BLUE WATER BAY AT CENTER HILL, LLC, ET AL.
LARRY J. HASTY, ET AL.
Session Date: August 15, 2017
from the Chancery Court for Williamson County No. 43307
Deanna Johnson , Judge
appeal follows the trial court's confirmation of an
arbitration award. There are four participating parties on
appeal, the Appellant and three separate Appellees. With
respect to the claims asserted by Appellee Blue Water Bay
against the Appellant, we hereby vacate the trial court's
orders and remand for further proceedings because the trial
court erred in not allowing the Appellant pre-arbitration
discovery regarding issues pertaining to arbitrability. With
respect to the claims involving the other two Appellees, we
reverse the trial court's orders due to the absence of a
sufficient basis to establish arbitrability.
R. App. P. 3 Appeal as of Right; Judgment of the Chancery
Court Vacated in part and Reversed in part and Remanded
Rose and Joshua D. Arters, Brentwood, Tennessee, for the
appellant, Larry J. Hasty.
William B. Hawkins, III and Eric G, Evans, Nashville,
Tennessee, for the appellees, Blue Water Bay At Center Hill,
LLC, and Edmond R. Queen.
Carney, Nashville, Tennessee, for the appellee, Greyhawk
B. Goldin, J., delivered the opinion of the Court, in which
Brandon O. Gibson and Kenny Armstrong, JJ., joined.
B. GOLDIN, JUDGE
AND PROCEDURAL HISTORY
case involves a dispute among the Appellant, Larry Hasty
("Mr. Hasty"), and the Appellees, Blue Water Bay at
Center Hill, LLC ("Blue Water"), Edmond Queen
("Mr. Queen"), and Greyhawk Development Corporation
("Greyhawk"). The genesis of the lawsuit lies in a
2007 loan granted to Greyhawk by Cadence Bank, N.A.
("Cadence"). Incident to Greyhawk's acquisition
of loan proceeds from Cadence, which was evidenced by a
promissory note in the amount of $3, 100, 000.00, Mr. Hasty,
a corporate officer of Greyhawk, executed a personal
guaranty. It is not disputed that Mr. Queen also signed a
personal guaranty for payment of the same 2007 loan.
relevant herein, Mr. Hasty's guaranty contained an
arbitration provision. In pertinent part, the provision
provided that "[a]ny controversy or claim between or
among the parties hereto including, but not limited to, those
arising out of or relating to this Guaranty or any related
agreements or instruments . . . shall be determined by
binding arbitration[.]" Following the execution of the
2007 note, the loan documents were allegedly amended and
transferred multiple times.
present litigation commenced on July 1, 2014, when Blue Water
and Mr. Queen filed a complaint in the Williamson County
Chancery Court. The filed complaint set forth alternative
counts for relief. Notably, the alternative claims that were
advanced were not pursued jointly by the named Plaintiffs.
That is, whereas the first count of the complaint was pursued
exclusively by Blue Water, the alternative count was pursued
exclusively by Mr. Queen. In the first count, Blue Water
alleged that through a series of assignments of loan
documents, it had become the holder of the most recent
renewal of the original 2007 promissory note. It averred that
because Greyhawk had not made any payments under the renewed
note, Mr. Hasty was liable pursuant to his personal guaranty.
Nevertheless, in recognition of the fact that Mr. Queen had
also guaranteed payment of the note, Blue Water only sought
to recover half of the loan amounts allegedly due and owing.
alternative to Blue Water's request for relief, Mr. Queen
asserted a claim for contribution. In advancing this claim,
Mr. Queen asserted that Cadence had previously filed suit
against himself, Mr. Hasty, and Greyhawk in regard to
outstanding loan payments. According to Mr. Queen, Cadence
agreed, following a mediation, to accept $1, 800, 000.00 in
satisfaction of its claims. Because he had allegedly
"paid the entire amount necessary to satisfy Cadence
Bank's claims, " Mr. Queen sought to recover against
his co-guarantor, Mr. Hasty, for contribution, having paid
more than his pro-rata share.
several months passed without the filing of an answer, Blue
Water and Mr. Queen moved for a default judgment against Mr.
Hasty in December 2014. However, following the filing of an
answer by Mr. Hasty on January 14, 2015, the motion for
default was later stricken pursuant to an agreed order. In
his answer, Mr. Hasty generally contended that the claims
against him should be dismissed, and he stated that he was
without sufficient information or knowledge to admit or deny
Blue Water's status in relation to the renewed promissory
note. In addition, Mr. Hasty filed a third-party complaint
against Greyhawk, asserting claims for statutory and common
to the filing of Mr. Hasty's answer and third-party
complaint, Greyhawk filed a motion to stay litigation pending
arbitration pursuant to Tennessee's Uniform Arbitration
Act, Tenn. Code Ann. § 29-5-301 et seq. In a
legal memorandum filed contemporaneously with its motion to
stay, Greyhawk noted that Mr. Hasty's guaranty contained
a mandatory arbitration clause and contended that the claims
in the lawsuit all arose out of the guaranty and related
agreements. In response to Greyhawk's motion to stay, Mr.
Hasty filed a motion to continue. Therein, Mr. Hasty
contended that because he intended to challenge the
arbitrability of his claims against Greyhawk, he was entitled
to engage in pre-arbitration discovery prior to a hearing on
the motion to stay. Mr. Hasty contended that discovery was
necessary, in part, to verify the "litany of
allegations" that Greyhawk had relied upon in support of
its motion to stay. He further expressed a desire to
challenge the validity of the specific arbitration clause
sought to be enforced. Subsequent to Mr. Hasty's request
for a continuance, Blue Water, Mr. Queen, and Greyhawk all
filed responses disputing that any discovery was proper prior
to a hearing on the motion to stay. Mr. Hasty thereafter
filed a reply wherein he again noted that Tennessee law
allows for pre-arbitration discovery.
hearing on Mr. Hasty's motion to continue was held on
July 10, 2015. During the hearing, the trial court appeared
to express a willingness to allow some discovery prior to
determining the question of arbitrability, stating as
follows: "I've already indicated my inclination is
going to be to . . . allow discovery on the question of
whether the arbitration provision pertaining to the
guarant[y] even applies to the obligations created by these
notes." Although the court indicated that Greyhawk's
motion to stay was set to be heard on August 21, 2015, it
suggested that this future setting might not ultimately be
necessary. Speaking to Mr. Hasty's counsel regarding the
motion to continue, the trial court stated as follows:
My ruling is that your motion is overruled. It's
premature. You'll need to file a response to the motion
to stay that's set for the 21st asking for leeway to take
specific discovery. If you can fashion an order resulting
from today's proceedings that's satisfactory, and not
have to come here on the 21st, I'm happy to approve it.
Because on the 21st I'm going to grant your client, Mr.
Hasty, permission to pursue discovery on the question of
whether the guarant[y], in fact, applies to these underlying
response to the trial court's comments, Mr. Hasty filed
an application on August 7, 2015 seeking leave to pursue
discovery regarding the arbitrability of his claims against
Greyhawk. He also filed a "motion to sever" on that
date, requesting that the claims filed by Blue Water and Mr.
Queen be severed from his own claims against Greyhawk if
necessary. On August 17, 2015, Blue Water, Mr. Queen, and
Greyhawk filed responses to Mr. Hasty's August 7 filings.
Blue Water and Mr. Queen also filed a separate response to
Greyhawk's motion to stay, wherein they asserted that all
matters between all parties should be resolved in
August 21, 2015, the trial court held a hearing on
Greyhawk's motion to stay litigation and on Mr.
Hasty's motion to sever and application for discovery.
During the course of the hearing, which consisted entirely of
argument of counsel, Mr. Hasty's counsel frequently
expressed a desire to engage in discovery on the question of
arbitrability. Although counsel for Greyhawk, Blue Water, and
Mr. Queen indicated that papers attached to various court
filings established Blue Water's status as a holder of
the renewed promissory note and related loan documents,
counsel for Mr. Hasty argued that he should be able to
inquire into the legitimacy of the referenced transactions
underpinning Blue Water's alleged status. We observe that
the documents referenced by counsel for Greyhawk, Blue Water,
and Mr. Queen were not actually introduced as evidence into
the record at the August 21 hearing.
the specific issues discussed at the hearing were some of the
allegations pertaining to the alternative contribution claim
asserted by Mr. Queen. As noted earlier, Mr. Queen's
claim asserted that because he had "paid the entire
amount necessary to satisfy Cadence Bank's claims, "
he was entitled to recover against his co-guarantor, Mr.
Hasty, for having paid more than his pro-rata share. During
the hearing, Mr. Hasty's counsel expressed a desire to
inquire into whether the loan obligations were previously
extinguished before the alleged assignment to Blue Water.
Counsel for Greyhawk argued to the trial court that, in light
of the various referenced transactions, it was inaccurate to
say that the underlying debt had been "paid off."
According to Greyhawk's counsel, it was clear that Mr.
Queen's company, PDQ Disposal, Inc., had purchased the
note. In the trial court's view, answering this question
And that's critical. That's a critical question here.
And either this Court or an arbitrator has got to look at
that issue. If PDQ just paid it off, that's one thing. If
PDQ bought it and took an assignment of the note and deed of
trust or the note and trust and guarant[e]es, all the
collateral, in other words, then it's a different
problem. And I can't imagine, frankly, that the lat[t]er
didn't occur. It would be hard for me to conceive that
PDQ didn't simply buy it and take an assignment of the
note and all the collateral that went with it. But that's
a fact question that will have to be addressed by either this
Court or an arbitrator.
the trial court later suggested that this would be a question
for the arbitrator and that the arbitrator would be able to
set the parameters of discovery, counsel for Mr. Hasty argued
that "when you're challenging arbitrability, you get
to discover arbitrability in [the trial court]."
Water, Mr. Queen, and Greyhawk were not signatories to the
guaranty containing the arbitration provision that was relied
upon in support of the motion to stay, and Mr. Hasty simply
wanted to be afforded some limited discovery to inquire into
the various transactions that these parties were citing in
support of their desire to arbitrate. Although the trial
court found it "interesting" that there had been
resistance to Mr. Hasty's desire to conduct discovery, it
nevertheless expressed confusion as to why any discovery
would be needed in light of the various documents that had
been referenced by counsel for Blue Water, Mr. Queen, and
Greyhawk. Mr. Hasty's counsel responded to the trial
court's questioning on this issue by stating that, beyond
the set of documents that had been referenced, Mr. Hasty
should be able to explore whether those were actually
legitimate transactions. Towards the conclusion of the
hearing, the trial court stated that its inclination was to
stay proceedings pending arbitration. Ultimately, however, it
did not make a definitive ruling from the bench, and the
matter was taken under advisement.
September 11, 2015, the trial court entered an order holding
that it was proper to stay litigation and compel the parties
to enter into arbitration concerning all raised claims. As a
corollary to this determination, it denied Mr. Hasty's
motion to sever and his application to pursue discovery. In
reaching its decision that all claims should be arbitrated,
the trial court made a number of factual findings regarding
the loan documents and transactions that had been referenced
during the August 21 hearing. As previously noted, while
these documents were not introduced as proof, they had been
attached to court papers filed by the parties seeking
arbitration. Although a close inspection of the trial
court's order reveals that it attempted to qualify its
language in a couple of places regarding the documents relied
on by Blue Water, Mr. Queen, and Greyhawk,  it nonetheless
treated these documents as proof and accepted them at face
value with regard to the legitimacy of the underlying
transactions referenced therein. In the trial court's
opinion, no discovery was required because there was no need
for any additional documents.
making its findings, the trial court noted that Mr.
Hasty's guaranty was assignable, and as such, it reasoned
that an assignment of the guaranty would allow the assignee
to enforce the guaranty's arbitration provision.
Interestingly, however, despite the trial court's attempt
to trace the purported transfer of the loan documents among
various non-signatories to the guaranty, the resulting
findings were seemingly irreconcilable. At one place in its
order, for example, the trial court recited as follows:
"PDQ Disposal subsequently assigned its Loan Documents
to Mr. Queen. On December 31, 2013, Mr. Queen assigned all of
[his] rights under these transactions to Blue Water."
However, the trial court's order also contained a finding
that Mr. Hasty's guaranty, which included the arbitration
provision, was ultimately assigned to Mr. Queen:
"Subsequently, PDQ Disposal, which held the Guaranty,
then assigned the Guaranty to Blue Water, which assigned the
Guaranty to Mr. Queen[.]"
the trial court's specific reasoning is somewhat unclear
in light of the apparent inconsistency of its findings, the
trial court ultimately determined that every claim should be
sent to arbitration because, in the view of the trial court,
all claims were "intertwined" with Mr. Hasty's
Although the Plaintiffs and Greyhawk are not signatories to
Mr. Hasty's Guaranty, the rights of the Plaintiffs and
the obligations of Greyhawk depend upon Mr. Hasty's
rights and obligations under the Guaranty. The case is
intertwined around the Guaranty, which contains the
arbitration provision, so the Court finds it is proper to
stay the litigation and compel the parties to enter into
arbitration of all claims of all parties.
Mr. Hasty requested permission to seek an interlocutory
appeal following the trial court's September 11, 2015
order, the trial court denied his request.
subsequently ensued regarding the claims of all the parties.
Although the arbitrator entered an award against Mr. Hasty in
Blue Water's favor, the claims asserted by Mr. Queen and
Mr. Hasty were dismissed. Proceedings in the trial court
resumed soon thereafter. On July 7, 2016, Blue Water filed an
application to confirm its arbitration award. On July 18,
2016, Mr. Hasty responded to Blue Water's application and
moved to vacate the arbitration award.
hearing on Blue Water's application to confirm the
arbitration award was later held on July 21, 2016. The trial
court did not definitively rule on the application at that
time, however, and on July 28, 2016, it entered an order
stating that it would take the matter under advisement. In
its July 28 order, the trial court informed Blue Water and
Mr. Hasty that they could file additional replies to assist
the court in making its ruling. On October 11, 2016,
following the submission of additional filings by Mr. Hasty
and Blue Water, the trial court entered an order confirming
the arbitrator's award. This appeal followed.
brief, Mr. Hasty raises the following issues for review:
1. Whether the trial court erred in staying all claims of all
parties in favor of arbitration;
2. Whether the trial court erred in denying the
Appellant's request to take discovery regarding the
arbitrability of the claims in this case; and,
3. Whether the trial court erred in granting [Blue
Water's] Application for Confirmation of Arbitration
Award and denying the ...