Schaller, M. v. Excell Homes, Inc.

J-A17024-14
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
MICHELLE SCHALLER IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellee
v.
EXCELL HOMES, INC.
Appellant No. 2926 EDA 2013
Appeal from the Judgment Entered September 30, 2013
In the Court of Common Pleas of Pike County
Civil Division at No(s): 2011-00609
BEFORE: GANTMAN, P.J., PANELLA, J., and STABILE, J.
MEMORANDUM BY PANELLA, J. FILED DECEMBER 23, 2014
Appellant, Excell Homes, Inc., appeals from the judgment entered in
the Court of Common Pleas of Pike County, after an arbitration panel
awarded Appellee, Michelle Schaller, $181,006.11 on her residential
construction defect claim. After careful review, we affirm.
Excell contracted with Schaller to build and sell her a residence in
Lackawaxen for the price of $299,712. The contract called for any
disagreement, save for one involving a default in payment, to be submitted
to binding arbitration. The contract further specified that Schaller would
select one arbitrator and Excell would select another. These two arbitrators
would then agree to the third arbitrator.
Excell built the home and Schaller subsequently filed a motion seeking
to require Excell to exercise its authority to designate an arbitrator to
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address a disagreement between the parties over the quality of the
workmanship on the home. Schaller alleged that the defects in the home
would require in excess of $140,000 to repair. Schaller named Charles
Kannebecker, Esq., as her appointed arbitrator.
Excell filed an answer indicating that the only issue it had at the time
was Schaller’s default in payment for the property. Excell indicated that it
had filed a mechanic’s lien against the property, and denied that there were
any defects in the workmanship. Excell further denied any responsibility to
appoint an arbitrator.
The trial court ordered Excell to appoint an arbitrator. The trial court
further held that, pursuant to the contract, Excell’s claims for payment were
not subject to arbitration and would be resolved through the mechanic’s lien
filed by Excell.
Excell appointed Jeffrey S. Treat, Esq., as an arbitrator, and Attorney
Treat and Attorney Kannebecker appointed Mark E. Moulton, Esq., as the
chairperson. The arbitration panel held a preliminary hearing in November,
2011, at which Schaller presented her case-in-chief. After this hearing,
Excell requested an opportunity to bring a representative from the company
that supplied the concrete for the home, as well as an engineer, to examine
the concrete in place. Chairperson Moulton memorialized the board’s ruling
in a letter to the parties:
There will be no home study or examination of the home by
Excell’s engineer. The engineer may examine the concrete to
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respond to the issues already raised. If Excell wishes to pursue
claims against the concrete company that is outside the scope of
this arbitration and no such pre-complaint discovery will be
allowed this Friday. I prefer to rely on the professionalism of
counsel to limit Friday’s time at the Schaller house to only a 20
to 30 minute examination of the basement concrete floor with
core samples drawn if necessary, as a home study is specifically
not authorized.
In a subsequent letter to the parties, Chairperson Moulton expanded on this
ruling:
The ruling was to allow Excell to obtain a floor sample and not a
home investigation. As for the balance of paragraph two,
discovery should have been completed prior to the matter being
listed for arbitration, and certainly any discovery issues should
have been raised and resolved before the arbitration.
The additional request for an engineering inspection is outside
the standard for these arbitrations. The panel discussed and
ruled that this matter was a “bring it all at once and have the
panel sort it out” affair. Aside from the issues of “metal design”
in the basement structure; 2X10 vs 2X12s and correction of the
piers in back, I do not note any substantial scientific testimony.
Excell heard what Schaller was complaining of and had the
opportunity to note same. Excell can certainly bring their own
engineer to provide on the spot replies to the remaining
testimony. In fairness, these matters are resolved by on-site
presentation.
A second arbitration hearing was held in May 2012, approximately six
months after the presentation of Schaller’s case-in-chief. The arbitration
panel, in a letter dated May 25, 2012, ruled in favor of Schaller, and
awarded her $181,006.11.
Attached to the letter is a document entitled “Accompanying Memo to
Board of Arbitrators’ Decision,” dated June 13, 2012. In this memo,
Attorney Treat, the arbitrator appointed by Excell, set forth his reasoning in
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finding for Schaller. Attorney Treat’s memo highlights the condition of the
concrete floor, concluding that “the concrete floor installed clearly fails to
meet the requirements of good workmanship.” Attorney Treat further
concluded that other defects in the home “resulted from the lack of proper
coordination and oversight by the Project Manager …,” while noting that the
project manager did not testify at the May hearing.
Schaller petitioned to have judgment entered upon the arbitrators’
award. Excell filed a counter-petition to vacate the arbitrators’ award.
Schaller then filed preliminary objections to Excell’s counter-petition. Excell
subsequently filed an answer to Schaller’s petition to confirm, and an
amended counter-petition, to which Schaller again filed preliminary
objections. The trial court granted Schaller’s preliminary objections.
The trial court held a hearing1 on Schaller’s petition to confirm, and
later granted Schaller’s petition. Judgment was entered on September 30,
2013, and Excell filed this timely appeal.
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1
Excell has included, in the reproduced record, selected portions of the
transcript from this hearing. There is no transcript in the certified record.
Ordinarily, we can only consider documents which are part of the certified
record. Roth Cash Register Company, Inc. v. Micro Systems, Inc., 868
A.2d 1222, 1223 (Pa. Super. 2005). Furthermore, "[i]t is the obligation of
the appellant to make sure that the record forwarded to an appellate court
contains those documents necessary to allow a complete and judicious
assessment of the issues raised on appeal." Everett Cash Mutual
Insurance Company v. T.H.E. Insurance Company, 804 A.2d 31, 34
(Pa.Super. 2002)(quoting Hrinkevich v. Hrinkevich, 676 A.2d 237, 240
(Pa.Super. 1996)). However, since Schaller has not objected to the
(Footnote Continued Next Page)
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On appeal, Excell raises the following issues for our review:
[1.] Whether the trial court erred as a matter of law and
abused its discretion in dismissing the appellant’s amended
counter petition to vacate arbitration.
[2.] Whether the trial court erred as a matter of law and
abused its discretion in dismissing the appellant’s amended
counter petition to vacate arbitration award based upon
preliminary objections filed pursuant to the Pennsylvania rules of
civil procedure.
[3.] Whether the trial court erred as a matter of law and
abused its discretion in confirming the arbitration award since
the appellant did not receive a full and fair hearing and there
was misconduct or irregularities in the proceedings on the part of
the arbitrators.
Appellant’s Brief, at 4.
In its first two issues on appeal, Excell argues that the trial court erred
in granting Schaller’s preliminary objections to Excell’s petition to vacate the
arbitration award. In particular, Excell contends that a party cannot file
preliminary objections to a petition. While we agree with Excell on this point
of law, we conclude that the error is harmless under these circumstances.
Under the Uniform Arbitration Act, 42 Pa.C.S.A. §§ 7301-7362, a party
wishing to have a court confirm or challenge an arbitration award is required
to file a petition. See 42 Pa.C.S.A. § 7317.2 The rules governing these
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(Footnote Continued)
inclusion of any document in the reproduced record, we will address Excell’s
claims as if the documents were properly included in the certified record.
2
Section 7317 applies to common law arbitrations as well as statutory
arbitrations. See 42 Pa.C.S.A. § 7342(a).
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petitions are the same as those “for hearing of petitions in civil matters.”
Id. “A hearing on a petition is not to be equated with a trial by the court
sitting without a jury.” Haegele v. Pennsylvania General Ins. Co., 479
A.2d 1005, 1008 (Pa. Super. 1984) (citations, emphasis, and block quote
formatting omitted). The rules governing petition practice are distinct from
those governing actions instituted by complaint. See id. “Our rules of civil
procedure governing petition practice make no provision for the filing of
preliminary objections.” Cid v. Erie Ins. Group, 63 A.3d 787, 792 (Pa.
Super. 2013).3
Furthermore, a party may not file preliminary objections to a
document that is not a pleading. See Pa.R.C.P., Rule 1028(a); Fox v.
Thompson, 546 A.2d 1146 (Pa. Super. 1988).4 A petition to vacate or
modify an arbitration award is not listed as a pleading in Pa.R.C.P., Rule
1017. As such, Excell is correct in asserting that the trial court erred in
granting Schaller’s preliminary objections.
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3
Unlike Philadelphia County, Pike County does not have a local Rule
206.1(a) listed on the Pennsylvania Judiciary’s Web Application Portal. Thus,
Cid are distinquishable from the present appeal.
4
We find that Clark v. State Farm Auto. Ins. Co., 599 A.2d 1001 (Pa.
Super. 1991) and Boyce v. St. Paul Property and Liability Ins. Co., 618
A.2d 962 (Pa. Super. 1992), distinguishable from the present case. Both of
those panels held that a petition to compel arbitration was the functional
equivalent of a complaint, and therefore subject to preliminary objections.
To whatever extent those holdings remain valid, we conclude that a petition
to confirm, vacate, or modify an arbitration award is not the functional
equivalent of a complaint.
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Nevertheless, this error did not prejudice Excell in any way. The trial
court in this matter was presented with conflicting petitions regarding the
arbitration award. On appeal, Excell does not identify any issue that the trial
court failed to address in issuing the order to confirm the arbitration award.
Conceptually, if a court were to deny a petition to confirm an arbitration
award on substantive grounds, it would need to find that sufficient grounds
exist to modify or vacate the award. Conversely, in the present case, the
trial court confirmed the arbitration award after addressing all of Excell’s
defenses. As Excell has not identified any defenses that were exclusive to
the petition to vacate, we conclude that the trial court’s procedural error was
harmless.
In its final, bifurcated issue on appeal, Excell presents two arguments
that the trial court erred in confirming the arbitration award. Excell asserts
that substantial irregularities existed in the arbitration proceedings such that
Excell was denied its due process right to a full and fair hearing. See
Appellant’s Brief, at 16.
Section 7341 of the Judicial Code provides that common law
arbitration is binding and “may not be vacated or modified unless it is clearly
shown that a party was denied a hearing or that fraud, misconduct,
corruption or other irregularity caused the rendition of an unjust, inequitable
or unconscionable award.” 42 Pa.C.S.A. 7341. Our standard of review is
well defined. Judicial review of a common law arbitration award is severely
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limited because otherwise arbitration would be an unnecessary stage of
litigation, causing only delay and expense without settling the dispute. See
Cargill v. Northwestern Nat’l Ins. Co., 462 A.2d 833, 834 (Pa. Super.
1983).
The arbitrators are the final judges of both law and fact, and an
arbitration award is not subject to a reversal for a mistake of
either. Neither we nor the trial court may retry the issues
addressed in arbitration or review the tribunal’s disposition of the
merits of the case. Rather, we must confine our review to
whether the appellant was deprived of a hearing or whether
fraud, misconduct, corruption or other irregularity tainted the
award. The appellant has the burden of providing clear, precise,
and indubitable evidence to demonstrate that an irregularity in
the proceedings occurred. In this context, irregularity refers to
the process employed in reaching the result of the arbitration,
not the result itself.
McKenna v. Sosso, 745 A.2d 1, 4 (Pa. Super. 1999). “[T]he right to a fair
hearing comprises the right to notice and the right to an opportunity to be
heard.” Id. (citation omitted).
The availability and scope of pre-hearing discovery is a matter left in
the exclusive jurisdiction of the arbitrators, unless the arbitration agreement
specifies otherwise. See Savage v. Commercial Union Ins. Co., 473 A.2d
1052, 1059 (Pa. Super. 1984). Furthermore, “[t]he right to discovery is one
of these devices which is not obligatory as an essential of due process to a
valid arbitration proceeding.” Harleysville Mutual Casualty Co. v. Adair,
218 A.2d 791, 794 (Pa. 1966).
As its first assertion of error in this issue, Excell claims that the
agreement to arbitrate required certain pre-hearing discovery rights. In
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particular, Excell argues that the Construction Agreement requires the
arbitration to proceed pursuant to the American Arbitration Association’s
Home Construction Arbitration Rules. Section ARB-1 (a) of the Home
Construction Arbitration Rules provides that “the parties shall be deemed to
have made these Rules a part of their arbitration agreement whenever they
have provided for arbitration by the American Arbitration Association under
its Home Construction Arbitration Rules.” Paragraph 13 of the Construction
Agreement provides that “[t]he arbitration shall be held under the standard
form of arbitration and rules of the American Arbitration Association.” While
Excell asserts that there are no ‘standard’ rules under the American
Arbitration Association, we note that the explicit language of the contract
does not “provide for” use of the Home Construction Rules.
From documents submitted to the trial court during its consideration of
the petition to confirm, it appears that the arbitrators utilized American
Arbitration Association Rules designed for use in consumer contracts. 5 There
is no evidence in the record to support a finding that these Rules do not
constitute the ‘standard’ Rules under the American Arbitration Association.
It is at best arguable as a question of law, under Section ARB-1 of those
Rules, that the Home Construction Rules applied to this arbitration. Thus,
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5
The certified record does not contain these documents, nor does it contain
copies of Schaller’s expert reports, all of which are included in the
reproduced record. As before, in the absence of an objection by Schaller, we
decline to find Excell’s claims waived.
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Excell has not met its burden of establishing its claim by clear evidence.
Given the courts’ extremely limited power of review, and the deference
required to be given to the arbitrators on questions of law as well as fact, we
cannot conclude that the failure to follow the Home Construction Rules
deprived Excell of a full and fair arbitration hearing.
In the alternative, Excell argues that the arbitrators violated even the
limited arbitration rules that they had held applied. Excell relies upon
“Principle 12” and “Principle 13” from the documents submitted to the trial
court. Principle 12 provides that “[a]ll parties are entitled to a
fundamentally-fair arbitration hearing.” Principle 13 provides that
[n]o party should ever be denied the right to a fundamentally-
fair process due to an inability to obtain information material to
a dispute. Consumer ADR agreements which provide for binding
arbitration should establish procedures for arbitrator-supervised
exchange of information prior to arbitration, bearing in mind the
expedited nature of arbitration.
Excell maintains that it was denied a “fundamentally-fair process” when it
was denied the ability to have its expert examine the home.
Excell analogizes these circumstances to those present in Smaligo v.
Fireman’s Fund Ins. Co., 247 A.2d 577 (Pa. 1968). In Smaligo, the
arbitrator had denied the appellant the right to present the testimony of his
expert witness. See id., at 580. On appeal, the Supreme Court of
Pennsylvania held that the complete exclusion of relevant evidence denied
the appellant a full and fair hearing before the arbitrator. See id., at 579.
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Here, Excell does not contend that the arbitration panel denied it the
opportunity to present its expert’s testimony. Nor has Excell identified how
its expert’s inability to examine the home prevented the expert from being
able to rebut the conclusions in Schaller’s expert’s report. There is no expert
testimony or report in the record elucidating how the inability to examine the
home completely confounded Excell’s expert’s ability to testify. While Excell
cannot be required to identify what the expert would have found during her
inspection, it is equally true that the burden of establishing the claim that it
was denied a fair hearing by clear evidence rested on Excell.
Schaller’s expert report closes with the following conclusion:
Although many aspects of the deficiencies and concerns
identified above can be considered workmanship items, there are
concerns which warrant further attention. These include but are
not limited to the likely replacement of the basement slab, the
concerns with the steel reinforcement, or lack thereof, within the
foundation walls, the wall framing and lateral bracing lines, the
sizing and design of the structural steel beams, and the sono-
tube support of the rear deck. It is our opinion that the house
as constructed does not meet the requirements of the plans and
specifications which were provided to our office for review.
(emphasis supplied). Excell does not contend that it did not have copies of
the plans and specifications. Furthermore, at least some of the relevant
specifications identified by Schaller’s expert are included in exhibit “B” to the
contract. The first arbitration hearing occurred at the home, and the
arbitrators granted Excell’s request to perform core samples on the concrete
foundation to allow its expert an ability to respond to the claimed
deficiencies in the floor.
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Under these circumstances, we conclude that Savage requires
decisions regarding the scope of discovery available in arbitration to be left
to the exclusive jurisdiction of the arbitrators. The arbitrators decision did
not completely deprive Excell of an opportunity to present relevant evidence.
Parties to an arbitration agreement necessarily understand and desire for the
streamlined processes inherent to alternative dispute resolution procedures.
While Excell was not provided the full panoply of discovery rights inherent in
traditional court cases, it has not established, by clear, precise and
indubitable evidence that it was denied a fair hearing. Accordingly, we
affirm the trial court’s confirmation of the arbitrators’ award.
Judgment affirmed. Jurisdiction relinquished.
Judge Stabile joins in the memorandum.
President Judge Gantman concurs in the result.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 12/23/2014
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