H.L. Fuller Const. Co., Inc. v. Industrial Development Bd. of Town of Vincent

• Decision Date: 01 November 1991
• Citation: 590 So.2d 218
• Parties: H.L. FULLER CONSTRUCTION COMPANY, INC. v. INDUSTRIAL DEVELOPMENT BOARD OF the TOWN OF VINCENT. 89-1793.
• Court: Alabama Supreme Court

Page 218

590 So.2d 218

H.L. FULLER CONSTRUCTION COMPANY, INC. v. INDUSTRIAL DEVELOPMENT BOARD OF the TOWN OF VINCENT.

89-1793.

Supreme Court of Alabama.

Nov. 1, 1991.

G. Daniel Brown of Dillon, Kelley & Brown, Alexander City, and D. Lee Roberts, Jr. of Smith, Currie & Hancock, Atlanta, Ga., for appellant.

Wanda D. Devereaux, Montgomery, and Rodney A. Max of Najjar Denaburg, P.C., Birmingham, for appellee.

ON APPLICATION FOR REHEARING

INGRAM, Justice.

This Court's opinion of August 16, 1991, is withdrawn, and the following is substituted therefor:

This is an appeal from a judgment of the Circuit Court of Shelby County confirming an arbitration award.

The record indicates that in September 1986, the Industrial Development Board of the Town of Vincent ("IDB") contracted with H.L. Fuller Construction Company, Inc. ("Fuller"), an Alabama corporation, to build a Comfort Inn motel in Shelby County, Alabama. The contract, by reference to the "General Conditions of the Contract for Construction AIA [American Institute of Architects] Document A201, August 1976 Edition," provided for arbitration as the means of resolving conflicts arising out of the contract. That provision, in part, reads as follows:

"7.9.1. All claims, disputes and other matters in question between the Contractor and the Owner arising out of, or relating to, the Contract Documents or the breach thereof, except as provided in Subparagraph 2.2.11 with respect to the Architect's decisions on matters relating to artistic effect, and except for claims which have been waived by the making or acceptance of final payment as provided by Subparagraphs 9.9.4 and 9.9.5, shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then obtaining unless the parties mutually agree otherwise...."

On March 15, 1988, Fuller, in response to an alleged breach of contract, filed a complaint in the circuit court for foreclosure of a mechanic's lien against IDB, Shelby Motel Group, Inc. ("SMG"), as lessee of the motel project, and First Alabama Bank ("bank"), as indenture trustee. In response, both IDB and SMG, pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seq. ("FAA"), filed motions to compel arbitration and for a stay of the trial court proceedings. On June 24, 1988, the trial court entered the following order on the motions: "Parties consent to arbitration and proceedings are stayed."

In September 1988, Fuller filed "counterclaims" in the arbitration proceeding against IDB and SMG. As against IDB, Fuller filed a breach of contract claim and a quantum meruit claim. As against SMG, Fuller filed a third-party beneficiary claim, an interference with contractual relations claim, and a fraud claim. Fuller also restated the lien claim alleged in the lawsuit, which had been referred by the trial court to arbitration. ¹

In April 1990, IDB expressly answered the claims asserted by Fuller and reserved "other answers, defenses and claims" pending the completion of discovery. Fuller did not object to this reservation. On June 13, 1990, IDB filed a claim in arbitration against Fuller and its surety, The Hartford Accident and Indemnity Company, alleging breach of contract and fraudulent concealment. Fuller filed with the American Arbitration Association ("AAA") a written objection to IDB's filing of this claim against it. Fuller contended that the fraud claim came too late and that it prejudiced Fuller in the arbitration proceeding. The arbitrators overruled Fuller's objection and allowed IDB's claim to stand. Fuller never filed a motion to stay in the circuit court or stated any further objection to the allowance of the fraud claim by IDB.

In August 1990, the arbitrators, after receiving documentary evidence and testimony of the parties involved, entered awards in favor of both Fuller and IDB. The AAA's order reads, in pertinent part, as follows:

"On the claim, H.L. FULLER CONSTRUCTION CO. shall pay to INDUSTRIAL DEVELOPMENT BD. OF THE TOWN OF VINCENT the sum of TWO HUNDRED FIFTY-THREE THOUSAND THREE HUNDRED SEVENTY-EIGHT DOLLARS AND NO CENTS ($253,378.00).

"On the counterclaim, INDUSTRIAL DEVELOPMENT BD. OF THE TOWN OF VINCENT shall pay to H.L. FULLER CONSTRUCTION CO. the sum of TWO HUNDRED SIXTY-TWO THOUSAND SIX HUNDRED DOLLARS AND NO CENTS ($262,600.00).

"Therefore, INDUSTRIAL DEVELOPMENT BD. OF THE TOWN OF VINCENT shall pay to H.L. FULLER CONSTRUCTION CO. the net sum of NINE THOUSAND TWO HUNDRED TWENTY-TWO DOLLARS AND NO CENTS ($9,222.00) to be paid within (30) thirty days from date of Award. Interest shall accrue at twelve (12%) percent per annum from date of Award until paid."

On August 31, 1990, prior to a judgment on the arbitration award by the Circuit Court of Shelby County, Fuller filed a notice of appeal with this Court. IDB filed a motion to dismiss the appeal, contending that because the circuit court had not entered a judgment, this Court did not have jurisdiction. In December 1990, this court remanded the case to the Circuit Court of Shelby County for entry of the AAA's award as the judgment of that court and for any further proceedings in accordance with § 6-6-15.

On remand, the circuit court entered the following judgment:

"THIS MATTER, having come before the Court upon the Confirmation of Arbitration Award and Satisfaction Thereof and Supplement thereto, filed by the [IDB], and the Court having considered the same, and in compliance with the Supreme Court of Alabama's Order of December 21, 1990, it is accordingly,

"ORDERED, ADJUDGED and DECREED, that the Arbitration Award ... be and hereby is ENTERED as a Judgment of this Court pursuant to Code of Alabama, 1975, § 6-6-15...."

Fuller made a motion to vacate the arbitration award, which the circuit court subsequently denied, and the matter was then properly before this Court.

On appeal, Fuller contends that the arbitration award is due to be vacated. Fuller argues that the award is inconsistent on its face, that it lacks fundamental rationality, and that it is so "imperfectly executed" that it violated the FAA and should not be allowed to stand. Fuller also contends that the arbitrators abused their discretion in allowing IDB to file its fraud claim at such a late stage in the proceedings.

At the outset, we note that neither side contends that the FAA does not apply in this case. In fact, Fuller's argument on appeal is based on the applicability of the FAA. Therefore, there is no issue presented as to whether this case involved a contract in "interstate commerce." See Wright v. Land Developers Construction Co., 554 So.2d 1000 (Ala.1989), cert. denied, 495 U.S. 931, 110 S.Ct. 2170, 109 L.Ed.2d 499 (1990) (both sides conceded the applicability of the FAA; therefore, there was no issue presented as to whether the case involved a contract in interstate commerce).

We further note that neither side contends that the arbitration provision did not encompass the fraud claim. In other words, Fuller did not argue that the fraud claim could not be submitted to arbitration pursuant to the original contract between the parties. Therefore, that issue is not properly before us.

However, at this juncture, this Court feels compelled to point out its disfavor of predispute arbitration agreements. In fact, Ala.Code 1975, § 8-1-41(3), explicitly prohibits the enforcement of predispute arbitration agreements. This somewhat hostile attitude toward predispute arbitration agreements is rooted in the belief that parties should not be permitted, by their agreement, to oust the courts of their jurisdiction. In discussing Alabama's policy toward predispute arbitration agreements, this Court has stated:

"The public policy of this state is to encourage arbitration and amicable settlements of differences between parties; but public policy also holds void an agreement in advance to oust or defeat the jurisdiction of all courts, as to all differences between the parties."

Wells v. Mobile County Bd. of Realtors, 387 So.2d 140, 144 (Ala.1980) (quoted with approval in Ex parte Warren, 548 So.2d 157, 160 (Ala.1989); cert. denied, 493 U.S. 998, 110 S.Ct. 554, 107 L.Ed.2d 550 (1989)).

However the United States Supreme Court in Southland Corp. v. Keating, 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984), firmly established that in cases governed by the FAA, the federal substantive law of arbitration governs, despite contrary state law or policy. Further, Alabama has recognized that the federal policy embodied in the FAA mandates that whenever a written contract evidencing a transaction in interstate commerce contains an arbitration provision, that provision must be given effect by state and federal courts alike. Ex parte Costa & Head (Atrium), Ltd., 486 So.2d 1272, 1276 (Ala.1986); Ex parte Alabama Oxygen Co., 452 So.2d 860 (Ala.1984) (approving the view expressed in Justice Maddox's dissent in the original proceeding at 433 So.2d 1158, 1168 (Ala.1983)).

Ex parte Costa & Head was a mandamus proceeding arising out of a lawsuit involving a dispute over a construction contract. There, the petitioner, a general contractor, executed a standard AIA construction contract, which provided that "[a]ll claims, disputes and other matters in question between the contractor and the owner arising out of, or relating to, the contract documents or the breach thereof ... shall be decided by arbitration." Costa at 1273. Ultimately, a suit was filed in the circuit court, which, among other things, alleged breach of contract, fraud, negligence, and wrongful termination. The petitioner requested that the circuit court stay the case and compel arbitration of all arbitrable issues. The trial court denied the petitioner's request and instead stayed any pending arbitration proceedings. In the mandamus proceeding before this Court, the petitioner requested an order to stay the circuit court proceedings pending...