Washington v. Washington

• Decision Date: 12 May 2009
• Docket Number: Docket No. 281174.
• Citation: 770 N.W.2d 908,283 Mich. App. 667
• Parties: WASHINGTON v. WASHINGTON.
• Court: Court of Appeal of Michigan — District of US

770 N.W.2d 908

283 Mich. App. 667

WASHINGTON v. WASHINGTON.

Docket No. 281174.

Court of Appeals of Michigan.

Submitted March 4, 2009, at Detroit.

Decided May 12, 2009, at 9:15 a.m.

Allan Falk, P.C (by Allan Falk), Okemos, for the plaintiff.

Judith A. Curtis, Grosse Pointe, for the defendant.

Before: MURRAY, P.J., and GLEICHER and M.J. KELLY, JJ.

MURRAY, P.J.

Defendant appeals as of right the trial court's judgment of divorce entered after a partial settlement and subsequent arbitration award on the division of marital property. On appeal, defendant challenges the trial court's denial of her motion to set aside, vacate, or modify the arbitration ruling as being inconsistent with Michigan law. For the following reasons, we affirm.

I. FACTS AND PROCEEDINGS¹

On August 18, 2004, and after a marriage of approximately 14 years, plaintiff filed a complaint to obtain a divorce from defendant. Less than four months later, the parties reached a partial settlement through mediation. The settlement resolved issues of custody, parenting time, spousal support, and the sale of the marital home. According to the written settlement agreement, plaintiff was ordered to pay defendant $33,500 a year, for four years, in non-modifiable spousal support. Further, the parties agreed to joint custody over the children, with plaintiff paying $2,897 a month in child support.

At the same time, the parties entered into an arbitration agreement to resolve the division of property, debts, and any unresolved issues flowing from the settlement agreement.² The parties selected the arbitrator and eventually proceeded to an arbitration hearing. On December 19, 2006, the arbitrator submitted his arbitration ruling.³ The arbitrator determined that the fair market value of plaintiff's dental practice was $165,000. He also determined that because plaintiff would be paying spousal and child support out of the earnings that made up a portion of the fair market value of the business, dividing the business at full value would constitute "double-dipping" into plaintiff's future earnings. As a result, the arbitrator valued the practice, for the purposes of the division of property, at $99,000 and awarded the practice to plaintiff.

Next, the arbitrator determined that the property on which the practice was located should also be valued using a fair market value approach, a fact agreed to by both real estate experts. After a discussion of a separate offer to purchase the building and the complicating consequences from the offer, the arbitrator valued the property at $123,000 (the fair market value offered by defendant's expert), minus the $47,000 outstanding mortgage balance, and awarded it to plaintiff.

The arbitrator also awarded defendant one car worth $14,000 and plaintiff two cars worth $31,000 and $12,000, respectively. The amount receivable from plaintiff's loan to his sister was awarded to plaintiff. The economic damages ($50,000) flowing from defendant's personal injury settlement were considered marital property subject to division, while the noneconomic damages ($212,500) were considered defendant's separate property. Further, a play structure and furniture for the children, worth $13,600, was awarded to defendant. All other bank accounts were divided evenly. Plaintiff retained $18,000 in credit card debt and defendant retained $61,000 in credit card debt.

The arbitrator stated that the total value of assets awarded to defendant was $177,428 less than that awarded to plaintiff, but that this division of property was equitable for two reasons. First, he determined that $80,555 of the home improvement expenses made by defendant using the home equity line of credit was "less than necessary and beyond that which the parties could afford." As such, he concluded that these expenses were defendant's "separate responsibility" and that the remainder of the expenses were "joint in nature." Second, he concluded that, with respect to defendant's personal injury settlement "a portion of [defendant's] separate property shall be taken into consideration in the overall award." The arbitrator opined that, taking these issues into consideration, the division of property was equitable, even if it was not equal.

Defendant then filed with the trial court a motion to set aside, vacate, or modify the arbitration award. Defendant argued that the arbitrator exceeded his powers and showed partiality against her and that the award was issued beyond the time limits afforded by statute. After a hearing, the court ruled that there was no basis under MCL 600.5081 to set aside the award, and it denied the motion. The trial court therefore entered a judgment of divorce that included the division of property determined by arbitration.

II. ANALYSIS

This Court reviews de novo a trial court's ruling on a motion to vacate or modify an arbitration award. Tokar v. Albery, 258 Mich.App. 350, 352, 671 N.W.2d 139 (2003). This means that we review the legal issues presented without extending any deference to the trial court. In re Contempt of Auto Club Ins. Ass'n, 243 Mich.App. 697, 714 n. 33, 624 N.W.2d 443 (2000).

Judicial review of arbitration awards is usually extremely limited, Konal v. Forlini, 235 Mich.App. 69, 74, 596 N.W.2d 630 (1999),⁴ and that certainly is the case with respect to domestic relations arbitration awards. Through MCL 600.5081(2) the Michigan Legislature has provided four very limited circumstances under which a reviewing court may vacate a domestic relations arbitration award:

(a) The award was procured by corruption, fraud, or other undue means.

(b) There was evident partiality by an arbitrator appointed as a neutral, corruption of an arbitrator, or misconduct prejudicing a party's rights.

(c) The arbitrator exceeded his or her powers.

(d) The arbitrator refused to postpone the hearing on a showing of sufficient cause, refused to hear evidence material to the controversy, or otherwise conducted the hearing to prejudice substantially a party's rights.

MCL 600.5081(2)(c), "the arbitrator exceeded his or her powers" provision, is the codification of a phrase used for many years in common law and statutory arbitrations. Indeed, our Court has repeatedly stated that "arbitrators have exceeded their powers whenever they act beyond the material terms of the contract from which they primarily draw their authority, or in contravention of controlling principles of law." Dohanyos v. Detrex Corp. (After Remand), 217 Mich.App. 171, 176, 550 N.W.2d 608 (1996); see also Miller v. Miller, 474 Mich. 27, 30, 707 N.W.2d 341 (2005) and Krist v. Krist, 246 Mich.App. 59, 62, 631 N.W.2d 53 (2001). Pursuant to MCL 600.5081(2)(c), then, a party seeking to prove that a domestic relations arbitrator exceeded his or her authority must show that the arbitrator either (1) acted beyond the material terms of the arbitration agreement or (2) acted contrary to controlling law.

Whether an arbitrator exceeded his authority is also reviewed de novo. Miller, supra at 30, 707 N.W.2d 341. A reviewing court may not review the arbitrator's findings of fact, Detroit Automobile Inter-Ins. Exch. v. Gavin, 416 Mich. 407, 429, 331 N.W.2d 418 (1982); Krist, supra at 67, 631 N.W.2d 53, and any error of law must be discernible on the face of the award itself, Gavin, supra at 428-429, 331 N.W.2d 418. By "on its face" we mean that only a legal error "that is evident without scrutiny of intermediate mental indicia," id. at 429, 331 N.W.2d 418, will suffice to overturn an arbitration award. Courts will not engage in a review of an "arbitrator's `mental path leading to [the] award.'" Krist, supra at 67, 631 N.W.2d 53, quoting Gavin, supra at 429, 331 N.W.2d 418. Finally, in order to vacate an arbitration award, any error of law must be "so substantial that, but for the error, the award would have been substantially different." Collins v. Blue Cross Blue Shield of Michigan, 228 Mich.App. 560, 567, 579 N.W.2d 435 (1998), citing Gordon Sel-Way v. Spence Bros., Inc., 438 Mich. 488, 497, 475 N.W.2d 704 (1991).

Defendant's primary argument is that the arbitration award was facially inequitable-and therefore contrary to Michigan law and the arbitration agreement⁵—because she received one-quarter of the marital assets and three-quarters of the marital debts. Whether this division of property is in contravention of Michigan divorce law requires us to review the controlling principles governing property distribution upon divorce. The goal behind dividing marital property is to reach an equitable distribution in light of all the circumstances. Berger v. Berger, 277 Mich.App. 700, 716-717, 747 N.W.2d 336 (2008). However, an equitable distribution need not be an equal distribution, as long as there is an adequate explanation for the chosen distribution. Id. at 717, 747 N.W.2d 336, citing McNamara v. Horner, 249 Mich.App. 177, 188, 642 N.W.2d 385 (2002), and Gates v. Gates, 256 Mich.App. 420, 423, 664 N.W.2d 231 (2003). See also Ackerman v. Ackerman, 163 Mich.App. 796, 807, 414 N.W.2d 919 (1987) (A property award "need not be equal, it need only be equitable."). As a result, an unequal division in the range of 70 percent to 30 percent is not contrary to Michigan law as long as it is based on appropriate criteria. Berger, supra at 718-722, 747 N.W.2d 336. And, as a corollary to that, there is no Michigan statute or caselaw that precludes outright a substantial deviation from numerical equality in a property distribution award.

Assuming defendant's arithmetic is correct, there is no basis on the face of the award to conclude that the arbitrator's award was in contravention of controlling law. The arbitrator recognized the foregoing principles of Michigan divorce law and applied that law to the facts as he found them. Once we are satisfied that the arbitrator has applied the controlling law, our review is complete absent some error appearing on the face of the award. But here no such error exists. Indeed, the...