Hubert v. Turnberry Homes, LLC, No. M2005-00955-COA-R3-CV (Tenn. App. 10/4/2006)
| Decision Date | 04 October 2006 |
| Docket Number | No. M2005-00955-COA-R3-CV.,M2005-00955-COA-R3-CV. |
| Parties | TREVOR HUBERT ET AL. v. TURNBERRY HOMES, LLC |
| Court | Tennessee Court of Appeals |
Appeal from the Chancery Court for Williamson County; No. 31142; Russ Heldman, Judge.
Judgment of the Chancery Court Affirmed in Part, Reversed in Part, and Remanded.
Todd E. Panther, Nashville, Tennessee, for the appellant, Turnberry Homes, LLC.
Corey J. Stringer, Nashville, Tennessee, for the appellees, Trevor Hubert and Violet Hubert.
OPINION
This appeal involves the enforceability of an arbitration clause in a residential construction contract. After the construction was completed, the purchasers filed suit against the builder in the Chancery Court for Williamson County alleging numerous construction defects and code violations. The builder moved to compel arbitration pursuant to the contract's arbitration clause. When the purchasers argued that the arbitration clause was invalid because they had not separately signed or initialed it as required by the Tennessee Uniform Arbitration Act, the builder asserted that the Federal Arbitration Act, rather than the Tennessee Uniform Arbitration Act, governed the parties' agreement to arbitrate. The trial court denied the builder's motion to compel arbitration without explanation, and the builder appealed. We have determined that the Federal Arbitration Act preempts the Tennessee Uniform Arbitration Act except insofar as the purchasers' fraudulent inducement claim is concerned.
On February 1, 2003, Trevor and Violet Hubert contracted with Turnberry Homes, LLC ("Turnberry") to construct a new house in a subdivision straddling the boundary line between the City of Brentwood and the City of Franklin in Williamson County. The Huberts were dissatisfied with the house when it was completed and, on December 1, 2004, filed suit against Turnberry in the Chancery Court for Williamson County alleging shoddy construction and numerous code violations. The Huberts sought damages under various causes of action, including fraudulent inducement, breach of contract, violations of the Tennessee Consumer Protection Act, negligent misrepresentation, negligence, and mistake.
On January 25, 2005, Turnberry filed a motion to compel arbitration and to stay the litigation pursuant to the Federal Arbitration Act1 and the arbitration clause contained in the construction agreement. The arbitration clause provides in relevant part as follows:
BINDING ARBITRATION: By signing this Agreement, Seller and Purchaser agree that any claim or controversy between or among the parties whether based in contract, warranty, negligence, or other possible legal theories, shall be determined by binding arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association . . . .
Turnberry also filed an affidavit of its president identifying the interstate origins of various materials used in the construction of the house.
The Huberts opposed Turnberry's motion to compel arbitration based on the construction contract's choice of law clause2 and on the Tennessee Uniform Arbitration Act.3 Because the contract provided that the parties' rights and obligations would be governed by Tennessee law, the Huberts first argued that the arbitration clause was unenforceable because the TUAA expressly prohibits the enforcement of private agreements to arbitrate in residential construction contracts unless the arbitration clause is separately signed or initialed by the parties4 and because they had neither signed nor initialed the agreement to arbitrate. Second, relying on Frizzell Constr. Co. v. Gatlinburg, L.L.C., 9 S.W.3d 79 (Tenn. 1999), the Huberts argued that notwithstanding the arbitration clause, they were entitled to a judicial resolution of their fraudulent inducement claim. Responding to the Huberts, Turnberry insisted that the parties' agreement to arbitrate was governed by the FAA and was, therefore, fully enforceable.
The trial court evidently accepted the Huberts' broader argument. On March 18, 2005, the court entered a three-line order denying Turnberry's motion to compel arbitration and to stay the litigation. The court offered no explanation for its ruling. Turnberry appealed.
This court reviews a grant or denial of a motion to compel arbitration under the FAA or the TUAA under the same standards that apply to bench trials. Spann v. Am. Express Travel Related Servs. Co., No. M2004-02786-COA-R3-CV, 2006 WL 2516431, at *5 (Tenn. Ct. App. Aug. 30, 2006). The standards this court uses to review the results of bench trials are well-settled. With regard to a trial court's findings of fact, we will review the record de novo and will presume that the findings of fact are correct "unless the preponderance of the evidence is otherwise." Tenn. R. App. P. 13(d). We will also give great weight to a trial court's factual findings that rest on determinations of credibility. In re Estate of Walton, 950 S.W.2d 956, 959 (Tenn. 1997); B & G Constr., Inc. v. Polk, 37 S.W.3d 462, 465 (Tenn. Ct. App. 2000). If, however, the trial court has not made a specific finding of fact on a particular matter, we will review the record to determine where the preponderance of the evidence lies without employing a presumption of correctness. Ganzevoort v. Russell, 949 S.W.2d 293, 296 (Tenn. 1997).
Reviewing findings of fact under Tenn. R. App. P. 13(d) requires an appellate court to weigh the evidence to determine in which party's favor the weight of the aggregated evidence falls. There is a "reasonable probability" that a proposition is true when there is more evidence in its favor than there is against it. Chapman v. McAdams, 69 Tenn. (1 Lea) 500, 506 (1878); see also 2 MCCORMICK ON EVIDENCE § 339, at 484 (Kenneth S. Broun ed., 6th ed. 2006) (defining "proof by a preponderance" as "proof which leads the [finder of fact] to find that the existence of a contested fact is more probable than its nonexistence"). Thus, the prevailing party is the one in whose favor the evidentiary scale tips, no matter how slightly. Parks Props. v. Maury County, 70 S.W.3d 735, 741 (Tenn. Ct. App. 2001); Realty Shop, Inc. v. RR Westminster Holding, Inc., 7 S.W.3d 581, 596 (Tenn. Ct. App. 1999).
Tenn. R. App. P. 13(d)'s presumption of correctness requires appellate courts to defer to a trial court's findings of fact. Fell v. Rambo, 36 S.W.3d 837, 846 (Tenn. Ct. App. 2000). Because of the presumption, an appellate court is bound to leave a trial court's finding of fact undisturbed unless it determines that the aggregate weight of the evidence demonstrates that a finding of fact other than the one found by the trial court is more probably true. Parks Props. v. Maury County, 70 S.W.3d at 742. Thus, for the evidence to preponderate against a trial court's finding of fact, it must support another finding of fact with greater convincing effect. Walker v. Sidney Gilreath & Assocs., 40 S.W.3d 66, 71 (Tenn. Ct. App. 2000).
The presumption of correctness in Tenn. R. App. P. 13(d) applies only to findings of fact, not conclusions of law. Accordingly, appellate courts review a trial court's resolution of legal issues without a presumption of correctness and reach their own independent conclusions regarding these issues. Johnson v. Johnson, 37 S.W.3d 892, 894 (Tenn. 2001); Nutt v. Champion Int'l Corp., 980 S.W.2d 365, 367 (Tenn. 1998); Knox County Educ. Ass'n v. Knox County Bd. of Educ., 60 S.W.3d 65, 71 (Tenn. Ct. App. 2001); Placencia v. Placencia, 48 S.W.3d 732, 734 (Tenn. Ct. App. 2000).
The trial court's conclusion that the arbitration clause in the parties' construction contract was unenforceable is a question of law that we will review de novo without a presumption of correctness.
We turn first to Turnberry's claim that the FAA preempts the TUAA's requirement that arbitration clauses in contracts relating to residential structures must be separately signed or initialed by the parties in order to be enforceable. Turnberry argues that the states may not enact statutory requirements for arbitration agreements that are not applicable to contracts generally. We agree.
In 1925, Congress declared a nationwide policy favoring the enforcement of private agreements to arbitrate by enacting the FAA.5 The FAA was designed to reverse centuries of Anglo-American judicial opposition to the enforcement of arbitration agreements. The heart of the statute, Section 2, mandates that "a written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration" present or future controversies "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C.A. § 2.
Other sections of the FAA define relevant terms, 9 U.S.C.A. § 1, authorize federal courts to stay litigation pending the outcome of an arbitration proceeding, 9 U.S.C.A. §§ 3-4, provide procedures both for invoking the right to compel arbitration in federal court and for conducting arbitrations where the details are not otherwise specified in the parties' agreement, 9 U.S.C.A. §§ 5-8, and delineate the grounds and procedures for asking a federal court to confirm, set aside, or modify an arbitrator's decision, 9 U.S.C.A. §§ 9-13. Finally, the statute stipulates that it does not apply to contracts made prior to January 1, 1926, provides that the does not apply to proceedings under the Act, and establishes procedures for interlocutory appeal of federal court orders entered under the FAA. 9 U.S.C. §§ 14-16.
The FAA is expressly limited to disputes arising out of maritime transactions or contracts involving interstate commerce. Moreover, for many...
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