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Davis 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

p. 9

        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:

        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.

and broker. Resorts is a corporation conducting business as a rental

management company owning and managing facilities in the Myrtle Beach

area.

p. 10

        In 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:

p. 11

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

submission 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

arbitrators' 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

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); 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

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

Enterprises 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

would 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

between 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