Henderson v. MILLNER DEVELOPMENTS, LLC.

• Decision Date: 17 February 2003
• Docket Number: No. A02A2101.,A02A2101.
• Citation: 259 Ga. App. 709,578 S.E.2d 289
• Parties: HENDERSON v. MILLNER DEVELOPMENTS, LLC.
• Court: Georgia Court of Appeals

578 S.E.2d 289

259 Ga. App. 709

HENDERSON v. MILLNER DEVELOPMENTS, LLC.

No. A02A2101.

Court of Appeals of Georgia.

February 17, 2003.

Smith, Currie & Hancock, Kent P. Smith, James W. Copeland, Atlanta, for appellant.

Shapiro, Fussell, Wedge, Smotherman, Martin & Price, Herman L. Fussell, for appellee.

ADAMS, Judge.

Alan L. Henderson appeals from the trial court's order confirming an arbitration award and denying his petition to vacate and modify that award. We affirm.

The arbitration was conducted pursuant to an arbitration provision contained in the parties' "New Construction Purchase and Sale Agreement" dated March 6, 1999. Henderson was the purchaser of a new home under the agreement, and Millner Developments, LLC was the seller. During construction of the house, Henderson asked Millner to make certain changes to the design. Under the terms of the parties' agreement Millner had the right to refuse to make any requested changes and the right to receive payment in advance for the work necessitated by any changes the company agreed to make. Millner chose to proceed with Henderson's requested changes even though the parties had not reached a prior agreement on the cost of those changes.

When the parties later could not agree on an appropriate price, Millner sent Henderson a letter stating (1) that it was unilaterally extending the closing date from July 31, 1999, to January 15, 2000, due to the requested changes, (2) that it would not perform any changes on which it had not already begun work, and (3) that it would demand arbitration to resolve the parties' dispute as to the price of the changes. In later correspondence, however, Millner demanded that Henderson pay the cost of his proposed changes within five days. Millner indicated that if that payment was not made, it would consider Henderson in material breach of the agreement and would seek another buyer for the property.

In response, Henderson filed a demand for arbitration, seeking either specific performance or the return of his $250,000 earnest money deposit, along with attorney fees and other expenses of arbitration. Millner counterclaimed in the arbitration, seeking actual damages for costs incurred as a result of Henderson's failure to pay for his requested design changes. Millner also sought to recover liquidated damages under the agreement in the amount of Henderson's $250,000 earnest money deposit.

After the matter proceeded to arbitration, the arbitrator determined that Millner had breached two provisions of the parties' agreement. First, he found that Millner violated the arbitration clause by declaring Henderson to be in material breach of the agreement and by finding a new buyer, without first submitting the matter to arbitration. Second, he found that Millner also violated a separate provision that allowed the corporation to unilaterally extend the closing date for a period "not to exceed thirty calendar days."¹ Thus, the arbitrator concluded that Millner was not entitled to keep the $250,000 earnest money as liquidated damages. The arbitrator then awarded actual damages to Millner in the amount of $196,064.43 for the reasonable value of the change orders authorized by Henderson and begun by Millner, including a reasonable 15 percent contractor profit.

The Georgia Arbitration Code, OCGA § 9-9-1 et seq., provides the exclusive means by which an arbitration agreement will be enforced. Greene v. Hundley, 266 Ga. 592, 595-596(3), 468 S.E.2d 350 (1996). And the Code states that an arbitration award must be confirmed unless it is vacated or modified as provided in the Code. OCGA § 9-9-12. Therefore, "[u]nless prejudice is shown and one of the ... statutory grounds for vacating or modifying an award is established, the ... Code requires a trial court to confirm an award...." Sweatt v. Intl. Dev. Corp., 242 Ga.App. 753, 754-755(1), 531 S.E.2d 192 (2000). See also OCGA §§ 9-9-11; 9-9-13.

Henderson argues that the arbitrator lacked the authority to award Millner actual damages because the contract's liquidated damages clause provided Millner's sole remedy. He also asserts that the trial court erred in failing to modify the award because the issue of actual damages had not been submitted to the arbitrator in light of the liquidated damages provision.

1. The overstepping of an arbitrator's authority is one of the statutory grounds for vacatur. OCGA § 9-9-13(b)(3). "`Overstepping' like the other grounds for vacating arbitration awards is very limited in scope. `Overstepping' has been described as `addressing issues not properly before the arbitrator.'" (Citations omitted.) Haddon v. Shaheen & Co., 231 Ga.App. 596, 598(1)(b), 499 S.E.2d 693 (1998). Thus, this ground does not apply where an issue is properly raised before the arbitrator. Progressive Data Systems v. Jefferson Randolph Corp., 275 Ga. 420, 421, 568 S.E.2d 474 (2002).

The limits of an arbitrator's authority are defined by the parties' arbitration agreement. See Banderas v. Doman, 224 Ga.App. 198, 199(1), 480 S.E.2d 252 (1997). Here, the arbitration clause provides that "Buyer and Seller agree that any unresolved claim arising out of or relating to this contract, or the breach thereof, ... shall be settled by arbitration." The arbitrator in this case, therefore, had broad authority to consider any disputes arising out of the contract. Nonetheless, the arbitrator was bound by the terms of the parties' agreement in crafting his award:

An arbitration award should be consistent with terms of the underlying agreement and reflect the "essence" of that contract; it must not demonstrate an "imperfect execution" of the arbitrator's authority. Although an arbitrator has some latitude in fashioning remedies, he is not free to ignore the express terms of a valid and enforceable contract.

(Citations omitted.) Sweatt, 242 Ga.App. at 755(1), 531 S.E.2d 192.

The liquidated damages clause in this case provides that Millner may retain the $250,000 earnest money deposit in the event of Henderson's breach, but only if Millner has performed all of its own obligations under the contract:

Seller and Buyer

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