WiLLCo Enter.S LLC v. Woodruff

• Decision Date: 22 January 2010
• Docket Number: No. 106,237.Released for Publication by Order of the Court,Division No. 3.,106
• Citation: 231 P.3d 767,2010 OK CIV APP 18
• Parties: WILLCO ENTERPRISES, LLC, Plaintiff/Appellant,v.Conchita L. WOODRUFF and Victore Insurance Company, Defendant/Appellee.Conchita L. Woodruff, Counter-Claimant/Third-Party Plaintiff/Plaintiff/Appellee,v.Willco Enterprises, LLC and Donny Williamson, Counter-Defendants/Third-Party Defendants/Appellants.
• Court: United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma

231 P.3d 767

2010 OK CIV APP 18

WILLCO ENTERPRISES, LLC, Plaintiff/Appellant,

v.Conchita L. WOODRUFF and Victore Insurance Company, Defendant/Appellee.

Conchita L. Woodruff, Counter-Claimant/Third-Party Plaintiff/Plaintiff/Appellee,

v.Willco Enterprises, LLC and Donny Williamson, Counter-Defendants/Third-Party Defendants/Appellants.

No. 106,237.Released for Publication by Order of the Court

of Civil Appeals of Oklahoma, Division No. 3.

Court of Civil Appeals of Oklahoma Division No. 3.

Jan. 22, 2010.

COPYRIGHT MATERIAL OMITTED

Appeal from the District Court of Tulsa County, Oklahoma; Honorable Jefferson D. Sellers, Judge.

REVERSED.

David H. Herrold, Monica L. Maple, Andrew T. Harrison, Emily M. Jones, Herrold Herrold & Co., Lawyers, P.C., Tulsa, OK, for Counter-Claimant/Third-Party Plaintiff/Appellee.

Brian L. Mitchell, Chad M. Neuens, M. Scott Hall, Amy E. Hampton, Glass Wilkin, P.C., Tulsa, OK, for Counter-Defendants/Third-Party Defendants/Appellants.

BAY MITCHELL, Chief Judge.

¶ 1 In a dispute arising out of a residential construction contract, Plaintiff/Counter-Defendant/Appellant Willco Enterprises, L.L.C. (Willco) and Third-Party Defendant/ Appellant Donny Williamson (Williamson), appeal the trial court's order denying their motion to compel arbitration. Willco and Williamson (Appellants) argue the Uniform Arbitration Act, 12 O.S. Supp.2006 §§ 1851-1881 (the New Act), supplants the six-factor test set forth in Northland Ins. Co. v. Kellogg, 1995 OK CIV APP 84, 897 P.2d 1161, for determining whether a party has waived its right to compel arbitration under 15 O.S.1991 §§ 801-818 (the Old Act). Appellants thus insist it was error for the trial court to apply the Northland analysis in ruling on their motion to compel. In the alternative, Appellants argue if Northland does survive under the New Act, Defendant/Counter-Claimant/Third-Party Plaintiff/Appellee Conchita L. Woodruff (Woodruff) failed to meet her burden of proof. Even assuming, as did the trial court, five of the six Northland factors survive under the New Act, we find Woodruff's evidence insufficient to show Appellants waived their right to compel arbitration in this case. We REVERSE the decision of the trial court.

Facts and Procedural History

¶ 2 Williamson is the owner and managing member of Willco, a homebuilding company based in Tulsa, Oklahoma. In 2006, Woodruff purchased from Willco certain real property in Tulsa and retained Willco to construct a residence on the site. Toward that end, the parties entered a Real Estate Purchase Agreement (Agreement) May 12, 2006. The Agreement includes both a clause mandating arbitration of all disputes between the parties, which the parties were required to initial at execution, and an anti-waiver provision.¹ The arbitration clause expressly provides nothing contained therein “shall be deemed to limit or restrict Builder's right to file a materialmen's or mechanics' lien against the Real Property or prosecute foreclosure proceedings based thereupon,” and the waiver provision declares “[f]ailure by any Party to enforce or exercise rights under this Agreement ... shall not affect the right of any Party to exercise or enforce any such rights or require such performance at any time thereafter.”

¶ 3 In building Woodruff's home, Appellants claim they furnished material, labor, and equipment through January 2008, by which point Woodruff, who had taken up residence in the home, allegedly ceased making required payments under the Agreement. In response, Willco filed a verified lien statement with the Tulsa County Clerk January 22, 2008, in which it declared Woodruff had an outstanding debt of $90,617.38 plus interest for labor, material, and equipment. Willco amended its materialmen's and mechanics' lien February 26, 2006, to increase the amount of Woodruff's alleged indebtedness to $106,708.25 plus interest. Prosecuting foreclosure actions being expressly permitted by the Agreement, Willco initiated the present lawsuit March 5, 2008 by filing with the trial court a petition asserting breach of contract and seeking to foreclose the amended lien or, in the alternative, to recover in quantum meruit.²

¶ 4 Woodruff filed an answer March 27, 2008, in which she asserted fourteen counterclaims against Willco and advanced two third-party claims against Williamson in his individual capacity, thus bringing him into the lawsuit as a third-party defendant. On the same day as her answer, prior to conducting any discovery in the case, Woodruff separately filed both a motion for summary judgment and an offer to allow judgment.

¶ 5 Willco replied to Woodruff's counterclaims and Williamson answered her third-party petition April 7, 2008. In neither of these responsive pleadings did Appellants assert their contractual right to arbitrate the counter- and third-party claims as an affirmative defense.

¶ 6 On April 11, 2008, the president of 1st Bank of Oklahoma moved to quash Woodruff's subpoena duces tecum. Three days later, Appellants together filed a Rule 13(D) motion regarding Woodruff's motion for summary judgment,³ and followed that with a combined motion to quash Woodruff's subpoena and/or for protective order.

¶ 7 On April 24, 2008, Woodruff filed separate responses in opposition to both motions to quash. The following week, she objected to Appellants' Rule 13(D) motion. On May 6, 2008, Woodruff subpoenaed for deposition both Williamson and an individual named Chris Burdan.

¶ 8 On or about May 13, 2008, Appellants served Woodruff with one set of discovery requests to which Woodruff never responded; she filed a motion for protective order instead. Appellants filed an unopposed motion for leave to dismiss and substitute parties May 30, 2008.⁴ Appellants' counsel filed a motion to withdraw June 9, 2008, which the trial court granted two days later. Appellants' current counsel filed their entries of appearance the same day.

¶ 9 According to the parties' briefs on appeal and the trial court's docket sheet, the aforementioned motions, requests, and pleadings comprise all of the activity that took place during the three-and-a-half months after Willco's March 5, 2008 petition but prior to Appellants' June 20, 2008 motion to compel arbitration.⁵

¶ 10 The trial court denied Appellants' request to compel arbitration of Woodruff's counterclaims and third-party claims, declaring in its August 20, 2008, order:

1. The Court FINDS Woodruff is bound by the contractual provision to arbitrate this dispute. However, the Court FINDS Willco has waived its right to arbitrate pursuant to the analysis articulated in Northland Ins. Co. v. Kellogg, 1995 OK CIV APP 84 , which the Court finds has not been displaced by Oklahoma's Uniform Arbitration Act of 2005, 12 O.S. Supp.2005 §§ 1851 et seq. (the “Arbitration Act”).

2. The Court FURTHER FINDS, in applying the 6-factor test of Northland herein (subparts (a)-(f) herein), that: (a, b) Willco filed this action without providing notice of arbitration or seeking a stay of the proceedings and affirmatively sought relief from the Court including conducting discovery, inconsistent with the right to arbitrate, (c) Willco's delay in seeking to compel arbitration was not a long delay, but the delay was indicative of actions inconsistent with the right to arbitrate, (d) there has been substantial work performed in the action before the District Court, (e) the fifth factor of the Northland test (engagement in discovery proceedings unavailable in arbitration) is inapplicable herein, and (f) no showing has been made that there has been a substantial prejudice visited upon Woodruff if arbitration were compelled-whatever prejudice there might be to Woodruff is slight since work that has been performed would be performed in arbitration.

The trial court further found “Woodruff's third-party claims against Williamson are subject to the arbitration provision of the parties' Residential Construction Agreement at issue herein, and should this decision be reversed by final order of an appellate court and arbitration later compelled, any such claims against Williamson shall be compelled to arbitration as well.” ⁶ The trial court stayed the action pending appeal.

¶ 11 Pursuant to 12 O.S. Supp.2006 § 1879(A)(1), Willco and Williamson appeal the trial court's order denying their motion to compel arbitration of Woodruff's counterclaims and third-party claims. Appellants argue the Northland analysis does not survive under the New Act. In the alternative, Appellants insist it was error for the trial court to hold Woodruff's evidence sufficient under Northland to prove Appellants had waived their contractual right to compel arbitration of Woodruff's counterclaims and third-party claims.

Standard of Review

¶ 12 An order denying a motion to compel arbitration is an interlocutory order appealable by right, which we review de novo. See 12 O.S. Supp.2006 § 1879(A)(1); see also Thompson v. Bar-S Foods Co., 2007 OK 75, ¶ 9, 174 P.3d 567, 572. “The determination of whether a party waived its right to compel arbitration is a mixed question of law and fact.” Gish v. ECI Servs. of Okla., Inc., 2007 OK CIV APP 40, ¶ 25, 162 P.3d 223, 230; see also Booker v. Sumner, 2001 OK CIV APP 22, ¶ 14, 19 P.3d 904, 906. “The review of whether the trial court applied the correct legal standards is a de novo review for correctness ... while the review of the trial court's determination of the existence of facts supporting waiver is deferential in nature.” Northland Ins. Co. v. Kellogg, 1995 OK CIV APP 84, ¶ 5, 897 P.2d 1161, 1162 (internal citations omitted).

Analysis

¶ 13 Oklahoma law reflects this State's strong public policy in favor of arbitration. See 12 O.S. Supp.2006 § 1857(A); see also Towe, Hester & Erwin, Inc. v. Kansas City Fire & Marine Ins. Co., 1997 OK CIV APP 58, ¶ 24, 947 P.2d 594, 599. Section 1857(A) of the New Act declares arbitration agreements “valid, enforceable, and irrevocable except upon a ground that exists at law or in equity...