Smith v. YOUNG MOVING AND STORAGE, INC.

• Decision Date: 21 December 2004
• Docket Number: No. COA03-1593.,COA03-1593.
• Court: North Carolina Court of Appeals
• Parties: Kay C. SMITH, Plaintiff, v. YOUNG MOVING AND STORAGE, INC., Defendant.

606 S.E.2d 173

167 NC App. 487

Kay C. SMITH, Plaintiff, v. YOUNG MOVING AND STORAGE, INC., Defendant.

No. COA03-1593.

Court of Appeals of North Carolina.

December 21, 2004.

Hinton, Hewett & Wood, P.A., by Alan B. Hewett, Selma, for plaintiff-appellant.

McGuire Woods, L.L.P., by J. Mark Langdon and Mark N. Hosmer, Charlotte, for defendant-appellee. HUNTER, Judge.

By this appeal Kay C. Smith ("plaintiff"), contends the trial court erroneously confirmed the arbitration award and should have granted plaintiff's motion to vacate said award because the settlement agreement was not a binding and enforceable agreement. Specifically, plaintiff challenges the arbitration award based upon three grounds: (I) the 18 February 2002 letter did not constitute a binding and enforceable settlement agreement; (II) the arbitrator and trial court did not properly identify condition precedents and (III) North Carolina law mandates that arbitration is compellable and irrevocable except with the consent of all parties. We affirm the trial court's order.

In January 1991, plaintiff and Young Moving and Storage, Inc. ("defendant"), entered into a contract whereby defendant would store plaintiff's photographic equipment at its storage facility. Plaintiff filed a complaint against defendant after defendant could not locate plaintiff's property. After appeal to the Supreme Court of North Carolina, which affirmed the Court of Appeals' decision compelling arbitration, plaintiff filed a demand for arbitration on 22 January 2002.

On 18 February 2002, plaintiff's counsel sent a letter to defendant indicating plaintiff was willing to settle the dispute upon terms and conditions requiring the payment of $32,750.00 plus interest over a three year time period. According to the letter, defendant would prepare the settlement agreement and promissory note and the arbitration proceedings and lawsuit would be dismissed. Defendant contends the next day, his counsel sent an unexecuted settlement and mutual release agreement and an unexecuted promissory note to plaintiff's counsel. On 26 April 2002, plaintiff's counsel informed defendant's counsel that plaintiff refused to sign the settlement documents and wanted to proceed with arbitration.

On 12 August 2002, defendant filed a motion to enforce the settlement agreement. After plaintiff filed a response to deny the motion, an arbitrator was selected who reviewed the documents and conducted a telephone hearing with the parties' counsel. On 17 October 2002, the arbitrator filed an award in favor of defendant which indicated "[t]he settlement agreement reflected in the letter signed by Claimant's counsel, dated February 18, 2002, shall be enforced." Thereafter, plaintiff filed a motion to vacate the arbitration award on 15 January 2003 and defendant filed a motion to confirm the arbitration award the next month. On 7 June 2003, the trial court entered an order denying plaintiff's motion and confirming the arbitration award. Plaintiff appeals.

Plaintiff first argues the 18 February 2002 letter was not a binding and enforceable settlement agreement. "'[J]udicial review of an arbitration award is confined to [a] determination of whether there exists one of the specific grounds for vacation of an award under the arbitration statute.'" Semon v. Semon, 161 N.C.App. 137, 141, 587 S.E.2d 460, 463 (2003) (quoting Carolina Virginia Fashion Exhibitors v. Gunter, 41 N.C.App. 407, 411, 255 S.E.2d 414, 418 (1979)); see also Sholar Bus. Assocs. v. Davis, 138 N.C.App. 298, 301, 531 S.E.2d 236, 239 (2000)

(stating "[a]ppellate review of an arbitration award is limited. A court may only vacate such an award for the reasons enumerated in North Carolina General Statutes section 1-567.13"¹). N.C. Gen.Stat. § 1-567.13(a) (2001) provides:

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 G.S. 1-567.6, 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 G.S. 1-567.3 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.

Plaintiff contends the arbitrator erroneously concluded the 18 February 2002 letter from plaintiff's counsel to defendant's counsel constituted a binding settlement agreement between the parties; rather, plaintiff contends the letter was an unaccepted offer. Plaintiff further argues that even if the offer was accepted, consideration was lacking, there was no mutual assent to all terms and the arbitrator failed to identify condition precedents. These legal arguments are not grounds for vacating an arbitration award under N.C. Gen.Stat. § 1-567.13. Indeed, "an arbitrator is not bound by substantive law or rules of evidence, [and] an award may not be vacated merely because the arbitrator erred as to law or fact. Where an arbitrator makes such a mistake, `it is the misfortune of the party.'" Sholar, 138 N.C.App. at 301,531 S.E.2d at 239 (citations omitted).

"[O]nly awards reflecting mathematical errors, errors relating to form, and errors resulting from arbitrators['] exceeding their authority shall be modified or corrected by the reviewing courts.... If an arbitrator makes a mistake, either as to law or fact unless it is an evident mistake in the description of any person, thing or property referred to in the award, it is the misfortune of the party.... There is no right of appeal and the Court has no power to revise the decisions of `judges who are of the parties' own choosing.' An award is intended to settle the matter in controversy, and thus save the expense of litigation. If a mistake be a sufficient ground for setting aside an award, it opens the door for coming into court in almost every case; for in nine cases out of ten some mistake either of law or fact may be suggested by the dissatisfied party. Thus ... arbitration instead of ending would tend to increase litigation."

Cyclone Roofing Co. v. David M. LaFave Co., Inc., 312 N.C. 224, 236, 321 S.E.2d 872, 880 (1984) (citations omitted). Accordingly, we overrule this assignment of error.

Finally, plaintiff contends the arbitrator exceeded his authority by enforcing an invalid settlement agreement and not conducting a full and fair hearing on the merits of her claim. Essentially, plaintiff argues an arbitrator should not be allowed to enforce a contract that does not exist.

An arbitrator exceeds his authority when he arbitrates additional claims and matters not properly before him. See Howell v. Wilson, 136 N.C.App. 827, 830, 526 S.E.2d 194, 196 (2000)

. Moreover, "[i]t is from the agreement that the arbitrators derive[ ] their authority." Thomasville Chair Co. v. United Furniture Workers of America, 233 N.C. 46, 48, 62 S.E.2d 535, 537 (1950). There have been

only a few cases in which our courts have held that an arbitrator exceeded his powers. In G.L. Wilson Building Co. v. Thorneburg Hosiery Co., Inc., 85 N.C.App. 684, 355 S.E.2d 815, disc. review denied, 320 N.C. 798, 361 S.E.2d 75 (1987), we concluded that, because the amount of attorney's fees for debts and obligations is set by statute, the arbitrator exceeded his authority by ordering fees in excess of that amount. Id. at 686-88, 355 S.E.2d at 817-18.... [In] FCR Greensboro, Inc. v. C & M Investments, 119 N.C.App. 575, 459 S.E.2d 292, cert. denied, 341 N.C. 648, 462 S.E.2d 510 (1995)..., the parties submitted for arbitration the amount of liquidated damages caused by the defendant completing construction of a building after the agreed-upon date. Id. at 576, 459 S.E.2d at 293. The arbitrator awarded plaintiff these damages, but then also awarded plaintiff two other kinds of damages: (1) liquidated damages caused by delays in starting construction; and (2) reimbursement for certain changes plaintiff made to the sprinkler system that was installed. Id. at 577-78, 459 S.E.2d at 294-95. We held that the arbitrator exceeded his powers by making these additional awards. Id. at 578, 459 S.E.2d at 294-95.

Howell, 136 N.C.App. at 830, 526 S.E.2d at 196. In this case, the contract provided in pertinent part:

9. Arbitration: Any controversy or claim arising out of or relating to this contract, the breach thereof, or the goods affected thereby, whether such claims be found in tort or contract shall be settled by arbitration law of the Company's State and under the Rules of the American Arbitration Association, provided however, that upon such arbitration the arbitrator or arbitrators may not vary or modify any of the foregoing provisions.

Plaintiff alleged defendant breached its contract with plaintiff by losing her photographic equipment. Plaintiff filed a demand for arbitration and the parties began settlement discussions. According to defendant, the parties reached an oral settlement and plaintiff forwarded a 18 February 2002 letter to defendant confirming the settlement terms. The next day, defendant sent a settlement agreement, which included the terms in the 18 February 2002 letter, and release to plaintiff per plaintiff's request. The arbitration proceedings were dismissed in reliance upon the settlement. After plaintiff refused to sign the documents, defendant filed a motion with the American Arbitration Association requesting the assigned arbitrator to enforce the settlement...