FCR Greensboro, Inc. v. C & M Investments of High Point, Inc. , 119 N.C. App. 575 ( 1995 )

459 S.E.2d 292 (1995) 119 N.C. App. 575

FCR GREENSBORO, INC., Plaintiff,
v.
C & M INVESTMENTS OF HIGH POINT, INC. and C. Wayne McDonald, Defendants.

No. COA94-979.

Court of Appeals of North Carolina.

July 18, 1995.

Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P. by Reid L. Phillips and James C. Adams, II, Greensboro, for plaintiff-appellee.

Elrod Lawing & Sharpless, P.A. by Frederick K. Sharpless, Greensboro, for defendants-appellants.

ARNOLD, Chief Judge.

Defendant contends that the trial court erred in denying defendant's motion to vacate or modify the arbitration award, and in confirming the award and entering judgment thereon because the arbitrator exceeded his authority by: (1) awarding liquidated damages not within the scope of the parties' agreement to arbitrate, and (2) awarding monies for changes in the sprinkler system, a controversy not within the scope of the parties' agreement to arbitrate. We agree.

The parties' arbitration agreement is governed by the Uniform Arbitration Act, N.C.Gen.Stat. § 1-567.1, et seq. (1983). Generally, parties who have agreed to abide by an arbitrator's decision will not be heard to attack the regularity or fairness of an award, Thomas v. Howard, 51 N.C.App. 350, 276 S.E.2d 743 (1981), and the trial court must confirm the award unless grounds exist to either vacate or modify the award. N.C.Gen. Stat. § 1-567.12. Judicial review of an arbitration award is limited to determining whether there exists one of the specific grounds for vacating the award under N.C.Gen.Stat. § 1-567.13, or modifying the award under N.C.Gen.Stat. § 1-567.14. Cyclone Roofing Co. v. LaFave Co., 312 N.C. 224, 321 S.E.2d 872 (1984); Fashion Exhibitors v. Gunter, 41 N.C.App. 407, 255 S.E.2d 414 (1979). "[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." Gunter, 41 N.C.App. at 414, 255 S.E.2d at 419. An award is presumed to be valid, and the party seeking to set it aside must demonstrate an objective basis in the record for concluding that the arbitrator in fact exceeded his authority. Wilson Building Co. v. Thorneburg Hosiery Co., 85 N.C.App. 684, 355 S.E.2d 815, disc. review denied, 320 N.C. 798, 361 S.E.2d 75 (1987).

Defendant first contends that the parties never agreed to submit to arbitration disputes regarding liquidated damages due for a delay in starting construction, nor did their agreements ever contemplate such liquidated damages. In calculating his award, however, the arbitrator assessed ninety-one days at $750 per day ($68,250) between 1 February 1993 (the date of the parties' lease amendment) to 12 May 1993 (the date defendants actually began construction), labelling this as "liquidated damages due to delay of beginning construction for [February] 1 amendment."

The duty to arbitrate is contractual, therefore, only disputes which the parties agreed to submit to arbitration may be resolved. Rodgers Builders v. McQueen, 76 N.C.App. 16, 331 S.E.2d 726 (1985), disc. review denied, 315 N.C. 590, 341 S.E.2d 29 (1986). "To determine whether the parties agreed to submit a particular dispute or claim to arbitration, we must look at the language in the agreement, viz., the arbitration clause, and ascertain whether the claims fall within its scope." Id. at 23-24, 331 S.E.2d at 731. Upon review of the record, it is apparent that the arbitration agreement, as well as the lease and lease amendment, did not contemplate liquidated damages in the form of delay in starting construction of the facility. In fact, the record is replete with language that "claimed liquidated damages" were to be calculated only for any delay in the construction of the facility beyond the agreed upon completion date. Furthermore, the record demonstrates plaintiff never even made a request for damages caused by a delay in beginning construction. Therefore, we find defendant has demonstrated an objective basis in the record for concluding that the arbitrator in fact exceeded his authority by awarding upon a matter not submitted to him, and the award should be modified accordingly. See N.C.Gen.Stat. § 1-567.14(a)(2).

Furthermore, we agree with defendant's contention that the trial court also erred by confirming the arbitrator's award of $8645 "as reimbursement to FCR for additions made to the sprinkler system." Although public policy favors confirmation of arbitration awards, such awards are not infallible. J.M. Owen Bldg. Contractors v. College Walk, Ltd., 101 N.C.App. 483, 400 S.E.2d 468 (1991). Under N.C.Gen.Stat. § 1-567.14(a)(2), as demonstrated by the objective evidence provided in the record, the arbitrator awarded on a matter not submitted to him. See Rodgers, 76 N.C.App. 16, 331 S.E.2d 726. No evidence exists to show that reimbursement for sprinkler system additions was ever a part of plaintiff's "claimed liquidated damages" or "claimed Tenant change orders" pursuant to the arbitration agreement. Therefore, the arbitrator exceeded his authority, and the trial court improperly confirmed that portion of the award.

We therefore remand to the Superior Court of Guilford County to enter judgment vacating the portions of the arbitrator's award regarding liquidated damages due to delay in beginning construction and reimbursement for additions made to the sprinkler system.

Reversed in part and remanded.

LEWIS and McGEE, JJ., concur.