Opinion ID: 1057586
Heading Depth: 3
Heading Rank: 2

Heading: Effect of the Invalidity of the Scope of Review Provision

Text: We turn now to the question of whether the failure of the consent order provision expanding judicial review requires that we reform the agreement and review the award under the narrow review provisions of the TUAA or rescind the agreement and remand the case to the trial court. As a preliminary matter, we disagree with the Court of Appeals' determination that the issue of the validity of the consent order is waived because Pugh's did not object to Jaycon's motion to confirm the arbitrator's award in the trial court. Generally speaking, we agree with the Court of Appeals that an issue cannot be raised for the first time on appeal. See Simpson v. Frontier Cmty. Credit Union, 810 S.W.2d 147, 153 (Tenn.1991). However, neither party challenged at the trial level the provision in the consent order purporting to expand judicial review. The Court of Appeals raised this issue sua sponte during oral argument. Thereafter, Pugh's argued in its supplemental brief filed in the Court of Appeals that the failure of the provision purporting to expand judicial review rendered the consent order invalid and mandated a remand to the trial court. The Court of Appeals also erred in finding that the record did not contain sufficient facts on which to make a finding on the validity of the parties' agreement to arbitrate. It is undisputed that the consent order embodies the only arbitration agreement between the parties. In accord with the general principle that rescission is not favored in Tennessee, Klosterman Dev. Corp. v. Outlaw Aircraft Sales, Inc., 102 S.W.3d 621, 631 (Tenn.Ct.App.2002), we have held that a consent order cannot be set aside unless entered through fraud or mistake. Gardiner v. Word, 731 S.W.2d 889, 893 (Tenn. 1987); Third Nat. Bank, 370 S.W.2d at 487. This Court has explained that a mistake exists in a legal sense when a person, acting on an erroneous conviction of law or fact, executes an instrument that he or she would not have executed but for the erroneous conviction. State ex rel. Mathes v. Gilbreath, 181 Tenn. 498, 181 S.W.2d 755, 757 (1944); Metro. Life Ins. Co. v. Humphrey, 167 Tenn. 421, 70 S.W.2d 361, 362 (1934). A court may not rescind a contract for mistake unless the mistake is innocent, mutual, and material to the transaction and unless the complainant shows an injury. Klosterman Dev. Corp., 102 S.W.3d at 632 (quoting Robinson v. Brooks, 577 S.W.2d 207, 209 (Tenn. Ct.App.1978)); see also Atkins v. Kirkpatrick, 823 S.W.2d 547, 553 (Tenn.Ct.App. 1991); Wilson v. Mid-State Homes, Inc., 53 Tenn.App. 520, 384 S.W.2d 459, 463-64 (1964). In this case, the record clearly establishes that the mistake was innocent and mutual in that both parties anticipated that expanded judicial review would be available. Indeed, neither party challenged at the trial level the provision in the consent order purporting to expand judicial review. Instead, this issue was raised by the Court of Appeals. Moreover, the consent order states that the agreement that the arbitrator's ruling is appealable was material consideration for the agreement of each party to submit this matter to arbitration. Finally, the complainant, Pugh's, has shown an injury in that its right to appeal would be substantially limited were the arbitration agreement enforced despite the failure of the provision authorizing expanded judicial review. We therefore hold that rescission of the parties' arbitration agreement is the appropriate remedy for the parties' mutual mistake concerning the availability of the provision for expanded judicial review.