Smitty's Super-Valu, Inc. v. Pasqualetti

• Decision Date: 20 August 1974
• Docket Number: No. 1,INC,SUPER-VAL,CA-CIV,1
• Citation: 22 Ariz.App. 178,525 P.2d 309
• Parties: SMITTY'S, an Iowa corporation, Appellant, v. Amos PASQUALETTI; First National Bank of Arizona, Executor of the Estate of Anthony J. Pasqualetti, Deceased; James A. Leonard, Guardian of the Estate of Ben Pasqualetti, an Incompetent, and M. Ralph Jenkins, Executor of the Estate of Rose Pasqualetti Jenkins, Deceased, Appellees. 2099.
• Court: Arizona Court of Appeals

Page 309

525 P.2d 309

22 Ariz.App. 178

SMITTY'S SUPER-VALU, INC., an Iowa corporation, Appellant, v. Amos PASQUALETTI; First National Bank of Arizona, Executor of the Estate of Anthony J. Pasqualetti, Deceased; James A. Leonard, Guardian of the Estate of Ben Pasqualetti, an Incompetent, and M. Ralph Jenkins, Executor of the Estate of Rose Pasqualetti Jenkins, Deceased, Appellees.

No. 1 CA-CIV 2099.

Court of Appeals of Arizona, Division 1, Department B.

Aug. 20, 1974.

Rehearing Denied Sept. 20, 1974.

Roush, Mori, Welch & Steiner, by George Welch, Jr. and Roderick D. MacMillan, Phoenix, for appellant

Allen, McClennen & Fels, by John V. Fels, Phoenix, for appellees.

OPINION

HAIRE, Presiding Judge.

On this appeal we must determine whether the trial judge committed error when he modified the arbitration award which was the subject of the trial court proceedings. The proceedings were initiated when the appellees, as successors to the lessors' interests under a lease, filed an action seeking to void an arbitration award concerning rental payments under a lease wherein the appellant was the lessee. The lessee answered and filed a counterclaim seeking confirmation of the award.

The problem between the lessors and the lessee arose as a result of their failure to agree concerning a rental adjustment after the condemnation of a portion of the leased premises. The lease agreement provisions relating to a rental adjustment after a condemnation taking were as follows:

'. . . the amount of the rental to be paid for the remainder of the term of the lease for the portion of the premises not so taken shall be determined by agreement between the parties hereto and if the parties are unable to so agree, the amount of such rental shall be determined by arbitration by arbitrators to be appointed and who shall act according to the arbitration provisions of paragraph 6 of this lease. . . .'

The arbitration provisions of paragraph 6, insofar as pertinent, provided that:

'. . . the amount of such adjusted rental shall be determined by arbitration, in which event Lessor shall immediately appoint one arbitrator and Lessee shall immediately appoint one arbitrator, and the two arbitrators so appointed shall promptly select a third arbitrator. . . . The decision in writing signed by two or more of the said arbitrators shall be binding and conclusive upon the parties hereto. . . .'

Because of the inability of the parties to agree on a rental adjustment, the arbitration provisions were invoked, and three arbitrators were appointed. Two of these arbitrators eventually reached agreement and issued an award setting the sum of $6,670 as the proper annual rental abatement which would apply from the time of the taking through the approximate 50-year remaining term of the lease.

In the trial court the lessors sought to have the award declared void pursuant to A.R.S. § 12--1512A(3) upon the basis that the arbitrators had exceeded their powers. ¹

In the event the alleged excess was not sufficient to support a complete voiding of the award, the lessors sought to have the award modified pursuant to A.R.S. § 12--1513A(2) to the extent that the arbitrators had allegedly included in their award an amount relating to a matter not submitted to them. ²

In the trial court the issues were decided on the basis of affidavits submitted with motions for summary judgment filed by both parties. Although the facts presented to the trial court are somewhat limited, they are not in dispute, and during oral argument on this appeal, both counsel have urged that nothing would be gained by remanding this matter to the trial court for further development of the facts.

Before discussing in detail the facts relied upon by the lessors as showing that the arbitrators exceeded their powers, it must be noted that severe limitations are placed upon judicial review of an arbitration award. A.R.S. § 12--1512 sets forth the circumstances which would justify a court's avoidance of the award. As previously noted, the lessors rely upon subsection A(3), that 'the arbitrators exceeded their powers'. The boundaries of the arbitrators' powers are defined by the agreement of the parties. Transnational Insurance Co. v. Simmons, 19 Ariz.App. 354, 507 P.2d 693 (1973); Bacchus v. Farmers Insurance Group Exchange, 12 Ariz.App. 1, 467 P.2d 76 (1970), vacated on other grounds, 106 Ariz. 280, 475 P.2d 264 (1970). Within those boundaries, the arbitrators' decision is final both as to questions of fact and law. Verdex Steel and Construction Co. v. Board of Supervisors, 19 Ariz.App. 547, 509 P.2d 240 (1973); Transnational Insurance Co. v. Simmons, Supra; New Pueblo Constructors, Inc. v. Lake Patagoniz Recreation Association, Inc., 12 Ariz.App. 13, 467 P.2d 88 (1970); Funk v. Funk, 6 Ariz.App. 527, 434 P.2d 529 (1967); 5 Am.Jr.2d Arbitration and Award, § 145, p. 626. Thus, even though a court reviewing an arbitration award might consider erroneous some rulings on questions of law, the rulings made by the arbitrators are binding unless they result in extending the arbitration beyond the scope of the submission, Verdex Steel and Construction Co. v. Board of Supervisors, Supra. In New Pueblo Constructors, Inc. v. Lake Patagonia Recreation Association, Inc., Supra, the trial judge had entered an order staying arbitration proceedings. On appeal, as a basis for sustaining the trial court's order, the appellee urged that the matters which would be decided by the arbitrators would involve both questions of law and fact and that questions of law were to be decided by the courts and not by the arbitrators. The court noted that an arbitration agreement which was without limitations such as the one in that particular case gave the arbitrators 'full power to decide both questions of law and fact', and then proceeded to reverse the stay order previously entered by the trial court. As noted by the United States Supreme Court in Bernhardt v. Polygraphic Co. of America, 350 U.S. 198, 76 S.Ct. 273, 100 L.Ed. 199 (1956), judicial review of an arbitration award is more limited than judicial review of a trial, and questions of law such as whether the arbitrators misconstrued a contract are not open to judicial review. Although at first consideration this concept might appear highly questionable, when the rationale underlying the entire theory of arbitration is considered, it becomes obvious that this non-reviewability concept is essential to the continued viability of arbitration as a controversy-settling device. This...