Pittman Mortg. Co., Inc. v. Edwards

• Decision Date: 19 February 1997
• Docket Number: No. 24646,24646
• Citation: 488 S.E.2d 335,327 S.C. 72
• Court: South Carolina Supreme Court
• Parties: PITTMAN MORTGAGE COMPANY, INC. and Cleonard G. Pittman, Jr., Appellants, v. Susan H. EDWARDS, Respondent. . Heard

Page 335

488 S.E.2d 335

327 S.C. 72

PITTMAN MORTGAGE COMPANY, INC. and Cleonard G. Pittman, Jr. Appellants, v. Susan H. EDWARDS, Respondent.

No. 24646.

Supreme Court of South Carolina.

Heard Feb. 19, 1997.

Decided July 21, 1997.

[327 S.C. 74] Richard E. Miley, North Augusta, for appellants.

John W. Harte, Aiken, for respondent.

BURNETT, Justice:

Appellants appeal the circuit court's denial of their motion to vacate an arbitration award. We affirm in part and vacate in part.

FACTS

Appellants (Pittman and Mortgage Co.) commenced this action in circuit court seeking a declaratory judgment ¹ to determine whether respondent was entitled to shares of the Mortgage Co. ² and asserting a claim for conversion by respondent of certain equipment Following discovery, the parties consented to binding arbitration and all issues embraced within the pleadings were submitted to arbitration. ³ The parties agreed that Georgia law governed the substantive rights of the parties in this proceeding. Although the parties did not expressly agree prior to arbitration that the terms of the Uniform Arbitration Act, S.C.Code Ann. §§ 15-48-10 to -240 (Supp.1996) (the Act), governed the proceedings, the award concludes the Act governs and neither party has contested this finding.

owned by Mortgage Co. Respondent answered and asserted counterclaims alleging, seriatim: (1) respondent was entitled to a fifty percent ownership in Mortgage Co. and damages caused by her wrongful exclusion from the corporation and her share of the profits earned by the business prior to her termination; (2) unfair trade practices; and (3) violation of the Fair Labor Standards Act.

After a hearing in accordance with the Act, the arbitrators served and filed the Award of Arbitrators. The arbitration panel found Pittman and respondent entered into an agreement to start a realty company. The parties agreed to share the profits on a fifty-fifty basis. The agreement contemplated that each party would have an ownership interest in the company; however, no percentage was agreed upon. The parties made contributions to the business. The Mortgage Co. in June 1994 represented to the State of Georgia that Pittman owned 60% of the stock and respondent owned 40% of the stock. The arbitrators found this agreement to evidence a stock distribution. On June 18, 1994, respondent's employment with Mortgage Co. was terminated. Although respondent was paid the salary due to her, she was not fully paid her share of the earned profits, as agreed.

The panel determined respondent was entitled to a 40% interest in the Mortgage Co. and awarded respondent a judgment against both Pittman and Mortgage Co. in the amount of $40,963.00, representing the value of her stock at the time she was terminated. The panel also awarded respondent $2,726.00 in earned but unpaid income against both appellants. Appellants filed a motion to vacate the award with the circuit court. The circuit court denied this motion and confirmed the award. This appeal ensued.

ISSUE

Did the arbitration panel exceed its powers under S.C.Code Ann. § 15-48-130 (Supp.1996), so that appellants are entitled to vacation of the award?

DISCUSSION

Appellants claim the arbitrators exceeded their powers under § 15-48-130(a)(3) by awarding respondent the value of her stock instead of ordering the issuance of the stock; therefore, the award should be vacated. We agree.

Arbitration is a favored method of settling disputes in South Carolina. Batten v. Howell, 300 S.C. 545, 389 S.E.2d 170 (Ct.App.1990); see also Trident Technical College v. Lucas & Stubbs, Ltd., 286 S.C. 98, 333 S.E.2d 781 (1985). When a dispute is submitted to arbitration, the arbitrators determine questions of both law and fact. S.C.Code Ann. § 15-48-180. Generally, an arbitration award is conclusive and courts will refuse to review the merits of an award. Batten, supra. An award will only be vacated under narrow, limited circumstances.

(a) Upon application of a party, the court shall vacate an award where:

(1) The award was procured by corruption, fraud or other undue means;

(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;

(4) The arbitrators refused to postpone the hearing upon sufficient cause being shown therefor or refused to hear evidence material to the controversy or otherwise so conducted the hearing, contrary to the provisions of § 15-48-50, so as to prejudice substantially the rights of a party; or

(5) There was no arbitration agreement and the issue was not adversely determined in proceedings under § 15-48-20 and the party did not participate in the arbitration hearing without raising the objection;

But 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.

S.C.Code Ann. § 15-48-130(a) (Supp.1996).

The question of whether arbitrators have exceeded their powers relates to the arbitrability of the issue they have attempted to resolve. Batten, supra. Arbitrators exceed their powers only if the issue resolved by them is not within the scope of the agreement to arbitrate. Id. Factual and legal errors by arbitrators do not constitute an abuse of their powers, and the court is not required to review the merits of the decision so long as the arbitrators do not exceed their powers. Id. A party may not attempt to relitigate the merits of the arbitrators' resolution of the arbitrable issues under the guise of questioning the arbitrators' power. Id.; Trident Technical College, supra.

Arbitrators need not specify their reasoning or the basis of the award so long as the factual inferences and legal conclusions supporting the award are "barely colorable." Batten, supra. If the grounds for the award can be inferred from the facts, the award should be confirmed. Id.

The arbitration panel exceeded its powers by awarding respondent the value of her shareholder's equity. Because the pleadings represented the arbitration agreement in this case, absent an amendment of the pleadings or implied consent to consider relief not requested in the pleadings, the panel could only consider the issues contained within the pleadings and could only award the parties the relief they requested within the pleadings. See 61 Am.Jur.2d, Pleading § 383 (1981); see also Rule 15(b), SCRCP; Parker Peanut Co. v. Felder, 207 S.C. 63, 34 S.E.2d 488 (1945); Ball v. Canadian American Express Co., 314 S.C. 272, 442 S.E.2d 620 (Ct.App.1994) (a motion to amend pleadings to conform to proof may be made even after judgment and should be liberally allowed absent prejudice to the opposing party). Respondent did not request either her shareholder's equity or rescission of the contract for issuance of stock and the return of her contribution to the corporation. Instead, she only sought the issuance of stock and her share of the income owed to her from the business. ⁴ Further, respondent did not attempt to amend her pleading to request the value of the stock instead of the issuance of the stock, and there is no evidence to support a finding that appellants impliedly consented at the hearing to allow the panel to consider this type of relief. Therefore, the panel was limited to deciding whether she was entitled to stock in the corporation and to order issuance of this stock. By awarding respondent the value of her stock, the panel exceeded its authority.

Appellants further claim the arbitration panel exceeded its authority by holding...