Waverlee Homes, Inc. v. McMichael

• Decision Date: 14 February 2003
• Citation: 855 So.2d 493
• Parties: WAVERLEE HOMES, INC. v. Chris McMICHAEL and Brenda McMichael.
• Court: Alabama Supreme Court

855 So.2d 493

WAVERLEE HOMES, INC. v. Chris McMICHAEL and Brenda McMichael.

1010966.

Supreme Court of Alabama.

February 14, 2003.

Joel A. Williams and Chaya Bail of Sadler Sullivan, P.C., Birmingham, for appellant.

David M. Cowan and Robert Potter of Mann, Cowan & Potter, P.C., Birmingham; and Jeff Utsey of Utsey & Utsey, Butler, for appellees.

Robert E. Sasser, Patrick L.W. Sefton, and Chad E. Stewart of Sasser, Littleton & Stidham, P.C., Montgomery, for amicus curiae Alabama Manufactured Housing Institute, in support of the appellant.

HARWOOD, Justice.

Waverlee Homes, Inc., the defendant in an action pending in the Choctaw County Circuit Court, challenges a judgment entered upon an arbitration award, on the ground that the arbitrator was biased.

Chris McMichael and Brenda McMichael, purchasers of a mobile home and residents of Alabama, sued Causey & Graves d/b/a Holly Brook Homes, L.L.C. (hereinafter "Holly Brook"), a Mississippi entity and the seller of the home, as well as Waverlee Homes, Inc. (hereinafter "Waverlee"), an Alabama corporation and the manufacturer of the home, in the Choctaw County Circuit Court on December 29, 1999. As finally amended, the McMichaels' complaint sought compensatory and punitive damages on claims alleging fraud, breach of express and implied warranties, and negligent and/or wanton construction, inspection, transport, and setup of the home.

Pursuant to an arbitration provision contained in a "Manufactured Home Retail Installment Contract and Security Agreement" ("the retail installment contract") executed by the McMichaels and Holly Brook during the purchase of the mobile home, Waverlee and Holly Brook filed motions to compel arbitration. On June 1, 2000, the trial court granted those motions and stayed the proceeding until the final disposition of the arbitration. The case was arbitrated on September 26, 2000. On August 28, 2001, Spencer Walker, the arbitrator, an attorney from Grove Hill, issued an order requesting all parties to divide the $2,756.25 arbitration costs equally; we infer from the record that all parties contributed their respective portions of the fee. On September 19, 2001, Holly Brook settled pro tanto with the McMichaels for $5,000. On Friday, September 21, 2001, Walker filed his "Report and Award of Arbitrator" with the clerk of the Choctaw Circuit Court, finding in favor of the McMichaels and awarding them damages in the amount of $490,000. Inconsistent with its order of August 28, 2001, the arbitrator's award also assessed Waverlee $3,000, which represented the entire cost of the arbitration. The trial court entered a judgment on the arbitrator's award on Monday, September 24, 2001.

On October 1, 2001, Waverlee filed a notice in the trial court to depose Robert C. Black, Jr., a Montgomery attorney, concerning a "deal" allegedly proposed by the McMichaels' attorney, Jeff Utsey, in an arbitration proceeding in another similar case. The McMichaels filed a "Motion for Protective Order and/or in the Alternative, Motion to Quash," which the trial judge granted. Waverlee then filed a postjudgment "Motion to Vacate Judgment and Arbitration Award and/or Petition to Vacate, Modify and Correct Arbitration Award and Judgment and for Other Relief," pursuant to Rule 59(e), Ala.R.Civ.P., seeking to vacate the judgment entered on the arbitration award. In support of the motion, Waverlee referenced the proposed deposition of Black, made an offer of proof regarding the alleged deal Utsey proposed to Black, and submitted the affidavit of Joel Williams, its attorney. In the motion, Waverlee requested that the court, among other things, "vacate the arbitration award and the judgment of this Court entering the arbitration award rendered against Waverlee and in favor of the plaintiffs...."

On December 26, 2001, Waverlee again noticed the deposition of Robert Black, Jr. Thereafter, the McMichaels filed a response opposing Waverlee's postjudgment motion and moved to strike the evidence submitted by Waverlee in its motion, asserting that it was inadmissible hearsay. The McMichaels also filed a motion to quash the second deposition subpoena of Robert Black, Jr., which the trial court granted. The trial court never ruled on Waverlee's postjudgment motion to vacate the judgment entered on the arbitration award, and on January 9, 2002, that motion was denied by operation of law pursuant to Rule 59.1, Ala.R.Civ.P. On January 17, 2002, the trial court entered an "Order of Partial Dismissal"; that order dismissed Holly Brook from the action as a result of the pro tanto settlement. Waverlee appealed to this Court on February 11, 2002, challenging the trial court's adoption of the arbitration award. Holly Brook is not a party to this appeal.

Waverlee argues on appeal that the denial of its motion to vacate the judgment entered on the arbitrator's award must be reversed because, it says, (1) the $490,000 arbitration award was a result of partiality, bias, and corruption on the part of the arbitrator, and (2) the arbitrator acted arbitrarily and capriciously and in a manifest disregard of the law by issuing such an award. The dispositive issue for the purposes of this appeal is whether, in light of the evidentiary showing by Waverlee, the trial court erred in denying, without a hearing, Waverlee's postjudgment motion to vacate the judgment confirming the award of the arbitrator.

Facts

The record contains the affidavit of Joel Williams attesting that after the trial court granted the motions to compel arbitration filed by Waverlee and Holly Brook, Williams sent a letter to Utsey naming six attorneys who he proposed could serve as arbitrators in the matter. Utsey's letter in reply stated that he opposed all of the proposed arbitrators suggested by Williams and that any proposals for arbitrators should be made by David Jordan, the attorney for Holly Brook, as required by the retail installment contract entered into by the McMichaels and Holly Brook. The retail installment contract stated, in pertinent part:

"14. ARBITRATION: ALL DISPUTES, CLAIMS, OR CONTROVERSIES ARISING FROM OR RELATING TO THIS CONTRACT OR THE PARTIES THERETO SHALL BE RESOLVED BY BINDING ARBITRATION BY ONE ARBITRATOR SELECTED BY YOU WITH MY CONSENT."

(Capitalization original.) The section of the retail installment contract entitled "Definitions" states, in pertinent part:

" `I', `me', `my', means the Buyers. `You', `your' means the Seller and also the Assignee or their affiliates (after the Contract is assigned by the Seller)."

Williams attested that he subsequently had a telephone conversation with Jordan in which Jordan represented that he believed Utsey would agree to have Spencer Walker serve as arbitrator in the matter. Jordan stated that to his knowledge Walker had no relationship with Utsey and had no previous adversarial relationship with the mobile-home industry. On June 12, 2000, Williams received a letter from Jordan proposing Walker as arbitrator, stating Jordan's belief that Walker "would be fair to all parties," and stating that Utsey had agreed to accept Walker as arbitrator. Walker was selected to arbitrate the matter, but, according to Williams's affidavit, he refused to allow Waverlee to depose the McMichaels or their experts during the arbitration proceeding.

Williams stated that on September 26, 2001, five days after Walker filed the arbitration award in favor of the McMichaels, Williams learned of certain circumstances relating to Walker and Utsey, including a letter authored by Utsey and sent to the Alabama State Bar on February 11, 1999, relating to another arbitration proceeding. Utsey's letter to the Bar stated:

"I represent a purchaser against a manufacturer and seller of a mobile home. This case has been ordered to arbitration. The terms of the arbitration are that I pick one arbitrator, the seller picks one arbitrator and the two arbitrators together pick one arbitrator.

"Can I make an agreement with the seller that I will argue him out of this case or in the event a verdict is returned against them, either through a jury trial or an arbitration, I will never try and collect the judgment from his client? In return for this, I would be given the right to select his arbitrator.

"Before I do anything, I would like to know if this is unethical behavior. If this agreement is deemed ethical, do I have to inform the other parties to this case of the agreement? I thank you in advance and with warmest personal regards. I await your reply."

The Bar's letter in response, dated February 18, 1999, authored by an assistant general counsel for the Bar, stated:

"I am writing in response to your letter of February 11, 1999, requesting an ethics opinion from this office. A copy of your letter is attached hereto for reference purposes. In response to your request, I am providing you the following which is an informal opinion of the Office of General Counsel and is not binding on the Disciplinary Commission of the Alabama State Bar.

"Since the scheme for selecting arbitrators is specified in an arbitration agreement and not fashioned by a particular order, there is nothing unethical in proceeding in the manner you have described in your letter.

"I trust the above is sufficient to answer your inquiry. If you have any further questions, please feel free to contact this office."

Williams attested that, upon learning of this exchange of letters, he formed the belief that Utsey, rather than Holly Brook, had actually selected Walker as the arbitrator.

Williams further attested that he also learned of court records in Choctaw and Clarke Counties showing that Walker had served as plaintiffs' counsel in actions against Southern Energy Homes ("Southern Energy"), a mobile-home manufacturer, before Walker served as the arbitrator in this case. The records showed that in 1997, Walker had served as plaintiffs' counsel in Rodney Todd v. Southern Energy Homes (case no. CV-97-022) in the Circuit Court of ...