Sumner County Board of Education v. Carden Company, Inc. ( 2006 )

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
June 28, 2006 Session
SUMNER COUNTY BOARD OF EDUCATION v. CARDEN COMPANY,
INC.
Direct Appeal from the Chancery Court for Sumner County
No. 2005C-271 Hon. Tom E. Gray, Chancellor
No. M2005-2670-COA-R3-CV - Filed on July 25, 2006
In this action, the Trial Court stayed defendant’s planned arbitration and defendant has appealed.
We affirm.
Tenn. R. App. P.3 Appeal as of Right; Judgment of the Chancery Court Affirmed.
HERSCHEL PICKENS FRANKS, P.J., delivered the opinion of the court, in which CHARLES D. SUSANO ,
JR., J., and SHARON G. LEE, J., joined.
Todd E. Panther, Nashville, Tennessee, for Appellant.
James L. Fuqua, Jr., Hendersonville, Tennessee, for Appellee.
OPINION
The issue in this action is the interpretation of a contract between the Sumner County
Board of Education (“Board”) and Carden Company, Inc. (“Carden”), regarding the construction of
the T.W. Hunter Middle School in Sumner County. The contract is an AIA document, Standard
Form of Agreement between Owner and Contractor, with General Conditions, and a Supplement to
the General Conditions, which was added by the parties. The Supplement modifies the form
Agreement and General Conditions, and is the focal point of this dispute.
The Board filed a Complaint for Declaratory Judgment, after Carden made a demand
for arbitration pursuant to the Agreement. The Board averred that all references to arbitration within
the Agreement and General Conditions had been deleted by the Supplement, paragraph 4.5, and
requested a restraining order to prevent Carden from proceeding with arbitration, until the Court
could determine if arbitration was required pursuant to the Agreement. The Court issued a
Restraining Order, and a hearing was held October 14, 2005, where the Trial Court ruled that the
supplemental conditions deleted paragraph 4.5 in the General Conditions, and all subsequent
portions dealing with arbitration. The Court stated that “herein” means “in this”, and referred to the
entire contract, not just that paragraph. The Trial Court pointed out that in other provisions, “herein”
was used to refer to provisions contained in a different section or paragraph.1 The Court ruled that
since the mediation and arbitration provisions had been deleted, the parties could file an action in
court. Further, the Court held the contract was not ambiguous, and that if the parties wanted to agree
to mediation and arbitration they could, but were not required.
The issue on appeal is whether the Trial Court erred in ruling that arbitration was not
required under the contract?
As this Court has previously explained:
The interpretation of a contract is a question of law. Issues as to interpretation and
application of unambiguous contracts are likewise issues of law, the determination
of which enjoys no presumption of correctness on de novo appellate review.
Therefore, the trial court's interpretation of a contract is not entitled to a presumption
of correctness under Tenn. R.App. P. 13(d) on appeal. Accordingly, we will review
the contractual issues de novo and reach our own independent conclusions regarding
their meaning and legal import. When resolving disputes concerning contract
interpretation, we are to ascertain the intention of the parties based upon the usual,
natural, and ordinary meaning of the contractual language. All provisions in the
contract should be construed in harmony with each other, if possible, to promote
consistency and to avoid repugnancy between the various provisions of a single
contract.
The cardinal rule for interpretation of contracts is to ascertain the intention of the
parties and to give effect to that intention consistent with legal principles. A primary
objective in the construction of a contract is to discover the intention of the parties
from a consideration of the whole contract. In construing contracts, the words
expressing the parties' intentions should be given their usual, natural and ordinary
meaning, and neither party is to be favored in the construction.
The court, at arriving at the intention of the parties to a contract, does not attempt to
ascertain the parties' state of mind at the time the contract was executed, but rather
their intentions as actually embodied and expressed in the contract as written. All
provisions of a contract should be construed as in harmony with each other, if such
construction can be reasonably made, so as to avoid repugnancy between the several
1
Arguably, “herein” can be vague, but as employed throughout this agreement its meaning
is clear as noted by the Trial Court.
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provisions of a single contract.
Eatherly Const. Co. v. HTI Memorial Hosp., 2005 WL 2217078 (Tenn. Ct. App. Sept. 12,
2005)(citations omitted).
A Court is not to make a new contract for the parties, but to enforce the parties’
unambiguous contract as it is written. Berry v. Prudential Ins. Co. of America, 134 S.W.2d 886
(Tenn. Ct. App. 1939).
The General Conditions of the Agreement are contained in paragraphs 4.5 and 4.6,
which deal with mediation and arbitration, respectively. Paragraph 4.5 states that any claim is
subject to mediation as a condition precedent to arbitration or to filing suit. Paragraph 4.6 states that
claims which are not resolved by mediation shall be subject to arbitration.
The Supplement to General Conditions added by the parties contains the following
provision:
DELETE PARAGRAPH 4.5 AND SUBSTITUTE THE FOLLOWING:
4.5 Consent to Law and Venue
4.5.1 All references to Arbitration contained herein are deleted and replaced with
the following:
4.5.2 Place of making. The parties agree and acknowledge that this contract is
being made in Sumner County, Tennessee.
4.5.3 Consent to Law. It is agreed that the law of the State of Tennessee shall
govern this Contract, and any disputes arising therefrom.
4.5.4 Consent to Venue. The parties agree and consent to venue in Sumner
County, Tennessee for any and all disputes arising between the parties
concerning this Contract. The Contractor weighs [sic] any objection to venue
in Sumner County, Tennessee.
According the language of this provision its “usual, natural, and ordinary meaning”,
requires deletion of the entire paragraph 4.5 of the General Conditions dealing with mediation, and
replacement of the same with the above numbered provisions. The dispute thus becomes whether
the word “herein” refers to the contract as a whole, as the Board contends, or just to this particular
paragraph, as Carden contends.
As the Trial Court found, the Board’s position is the only one that makes sense, as
the paragraph, once replaced, does not contain any references to arbitration. Thus, if “herein” only
refers to this paragraph, it would be illogical, because it would purport to “delete” references to
arbitration that do not exist in the first place. As the Board concedes, it might have been a bit more
clear to simply delete paragraphs 4.5 and 4.6, but when the original paragraph 4.5 is deleted and the
above language inserted, it negates paragraph 4.6 as well.
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Carden argues that arbitration is favored in Tennessee and that the arbitration
provision should be enforced. Carden further argues that construing the word “herein” to refer to
another paragraph besides the one it is contained in is inconsistent with its use in the rest of the
document. However, as previously stated, construing the word “herein” to refer only to the
paragraph it is contained in would not give intent to the terms of the Contract, and it would serve no
purpose whatsoever, or would attempt to specifically delete something that does not exist. Carden
also argues that it is unreasonable to presume that the parties would agree to “eliminate binding
arbitration with a back-handed modification to the mediation provisions contained in paragraph 4.5.
They would simply delete paragraph 4.6.” As previously explained, while expressly stating that
paragraph 4.6 was deleted could have been better draftsmanship, it does not render the meaning of
the substituted paragraph 4.5 any less forceful. All references to arbitration were deleted by the
wording of the new paragraph 4.5.
Finally, Carden argues this provision at best renders the agreement ambiguous, and
as such, it should be construed against the Board. As we have stated, however:
If the language is clear and unambiguous, the literal meaning of the language controls
the outcome of the dispute. A contract is ambiguous only when its meaning is
uncertain and may fairly be understood in more than one way. If the contract is
found to be ambiguous, we then apply established rules of construction to determine
the intent of the parties. Only if ambiguity remains after applying the pertinent rules
of construction does the legal meaning of the contract become a question of fact.
Kafozi v. Windward Cove, LLC, 184 S.W.3d 693 (Tenn. Ct. App. 2005)(citations omitted).
The only reasonable interpretation is that the word “herein” applies to the entire
contract, and not just to the substituted paragraph 4.5. We hold the intent of the parties was to delete
all requirements for mediation and arbitration. We affirm the Judgment of the Trial Court and
remand, with the cost of the appeal assessed to Carden Company, Inc.
_________________________
HERSCHEL PICKENS FRANKS, P.J.
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