Bryant-Durham Elec. Co. v. Durham County Hospital Corp.

Annotate this Case

256 S.E.2d 529 (1979)

42 N.C. App. 351


No. 7814SC534.

Court of Appeals of North Carolina.

July 17, 1979.

*531 Smith, Currie & Hancock by John D. Sours and Robert O. Fleming, Jr., Atlanta, Ga., and Nye, Mitchell & Bugg by John E. Bugg, Durham, for plaintiff-appellant.

Bryant, Bryant, Drew & Crill by Victor S. Bryant, Jr., and Lester W. Owen, Durham, for respondents-appellees.

WEBB, Judge.

In 1972 when the parties entered into the construction contract, arbitration was governed by Chapter 1, Article 45 of the General Statutes. This article provided that a controversy had to exist between the parties in order for them to make a binding contract for arbitration. Skinner v. Gaither Corporation, 234 N.C. 385, 67 S.E.2d 267 (1951). The controversy in this case did not arise until after 2 June 1972. The provision for arbitration in the contract of that date is not binding.

The movant contends that the parties entered into an agreement for arbitration by correspondence between them in 1975. We hold that the letter from movant dated 22 August 1975 with the respondents' reply of 19 September 1975 created a contract between the parties for arbitration. As we read the letter of 22 August 1975 it was a demand by movant for arbitration for the damages caused to it by delay in the performance of the contract. The reply of respondents was an unconditional acceptance. The language in this letter which suggested a possible alternative method of arbitration did not make the respondents' acceptance of the offer conditional. Carver v. Britt, 241 N.C. 538, 85 S.E.2d 888 (1955). At the time this contract was made, Article 45A of Chapter 1 of the General Statutes governed arbitration agreements. In that article, G.S. 1-567.2 provides:

(a) Two or more parties may agree in writing to submit to arbitration any controversy existing between them at the time of the agreement, or they may include in a written contract a provision for the settlement by arbitration of any controversy thereafter arising between them relating to such contract or the failure or refusal to perform the whole or any part thereof. Such agreement or provision shall be valid, enforceable, and irrevocable except with the consent of all the parties, without regard to the justiciable character of the controversy.

Under this section the agreement to arbitrate made between the parties in 1975 would not bind them to arbitrate controversies not existing at the time of the agreement. It was not a provision of a contract for settling controversies in regard to the contract or controversies in regard to failure to perform under the contract. It was a contract to arbitrate controversies existing at the time of the agreement and binding to that extent under G.S. 1-567.2(a).

Although we hold that the agreement to arbitrate made between the parties in 1975 is binding on them as to controversies existing at that time we also hold the court properly denied the motion for arbitration. In its motion for arbitration the movant asked for arbitration of matters not in controversy at the time the agreement was made. The movant asked for arbitration as to the change order which movant alleged was made on 20 February 1976. The motion made no distinction between delays caused by respondents before 22 August 1975 and those caused after that date. It made no distinction in the penalty assessed by the architect for delays attributable *532 to the respondent before and after 22 August 1975. Since the movant made a demand for arbitration for controversies which were not in existence at the time the parties agreed to arbitrate, we hold the court properly denied the motion to compel arbitration.

The appellant also contends that the parties are bound by the Federal Arbitration Act.

9 U.S.C. § 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. 9 U.S.C. § 1 says: "[C]ommerce", as herein defined, means commerce among the several States or with foreign nations . . ..

The movant contends that 9 U.S.C. § 2 should be given a broad interpretation so that it requires arbitration since some of the materials used by movant to perform the contract were shipped in interstate commerce. We note that if this is the proper interpretation of the Federal Arbitration Act there would be little need for the State to have adopted an arbitration act. Most contracts would be governed by the Federal Act. 9 U.S.C. § 2 provides that in order for it to govern there must be a contract "evidencing a transaction involving commerce. . .." As we interpret this section the transaction which is the subject of the contract must be a transaction in interstate commerce. The construction of the Durham County General Hospital was not an act in interstate commerce and we hold the Federal Arbitration Act does not apply. See Varley v. Tarrytown Associates, Inc., 477 F.2d 208 (2d Cir. 1973).