Pass Termite & Pest Control, Inc. v. Walker, 2002-IA-01081-SCT.

• Decision Date: 09 December 2004
• Docket Number: No. 2002-IA-01081-SCT.,2002-IA-01081-SCT.
• Parties: PASS TERMITE AND PEST CONTROL, INC. v. Joe P. WALKER, Jr. and Carolyn Faye Walker.
• Court: Mississippi Supreme Court

904 So.2d 1030

PASS TERMITE AND PEST CONTROL, INC. v. Joe P. WALKER, Jr. and Carolyn Faye Walker.

No. 2002-IA-01081-SCT.

Supreme Court of Mississippi.

December 9, 2004.

R. Bradley Best, Oxford, attorney for appellant.

David D. O'Donnell, Oxford, Clayton O'Donnell Walsh, attorneys for appellees.

EN BANC.

CARLSON, Justice, for the Court.

¶ 1. We must determine today whether the Lafayette County Circuit Court erred in refusing to enforce an arbitration clause contained in a Mississippi Official Wood Destroying Insect Report. The circuit judge denied a motion to compel arbitration. Although we affirm the circuit judge's ruling, we do so for reasons different than those stated by the learned circuit judge.

FACTS AND PROCEEDINGS IN THE CIRCUIT COURT

¶ 2. In December of 1998, Joe D. Walker and Carolyn Faye Walker purchased a home near Oxford from Thomas and Evelyn Baggett. The Walkers' lender required that a termite inspection be conducted on the home. Pass Termite and Pest Control, Inc. ("Pass") was hired by the Walkers, and Pass thereafter performed the inspection and issued a report. In their complaint, the Walkers asserted claims based on fraud and breach of contract, and they alleged that they relied to their detriment on erroneous reports produced by Pass.¹

¶ 3. Pass was served with process on February 16, 2001, and on March 27, 2001, Pass filed its answer to the complaint, but failed to affirmatively plead arbitration as a defense. In addition to this omission, Pass demanded a jury trial and a judgment in its favor. On May 15, 2001, Pass propounded its First Set of Interrogatories and Requests for Production of Documents. On or about September 19, 2001, the Walkers responded to discovery. On October 11, 2001, Pass filed its Motion to Compel Arbitration. Pass did not request leave to amend its answer in order to assert this affirmative defense. In their response to the motion to compel, the Walkers argued that Pass had "waived its right to claim any entitlement to arbitration in this cause" based on the fact that it failed to affirmatively plead in its answer its right to arbitration. Moreover, the Walkers argued that Pass could not claim any right to arbitration after it availed itself of the discovery process afforded to litigants in a judicial forum.

¶ 4. The Circuit Court of Lafayette County, Judge Henry L. Lackey presiding, heard arguments on the motion to compel arbitration. On December 11, 2001, the circuit court issued an order denying the motion to compel arbitration for three reasons:

That the termite contract produced by [Pass] which contained the arbitration clause was not explicitly agreed to by the [Walkers].

That the termite contract as presented and the time it was presented, created a contract of adhesion; therefore, it is in the best interest of public policy that the [Walkers] not be bound by the term of said contract.

That for the reasons of judicial economy and litigation simplicity that the all (sic) claims against all parties be adjudicated in the same cause.

¶ 5. Upon a motion filed by Pass, the circuit court certified this case for an interlocutory appeal, and we thereafter granted the petition for interlocutory appeal. See M.R.A.P. 5.

STANDARD OF REVIEW

¶ 6. While the circuit court based its decision to deny arbitration on reasons different from ours, we may on appeal affirm the decision of the trial court where the right result is reached, even though we may disagree with the trial court's reasons for reaching that result. Puckett v. Stuckey, 633 So.2d 978, 980 (Miss.1993). The grant or denial of a motion to compel arbitration is reviewed de novo. East Ford, Inc. v. Taylor, 826 So.2d 709, 713 (Miss.2002) (citing Webb v. Investacorp. Inc., 89 F.3d 252, 256 (5th Cir.1996)).

ANALYSIS

I. Whether the Trial Court Erred in Denying the Appellant's Motion to Compel Arbitration?

¶ 7. Due to the aforementioned reasons submitted by the circuit judge in denying arbitration, the parties understandably present to us various arguments regarding the validity, scope and enforceability of the arbitration provision. However, inasmuch as today's decision to uphold the trial judge's denial of arbitration is based on waiver, we need not address the other issues raised. In so doing, we emphasize here that our decision today should in no way be interpreted as a retreat from our prior cases upholding arbitration, which we again state is favored and is firmly embedded in both our federal and state laws. Russell v. Performance Toyota, Inc., 826 So.2d 719 (Miss.2002); East Ford, Inc. v. Taylor, 826 So.2d 709 (Miss.2002); IP Timberlands Operating Co. v. Denmiss Corp., 726 So.2d 96 (Miss. 1998).

¶ 8. Instead, we today consider Miss. R. Civ. P. 8© and Pass's failure to assert in its Answer its right to arbitration.² Although a strict application of Miss. R. Civ. P. 8© would conceivably do violence to our recent decisions on arbitration issues, we find that Pass's failure to assert its right to arbitration in its answer in contravention of Rule 8's provisions is at least a factor we may consider along with the other facts existing in this case.³ Here is a brief time line: (1) February 14, 2001 — Complaint filed by the Walkers; (2) February 16, 2001 — Pass served with process; (3) March 27, 2001 — Pass filed its Answer and this Answer contained no affirmative defense of arbitration and in fact Pass, in its Answer, demanded a jury trial; (4) May 15, 2001 — Pass propounded its First Set of Interrogatories and Requests for Production of Documents to the Walkers, who later responded to these discovery requests; (5) October 11, 2001 — Pass, without requesting leave to amend its Answer, filed its motion to compel arbitration.

¶ 9. Both termite reports were attached to the Complaint which was filed on February 14, 2001. Contained in both termite reports were identical arbitration clauses which stated:

ARBITRATION. The purchaser and the pest control operator agree that any controversy or claim between them arising out of or relating to this agreement shall be settled exclusively by arbitration. Such arbitration shall be conducted in accordance with the Commercial Arbitration Rules then in force of the American Arbitration Association. The decision of the Arbitrator shall be a final and binding resolution of the disagreement which may be entered as a judgment by any Court of competent jurisdiction. Neither party shall sue the other where the basis of the suit is this agreement other than for enforcement of the arbitrator's decision. In no event shall either party be liable for indirect, special or consequential damages or loss of anticipated profits.

Thus, once Pass was served with a copy of the complaint and summons on February 16, 2001, Pass was aware of the availability of the defense of arbitration. Instead of asserting this defense, Pass answered the complaint, demanded a jury trial, and invoked the available discovery procedures. In fact, when Pass finally decided to file a motion to compel arbitration, some 237 days after it was served with a copy of the complaint and summons, it filed such motion to compel arbitration without seeking leave from the trial court to amend its original answer.

¶ 10. The general rule is that affirmative defenses must be raised in a party's answer. Miss. R. Civ. P. 8©. See also Canizaro v. Mobile Communications Corp. of Am., 655 So.2d 25 (Miss.1995) (The defense of statute of frauds is waived if not included in the answer.); Martin v. Estate of Martin, 599 So.2d 966(Miss.1992) (Maker of note who claims it is unenforceable as against public policy must say so affirmatively by way of defense); Hertz Commercial Leasing Div. v. Morrison, 567 So.2d 832 (Miss.1990) (Lessee was required to affirmatively plead that the acceleration clause was punitive and thus unenforceable); Wholey v. Cal-Maine Foods, Inc., 530 So.2d 136, 138 (Miss.1988) (Res judicata is an affirmative defense which may not be raised on a motion to dismiss unless allegations in a prior pleading in the case demonstrates its existence.).

¶ 11. Notwithstanding our prior cases finding waiver for failure to plead affirmative defenses, Pass urges us to follow cases from the Fifth Circuit in which similar or longer delays in asserting the defense of arbitration were found not to constitute a waiver of the right to invoke arbitration. Pass directs our attention to Tenneco Resins, Inc. v. Davy Int'l, 770 F.2d 416 (5th Cir.1985). In Tenneco, the Fifth Circuit upheld an arbitration clause even though the defendant waited eight months after the commencement of the lawsuit to invoke its right to arbitration. However, in Tenneco, the defendant timely responded to the complaint and in its initial responsive pleading, the defendant asserted the defense of arbitration based on the contractual provisions. In Walker v. J.C. Bradford & Co., 938 F.2d 575 (5th Cir.1991), the court likewise upheld an arbitration clause even though the defendant waited thirteen months after suit was filed to invoke its right to arbitration. In Walker, the plaintiffs commenced their suit in state court only to have the defendant remove the case to federal court, and once in federal court, the defendant invoked discovery and more than ten months later, the defendant finally answered the complaint. The Walker court cited Tenneco for the premise that the question of whether arbitration has been waived depends on the facts of each case. Id. at 576.

¶ 12. In Mississippi, a party waives the right to arbitrate when it "actively participates in a lawsuit or takes other action inconsistent with the right to arbitration." Cox v. Howard, Weil, Labouisse, Friedrichs, Inc., 619 So.2d 908, 913-14 (Miss.1993). "Taking advantage of pre-trial litigation such as answers, counterclaims, motions, requests, and discovery obviates the right to arbitration." Id. at 914. In University Nursing Associates, PLLC v. Phillips, 842 So.2d 1270, 1276-77 (Miss.2003),...