Thomas v. Howard , 51 N.C. App. 350 ( 1981 )

276 S.E.2d 743 (1981)

Kenneth THOMAS
v.
Richard HOWARD.

No. 8020DC626.

Court of Appeals of North Carolina.

April 7, 1981.

E. A. Hightower, Wadesboro, for plaintiff-appellee.

F. D. Poisson, Jr., Wadesboro, for defendant-appellant.

VAUGHN, Judge.

Defendant's brief does not comply with the Rules of Appellate Procedure in several respects. It does not contain a statement of the questions presented for review. App.R. 28(b)(1). In addition, it does not include a short, nonargumentative summary of the essential facts. App.R. 28(b)(2). Finally, the brief makes no reference to the assignment of error or exception in the record which is pertinent to defendant's argument on appeal. App.R. 28(b)(3). In our discretion, we shall, nevertheless, address the merits of the case.

Defendant seeks reversal of the order confirming the arbitration award. In essence, he contends that a judge must vacate an award, as a matter of law, whenever there is evidence that one of the arbitrators had both prior knowledge of the facts and a business connection with one of the parties involved in the controversy. We disagree and affirm the judgment.

The purpose of arbitration is to reach a final settlement of disputed matters without litigation, and it is well established that the parties, who have agreed to abide by the decision of a panel of arbitrators, will not generally be heard to attack the regularity or fairness of an award. Fashion Exhibitors v. Gunter, 41 N.C.App. 407, 255 S.E.2d 414 (1979). Thus, an award is ordinarily presumed valid, and the party seeking to set it aside has the burden of demonstrating an objective basis which supports his allegations that one of the arbitrators has acted improperly. See Young v. Insurance Co., 207 N.C. 188, 176 S.E. 271 (1934); 5 Am.Jur.2d, Arbitration and Award, § 156 (1962). See also Fashion Exhibitors v. Gunter, 291 N.C. 208, 230 S.E.2d 380 (1976). Defendant has failed to meet this burden in the instant case.

It is, of course, true that public policy generally requires that arbitrators be impartial and that they have no connection with the parties involved or the subject matter of the dispute. Annot., 56 A.L.R.3d 697 (1974). This principle is enforced in our State by G.S. 1-567.13(a)(2), which provides that a court shall vacate an award when there is "evident partiality by an arbitrator appointed as a neutral or corruption in any of the arbitrators or misconduct prejudicing the rights of any party." Significantly though, the statute does not provide relief from an award when there is "evident partiality" by an arbitrator who is not appointed as a neutral or umpire. G.S. 1-567.13, by its terms, does not, therefore, necessarily prevent parties from accepting arbitrators who they know are acquainted in some way with the case or the parties.

Indeed, it is only natural that parties will attempt to appoint arbiters, who tend to be biased in their favor. A noted author has explained that:

One who submits his case to an arbitrator selects his own judge; and he selects one, if he can induce the other party to agree, who is likely to be prejudiced in his own favor.

If two parties are willing to take their chances before an arbiter so selected, it is now believed that there is no public interest that makes it necessary to forbid them.

6A Corbin, Contracts § 1433, at 394 (1962). Thus, the common sense rule evolved that, even though partiality of an arbitrator is a well-recognized ground for the setting aside of awards, a party may, nonetheless, be concluded by an award when he knew of the facts alleged to constitute the bias or prejudice of the arbitrator at the time the agreement was made. 5 Am.Jur.2d, Arbitration and Award, §§ 101, 181 (1962); Annot., 56 A.L.R.3d 697, 703-04, 717-26 (1974).

This rule, that the disability of an arbitrator is waived if the complaining party had prior knowledge of it, obtains in North Carolina. Pearson v. Barringer, 109 N.C. 398, 13 S.E. 942 (1891), is an instructive case. In Pearson, defendant sought to set aside an arbitration award because the arbitrator chosen by plaintiff was a surety on the prosecution bond and was, therefore, an interested party. In upholding the award, the Court stated:

It is well settled, that parties "knowing the facts, may submit their differences to any person, whether he is interested in the matters involved (Navigation Co. v. Fenlon, 4 W. & S. [Pa.], 205), or is related to one of the parties, and the award will be binding upon them." (6 Wait's Act. & Def., 519; Morse on Arbitration, 105). But if the submission be made in ignorance of such incompetency, the award may be avoided. No relief, however, will be granted unless objection is made as soon as the aggrieved party becomes aware of the facts, and if after the submission he acquires such knowledge and permits the award to be made without objection, it is treated as a waiver and the award will not be disturbed.

109 N.C. at 400, 13 S.E. at 943. Similarly, in the case of Construction Co. v. Management Co., this Court refused to set aside an award where the judge had found as a fact, to which no exception was taken, that plaintiff knew of the extent and nature of the relationship between the arbitrator and defendant when he entered into the agreement. 37 N.C.App. 549, 555-57, 246 S.E.2d 564, 566, appeal dismissed, 295 N.C. 733, 248 S.E.2d 864 (1978). The Court applied the reasoning of Pearson v. Barringer, supra, and also emphasized that the record did not reveal a basis for judicial interference with the contractual rights of the parties "when each was aware and understood the contracts it entered into." Id. For analogous cases involving appraisal awards, see Firemen's Fund Ins. Co. v. Flint Hosiery Mills, 74 F.2d 533 (4th Cir.), cert. denied, 295 U.S. 748, 55 S.Ct. 826, 79 L.Ed. 1692 (1935); Young v. Insurance Co., 207 N.C. 188, 176 S.E. 271 (1934).

Without question, the foregoing authorities apply to the instant case. Defendant accepted plaintiff's selected arbitrator, Boyd Collins, in the written arbitration agreement. In his motion to vacate the award, defendant did not even allege that he was unaware at the time he entered that agreement, of the facts which indicated Collins' possible bias in plaintiff's favor. More importantly, the arbitration agreement itself compels the conclusion that defendant accepted Boyd Collins as an arbitrator with full knowledge of his business dealings with plaintiff and was aware of the possible bias that could result from that connection. The agreement includes the following stipulation: "The parties agree that Boyd Collins owes them $80 and that Kenneth Thomas [plaintiff] gets $20 and that the $60 belongs to Richard Howard [defendant] and that Kenneth Thomas will take care of it." Since defendant knew of Collins' business association with both parties when he entered into the agreement, we hold that he has not stated sufficient grounds to vacate the award under G.S. 1-567.13.

Moreover, even if we assumed that defendant did not waive his right to complain about Collins' bias, defendant would still be unable to show that Collins' alleged corruption or misconduct prejudiced his right to a fair and impartial settlement of the controversy. G.S. 1-567.13(a)(2). Here, the parties sought arbitration because they could not agree as to whether the amount of a debt was $5,904.68 or $1,675.00. Viewed in this light, we hold that the award discloses, on its face, that the arbitrators reached a rational compromise, in the midst of much dispute, in finding that defendant owed plaintiff $3,775.00. In addition, we would stress the unanimity of the arbitration award. In this case, an enforceable award could be rendered upon the concurrence of two arbiters.^[1] In his motion to set aside the award, however, defendant did not attack the neutrality of the other two arbitrators, and he did not suggest that either of them was improperly influenced by Collins. We fail to see, therefore, how defendant could have been harmed by any alleged misconduct by Collins when the combined votes of the umpire and defendant's own arbitrator would have been sufficient to enter the award for $3,775.00 in plaintiff's favor.

In conclusion, we would comment that, by enacting Article 45A, the legislature intended to encourage parties to submit disputed matters to arbitration when it is feasible and expedient for them to do so. See, e. g., G.S. 1-567.2. This public policy includes, however, the judicial admonition "that a party who has accepted this form of adjudication must be content with the results." DeFrayne v. Miller Brewing Co., 444 F.Supp. 130, 131 (E.D.Mich.1978) [citing with approval, Fashion Exhibitors v. Gunter, 291 N.C. 208, 230 S.E.2d 380 (1976)].

The order confirming the arbitration award is affirmed.

Affirmed.

MORRIS, C. J., and BECTON, J., concur.

NOTES

[1] The arbitration agreement between plaintiff and defendant did not specify what constituted binding action by the arbitrators. Thus, G.S. 1-567.5 applied. That statute provides: "[t]he powers of the arbitrators may be exercised by a majority unless otherwise provided by the agreement or by this Article." (Emphasis added).