L.D. Miller Constr., Inc. v. Kirschenbaum, 34,253

• Decision Date: 01 December 2016
• Docket Number: NO. 34,253,34,253
• Citation: 392 P.3d 194
• Parties: L.D. MILLER CONSTRUCTION, INC., Plaintiff-Appellee, v. Stephen KIRSCHENBAUM and Barbro Kirschenbaum, Defendants-Appellants.
• Court: Court of Appeals of New Mexico

392 P.3d 194

L.D. MILLER CONSTRUCTION, INC., Plaintiff-Appellee,

v.Stephen KIRSCHENBAUM and Barbro Kirschenbaum, Defendants-Appellants.

NO. 34,253

Court of Appeals of New Mexico.

Filing Date: December 1, 2016

Thomas E. Chism, Albuquerque, NM for Appellee.

Coberly & Martinez, LLLP, Todd A. Coberly, Santa Fe, NM for Appellants.

OPINION

ZAMORA, Judge

{1} In this case, we are presented with the question—can an arbitrator designated by the parties to conduct an arbitration be disqualified by the American Arbitration Association (AAA) for cause if the parties do not also explicitly agree in writing that the arbitrator shall function as a non-neutral arbitrator? The district court ruled that he could be disqualified. We affirm.

I. PROCEDURAL AND FACTUAL BACKGROUND

{2} In the fall of 2011, Stephen and Barbro Kirschenbaum hired L.D. Miller Construction Company (Miller) to do concrete and framing work for a garage and run-in shed on the Kirschenbaums' property in Santa Fe, New Mexico. Miller contends the construction project was finished in late fall. However, the Kirschenbaums were apparently unsatisfied with the work and hired other contractors to correct Miller's work.

{3} On December 2, 2011, Miller presented the Kirschenbaums with an invoice for $ 28,576.46, for its work on their property. The Kirschenbaums paid Miller $ 15,000 toward the balance owed, leaving an outstanding balance of $ 13,576.46, which the Kirschenbaums refused to pay. There is an allegation that the Kirschenbaums also kept possession of a table saw, tools, and other building materials belonging to Miller valued at approximately $ 800.

{4} On December 20, 2011, Miller and the Kirschenbaums entered into a written Arbitration Agreement. The full text of the Agreement is:

Contractor and Owner agree to binding arbitration under AAA (American Arbitration Association) for any dispute (claim, work, material, etc.) between Contractor and Owner at the following location:

Hacienda del Cerezo

100 Camino del Cerezo

Santa Fe, New Mexico 87506

(And including or for: Hacienda del Cerezo, Ltd., Stephen/Barbro Kirschenbaum)

Contractor and Owner agree that the designated arbitrator shall be Roger Lengyel [ (Lengyel) ].

{5} In April 2013 Miller filed a complaint in the First Judicial District Court against the Kirschenbaums for debt and money due concerning its work on the Kirschenbaums' property. The Kirschenbaums were served with a summons by certified mail. Though the Kirschenbaums responded informally to Miller's counsel, they did not enter a timely appearance or file a timely answer or other responsive pleading with the district court. In June 2013 Miller filed a motion for default judgment. No response to the motion was filed by the Kirschenbaums and as a result, the district court issued an order granting Miller's motion for default judgment, finding the Kirschenbaums liable for $ 16,153.98.

{6} Represented by counsel, the Kirschenbaums promptly filed an answer to Miller's original complaint alleging as an affirmative defense that Miller's court action was barred by the Arbitration Agreement. The Kirschenbaums also moved to compel arbitration and to vacate the default judgment. In November 2013, the court issued an order granting the Kirschenbaums' motion to vacate the default judgment and granting their motion to compel arbitration. In particular, the order stated:

[T]he [o]rder of [d]efault [j]udgment entered on July 2, 2013[,] is vacated, these proceedings are stayed, and that the parties are compelled to arbitrate this matter pursuant to the terms of the December [20,] 2011 [, A]rbitration [A]greement, requiring binding arbitration under the [AAA] with ... Lengyel as the designated arbitrator.

{7} Apparently the arbitration did not progress smoothly. On January 22, 2014, Miller sent a letter to AAA requesting disqualification and removal of Lengyel as arbitrator "pursuant to [AAA] Rule [ ]20" for refusing to perform his duties pursuant to required procedures, as well as for lack of independence, i.e., non-neutrality, which was not part of the parties' agreement. In particular, Miller alleged that "ground rules" set by Lengyel to govern the arbitration were mere "recitals" of the Kirschenbaums' desire to delay the arbitration process, exclude AAA intervention, and limit communication between the parties and Lengyel. Miller also asserted that it had become apparent that Lengyel was having ex parte communications with the Kirschenbaums.

{8} In response, the Kirschenbaums sent a letter to the AAA contending that Lengyel could not be disqualified pursuant to the district court's order compelling arbitration and designation of Lengyel as the parties' arbitrator. In addition, the Kirschenbaums argued that the parties intended to appoint a non-neutral arbitrator not subject to AAA Rule 20.

{9} AAA responded to Miller's complaint stating: "[i]n light of the [c]ourt [o]rder requiring binding arbitration under the [AAA] with ... Lengyel as the designated arbitrator, [Miller] may seek clarification from the [c]ourt as to AAA's authority to address this request for removal." Miller filed a motion with the district court seeking clarification of its order, arguing that all AAA rules had been incorporated into the Arbitration Agreement. At the hearing on Miller's motion to clarify, the court observed:

When I look at the contract that the parties entered into for the purpose of arbitration, I note that Mr. [Lengyel] is designated but not required [to serve as arbitrator]. What is required is that the parties arbitrate under the rules of AAA....

If it were the other way around then potentially the AAA rules would have no meaning. If the arbitrator could as a designated arbitrator ... ignore or avoid those rules at his discretion then that would put at issue the AAA rules and their requirement of the AAA rules under the parties' agreement.

{10} The court issued an order on June 4, 2014,¹ concluding that "it was the parties' intent that the arbitration between them would be subject to all the rules and procedures of the [AAA], including the rule regarding disqualification of an arbitrator[,]" and ordered that AAA "has the authority to disqualify designated arbitrator ... Lengyel, if the AAA determines that such a disqualification is warranted under its rules and procedures."

{11} On July 17, 2014, the Kirschenbaums moved, pro se, for reconsideration of the June 4 order. In pertinent part, the Kirschenbaums argued, "[n]ot disclosed by prior counsel was that both parties specifically discussed and agreed to use ... Lengyel, an architect very well known to them both—which was paramount to anything else. Using the procedures of the AAA was merely an adjunct to their desire to have Mr. Lengyel decide any dispute." The Kirschenbaums requested an order finding the AAA rule providing for the removal and substitution of an arbitrator did not apply to the parties' arbitration and order the parties to arbitrate with Lengyel serving as arbitrator. In September 2014 AAA decided to remove Lengyel from the parties' case.

{12} Two months later, in November 2014, the court denied the Kirschenbaums' motion for reconsideration. The Kirschenbaums filed their notice of appeal on November 14, 2014.

II. DISCUSSION

A. The Kirschenbaums' Appeal of the District Court's Order Denying Their Motion for Reconsideration Was Timely Filed

{13} The Kirschenbaums themselves note a potential problem with the timeliness of their appeal and the related issue of the scope of our review. The Kirschenbaums' motion for reconsideration was filed more than thirty days after the order it addressed. As such, the motion was filed after the deadline for filing an appeal to this Court from the district court's order. See Rule 12–201(A)(2) NMRA. Our case law is clear that Rule 1–060(B) NMRA motions brought "to correct an error of law by the district court must be filed before the expiration of the time for appeal." Deerman v. Bd. of Cty. Commr's , 1993–NMCA–123, ¶ 16, 116 N.M. 501, 864 P.2d 317 ; see Resolution Tr. Corp. v. Ferri , 1995–NMSC–055, ¶ 9, 120 N.M. 320, 901 P.2d 738. Deerman held that district courts lack authority to grant relief pursuant to a "belated" Rule 1–060(B) motion, absent extraordinary circumstances. Deerman , 1993–NMCA–123, ¶¶ 21, 23–24, 116 N.M. 501, 864 P.2d 317. Given the holding of Deerman , Miller argues that the Kirschenbaums' notice of appeal is too late to capture the order entered in June 2014 and the appeal should thus be dismissed as untimely. We disagree.

{14} As we noted in Wells Fargo Bank, N.A. v. City of Gallup , 2011–NMCA–106, ¶ 8, 150 N.M. 706, 265 P.3d 1279, the rule stated in Deerman is not absolute. In Wells Fargo Bank , we made clear that the rule in Deerman should be applied "only when the [Rule 1–060(B)(1) ] motion is used as a substitute for a direct appeal or as a means of circumventing the time period allowed for a direct appeal." Wells Fargo Bank , 2011–NMCA–106, ¶ 8, 150 N.M. 706, 265 P.3d 1279.

{15} The timeliness of the Kirschenbaums' motion for reconsideration was not litigated below. We are left with the real-world circumstance that the district court considered the motion and denied it on its merits. Part of the Kirschenbaums' motion for reconsideration detailed the breakdown of their relationship with the attorney who represented them at the hearing on Miller's motion, and their unsuccessful efforts to hire new counsel before they filed their pro se motion. Given their unrebutted circumstance, the district court would have been within its discretion to determine that the late motion was not simply an attempt to evade the time for appeal. Applying our presumption in the correctness of district court actions, we will not engage an independent assessment of the Kirschenbaums' motives. Cf. Farmers, Inc. v. Dal Mach. & Fabricating, Inc. , 1990–NMSC–100, ¶ 8, 111 N.M. 6, 800 P.2d 1063 ("The presumption upon review favors the correctness of the [district] court's actions."). This approach also...