Case Title: Ex Parte Celtic Life Ins. Co.

Citation: 834 So. 2d 766

Docket Number: 1010738, 1010759

State: alabama

Court: Alabama Supreme Court

Date: 2002-05-03T00:00:00Z

Document:
834 So. 2d 766 (2002)
EX PARTE CELTIC LIFE INSURANCE COMPANY.
Ex parte Jeffrey Fredrickson.
(In re Diane McLendon v. Celtic Life Insurance Company et al.)
1010738 and 1010759.

Supreme Court of Alabama.
May 3, 2002.
Robert S.W. Given, F.A. Flowers III, and Harlan F. Winn III of Burr & Forman, L.L.P., Birmingham, for petitioner Celtic Life Insurance Company.
Jerry Dean Hillman, Barry A. Brock, and J. David Moore of Walston, Wells, Anderson & Bains, L.L.P., Birmingham, for petitioner Jeffrey Fredrickson.
Ted L. Mann and Robert Potter of Mann, Cowan & Potter, P.C., Birmingham, for respondent.
HOUSTON, Justice.
In Celtic Life Insurance Co. v. McLendon, 814 So. 2d 222 (Ala.2001), an appeal from a trial court's order denying arbitration in a case involving the same parties as are before this Court on these petitions, this Court held:
After we remanded the case in Celtic Life, this Court decided Cavalier Manufacturing, Inc. v. Jackson, 823 So. 2d 1237 (Ala.2001). In Cavalier Manufacturing, a case of first impression in which the plaintiff had challenged the validity of an arbitration clause because the arbitration clause prohibited punitive damages, we held:
Cavalier Mfg., 823 So. 2d  at 1248-49. We reiterated that holding in Ex parte Thicklin, 824 So. 2d 723 (Ala.2002).
In Celtic Life, Diane McLendon did not challenge the arbitration clause on the theory that that clause was invalid because it prohibited the award of punitive damages, an issue that had not yet been addressed by the United States Supreme Court or this Court, and on which federal circuit and district courts were divided. However, after this Court reversed the trial court's judgment denying Celtic Life Insurance Company and Jeffrey Fredrickson's motions to compel arbitration and after this Court released opinions in Cavalier Manufacturing and Thicklin, McLendon filed a motion in the circuit court asking it to void the arbitration agreement based solely upon the provision in that agreement prohibiting the award of punitive damages. In spite of the mandate in Celtic Life, the trial court granted McLendon's motion. Celtic and Fredrickson then filed these petitions for a writ of mandamus.
The contract of insurance included the following arbitration agreement:
On March 4, 2002, this Court ordered McLendon to file an answer and brief. We grant the petitions and issue the writs of mandamus.
For the reason discussed in the following paragraphs, we need not discuss (1) whether the trial court had authority to enter an order contrary to the mandate of this Court (see Ex parte King, 821 So. 2d 205 (Ala.2001); Terminix Int'l Co. v. Jackson, 723 So. 2d 555, 558 (Ala.1998); Alfa Mut. Ins. Co. v. Nationwide Mut. Ins. Co., 684 So. 2d 1295, 1302 (Ala.1996); and Ex parte Mobil Oil Corp., 613 So. 2d 350, 352 (Ala.1993)); (2) whether the law of the case required the trial court to deny McLendon's motion (see Southern United Fire Ins. Co. v. Purma, 792 So. 2d 1092, 1094 (Ala.2001); Titan Indem. Co. v. Riley, 679 So. 2d 701, 705 (Ala.1996); and Glasscock v. Wallace, 488 So. 2d 1346, 1348 (Ala.1986)); (3) whether McLendon waived any claim that the contract language relating to punitive damages rendered the arbitration provision void (see Bogle v. Scheer, 512 So. 2d 1336, 1337 (Ala.1987); and Boshell v. Keith, 418 So. 2d 89, 92 (Ala.1982)); or (4) whether Cavalier Manufacturing and Thicklin should be given prospective application only.
Celtic and Fredrickson are requesting that this Court direct the trial court to vacate its order entered on remand and to enter another order granting the defendants' motions for a stay of the proceedings, including any discovery undertaken to compel arbitration, with instructions to the parties to proceed to arbitration in accordance with the parties' agreement to arbitrate, excluding the punitive-damages provision. The arbitration agreements in Cavalier Manufacturing and Thicklin contained severability clauses, and in those cases this Court severed the void provisions relating to punitive damages from the remainder of the arbitration clause.
The policy at issue contains the following provision:
We need not decide whether this clause renders ineffective a clause held to be void after the effective date of the policy, because Celtic, the only defendant who was a party to the contract, waived the right to enforce the provision excluding an award of punitive damages. This Court has long recognized that a party to a contract can waive a contractual provision beneficial to that party. See Industrial Mach., Inc. v. Creative Displays, Inc., 344 *769 So. 2d 743, 746 (Ala.1977); LaGrave v. Jones, 336 So. 2d 1330, 1332 (Ala.1976). See also Commercial Contractors, Inc. v. United States Fid. & Guar. Co., 524 F.2d 944, 954 (5th Cir.1975) (applying Alabama law).
Both Celtic and Fredrickson argue that this Court has frequently excised void or illegal provisions in a contract, even in the absence of a severability clause, and enforced the remainder of the contract. See Wright v. Robinson, 468 So. 2d 94, 98 (Ala. 1985); Sales-Davis Co. v. Henderson-Boyd Lumber Co., 193 Ala. 166, 172, 69 So. 527, 529 (1915). See generally 17A C.J.S., Contracts § 297 (1999) (discussing the general "duty of the court to preserve so much of a contract as may properly survive its invalid and ineffective provisions").
The trial court is directed to vacate its order and enter an order granting Celtic and Fredrickson's motions to stay the proceedings, including discovery, and to compel arbitration in accordance with the arbitration agreement set out hereinabove, except for the following provision:
PETITIONS GRANTED; WRITS ISSUED.
LYONS, BROWN, JOHNSTONE, HARWOOD, WOODALL, and STUART, JJ., concur.
MOORE, C.J., and SEE, J., recuse themselves.