D&E Construction Co. v. Robert J. Denley Co.

CourtTennessee Supreme Court
DecidedNovember 15, 2000
DocketW1998-00445-SC-R11-CV
StatusPublished

This text of D&E Construction Co. v. Robert J. Denley Co. (D&E Construction Co. v. Robert J. Denley Co.) is published on Counsel Stack Legal Research, covering Tennessee Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
D&E Construction Co. v. Robert J. Denley Co., (Tenn. 2000).

Opinion

IN THE SUPREME COURT OF TENNESSEE AT JACKSON November 15, 2000 Session

D&E CONSTRUCTION COMPANY, INC. v. ROBERT J. DENLEY CO., INC.

Appeal By Permission from the Court of Appeals, Western Section Chancery Court for Shelby County Nos. 98-0313-1, 98-0322-2 Hon. Walter L. Evans, Chancellor

No. W1998-00445-SC-R11-CV - Filed January 19, 2001

The contractor submitted to arbitration a contractual payment dispute with the project owner arising from a contract to build a subdivision in Collierville. The arbitrators found in favor of the contractor and included an award of attorney’s fees. The trial court determined that the arbitration panel exceeded its authority in awarding attorney’s fees and vacated the arbitration award. The Court of Appeals reversed, reinstating the entire award. We hold that when the arbitrators awarded attorney’s fees, they exceeded their authority by awarding upon a matter not within the scope of the contract’s arbitration provision. Therefore, we reverse in part the judgment of the Court of Appeals and vacate the award of attorney’s fees.

Tenn. R. App. P. 11 Appeal by Permission; Judgment of the Court of Appeals Affirmed in Part and Reversed in Part; Case Remanded to the Chancery Court for Shelby County

WILLIAM M. BARKER , J., delivered the opinion of the court, in which E. RILEY ANDERSON, C.J., and FRANK F. DROWOTA , III, ADOLPHO A. BIRCH, JR., and JANICE M. HOLDER , JJ., joined.

Julie C. Bartholomew, Somerville, Tennessee, for the appellant, Robert J. Denley Co., Inc.

Ted M. Hayden, Memphis, Tennessee, for the appellee, D&E Construction Company, Inc. OPINION

On October 5, 1995, Robert J. Denley Company, Inc. (“Denley”), the project owner, entered into a construction agreement with contractor D&E Construction Company, Inc. (“D&E”) to develop the Cottonwood Estates Subdivision in Collierville, Tennessee. In the contract, D&E agreed to provide all necessary labor, utilities, services, and materials for the building project. The contract also contains a provision providing for a retainage fund to be withheld until the completion of the contracted work. The agreement requires the arbitration of “all claims or disputes” relating to the contract that arise between the contractor and the owner. Specifically, the arbitration provision of this contract states in pertinent part:

10.8 All claims or disputes between the Contractor and the Owner arising out [of] or relating to the Contract, or the breach thereof, shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect unless the parties mutually agree otherwise and subject to an initial presentation of the claim or dispute to the Architect . . . . Notice of the demand for arbitration shall be filed in writing with the other party to this Agreement and with the American Arbitration Association and shall be made within a reasonable time after the dispute has arisen. The award rendered by the arbitrator or arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof. . . . The agreement herein among the parties to the Agreement and any other written agreement to arbitrate referred to herein shall be specifically enforceable under applicable law in any court having jurisdiction thereof.

In addition, the contract contains a choice-of-law clause requiring all provisions of the contract to be decided in accordance with Tennessee law.1

During the course of construction, disputes arose between the parties. Consequently, after the project was completed, Denley refused to pay the contract retainage amount of $64,756.09 to D&E. In response, D&E filed with the American Arbitration Association a demand for arbitration to resolve the contractual payment dispute. Denley thereafter filed a response to the demand for arbitration and a counterclaim requesting damages. Although neither party requested attorney’s fees in their written submissions for relief, it is undisputed that D&E orally notified Denley prior to the arbitration hearing that it would be seeking attorney’s fees.

In December 1997, a three-person arbitration panel, chosen in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association, conducted the

1 “19.1 The Contract shall be governed by the law of the place where the Project is located,” in this case, Collierville, Tennessee.

-2- arbitration hearing.2 At the hearing D&E requested attorney’s fees as additional compensation for Denley’s breach of contract. Denley objected to the arbitrators’ consideration of this issue. On January 15, 1998, the panel issued a written award, itemizing on separate lines the distinct categories of its compensatory awards to D&E: the total contract retainage amount, interest, and attorney’s fees. The panel also directed Denley to pay the administrative fees and expenses of the American Arbitration Association and the compensation and expenses of the arbitrators. The Panel denied Denley’s counterclaim in its entirety, awarding Denley none of the relief it requested.

Subsequently, D&E filed a petition to confirm the arbitration award pursuant to Tennessee Code Annotated section 29-5-312.3 In response, Denley filed a petition for an order vacating or, in the alternative, modifying the arbitration award pursuant to sections 29-5-3134 and -3145

2 A transcript of the arbitration hearing is not in the record in this case.

3 This section provides that “[u]pon application of a party, the court sh all confirm an awa rd, unless, w ithin the time limits hereinafter imposed, grounds are urged for vac ating or mod ifying or correcting the award, in w hich case the court shall proceed as provided in §§ 29-5-313 and 29-5-314.” Tenn . Code Ann. § 29-5-3 12 (2000).

4 This section requires a court to vacate an award where: (1)The aw ard was proc ured by co rruption, fraud o r other undu e means; (2)There was evident partiality by an arbitrator appointed as a neutral or corruption in any of the arbitrators or misconduct prejudicing the rights of any party; (3)The arbitrators ex ceeded their po wers; (4)The arbitrators refused to postpone the hearing upon sufficient cause being shown therefor o r refused to hear evid ence m aterial to the controversy or otherwise so conducted the hearing, contrary to the provisions of § 29-5-306, as to prejudice substantially the rights of a party; or (5)There was no arbitration agreement and the issue was not adversely determined in proceedings under § 29-5- 303 an d the party did not participate in the arbitration hearing without raising the objection. The fact that the re lief was suc h that it could not or w ould no t be grante d by a co urt of law or equity is not ground for vacating or refusing to confirm the award. Tenn. Code Ann. § 29 -5-313 (2000). Denley raised the following issues in its argument before the Cha ncery Court: the award was procured by undue means; there was evident partiality by one or more arbitrators and/or misconduct prejudicing the rights of Denley; the arbitrators exceeded their powers; and the arbitrators refused to hear evidence material to the controversy or otherwise conducted the hearing contrary to the provisions of section -306 , so as to prejudice substantially the rights of Denley.

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