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10/19/93 STEPHEN B. MCCARNEY v. NEARING

October 19, 1993

STEPHEN B. MCCARNEY, ET AL., RESPONDENTS,
v.
NEARING, STAATS, PRELOGAR AND JONES, APPELLANTS, STEPHEN B. MCCARNEY, ET AL., RELATORS, V. THE HONORABLE FRANK CONLEY, RESPONDENT.



APPEAL FROM THE CIRCUIT COURT OF BOONE COUNTY. The Honorable Frank Conley, Judge

Respondent'-relator's Motion for Rehearing and/or Transfer to Supreme Court Denied November 30, 1993.

Before Breckenridge, P.j., Berrey and Spinden, JJ.

The opinion of the court was delivered by: Breckenridge

ORIGINAL PROCEEDING IN PROHIBITION

Before Breckenridge, P.J., Berrey and Spinden, JJ.

This proceeding involves the consolidation of two cases pertaining to the construction of the Hawthorne Educational Services Building, a two-story office building in Columbia, Missouri. One of the consolidated cases concerns an appeal from a suit filed by Stephen B. McCarney, Michele T. Jackson, McCarney's wife, and Hawthorne Educational Services, Inc. (Hawthorne) against Nearing, Staats, Prelogar & Jones (Nearing) in which the trial court denied Nearing's application to compel arbitration. *fn1 Nearing raises one point on appeal arguing that under the Federal Arbitration Act, the trial court must compel arbitration and erred in refusing to submit the case to arbitration because the contract provides for arbitration of all "disputes."

The second case involves whether this court's issuance of a preliminary writ of prohibition should be made absolute in a suit filed by Reinhardt Construction Company (Reinhardt) against McCarney. McCarney argues the following five points in support of his petition for writ of prohibition. In Point I, he argues that prohibition is the proper remedy because the trial court exceeded its judicial power by compelling McCarney to submit to arbitration; in the remaining points he asserts that the trial court erred in ordering McCarney to submit to arbitration in that: II) there is no binding arbitration provision in any contract or in the escrow agreement between McCarney and Reinhardt; III) Reinhardt waived its right to demand arbitration; IV) McCarney's counterclaim alleging fraudulent representation as to the escrow agreement is not covered by an arbitration provision; and V) an equitable mechanic's lien suit, not arbitration, is the exclusive remedy for Reinhardt's claims.

Nearing was hired to provide architectural services for the construction of the Hawthorne Educational Services Building. On April 17, 1989, Nearing and McCarney signed an agreement entitled "Standard Form of Agreement Between Owner and Architect." Reinhardt Construction Company (Reinhardt) was hired to serve as the general contractor for the project. McCarney and Reinhardt signed an agreement entitled "Standard Form of Agreement Between Owner and Contractor" on April 9, 1990.

On or about April 10, 1991, McCarney informed Reinhardt that it had fired Nearing and it did not hire a replacement architect. In order to complete the construction of the building, McCarney and Reinhardt executed an escrow agreement on August 28, 1991. The escrow agreement required McCarney to deposit $140,000 in an escrow account and set forth the manner in which the $140,000 was to be allocated to Reinhardt in return for the completion of certain work.

Thereafter, Reinhardt, Nearing, and Miller Sash & Door, one of Reinhardt's subcontractors, filed mechanic's liens against the Hawthorne property in the amounts of $140,000, $24,559, and $20,179.14, respectively. Nearing did not file suit to foreclose by April 1, 1992, the end of the statutory six-month period in § 429.170, RSMo 1986, *fn2 and its mechanic's lien expired as a matter of law. McCarney filed suit against Nearing on April 6, 1992. His amended petition, filed on June 4, 1992, alleged breach of contract and negligence. On June 24, 1992, Nearing filed a demand for arbitration with the American Arbitration Association in Kansas City, Missouri. Nearing filed an application to compel arbitration and to stay the lawsuit on July 16, 1992. In response, McCarney filed an application to stay arbitration. The trial court denied Nearing's application to compel arbitration and to stay the lawsuit. This appeal was filed in a timely manner thereafter. Under § 435.440.1(1), an order denying an application to compel arbitration is an appealable order. Brookfield School v. Tognascioli et al. , 845 S.W.2d 103, 104 (Mo. App. 1993).

On June 5, 1992, Reinhardt filed suit against McCarney in the Circuit Court of Boone County seeking recovery of $140,000 allegedly due it under the escrow agreement. In Count I, Reinhardt's petition alleged that Reinhardt had completed all work set forth in the agreement but that McCarney refused to authorize the disbursement of the funds allocated for each item. Count II of Reinhardt's petition set forth a claim for foreclosure on the mechanic's lien filed by Reinhardt. Count III of Reinhardt's petition prays for recovery in quantum meruit for the amount of the unpaid labor, materials, supplies and equipment supplied to the Hawthorne project.

McCarney filed various pleadings in response to Reinhardt's petition including a counterclaim, motion to consolidate, answer and motion to add additional parties. On July 22, 1992, Reinhardt filed a "Motion to Stay Proceedings Pending Arbitration." McCarney filed an application to stay arbitration on August 14, 1992. After hearing oral arguments on the various motions of the parties, the trial court entered its order sustaining Reinhardt's motion to stay proceedings pending arbitration. McCarney filed his petition for writ of prohibition. This court entered a preliminary order in prohibition and Respondent, the Honorable Frank Conley, filed his response. McCarney filed its reply. Thereafter, the matter was briefed and oral arguments were heard. The matter was submitted to the court for decision upon the record and briefs were filed. The facts stated in the petition for the writ will be taken as true and the matter ruled in a manner similar to a motion for judgment on the pleadings. State ex rel. Dunphy v. Eversole, 339 S.W.2d 506, 507 (Mo. App. 1960).

This court will address the points raised in the appeal and the action for prohibition simultaneously as they generally are in regard to similar, if not identical, issues. In the interest of avoiding repetition, this court will not specifically refer to the points relied on in the parties' briefs. The first point raised by McCarney, however, will be addressed separately as it pertains to whether prohibition is an appropriate remedy.

McCarney argues in Point I that prohibition is the proper remedy because the trial court exceeded its jurisdiction by ordering McCarney to submit to arbitration since the dispute between McCarney and Reinhardt is not subject to arbitration. McCarney contends that unless an absolute order of prohibition is issued by this court, he will be subjected, without an adequate remedy of appeal, to duplicate proceedings and the possibility of conflicting determinations.

The writ of prohibition is an extraordinary remedy to be used cautiously and only in cases of extreme necessity. State ex rel. Douglas Toyota v. Keeter, 804 S.W.2d 750, 752 (Mo. banc 1991). Prohibition is primarily used to correct or prevent inferior courts and agencies from acting outside their jurisdiction. Id. Prohibition is not to be used in lieu of an appeal nor is it to be used as a substitute for the correction of alleged or anticipated judicial errors. Id. Neither is prohibition to be used to adjudicate disputes which will be adequately redressed during the ordinary course of judicial proceedings. Id.

Respondent argues that prohibition is not the proper remedy in this case because an order compelling arbitration is not a final appealable order. In support of his position, Respondent cites McClellan v. Barrath Constr. Co., Inc., 725 S.W.2d 656 (Mo. App. 1987), a case in which the court held that an order ...


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