Westridge Investment Group, L.P. v. McAtee, WD

• Decision Date: 05 May 1998
• Docket Number: No. WD,WD
• Parties: WESTRIDGE INVESTMENT GROUP, L.P., John R. Ferguson and The Ferguson Group, Appellants, v. Charles D. McATEE, Respondent. 54696.
• Court: Missouri Court of Appeals

Page 243

968 S.W.2d 243

WESTRIDGE INVESTMENT GROUP, L.P., John R. Ferguson and The

Ferguson Group, Appellants, v. Charles D. McATEE, Respondent.

No. WD 54696.

Missouri Court of Appeals,

Western District.

May 5, 1998.

David H. Cook, Stewart, Cook, Constance, Stewart & Minton, L.L.C., Independence, for appellants.

Phillip B. Grubaugh, Deacy & Deacy, Kansas City, for respondent.

Before ULRICH, C.J., P.J., and SMART and LAURA DENVIR STITH, JJ.

ULRICH, Chief Judge, Presiding Judge.

Westridge Investment Group, L.P., John R. Ferguson, and the Ferguson Group (Appellants) appeal the trial court's denial of their motion to vacate an arbitration award entered in favor of Charles McAtee and the court's confirmation of the award. Appellants claim that the award should have been vacated because the arbitrator exceeded his powers. The judgment of the trial court is affirmed.

Facts ¹

In July 1987, Charles McAtee invested $27,500 in Westridge Investment Group, L.P., a real estate limited partnership in which John Ferguson was the only general partner. The partnership was to develop a retirement community in the metropolitan Kansas City area. Mr. McAtee's investment was documented by an agreement entitled OFFER TO PURCHASE INTEREST IN REAL ESTATE PARTNERSHIP (OFFER). In the OFFER, Mr. McAtee offered to purchase a 2% participation in the partnership and to loan the partnership $25,000. The offer was accepted by John Ferguson as general partner on July 27, 1987. A promissory note in the amount of $25,000 was executed by Mr. Ferguson in conjunction with the OFFER on the same day. Mr. McAtee did not receive a copy of the Limited Partnership Agreement until sometime after the OFFER and promissory note were executed. In fact, whether the Limited Partnership Agreement even existed on July 27, 1987, is unclear.

Mr. McAtee never received any interest or principle payments on the note from the partnership or Mr. Ferguson. Pursuant to an arbitration clause contained in the Limited Partnership Agreement, Mr. McAtee requested arbitration on the issue of Mr. Ferguson's individual liability on the promissory note. Section 14.01 of the Limited Partnership Agreement provided, in pertinent part:

Arbitration. Any dispute, controversy or claim arising out of or in connection with, or relating to, the [Limited Partnership] Agreement or any breach or alleged breach thereof ... shall upon the request of any party involved, be submitted to and settled by arbitration in the city of Kansas City, state of Missouri, pursuant to the rules then in effect of the American Arbitration Association.

No objection was made by Mr. Ferguson to arbitration. Following a hearing on the issue, the arbitrator entered an award in favor of Mr. McAtee finding that Mr. Ferguson was individually obligated under the terms of the promissory note. Appellants filed a motion to vacate the award in the trial court claiming that the arbitrator exceeded his authority under section 435.405. ² The trial court denied Appellants' motion to vacate and confirmed the award. This appeal followed.

Arbitrator's Authority

In their sole point on appeal, Appellants claim that the trial court erred in denying their motion to vacate the arbitration award under section 435.405. They contend that the arbitrator exceeded his authority in entering the award by failing to comply with the provisions of the Limited Partnership Agreement. Specifically, they contend that (1) the promissory note merged into a capital contribution and under the Partnership Agreement, Mr. McAtee was not entitled to a return of his capital contribution and (2) under the Partnership Agreement, Mr. Ferguson, as a general partner, had no individual liability.

Arbitration proceedings are favored and encouraged by the courts. Estate of Sandefur v. Greenway, 898 S.W.2d 667, 669 (Mo.App.1995). The function of arbitration is to provide a speedy, efficient, and less expensive alternative to court litigation. Id. Because arbitration is encouraged, every reasonable intendment is given in favor of an arbitration award. Id. Missouri has adopted the Uniform Arbitration Act (UAA). §§ 435.350-435.470; Sheffield Assembly of God Church, Inc. v. American Ins. Co., 870 S.W.2d 926, 929 (Mo.App.1994). The purpose of the UAA is to afford parties the opportunity to reach a final disposition of differences in an easier more expeditious manner than by litigation. Id. To facilitate this purpose, judicial review of arbitration awards is strictly limited. Id.

Section 435.405 sets forth the only grounds for which a circuit court may vacate an award. § 435.405.1. The statute 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 section 435.370, 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 section 435.355 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.

Id. Appellants argue on appeal that the award should have been vacated because the arbitrator exceeded his powers, section 435.405.1(3). The powers of the arbitrator are set and defined by the contract to arbitrate. Greenway, 898 S.W.2d at 670. An arbitrator has the ability to settle legal as well as factual questions with little interference from the courts. Id. "[I]t...