Renaissance Enterprise v. Ocean Resorts
Annotate this CaseDavis Adv. Sh. No. 8
S.E. 2d
THE STATE OF SOUTH CAROLINA
In The Supreme Court
Renaissance
Enterprises, Inc., a
South Carolina
Corporation, Respondent,
v.
Ocean Resorts, Inc., a
South Carolina
Corporation, Ocean
Creek Resort, Inc., a
South Carolina
Corporation, and Ocean
Resorts Rental
Management Company,
a South Carolina
Corporation, Petitioners.
ON WRIT OF CERTIORARI TO THE COURT OF
APPEALS
Appeal From Horry County
Charles W. Whetstone, Jr., Judge
Opinion No. 24766
Heard November 19, 1997 - Filed February 23, 1998
VACATED
Craig A. Snook, of Myrtle Beach, for petitioners.p. 9
RENAISSANCE ENTERPRISES v. OCEAN RESORTS Dirk J. Derrick, of Conway,. for respondent.BURNETT, A.J.: This Court granted certiorari to review the
Court of Appeals' opinion in Renaissance Enterprises, Inc. v. Ocean
Resorts, Inc., Op. No. 96-UP-169 (S.C. Ct. App. filed June 5, 1996)
(Renaissance II).
FACTS
Respondent (Enterprises) seeks to recover damages from
petitioners (Resorts) based upon a breach of contract.1 In 1984,
Enterprises and Resorts executed a contract that provided Resorts would
pay Enterprises a referral fee for any guest referred to Resorts by
Enterprises. The parties then amended the contract to address future
fees:
[Resorts] will pay [Enterprises] the fee and/or fees outlined [above] should a guest or group of guests repeat and/or rebook with [Resorts] directly or indirectly by [Enterprises] or []Resorts]. These fees will be paid by [Resorts] to [Enterprises] on a perpetual basis as long as the guest or group of guests continue to utilize properties and facilities managed by [Resorts].The amendment also contained a new contractual provision
stating Enterprises would represent Resorts as its exclusive agent for
military contract quarters at the Myrtle Beach Air Force Base and other
military installations. Both the contract and amendment were subject to
arbitration should a dispute arise.
In January 1989, Enterprises filed a complaint alleging Resorts
had breached the contract by failing to pay commissions for referral fees
from 1985 to the date of the complaint and by violating the military
contract quarters provision. Pursuant to the contract provision, the case
was submitted to arbitration.
1Enterprises is a corporation conducting business as a travel agentand broker. Resorts is a corporation conducting business as a rental
management company owning and managing facilities in the Myrtle Beach
area.
p. 10
RENAISSANCE ENTERPRISES v. OCEAN RESORTSIn its arbitration demand, Enterprises sought damages for both
commissions due for referral fees and for loss of profits on the military
quarters provision. Specifically, it alleged it was due approximately
$100,000 in commissions and $748,682 for lost profits for the period in
question. In response, Resorts denied it had violated the contract and
alleged as one of its affirmative defenses that the contract had been
terminated prior to the period of time for which Enterprises was seeking
commissions and loss of military profits. As a counterclaim, Resorts
sought to rescind the contract and obtain restitution for all amounts
previously paid to Enterprises.
After a hearing, the arbitrators awarded Enterprises
$51,770.40 in actual damages, plus interest and attorney's fees. Resorts'
counterclaim was denied. The award does not mention Resorts'
affirmative defenses. The award states "[t]his award is in full settlement
of all claims and counterclaims submitted to this arbitration." Resorts did
not challenge the award or ask the arbitrators to clarify the award.2
Enterprises moved to vacate or modify the award arguing the arbitrators
failed to consider its right to lost profits under the military quarters
provision. Enterprises did not challenge the award of $51,770.40 in actual
damages, despite the fact that this amount was slightly more than half of
the approximately $100,000 Enterprises had claimed it was due in
commissions.
On appeal, Enterprises argued the arbitrators failed to consider
the issue of military quarters profits. The Court of Appeals affirmed the
decision of the circuit court stating, in part:
The arbitrators merely awarded a sum without discussion of how they arrived at that sum. They noted that the counterclaim of Resorts was denied, but made no indication on the validity of Resorts' general denial or affirmative defenses. Quite logically, the award can be interpreted as taking into consideration both of [Enterprises]'s allegations of breach of contract and Resorts' defenses to the alleged breaches. The arbitrators may well have found [Enterprises] proved the nonpayment of commissions but failed in its proof on the military quarters provision. Further, they may have found Resorts' affirmative defenses on that issue to be valid. This theory is buttressed by the specific notation in the award that 2S.C. Code Ann. § 15-48-100 (Supp. 1996).p. 11
RENAISSANCE ENTERPRISES v. OCEAN RESORTS it was "in full settlement of all claims and counterclaims submitted." (emphasis added).Renaissance Enterprises, Inc. v. Ocean Resorts, Inc., 310 S.C. 395, 399,
426 S.E.2d 821, 823 (Ct. App. 1992) (Renaissance I)
In July 1994, Enterprises filed the present action alleging the
continuing existence of the contract with Resorts. Enterprises
acknowledged it had received a judgment against Resorts for all
commissions owed from 1984 through January 30, 1989, as a result of the
arbitration award. However, Enterprises claimed because the contract was
still in effect, it was entitled to commissions due from referrals which had
accrued under the future fees provision since the arbitration award.
In its answer, Resorts alleged the present action was barred by
res judicata and arbitration and award because the prior arbitration
proceeding concluded the contract between the parties had been
terminated. Subsequently, Resorts moved for summary judgment on these
grounds. The parties agreed to submit this issue to arbitration in the
event the trial court denied Resorts' motion for summary judgment.
The trial judge concluded the facts in this action were not in
dispute and determined the only issue before the court for resolution was
whether Enterprises' contract with Resorts was terminated prior to the
time period for which Enterprises is now seeking compensation.3 After
concluding the prior arbitration adjudicated the contract had been
terminated, the trial judge granted Resorts' motion for summary judgment.
In reaching this conclusion, the trial judge noted the
3Res judicata can only apply to those matters included within thesubmission agreement. 4 Am.Jur.2d Alternative Dispute Resolution § 214
(1995) (arbitrator is limited to decide only those questions submitted by
the parties and res judicata may bar only issues submitted). The issue of
Enterprises' right to future fees was not submitted for arbitration in the
prior proceeding. Therefore, Enterprises is not precluded from raising this
issue once it becomes entitled to the fees unless the arbitrators determined
in the prior proceeding the contract was terminated. See Dunlap v.
Travelers Insurance Co., 223 S.C. 150, 74 S.E.2d 828 (1953) (res judicata,
does not apply to subsequent litigation between the same parties when the
cause of action dealt with breaches of the same contract which occurred
after the initiation of the prior litigation).
p. 12
RENAISSANCE ENTERPRISES v. OCEAN RESORTSarbitrators' award stated it was "in full settlement of all claims." The
trial judge concluded the only defense raised in Resorts' response capable
of producing such a result was that the contract had been terminated after
Enterprises became entitled to a portion of the commissions, but before
Enterprises became entitled to all the commissions that it claimed it was
owed.
The Court of Appeals reversed the grant of summary judgment.
Although the Court of Appeals agreed the facts in the case were largely
undisputed, it found summary judgement was inappropriate and that
further inquiry into the facts and circumstances surrounding the
arbitration award was necessary to clarify the application of the law.
Renaissance II, supra.
In support of its findings, the Court of Appeals noted in
Renaissance I, it had indicated the precise basis for the arbitration award
was unknown and could have been premised upon a number of different
scenarios. Consequently, it disagreed with the trial judge's finding the
only logical interpretation of the arbitrators' award was that the contract
had been terminated after Enterprises "became entitled to a portion of the
lodging, food and beverage commissions it demanded," but before
Enterprises "became entitled to all lodging, food, and beverages damages it
sought." (emphasis added). Instead, the Court of Appeals concluded it
was just as likely the arbitrators found Enterprises had proved its
entitlement to only a portion of the commissions it had claimed it was
due, and was unable to show any entitlement to profits under the military
provision of the contract. It found this conclusion was supported by
Renaissance I, as well as the fact that Enterprises alleged in its 1994
complaint that the contract between the parties was still in effect and only
sought payment of commissions accrued under the contract from the date
of the arbitration award. Further, while the Court of Appeals
acknowledged Resorts had, in the 1989 action, set out in its response the
affirmative defense that the "contract between the parties was terminated
prior to the time for which [Enterprises] is seeking compensation," it found
it can be reasonably inferred that the arbitrators rejected this defense
because damages were awarded.
In conclusion, the Court of Appeals stated the prior arbitration
proceeding was not res judicata as to the commissions claimed in the
current proceeding because it was not clear the arbitrators had ever
determined Enterprises' entitlement to such commissions. See Dunlap v.
Travelers Ins. Co., 223 S.C. 150, 74 S.E.2d 828 (1953) (res judicata does
p. 13
RENAISSANCE ENTERPRISES v. OCEAN RESORTSnot apply to subsequent litigation between the same parties when the
cause of action dealt with breaches of the same contract which occurred
after the initiation of the prior litigation); see also 4 Am.Jur.2d Alternative
Dispute Resolutions § 214 (1995) (there is also authority that res judicata
applies only to matters which were actually decided in arbitration, not
those which could have been asserted, since an arbitrator is limited to
deciding only those questions submitted by the parties).
Accordingly, the Court of Appeals reversed the trial judge's
grant of summary judgment and remanded the matter to the lower court
for further proceedings consistent with its opinion.
ISSUE
Did the Court of Appeals err in finding this action is not barred by res judicata because the prior arbitration proceeding did not conclude the contract between the two parties was terminated?DISCUSSION
Resorts argue the Court of Appeals reached the wrong
conclusion in interpreting the meaning of the arbitration award. Resorts
contend the correct interpretation of the arbitration award would result in
finding the contract was terminated by the prior arbitration because this
result is the only logical interpretation which promotes an end to
litigation.
In order to establish a plea of res judicata, three elements
must be established: (1) identity of the parties; (2) identity of the subject
matter; and (3) adjudication of the issue in the former suit. Sealy v.
Dodge, 289 S.C. 543, 347 S.E.2d 504 (1986).
The issue presented is not preserved for review. The
arbitration award does not address Resorts' affirmative defense that the
contract was terminated nor is such a conclusion inferable from the
arbitration decision. Therefore, we are unable to determine if the
arbitrators actually decided this issue. All that can be gleaned from the
award is the arbitrators found Resorts breached the contract and it owed
p. 14
RENAISSANCE ENTERPRISES v. OCEAN RESORTSEnterprises damages for the breach.4
If a party submits an issue for arbitration and the arbitrators
fail to clearly rule on the issue in the award, the party must request the
arbitrators address the issue pursuant to S.C. Code Ann. § 15-48-100
(Supp. 1996). If a party fails to do so, the issue will not be preserved for
further review and a claim of res judicata on that issue will fail. This
requirement is similar to our previous holdings that an issue not ruled on
by the trial judge is not preserved for appellate review unless the issue is
raised in a post-trial motion. Rickborn v. Liberty Life Ins. Co., 321 S.C.
291, 468 S.E.2d 292 (1996). Like other civil proceedings, the arbitrators
must rule on the issue in order to preserve it for further review.
Because Resorts did not request the arbitrators clarify their
award, the issue of whether the prior arbitration award found the contract
4The only evidence which would be helpful in resolving this issuewould be the testimony of the arbitrators explaining the meaning of the
award. However, such testimony would be improper. See Wall Street
Associates, L.P. v. Becker Paribas, Inc., 27 F.3d 845 (2d Cir. 1994)
(arbitrators are not required to provide rationale for their award and
courts generally will not look beyond the award in an attempt to analyze
the reasoning process of the arbitrators); see also Local P-9. United Food
and Commercial Workers Intern. Union, AFL-CIO v. George A. Hormel &
Co., 776 F.2d 1393 (8th Cir. 1985) (it is generally improper for arbitrators
to interpret, impeach, or explain a final and binding award); Sperry
Intern Trade, Inc. v. Government of Israel, 602 F. Supp. 1440 (S.D.N.Y.
1985) (arbitrator may not testify as to meaning or construction of his
written award; any other view would make arbitration not the end, but
only one step in the process of litigation). Rueben I. Friedman,
Annotation, Admissibility of Affidavit or Testimony of Arbitrator to
Impeach or Explain Award 80 A.L.R.3d 155 (1977) (the award is the best
evidence of its meaning and the construction of its provisions is a matter
for the courts; therefore, testimony of the arbitrator is inadmissible for the
purpose of explaining the meaning or construing the provisions of an
award). This Court does not require the arbitrators to specify their
reasoning or the basis of the award so long as the factual inferences and
legal conclusions supporting the award are "barely colorable." See Pittman
Mortgage Co. v. Edwards, __ S.C. __, 488 S.E.2d 335 (1997); Batten v.
Howell, 300 S.C. 545, 389 S.E.2d 170 (Ct. App. 1990). Therefore, it would
be inconsistent to require the arbitrators to explain their award after it
has been confirmed but not to require any explanation in the award.
p. 15
RENAISSANCE ENTERPRISES v. OCEAN RESORTSbetween the parties to be terminated is not preserved for review and we
do not infer the prior arbitration proceeding barred this present action.
We vacate the Court of Appeals' opinion and remand this
matter to the circuit court for further proceedings in accordance with the
contract between the parties.
VACATED.
FINNEY, C.J., TOAL, MOORE and WALLER, JJ., concur.
p. 16
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