearly indicating that Justus was
acting in his representative capacity. When pressed by the district
court during oral arguments, counsel for appellant admitted as much.
(J.A. 147).
HABITAT ARCHITECTURAL GROUP v. CAPITOL LODGING CORP. 5
As an alternative argument, Habitat maintained that because it did
not know with whom it was contracting at the time it entered into the
agreement, arbitration cannot be compelled. It is well established
under North Carolina law that a party does not have to be positively
identified for a contract to exist or for the previously unknown party
to enforce the contract. See Virginia-Carolina Peanut Co. v. Atlantic
Coast Line R.R., 71 S.E. 71, 72 (N.C. 1911) ("[W]here a person enters
into a simple contract . . . as agent for an undisclosed principal, the
principal may come in and sue the third party on the contract . . . not
only where the agent disclosed the existence, but not the name of the
principal, but also where he does not even disclose the existence of
the principal." (citations omitted)); see also Woodard v. Stieff, 87 S.E.
955, 955 (N.C. 1916) ("It is a well established rule of law that when
a contract, not under seal, is made with an agent in his own name for
an undisclosed principal, either the agent or the principal may sue
upon it." (citations omitted)).
Appellant’s argument that arbitration agreements should be held to
more stringent standards of contract formation than other types of
contracts undermines the clear federal policy supporting arbitration
and would fundamentally alter state law principles governing contract
formation. We therefore hold that absent normal defenses to contract
formation, an agreement to arbitrate cannot be defeated by one party’s
assertion that it did not know the precise identity of the party with
whom it contracted. Thus, the point of contention is not whether Hab-
itat knew whom it was contracting with at the time it signed the
agreement, but instead if the evidence supports the district court’s
conclusion that one of the appellees was party to the contract. The
court is of opinion that it does.
In this case, the district court, applying North Carolina law, prop-
erly determined that the term "Owner" was not clearly designated in
the letter agreement. Piedmont Bank & Trust Co. v. Stevenson, 339
S.E.2d 49, 52 (N.C. Ct. App. 1986). The court next proceeded to clar-
ify the parties’ intent by considering outside extrinsic evidence, keep-
ing in mind the following legal principles: 1) North Carolina law
requires that ambiguous terms be construed against Habitat, the party
who drafted the contract, Federal Realty Inv. Trust v. Belk-Tyler, 289
S.E.2d 145, 148 (N.C. Ct. App. 1982), and 2) North Carolina also has
a strong public policy favoring arbitration which resolves doubt con-
6 HABITAT ARCHITECTURAL GROUP v. CAPITOL LODGING CORP.
cerning the existence of an arbitration agreement in favor of arbitra-
tion. Martin v. Vance, 514 S.E.2d 306, 309 (N.C. Ct. App. 1999).
Based on the evidence presented, the district court properly con-
cluded that ambiguity concerning the term "Owner" could be resolved
from the record. First, Habitat knew or should have known that Justus
signed the letter agreement as a representative of an entity. As Justus
was president of two companies at the time the contract was formed,
the only options were Capitol Lodging Corporation and Capitol Lodg-
ing Developing Corporation, both parties to this action. The hotels
were built on property owned by Capitol Lodging Development Cor-
poration’s general partner, Carolina Partners. Additionally, Habitat
accepted payments from Carolina Partners. As general partners, Capi-
tol Lodging Development Corporation and Carolina Partners were
entitled to act on one another’s behalf. The district court’s conclusion
that Justus signed the letter agreement on behalf of Capitol Lodging
Development Corporation is supported by the record.
Turning to alternative interpretations of the ambiguous term, Habi-
tat’s refusal to present plausible evidence to contradict appellees’
position was key to the district court’s decision. When pressed to
identify who it believed the other contract party was, Habitat’s strat-
egy was to plead ignorance. As discussed above, Habitat cannot
escape a contract through its own lack of knowledge as to a party’s
identity. Instead, when presented with credible evidence that the
owner’s identity was ascertainable, Habitat should have asserted who
it believed the owner to be. This was obviously a position Habitat
wished to avoid because to have done so would have forced Habitat
into arbitration. As Habitat failed to provide any credible alternatives
as to the other contracting party’s identity, the evidence mandated the
district court’s conclusion that the arbitration agreement was between
Capitol Lodging Development Corporation and Habitat. Therefore,
the district court properly compelled arbitration.
Finding no error, we affirm the district court’s opinion.
AFFIRMED