Sanderson Group, Inc. v. Smith

• Decision Date: 10 August 2001
• Citation: 809 So.2d 823
• Parties: The SANDERSON GROUP, INC. v. Larry SMITH. The Sanderson Group, Inc. v. Larry Smith. Larry Smith v. The Sanderson Group, Inc.
• Court: Alabama Court of Civil Appeals

809 So.2d 823

The SANDERSON GROUP, INC. v. Larry SMITH.

The Sanderson Group, Inc. v. Larry Smith.

Larry Smith v. The Sanderson Group, Inc.

2000149, 2035.

Court of Civil Appeals of Alabama.

August 10, 2001.

Jessica M. McDill of Chason & Chason, P.C., Bay Minette, for appellant/cross appellee The Sanderson Group, Inc.

James G. Curenton, Jr., Fairhope, for appellee/cross appellant Larry Smith.

CRAWLEY, Judge.

On December 6, 1996, Larry Smith went to a manufactured-home lot operated by the Sanderson Group, Inc. ("Sanderson"), with the intent of purchasing a manufactured home. While at the lot, Smith negotiated with Morris Nelson, an agent of Sanderson, for the purchase of a manufactured home. Smith traded in his used manufactured home, which was worth $11,900, and executed a finance agreement for the remainder of the purchase price. That agreement was assigned to Green Tree Financial Corporation ("Green Tree").

Sanderson required that Smith's family vacate the trade-in immediately, and it promised delivery of the recently purchased home by Christmas. Although the first half of the home was delivered before Christmas, the second half was delivered between mid-January and mid-February. Smith faxed a "rejection" of the manufactured home to Green Tree's Pensacola, Florida, office on January 26, 1997. He stopped making payments at that time.

Green Tree sued Smith, seeking to repossess the manufactured home. Smith answered and counterclaimed against Green Tree, alleging, among other things, fraudulent misrepresentation. Smith also filed a third-party complaint against Sanderson and Nelson, alleging, among other things, fraud, breach of contract, and conversion. Green Tree and Sanderson moved to compel arbitration. The parties arbitrated the various claims, and on October 4, 2000, the arbitrator issued an order that, among other things, awarded Smith $20,000 for emotional distress caused by Sanderson's failure to timely deliver the manufactured home.

Pursuant to Ala. Code 1975, § 6-6-15, Sanderson filed in the Baldwin County Circuit Court a notice of appeal to this court, on October 16, 2000 (case no. 2000149). On that same date, again pursuant to § 6-6-15, Sanderson filed in the circuit court a copy of the arbitrator's award and a motion to vacate the arbitrator's award. Sanderson argued in that motion, as it argues on appeal, that the arbitrator's award of mental-anguish damages was in manifest disregard of the law.

Section 6-6-15 reads:

"Either party may appeal from an award under this division. Notice of the appeal to the appropriate appellate court shall be filed within 10 days¹ after receipt of notice of the award and shall be filed with the clerk or register of the circuit court where the action was pending. ... The notice of appeal, together with a copy of the award, signed by the arbitrators or a majority of them, shall be delivered with the file of papers or with the submission, as the case may be, to the court to which the award is returnable; and the clerk or register shall enter the award as the judgment of the court. Thereafter, unless within 10 days the court shall set aside the award for one or more of the causes specified in Section 6-6-14, the judgment shall become final and an appeal shall lie as in other cases. In the event the award shall be set aside, such action shall be a final judgement from which an appeal shall lie as in other cases."

Smith was also dissatisfied with the arbitrator's award, because it awarded him no damages for the conversion of his trade-in. He moved to modify the arbitrator's award on that ground. He also moved for attorney fees, pursuant to the Alabama Litigation Accountability Act ("ALAA"), Ala. Code 1975, § 12-19-270 et seq., arguing that Sanderson's motion to vacate the arbitrator's award and its appeal of that award were without substantial justification. Both motions were filed on November 13, 2000.

The trial court failed to rule upon Sanderson's motion to vacate the arbitrator's award within the 10 days provided for in the statute (that is, by October 26). The circuit court purported to deny Sanderson's motion to vacate the arbitrator's award on November 29, 2000. Sanderson again filed a notice of appeal (case no. 2000268)--on December 6, 2000 (which is within 42 days of October 26). This court, on December 5, 2000, reinvested the circuit court with jurisdiction to enter the arbitrator's award as a judgment, pursuant to the procedure outlined by our supreme court in H.L. Fuller Construction Co. v. Industrial Development Board, 590 So.2d 218, 220-21 (Ala.1991). The circuit court again denied Sanderson's motion and entered the arbitrator's award as a judgment, on December 29, 2000; it also on that date denied Smith's motion to modify and his motion for attorney fees pursuant to the ALAA.

On February 6, 2001, Sanderson filed a third appeal with this court (case no. 2000535), again pursuant to the provisions of § 6-6-15. Smith then filed a cross-appeal (in case no. 2000535). Smith argues that the arbitrator's failure to award him damages for the conversion of his trade-in was in manifest disregard of the law. He also argues that the circuit court should have awarded him attorney fees pursuant to the ALAA.

The Timeliness of Smith's Appeal

Sanderson argues that Smith's appeal from the arbitrator's award is procedurally defective because, it says, Smith failed to comply with § 6-6-15. Sanderson fails to recognize, however, that the adoption of Rule 4 of the Alabama Rules of Appellate Procedure served to modify the time period allowed for taking an appeal from the award of an arbitrator. See Appendix III--Statutes Modified, Ala. R. App. P.; see also Holt v. State, 361 So.2d 348, 349 (Ala.1978) (explaining that, because the time period for appeal is procedural, Rule 4 controlled the time for appeal in a paternity case where the paternity statute itself provided for appeal within 30 days); Alabama Power Co. v. Hamilton, 342 So.2d 8, 11 (Ala.1977) (explaining that Rule 4 explicitly modified the condemnation statute's time for appeal from 30 to 42 days). Although § 6-6-15 requires that an appeal be taken within 10 days, Rule 4 expanded that period to 42 days. Therefore, Smith's appeal is timely.

Sanderson's Appeal of the Arbitrator's Award

Sanderson appeals the arbitrator's award of $20,000 in mental-anguish damages. The arbitrator stated that his award was based on his conclusion that "Sanderson's late delivery, coupled with its promises of delivery by Christmas and its insistence that the Smiths vacate the trade-in, led to substantial disruption of the Smith famil[y's] lives for six to eight weeks, with accompanying severe emotional distress to... Smith." Sanderson argues that the arbitrator manifestly disregarded the law, which, it says, does not provide for the recovery of mental-anguish damages without either proof that Smith was physically injured or proof that Smith was placed in immediate risk of physical injury. See AALAR, Ltd. v. Francis, 716 So.2d 1141, 1147 (Ala.1998).

Although Alabama law disfavors predispute arbitration agreements, in cases involving "contract[s] evidencing a transaction in interstate commerce" the federal substantive law of arbitration governs. See H.L. Fuller Constr. Co. v. Industrial Dev. Bd., 590 So.2d 218, 221 (Ala. 1991). Under the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., review of an arbitrator's award is limited. See Montes v. Shearson Lehman Bros., Inc., 128 F.3d 1456, 1458 (11th Cir.1997). The FAA delineates only four bases for vacating an arbitrator's award:

"(1) Where the award was procured by corruption, fraud, or undue means.

"(2) Where there was evident partiality or corruption in the arbitrators, or either of them.

"(3) Where the arbitrators were guilty of misconduct in refusing to postpone the hearing ... or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced.

"(4) Where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made."

9 U.S.C. § 10.

In addition to the statutory reasons for vacating an award, there are nonstatutory, judicially recognized reasons. See Montes, 128 F.3d at 1458-59, 1462-63 (listing two and adopting another). In this case, Sanderson argues one of those judicially recognized reasons in favor of his request that we vacate the arbitrator's award--that the arbitrator manifestly disregarded the law. See id. at 1460-63. Although we agree that manifest disregard is a basis for vacating an award, we cannot agree that Sanderson has proved the arbitrator manifestly disregarded the law in this case.

To prevail on a claim that an arbitrator has manifestly disregarded the law, the party seeking vacation must convince the reviewing court that

"(1) the `arbitrators knew of a governing legal principle yet refused to apply it or ignored it altogether,' and (2) the `law ignored by the arbitrators ... [was] "well defined, explicit, and clearly applicable"' to the case."

DiRussa v. Dean Witter Reynolds, Inc., 121 F.3d 818, 821 (2d Cir.1997) (quoting Folkways Music Publishers, Inc. v. Weiss, 989 F.2d 108, 112 (2d Cir.1993) (citations omitted)).

Sanderson argues that Alabama law prohibits the award of mental-anguish damages without proof of either accompanying physical injury or accompanying risk of physical injury. See AALAR, Ltd.,716 So.2d at 1147. While Sanderson's interpretation of AALAR, Ltd. is correct insofar as it imposes limits on the award of mental-anguish damages in tort claims, Sanderson has failed to recognize that mental-anguish damages may be awarded in certain cases for breach of contract, provided that "the subject matter of the contract is so closely associated with matters of mental concern, or with the emotions of the party to whom the duty is owed, that a breach of...