AMUNDSEN v. WRIGHT

AMUNDSEN v. WRIGHT
2010 OK CIV APP 75
Case Number: 106924
Decided: 06/23/2010
Mandate Issued: 07/23/2010
DIVISION II
THE COURT OF CIVIL APPEALS OF THE STATE OF OKLAHOMA, DIVISION II

GERALD A. AMUNDSEN, II, and DAWN AMUNDSEN, Plaintiffs/Appellees,
v.
J. WRIGHT d/b/a J. WRIGHT HOMES, LLC, and JOHN L. WRIGHT, personally and individually, Defendants/Appellants,
and
NORTHWEST BUILDING SUPPLY, INC., WALLACE MECHANICAL, LLC, ROBERT S. WALLACE, personally and individually, and BRAD FLEENOR, personally and individually, Defendants.

APPEAL FROM THE DISTRICT COURT OF CANADIAN COUNTY, OKLAHOMA

HONORABLE EDWARD C. CUNNINGHAM, TRIAL JUDGE

AFFIRMED AND REMANDED FOR FURTHER PROCEEDINGS

Michael D. Denton, Jr., DENTON LAW FIRM, Mustang, Oklahoma, for Plaintiffs/Appellees
Jack S. Dawson, Joseph H. Rogers, III, Carri A. Remillard, MILLER DOLLARHIDE, P.C., Oklahoma City, Oklahoma, for Defendants/Appellants

DEBORAH B. BARNES, JUDGE:

¶1 Defendants/Appellants J. Wright d/b/a J. Wright Homes, LLC, and John L. Wright, personally and individually, (Builders) appeal from the Journal Entry of Judgment filed on January 16, 2009,1 in which the trial court overruled their Motion to Compel Arbitration. The issues on appeal arise out of the parties' agreement in their Residential Construction Agreement to submit any and all disputes to binding arbitration pursuant to specific procedures that turned out not to exist. Because the parties only agreed to arbitrate pursuant to specific, but non-existent, procedures, we find that, under the circumstances of this case, arbitration cannot be compelled. Therefore, we find the trial court did not err in overruling the Motion to Compel Arbitration and we affirm the trial court's January 16, 2009, Journal Entry of Judgment. We remand this case to the trial court for further proceedings.

FACTS

¶2 A dispute arose between the parties regarding the construction of a home in Canadian County, Oklahoma. Plaintiffs/Appellees Gerald A. Amundsen, II, and Dawn Amundsen (Buyers) filed a Petition against Builders and other defendants in the District Court of Canadian County. Builders responded by filing a Motion to Compel Arbitration. Builders seek to compel arbitration with Buyers based upon certain language found in Clause 10 of the parties' Residential Construction Agreement (the Agreement).2 The pertinent language in the Agreement states:

10. Arbitration of Disputes. Any and all claims, disputes and controversies of every kind and nature between the Parties to this Agreement . . . shall be submitted to binding arbitration pursuant to the procedures established and maintained by the Central Oklahoma HomeBuilder's (sic) Association. Subject to the foregoing obligations to arbitrate all disputes between the parties hereto, the Parties may elect to proceed with other alternative dispute resolution means, including conciliation and/or mediation. The Parties hereby stipulate and agree that the provisions of this section shall be a complete defense to any suit, action or proceeding instituted in any . . . state or local court . . . with respect to any controversy, dispute or claim arbitrable as set forth herein.3

¶3 However, "the Central Oklahoma HomeBuilder's (sic) Association" does not have, and has never had, procedures established for arbitration. In other words, "the arbitration procedures referenced in the contract do not exist."4 Based on the reasons set forth below,5 we affirm the trial court's Journal Entry of Judgment overruling Builders' Motion to Compel Arbitration, and remand for further proceedings.

STANDARD OF REVIEW

¶4 "We review an order granting or denying a motion to compel arbitration de novo,6 the same standard of review employed by the trial court." Thompson v. Bar-S Foods Co., 2007 OK 75, ¶ 9, 174 P.3d 567, 572 (citations omitted). "Arbitration should be compelled unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute." Id. (citation omitted).

¶5 "The interpretation of an arbitration agreement is governed by general state-law principles of contract interpretation." Id. at ¶ 18 (internal quotations and citation omitted). "The purpose of construing an instrument is to divine from its text the intent of the parties. Unless there is an ambiguity, that intent must be gathered solely from the four corners of the instrument." Cleary Petroleum Corp. v. Harrison, 1980 OK 188, ¶ 8, 621 P.2d 528, 532 (footnote omitted).

ANALYSIS

I. Removal of Certain Contract Language

¶6 Builders argue that the procedures for arbitration set forth in Clause 10 of the Agreement are "secondary and not central."7 They argue that, therefore, the language - "pursuant to the procedures established and maintained by the Central Oklahoma HomeBuilder's (sic) Association" - should be removed from the Agreement in order to express the parties' central intent: to arbitrate "[a]ny and all claims, disputes and controversies . . . ." The arbitration procedures found in "the Uniform Arbitration Act, 12 O.S. § 1851, et seq." should then be applied.8

¶7 In support, Builders cite to

¶8 Builders also cite to

¶9 We first note that Clause 15 of the Agreement provides that it shall "be governed, construed and interpreted in accordance with the laws of the State of Oklahoma . . . ." Therefore, the OUAA governs the Agreement. Sooner Builders & Investments, Inc. v. Nolan Hatcher Construction Services, Inc.,

¶10 Title

¶11 Builders argue, finally, that there was a mutual mistake and that the trial court should have resolved this mutual mistake by striking the arbitration procedures chosen by the parties rather than by striking the entire arbitration clause. Mutual mistake is pertinent to the remedy of reformation. Reformation is a remedy to "conform a written contract to the parties' antecedent agreement" when the written contract "differs from the antecedent expressions on which the parties based their agreement." Oklahoma Oncology & Hematology P.C. v. U.S. Oncology, Inc.,

¶12 The intent of the parties is clear and unambiguous. We reach this conclusion "without narrowly concentrating upon some clause or language taken out of context." Mercury Investment Co. v. F. W. Woolworth Co.,

II. The Arbitration Procedures Referenced in the Agreement Do Not Exist

¶13 In determining whether arbitration may be nevertheless compelled when the arbitration procedures referenced in the contract do not exist, we are guided by the rationale employed by the Oklahoma Supreme Court in The Pentagon Academy, Inc. v. Independent School District No. 1 of Tulsa County, Oklahoma,

¶14 Although we are confronted with an issue of contract interpretation, and the Court in Pentagon was confronted with an issue of statutory interpretation, we find its logic to be persuasive. As in Pentagon, the procedures for arbitration referenced in the Agreement do not exist. The Agreement clearly states in one, unambiguous sentence that "[a]ny and all claims, disputes and controversies of every kind and nature between the Parties to this Agreement . . . shall be submitted to binding arbitration pursuant to the procedures established and maintained by the Central Oklahoma HomeBuilder's (sic) Association." Because there are no such procedures, we find that reliance on this provision of the Agreement as authority for compulsory arbitration is legally impossible.

¶15 The parties' agreement to arbitrate contains one object: that "[a]ny and all claims, disputes and controversies of every kind and nature between the Parties to this Agreement . . . shall be submitted to binding arbitration pursuant to the procedures established and maintained by the Central Oklahoma HomeBuilder's (sic) Association." Because the procedures chosen by the parties do not exist and never existed, performance pursuant to the arbitration clause in the Agreement is impossible.

Where impossibility of performing part of the performance promised by a party to a bargain is of such character that if it related to the entire performance it would prevent the imposition of a duty or would discharge a duty that had arisen, and the remainder of the performance is not made materially more difficult or disadvantageous than it would have been if there had been no impossibility, the existence of duty is affected only as to that part; and if performance of the whole contract is possible with only an unsubstantial variation, the promisor is under a duty to render performance with that variation.

"[I]mpossibility of performing part of a promise rarely discharges a promisor beyond the extent of the impossibilty." Restatement (First) of Contracts, § 463, comment b (1932). See also 84 A.L.R.2d 12, § 14(b). This rule is mirrored in the Restatement (Second) of Contracts, § 270 (1981), which states as follows:

Where only part of an obligor's performance is impracticable, his duty to render the remaining part is unaffected if

(a) it is still practicable for him to render performance that is substantial, taking account of any reasonable substitute performance that he is under a duty to render . . . .

¶16 Although performance pursuant to the arbitration clause in the Agreement is impossible because the procedures chosen by the parties do not exist, we find that this does not make Builders' performance pursuant to the Agreement materially more difficult or disadvantageous than it would have been if there had been no such impossibility. We find that it is still practicable for Builders to render performance pursuant to the Agreement that is substantial, despite the impossibility of arbitrating disputes.

¶17 As in Pentagon, Builders' Motion to Compel must be overruled because it is legally impossible to arbitrate pursuant to nonexistent procedures, and ordering arbitration pursuant to some other set of procedures would violate the unambiguous intent of the parties as expressed in the Agreement. The remainder of the Agreement is not dissolved due to this impossibility.

CONCLUSION

¶18 Based on our review of the record and applicable law, we affirm the trial court's Journal Entry of Judgment overruling Builders' Motion to Compel Arbitration and remand this case to the trial court for further proceedings.

¶19 AFFIRMED AND REMANDED FOR FURTHER PROCEEDINGS.

WISEMAN, C.J., and FISCHER, P.J., concur.

FOOTNOTES

1 Builders did not file their Petition in Error until March 25, 2009, more than 30 days after the trial court's Journal Entry of Judgment. See 12 O.S. Supp. 2002 § 990A ("[a]n appeal to the Supreme Court of Oklahoma, if taken, must be commenced by filing a petition in error with the Clerk of the Supreme Court of Oklahoma within thirty (30) days from the date a judgment, decree, or appealable order . . . is filed with the clerk of the trial court"). However, Builders assert in the Petition in Error that Plaintiffs/Appellees, Gerald A. Amundsen, II, and Dawn Amundsen, drafted the Journal Entry of Judgment but did not serve Builders with a filed-stamped copy until February 24, 2009. We review this appeal as timely pursuant to the March 27, 2009, Order of the Oklahoma Supreme Court, which states:

Based upon the representation in the petition in error that the [Builders] did not have notice of the filing of the January 16, 2009 order until February 24, 2009, this appeal appears to be timely commenced and shall proceed. 12 O.S. § 990A.

2 The Agreement was signed by Builders (i.e., by J. Wright Homes, LLC's "Member/Manager," John L. Wright) and Buyers and is dated March 28, 2005. Record (R.), pp. 11-18.

3 R., p. 14.

4 R., p. 41; Builders' Brief-in-chief, p. 5. The trial court found in its Journal Entry of Judgment "[t]hat the Central Oklahoma Home Builders' Association does not have any established arbitration procedures," and Builders do not contest this finding on appeal. Rather, this fact is stipulated by the parties in their appellate briefs.

5 "An appellate court has a common-law duty to affirm a trial judge's decision if it can be supported by any applicable legal theory." Nichols v. Nichols, 2009 OK 43, ¶ 10, 222 P.3d 1049, 1054 (footnote omitted). "If legally correct, a trial court's ruling will not be reversed because of its faulty reasoning, erroneous finding of fact or its consideration of an immaterial issue." Id. at n.14 (citations omitted).

6 By de novo review, we mean this Court claims for itself plenary, independent, and non-deferential authority to reexamine a trial court's legal rulings. Kluver v. Weatherford Hospital Authority, 1993 OK 85, 859 P.2d 1081.

7 Builders' Brief-in-chief, p. 5. In Builders' Reply in the court below, they argued that "[t]he method of the arbitration is simply secondary and of little concern." R., p. 33.