Lemon Drop Properties, LLC. v. Pass Marianne, LLC, et al.
| Docket Number: | 2010-IA-00883-SCT | |
| Supreme Court: | Opinion Link Opinion Date: 10-20-2011 Opinion Author: Randolph, J. Holding: Affirmed in part, reversed and remanded in part |
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| Additional Case Information: |
Topic: Contract - Arbitration - Waiver - Affirmative defense - M.R.C.P. 8(c) - Right to compel arbitration Judge(s) Concurring: Waller, C.J., Carlson and Dickinson, P.JJ., Lamar, Chandler and Pierce, JJ. Concur in Part, Concur in Result 1: King, J. Concur in Part, Concur in Result Joined By 1: King, J., Concurs in Part and Dissents in Kitchens, J. Procedural History: Interlocutory Appeal Nature of the Case: CIVIL - CONTRACT |
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| Trial Court: |
Date of Trial Judgment: 05-10-2010 Appealed from: Harrison County Circuit Court Judge: Roger T. Clark Disposition: Granted motion to compel arbitration. Case Number: A2401-08-475 |
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| Party Name: | Attorney Name: | |||
| Appellant: | Lemon Drop Properties, LLC. |
STEPHEN WALKER BURROW
JAMES H. COLMER, JR.
ANN M. HALPHEN |
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| Appellee: | Pass Marianne, LLC and Alfonso Realty, Inc. (d/b/a Coldwell Banker Alfonso Realty, Inc.) | GAIL D. NICHOLSON CHESTER D. NICHOLSON |
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| Topic: | Contract - Arbitration - Waiver - Affirmative defense - M.R.C.P. 8(c) - Right to compel arbitration |
| Summary of the Facts: | In 2005, Pass Marianne, LLC entered into a contract with Carl E. Woodward, LLC for the construction of a new condominium development, Pass Marianne Condominiums, in Pass Christian. Pass and Lemon Drop Properties, LLC entered into a “Preconstruction Sales and Purchase Agreement” for Unit No. 209 within the Pass Marianne Condominiums. Because of Hurricane Katrina, construction of the Pass Marianne Condominiums was not completed until 2007. At that time, Pass executed a warranty deed conveying Unit No. 209 to Lemon Drop, and Woodward furnished a “Warranty of Completion of Construction” to Lemon Drop. In 2008, Lemon Drop filed a complaint against Pass and Woodward, which sought, inter alia, rescission of the Agreement due to alleged defects in design and construction. Pass filed its Answer, along with a cross-claim against Woodward for fraud, defamation, and breach of contract. The pleading requested a jury trial and did not invoke an arbitration plea against Lemon Drop. In 2009, Pass joined in an agreed “Order Setting Trial Date.” Subsequently, Pass propounded and responded to written discovery requests with both Lemon Drop and Woodward. Lemon Drop filed a “Motion to Amend Complaint,” seeking to add Alfonso Realty, Inc. as a defendant. Thereafter, the circuit court granted Woodward’s “Motion to Compel Arbitration” as to Pass’s cross-claim against Woodward. After the circuit court granted the “Motion to Amend Complaint,” Lemon Drop filed its “First Amended Complaint,” which named Pass, Woodward, and Alfonso as defendants. Multiple claims were asserted against Alfonso which related to, and arose out of, the transaction. Pass filed its “Answer; Affirmative Defenses; and Motion to Compel Arbitration” in response to the “First Amended Complaint.” Approximately one month after the “First Amended Complaint” was filed, Alfonso filed its “Answer, Affirmative Defenses and Motion to Compel Arbitration.” Alfonso asserted that, because it had acted as Pass’s agent, any claim against Alfonso would be subject to the Agreement’s arbitration provision. Following a hearing, the parties were ordered to participate in good-faith mediation. After mediation proved unsuccessful, the circuit court entered an order which granted the “Motions to Compel Arbitration” filed by Pass and Alfonso. Thereafter, Lemon Drop filed a petition for permission to file an interlocutory appeal, which was granted. |
| Summary of Opinion Analysis: | Issue 1: Waiver The right to compel arbitration can be waived where a party actively participates in a lawsuit or takes other action inconsistent with the right to arbitration, which substantially invokes the judicial process to the detriment or prejudice of the other party. In this case, Pass answered the original Complaint, but failed to assert arbitration as an affirmative defense, and instead demanded a jury trial. Thereafter, Pass joined in an agreed “Order Setting Trial Date” and engaged in discovery. Although the Complaint should have attached a copy of the Agreement, the absence thereof did not excuse Pass’s failure to demand arbitration, since Pass acknowledged that its “closing attorney had all contracts of units which had closed in storage.” Two-hundred-and-fifty-two days after the Complaint was filed, Pass attempted to invoke a contingent affirmative defense of mandatory arbitration, dependent upon further rulings of a court, which is inconsistent with claiming an absolute right to arbitrate. Thus, Pass’s participation in, and invocation of, the judicial process vis-à-vis arbitration was inconsistent with timely invocation of the arbitration process. Issue 2: Right to compel arbitration Lemon Drop argues that Alfonso has no right to compel arbitration as a nonsignatory. But under the Agreement, Alfonso is Pass’s express agent. An express agent is one who is in fact authorized by the principal to act on their behalf. Consistent with Mississippi law and the law of other states, Alfonso, as Pass’s agent, had the right to compel arbitration based on the Agreement between Pass and Lemon Drop. Lemon Drop alternatively argues that, even if Alfonso had the right to compel arbitration, Pass waived that right. However, Pass’s waiver is not imputed to Alfonso. Moreover, arbitration is in the nature of an affirmative defense under M.R.C.P. 8(c). As arbitration is a forum-related defense (i.e., an appropriate venue), emanating from arbitration law and provided for contractually in this case, a demand to arbitrate must be timely raised. Given the presumption against the waiver of arbitration, and Alfonso’s prompt “Motion to Compel Arbitration” after Lemon Drop filed its “First Amended Complaint,” there can be no dispute that Alfonso timely and properly asserted its arbitration rights. |
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