Matthew Patch v. Mark Patch

THE STATE OF NEW HAMPSHIRE
SUPREME COURT
In Case No. 2017-0165, Matthew Patch v. Mark Patch, the
court on October 27, 2017, issued the following order:
Having considered the briefs and record submitted on appeal, we
conclude that oral argument is unnecessary in this case. See Sup. Ct. R. 18(1).
We affirm.
The petitioner, Matthew Patch, appeals an order of the Superior Court
(Bornstein, J.) denying his motion to modify an arbitration award and granting
the motion of the respondent, Mark Patch, to confirm the award. The
petitioner argues that the arbitrator misconstrued the arbitration agreement,
and that the superior court erred in failing to correct the error.
The parties are brothers, each of whom owns 50 percent of Walhowdon
Farm, Inc., a commercial farming operation. The record shows that the parties’
estrangement led to an impasse in corporate governance and years of litigation.
In 2015, the parties agreed to divide the farm’s assets into two shares as
determined by an arbitrator.
After five hearings over a period of ten months, and after reviewing the
parties’ numerous exhibits, the parties’ chosen arbitrator issued a final award
dividing the farm’s assets. The arbitrator first noted that each party had
proposed receiving “a lion’s share” of the property, with the other party
receiving “only a fraction of the total acreage.” The arbitrator concluded that
neither proposal was fair or equitable. The arbitrator acknowledged that both
parties “want to – and need to – live independent of the other,” and found it
“imperative” that they “separate geographically so that they need not live and
work in close proximity to one another.” To accomplish this goal, the arbitrator
generally allocated the lands accessed by Churchill Way to the petitioner and
the lands accessed by Walhowdon Way to the respondent. The arbitrator
awarded the apple operation assets to the petitioner and the dairy operation
assets to the respondent. The final allocation awarded a total of 270 acres to
the petitioner, 76 acres more than the acreage awarded to the respondent.
However, the land awarded to the petitioner is less valuable per acre, and the
petitioner received a much smaller share of the farm’s other assets. According
to the petitioner’s calculation, he received approximately 27 percent of the
farm’s total value, while the respondent received approximately 73 percent. To
equalize this disparity, the arbitrator required the respondent to pay the
petitioner an “equalization payment” of $579,366.26, including approximately
$325,000 from the sale of most of the cow herd, which was awarded to the
respondent.
The petitioner first argues that the arbitration agreement does not allow
for such a disproportionate allocation of the farm’s assets. We have held that
parties to an arbitration have agreed to accept the arbitrator’s view of the facts
and interpretation of the contract. Appeal of Merrimack County, 156 N.H. 35,
40 (2007). Accordingly, we will not reject the arbitrator’s interpretation of the
agreement simply because we may disagree with it. Id.In his brief, the petitioner does not propose an alternative allocation that
would have been fair and equitable without a substantial equalization
payment. Instead, he argues that the arbitrator should have simply divided the
farm into equal shares by value. In support of his position, the petitioner relies
upon paragraph 2(c)(i) of the agreement, which defines the issue to be
addressed at the preliminary allocation hearing as follows: “The sole issue
shall be the allocation of assets and liabilities between the [parties], based on
their values, and any subsidiary issues necessary to accomplish a fair and
equitable allocation.” The preceding section of the agreement defines the scope
of the arbitrator’s authority more broadly. Paragraph 1(a) provides that the
arbitrator “shall allocate the [farm’s] assets on a fair and equitable basis, after
receiving evidence and position memoranda from the parties relating to which
assets each would like, the appropriateness of allocating specific assets to one
or the other party, the value of the assets, and such other matters as the
parties wish to submit.” The arbitrator interpreted this language to allow for a
fair and equitable allocation of assets, not simply an allocation of assets into
two shares of equal value. The superior court concluded that the arbitrator’s
award was based upon a reasonable interpretation of the parties’ agreement.
At the outset, we address the respondent’s argument that the petitioner,
in his brief, waived any right to appeal the award under the standard set forth
in the arbitration statute. RSA 542:8 (2007) provides that any party to an
arbitration “may apply to the superior court for an order confirming the award,
correcting or modifying the award for plain mistake, or vacating the award for
fraud, corruption, or misconduct by the parties or by the arbitrators, or on the
ground that the arbitrators have exceeded their powers.” In his brief, the
petitioner argues that “RSA 542:8 does not apply” because the parties “opted
out of RSA 542:8” by specifying a different standard of review in paragraph 7 of
their arbitration agreement. In his reply brief, however, the petitioner argues,
in the alternative, that the arbitrator’s decision constitutes “plain mistake”
under RSA 542:8. Generally, we do not consider arguments raised for the first
time on appeal in a reply brief. Harrington v. Metropolis Property Management
Group, 162 N.H. 476, 481 (2011). Assuming, without deciding, that the
petitioner did not waive his right to appeal under RSA 542:8, we cannot
conclude that the arbitrator’s award constitutes plain mistake, even if the farm
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assets could have been equitably divided without a substantial equalization
payment.
Paragraph 7 of the parties’ agreement specifies that “[a]ll decisions of the
Arbitrator shall be final and unappealable, except for fraud, misconduct or
clerical error.” The petitioner argues that the arbitrator’s “knowing violation” of
his duty to allocate shares equally based upon their value constitutes
misconduct. We are not persuaded that the term “misconduct,” as used in the
agreement, should be interpreted so broadly. However, even under this
standard, we find no basis to disturb the arbitrator’s award because we agree
with the superior court that the parties’ agreement did not require the
arbitrator to divide the farm into equal shares by value. See Appeal of
Merrimack County, 156 N.H. at 40.
Affirmed.
Dalianis, C.J., and Hicks, Lynn, Bassett, and Hantz Marconi, JJ.,
concurred.
Eileen Fox,
Clerk
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