CHOATE CONST. v. Ideal Elec. Contractors, A00A1307.

• Decision Date: 02 November 2000
• Docket Number: No. A00A1307.,A00A1307.
• Citation: 541 S.E.2d 435,246 Ga. App. 626
• Parties: CHOATE CONSTRUCTION COMPANY, INC. v. IDEAL ELECTRICAL CONTRACTORS, INC.
• Court: Georgia Court of Appeals

541 S.E.2d 435

246 Ga. App. 626

CHOATE CONSTRUCTION COMPANY, INC. v. IDEAL ELECTRICAL CONTRACTORS, INC.

No. A00A1307.

Court of Appeals of Georgia.

November 2, 2000.

Smith, Curry & Hancock, Philip E. Beck, Atlanta, Mark V. Hanrahan, for appellant.

Daniel W. Lee, LaGrange, for appellee.

SMITH, Presiding Judge.

Choate Construction Company, Inc., the general contractor for the construction of a medical facility in LaGrange, appeals from the trial court's entry of judgment on a jury verdict in favor of Ideal Electrical Contractors, Inc., a subcontractor on the project, in Ideal's action against Choate for breach of contract and in quantum meruit for extra work performed. Choate contends the trial court erred in the following: in denying its motion to dismiss or, in the alternative, to compel arbitration; in denying its motions for directed verdict, judgment notwithstanding the verdict, and for a new trial; and in failing to require Ideal to elect its remedy, permitting it to recover both in contract and quantum meruit. The trial court denied Choate's motion to dismiss or, in the alternative, to compel arbitration because it found that the subcontract did not include a mandatory arbitration clause and that it included a condition precedent to arbitration which was not fulfilled. The trial court also denied the motions for directed verdict, judgment n.o.v., and new trial on Ideal's claims for recovery in quantum meruit. The motions were made on the ground that the contract itself addressed payment for changes in the work and extra work and that Ideal therefore was precluded from seeking payment under a theory of quantum meruit. Because we disagree with these findings, we conclude that the trial court erred in denying Choate's motions.

1. We first note that although the denial of a motion to compel arbitration is subject to interlocutory appeal under OCGA § 5-6-34(b), the denial may also be appealed after final judgment. Bishop Contracting Co. v. Center Bros., Inc., 213 Ga.App. 804, 805-806(1), 445 S.E.2d 780 (1994).

2. In Choate's motion to dismiss or, in the alternative, to compel arbitration, it sought to enforce certain provisions in the subcontract requiring dissatisfied subcontractors to submit their disputes to binding arbitration.

Article IX, Paragraph 23 of the subcontract provides in Section A that all subcontractors are bound to Choate to the "same extent that [Choate] is bound to" the owner under the contract between Choate and the owner and that subcontractors must go through the contractor before initiating actions against the owner.

Section B of Paragraph 23 provides that subcontractors will be bound by any arbitration between Choate and the owner on matters involving the subcontractor's rights.

Section C of Paragraph 23 provides:

If at any time any controversy should arise between contractor and subcontractor, which controversy is not controlled or determined by sections (a) or (b) above or other provisions of this subcontract, then the decision of contractor shall be followed by subcontractor, and said controversy shall be decided as follows:

(i) Subcontractor shall conclusively be bound by and abide by contractor's decision, unless subcontractor shall commence arbitration proceedings.

(ii) If subcontractor decides to appeal the decision of contractor, then the controversy shall be decided by arbitration in accordance with the construction industry rules of the American Arbitration Association and the arbitration decision shall be final and binding both parties to resolve the controversy; provided, however, that arbitration proceedings shall be commenced by subcontractor not later than 30 days following receipt of notice of contractor's decision.

Section E of Paragraph 23 provides:

Should either party to this agreement institute a lawsuit, or demand arbitration to enforce any of the provisions hereof, to protect its interest in any matter arising under the subcontract, or to collect damages for the breach of the subcontract..., the prevailing party shall be entitled to recover and the losing party agrees to pay all reasonable attorney's fees, costs, charges, and expenses expended or incurred therein.

The trial court concluded that Section C "did not provide that arbitration was a mandatory substitute for litigation" but merely provided the option of arbitrating. Choate contends this conclusion is erroneous, and we agree.

OCGA § 13-2-3 commands us, in construing a contract, to "ascertain the intention of the parties." A contract must be enforced if "that intention is clear and it contravenes no rule of law and sufficient words are used to arrive at the intention." Id. The subcontract in issue reflects clearly the intention of the parties to resolve all disputes by arbitration. It is apparent both in the "flow down" provision in Section A¹ and in the mandatory language regarding arbitration used in Section C.

The trial court construed Section E as creating an ambiguity because it intimates that instituting a lawsuit is an alternative to demanding arbitration. But the language in Section E does not authorize instituting a lawsuit; it simply provides for payment of costs and attorney fees in the event that one or the other party does, in fact, institute a lawsuit, whether forbidden by the contract or not. With respect to any matter arising under the subcontract, if either party institutes a lawsuit or demands arbitration and loses, Section E requires it to bear all costs and expenses, including attorney fees.

3. The trial court also concluded that a "`final decision'" on the part of Choate was required "for purposes of submitting the matter to arbitration." The trial court found, with regard to Ideal's claims, that Choate had not rendered such a decision, nor had it rendered a decision that would conclusively bind Ideal without Ideal having chosen to arbitrate. We agree with Choate that these conclusions were error as well.

Section C of Paragraph 23 places the burden on Ideal to arbitrate any decision made by Choate or be bound by it. It does not, however, use any language modifying the word "decision." Conditions precedent, which are not favored in interpreting contracts, are created by language such as "on condition that," "if," and "provided," or by explicit statements that certain events are to be construed as conditions precedent. Fulton County v. Collum Properties, 193 Ga. App. 774, 775, 388 S.E.2d 916 (1989). If the contract's terms are clear and unambiguous and do not clearly establish a condition precedent, we cannot construe the contract to create one. Id. at 775-776(1)(b), 388 S.E.2d 916. Yet here, that is what the trial court did.

On November 6, 1995, Ideal's counsel sent a letter to Choate listing its claims for additional compensation. Choate rendered its decision, responding to each of Ideal's claims by letter dated November 30, 1995. Under the subcontract provisions, if Ideal was not satisfied with Choate's decision on its claims, it was required to demand arbitration within 30 days of Choate's response to its claims. Because Ideal did not demand arbitration after receiving the November 30 letter, under the contract provisions it became bound by Choate's decision.

Ideal correctly describes a 1960 decision of this court. In it, this court held that an early Supreme Court of Georgia case established that

an agreement to refer matters in

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