Wesley Retirement Services, Inc. v. Hansen Lind Meyer, Inc., 97-1027

• Citation: 594 N.W.2d 22
• Decision Date: 28 April 1999
• Docket Number: No. 97-1027,97-1027
• Parties: WESLEY RETIREMENT SERVICES, INC., Appellee, v. HANSEN LIND MEYER, INC., Appellant.
• Court: United States State Supreme Court of Iowa

Page 22

594 N.W.2d 22

WESLEY RETIREMENT SERVICES, INC., Appellee, v. HANSEN LIND MEYER, INC., Appellant.

No. 97-1027.

Supreme Court of Iowa.

April 28, 1999.

Joseph A. Happe and Patrick D. Smith of Huber, Book, Cortese, Happe & Brown, P.L.C., Des Moines, for appellant.

John R. Mackaman and F. Richard Lyford of Dickinson, Mackaman, Tyler & Hagen, P.C., Des Moines, for appellee.

Considered by LARSON, P.J., and LAVORATO, SNELL, TERNUS, and CADY, JJ.

TERNUS, Justice.

Appellee, Wesley Retirement Services, Inc., filed suit against appellant, Hansen Lind Meyer, Inc. (HLM), alleging two contract claims and one tort claim arising out of HLM's performance of architectural services for Wesley. HLM filed a motion to compel arbitration, which the district court granted as to the contract claims and denied as to the tort claim. HLM appeals, asserting the court erred in ruling that tort claims were not subject to arbitration under Iowa Code chapter 679A (1997). Wesley cross-appeals from that part of the court's decision ordering arbitration of the contract claims, arguing HLM waived its contractual right to demand arbitration. Finding no basis for reversal, we affirm.

I. Factual and Procedural Background.

In a written contract between HLM and Wesley, HLM agreed to provide architectural services for a retirement care facility being built by Wesley. The contract provided that upon written demand of one of the contracting parties, any claim or dispute arising out of or related to the contract shall be decided by arbitration.

After construction of the facility was substantially completed in September 1992, a dispute developed between the parties concerning alleged defects in the design and construction of the building. Wesley's attorney suggested mediation, but HLM was reluctant to engage in mediation without a better understanding of Wesley's claims.

On June 4, 1996, Wesley filed suit in district court alleging that HLM breached the contract and was negligent in the performance of its contractual duties. HLM filed an answer denying Wesley's allegations of fault and alleging several affirmative defenses. HLM did not assert a right to arbitrate Wesley's claims.

On September 18, 1996, the parties agreed to a uniform scheduling order, setting deadlines for adding new parties (February 26, 1997), for discovery (May 23, 1997), and for disclosure of experts (February 25, 1997 for Wesley and March 25, 1997 for HLM). The stipulated order also scheduled trial for August 25, 1997. Wesley subsequently served interrogatories and a request for production of documents on February 18, 1997, and a day later amended its petition. Wesley also timely designated its expert witnesses and provided their reports to HLM. HLM initiated no discovery and filed no motions.

Meanwhile, the parties continued to discuss mediation, and eventually conducted a full day of mediation with a privately retained mediator on April 1, 1997. Mediation proved unsuccessful, however, and on April 8, 1997, HLM filed a motion to compel arbitration. Wesley resisted the motion, claiming that HLM had waived its right to arbitrate and that the arbitration clause was unenforceable because it was contained in a contract of adhesion. Wesley also pointed out that arbitration of tort claims was unavailable under Iowa law.

In its ruling on HLM's motion, the court held there was no waiver, but did agree that Iowa Code section 679A.1 prevented the enforcement of arbitration clauses with respect to claims sounding in tort. The court ordered that the contract claims asserted by Wesley against HLM be arbitrated, but denied arbitration of the tort claim.

HLM filed this appeal, alleging that the trial court abused its discretion in refusing arbitration of Wesley's tort claim. HLM asserts two grounds in support of its appeal: (1) denying arbitration of the tort claim while compelling arbitration of the contract claims is contrary to the intent of the Iowa Arbitration Act, Iowa Code chapter 679A; and (2) to the extent Iowa's arbitration law does not allow arbitration of negligence claims, it is preempted by the Federal Arbitration Act. On its cross-appeal, Wesley raises three issues: (1) the conditions precedent to arbitration required by the parties' contract were not satisfied by HLM; (2) HLM waived its right to compel arbitration; and (3) the contract between the parties was a contract of adhesion and therefore is unenforceable under Iowa's arbitration statute. HLM also challenges Wesley's right to file an appeal, arguing that the decision from which Wesley cross-appeals--one ordering arbitration--is not appealable as a matter of right.

II. HLM's Appeal: Did the District Court Err in Denying HLM's Motion to Compel Arbitration of Wesley's Tort Claim?

A. Preservation of error and scope of review. Before we address the merits of the district court's ruling, we first consider Wesley's contention that HLM did not preserve error on its claim that the Iowa exemption of tort claims from arbitration is preempted by federal law. "Ordinarily, issues must be raised and decided by the trial court before they may be raised and decided on appeal." Peters v. Burlington N. R.R., 492 N.W.2d 399, 401 (Iowa 1992). Here, HLM did not make a federal preemption argument in the district court, and consequently, the district court did not decide whether the federal act preempted Iowa's tort-claim exception. Under these circumstances, this issue was not preserved for our review.

The only issue that remains with respect to HLM's appeal is whether the district court correctly interpreted the Iowa Arbitration Act. See Iowa Code ch. 679A. We review issues of statutory interpretation for correction of errors of law. See In re E.H. III, 578 N.W.2d 243, 245 (Iowa 1998).

B. Scope of tort-claim exemption. Iowa's arbitration statute provides that a written agreement to arbitrate a future controversy is "valid, enforceable, and irrevocable unless grounds exist at law or in equity that would support revocation of the contract." Iowa Code § 679A.1(2). In refusing to enforce the parties' arbitration agreement with respect to Wesley's tort claim, the district court relied on an exception to the statute's general validation of arbitration clauses. Section 679A.1(2) lists three exceptions to the enforceability of arbitration agreements. The one pertinent to the present discussion encompasses "any claim sounding in tort whether or not involving a breach of contract," unless so provided in a separate writing executed by the parties. Id. § 679A.1(2)(c). There is no claim here that the parties executed a separate writing making tort claims subject to the contractual arbitration clause. Therefore, the only issue before us is the meaning and scope of the tort-claim exception to arbitration.

Our rules of statutory interpretation are well established. "When the text of a statute is plain and its meaning clear, the court should not search for a meaning beyond the express terms of the statute...." Henriksen v. Younglove Constr., 540 N.W.2d 254, 258 (Iowa 1995). Thus, we look to what the legislature said, not what it might or should have said. See Iowa R.App. P. 14(f)(13).

The application of these rules unequivocally supports the district court's interpretation of section 679A.1(2)(c). The General Assembly plainly and clearly stated its intent in this statute; tort claims are not subject to arbitration. As the legislature explicitly stated, this is so regardless of whether the tort claims involve a breach of contract. Consequently, the negligence claim alleged by Wesley against HLM falls within the scope of this exception even though it arises out of the same facts that support Wesley's breach-of-contract claim. See Reicks v. Farmers Commodities Corp., 474 N.W.2d 809, 810 (Iowa 1991) (stating in dicta that "[b]ecause a tort claim is involved, ... Iowa Code chapter 679A is not involved").

HLM attempts to overcome the language of the statute by claiming that a literal application of section 679A.1(2)(c) is contrary to the legislature's overall goal of promoting arbitration, and that such an interpretation produces an absurd result as well. It is true that this court will "look beyond the ordinary meaning of the statutory language when a statute's literal terms are in conflict with its general purpose." State v. Hopkins, 465 N.W.2d 894, 896 (Iowa 1991). In determining whether such a conflict exists, we "consider the objects sought to be accomplished and 'place a reasonable construction on the statute which will best effectuate its purpose rather than one which will defeat it.' " Id. (quoting State v. Schlemme, 301 N.W.2d 721, 723 (Iowa 1981)). Moreover, we seek to avoid absurd results. See Hagen v. Texaco Refining & Mktg., Inc., 526 N.W.2d 531, 543 (Iowa 1995).

The problem with HLM's argument is that the legislature's intent as evidenced by section 679A.1 is not solely to facilitate the use of arbitration as an alternative to sometimes expensive and time-consuming litigation. See generally Humphreys v. Joe Johnston Law Firm, P.C., 491 N.W.2d 513, 514 (Iowa 1992) (stating "[a]rbitration is looked on favorably as an alternative to civil litigation"). If that had been the sole purpose of chapter 679A, the legislature would not have specifically provided for exceptions to the enforceability of arbitration agreements, as it did in section 679A.1(2). The fact that it did provide for an exception for tort claims evidences an intent to preserve litigants' traditional right to have their claims resolved in a court of law. Thus, the preservation of the conventional method of resolving tort suits in court is also a goal of the legislature in section 679A.1(2). It is certainly within the legislature's province to promote the efficient resolution of claims through arbitration, while at the same time recognizing that parties value the opportunity to have their claims heard in court. The legislature's balance of these inconsistent...