Paragon Ltd., Inc. v. Boles

987 So. 2d 561, 2007 Ala. LEXIS 278, 2007 WL 4464880
CourtSupreme Court of Alabama
DecidedDecember 21, 2007
Docket1061255
StatusPublished
Cited by17 cases

This text of 987 So. 2d 561 (Paragon Ltd., Inc. v. Boles) is published on Counsel Stack Legal Research, covering Supreme Court of Alabama primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Paragon Ltd., Inc. v. Boles, 987 So. 2d 561, 2007 Ala. LEXIS 278, 2007 WL 4464880 (Ala. 2007).

Opinion

987 So.2d 561 (2007)

PARAGON LIMITED, INC.
v.
Emily BOLES.

1061255.

Supreme Court of Alabama.

December 21, 2007.

*562 Ellen H. Dover of Marks & Weinberg, P.C., Birmingham, for appellant.

John M. Aaron, Alabaster, for appellee.

STUART, Justice.

Paragon Limited, Inc. ("Paragon"), appeals from an order of the trial court holding that Paragon waived its right to compel Emily Boles to submit her claims against it to arbitration. We reverse and remand.

Facts and Procedural History

On April 15, 2005, Boles and Paragon entered into a contract pursuant to which Paragon was to construct a residence for Boles. On August 22, 2006, Boles sued Paragon, claiming that it had breached the construction contract because Paragon failed to complete the construction of the house and had allegedly overcharged Boles for the work it had completed. On October 23, 2006, Paragon filed an answer to Boles's complaint. The answer denied Boles's claims, asserted various defenses, asserted various counterclaims against Boles, and asserted a third-party claim against Compass Bank, who is not a party to this appeal. One of the counterclaims sought to enforce a lien that Paragon had filed on August 25, 2006, against the property that was the subject of the construction contract. The answer also asserted that the construction contract contained a valid and enforceable arbitration clause, which required that any dispute related to the contract be settled by arbitration. Contemporaneously with filing its answer, Paragon filed a "motion to compel arbitration or, alternatively, to stay action pending arbitration," which further detailed Paragon's claim that Boles must submit her claims against it to arbitration. Boles filed a motion in opposition to arbitration.

On January 9, 2007, the trial court conducted a hearing on the motion to compel arbitration and at the end of the hearing requested that each party submit a proposed order to the court. On February 21, 2007, the trial court entered the order submitted by Boles, holding that Paragon had waived its right to arbitration because it filed the lien against the property. Specifically, the trial court held:

"Pending before this Court is Defendant['s], Paragon Limited, Inc., Motion to Stay Proceedings. A hearing was held on the 9th day of January, 2007, on this matter and all parties [were] present. This Court has reviewed the motion, responses, and the evidentiary submissions of the parties. Upon consideration *563 of the pleadings and evidentiary submission the Court concludes that [Paragon]'s Motion to Stay Proceedings is due to be denied.
"The Court determined that [Boles] and [Paragon] had a contract and in that contract there was an Arbitration Clause. The subject of the contract was the construction of [Boles]'s home by [Paragon].
"[Paragon] has waived its right to arbitration under the Federal Arbitration Act, 9 U.S.C.S. §§ 1-16 by failing to submit its claims to arbitration and substantially invoking the litigation machinery prior to demanding arbitration. [Paragon] used the litigation process to its benefit and to the disadvantage of the Plaintiff, Emily Boles, and the third party Defendant, Compass Bank.
"On or about August 25, 2006, [Paragon] filed a lien in the Probate Court of Tallapoosa County against [Boles]'s property for work performed on [Boles]'s house. The work that is the subject of the lien is that which is contemplated by the contract. A lien is a creation of a statute not a contract. The lien is a creation of law, and not of contract; and the law, and not the contract, determines the character, extent, and [possibility] of enforcement. Crawford v. Sterling, 155 Ala. 511, 46 So. 849 (Ala.1908). A materialman's or mechanic's lien created by this section loses all force and vitality unless suit is brought and prosecuted to final judgment. United States v. Costas, 273 Ala. 445, 142 So.2d 699 (Ala.1962). [Paragon] has benefitted from the filing of the lien, by protecting its claim against [Boles], and making [its] claim a priority over the mortgage of the third party Defendant, Compass Bank. [Boles] has been damaged by the filing of the lien because it has clouded her title in the property.
"[Paragon] never submitted its claims to be arbitrated, nor notified [Boles] that it was submitting its claims to arbitration. It did not raise the issue of arbitration until it was sued by [Boles] for breach of contract and breach of warranty. [Paragon] has filed an answer and counterclaim against [Boles]. [Paragon]'s counterclaims against [Boles] are contrary to the terms of the contract, asking for compensation for work performed above and beyond that which was agreed to in the contract and the change orders. Ex parte Prendergast, 678 So.2d 778 (Ala.1996).
"[Paragon]'s motion is due to be denied because it substantially invoked the litigation machinery and benefitted from it. [Paragon]'s actions disadvantaged [Boles] and the third party Defendant at the same time it benefitted [Paragon]. [Paragon] has never submitted its own claims to arbitration."

On March 22, 2007, Paragon filed a motion to alter, amend, or vacate the order, which the trial court denied on May 9, 2007. On May 23, 2007, Paragon appealed.

Standard of Review

"We review the trial court's grant or denial of a motion to compel arbitration de novo." Title Max of Birmingham, Inc. v. Edwards, 973 So.2d 1050, 1052 (Ala. 2007).

Issues and Analysis

The trial court and both parties appear to agree that the construction contract contains a valid arbitration clause and that that clause encompasses any claim related to the contract, including the claims brought by Boles in the present case. The trial court explicitly held that Paragon and Boles "had a contract and in that contract there was an [a]rbitration [c]lause." However, the trial court held that Paragon had waived its right to enforce the arbitration *564 clause because it "substantially invok[ed] the litigation machinery prior to demanding arbitration" and "used the litigation process to its benefit and to the disadvantage of [Boles]." This holding was based solely on the fact that Paragon had filed a lien against the property that was the subject of the contract.

On appeal, Paragon disputes the trial court's holding and alleges that it did not waive its right to arbitration. In her response brief, Boles does not respond to Paragon's argument. Instead, Boles raises a new argument. Boles alleges that Paragon cannot maintain an action to enforce any provision of the construction contract because, in a separate administrative proceeding, Paragon entered into a consent agreement with the Alabama Home Builders Licensure Board in which Paragon admitted that it had undertaken to construct Boles's residence without holding a required license and, thus, under § 34-14A-14, Ala.Code 1975, Paragon cannot maintain any action to enforce the provisions of the residential-home-building contract.[1]

I.

First, this Court must decide whether the trial court erred when it held that Paragon had waived its right to arbitration by filing a lien against the property.

"It is well settled under Alabama law that a party may waive its right to arbitrate a dispute if it substantially invokes the litigation process and thereby substantially prejudices the party opposing arbitration.

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Bluebook (online)
987 So. 2d 561, 2007 Ala. LEXIS 278, 2007 WL 4464880, Counsel Stack Legal Research, https://law.counselstack.com/opinion/paragon-ltd-inc-v-boles-ala-2007.