Hardy Const. Co., Inc. v. Arkansas State Highway and Transp. Dept.

• Decision Date: 28 May 1996
• Docket Number: No. 96-67,96-67
• Citation: 922 S.W.2d 705,324 Ark. 496
• Parties: HARDY CONSTRUCTION COMPANY, INC., Appellant, v. ARKANSAS STATE HIGHWAY AND TRANSPORTATION DEPARTMENT, Appellee.
• Court: Arkansas Supreme Court

Page 705

922 S.W.2d 705

324 Ark. 496

HARDY CONSTRUCTION COMPANY, INC., Appellant, v.ARKANSAS STATE HIGHWAY AND TRANSPORTATION DEPARTMENT, Appellee.

No. 96-67.

Supreme Court of Arkansas.

May 28, 1996.

John A. Davis, III, Little Rock, for Appellant.

Robert L. Wilson, Chief Counsel, Mark J. Whitmore, Lawrence W. Jackson, Little Rock, for Appellee.

BROWN, Justice.

AppellantHardy Construction Company, Inc., appeals the chancery court's dismissal of its petition for the appointment of an arbitrator and raises four points for reversal: (1) the chancery court was required by statute to appoint an arbitrator; (2) the arbitrators decide procedural matters, not the courts; (3) the chancery court has jurisdiction to enforce the arbitration clauses at issue; and (4) sovereign immunity is no defense to the petition by Hardy Construction.We agree with Hardy Construction that the chancery court had subject-matter jurisdiction but we affirm the decision of that court because of the insufficiency of the abstract.

In 1987, Hardy Construction entered into a contract with appelleeArkansas State Highway and Transportation Department to construct a project designated as Missouri Street overpass in West Memphis.In 1989, the same parties contracted for Hardy Construction to construct a second project, also in West Memphis, designated as the West Memphis Interchange at Interstate Highway 55.Both contracts provided that any disputes would be settled by arbitration.

The two contracts provided with respect to arbitration that each party would appoint a member to serve on the arbitration panel.Those two arbitrators would then select a third member.The provision further states:

If such arbitrators are unable to agree upon the third member of the Board of Arbitration within ten (10) calendar days after their appointment, application may be made by either party to the Chancery Court of Pulaski County within ten (10) calendar days for such purpose, and the court shall, on or before ten (10) calendar days thereafter[,] appoint a disinterested party to serve as the third member of said Board of Arbitration.

The contracts further provided that prefatory to arbitration any disputes must be submitted to the resident engineer and, if unsuccessful, then appealed to the Chief Engineer of the Highway Department for final decision.Within 20 days of an unfavorable decision, a party could request arbitration.Thus, according to the contracts, the party requesting arbitration first had to exhaust all remedies within the Highway Department.

Disputes arose over the final estimates of compensation due Hardy Construction on both projects.On June 21, 1995, Hardy Construction gave notice of arbitration and designated its arbitrator for the arbitration process.On August 4, 1995, Hardy Construction filed its Petition for Appointment of Arbitrator.In that petition, Hardy Construction asserted that the Highway Department had refused to select its arbitrator and was frustrating the arbitration process under both contracts.Hardy Construction further prayed that the chancery court appoint the third arbitrator in accordance with the contracts so as to move the process along.

On August 28, 1995, the Highway Department moved to dismiss the petition in separate motions for each job.(Both motions are substantially the same and are treated as one for purposes of this opinion.)The Department urged in its motion that the petition failed to show that the chancery court had jurisdiction over the subject matter and further that Hardy Construction had failed to allege that it had exhausted administrative remedies under the contracts by submitting the dispute to the Department's engineers.Finally, the Department cited sovereign immunity as grounds for dismissal.On September 5, 1995, Hardy Construction amended its petition to add a paragraph to state "that all conditions precedent have been performed...."On October 16, 1995, the chancery court concluded in part:

Plaintiff has appointed an arbitrator; however, the defendant has not appointed an arbitrator, because it contends plaintiff has not followed the administrative procedures under the contract.Therefore, there is no situation where the two arbitrators appointed by the parties are unable to agree on a third arbitrator, and, under the terms of the contract, that is the only provision for court intervention.

Plaintiff amended its petition on September 5, 1995; however, it still does not request any relief in this court that is cognizable in equity.It is simply trying to get this court to appoint a third arbitrator, and the provisions for that contingency have not occurred.Since plaintiff is asking this court to perform a duty that is not provided for in the contract, it is attempting to modify the terms of the arbitration provisions.At the hearing, plaintiff contended that it was asking for specific performance; however, its pleadings have not been amended, nor have any additional parties been named.It is axiomatic that the State cannot "be made a defendant in any of her courts."Article 5, Section 20, Constitution of Arkansas.

The chancery court ordered that the petition be dismissed under Ark.R.Civ.P. 12(b)(6).

I.Jurisdiction

The issue of subject-matter jurisdiction raised by the Highway Department is paramount and must be addressed first.Under the Uniform Arbitration Act, codified at Ark.Code Ann. § 16-108-201 et seq.(1987), the following section is found:

The term "court" means any circuit or chancery court of this state.The making of an agreement described in § 16-108-201 providing for arbitration in this state confers jurisdiction on the court to enforce the agreement under this subchapter and to enter judgment on an award thereunder.

Ark.Code Ann. § 16-108-217(1987).The contract provision set forth above in this opinion alludes to jurisdiction in Pulaski County Chancery Court.While it is true that the parties may by agreement consent to personal jurisdiction in a given court, subject matter jurisdiction cannot be conferred merely by agreement of the parties.See, e.g., Flemens v. Harris, 319 Ark. 659, 893 S.W.2d 783(1995);Arkansas Department of Human Services v. Estate of Hogan, 314 Ark. 19, 858 S.W.2d 105(1993);Nelms v. Morgan Portable Bldg. Corp., 305 Ark. 284, 808 S.W.2d 314(1991).Thus, if subject matter jurisdiction is appropriate, the parties may agree on the appropriate court in which to resolve disputes.

Hardy Construction argues that subject-matter jurisdiction is appropriate in chancery court because the relief requested is akin to a mandatory injunction to enforce the contract or, alternatively, to specific performance of the contract provision relating to court appointment of an arbitrator.Specific performance is an equitable remedy cognizable only in equity.Arkansas State Employees Ins. Advisory Comm. v. Estate of Manning, 316 Ark. 143, 870 S.W.2d 748(1994).Although there is no case in Arkansas that specifically addresses whether the chancery court has jurisdiction to act to enforce an arbitration agreement pursuant to statutory authority, foreign jurisdictions have treated these actions as ones for specific performance of a contract to arbitrate.SeeAnnapolis Professional Firefighters Local 1926, IAFF, AFL-CIO v. City of Annapolis, 100 Md.App. 714, 642 A.2d 889(1994)(dictum );Trubowitch v. Riverbank Canning Co., 30 Cal.2d 335, 182 P.2d 182(1947);see also4 Am.Jur.2d, Alternative Dispute Resolution, § 113, p. 158(1995).

For example, in Annapolis Professional Firefighters Local 1926, IAFF, AFL-CIO, supra, the Maryland Court of Special Appeals addressed by way of dictum the power of a court of equity to appoint an arbitrator under the Uniform Arbitration Act when the agreed method failed or otherwise could not be followed:

Although this power, under the Act, is a statutory one, it is not foreign to or inconsistent with the general equitable jurisdiction of a circuit court.¹ Equity courts have long had the power, for example, when specifically enforcing agreements, to appoint trustees to carry out their decrees when a party proves recalcitrant or when otherwise necessary to implement the agreement.

Annapolis Firefighters, 642 A.2d at 895.

To support its argument that the chancery court did not have subject-matter jurisdiction, the Highway Department directs our attention to Bates v. Bates, 303 Ark. 89, 793 S.W.2d 788(1990).In that case, this court reiterated that the General Assembly is without authority to expand the jurisdiction of chancery courts beyond that granted by the 1874 Arkansas Constitution.Bates, 303 Ark. at 91, 793 S.W.2d at 790.In Bates, we held specifically that the General Assembly could not expand the chancery court's jurisdiction to include areas of criminal law.The Bates case, though, is distinguishable from Annapolis Firefighters and the instant case because the latter situations add nothing to a court of equity's traditional responsibilities to specifically enforce agreements to arbitrate under certain circumstances.

Though Arkansas does not have a precise case in point, an analogous situation arose in Arkansas Cotton Grs.Co-op. Assn. v. Brown168 Ark. 504, 270 S.W. 946(1925).In Brown, we interpreted the Cooperative Marketing Act, including a provision of the Act which gave the Association the right to seek an injunction in equity against a member "to prevent the further breach of the contract and to a decree of specific performance thereof."seeAct 116 of 1921, § 17, codified at Ark.Code Ann. § 2-2-419(a)(1)(Repl.1996).We stated in Brown:

It is contended that the chancery court does not possess jurisdiction to prevent a breach by injunction and thereby compel specific performance of the contract.The statute creating the association contains an express provision for such relief, but it is contended that this statute constitutes an attempt to enlarge the jurisdiction of the court, which is beyond...