Macon Water Authority v. City of Forsyth

• Decision Date: 26 June 2003
• Docket Number: No. A03A0785.,A03A0785.
• Citation: 262 Ga. App. 224,585 S.E.2d 131
• Parties: MACON WATER AUTHORITY v. CITY OF FORSYTH.
• Court: Georgia Court of Appeals

585 S.E.2d 131

262 Ga. App. 224

MACON WATER AUTHORITY v. CITY OF FORSYTH.

No. A03A0785.

Court of Appeals of Georgia.

June 26, 2003.

Reconsideration Denied July 9, 2003.

Jones, Cork & Miller, Hubert C. Lovein, Jr., Macon, for appellant.

Alston & Bird, William H. Hughes, Jr., Atlanta, Hall, Bloch, Garland & Meyer, John F. Kennedy, Macon, for appellee.

ELDRIDGE, Judge.

This is an appeal from the trial court's order compelling arbitration under the contract to supply electricity and not from the confirmation of the arbitration award against the Macon Water Authority and for the City of Forsyth. MWA defaulted upon the contract when it changed its plans to renovate the existing water treatment plant, the subject of the service contract, because of flooding, but instead, MWA built a new treatment plant in a different county and using a different electric service supplier. MWA contended that the service contract terminated when the existing site flooded; however, MWA should have submitted such termination issue to arbitration but did not do so, ignoring the contract terms. On November 13 and 14, 2001, arbitration took place, and the arbitrators awarded the City of Forsyth $938,575 in damages against MWA for its default under the contract. MWA appeals from the trial court's order compelling arbitration under the electric service contract and denying MWA's motion to stay arbitration. Finding no error, we affirm.

On November 18, 1993, the MWA contracted for the purchase of electricity from the City of Forsyth, Georgia, a municipal corporation receiving wholesale electricity supplied by the Municipal Electric Authority of Georgia for five years with an additional five-year option for its proposed expansion of its existing treatment facility. Under the contract, the City of Forsyth caused MEAG to build a 115kV/12.47kV substation next to the proposed site for the expanded water works, and MEAG owned the site and improvements; also, MEAG relocated four 115kV transmission lines away from the location of MWA's water reservoir. December 31, 1994, was the completion date for all work.

In the contract, the parties contemplated the catastrophic occurrence of a flood, but agreed that the contract would abate for the duration of the flood but that the contract would not terminate. After five years, MWA had the right to opt out of the agreement. The contract had no other termination provision. The agreement required mandatory arbitration in the event of default or dispute by either party as to any issue. The contract provided for no other unilateral right for either party to terminate the contract.

In July 1994, the Ocmulgee River flooded the existing MWA's water treatment plant, rendering it inoperable and causing water customers to be without service for up to 21 days. MWA recognized that the existing site had a continuing risk of flooding. MWA defaulted on its contract with the City of Forsyth without submitting the issue of termination to arbitration as required by the contract. MWA cancelled other contracts to improve the existing water treatment plant because of the risk of future flooding at the existing site. Already, MWA owned a reservoir site in Jones County, approximately two and one-half miles from the existing treatment plant on the east side of the Ocmulgee River on high ground not subject to flooding. MWA built a new water treatment plant on such site. Then, MWA entered into a new contract with Tri-County Electric Membership Corporation to provide electric services.¹ MWA treated the contract with the City of Forsyth as terminated by the flood without submitting this to arbitration.

1. MWA contends that the trial court erred in compelling arbitration, because the City of Forsyth had waived or abandoned its right to arbitrate by its proceeding before the Public Service Commission. We find no merit to this contention.

MWA contends that the City of Forsyth waived any right to arbitration under the contract by bringing the action before the PSC against the Tri-County EMC for violation of the Georgia Territorial Electric Service Act. "`[A]n agreement to arbitrate is waived by any action of a party which is inconsistent with the right of arbitration.'" (Citation omitted.) Tillman Group v. Keith, 201 Ga.App. 680, 681(2), 411 S.E.2d 794 (1991). The trial court must have jurisdiction to compel arbitration under the contract. Id. at 681(1), 411 S.E.2d 794. However, unlike this case where the alleged inconsistent action was with a nonparty in a regulatory proceeding that lacked jurisdiction to compel arbitration, such "inconsistent action" was proceeding to trial over the agreement with the opposite party and not demanding a stay of litigation in order to arbitrate. Id. at 681(2), 411 S.E.2d 794; OCGA § 9-9-6(a). In McCormick-Morgan, Inc. v. Whitehead Elec. Co., 179 Ga.App. 10, 13, 345 S.E.2d 53 (1986), waiver of the written arbitration rights consisted of negotiating and settling of all claims under the oral contract, which was reduced to the written contract, and then waiting three years after final payment under the written contract to claim a dispute for arbitration. In Conseco Finance Servicing Corp. v. Hill, 252 Ga.App. 774, 779(4), 556 S.E.2d 468 (2001), this Court held that a default judgment by failure to answer the complaint waived not only any defense of the right to arbitrate but also any other defenses to liability between the parties under the contract. Such cases are distinguishable on the law and facts, because each case dealt with litigation or settlement between the parties to the arbitration regarding issues that were subject to the arbitration clause but were not timely arbitrated.

The proceedings before the PSC and appeal therefrom involved the application of the Georgia Territorial Electric Service Act to Tri-County EMC, a nonparty to the arbitration agreement, where the City of Forsyth contended that it was the electric service provider based upon the earlier contract with MWA. MWA was never a party, and the PSC lacked jurisdiction to compel MWA to arbitrate. Such proceedings did not determine either directly or indirectly whether or not the agreement between the City of Forsyth and MWA had terminated by default or other reasons. The only issue decided by such administrative procedure was that the Town Creek Plant in Jones County was not subject to the Georgia Territorial Electric Service Act so that Tri-County EMC could contract with MWA to provide electric services, because such Town Creek facility was not the same premises under the Act that the City of Forsyth contracted to supply electric...