Opinion ID: 1950999
Heading Depth: 1
Heading Rank: 3

Heading: Is Arbitration Binding?

Text: In support of their argument, the Adcocks cite a number of provisions of the home warranty agreement. This they are entitled to do, because `[u]nder general Alabama rules of contract interpretation, the intent of the contracting parties is discerned from the whole of the contract.' Lewis v. Oakley, 847 So.2d 307, 327 (Ala.2002) (quoting Homes of Legend, Inc. v. McCollough, 776 So.2d 741, 746 (Ala.2000)) (emphasis added). `The agreement must be construed in its entirety, and a single provision or sentence is not to be disassociated from others having reference to the same subject matter.' Ex parte University of South Alabama, 812 So.2d 341, 345 (Ala.2001) (quoting Yu v. Stephens, 591 So.2d 858, 859 (Ala.1991)). The Adcocks first rely on that portion of §§ V and VIII.C. on which Adams and Bonded Builders relied in arguing that arbitration is mandatory, namely, the clause providing that `[the dispute settlement] process ... shall be a condition precedent to the commencement of litigation by any party.' (Emphasis added.) In that connection, they argue: The intent of providing the Adcocks with a right to proceed with litigation could not be more obvious given the fact[] that [ the home warranty agreement] plainly state[s] that the `dispute settlement process' is only a `condition precedent' to filing a civil action. This very language makes it obvious that arbitration was never contemplated or intended to be binding on any party in this case. Adcocks' brief, at 23-24 (emphasis in original; citation to the record omitted). We agree with this argument. Precedent, as used in the home warranty agreement, as we have already discussed, simply means  before  litigation. It does not mean in lieu of, or in place of, litigation. Thus, the parties obviously contemplated the possibility of litigation after failure of the dispute settlement process, which includes arbitration. This conclusion is buttressed, as the Adcocks further argue, by the manner in which the home warranty agreement deals with attorney fees and court costs, depending on whether the dispute was arbitrated or litigated. Specifically, § V provides that attorney fees and court costs will not be regarded as arbitration expense, and will not necessarily be deemed the liability of Adams or Bonded Builders. Section VIII.I., by contrast, provides that the prevailing party in litigation shall be entitled to recover its reasonable attorney's fees and court costs. Because the parties contemplated a different disposition of court costs and attorney fees, depending on the forum in which the dispute was ultimately resolved, they could hardly have intended arbitration to be the final and exclusive mode of dispute resolution. Although the acknowledgment provides for binding arbitration, it does so only [i]n the absence of a Home Warranty Agreement. (Emphasis added.) That provision is not controlling in this case, because there is a home warranty agreement. The home warranty agreement expressly binds Adams, as well as the other parties. For these reasons, the trial court erred in ordering binding arbitration.