### IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE Assigned on

Briefs D ecem

ber 10, 200 1 FORREST CATE MOTOR COMPANY, INC. v. DEALER COMPUTER SERVICES, INC.
Appeal from the Circuit Court for Sequatchie County

No. 7464 Buddy Perry, Judge

No. M2001-01577-COA-R3-CV - Filed October 16, 2002

Plaintiff appealsa decla

ratory judgmen t wherein the trial judge held that the mandatory arbitration provision s in the co ntract b etween the part ies contr olled and declar ed acco rdingly . We affir

m. Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed

W IL LI AM B. C AIN , J., delivered the opinion of the court, in which B EN H. C ANT RELL , P.J. and P ATRIC IA J. C OTT RELL , J., joined.

Catherine M. White, Chattanooga, Tennessee, for the appellant, Forrest Cate Motor Company , Inc.

Thomas O. Helton and Cameron S. Hill, Chattanooga, Tennessee, for the appellee, Dealer Computer Services, Inc.
OPINION Appellan t, Forrest Cate Motor

Company, I

nc., is a Tenne ssee cor

poration doing bu siness in Sequatch ie County, Tennessee a

nd i s a fran chise d dealer of Ford Motor Company products. On March 31, 1995, App ell ant entered into a contract with Appellee, Dea ler Computer Services, Inc. (former ly d/b/a Ford Dealer Computer Services, I nc.). Under the terms of

the contract, Appellant purchased

certain computer

equipmen

t and soft ware tha t enable d Appella

nt to acc ess a

catalog data base of both old

and new p arts for

Ford Moto

r Company

Products. This compu

ter sy stem, (the CPD System), required e

quipment maintenance and modifications to accommodate updated softwar e.
A little more than four yea rs after enter

ing into the contract, Appellee informed Appellant of the need for Appellant to buy certain new equipment to accommodat e more com plex software containing up dated parts information through Ford Motor Company ’s global parts catalog or “G CAT System.” Appellan

t claims th at the “GCAT Sy stem” is a n entirely new sy stem from t he “CP D Syst em” and that d

isputes be tween the parties a s to this alleged new system are not subject to the-2-

mandatory

arbitration provision of the March 31, 1995 contract. Appellee asserts the contrary , and thus, the deci sive issue

in the declaratory

judgment action filed by

Appellant on March 22, 2000, is the appli cability

of this mandatory

arbitra tion clau se of the

contract.
The case was tried on documentary evidence and submitted to the court on October 31, 2000, without oral test

imony or deposi tions. I n his fina l judgme nt of Apri l 26, 2001, the trial court made the following find

ings of f act:
1. O n March 31, 1995, Forrest Cate and DCS’s predec essor, Ford Deale r Computer Service s, Inc., entered

a contractual agree

ment (“Agreement”) for , among other things, the purchase by

Forrest Cate of a computer sy stem thatprovides d ata and infor mation ab out Ford

Motor Compa

ny v ehicle p arts.
2. Forres tCate admitted t hat it entered into the Agreement, see Complaint at ¶ 3 and Amended Complaint at ¶ 3.

3. Forres tCate doe s not disput e th at D CS assumed the benefits and obligations of the Agreement from F ord Dealer Computer Services, I nc.
4. Forres tCateadmitted t hat the Ag

reemen t contain s a valid

arbitration clause. See Complaint at ¶ 8(a) and Amended Complaint at ¶ 7(a).

5. The Agreement defines severa l key term s, in cludi ng, but not limited to, the “CPD System,” “Enh ancements and/or Modifications,” and “Soft ware,” whic h are def ined as f ollows:

a. CPD System - Computer sy stem, including all co mput er equipment and software, that enables users to access c urrent Ford Motor Company Ford a

nd Lincoln/Mercury

car and ligh t truck pa rts catalog data.

b. En ha ncement s and/or Modifications - Any modific ation or additi on tha t, when made or added to the L icensed Software, materia lly changes its utility, ef

ficiency, f

unctional capabi lit y, or application.

c. Software - A general term used to describe all programs used inside the computer and peripheral devices to make them pe rform any function. This term includes o peratin g sy stem, Docume nt ation, corrections or Modification. Enhancements, micr osoft ware, and Firmwareused within the cen tral proc essin g uni t or within any peripheral d evi ce, terminal, or printer attached to the computer sys tem.-3- 6. The Agreement outlines numerous duties and obligations b etween Forres tCate and DCS concerning the CPD System and its software. I n particular, the Agreem ent cl early c ontemplates that certain “upgrades,”“modifications,” and “enhan cements ” willfrom time-to-time occur to the CPD System and its software. For example,

Deal er[, Forrest Cate,] shall provide FDCS unlimited access to the Equipmentand shall cause employ ees to cooperate with FDCS in the maintenance of the Equipment andin th e making of engineering chang es and up grade s.
7. The Agreement permits DCS to make “modifications” and “enhan cements ” to the software, and such chang es may re quire Fo rrest Ca te to expand its c omputer s yst

em. [DCS] will, from time-to-time, in its sole discretion, make Modifi cations and Enhancements to the Software. During the te rm of this Agreement, Dealer shall rec eive all generally re lease d Enhancements/Modifications and Docu mentation appli cab le thereto. Dealer ackn owled ges an d agre es that the se Enhancements / Modifications may at

times require changes or

expansion to Dealer’s computer sys tem such a s compute

r power , memory , disk

storage, or periphe rals. Dealer

agrees to make

such cha nges or expansion a

t its expens e as a necessary cost of obtaining the added Software function ality

provided by t he Enhancement/M odifica tions.

8. In the

Agree ment, For rest Cate also

covena nts and agrees to . . . [i]mple ment all revisions to the Software and CD-ROM data files that are released by FDCS within thirty (30) da ys after r

eceive d by

Dealer . FDCS is und er no obli gation t o provide Software or

CD-ROM support for other than the then-current version of the Licensed Softwa re.
9. On the top of the fir st page of the Ag reemen t, in bold, c apital le

tters, and set off from other t ext , i s t he f ol lo win g st ate men t: “TH IS AG RE EME NT IS SUBJECT

TO ARBITRATI

ON UNDER APPLICABLE STATUTE.” This is clear , unambiguous notice to

Forres tCate that the Agreement is subject to arbitration. The arbitration provision is written in clear la nguag e and is se

t off by itself in a separa te provision of the Agreement under the hea ding “ARBIT

RATION.”

10. The Ag

reemen t’s arbit ration pr ovision sta

tes:-4- Exceptas prov ide d otherw ise in Sec tion 5 of th is Agre ement, a

ll disputes, claims, controversies and other matters in question between the parties to thi s Agreemen t, arising out of, or

relating to this Agree ment, or to the breach thereof, i ncludi ng any claim in which either party is demanding

monetary dama

ges of any nature including negligence, strict liability or intentional acts or omissions by eithe r pa rt y, and which cannot be resolved by the parties, shall be settled by arbitration. Excep t as provided otherwise in this Section 17, the arbitration shallbe admini stered in accord ance with the commercial arbitration rules of the American Arbitration Associa tion. Arbitrators shallbe chosen from a panel of persons with knowl edge o f electr onic data processing industry

pr actices, contracts, and data proce ssing sys tems. The arb itration p roceed ing will b e held in D etroit, Michigan. In no event shall the demand for arbitration be made more than one (1) ye ar after

the claim or cause of action arises. The awa rd of the arbitrator or arbitration panel shall be final an[d] binding, and th ere sh all be no appeal therefrom. Judgment upon the award rendered by

the arbitrator or arbitration panel may be ente

redin any court having jurisdiction. The U. S. Arbitration Act shall govern the interpretation and appli cation of this Secti on 17. In the case of nonpayment

by Deale

r, this arbitration procedure shall in no way limit FDCS’s remedies as provided in Section 11.

11. The arbitration provision is broad and comprehensive. It covers “ all disputes, claims, controversies and other matte[r]s in question between the parties to this Agree

ment, ar ising out of, or re lati ng to this Agreement, or to the breach thereof.”

12. The arbitration provision recognizes the need for expe rts i n the computer field to serve as arbitrators. It ca lls for ar bitrator s “chose

n from a panel of persons with knowle dge of electro nic data processing industry practic es, contr

acts, and data processing sy stems.”

13. The Agreement states that it “shall be g ov er ne d b y the laws of the State of Michigan.”

14. Underst anding the “CPD System” is at the hear t of this matter

. Forres tCate states it “did not contract for an ything other than the CPD System.” Responsive Memoran dum, p. 3. F orrest Ca te al so st at es : “ Ad di ti on al ly, the plaintiff didnot agree to arbitrate any thing other thanmatte rs direc tly r elated to the CPD System .” Id. Th e Agreement defines the CPD Sy stem as the

“Computer

sys tem, including all computer equipment and software, that enables users to access current-5-

FordMotor Compa

ny F ord and L incoln/Me

rcury car and li ghttruck parts catalog data.”

15. Forres tCate attaches as Exhibit B to the Complaint a letter dat e d August 10, 1999 from Ford Motor Company that explains the enhancemen ts and
m odifications to th e CP D S yste m, in clu di ng c ert ain softwa re a nd e qui pm ent . In pertinent part, the letter addresses parts cata log data and states that

FordMotor Compa

ny i s making

a ma j or change in data formats for CPD parts information. * * * * * Your CPD so ftware

will be upd ated to ha

ndle both the or

iginal d ata format and the ne

w GCAT da

ta forma t simultane ously

- which w ill require new equipment and more complex software. Beca use the GCAT data format is illustration ori e nted, con siderab ly mo re data stora ge will be required

on your CPD Server. Da

ta will be distributed via a DVD disk instead of the CD-ROM disks currently used.
Therefore, you

r CPD Serve

r will nee d to be upg raded to
accommo date

Windows 98, l arger pr ograms , more stora ge ca pa ci ty, and a DV D drive to

deal with the new GCAT data r

equirem ents.
16. For rest

Cate attached as Exhibit C to the Complaint a letter d ate d September

1, 1999 fr om Ford Motor Company that fur ther explains the enhanc ements and modificat io ns to the CPD System. I n pertinent part, the letter addresses parts catalog data a nd states that Improving

the quality of

catalog text and illustrations has been a l ongstanding Dealer and PartsManag er requ est.

* * * * * The new catalog will increase prod u ctivity, improve customer satisfaction and a

dd value t o yo ur parts operati ons.
17. Forres tCate attached as Exhibit E to Forrest Cate’s Responsive Memorandum

a letter dated September

2, 1999 fr

om DCS, whic

h notes: “ Your CPD software will be upd ated to ha ndle both the original data format and the new GCAT data format simultaneously - w hich will require more complex software.”

18. Forres tCate atta

ched as E

xhibit F to F

orrest Cate’ s Responsive Memorandum

a letter dated October 12, 1999 from DCS, w hic h states that the enhanc ements would require “your CPD Server be upgraded to a new Pentium CPD Server.”-6- 19. Forres tCate atta

ched as E

xhibit G to For rest Cate’s Responsive Memorandum

a letter dated Janu ary

4, 2000 fr

om DCS, which addressed thereleas e date for “the new CPD GCAT da ta forma t” and wis hed “all

CPD client s to be abl e to continue operating efficiently up to and beyond the c onversion in data format.”

20. DCS has had since Forres t Cate sig ned the A greem ent, and s till has,
an office in Southfield, Michigan. See Affidav it of Micha el Creag h, ¶ 7 (“D CS also
curren tly maintains offices at 1000 Town Square, Southfield, Michigan 48075. [Its] offices in Southfield, Michigan make it convenient to work with Ford Motor Company on CPD o r othe r matter s relatin g to the o ngoing contractual rela

tionship between DCS an d Ford Motor Company. DCS communicates with Ford Motor Company on issues related to CPD and other issues on a t least a weekly

basis.”).

21. DCS has fre quent con tact with Ford Motor Company, a

nd DCS uses its Southfield, Michigan offices to facilitate that contact. “F ord Motor Company supplies to DCS on at least a monthly basis parts ca talog data that

is utilized b y D CS to prov[ ide] an elec troni c catal og to Fo rd deal ers. T he elec troni c parts catal og, or CPD, is provided to Ford dealer s pu rsuant to a contract as required by the contract between DCS and Ford Motor Company. The parts data set forth in CPD i s For d Motor Company

data. The parts d ata cont ained in t

he elec tronic par ts catalog describe Ford parts. . . . Ford Motor Company works with DCS on an ongoing basis in connection with the development of CPD.” Creagh Affida vit, ¶ 4.

22. The clear w eight of the evide

nce con firms tha t t he Agreement contemplatedthe enhancements and modifications to the CPD Syst em made b y D CS.

T he determinat ive quest

ion on app eal is a q

uestion of law and isconclusi vely

resolve d in favor of Appellee by

the provision of the contract quoted by the trial court in it s Findings of Fact no. 7:
[DCS] will, from time-to-time, in its sole discretion, make

Modifications and Enhancements to the Software. During the term of this Agr

eement, Dealer

sh all rec eive all generally released Enhancements/Modifications a nd D ocumentation applicable thereto. Dealer acknowl edges a nd ag rees tha t these En

hanceme nts/ Modifications may at times require chang es or expa

nsion to Dealer’s computer system such as computer po we r, me mo ry, disk storage, or periphe rals. Dealer

agree s to make such chang es or expa nsion at its expens e as a necessary cost of obtaining the added Software functionality provided by the Enhancement/Modifications

. (emphas is added) The question for the trial court, and the question for this Court o n appea

l, is not whether the “GCA

T Sy stem” is a

chang e or expan sion of the “CPD System,” but rather, wha t is the-7-

proper forum to a

ddress such a question. The expansive, all-inclusive provisions of the arbitration clause in the contract bindboth parties to compulsory arbitra tion, and this fact would be true under either the law of Michigan or the law of Tenne ssee. Buraczynski v. Eyring , 919 S.W.2d 314, 318-19 (Tenn. 1996); Wachtel v. Sh oney’s, Inc. , 830 S.W.2d 905, 908 (Tenn. Ct. App. 1991); Kauffman v. Chicago Corp. , 466 N.W.2d 726, 730 (Mich. Ct. App. 19 91); Amtower v. William C. Roney & Co. , 590 N.W.2d 580, 583 (Mich. Ct. App. 1998).

Since the contr

olling qu estion is on

e of law, it is befor

e this cou rt de novo witho ut any presump tion of cor rectness of the finding of the trial court. Nelson v. Wal-Mart Stores, Inc. , 8 S.W.3d 625, 6 28 (Tenn . 1999); Guiliano v. Cleo, Inc. , 995 S.W.2d 88, 95 (Tenn. 1999).

The trial cou

rt correctly

ruled in favor of the appellee on this issue and gr anted the appellee’s Motion to Dismiss and Compel Arbitration. Subsequen t to the filing of the initial Complaint on April 22, 2000, Plaintiff sought, by amended complaints on August 7, 2000 and October 10, 2000, toconvert the case from a declar atory judgment action into an action challenging the validity of the contract

on principles of overreaching and adhesion. After having admitted in the original Complaint that the laws of Michigan governed under the choice of forum provisions in the contract, Plai ntiff withdrew this admiss ion and al so challenged

the validity of the choice

of forum provisions of the contract. The Complaint had already been met by

a respon sive plea

ding (A ppellee ’s Motion to

Dismiss) a

t the time leave of the court

was sought to file the amended

complaints. Wilson v. Ricciardi , 778 S.W.2d 450 (Tenn. Ct. App. 1989). No order of

the cour t, pursua nt to Rule 15 .01 of the

Tenness ee Rules o f CivilProcedu re, appe ars in the record grant

ing leave to file either the Amended Complaint of Aug ust 7 or the Amended Complaint of October 5. But, in its Amended Memorandum in Support of Motion to Dismiss and to Compel A

rbitrati on filed O ctober 2 0, 2000, A ppellee asserts:
On or about August 2, 2000, Forrest Cate submitted a Motion to Ame nd Complaint for Dec larator y Judg ment (“Motion to Ame nd”) and a respon siv e memorandum

to the Motion to Dismiss and Compel (“Responsive Memorandum”). Without waiving

any of its defenses or arguments DCS otherwise would have had or has to Forre st C at e’s Complaint and Motion to Amend, DCS, in the interests of judicial economy and efficiency, permit ted Fo r rest Cate to file its Amended Complaint for Declaratory Judgment (“Amended Complaint”).

DCS now submitsthis Amend ed Memor

andum to D ismi ss and Compel in response to Forre st Cate’s Amended Complaint.

Such is not in

the inter est of jud icial ec onomy , but the a

bove stat ement by Appellee in the amended memorandum effectively waives the “written consent” provision of T.R.C.P. Rule 15.01.

The trial court disposed of the fa ctual all egatio ns asser

ted in the amended complaints filed by Appellant in a conc lusion of law that provided:-8- 1. Forres tCate did not plead fraud with the requisite particularity

. See Harvey v. Ford Motor Credit Company , 8 S.W.3d 273, 275 (Tenn. Ct. App. 1999) (citi ng Tenn. R. Civ. P. 9.02). In addition, “no man can recover upon the theory of fraud or mistake with r espect to a ny matter of fa ct about which he has actual knowl edge or legally

imputed knowledge.” Hill v. John Banks Bui ck, Inc. , 875 S.W.2d 667, 670 (Tenn. Ct. A pp. 19 93). In this case, the facts show that the Agreement

signaled to Forre st Cate

that (1) it was subject to arbitration in Michigan, (2) that Michigan law controlled, and (3) the DCS had, and has, an office in Southfield, Michiga

n. Forr est Cate c annot cla

im fraud w

hen such facts we re clea rly known to it.

This Court has observed: “Although the Court has the authority to settle disputed issues of fact in Declaratory

Judgment matters, such settleme nt is ordina

rily left to other forums.” Goodwin
v. Metropol itan Bd. of H

ealth , 656 S.W.2d 383, 387 (Tenn. Ct. App. 1983). Declaratory judgment may be pr op er ly r efuse d if judicial investigation of disputed facts is first necessary

. Nicholson v. Cummings , 217 S.W.2d 942 (Tenn. 1949).

A more pre ssin g reason exists for affirming the trial judg e as to all matters set forth in the amended complaints. No proof was ever taken to support the alleg ations of overreaching, adhesion and intimations of fr aud. Much of the documentation submitted in the extensive appendix to the brief of Appellant was never admitted into evidence. The circumstances surrounding the inception of the contract are supported in the record only

by the Affida

vit of Forrest Cate, who never testified.

When parties choose or acquiesce in the choice of a dec larator

y ju dgment p

roceed ing to addressdisputed issues of fact and the trial court, in its discretion, allows them to do so, the disputed issues of fact

must be ac tuall y tried, and the record of such trial must be properly preserved for appella te review under the provisions of T.R.A.P. Rule 24. Without such a record, this Court

must presume that the trial co urt was c orrect in its disposition of factual issues. Sherrod v . Wix , 849 S.W.2d 780, 783 (Tenn. Ct. App. 1992).

Under these circumstances, this Court is, likewise, unable to review issues as to the choice of forum provisions of the contract, although, as alrea dy observed

in this par

ticular c ase, the

result
on the original declaratory judgment suit would be the same whether Michigan law or Tennesseelaw applies.

The judgment of the trial court is in all respects affi rmed, and cos ts are a ssessed a gainst Appellant.

___________________________________ WILL IAM B. CAI

N, JUDGE