Filed 3 February 2004 This case not for publication
Appeal by defendant, J.H. Batten, Inc., from order entered 30 August 2002 by Judge Wiley F. Bowen, Superior Court, Lee County. Heard in the Court of Appeals 2 December 2003.
Adams, Kleemeier, Hagan, Hannah Fouts, by Eric H. Biesecker, for defendant-appellant. Safran Law Offices, by Perry R. Safran, for plaintiff-appellee.
Lee County No. 02 CVS 00410.
By this appeal, J.H. Batten, Inc. contends that the trial court erroneously failed to (I) grant judgment on the pleadings on the grounds of res judicata or collateral estoppel; (II) dismiss plaintiff's claim of negligent construction; (III) stay arbitration; and (IV) impose sanctions under Rule 11. After careful review, we affirm the judgment below.
This is the second appeal arising from a contractual disputebetween J.H. Batten, Inc. and Jonesboro United Methodist Church. See J.H. Batten, Inc. v. Jonesboro United Methodist Church, 158 N.C. App. 542, 581 S.E.2d 832 (2003) (unpublished). By contract dated 4 October 1999, J.H. Batten, Inc. agreed to renovate the church's fellowship hall. However, disputes arose between the parties over payment terms, additional items of work to be performed under the contract, completion of punch list items, and warranty matters. On 6 August 2001, the parties agreed during a telephone conversation to settle the dispute under terms that included the payment of $101,000.00 on or before 15 August 2001 by the church. When, however, the church refused to pay the settlement amount, J.H. Batten, Inc. brought an action in Forsyth County that resulted in summary judgment in its favor. On appeal, this Court affirmed. Id.
In the meantime, after the trial court entered summary judgment in the Forsyth County action to enforce the settlement agreement, the church brought an action for breach of contract, breach of express and implied warranties, negligence and malpractice against J.H. Batten, Inc. and Mullins-Sherman Architects, L.L.P. From the trial court's refusal to stay arbitration, dismiss the action, award sanctions and enter judgment on the pleadings, J.H. Batten, Inc. appeals.
Preliminarily, we note that while interlocutory, a denial of a motion for judgment on the pleadings based upon res judicata affects a substantial right and is immediately appealable. SeeMabrey v. Smith, 144 N.C. App. 119, 121, 548 S.E.2d 183, 185 (2001); see also Bockweg v. Anderson, 333 N.C. 486, 428 S.E.2d 157 (1993) (stating the "denial of a motion for summary judgment based on the defense of res judicata may affect a substantial right making the order immediately appealable"); Clancy v. Onslow County, 151 N.C. App. 269, 564 S.E.2d 920 (2002) (indicating a motion for judgment on the pleadings grounded on governmental immunity or based on res judicata affects a substantial right and is immediately appealable). Moreover, although an appeal based on collateral estoppel would generally not affect a substantial right and is therefore subject to dismissal as interlocutory, in the exercise of our discretion, we choose to address J.H. Batten's arguments relating to collateral estoppel. However, because we hold that the church's claims are not barred by res judicata or collateral estoppel, we dismiss the remaining issues on appeal challenging the trial court's refusal to stay arbitration and impose sanctions under Rule 11 as interlocutory.
"The companion doctrines of res judicata and collateral estoppel have been developed by the courts of our legal system during their march down the corridors of time to serve the present-day dual purpose of protecting litigants from the burden of relitigating previously decided matters and of promoting judicial economy by preventing needless litigation." Thomas M. McInnis Associates, Inc. v. Hall, 318 N.C. 421, 427, 349 S.E.2d 552, 556 (1986). Thus,
under the doctrine of res judicata, a final judgment on the merits by a court of competentjurisdiction is conclusive as to rights, questions, and facts in issue. Such judgment bars all subsequent actions involving the same issues and the same parties or those in privity with them. The doctrine of res judicata also applies to those issues which could have been raised in the prior action but were not. Thus, the doctrine is intended to force parties to join all matters which might or should have been pleaded in one action. The doctrine only applies, however, when a party attempts to litigate the same cause of action after a full opportunity to do so in a prior proceeding.
In this appeal, J.H. Batten, Inc. contends res judicata applies in this case because the church's claims were compulsory counterclaims which should have been pleaded in the Forsyth County litigation. We disagree.
N.C. Gen. Stat. § 1A-1, Rule 13 states in pertinent part:
(a) Compulsory counterclaims — A pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction. . . .
"Generally, a counterclaim is compulsory if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction." Fickley v. Greystone Enters., Inc., 140 N.C. App. 258, 260, 536 S.E.2d 331, 333 (2000).
In determining whether certain claims aroseout of the same transaction or occurrence as a prior action for purposes of treating them as compulsory counterclaims, several factors are considered: (1) whether the issues of fact and law are largely the same; (2) whether substantially the same evidence is involved in each action; and (3) whether there is a logical relationship between the two actions.
In the Forsyth County litigation, J.H. Batten, Inc. sought enforcement of a settlement agreement entered into by the parties. The factual allegations of its complaint stated that on 6 August 2001, J.H. Batten, Inc. and Jonesboro United Methodist Church agreed to settle the disputes between them by the church's payment of $101,000.00 on or before August 15, 2001. J.H. Batten, Inc. contended the settlement also resolved "certain disputes" between the parties regarding their "performance of the Contract." Alternatively, J.H. Batten, Inc. sought a declaration of the "relative rights and obligations pursuant to the Contract." As affirmative defenses, Jonesboro United Methodist Church pleaded unclean hands, estoppel, anticipatory breach, accord and satisfaction, laches and immunity. Upon J.H. Batten, Inc.'s motion for summary judgment which argued the parties had entered into a binding settlement agreement, the trial court entered summary judgment in favor of J.H. Batten, Inc. On appeal, this Court affirmed the entry of summary judgment stating "the plain and unambiguous language in the agreement that Jonesboro Church acknowledged would `satisfy not only a final amount due on the original contract, but also all change orders . . . and accruedinterest' is valid and binding as a settlement agreement." J.H. Batten, Inc., Inc. v. Jonesboro United Methodist Church, 158 N.C. App. 542, 581 S.E.2d 832 (2003) (unpublished). Therefore, this Court held that the church's failure to remit to J.H. Batten, Inc., $101,000.00 on or before August 15, 2001 was a "breach of contract." Id.
In the present litigation between the parties, Jonesboro Church contends J.H. Batten, Inc. breached its contract, breached express and implied warranties, and committed negligence and/or malpractice. In the factual allegation of its complaint, Jonesboro Church contends the architect and general contractor were aware of problems with the construction, made representations the roof would be fixed, and contends the architect certified the Contractor's certificate of payment despite concerns with the workmanship and nonconforming work. In its claims solely against J.H. Batten, Inc., Jonesboro United Methodist Church provides further details regarding the nonconforming and unworkmanlike construction.
After careful consideration, we conclude Jonesboro United Methodist Church's claims are not barred by the doctrine of res judicata. Whereas the Forsyth County litigation required the trial court to consider whether, based upon contract principles, a settlement agreement was formed, the present litigation involves a determination of whether J.H. Batten, Inc.'s performance under the construction contract constituted a breach of contract, various warranties and negligence or malpractice. The present litigation involves consideration of different facts and involves differentlegal principles. As stated in Twin City Apts., Inc. v. Landrum, 45 N.C. App. 490, 494, 263 S.E.2d 323, 325 (1980), "Rule 13(a) is a tool designed to further judicial economy. The tool should not be used to combine actions that, despite their origin in a common factual background, have no logical relationship to each other."
We also conclude J.H. Batten, Inc.'s alternative claim in the Forsyth County litigation for a declaratory judgment determining the "relative rights and obligations pursuant to the contract" does not bar Jonesboro United Methodist Church's claims in the Lee County litigation. J.H. Batten, Inc. contends Jonesboro United Methodist Church's Lee County claims were compulsory counterclaims to J.H. Batten, Inc.'s declaratory judgment action. However, "under the doctrine of res judicata, a final judgment on the merits by a court of competent jurisdiction is conclusive as to rights, questions, and facts in issue." Chrisalis Properties, Inc., 101 N.C. App. at 84, 398 S.E.2d at 631. In this case, the trial court did not render a final judgment on the merits as to J.H. Batten, Inc.'s claim for declaratory judgment. Accordingly, Jonesboro United Methodist Church's claims in the present litigation are not barred by the doctrine of res judicata.
Similarly, we conclude the present litigation is not barred by collateral estoppel. J.H. Batten, Inc. contends that the Forsyth County litigation conclusively determined the parties entered into a complete settlement. We disagree.
Under the doctrine of collateral estoppel . . . a final judgment on the merits prevents relitigation of issues actually litigated and necessary to the outcome of the prior actionin a later suit involving a different cause of action between the parties or their privies. A party asserting collateral estoppel is required to show that the earlier suit resulted in a final judgment on the merits, that the issue in question was identical to an issue actually litigated and necessary to the judgment, and that both [the party asserting collateral estoppel and the party against whom collateral estoppel is asserted] were either parties to the earlier suit or were in privity with parties.
The Forsyth County litigation concluded the parties entered into a binding settlement agreement. However, the scope of the settlement agreement must be determined. The Jonesboro United Methodist Church letter confirming the details of the settlement agreement stated in pertinent part:
According to our understanding, a payment of $101,000 will satisfy the construction relationship between your company and Jonesboro United Methodist Church. . . . Additionally, it is our understanding that a payment of $101,000 will satisfy not only a final amount due on the original contract but also all change orders including the last $5,145.84 on the roof, and accrued interest over the prior one year.
J.H. Batten, Inc.'s representative signed the letter and, underneath its signature, wrote "I agree that this is a complete settlement between J.H. Batten, Inc., and Jonesboro United Methodist Church." As stated by our Supreme Court in Wilkins v. Vass Cotton Mills, 176 N.C. 72, 76, 97 S.E. 151, 152 (1918):
There cannot be a contract unless there is agreement of minds, and an offer can become a binding promise and result in a contract only when it has been accepted, according to itsterms, and without substantial change, either by word or act, for without such an acceptance there cannot be agreement, which is an essential element and consists in the parties being of the same mind and intention concerning the subject-matter of the contract.
In this case, the record fails to show that Jonesboro United Methodist Church agreed with J.H. Batten, Inc.'s added language that the settlement agreement constituted a complete settlement. Indeed, Jonesboro United Methodist Church limited the settlement agreement to the final amount due on the contract and change orders. Thus, while the parties agreed to the settlement of issues arising from change orders and payments on the contract, the record shows they failed to reach a "meeting of the minds" as to the scope of the settlement agreement. Accordingly, as the scope of the settlement agreement was not actually litigated in the prior action, J.H. Batten, Inc.'s contention that Jonesboro United Methodist Church's claims are barred by collateral estoppel is without merit.
Judges TIMMONS-GOODSON and McCULLOUGH concur.