Turner v. Nicholson Properties, Inc.

341 S.E.2d 42 (1986)

Richard TURNER v. NICHOLSON PROPERTIES, INC.

No. 8510SC790.

Court of Appeals of North Carolina.

April 1, 1986.

*44 John E. Bugg, P.A. by John E. Bugg, Durham, for claimant-appellee.

Kimzey, Smith, McMillan & Roten by James M. Kimzey, Raleigh, for respondent-appellant.

WHICHARD, Judge.

Respondent contends the court erred in denying its motion for an order permitting it to depose the arbitrator. A party to an arbitration may depose the arbitrator relative to alleged misconduct only when "an objective basis exists for a reasonable belief that misconduct has occurred...." Fashion Exhibitors v. Gunter, 291 N.C. 208, 219, 230 S.E.2d 380, 388 (1976). Respondent maintains that the arbitrator's prior association with claimant's counsel, together with what it contends is an award in "flagrant disregard for the law," establishes an objective basis for believing there was evident partiality by the arbitrator. N.C.Gen.Stat. 1-567.13(a)(2). It also maintains that the award itself constitutes an objective basis for believing that the arbitrator exceeded his powers. N.C.Gen.Stat. 1-567.13(a)(3). We disagree.

Respondent objects to the award on the grounds that, when coupled with previous payments made to claimant by respondent, it constitutes payment to claimant in excess of claimant's licensing limits for a single project, in contravention of North Carolina licensing law. N.C.Gen.Stat. Ch. 87, Art. 1; see Sample v. Morgan, 311 N.C. 717, 319 S.E.2d 607 (1984). In Sample the Supreme Court held that an underlicensed general contractor seeking contract damages may recover up to the limits of its license, but not beyond. Here, claimant and respondent entered into two contracts under which respondent was to pay claimant a total of $187,747. Claimant held a contractor's license limited to $175,000.00 on any single project. At the arbitration hearing claimant testified that the project was split into two contracts in order to stay within his $175,000.00 license.

Assuming, arguendo, that an award in contravention of established law could constitute an objective basis for a reasonable belief that an arbitrator acted with bias or exceeded his powers, respondent nevertheless cannot prevail. It has not shown the award to be in violation of North Carolina licensing law. It argues bare allegations and has failed to demonstrate that any evidence regarding the amount claimant received prior to the arbitration award was presented at the arbitration hearing. Without such evidence we cannot say that the award, when combined with previous payments to claimant, exceeded the amount claimant could receive under Sample, supra.

Further, the fact that the arbitrator had appeared as an expert witness for clients of opposing counsel's former law firm is alone insufficient to establish an objective basis for believing the arbitrator was biased. In accordance with its rules the Association determined that the arbitrator's prior association with claimant's counsel was neither current, continuing, direct nor substantial, and concluded that the arbitrator was qualified to serve impartially. Respondent had agreed to an arbitration in accordance with Association rules. Further, the factors examined by the Association are highly relevant to the question of whether a person associated with one of the parties could serve as an unbiased and impartial arbitrator. Respondent had ample opportunity at the arbitration hearing to explore the nature of the arbitrator's association with claimant's counsel. He has not, however, put forth any evidence which would indicate that the Association erred in ascertaining the nature of that association.

To allow inquiry into an arbitration award based solely on the disclosed fact that the arbitrator was indirectly and remotely associated with a party's counsel *45 would severely frustrate the goals of parties seeking arbitration. See generally, Annot., 56 A.L.R.3d 697, Sec. 6[a]. "A foundation of the arbitration process is that by mutual consent the parties have entered into an abbreviated adjudicative procedure, and to allow `fishing expeditions' to search for ways to invalidate the award would tend to negate this policy." Gunter, 291 N.C. at 217, 230 S.E.2d at 387. As stated by the court below, "[w]hile it might have been preferable had the Arbitrator not been the least bit acquainted with the parties or their counsel, the realities of today's business world as well as the [Association] rules of procedure clearly preclude the notion that this can or must be the case in every instance."

Respondent also contends the court erred in confirming the arbitration award pursuant to N.C.Gen.Stat. 1-567.12. N.C. Gen.Stat. 1-567.12 provides that "[u]pon application of a party, the court shall confirm an award, unless within the time limits hereinafter imposed grounds are urged for vacating or modifying or correcting the award...." Respondent urged the court to vacate the award under N.C.Gen.Stat. 1-567.13(a)(2) and (3). N.C.Gen.Stat. 1-567.13(a) provides:

Upon application of a party, the court shall vacate an award where: . . . . . (2) There was evident partiality by an arbitrator appointed as a neutral or corruption in any of the arbitrators or misconduct prejudicing the rights of any party; (3) The arbitrators exceeded their powers;....

An arbitration award is presumed valid and the burden of proving specific grounds for vacating an award rests on the party attacking it. See Thomas v. Howard, 51 N.C.App. 350, 353, 276 S.E.2d 743, 745 (1981); see generally, Annot., 56 A.L.R.3d 697, Sec. 5.

For reasons stated above, respondent has failed to carry his burden of proving that the arbitrator was partial or that he exceeded his powers. In addition, the legal premise by which respondent attempts to upset the arbitration award pursuant to N.C.Gen.Stat. 1-567.13(a)(3) is faulty. In essence respondent argues that an arbitrator who errs as a matter of law exceeds his powers and as a result the award can be vacated. Allowing such relief is inconsistent with the general rule that "errors of law or fact, or an erroneous decision of matters submitted to [arbitration], are insufficient to invalidate an award fairly and honestly made." Fashion Exhibitors v. Gunter, 41 N.C.App. 407, 411, 255 S.E.2d 414, 417-18 (1979). "If an arbitrator makes a mistake, either as to law or fact ..., it is the misfortune of the party.... There is no right of appeal and the court has no power to revise the decisions of `judges who are of the parties own choosing.'" Cyclone Roofing Co. v. LaFave Co., 312 N.C. 224, 236, 321 S.E.2d 872, 880 (1984), quoting Fashion Exhibitors, 41 N.C.App. at 415, 255 S.E.2d at 420; see also Gunter, 291 N.C. at 218, 230 S.E.2d at 387; In re Cohoon, 60 N.C.App. 226, 232, 298 S.E.2d 729, 732-33, disc. rev. denied, 307 N.C. 697, 301 S.E.2d 388 (1983). In addition, N.C.Gen.Stat. 1-567.13(a)(5) provides, "the fact that the relief was such that it 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."

If an arbitrator exceeded his powers merely by rendering an award based on errors of law, the general rule that such errors are insufficient to invalidate an award would be easily circumvented. See Fashion Exhibitors, 41 N.C.App. at 414, 255 S.E.2d at 419 (refusing to review plaintiff's contention that the arbitrator's decision was not supported by the evidence); Trident Technical College v. Lucas & Stubbs, Ltd., 286 S.C. 98, 106, 333 S.E.2d 781, 786 (1985), cert. denied, George A. Creed & Son, Inc. v. Trident Technical College, ___ U.S. ___, 106 S. Ct. 803, 88 L. Ed. 2d 779 (1986) (interpreting a similar provision of the Federal Arbitration Act to require that an arbitrator resolve only those issues within the scope of the arbitration *46 agreement; it did not require the court to review the merits of the arbitration decision). But cf. Cotton Mills, Inc. v. Textile Workers Union, 238 N.C. 719, 722, 79 S.E.2d 181, 183 (1953) (decided under former law). N.C.Gen.Stat. 1-567.13(a)(3) would then open a "door for coming into court in almost every case; for in nine cases out of ten some mistake either of law or fact may be suggested by the dissatisfied party. Thus ... arbitration instead of ending would tend to increase litigation." Cyclone Roofing, 312 N.C. at 236, 321 S.E.2d at 880, quoting Fashion Exhibitors, 41 N.C.App. at 415, 255 S.E.2d at 420.

For the reasons stated, we affirm the order and judgment confirming the award pursuant to N.C.Gen.Stat. 1-567.12.

Affirmed.

BECTON and PARKER, JJ., concur.