Wildwoods of Lake Johnson Associates v. L. P. Cox Co. , 88 N.C. App. 88 ( 1987 )

362 S.E.2d 615 (1987)

WILDWOODS OF LAKE JOHNSON ASSOCIATES, a North Carolina Partnership, and William P. Joyner, Jr., Marguerite B. Joyner, Charles B. Douthit, C. Owen Phillips, Linda Phillips, and Susanna Clark, General Partners
v.
L.P. COX COMPANY, and Hartford Fire Insurance Company.

No. 8710SC152.

Court of Appeals of North Carolina.

December 15, 1987.

McMillan, Kimzey, Smith & Roten by James M. Kimzey, Raleigh, for plaintiffs-appellees.

Marshall & Safran by Grayson G. Kelley, Carey, for defendants-appellants.

JOHNSON, Judge.

Defendants advance one Assignment of Error on appeal, contending that the trial court erred in granting plaintiff appellees' motion for confirmation of the arbitration award and in denying defendant appellant's motion to vacate the award. Appellants base their assignment of error upon an alleged violation of G.S. 1-567.13 by the arbitration panel which presided over the hearing in question. Upon careful consideration of the record, briefs, and transcript, we agree and thus vacate the award and remand.

It has been well established both at common law, and in accordance with the statutory Uniform Arbitration Act that an arbitration award is presumed valid and the party which seeks to vacate it must shoulder the burden of proving the grounds for attacking its validity. Wilson Bldg. Co. v. Thorneburg Hosiery, Co., 85 N.C.App. 684, 355 S.E.2d 815 (1987); Turner v. Nicholson Properties, Inc., 80 N.C.App. 208, 341 S.E.2d 42 (1986); Thomas v. Howard, 51 N.C.App. 350, 276 S.E.2d 743 (1981). In addition, public policy favors the confirmation of arbitration awards; there is a presumption of validity and "every reasonable intendment will be indulged in favor of the regularity and integrity of the proceeding." Bryson v. Higdon, 222 N.C. 17, 20, 21 S.E.2d 836, 837-38 (1942). Bearing these principles in mind, however, it becomes crucial to note that such an award is not infallible and a careful review, upon motion, serves to protect the integrity of this system for dispute settlement.

Although the issue regarding adequate grounds for vacating an award has infrequently been addressed, the North Carolina Supreme Court has held that where a party sufficiently meets its burden of demonstrating prejudicial misconduct as specified in G.S. 1-567.13, the award must be vacated. Carolina-Virginia Fashion Exhibitors, Inc. v. Gunter, 291 N.C. 208, 230 S.E.2d 380 (1976).

In attempting to meet this heavy but not insurmountable burden, appellant Cox relies basically upon the statute in question. G.S. sec. 1-567.13 states in pertinent part:

(a) Upon application of a party, the court shall vacate an award where:

... (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;

... (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 G.S. 1-567.6, as to prejudice substantially the rights of a party; ... (Emphasis added).

In accordance with the Uniform Arbitration Act, arbitrators are also bound by guidelines set forth in G.S. sec. 1-567.6 in order to insure a full and fair hearing. One provision specifically provides that the parties to the action are entitled to be heard and are also entitled to present evidence which is material to the case or controversy.

Appellants contend that the carnival-like atmosphere which the arbitration panel facilitated from the inception of the proceeding substantially prejudiced their right to a full and fair determination. Specifically, appellants' attorney stated in his affidavit that as a result of continuous comments and sarcastic remarks by the panel he "felt compelled to modify [his] presentation, including the deletion of evidence which [he] had intended to present." He also stated that witnesses testifying on behalf of Cox consulted him as to how they could "avoid being criticized by the Arbitration Panel." Specific instances of the panel's negative conduct directed toward Mr. Safran, appellants' attorney, include colloquies as follows:

Arbitrator Spence: That's argumentative.

Mr. Kimzey: I don't have any further redirect.

Mr. Safran: I just want to repeat that I just hope—

Arbitrator Spence: I don't care to hear that either.

.....

Q. (Mr. Safran): I'm sorry. I didn't hear that.

A: (Bill Dail): I said, we'd probably have to insulate every pipe in the project. I mean that you know, that—

Mr. Spence: (interposing) Say it one more time, because he may not hear well. Is that what you wanted?

....

Mr. Van Lannen: No, I think he's done an admirable job in a confusing situation. (Laughter)

Mr. Myles: You should have seen him on the job.

Mr. Kimzey: "Should have seen him on the job"? [sic] Who said that? Mr. Myles? (Laughs)

Mr. Safran: I don't—I don't mind that kind of interplay. It's just, you know, we're sitting here tring to put together a case—

.....

Mr. Safran: You'll be pleased by—by the sequencing and timing of Mr. Hughes, Mr. Mann, and so forth.

Mr. Spence: I'm not complaining. It's your lawsuit. I sure as hell am not going to try it for you.

In addition, the panel also directed this impatience and unprofessionalism toward witnesses; as a result some of them became intimidated and apparently felt the necessity of apologizing for even testifying. During his direct testimony, appellants' witness Claude (Bubba) Hughes encountered such behavior as follows:

Mr. Spence: I wonder if we could get some testimony on what the hell was done on this job? ...

Q. (Mr Safran) Okay, Bubba, let's go right to—

A. (Interposing) All right.

Q. —the point. Let's give them, right now, the as built plan on exactly what happened at Wildwoods.

A. We can do that, and I apologize for bringing you through this; but I do want you to understand what you're fixing to see.

.....

Mr. Spence: Don't—don't give us a sermon. Let's just talk about this particular project.

A. Sir, I am.

.....

Mr. Spence: Do you have any documentary evidence that Mr. Li and the contractor and the architect and the owner ever discussed the possibility of delays?

A. Only what would be in the reports.

Mr. Spence: I'll be damned if I can get an answer to save my neck.

A. I'm sorry.

Based upon these specific illustrations we find the arbitrators conducted this hearing contrary to the provisions of G.S. 1-567.6 in their basic refusal to hear evidence which would interfere with their desire to dispose of this controversy as quickly as possible and apparently at any and all costs. G.S. 1-567.6 provides that the parties are entitled to be heard and to present evidence which is material to the determination of the dispute. In order for the parties to be meaningfully afforded such an entitlement, they must be given a reasonable opportunity to present their respective arguments. Upon careful examination of the evidence we find that appellants have sufficiently met their burden of demonstrating misconduct as contemplated in G.S. 1-567.13. It is for these reasons that we vacate the award of the arbitrators and the order confirming it. This case is remanded to the Superior Court of Wake County for further proceedings not inconsistent with this opinion.

Vacated and remanded.

BECTON and PARKER, JJ., concur.