C & O DEVELOPMENT CO. v. American Arbitration Ass'n

269 S.E.2d 685 (1980) 48 N.C. App. 548

C & O DEVELOPMENT COMPANY, Plaintiff,
v.
AMERICAN ARBITRATION ASSOCIATION, Defendant; G. J. Hopkins, Incorporated, Intervenor; Nello L. Teer Company, Intervenor.

No. 8011DC168.

Court of Appeals of North Carolina.

September 2, 1980.

Mast, Tew, Nall & Lucas, P. A., by George B. Mast and Joseph T. Nall, Smithfield, for plaintiff-appellee.

Osterhoudt, Ferguson & Natt, P. A., by Charles H. Osterhoudt, Salem, Va., and Daughtry, Hinton, Woodard, Murphy & Ragland, P. A., by Stephen C. Woodard, Jr., Smithfield, for intervenor-defendant G. J. Hopkins.

WELLS, Judge.

The first issue we must resolve concerns the justiciability of the present action-whether the trial court had authority to enjoin arbitration on grounds of res judicata or collateral estoppel. Defendant argues that G.S. 1-567.3^[1] limits the basis upon which a court may stay arbitration proceedings solely to the issue of whether a written agreement to arbitrate a particular dispute exists and that all other matters, including factual and legal issues, are the proper subject matter of the arbitration itself. It is defendant's position that the courts may determine any factual or legal issues involved only after the arbitration award has been entered. While we have found no cases in this State or other jurisdictions dispositive of this precise issue under the Uniform Act, it is our opinion that the extent of a judgment's binding effect is a matter for judicial determination. Cf., Rembrandt Ind. v. Hodges Int., 38 N.Y.2d 502, 381 N.Y.S.2d 451, 344 N.E.2d 383 (1976) (the scope of an arbitration award and its res judicata effect are issues properly determinable by the court and not the arbitrators); accord, Weinberger v. Friedman, 41 A.D.2d 620, 340 N.Y.S.2d 720 (1st Dep't 1973). We do not believe that in enacting the Uniform Act, the General Assembly intended to grant arbitrators the authority to determine the res judicata or collateral estoppel effect of a prior judgment. The arbitrability of various issues and disputes under the Uniform Act has, in general, been determined to be a matter for the courts to decide. See, e. g., Ferris College v. Faculty Ass'n, 72 Mich.App. 244, 249 N.W.2d 375 (1976), cert. denied, 399 Mich. 861 (1977); Layne-Minnesota Co. v. Regents of University, 266 Minn. 284, 123 N.W.2d 371 (1963). We hold that it was within the authority of the trial court to determine whether the subject matter of the demand for arbitration had been previously litigated between the parties and reduced to a judgment binding upon them.

Defendant also maintains that the arbitration here is not barred under the doctrine of res judicata or collateral estoppel because the issue in the proposed arbitration was not fully litigated and determined between the parties in the prior Virginia court proceedings. The basic principles of estoppel by judgment are succinctly set forth in King v. Grindstaff, 284 N.C. 348, 200 S.E.2d 799 (1973). Estoppel by judgment arises when there has been a final judgment or decree, necessarily determining a fact, question or right in issue, rendered by a court of competent jurisdiction, and there is a later suit involving an issue as to the identical fact, question or right determined, involving identical parties or parties in privity with a party or parties to the prior suit. Such a judgment operates as an estoppel not only as to the issues actually reduced to judgment in the former proceeding, but also as to all issuable matters contained in the pleadings, including all material and relevant matters within the scope of the pleadings, which the parties, in the exercise of reasonable diligence, could and should have brought forward. Borndum v. Cox, 292 N.C. 192, 232 S.E.2d 687 (1977); Bruton v. Light Co., 217 N.C. 1, 6 S.E.2d 822 (1940). Issues which could have been litigated in the prior suit but were not are said to be "merged" into the prior judgment. Behr v. Behr, 46 N.C.App. 694, 266 S.E.2d 393 (1980). Similarly, a party to a judgment is barred from litigating or relitigating issues in an arbitration proceeding which are raised or could have been raised in the prior action. Cf., Domke on Commercial Arbitration, § 39.04, pp. 338-339 (1968) (prior arbitration award constitutes a bar to subsequent suit or arbitration arising out of the same cause of action or dispute). Judge Pridgen found that the same issues asserted in the demand for arbitration were asserted by Hopkins in the prior Virginia court proceeding and were fully determined there. The evidence clearly supports this finding and we are therefore bound by it. Henderson County v. Osteen, 297 N.C. 113, 254 S.E.2d 160 (1979).

Upon his findings, Judge Pridgen correctly concluded that the parties in this action and in the demand for arbitration are the same or were in privity with the parties in the Virginia action, that the judgment in that action finally determined the issues between the parties asserted by Hopkins in its demand for arbitration, and that Hopkins is barred by that judgment from proceeding further in its demand for arbitration.

Affirmed.

MORRIS, C. J., and VAUGHN, J., concur.

NOTES

[1] G.S. 1-567.3 provides as follows:

Proceedings to compel or stay arbitration.—(a) On application of a party showing an agreement described in G.S. 1-567.2, and the opposing party's refusal to arbitrate, the court shall order the parties to proceed with arbitration, but if 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, otherwise, the application shall be denied.

(b) On application, the court may stay an arbitration proceeding commenced or threatened on a showing that there is no agreement to arbitrate. Such an issue, when in substantial and bona fide dispute, shall be forthwith and summarily tried and the stay ordered if found for the moving party. If found for the opposing party, the court shall order the parties to proceed to arbitration.

(c) If an issue referable to arbitration under the alleged agreement is involved in an action or proceeding pending in a court having jurisdiction to hear applications under subsection (a) of this section, the application shall be made therein. Otherwise the application may be made in any court of competent jurisdiction.

(d) Any action or proceeding involving an issue subject to arbitration shall be stayed if an order for arbitration or an application therefor has been made under this section or, if the issue is severable, the stay may be with respect thereto only. When the application is made in such action or proceeding, the order for arbitration shall include such stay.

(e) An order for arbitration shall not be refused or a stay of arbitration granted on the ground that the claim in issue lacks merit or bona fides or because any fault or grounds for the claim sought to be arbitrated have not been shown.