DEMARIA BUILDING CO INC V WORD OF FAITH INTL CHRISTIAN CENTER
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STATE OF MICHIGAN
COURT OF APPEALS
DEMARIA BUILDING COMPANY, INC.,
UNPUBLISHED
July 14, 2005
Plaintiff/CounterdefendantAppellee,
v
No. 252892
Oakland Circuit Court
LC No. 1999-012237-CK
WORD OF FAITH INTERNATIONAL
CHRISTIAN CENTER,
Defendant/CounterplaintiffAppellant,
and
EDDIE PICKETT, SHREM/LUTTERMOSER
ASSOCIATES, INC., MICHIGAN NATIONAL
BANK, and EFFICIENT DESIGN, INC.,
Defendants.
Before: Neff, P.J., Smolenski and Talbot, JJ.
PER CURIAM.
Defendant Word of Faith International Christian Center hired plaintiff as the general
contractor for a project involving the construction of a sanctuary building at defendant’s property
in Southfield, but defendant terminated plaintiff’s services before the construction was
completed. Plaintiff filed this lawsuit for breach of contract, maintaining that it was terminated
without cause. The parties stipulated to submit their dispute to binding arbitration. The
arbitrator found that defendant breached the contract for convenience, rather than for cause, and
awarded plaintiff total damages of $2,082,748.37. The trial court subsequently denied
defendant’s motion to vacate or modify the arbitration award and entered a judgment in favor of
plaintiff consistent with the award. Defendant now appeals as of right. We affirm in part and
reverse in part.
Defendant first argues that, because plaintiff failed to meet the substantial completion
date set forth in the construction contract, the arbitrator was required to find as a matter of law
that defendant terminated plaintiff for cause, rather than convenience. We disagree.
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A trial court’s decision to enforce, vacate, or modify an arbitration award is reviewed de
novo. Tokar v Albery, 258 Mich App 350, 352; 671 NW2d 139 (2003).
Defendant correctly observes that the “interpretation of unambiguous and unequivocal
contracts is a question of law.” Massachusetts Indemnity & Life Ins Co v Thomas, 206 Mich
App 265, 268; 520 NW2d 708 (1994). Where contractual language is unclear or susceptible to
multiple meanings, however, interpretation is a question of fact. Port Huron Ed Ass’n v Port
Huron Area School Dist, 452 Mich 309, 323; 550 NW2d 228 (1996).
In this case, the parties’ breach of contract dispute was submitted to binding arbitration.
Judicial review of an arbitration award is limited.1 A court may not review an arbitrator’s factual
findings or decision on the merits. Byron Center Public Schools Bd of Ed v Kent Co Ed Ass’n,
186 Mich App 29, 31; 463 NW2d 112 (1990); Donegan v Michigan Mutual Ins Co, 151 Mich
App 540, 549; 391 NW2d 403 (1986). A court may set aside an arbitration award only if it
clearly appears on the face of the award or in the reasons for the decision that the arbitrator made
an error of law and that, but for that error, a substantially different award must be made. Gordon
Sel-Way, Inc v Spence Bros, Inc, 438 Mich 488, 497; 475 NW2d 704 (1991); DAIIE v Gavin,
416 Mich 407, 428-429, 443; 331 NW2d 418 (1982); Dohanyos v Detrex Corp (After Remand),
217 Mich App 171, 176; 550 NW2d 608 (1996). In an arbitration arising from a contract
dispute, the arbitrator is bound to render an award that comports with the terms of the parties’
contract. Gordon Sel-Way, Inc, supra at 496. The role of the court is to examine whether the
arbitrator has rendered an award that facially comports with the terms of the contract. Id.; see
also Saveski v Tiseo Architects, Inc, 261 Mich App 553, 555-556; 682 NW2d 542 (2004). But a
court may not engage in contract interpretation, which is a question only for the arbitrator,
especially when it involves the application of questions of fact. Konal v Forlini, 235 Mich App
69, 74; 596 NW2d 630 (1999).
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MCR 3.602(J)(1) identifies the circumstances in which a court can vacate an arbitration award:
On application of a party, the court shall vacate an award if:
(a) the award was procured by corruption, fraud, or other undue means;
(b) there was evident partiality by an arbitrator appointed as a neutral,
corruption of an arbitrator, or misconduct prejudicing a party’s rights;
(c) the arbitrator exceeded his or her powers; or
(d) the arbitrator refused to postpone the hearing on a showing of
sufficient cause, refused to hear evidence material to the controversy, or otherwise
conducted the hearing to prejudice substantially a party’s rights.
The fact that the relief could not or would not be granted by a court of law or
equity is not ground for vacating or refusing to confirm the award.
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In this case, defendant has not shown that the arbitrator erred by considering evidence
that the parties may have extended the contract completion date, notwithstanding the absence of
a written time extension request by plaintiff. See Belen v Allstate Ins Co, 173 Mich App 641,
645-646; 434 NW2d 203 (1988). Defendant has also failed to show that the arbitrator made a
clear error of law by apparently determining that defendant’s actions or other considerations
altered the substantial completion date. See Quality Products & Concepts Co v Nagel Precision,
Inc, 469 Mich 362, 364; 666 NW2d 251 (2003) (parties to a contract are free to mutually waive
or modify their contract); see also Phoenix Contractors, Inc v General Motors Corp, 135 Mich
App 787, 793-794; 355 NW2d 673 (1984) and Verran v Blacklock, 60 Mich App 763, 768; 231
NW2d 544 (1975) (interference by the opposing party can excuse a failure to comply with
contract time provisions).
Furthermore, it is not apparent that a substantially different award would be required but
for the alleged error concerning the project completion date. The parties’ agreement does not
specify the allowable damages for a failure to complete the project in the time indicated, nor
does it list this contingency among the stated reasons justifying termination for cause.
Additionally, contrary to what defendant argues, the arbitrator’s decision was not based solely, or
principally, on the arbitrator’s reliance on a modified project completion date. Rather, the
arbitrator found that defendant repeatedly violated the terms of the contract though the use of
unapproved agents, its intentional failure to provide critical information about the project, and
attempts to undermine plaintiff’s relationships with subcontractors.
The question of a substantial or material breach based on the arbitrator’s additional
factual determinations was a question of fact to be decided by the arbitrator. Contrary to
defendant’s position, where reasonable minds could differ about the conclusions to be drawn
from the evidence, the question whether a party committed a material or substantial breach is one
of fact. See Glittenberg v Doughboy Recreational Industries (On Rehearing), 441 Mich 379,
398-399; 491 NW2d 208 (1992); Omnicom of Michigan v Giannetti Investment Co, 221 Mich
App 341, 348; 561 NW2d 138 (1997); Michaels v Amway Corp, 206 Mich App 644, 651; 522
NW2d 703 (1994). Thus, this question is outside the proper scope of judicial review from an
arbitration award. Saveski, supra at 555-556; Byron, supra at 31. Defendant has not
demonstrated that the arbitration award would have been substantially different but for the
arbitrator’s decision regarding the completion date. Therefore, appellate relief is not warranted
with respect to this issue.
Defendant also argues that the arbitrator erred by failing to find that defendant properly
terminated plaintiff for cause due to plaintiff’s use of substandard materials and workmanship.
Because this determination requires review of the arbitrator’s factual findings, which may not be
disturbed on appeal, it provides no basis for appellate relief. Saveski, supra at 555-556; Byron,
supra at 31.
Defendant next argues that the arbitration award should be modified to reflect that
plaintiff, rather than defendant, was required to pay for building permit fees. We recognize that
§ 3.7.1 of the parties’ contract supports defendant’s position. But parties to a contract are free to
mutually waive or modify contract provisions. Quality Products & Concepts Co, supra at 364.
Here, Burlee Jackson, defendant’s secretary/treasurer, testified that it was his understanding that
defendant was responsible for paying the permit fees because he was told this by the project
architect, Robert Luttermoser. As the arbitrator noted, Luttermoser was authorized to advise and
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consult with defendant and was further authorized to act on its behalf under § 4.2.1 of the
contract. Kent Broughman, plaintiff’s estimator, stated that he did not include permit costs in the
preliminary estimate he prepared. He further testified that, in his experience, owners regularly
paid permit costs.
Given this evidence, the arbitrator could have found that, despite the language of § 3.7.1,
the parties agreed to modify the contract so that defendant would be responsible for the permit
fees. Under the circumstances, defendant has not shown that the arbitrator made a clear error of
law that may be reviewed on appeal, as opposed to an “unwarranted” factual finding, which is
not subject to appellate relief. See Gavin, supra at 428-429; Saveski, supra at 555, 557.
Therefore, we decline to find that the arbitrator exceeded his authority by not crediting defendant
with payment of the permit fees.
Defendant lastly argues that the arbitrator erroneously awarded plaintiff damages of
$154,546, representing fees that plaintiff had previously waived in connection with the
acceptance of change order #2. We agree.
We acknowledge that an arbitrator generally has broad powers to fashion remedies, even
remedies that are not generally available in a court of law. See MCL 600.5025; MCR
3.602(J)(1). In this instance, however, the arbitrator’s award of the waived fees is contrary to
both Michigan law and the parties’ agreement. Damages available for breach of a commercial
contract are generally limited to the monetary value of the contract had the breaching party fully
performed under it. Corl v Huron Castings, Inc, 450 Mich 620, 625, n 7; 544 NW2d 278 (1996),
citing Kewin v Massachusetts Mut Life Ins Co, 409 Mich 401, 414-415; 295 NW2d 50 (1980).
Here, under the plain language of the parties’ contract, as amended by change order #2, had the
parties fully performed, plaintiff would not have been entitled to recover the $154,546 in fees
associated with change order #2. The arbitrator’s “waived fee” award is facially contrary to this
contract language. Had the arbitrator referred to this award as representing a form of exemplary
damages not ordinarily awarded in a contract case, it might be supportable under MCL 600.5025
and MCR 3.602(J)(1), but the arbitrator specifically referred to this amount as an award for
“waived fees.” It is clear, therefore, that the arbitrator effectively added this amount to plaintiff’s
damages after plaintiff expressly agreed to waive it. In this circumstance, it was improper for the
arbitrator to fashion an award that directly conflicted with the parties’ express contract, as
amended. Gordon Sel-Way, Inc, supra at 496-497; Gavin, supra at 428-429; Saveski, supra at
555-556.
Accordingly, we vacate the portion of the arbitrator’s decision awarding plaintiff fees that
were expressly waived by the acceptance of change order #2. The arbitration award is affirmed
in all other respects.
Affirmed in part, reversed and vacated in part, and remanded for further proceedings not
inconsistent with this opinion. We do not retain jurisdiction.
/s/ Janet T. Neff
/s/ Michael R. Smolenski
/s/ Michael J. Talbot
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