J.L. Loper Constr. Co. Inc. v. Findout P'ship

• Decision Date: 13 August 2010
• Docket Number: 1081633 and 1081692.
• Citation: 55 So.3d 1152
• Parties: J.L. LOPER CONSTRUCTION COMPANY, INC., et al.v.FINDOUT PARTNERSHIP, LLP.Findout Partnership, LLPv.J.L. Loper Construction Company, Inc., et al.
• Court: Alabama Supreme Court

55 So.3d 1152

J.L. LOPER CONSTRUCTION COMPANY, INC., et al.

v.FINDOUT PARTNERSHIP, LLP.Findout Partnership, LLP

v.J.L. Loper Construction Company, Inc., et al.

1081633 and 1081692.

Supreme Court of Alabama.

May 21, 2010.Rehearing Denied Aug. 13, 2010.

A. Riley Powell IV of The Powell Law Firm, P.C., Gulf Shores, for appellants/cross-appellees J.L. Loper Construction Company, Inc., et al.David P. Shepherd, Fairhope, for appellee/cross-appellant Findout Partnership, LLP.BOLIN, Justice.

J.L. Loper Construction Company, Inc., and Michael Chad Loper (hereinafter referred to collectively as “Loper”) appeal from the trial court's order dismissing Loper's declaratory-judgment action and ordering Loper to submit to arbitration. Findout Partnership, LLP (“Findout”), cross-appeals from the trial court's order setting aside an arbitration award in favor of Findout and remanding the arbitration proceeding to the arbitrator for the taking of additional testimony so that Loper could be heard.

On September 23, 2005, the parties entered into a construction contract pursuant to which Loper was to construct for Findout a house on Ono Island in Baldwin County. The estimated total cost of the construction contract was $1,637,102.20, with $200,000 of the estimated contract price representing the contractor's fee to be paid to Loper. The construction contract provided, among other things, that the house would be completed within 18 months from the issuance of the building permit and provided for a penalty of 1% of the “builder's profit” per month for every month the project was delinquent. Article 9 of the construction contract contained the following arbitration agreement:

“Any controversy or claim arising out of or related to [this] contract, or breach thereof, will be settled by binding arbitration in accordance with the Alabama Arbitration Act, Sections 6–6–1 through 6–6–16 of the Alabama Code.” ¹

On August 29, 2006, the parties executed an addendum to the construction contract, which changed the roof material and the exterior finish, adding an estimated cost to the construction contract of $92,000. On April 11, 2007, the parties executed an additional addendum to the construction contract adding a number of change orders, the additional cost of which was estimated to be $268,855.24.

On August 10, 2007, the parties executed an amendment to the construction contract whereby Loper agreed to complete work on a “punch list” by September 30, 2007. The parties further agreed to set the sum of $1,000 per day as the amount of liquidated damages to be deducted from the contractor's fee for each day after September 30, 2007, that the punch-list work was not completed. The amended contract also provided that Findout was to pay Loper $275,000, which the parties acknowledged was the final sum owed Loper for the construction of the house. The other provisions contained in the original construction contract were not amended and remained in force.

On October 22, 2007, the parties executed a second amendment to the construction contract that provided, in part, as follows:

“1. Attached to this Second Amendment and marked as Exhibit ‘A’ is a copy of the punch list items which are not completed in accordance with the provisions of the Contract and Amendment to Contract. [Findout] and [Loper] agree that [Loper] is released from the obligation to complete said punch list items on Exhibit ‘A’ in consideration for the payment by [Findout] to [Loper] of the sum of Seven Thousand Eight Hundred Dollars ($7,800.00) and [Findout] is released from the obligation to pay the sum of Nineteen Thousand Seven Hundred Dollars ($19,700.00) to [Loper].

“2. [Findout] and [Loper] acknowledge that all sums due to [Loper] under the Construction Contract, as amended by the Amendment to Construction Contract and this Second Amendment, have been paid in full. [Loper] waives and releases any lien or right to lien on or against the Real Property on account of the work or labor furnished by [Loper] and warrants and represents that any and all parties who had supplied work, labor and material to the Real Property have been paid in full.

“....

“5. In all other respects, except as provided for in this Second Amendment, the terms, conditions, and provisions of the Construction Contract and the Amendment to Construction Contract shall remain unchanged and in full force and effect. All understandings and agreements made between the parties are merged into the Construction Contract, as amended by the Amendment to Construction Contract and this Second Amendment which together express the entire agreement of the parties. No representations, oral or written, not contained in the Construction Contract, as amended by the Amendment to Construction Contract and this Second Amendment, shall be considered a part of the agreement of the parties.”

In July 2008, counsel for Findout wrote a letter to Loper's counsel for the purpose of opening up settlement negotiations regarding certain defaults Findout alleged Loper had made under the construction contract. On August 29, 2008, Findout's counsel notified Loper's counsel that it was demanding arbitration under Article 9 of the construction contract and asserted as grounds for the arbitration poor workmanship, incomplete work, improperly performed work, work that was not performed pursuant to code, work that was not performed pursuant to industry standards, and inaccurate and fraudulent billings.

On September 8, 2008, Loper's counsel responded by letter to Findout's demand for arbitration, stating that Loper would not agree to arbitration “as [Loper had] zero liability” and had “a signed full release” relating to the construction project.

On September 10, 2008, Findout responded to Loper's September 8 letter reminding Loper that the parties had contracted to arbitrate any disputes and again requesting that Loper submit to arbitration. Findout also informed Loper that the defense of release would be an appropriate defense to raise during the arbitration proceeding.

On September 17, 2008, Loper responded to Findout's letter of September 10 stating that it would not agree to arbitration because this “case is long over.” Loper enclosed a copy of a mutual release and settlement agreement that purports to release both parties from any additional liability relating to the construction of the house in question. The mutual release and settlement agreement states that both Loper and Findout release and discharge each other from any and all claims relating to the construction of the house. The mutual release and settlement agreement Loper enclosed was not signed by either party. Findout responded that same day to Loper's letter advising Loper that it would proceed with arbitration and again requested Loper's participation in the arbitration process. Findout also noted in its letter to Loper that the copy of the mutual release and settlement agreement provided to it was not signed. Findout requested that it be provided a signed copy of the mutual release and settlement agreement.

Findout thereafter selected an arbitrator. On October 10, 2008, Findout contacted the arbitrator by letter to set the date for a scheduling conference. Findout also informed the arbitrator that as a result of Loper's refusal to participate in the arbitration process, it could not provide the arbitrator with a joint statement from the parties. However, Findout did provide the arbitrator with a copy of its August 29, 2008, letter to Loper's counsel, which set forth Findout's claims against Loper. Findout forwarded a copy of this letter and its enclosures to Loper and requested that Loper contact Findout if it had decided to participate in the arbitration process.

On October 14, 2008, Findout notified Loper that a scheduling conference in the arbitration proceeding had been set for October 22, 2008. On October 15, 2008, Loper petitioned the Baldwin Circuit Court for a judgment declaring whether Loper could be compelled to arbitrate claims arising out of the construction of the house on Ono Island despite the existence of the mutual release and settlement agreement. Loper referenced the mutual release and settlement agreement in its complaint and attached to its petition a copy of the unsigned mutual release and settlement agreement. Contemporaneously with the petition for a declaratory judgment Loper filed a motion seeking to enjoin Findout from arbitrating any claims until the trial court entered a judgment in the declaratory-judgment action. On October 16, 2008, Loper informed Findout and the arbitrator that it had filed the declaratory-judgment action and motion for injunctive relief.

On October 21, 2008, Findout notified the arbitrator and Loper by letter that it intended to proceed with the scheduling conference because the trial court had not entered an injunction in favor of Loper. Findout again informed Loper that if it wanted to participate in the scheduling conference it should notify Findout. Findout also stated in the letter that “[it] can only hope that [counsel for Loper] will participate, regardless of what his client wants, so that the interest of his client will be protected.” In response, Loper petitioned the trial court requesting that it immediately enter an order enjoining Findout from proceeding with arbitration until its petition for a declaratory judgment had been heard by the trial court.

On October 30, 2008, the arbitrator contacted Loper noting that the mutual release and settlement agreement Loper was relying on was unsigned and that no injunction had been issued by the trial court. The arbitrator informed Loper that arbitration would proceed and requested that Loper notify him if it wished to participate. Loper failed to respond to the arbitrator's October 30 letter. On November 13, 2008, the arbitrator sent an e-mail to Loper requesting a response to his October 30 letter. On November 14, 2008, Loper responded to the arbitrator's...