Hillhouse v. Chris Cook Constr., LLC

325 So.3d 646

Timothy HILLHOUSE and Rebecca Hillhouse

v.CHRIS COOK CONSTRUCTION, LLC, and Cress Realty Group, Inc.

NO. 2020-CA-00438-SCT

Supreme Court of Mississippi.

September 30, 2021

ATTORNEYS FOR APPELLANTS: BRIAN AUSTIN HINTON, THOMAS McILWAIN WRIGHT, JR., ROBERT DAVIS HOUSE

ATTORNEYS FOR APPELLEES: CLYDE X. COPELAND, Ridgeland, FRANK RUSSELL BRABEC, JAMES MATTHEW TYRONE, Jackson, MATTHEW WILLIAM VANDERLOO, Ridgeland

EN BANC.

KING, PRESIDING JUSTICE, FOR THE COURT:

¶1. Timothy and Rebecca Hillhouse entered into a contract with Chris Cook Construction for the construction of their home. The contract contained an arbitration provision mandating that arbitration be conducted before a forum that was unavailable at the time the contract was executed. The trial court entered an order compelling arbitration and appointing an arbitrator. Because the forum was a contract requirement, the arbitration provision is unenforceable, and appointing an arbitrator requires courts to reform the contractual agreement between the parties. This Court therefore reverses the trial court's order compelling arbitration and remands the case for further proceedings.

FACTS AND PROCEDURAL HISTORY

¶2. On November 28, 2018, the Hillhouses filed a complaint against a number of defendants, including Chris Cook Construction (CCC), asserting negligence, breach of warranty, and breach of contract regarding the design and construction of their home and drainage system. They alleged that their lot and home had flooded, causing property damage. On January 10, 2019, CCC filed its motion to compel arbitration and its answer and defenses.

¶3. The Hillhouses and CCC executed a contract on September 10, 2013, for the construction of the Hillhouses’ home. That contract contained an arbitration provision.¹ The arbitration provision provided that "[a]ll claims, disputes and other matters in question, arising out of or related to this Contract or the breach thereof shall be submitted to arbitration before the Southern Arbitration and Mediation Association upon demand by either party to the dispute." CCC admits that the Southern Arbitration and Mediation Association (SAMA) ceased to exist in 1996.

¶4. After a January 22, 2020 hearing, the trial court granted CCC's motion to compel arbitration. It found that a valid agreement to arbitrate existed and appointed an arbitrator pursuant to Mississippi Code Section 11-15-109 (Rev. 2019). The Hillhouses filed a Mississippi Rule of Civil Procedure 59 motion to alter or amend the judgment, arguing that arbitration should have been denied. The trial court denied their motion. The Hillhouses appeal, arguing that 1) the contract does not contain a valid and enforceable arbitration agreement; 2) this case is controlled by Covenant Health & Rehabilitation v. Estate of Moulds ex rel. Braddock , 14 So. 3d 695 (Miss. 2009), and the trial court therefore erred by denying their Rule 59 motion; and 3) CCC waived any right to arbitration.

ANALYSIS

1. Standard of Review

¶5. This Court applies a de novo standard of review to a trial court's decision to grant or deny a motion to compel arbitration. Moulds , 14 So. 3d at 701. This case also presents an issue of first impression in statutory interpretation. " ‘The interpretation of a statute is a question of law, and the standard of review on appeal is de novo.’ " Dancy v. State , 287 So. 3d 931, 935–36 (Miss. 2020) (quoting Rex Distrib. Co., Inc. v. Anheuser-Busch, LLC , 271 So. 3d 445, 449 (Miss. 2019) ).

2. Mississippi Construction Arbitration Statutes

¶6. Mississippi Code Sections 11-15-101 through -143 apply specifically to arbitration agreements found in certain construction contracts. The parties to an applicable construction contract "may include in a written contract a provision for the settlement by arbitration of any controversy thereafter arising between them relating to such contract .... Such agreement or provision shall be valid, enforceable and irrevocable without regard to the justiciable character of the controversy." Miss. Code Ann. § 11-15-103 (Rev. 2019).² A party to such an agreement may apply to the court

for an order directing the parties to proceed with arbitration in accordance with the terms of such agreement or provision. If the court finds that no substantial issues exists as to the making of the agreement or provision, it shall grant the application. If the court shall find that a substantial issue is raised as to the making of the agreement or provision, it shall summarily hear and determine such issue and shall, consistent with such determination, grant or deny the application.

Miss. Code Ann. § 11-15-105(1) (Rev. 2019).³

¶7. The construction statutes further provide that

If an agreement or provision for arbitration provides a method for the appointment of arbitrators this method shall be followed. In the absence thereof, or if the agreed method fails or for any reason cannot be followed, or if an arbitrator who has been appointed fails or is unable to act and his successor has not been duly appointed, the court, on application of a party to such agreement or provision, shall appoint one or more arbitrators.

Miss. Code Ann. § 11-15-109 (Rev. 2019).⁴ Like the FAA, the Mississippi statutes provide for arbitration procedures that are to be followed, unless otherwise provided by the parties’ agreement. See Miss. Code Ann. §§ 11-15-111 to -143 (Rev. 2019). Interpreting Section 11-15-109 is an issue of first impression.

3. Arbitration Caselaw

¶8. This Court has recognized that "the use of arbitration to resolve disputes finds favor under federal and state law." Moulds , 14 So. 3d at 698. While doubts are resolved in favor of arbitration under the FAA, applicable state law contract defenses may invalidate an arbitration agreement. Id. at 698–99.

Our law requires this Court to accept the plain meaning of a contract as the intent of the parties if no ambiguity exists. I.P. Timberlands Operating Co. v. Denmiss Corp. , 726 So. 2d 96, 108 (Miss. 1998). Furthermore, "[c]ontracts are solemn obligations and the Court must give them effect as written." Id. We agree with the U.S. Supreme Court that, "we do not override the clear intent of the parties, or reach a result inconsistent with the plain text of the contract, simply because the policy favoring arbitration is implicated." EEOC v. Waffle House, Inc. , 534 U.S. 279, 294, 122 S. Ct. 754, 151 L.Ed. 2d 755 (2002).

B.C. Rogers Poultry, Inc. v. Wedgeworth , 911 So. 2d 483, 487 (Miss. 2005). "The U.S. Supreme Court has stated that, ‘arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed to submit.’ " Id. at 487–88 (quoting AT & T Techs., Inc. v. Commc'n Workers of Am. , 475 U.S. 643, 648, 106 S. Ct. 1415, 89 L.Ed. 2d 648 (1986) ). Moreover, "a court should not become a party to redrafting or reforming agreements." Moulds , 14 So. 3d at 707.

¶9. " ‘Arbitration is about choice of forum—period.’ " Id. (quoting Vicksburg Partners, L.P. v. Stephens , 911 So. 2d 507, 525 (Miss. 2005), overruled on other grounds by Moulds , 14 So. 3d 695 ). In Moulds , this Court held that when a contract required that arbitration be administered by a certain organization, and when such organization was not available to administer arbitration, this Court would not enforce the arbitration agreement. Moulds , 14 So. 3d at 706–09. We found that "[a] court should not be used to reform a contract to select a forum not anticipated by either of the parties." Id. at 707. "To do so, the court must become involved and assume powers over parties. Courts’ involvement is limited to determining whether to compel agreed-upon arbitration vel non . As the court's participation and involvement increase, the reason for arbitration in the first place becomes greatly diminished, and its purpose defeated." Id.

¶10. For the drafter of the contract and party seeking to compel arbitration to prevail, it is "required to show that the situs was merely a minor consideration and that the essence of the bargain was to arbitrate." Id. at 708 (citing Nat'l Iranian Oil Co. v. Ashland Oil , 817 F.2d 326, 333 (5th Cir. 1987) ). In Moulds , the contract drafter prescribed that one certain organization administer arbitration. Moulds , 14 So. 3d at 708. The contract required administration by that organization. Id. Thus, the Court concluded that administration by that organization "was a contract requirement, which remained a part of the agreement, if it was otherwise enforceable." Id. We therefore declined to "rewrite the agreement in favor of the drafter" and "select a forum not anticipated by either party." Id. at 709.

¶11. This Court has distinguished the situation of a required forum being unavailable from arbitration provisions that simply require that parties arbitrate in accordance with the rules of an unavailable forum. NC Leasing, LLC v. Junker , 172 So. 3d 155, 160 (Miss. 2015). In Junker , the agreement specifically provided that the parties would mutually select an arbitrator, that the parties did "not agree to use the [unavailable forum] to conduct or administer any arbitration agreement ... nor do they agree to use the [organization's] arbitrators[,]" and that the arbitration would simply follow the procedural rules of the organization. Id. at 160–61 (emphasis added). Arbitration clauses that simply require the parties to arbitrate according to the rules of an unavailable forum are therefore enforceable. Id.

¶12. Indeed, the Supreme Court of South Carolina, citing numerous cases including Moulds , has noted that Mississippi is not alone in such a distinction:

[A] majority of jurisdictions distinguish agreements requiring a proceeding "administered by" the named forum from those requiring a proceeding conducted "in accordance with" the named forum's rules. In the case of proceedings "administered by" a named forum, most courts view the forum selected as an integral term of the agreement because it is an

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