Lee Warehouse LP by Warehouses, Inc. v. Jepco Construction ( 2000 )

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
LEE WAREHOUSE LIMITED PARTNERSHIP by WAREHOUSES INC., v.
JEPCO CONSTRUCTION CO., A Sole Proprietorship, and JOSEPH E.
PROCTOR, its Owner
Direct Appeal from the Chancery Court for Hamilton County
No. 98-1043 Hon. W. Frank Brown, Chancellor
No. E1999-01944-COA-R3-CV - Decided June 13, 2000
The action to void a contract under T.C.A. §62-6-103 was dismissed by the Trial Court on the
ground that the dispute between the parties had been arbitrated thereby waiving the right to maintain
the action. On appeal, we affirm the Trial Court.
Tenn. R. App. P.3 Appeal as of Right; Judgment of the Chancery Court Affirmed.
FRANKS, J., delivered the opinion of the court, in which GODDARD , P.J., and SUSANO, J., joined.
William G. Colvin and Jane M. Stahl, Shumacker & Thompson, P.C., Chattanooga, Tennessee, for
Plaintiff-Appellant.
Hugh P. Garner, Garner, Lewis & Prickett, Chattanooga, Tennessee, for Defendants Counter-
Plaintiffs-Appellees.
OPINION
In this action for recission to void a construction contract, the Trial Court, responding
to a Motion to Dismiss filed by defendants, dismissed the action.
On appeal, plaintiff insists that the Chancellor was in error in dismissing the action.
The Chancellor set forth several grounds for dismissing the action, but the dispositive issue is
whether the Trial Judge correctly found that the plaintiff waived its right to challenge the validity
of the arbitration agreement by participating in arbitration without objection.
On January 7, 1997, plaintiff and defendant Jepco entered a contract which provided
that Jepco would build a mini-warehouse for plaintiff. Work commenced on the project and plaintiff
made several payments to the defendant. Disputes arose between the parties and the parties sought
arbitration in accordance with the contract.
On June 11, 1998, plaintiff learned that defendant was not a licensed contractor as
required by Tennessee law. Nevertheless, the parties proceeded to arbitration on September 17 and
18, 1998. The issue of the contractor’s non-licensed status was submitted to the arbitrator. The
arbitrator’s decision required plaintiff to pay additional monies to defendant.
The Tennessee Uniform Arbitration Act allows for judicial determination on issues
of arbitrability. See Frizzell Construction Co., Inc. v. Gatlinburg, L.L.C., 9 S.W.3d 79 (Tenn. 1999);
City of Blaine v. John Coleman Hayes & Assoc., Inc., 818 S.W.2d 33 (Tenn. Ct. App. 1991).
However, the right to a judicial determination on the issue of arbitrability may be waived. In
Harmon v. Komisar, 15 Tenn. App. 405 (Tenn. Ct. App. 1932), this Court held that the plaintiff by
participating in a hearing before the arbitrator constituted a waiver of the objections raised in the
court action.
As a general rule, a party waives the right to a judicial determination of an issue
where the party has participated in arbitration of the issues without raising any objection. Arner v.
Liberty Mutual Ins. Co., 233 A.D.2d 321, 321 (N.Y. App. Div. 1996); Holk v. Biard, 920 S.W.2d
803 (Tex. App. 1996); Victor v. Dean Witter Reynolds, Inc., 606 So.2d 681 (Fla. App. 1992); Russell
v. World Famous, Inc., 767 P.2d 456 (Or. App. 1989).
The plaintiff participated in arbitration, after learning that the defendant did not have
a Tennessee contractor’s license, and submitted that issue to the arbitrator, requesting that defendant
be allowed to recover actual costs pursuant to the Tennessee Contractor’s Licensing Act. However,
plaintiff did not raise objection that the lack of license voided the contract, thus making arbitration
the appropriate venue for resolving the dispute. By participating in the arbitration without objection
and submitting the licensing issue, the plaintiff waived his right to subsequently challenge the
validity of the contract and the arbitration clause. A party may not take his chances in arbitration
and then, if dissatisfied with the results, seek relief in the courts.
We find it unnecessary to discuss the remaining issues, and affirm the judgment of
the Trial Court and remand with cost of the appeal assessed to the appellant.
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