Thompson v. Speller

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA17-416
Filed: 5 December 2017
Carteret County, No. 15-CVS-523
LEE VANDER THOMPSON, Plaintiff,
v.
WALTER SPELLER, Defendant.
Appeal by Unnamed Defendant from judgment entered 27 September 2016 by
Judge John E. Nobles, Jr. in Carteret County Superior Court. Heard in the Court of
Appeals 21 September 2017.
Dodge Jones Law Firm, LLP, Robert C. Dodge, for the Plaintiff-Appellee.
Harris, Creech, Ward & Blackerby, P.A., by Heather M. Beam and Jay C.
Salsman, for the Unnamed Defendant-Appellant.
DILLON, Judge.
The Unnamed Defendant, North Carolina Farm Bureau Mutual Insurance
Company (“Farm Bureau”) appeals from a judgment entered by the trial court
confirming an arbitration award in favor of Lee Vander Thompson (“Plaintiff”). The
arbitration panel awarded Plaintiff $110,000. In confirming the award, the trial
THOMPSON V. SPELLER
Opinion of the Court
court also granted Plaintiff pre-award and post-award/pre-judgment1 interest on the
$110,000 figure, as well as approximately $1,100 in costs associated with the action.
For the following reasons, we affirm in part and reverse in part.
I. Background
In October 2013, Plaintiff and Walter Speller (“Defendant”) were involved in a
motor vehicle collision in which Plaintiff was injured. At the time of the accident,
Farm Bureau was Plaintiff’s underinsured motorist insurer. Under Plaintiff’s policy
(the “Policy”), Farm Bureau was obligated to pay compensatory damages to Plaintiff
in the event that Plaintiff was injured by an at-fault driver whose liability coverage
limits were too low to cover his damages.
Following the accident, Plaintiff settled with Defendant’s liability insurance
carrier. Also, Farm Bureau advanced to Plaintiff a total of $35,000, which included
the following: (1) $5,000, the maximum medical payment under the Policy, and (2)
$30,000, representing the liability limits of Defendant’s liability policy.2 However,
because Farm Bureau and Plaintiff were ultimately unable to settle on the amount
1 Our case law often refers to the interest which accumulates during the period before an
arbitration award is entered as “prejudgment interest.” In the interest of clarity, we refer to any
potential interest which accumulates before an arbitration award is entered as “pre-award interest.”
Any potential interest which accumulates after the entry of an arbitration award but before entry of
the trial court’s judgment confirming the award is referred to as “post-award/pre-judgment interest.”
2 N.C. Gen. Stat. § 20-279.21(b)(4) requires an insurer to advance a payment to its insured in
an amount equal to the tentative settlement within thirty (30) days in order to preserve its right to
exercise any right of subrogation. N.C. Gen. Stat. § 20-279.21(b)(4) (2015).
-2-
THOMPSON V. SPELLER
Opinion of the Court
of total damages Plaintiff was entitled to recover, Plaintiff demanded arbitration
pursuant to the arbitration provision of the Policy.
The case was heard by a three-member arbitration panel which rendered a
unanimous arbitration award of $110,000. The award specifically provided that
“[t]he arbitrators did not consider interest or costs in the determination of th[e]
award.” (Emphasis added.)
Plaintiff filed a motion with the trial court for an order confirming the $110,000
arbitration award and for interest and costs. In confirming the arbitration award,
the trial court entered judgment for Plaintiff for $110,000 plus $8,000 in pre-award
interest (calculated from the filing of the complaint to the date of the arbitration
award) plus $805 in post-award/pre-judgment interest (calculated from the date of
the arbitration award to the date of the judgment confirming the award) plus $1,100
in costs. Farm Bureau timely appealed.
II. Analysis
On appeal, Farm Bureau makes no argument concerning the confirmation of
the $110,000 award. Rather, Farm Bureau argues that trial court exceeded its
authority when it awarded Plaintiff costs, pre-award interest, and post-award/pre-
judgment interest in its judgment confirming the arbitration award.
Our Supreme Court has stated that our courts have very limited authority to
modify an arbitration award under our Revised Uniform Arbitration Act, codified in
-3-
THOMPSON V. SPELLER
Opinion of the Court
Article 45C of our General Statutes. Nucor Corp. v. General Bearing Corp., 333 N.C.
148, 155, 423 S.E.2d 747, 751 (1992) (noting that the Act is “virtually a self-contained,
self-sufficient code, [providing] controlling limitations upon the authority of our
courts to vacate, modify, or correct an arbitration award”); see also Cyclone Roofing
Co., Inc. v. David M. LaFave Co., Inc., 312 N.C. 224, 236, 321 S.E.2d 872, 880 (1984)
(holding that “[j]udicial review of an arbitration award is confined to determination
of whether there exists one of the specific grounds for [modification] of an award
under the Uniform Arbitration Act”).
And our Supreme Court has specified that a trial court may modify an
arbitration award only where the arbitrators make (1) a mathematical error, (2) an
error relating to form, or (3) an error resulting from arbitrators’ exceeding their
authority. Id. at 236, 321 S.E.2d at 880; N.C. Gen. Stat. § 1-569.24 (2015). None of
these grounds, however, apply in the present case.
On appeal, we must determine whether the trial court’s grant of (1) pre-award
interest, (2) post-award/pre-judgment interest, and (3) costs was proper. For the
reasons stated below, we conclude that the trial court’s grant of pre-award interest
and costs constituted an impermissible modification of the arbitration award. See
Eisinger v. Robinson, 164 N.C. App. 572, 576-77, 596 S.E.2d 831, 833-34 (2004).
However, we further conclude that the trial court’s grant of post-award interest was
appropriate.
-4-
THOMPSON V. SPELLER
Opinion of the Court
A. Pre-Award Interest and Costs
We hold that the trial court exceeded its authority by adjudging that Plaintiff
was entitled to recover pre-award interest and costs in this case.
In the absence of a policy exclusion, pre-award interest is considered part of
compensatory damages for which an uninsured motorist insurer may be liable. See
Baxley v. Nationwide Mutual Ins. Co., 334 N.C. 1, 11, 430 S.E.2d 895, 901 (1993)
(holding that “prejudgment interest . . . is within the term ‘damages’ as that term is
used in the UIM portion of plaintiff’s policy”). Whether to include pre-award interest
as part of compensatory damages is a matter within the authority of the arbitrators
– not the trial court – to decide. Hamby v. Williams, 196 N.C. App. 733, 736, 676
S.E.2d 478, 479 (2009) (applying Baxley in an arbitration context); Sprake v. Leche,
188 N.C. App. 322, 658 S.E.2d 490 (2008) (holding that the arbitration panel had
authority to award pre-award interest and the trial court properly confirmed the
arbitration award as written); Faison & Gillespie v. Lorant, 187 N.C. App. 567, 654
S.E.2d 47 (2007) (holding that an arbitrator’s authority was not exceeded by including
pre-award interest in an arbitration award).
Typically, where the arbitration award fails to make any provision for pre-
award interest, “the trial court [is] obligated to confirm the award as written, unless
there was some mathematical error, error relating to form, or error resulting from
-5-
THOMPSON V. SPELLER
Opinion of the Court
the arbitrator exceeding his/her authority[.]” Palmer v. Duke Power Co., 129 N.C.
App. 488, 498, 499 S.E.2d 801, 807 (1998).
A trial court may grant pre-award interest only if the arbitrators expressly
defer the issue of interest to the trial court’s discretion as part of their award. See
Lovin v. Byrd, 178 N.C. App. 381, 382, 631 S.E.2d 58, 59 (2006) (finding no error
where a trial court added pre-award interest where the arbitration award provided
that the issue of pre-award interest “is expressly left to counsel for the parties and a
Superior Court Judge . . . to decide”); see also Hamby, 196 N.C. App. at 738, 676 S.E.2d
at 481 (concluding that a grant by the trial court of pre-award interest is not a
modification of an arbitration award where the arbitrators expressly deferred the
issue to the trial court). In such cases, the trial court is merely enforcing the terms
of the arbitration award.
Unlike in Lovin and Hamby, however, the arbitrators in the present case did
not expressly defer the issue of pre-award interest to the discretion of the trial court.
Here, the award simply provided that they “did not consider interest or costs in the
determination of th[e] award.” If the arbitration panel had wanted to authorize the
trial court to award pre-award interest and costs, it could have done so in its
arbitration award. But even if language to this effect was omitted in error by the
arbitrators, our Supreme Court has held that such a mistake is not, by, itself a
sufficient ground to set aside an award:
-6-
THOMPSON V. SPELLER
Opinion of the Court
If an arbitrator makes a mistake, either as to law or fact, it
is the misfortune of the party, and there is no help for it.
There is no right of appeal, and the Court has no power to
revise the decisions of “judges who are of the parties’ own
choosing.” An award is intended to settle the matter in
controversy, and thus save the expense of litigation. If a
mistake be a sufficient ground for setting aside an award,
it opens a door for coming into court in almost every case;
for in nine cases out of ten some mistake either of law or
fact may be suggested by the dissatisfied party. Thus the
object of references would be defeated and arbitration
instead of ending would tend to increase litigation.
Patton v. Garrett, 116 N.C. 847, 21 S.E. 679, 682–83 (1895) (citing Eaton v. Eaton, 43
N.C. 102, 106-07 (1851)).
The trial court also lacked the authority to grant Plaintiff costs in this case.
Although N.C. Gen. Stat. § 1-569.25 does allow the trial court to include “reasonable
costs” in its judgment, these costs are limited to “reasonable costs of the motion [to
confirm the award]” filed by the party after the arbitration award is entered. See N.C.
Gen. Stat. §§ 1-569.22, 1-569.23, 1-569.24, 1-569.25. Here, however, the trial court
granted Plaintiff costs related to the filing of the original action, the cost of the court
reporter for depositions, an expert witness fee, and subpoena service fees.
In sum, we conclude that the trial court’s modification of the arbitration award
requiring Farm Bureau to pay pre-award interest and costs to Plaintiff was error.
See Eisinger, 164 N.C. App. at 576, 596 S.E.2d at 834 (concluding that because
plaintiff’s request for pre-award interest and costs did not fall within any of the three
grounds permitting modification, the trial court was without authority to modify the
-7-
THOMPSON V. SPELLER
Opinion of the Court
award to include pre-award interest or costs); see also M. Domke, Domke on
Commercial Arbitration § 35:6 (3d ed. 2012) (“[C]ourts cannot add interest from a
date prior to the award, since this would infringe on the arbitrators’ authority.”).
B. Post-Award/Pre-Judgment Interest
The trial court also awarded Plaintiff approximately $800 in post-award/pre-
judgment interest, calculated from the date of the arbitration award to the date Farm
Bureau paid Plaintiff in full. For the reasons detailed below, we conclude that the
trial court acted within its authority in granting interest from the date of the
arbitration award to the date of Farm Bureau’s payment to Plaintiff.
Neither party cites a North Carolina case which directly addresses the power
of a trial court to grant interest which accrues after the arbitration award but before
the trial court enters judgment confirming the award. The seminal treatise on
commercial arbitration states that, generally, a trial court does have the discretion to
grant interest which may accrue after the date of the award:
If an arbitrator does not include a determination of interest
in the award, courts have the discretion to award
postarbitration award interest and postjudgment interest
on actions to confirm arbitration award. . . . [G]enerally,
prejudgment interest runs from the date of the arbitration
award to the date that judgment is rendered, while
postjudgment interest runs from the time that the award
is confirmed.
M. Domke, Domke on Commercial Arbitration § 35:6 (3d ed. 2012). We agree with
this general rule as stated. The time it will take for the arbitrators’ award to be
-8-
THOMPSON V. SPELLER
Opinion of the Court
confirmed by a trial court is unknown to the arbitrators at the time they make the
award. Consider a situation in which an arbitration award is entered against an
insurer for $100,000, but the insurer obtains continuances such that the trial court
does not enter its judgment pursuant to N.C. Gen. Stat. § 1-569.25 for some period of
time. The arbitrators certainly could not anticipate this delay between the entry of
the arbitration award and the trial court’s entry of judgment on the award, and the
trial court should be allowed to compensate the insured for the “time value” of the
award between the time the award is made and the time the award is paid.
III. Conclusion
We affirm the trial court’s judgment confirming the $110,000 arbitration
award and its grant of post-award/pre-judgment interest. We reverse the trial court’s
grant of pre-award interest and costs.
AFFIRMED IN PART, REVERSED IN PART.
Judges HUNTER, JR., and ARROWOOD concur.
-9-