Neighbors Constr. Co. v. Woodland Park At Soldier Creek, LLC

Citation284 P.3d 1057
Decision Date03 August 2012
Docket NumberNo. 106,536.,106,536.
PartiesNEIGHBORS CONSTRUCTION CO., INC., Appellee, v. WOODLAND PARK AT SOLDIER CREEK, LLC, et al., Appellant.
CourtCourt of Appeals of Kansas

OPINION TEXT STARTS HERE

Syllabus by the Court

1. An appellate court's standard of review of an arbitration award is highly deferential. The court must affirm an award if the arbitrator acted within the scope of his or her authority. As long as the arbitrator's errors are not in bad faith or so gross as to amount to affirmative misconduct, the appellate court is bound by the arbitrator's findings of fact and conclusions of law.

2. The Kansas Uniform Arbitration Act, which is set forth at K.S.A. 5–401 et seq., allows a party to appeal from an order confirming or vacating an arbitration award. K.S.A. 5–418(a). A trial court must presume an arbitration award is valid unless there is proof of one of the specific grounds for vacating the award set forth in K.S.A. 5–412(a).

3. K.S.A. 5–412(a) sets forth five circumstances in which an arbitration award must be vacated: (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 K.S.A. 5–405, 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 K.S.A. 5–402 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.

4. In building and construction contracts, the parties frequently agree that the finding of an architect or other designated person in respect to quantity and character of work done shall be conclusive, in which case it can only be impeached upon the ground of fraud, gross mistake, bad faith, undue influence, or some other good cause. But the decision on the matters entrusted to the architect or other designated person is deemed final and conclusive only when it appears from express terms of the contract or from plain language therein that the parties intended the architect or other designated person's decision have that effect.

5. Generally, where the parties have agreed to be bound to a submission to arbitration, errors of law and fact, or an erroneous decision of matters submitted to the judgment of the arbitrators, are insufficient to invalidate an award fairly made. Nothing in the award relating to the merits of the controversy, even though incorrectly decided, is grounds for setting aside the award in the absence of fraud, misconduct, or other valid objections. Further, where an arbitration award made under the Kansas Uniform Arbitration Act is attacked by one of the parties, it is not the function of the court to hear the case de novo and consider the evidence presented to the arbitrators. Ordinarily, an arbitrator's award will not be subject to judicial revision unless such award is tainted or based on an irrational interpretation of the contract.

6. Kansas courts must exercise immense caution when asked to vacate an arbitration award. Moreover, because a focal purpose of arbitration agreements is to avoid the expense and delay of court proceedings, judicial review of an arbitration award is very narrowly limited. The party seeking that an arbitration award be vacated bears the burden of proving a basis for setting aside the award.

7. When there is evidence that the parties' contract contained a broad arbitration clause, this broad arbitration clause grants arbitrators wide discretion in ruling on the issues submitted for arbitration. In other words, evidence of a broad arbitration clause in the parties' contract can support the position that the issues addressed by the arbitrators were within the scope of their authority.

8. Kansas courts have recognized nonstatutory grounds for vacating an arbitration award when an applicant demonstrates the arbitrator's award is in manifest disregard of the law. Manifest disregard of the law occurs when the arbitrator knew of a governing legal principle yet refused to apply it. But this exception does not apply when an arbitrator simply misinterprets the law.

9. Kansas courts recognize that an arbitration award may be vacated if it is tainted or based on an irrational interpretation of the contract. However, an arbitration award may be found irrational only under extraordinary circumstances.

Stephen P. Weir, of Stephen P. Weir, P.A., of Topeka, for appellant.

Thomas J. Fritzlen, Jr., of Martin, Leigh, Laws & Fritzlen, of Kansas City, Missouri, for appellee.

Before GREEN, P.J., MALONE and McANANY, JJ.

GREEN, P.J.

Woodland Park at Soldier Creek, LLC (Woodland Park) appeals from the trial court's decision: (1) that denied Woodland Park's application to vacate or modify and correct arbitration; and (2) that confirmed an arbitration award in favor of Neighbors Construction Co., Inc. (Neighbors Construction) in the amount of $1,277,701.31. On appeal, Woodland Park makes the following arguments: (1) that the trial court misapplied the standard of review when it confirmed the arbitration award in favor of Neighbors Construction; (2) that the trial court erred when it confirmed the arbitration award because the arbitrator exceeded his statutory power; (3) that the trial court erred when it confirmed Neighbors Construction's attorney-fee award because the arbitrator relied on the wrong statute; and (4) that the trial court erred when it denied Woodland Park's motion to add the arbitration transcript to the record. We disagree. Accordingly, we affirm.

On May 17, 2007, Neighbors Construction entered into a standard form construction agreement with Woodland Park. The contract agreement was amended and signed by the parties on May 21, 2007. Under the agreement, Neighbors Construction was to serve as the general contractor for the Woodland Park at Soldier Creek multi-family housing project (project) located in Topeka, Kansas. Woodland Park was the owner of the project. The contract required Neighbors Construction to “fully execute the Work described in the Contract Documents, except to the extent specifically indicated in the Contract Documents to be the responsibility of others.”

The contract, in part, contained the following terms: (1) that Neighbors Construction would receive $16,611,466 in compensation for performing the contract; (2) that Neighbors Construction would receive periodic progress payments as provided in the contract; and (3) that Neighbors Construction should achieve “substantial completion” of the entire work no later than 608 days from the date of commencement. The contract also incorporated by reference the American Institute of Architects (AIA) Document A201, General Conditions to the contract for construction (1997 ed.) (General Conditions). Section 4.4 of the General Conditions, entitled “resolution of claims and disputes,” contained several numbered paragraphs that explained the process the parties were to use if a dispute arose. Section 4.4.1 stated that claims

“shall be referred initially to the Architect for decision. An initial decision by the Architect shall be required as a condition precedent to mediation, arbitration, or litigation ... unless 30 days have passed after the Claim has been referred to the Architect with no decision having been rendered by the Architect.”

Section 4.6 contained the arbitration procedures. Section 4.6.1 read as follows:

“Any Claim arising out of or related to the Contract, except Claims relating to aesthetic effect and except those waived ... shall, after decision by the Architect or 30 days after submission of the Claim to the Architect, be subject to arbitration. Prior to arbitration, the parties shall endeavor to resolve disputes by mediation in accordance with the provisions of Section 4.5

After the execution of the contract, Neighbors Construction began to perform and Woodland Park timely paid Neighbors Construction the first 19 progress payments. In Application 20R, Neighbors Construction requested a progress payment of $845,273.92. Woodland Park short-paid Application 20R by $200,000. On February 11, 2009, Neighbors Construction provided Woodland Park with notice that it intended to stop work on the project until it received payment. Neighbors Construction also submitted Application 21 to Woodland Park in the amount of $626,801.86, which included the unpaid balance of $200,000 from Application 20R. Woodland Park disputed Neighbors Construction's progress payment request for Application 21, disputed the $200,000 balance owed on Application 20R, and submitted a claim to the architect asking him to review all previous pay applications.

On March 25, 2009, the architect rescinded its certification of the $200,000 owed to Neighbors Construction under Application 20R. Neighbors Construction and its subcontractors then returned to the project and continued to work. At that time, however, Neighbors Construction filed a demand for arbitration. Before the arbitration hearing, the architect certified Application 21 for payment, but he did not include the $200,000 from Application 20R in the certification. As of July 14, 2009, the architect had determined that Woodland Park owed Neighbors Construction $622,102.84. On July 31, 2009, Neighbors Construction told Woodland Park that it would stop work until the balance was paid. When Woodland Park failed to pay the $622,102.84, Neighbors Construction gave Woodland Park a notice of termination, as required under the contract, and...

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6 cases
  • Harder v. Foster, s. 116,117, 116,543.
    • United States
    • Court of Appeals of Kansas
    • July 28, 2017
    ...fees are not considered consequential damages. See Neighbors Construction Co. v. Woodland Park at Soldier Creek , 48 Kan. App. 2d 33, 56, 284 P.3d 1057 (2012). This principle is that damages for breach of contract "are limited to those damages which may fairly be considered as arising, in t......
  • Tonn Family Ltd. Agric. P'ship v. W. Agric. Ins. Co., 120,933
    • United States
    • Court of Appeals of Kansas
    • March 19, 2021
    ...Estate of Marshall , 59 Kan. App. 2d ––––, 2021 WL 219229, at *11 (Kan. App. 2021) ; see Neighbors Construction Co. v. Woodland Park at Soldier Creek , 48 Kan. App. 2d 33, 55, 284 P.3d 1057 (2012). In Kansas, "[F]undamental fairness" requires that those who fail to perform under an obligati......
  • Harder v. Foster, 116,117
    • United States
    • Court of Appeals of Kansas
    • July 28, 2017
    ...fees are not considered consequential damages. See Neighbors Construction Co. v. Woodland Park at Soldier Creek, 48 Kan. App. 2d 33, 56, 284 P.3d 1057 (2012). This principle is that damages for breach of contract "are limited to those damages which may fairly be considered as arising, in th......
  • Martin Underground LLC v. Excavating
    • United States
    • Court of Appeals of Kansas
    • September 13, 2013
    ...was the prevailing party in the district court citing Neighbors Construction Co. v. Woodland Park at Soldier Creek, 48 Kan.App.2d 33, 58, 284 P.3d 1057 (2012), which approved a district court's definition of a prevailing party as the party which is “ ‘ “substantially successful in a cause o......
  • Request a trial to view additional results
2 books & journal articles
  • Awarding Damages for a Breach of Contract
    • United States
    • Kansas Bar Association KBA Bar Journal No. 86-9, October 2017
    • Invalid date
    ...Tuel in September of this year. --------- Notes: [1] Neighbors Const. Co. v. Woodland Park at Soldier Creek, LLC, 48 Kan. App. 2d 33, 55, 284 P.3d 1057, 1073 (2012) (quoting Hochman v. American Family Ins. Co., 9 Kan. App. 2d 151, 153, 673 P.2d 1200 (1984)). [2] Hadley v. Baxendale, 156 Eng......
  • Awarding Damages for Breach of Contract
    • United States
    • Kansas Bar Association KBA Bar Journal No. 86-9, October 2017
    • Invalid date
    ...position to maximize a recovery. --------- Notes: [1]Neighbors Const. Co. v. Woodland Park at Soldier Creek, LLC, 48 Kan. App.2d 33, 55, 284 P.3d 1057, 1073 (2012) (quoting Hochman v. American Family Ins. Co., 9 Kan. App.2d 151, 153, 673 P.2d 1200 (1984)). [2] Hadley v. Baxendale, 156 Eng. ......

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