IN THE SUPREME COURT OF TENNESSEE
AT KNOXVILLE
September 6, 2001 Session
SOUTHERN CONSTRUCTORS, INC. v. LOUDON COUNTY
BOARD OF EDUCATION
Appeal by Permission from the Court of Appeals, Eastern Section
Chancery Court for Loudon County
No. 9756 Hon. Frank V. Williams, III, Chancellor
No. E2000-02577-SC-S09-CV - Filed October 26, 2001
The issue in this case is whether a county board of education has the authority to arbitrate a dispute
arising out of a school construction contract. After the parties completed arbitration, the plaintiff
filed suit to vacate the award, arguing that the defendant, a county board of education, lacked the
statutory authority to agree to arbitration. The defendant unsuccessfully moved for summary
judgment, and it sought interlocutory appeal with the trial court’s permission. The intermediate
court, however, denied the interlocutory appeal, finding that the trial court’s decision was consistent
with prior cases from the Eastern Section Court of Appeals. We granted permission to appeal and
hold that the rule of strict construction of local governmental powers should be retained. We also
hold, though, that the power to arbitrate construction contract disputes is fairly implied from the
express authority to enter into construction contracts. We therefore reverse the trial court’s denial
of summary judgment and dismiss the case.
Tenn. R. App. P. 11 Application for Permission to Appeal; Judgment of the
Court of Appeals Reversed; Case Dismissed
WILLIAM M. BARKER, J., delivered the opinion of the court, in which FRANK F. DROWOTA, III, C.J.,
and E. RILEY ANDERSON, ADOLPHO A. BIRCH, JR., and JANICE M. HOLDER, JJ., joined.
R. Loy Waldrop, Linda J. Hamilton Mowles, and Maranee L. Petersen, Knoxville, Tennessee, for
the appellant, Loudon County Board of Education.
Monty L. Walton and Stephanie K. Hunt, Knoxville, Tennessee, for the appellee, Southern
Constructors, Inc.
OPINION
FACTUAL BACKGROUND
On April 24, 1997, the Loudon County Board of Education (“Board”) contracted with
Southern Constructors, Inc. (“SCI”), for additions and renovations to two county school buildings.
Shortly after construction began, a subcontractor for SCI ruptured an electrical cable at one of the
sites, damaging electrical switchgear at the school and disrupting power to another building. The
subcontractor subsequently repaired the damaged lines and equipment at no cost to the Board.
Although SCI supplied power to parts of the building during the repair of the electrical
equipment, most of the school building remained without electricity. On July 17, a Board employee
discovered mold and mildew growth in a part of the school building without electrical power, and
the Board requested that SCI remove the growth. SCI declined to do so, however, claiming that it
was not contractually responsible for such expenses. The Board then hired outside contractors to
remove the growth at a cost of $115,248.22, and it withheld this amount from the balance owed to
SCI under the construction contract.
SCI then demanded that Board pay the withheld amount, and after a failed attempt to mediate
the dispute, SCI requested that the Board agree to arbitration. Although the parties had removed the
arbitration clause from their original contract, both parties executed a written arbitration agreement
in March 1999, and two months later, a hearing was held before a mutually selected arbitrator. On
May 26, 1999, the arbitrator rendered a decision in favor of the Board, but he awarded $10,000 of
the withheld amount to SCI in addition to interest and administrative expenses.1 Thereafter, the
Board issued a check to SCI for $12,988.25, which SCI deposited on June 7.
Less than two months later, SCI filed a complaint in the Loudon County Chancery Court
seeking to set aside the arbitration award. SCI claimed that after the issuance of the arbitration
award, it learned that the Board, “as a governmental entity[,] had no authority to enter into an
agreement to arbitrate and its act in doing so was ultra vires.” More specifically, SCI alleged that
the Board lacked the power to enter into arbitration agreements because the General Assembly did
not expressly give that power to county school boards and because other express legislative grants
of power did not imply that county school boards possessed any such authority.
On September 29, 1999, the Board filed a motion for summary judgment, asserting that the
chancery court lacked subject matter jurisdiction over the dispute. The Board claimed that because
SCI agreed to arbitrate the dispute, and because the arbitration award had already been rendered and
satisfied, state and federal law prevented SCI from seeking a de novo hearing of that award in court.
However, the court denied the Board’s motion, agreeing with Chattanooga Area Regional Transit
1
Though not relevant to the issues in this appeal, the arbitrator specified no reasons for the $10,000 award to
SCI, and he denied SCI’s motio n for clarification of the award .
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Authority v. Parks Construction Co.,2 that local governments do not have the implied power to
arbitrate disputes.
Pursuant to Tennessee Rule of Appellate Procedure 9, the Board then requested permission
to seek interlocutory appeal, which the chancery court granted. The court cited two reasons for
granting permission: (1) the presence of conflicting decisions from the Court of Appeals evidenced
a need to develop a uniform body of law as to whether a governmental entity may arbitrate an
existing dispute; and (2) a decision in favor of the Board would prevent needless, expensive, and
protracted litigation. The Board then petitioned the intermediate court for interlocutory appeal.
The Court of Appeals denied the Board’s petition for interlocutory appeal, but it did so based
upon its view that the Board’s case lacked merit. In its order, the court noted the presence of
conflicting decisions between the Eastern and Western sections of the Court of Appeals on this issue,
but it felt constrained to follow the opinion of its own section and to deny the motion. However, the
panel further suggested in its order that the Board seek permission to appeal from this Court.
We then granted the Board’s application for permission to appeal on the issue of whether
county boards of education have the authority to arbitrate contract disputes concerning the
construction and renovation of school buildings. For the reasons given herein, we hold that the
county boards of education do have authority to arbitrate construction contract disputes, and although
we decline to abolish the rule of strict construction known as “Dillon’s Rule,” we conclude that this
authority is fairly implied from the express power to enter into construction contracts. Therefore,
because the Loudon County School Board is entitled to summary judgment, we reverse the judgment
of the Court of Appeals and dismiss the case.
ANALYSIS
The question before the Court is whether the Loudon County Board of Education possesses
the authority under the laws of the State of Tennessee to arbitrate disputes arising out of a school
construction contract. If the Board possesses no such authority, then its agreement to arbitrate the
dispute in this case, along with the ultimate award, are void as ultra vires. The Board urges this
Court, under several legal theories, to find that it possesses the authority to enter into such arbitration
agreements, and SCI urges this Court to apply Dillon’s Rule and to strictly construe the statutory
powers of county school boards against having any such authority. Any question regarding the scope
of local governmental authority is a question of law, and as such, we review the issue in this case
under a pure de novo standard of review, according no deference to the conclusions of law made by
the lower courts. See, e.g., Daron v. Department of Corr., 44 S.W.3d 478, 480 (Tenn. 2001);
Johnson v. Johnson, 37 S.W.3d 892, 894 (Tenn. 2001).
2
See No. 03 A01-97 12-CH -00524 , 1999 W L 7607 4 (Tenn . Ct. App. file d at Knoxville, Jan. 28, 1999).
Although this decision appears to be in conflict with another unreported decision from the Western Section of the Court
of Appea ls, the chancer y court felt bound by the decision of the Eastern Section in Parks Construction Co. We granted
permission to appeal in Parks Construction Co. on September 13, 1999, but the case was settled during the pendency of
that appea l.
-3-
I. DILLON’S RULE AND THE SCOPE OF LOCAL GOVERNMENTAL
AUTHORITY IN TENNESSEE
At its most basic level, Dillon’s Rule is a canon of statutory construction that calls for the
strict and narrow construction of local governmental authority. As originally articulated by its
author, then Chief Justice John F. Dillon of the Iowa Supreme Court, Dillon’s Rule provides the
following regarding the nature and scope of municipal government authority:
In determining the question now made, it must be taken for settled law, that a
municipal corporation possesses and can exercise the following powers and no
others: First, those granted in express words; second, those necessarily implied or
necessarily incident to the powers expressly granted; third, those absolutely essential
to the declared objects and purposes of the corporation—not simply convenient, but
indispensable; fourth, any fair doubt as to the existence of a power is resolved by the
courts against the corporation—against the existence of the power.
Merriam v. Moody’s Ex’r, 25 Iowa 163, 170 (1868).
As in many jurisdictions throughout the nation, Dillon’s Rule has been applied in this state
for more than a century to determine the scope of local governmental authority. Beginning with
Mayor & City Council v. Linck, 80 Tenn. (12 Lea) 499 (1883), this Court has recognized that
municipal governments in Tennessee derive the whole of their authority solely from the General
Assembly and that courts may reasonably presume that the General Assembly “has granted in clear
and unmistakable terms all [power] that it has designed to grant . . . .” Id. at 505 (citation omitted).
To this end, the Linck Court held that municipal governmental authority should be strictly construed,
and it stated that a municipal government may exercise a particular power only when one of the
following three conditions is satisfied: (1) the power is granted in the “express words” of the statute,
private act, or charter creating the municipal corporation; (2) the power is “necessarily or fairly
implied in, or incident to[,] the powers expressly granted”; or (3) the power is one that is neither
expressly granted nor fairly implied from the express grants of power, but is otherwise implied as
“essential to the declared objects and purposes of the corporation.” See id. at 504 (emphases in
original). Consistent with other articulations of Dillon’s Rule, we also stated that “‘[a]ny fair,
reasonable doubt concerning the existence of the power is resolved by the courts against the
corporation and the power is denied.’” Id. (quoting 1 John F. Dillon, Commentaries on the Law of
Municipal Corporations 173 (1st ed. 1872)).
Although a discussion of the numerous applications of Dillon’s Rule in this state is
unnecessary, the Rule has been consistently applied to all forms of local government, including those
of cities, counties, and special districts. Despite this wide application, however, many legal
commentators, and some courts, have criticized the Rule as needlessly depriving local governments
of the ability to deal with, and respond to, changing local situations and needs. See, e.g., Gerald E.
Frug, The City as a Legal Concept, 93 Harv. L. Rev. 1059 (1980); State v. Hutchinson, 624 P.2d
-4-
1116, 1121 (Utah 1980). Indeed, the Board in this case cites many of these same concerns as reasons
to abrogate Dillon’s Rule in Tennessee.
We are not unmoved by some of these criticisms, but while Dillon’s Rule is essentially only
a canon of construction, it continues to reflect the constitutional realities of local government in this
state. Article II, section 3 of our Constitution confers upon the General Assembly the whole of the
state’s legislative power, and with limited exception, see Gibson County Special Sch. Dist. v.
Palmer, 691 S.W.2d 544, 550 (Tenn. 1985), the General Assembly has the sole and plenary authority
to determine whether, and under what circumstances, portions of that power should be delegated to
local governments.3 As this Court has previously acknowledged, local governments have never
possessed the inherent right to autonomous self-government, and all local governmental authority
“has always been interpreted as a matter of constitutional entitlement or legislative delegation of
authority.” Civil Serv. Merit Bd. v. Burson, 816 S.W.2d 725, 727 (Tenn. 1991) (citation omitted).
Plainly stated, then, without some form of constitutional authorization, local governments in
Tennessee possess only those powers and authority as the General Assembly has deemed appropriate
to confer upon them.
It is from this rationale—that local governments have no inherent right to autonomous self-
government—that the rule of strict construction of local governmental authority arises in this state.
Though at least one court has criticized strict construction of local governmental power as
originating from a time when distrust of such government was prevalent, see Hutchinson, 624 P.2d
at 1121, we see no evidence that such has ever been the reason in this state for similar holdings. Far
from being an irrational interpretive canon, the doctrine of strict, but reasonable, construction of
delegations of state legislative power seeks only to give effect to the practical nature of local
governmental authority in Tennessee. As such, absent some indication to the contrary, the General
Assembly must be presumed to have endowed local governments with only as much authority as it
has granted through the language of its delegation. See Linck, 80 Tenn. (12 Lea) at 505.
3
See Tenn. Const. art. VII, § 1; Tenn. Const. art. XI § 8; Tenn. Const. art. XI, § 9. With regard to municipal
governments, this Court has acknowledged that Article XI, section 8 confers upon the General A ssembly the power to
create municipal corporations and that “no constitutional restriction [exists upon the power of the Gene ral Assemb ly]
requiring the consent or the acceptance of the inhabitants of the district or incorporated area to make it a corpora tion.”
See Bradley v . Rock G ardens U til. Dist., 186 Tenn. 665, 667-68, 212 S.W.2d 657, 658 (1948). Similarly, with respect
to county gov ernments, we have noted that the first clause of Article XI, se ction 9 estab lishes “that the cou nty courts
constitute the governing body o f these corporations, that these courts have judicial and police powers, [and] that they
can exercise that portion of the sovere ignty of the state co mmunica ted to them b y the Legislature , and no m ore . . . .”
Wright v. Cunningham, 115 Tenn. 445, 466, 91 S.W. 293, 298 (1905) (citations and internal quotation marks omitted).
While the Gener al Assemb ly generally lacks th e authority to delegate its law-making powers to other entities,
the legislature may do so under two circumstances: when the Constitution itself authorizes the delegation and when the
delegati on is “‘sanctioned by immemorial usage originating anterior to the Constitution and continuing unquestioned
thereunde r.’” Kee v. Parks, 153 Tenn. 306, 313, 283 S.W. 75 1, 753 (1926) (quoting Wright, 115 T enn. at 466 , 91 S.W .
at 297-98 ). We ha ve previou sly held that the “imm emorial usa ge” excep tion to the non-delegation doctrine permits the
General Assembly (1 ) to confer p owers upo n municipa l corpora tions in their several charters and through general
statutes, and (2) in conjunction with Article XI, section 9, to confer powers upon the several counties for the management
of their local m atters. Id.
-5-
Nevertheless, although the constitutional structure of local government in Tennessee provides
a sound basis for the continued strict construction of local governmental authority, we also recognize
that several important exceptions to Dillon’s Rule have diminished its practical importance. For
example, the General Assembly itself can mitigate any unwanted effects of strict construction by
supplying direct evidence of its intent to grant broad local governmental powers when it chooses to
do so. Importantly, strict construction of local governmental power is only appropriate when
legislative intent as to the proper scope of that power is absent or otherwise ambiguous,4 and an
intent to have local powers broadly construed may be expressed either in the language granting the
particular power itself or in a separate statute applying to all grants of power generally. 5 Because
Dillon’s Rule is essentially only a canon of construction used to ascertain the intention of the General
Assembly, the Rule must necessarily yield when a contrary intent plainly appears. See Dorrier v.
Dark, 540 S.W.2d 658, 659 (Tenn. 1976) (“All rules of statutory interpretation have only one
purpose, and that is to ascertain legislative intent.”).
As an important corollary to this principle, where the General Assembly grants
comprehensive governmental power to the local authority without either enumerating the powers or
expressly limiting the scope of the authority, that “general provision [will] be liberally construed.”
4
Some state legislatures, such as the North Carolina General Assembly, have enacted statutes to abolish the
effect of Dillon’s Rule:
It is the policy of the General A ssembly that the cities of this State should have adeq uate authority to
execute the powers, duties, privileges, and immunities co nferred up on them b y law. To this end, the
provisions of this Chapter and of city charters shall be broadly construed and grants of power shall be
construed to include any additional and supplementary powers that are reasonably necessary or
expedien t to carry them in to execution and effect. . . .
N.C. Gen. Stat. § 160A-4 (1994) . Indeed, Ind iana has abo lished the effect of D illon’s Rule by stating its intent more
directly: “The rule of law that a unit has o nly: (1) powe rs expressly gra nted by statute; (2 ) powers n ecessarily or fairly
implied in or incident to powers expressly granted; and (3) powers indispensable to the declared purpose s of the unit;
is abrogated.” See Ind. Code Ann. § 36-1-3-4(a) (1997). This statute further provides that a local government has “(1)
all powers granted it by statute; and (2) all other powers necessary or d esirable in the conduct of its affairs, even though
not granted by statute.” See id. § 36-1-3-4(b). Our General Assembly has taken no similar action in this regard.
5
For example, Tennessee Code Annotated section 6-19-102 clearly shows an intention to have municipal
powers broadly construed:
The enumeration of particular powers in this charter is not exclusive of others, nor restrictive of
general words or phrases granting powers, nor shall a grant or failure to grant power in this chapter
impair a power gra nted in any oth er part of this charter, and whether powers, objects, or purposes are
expressed, conjunctive ly or disjunctive ly, they shall be co nstrued so a s to permit the c ity to exercise
freely any one (1) or more such powers as to any one (1) or more such objects for any one (1) or more
such purposes.
See also Tenn. Code Ann. §§ 7-82-306 (stating the same with respect to utility districts); 7-83-302 (stating the same with
respect to power districts); 65-23-105 (stating the same with respect to the State Rural Electrification Authority).
Admitted ly, it appears as though section 6-19-102 largely duplicates Tennessee Code Annotated section 6-19-101(33),
which provides that “[e]very mu nicipality incorp orated und er [city manag er-comm ission] charter may . . . [h]ave and
exercise all powers that now or hereafter it would be competent for this charter specifically to enumerate, as fully and
completely as though these powers were specifically enumerated.” See also Tenn. Code Ann. § 6-2-201(32 ) (same).
However, we need not remark further on the precise applications of these two statutes, other than to say that they both
properly reflect a legislative intention to have municipal powers broadly construed.
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See Linck, 80 Tenn. (12 Lea) at 508 (emphasis in original). One example of a comprehensive grant
of power may be seen in the charter government provisions for counties authorized by Article VII,
section 1 of the Tennessee Constitution and Tennessee Code Annotated sections 5-1-201 to 5-1-214.
Under a charter form of government, counties are authorized to “pass ordinances relating to purely
county affairs,” subject only to the exceptions that these ordinances “shall not be opposed to the
general laws and shall not interfere with the local affairs of any municipality within the limit of such
county.” Counties organized under charter government, therefore, are not strictly limited to those
powers otherwise granted by the General Assembly, and they possess broad authority for the
regulation of their own local affairs. Consequently, when the issue concerns the scope of a general
grant of power such as this, Dillon’s Rule cannot be applied to narrowly limit the exercise of that
power by a local authority.
Further, courts have not taken a narrow view of local governmental power when the General
Assembly has conferred general welfare authority to protect the citizens’ health, convenience, and
safety. In the same decision that recognized Dillon’s Rule as a rule of construction in this state, this
Court stated that where the legislature grants local governments broad authority to provide for the
general welfare, Dillon’s Rule cannot be used to challenge the exercise of that authority as beyond
the scope of the delegated power. See Linck, 80 Tenn. (12 Lea) at 509-10. Because the very nature
of general police powers demands that such authority receive a broad construction to accomplish its
purposes, the Linck Court held that so long as ordinances adopted under a grant of general welfare
authority are not “unreasonable or oppressive[,] they are valid, and will be maintained.” Id. at 510;
see also McKelley v. City of Murfreesboro, 162 Tenn. 304, 310, 36 S.W.2d 99, 100 (1931).6 We
continue to concur in that assessment.
Finally, an exception to Dillon’s Rule necessarily arises when the issue concerns the authority
of home rule municipalities. In 1953, the Constitution was amended to permit municipal
governments to adopt and operate under home rule authority, see Tenn. Const. art. XI, § 9, and as
this Court has previously recognized, “‘[t]he whole purpose of the Home Rule Amendment was to
vest control of local affairs in local governments.’” Burson, 816 S.W.2d at 729 (Tenn. 1991)
(quoting Farris v. Blanton, 528 S.W.2d 549, 551 (Tenn. 1975)). The effect of the home rule
amendments was to fundamentally change the relationship between the General Assembly and these
types of municipalities, because such entities now derive their power from sources other than the
prerogative of the legislature.7 Consequently, because the critical assumption underlying application
6
A mode rn examp le of a grant of general police power to municipal governments may be found in Tennessee
Code A nnotated se ction 6-2-20 1(22), wh ich provid es that
[e]very municipality inco rporated under [a m ayor-alderm anic] charter may . . . [d]efine, prohibit ,
abate, suppress, p revent and regulate all acts, p ractices, conduct, businesses, occupations, callings,
trades, uses of property and all other things whatsoe ver detrime ntal, or liable to be detrimental, to the
health, morals, com fort, safety, convenience or welfare of the inhabitants of the municipality, and
exercise general police po wers.
See also Tenn. Code Ann. § 6-19-101(2 2) (stating the same with regard to city manager-commission charter).
7
In this respect, home rule municipalities differ from counties organized und er a charter governme nt, whose
(continued ...)
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of Dillon’s Rule is no longer valid as to home rule municipalities, Dillon’s Rule simply cannot be
applied to limit any authority exercised by them.8
Subject to these important exceptions, we hold that the courts of this state should continue
to strictly, but reasonably, construe the scope of local governmental authority delegated by the
General Assembly. The legislature has relied upon the continued existence of this presumption in
delegating its power to local authorities, and it has displayed a noted ability to abrogate the Rule
when necessary to accomplish its desired objectives. While Dillon’s Rule is essentially only a
judicial rule of statutory construction, and is therefore within our power to abrogate, we acknowledge
that the Rule is generally necessary to give effect to the constitutional realities of local government
in this state.9 Consequently, we retain Dillon’s Rule, subject to its exceptions, as a rule of
construction to determine the scope of local governmental authority.
II. APPLICATION OF DILLON’S RULE IN THIS CASE
Although we have found no case in Tennessee expressly holding that Dillon’s Rule applies
in construing the authority of county boards of education, we nevertheless conclude that it is proper
to do so. Just as the Constitution grants the General Assembly plenary authority to structure and
provide for local government, Article XI, section 12 of the Constitution also grants the General
Assembly plenary and exclusive authority to “provide for the maintenance, support and eligibility
standards of a system of free public schools.” Indeed, this Court has expressly recognized that
corporate entities created for educational purposes are under the control of the Legislature, “so that
[they] may be abolished or [their] power may be enlarged or [their] responsibilities increased at any
time by that body, without the danger of encountering constitutional difficulties.” Board of Educ.
v. Shelby County, 155 Tenn. 212, 219, 292 S.W. 462, 464 (1927) (citation and internal quotation
marks omitted). Moreover, while county boards of education are not part of the general county
7
(...continued)
establishment is authorized by the Constitution, but whose authority remains subject to the prerogative of the legislature.
Compare Tenn. Const. art. XI, § 9, with Tenn. Const. art. VII, § 1. Moreover, unlike counties organized under charter
governm ent, the charters of home rule municipalities cannot be amended or repealed through legisla tive acts. See County
of Shelby v. McWherter, 936 S.W.2d 923, 934 (Tenn. C t. App. 19 96). Des pite these imp ortant differen ces, though, it
must be recognized that both types of local gov ernment are beyond application of Dillon’s Rule. T he former is so
because of the constitutional change in the relationship between the state and local governments, and the latter is so
because it exercises authority pursuant to a general powers clause.
8
Other states have also recognize d that the ado ption of hom e rule author ity effectively abrog ates Dillon’s R ule
of construction. One very recent example is found in Bigs v. City of Wich ita, 23 P.3d 855, 863 (Kan. 20 01), where in
the Kansas S upreme C ourt noted spe cifically that “[h]ome rule abolished the “Dillon Rule” under which cities were
considered creatures of the legislature and could o nly exercise that authority co nferred by sta tute.” (citations omitted).
9
Although the constitutional stru cture of gov ernment in T ennessee p rovides a so und basis for the continued
use of Dillon’s Rule, we in no way hold that the Rule is somehow constitutionally required or beyond the power of the
judiciary to abroga te. It certainly is not. Rather, we mention these prov isions only to rec ognize the c onstitutional rea lity
that, with limited exception, local governments are creatures of the state and possess no more authority than has been
conferred upon them by the Gen eral Assem bly.
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government in the sense that they derive their powers and duties from the county charter, they are
in essence part of that local government, exclusively vested with statutory authority in all matters
relating to public education. See Reed v. Rhea County, 189 Tenn. 247, 251, 225 S.W.2d 49, 50
(1949) (“It follows that a County Board of Education is a county government entity exercising a
governmental function in the operation and maintenance of the schools of the County.”).10
Consequently, if Dillon’s Rule is generally applied to determine the scope of municipal and
county governmental authority, it seems only appropriate, in the absence of any exception, to apply
this rule of construction to determine the scope of local school board authority as well. In this case,
however, we have been unable to locate any expressed intention by the General Assembly to confer
general powers upon the county boards of education or to have the expressed powers broadly
construed.11 Moreover, the General Assembly does not appear to have conferred any type of “home
rule” authority upon county boards of education or particular schools as has been done in other
states. See, e.g., Cal. Educ. Code § 47610 (West 1993); Tex. Educ. Code Ann. § 12.054 (West
1996); Tex. Educ. Code Ann. § 12.103 (West 1996), amended by 2001 Tex. Sess. Law Serv. ch.
1504, § 4 (effective Sept. 1, 2001). Therefore, we conclude that Dillon’s Rule applies to determine
whether the Board possesses the authority to arbitrate its contract dispute with SCI.
Our first inquiry, then, in applying Dillon’s Rule in this case is whether the General
Assembly has expressly conferred upon county school boards the power to arbitrate disputes arising
out of a construction contract. The authority to enter into construction contracts is granted by
Tennessee Code Annotated section 49-2-203(a)(4), which confers upon county school boards the
authority to “[p]urchase all supplies, furniture, fixtures and material of every kind through the
executive committee.” Through subsections (C)(1), (C)(2), and (D) of this provision, the General
Assembly has given the local school boards the authority to “contract for the construction of school
buildings or additions to existing buildings,” and it has emphasized that “[n]o board of education
shall be precluded from purchasing materials and employing labor for the construction of school
buildings or additions thereto.” However, no part of section 49-2-203 expressly mentions any
authority to enter into arbitration agreements, either to confer the power or to deny it.
Because the General Assembly has not expressly conferred upon county school boards the
power to arbitrate disputes arising out of construction contracts, our next inquiry is whether that
power is fairly implied from the powers expressly granted. The law implies powers from express
10
The Board disputes that Dillon’s Rule applies because it is performing the “state function” of education.
Even if this fact were relevant to the analysis, the Bo ard’s argum ent appea rs to be contrad icted by Boswe ll v. Powell ,
163 Tenn. 445, 448, 43 S.W.2d 495, 495 (1931), which held that while “a county board of education is a part of the
state’s educational system, we think the members of such board are primarily local officers. They are primarily charged
with the business administration of the county schools, prim arily endowed with county or municipal functions.”
(emphasis added). Accordingly, we will apply Dillon’s Rule in this case for the reasons given above.
11
By way of contrast, the statutes governing municipalities do confer broad powers for the benefit of the local
education system. Tennessee Code Annotated section 6-19-101(30) authorizes cities under a city manager-commission
charter to “do all other acts necessary to establish, maintain and operate a complete educational system within the city.”
See also Tenn. Code Ann. § 6-2-201(29 ) (stating the same with respect to mayor-aldermanic charters).
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grants of authority because the General Assembly can hardly be expected to specify in minute detail
the incidents of power conferred upon local governments. However, in finding the existence of an
implied power, courts must remember that “[i]mplied powers do not exist independently of the grant
of express powers[,] and the only function of an implied power is to aid in carrying into effect a
power expressly granted.” City of Flagstaff v. Associated Dairy Prods. Co., 206 P.2d 1041, 1043
(Ariz. 1953). Consequently, we examine closely the express powers of the county boards of
education to determine what authority is also conferred as fairly implied from those powers.
Upon examination of the powers given to boards of education by section 49-2-203, we
conclude that the power to arbitrate is fairly implied from the express power to contract in the first
instance. Although no case from this Court has specifically held that the power to arbitrate a contract
dispute is fairly implied from the power to contract itself, the veracity of this proposition cannot be
reasonably doubted. As the Wisconsin Supreme Court has articulated the principle of law, “‘It is
well established that a city has the power to submit to arbitration any claim asserted by or against
it, whether based on contract or tort, in the absence of a statutory prohibition. This power is based
on the right to contract and the right to maintain and defend suits.’” City of Madison v. Frank Lloyd
Wright Found., 122 N.W.2d 409, 416 (Wis. 1963) (quoting Power of a Municipal Corporation to
Submit to Arbitration, 40 A.L.R. 1370, 1372 (1926)). Wisconsin is not alone in this view, and
decisions in several states reflect similar holdings.12
This Court held long ago that “when the law gives the power and right to contract, the right
to enforce such contract necessarily and as a matter of course follows . . . .” Uhl v. Board of
Comm’rs, 74 Tenn. (6 Lea) 610, 614 (1881). The power to enforce that contract not only includes
the authority to seek full judicial determination of the respective rights and obligations of the parties,
but it must also necessarily include the ability to seek other reasonable avenues of dispute resolution,
including settlement, mediation, and arbitration. It is not for this Court to decide which is the better
course for a local government to pursue in resolving a contract dispute. Cf. Mitchell v. Garrett, 510
S.W.2d 894, 898 (Tenn. 1974) (stating that discretionary actions of an education board or
superintendent are presumed to be reasonable and fair, “unless there is clear evidence to the
contrary”). Consequently, because the legislature has not provided for a specific method to be used
in resolving contract disputes, that decision is more properly made by those entrusted with ensuring
the overall well-being of each county school system. See City of Va. Beach v. Hay, 518 S.E.2d 314,
316 (Va. 1999) (“Where the state legislature grants a local government the power to do something
but does not specifically direct the method of implementing that power, the choice made by the local
12
See, e.g., City of Hartford v. American Arbitration A ss’n, 391 A.2d 137, 140 (Conn. 1978) (“The power
of a municipa l corpora tion to subm it to arbitration is incident to its capacity to contract or make settlements or its power
to sue and be sued.”); Department of Health & Rehab. Servs. v. E.D.S. Fed. Corp., 631 So . 2d 353 , 356 (Fla . Ct. App.
1994) (“[T]he power to contract implies the power to agree to settlement of disputes under the contract by arbitration.”)
(citation omitted); Dormitory Auth. v. Span Elec. Corp., 218 N .E.2d 69 3, 696-9 8 (N.Y . 1966) (“ [T]he p ower to contract
implies the power to assent to the settlement of disputes by means of arbitration.”); see also City of Atlanta v. Brinderson
Corp., 799 F.2d 1541, 1543 (11th Cir. 1986) (“Such a power [to arbitrate] is incident to its capacity to contract or make
settlements, and its powers to sue and be sued.”).
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government as to how to implement the conferred power will be upheld as long as the method
selected is reasonable.”).
In response, and citing an unreported case from the Court of Appeals, SCI urges this Court
to reject the notion that the power to arbitrate is fairly implied from the power to contract. In
Chattanooga Area Regional Transit Authority v. Parks Construction Co.,13 the intermediate court
held that municipalities lack the implied power to arbitrate disputes, relying exclusively upon a
federal decision that reached the same conclusion by applying Virginia law. See Schlosser Co. v.
School Bd., 980 F.2d 253 (4th Cir. 1993). In Schlosser Co., the court held that a local school board
under Virginia law has no authority to arbitrate a dispute arising out of a construction contract. The
school board argued that the power to arbitrate is implied from the power to contract, and while the
court noted that this argument was not “without force,” it viewed the Virginia Public Procurement
Act as reflecting a policy to withhold from local governments the power to arbitrate disputes. See
980 F.2d at 256. We note that even were we to agree with the general rationale used by the
Schlosser Co. Court, we find no evidence of a similar policy in Tennessee to generally withhold
arbitration from local governments as an avenue of dispute settlement. Consequently, to the extent
that the Parks Construction Co. Court did not note this apparent distinction between the general
policies of our state and that of Virginia, its persuasive value as an accurate reflection of Tennessee
law is significantly weakened. Cf. Tenn. Sup. Ct. R. 4(H)(1).
In any event, given that the general rule of law is that the power to contract necessarily
includes the power to settle disputes arising under that contract, one would reasonably expect the
General Assembly to expressly withhold the ability to arbitrate disputes if that avenue of dispute
resolution were not available. We can find no express prohibition in this regard, however, and we
must therefore conclude that the power to arbitrate disputes is fairly implied from the power to
contract in the first instance. Accordingly, we hold that the Board possessed the authority to arbitrate
its construction contract dispute with SCI as a power fairly implied from its authority to contract with
that party in the first instance. Having so concluded, it is unnecessary for us to inquire further as to
whether the power to arbitrate is otherwise so essential to the declared objects and purposes of
county boards of education that it must be within the scope of their authority.
CONCLUSION
We hold that grants of power to local governments will continue to receive a strict, but
reasonable, construction under the canon of construction known as Dillon’s Rule. This rule of
construction reflects the proper nature of local governmental power in this state, and its several broad
exceptions significantly alleviate its shortcomings. We also hold that the Loudon County Board of
Education possesses the authority to arbitrate construction contract disputes because such a power
is fairly implied from the express power to enter into construction contracts. Accordingly, because
the dispute in this case has already been resolved by means of final, binding arbitration, the Loudon
13
See No. 03 A01-97 12-CH -00524 , 1999 W L 7607 4 (Tenn . Ct. App. filed at Knoxv ille, Jan. 28, 19 99).
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County School Board is entitled to summary judgment. We reverse the judgment of the Court of
Appeals and dismiss the case.
Costs of this appeal shall be assessed to the appellee, Southern Constructors, Inc.
____________________________________
WILLIAM M. BARKER, JUSTICE
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