Opinion
No. 353854
04-15-2021
CENTENNIAL HOME GROUP, LLC, Plaintiff-Appellant, v. KIRK A. SMITH and DENISE M. SMITH, Defendants-Appellees, and DISCOVER PLUMBING INC., HURON FLOOR COVERING, LLC, MACOMB STAIRS, INC., and HUNTINGTON NATIONAL BANK, Defendants.
If this opinion indicates that it is "FOR PUBLICATION," it is subject to revision until final publication in the Michigan Appeals Reports. UNPUBLISHED Oakland Circuit Court
LC No. 2019-171562-CH Before: TUKEL, P.J., and SERVITTO and RICK, JJ. PER CURIAM.
Plaintiff, Centennial Home Group, LLC ("CHG"), appeals as of right the trial court's order confirming an arbitration award. We affirm.
I. FACTS
Defendants, Kirk A. Smith and Denise M. Smith (collectively, "the Smiths"), hired CHG to build a new house for their family in Oxford Township, Michigan (the "township"). The parties signed a contract that contained, among other things, a stipulation that the Smiths would obtain a construction loan on the project and CHG would seek intermittent "draws" on the loan throughout the construction process. The final draw would occur after the township issued a certificate of occupancy. The contract also contained an arbitration agreement indicating the parties agreed that any controversy arising from the contract "shall be settled by arbitration."
CHG also named Discover Plumbing, Inc., Huron Floor Covering, LLC, Macomb Stairs, Inc., and Huntington National Bank as defendants in this lawsuit. It appears that CHG's purpose in naming these other defendants was because CHG sought a declaration by the trial court deeming "the lien of CHG to be valid and superior to all other claims." Discover Plumbing, Inc., Huron Floor Covering, LLC, Macomb Stairs, Inc., and Huntington National Bank are not parties to this appeal.
Relevant to the instant matter, construction of the driveway was one of the last projects of the home build. However, issues arose with respect to the integrity of the driveway and a constructed retaining wall. The Smiths reported this to CHG, which attempted a couple of "temporary" mitigation measures. About the same time, the township issued a certificate of occupancy on the home and CHG sought its final draw of funds. The Smiths authorized the final draw, stipulating that CHG would complete the final "punch list" items—which included the directive that CHG would "Build Retaining wall up properly to support Driveway." However, the lender informed the parties it would not authorize the final draw until the driveway issue was "resolved." CHG then stopped work and sought a lien against the home, charging that the Smiths owed $180,656.39, which represented the total amount owing on the contract.
The Smiths later sought advice from a structural engineer who noted that the existing boulder retaining wall was structurally unsound and that the existing wall encroached on the easement. On the advice of the structural engineer, the Smiths removed the boulder retaining wall and replaced it with a block retaining wall that complied with the easement restrictions. The driveway was also rebuilt.
CHG filed a two-part complaint alleging foreclosure on the lien and breach of contract against the Smiths. The Smiths moved to compel arbitration. The trial court granted the motion and dismissed the breach-of-contract claim, but stayed the foreclosure on the lien stating that "the validity of the lien between [CHG] and [the Smiths] and amount, if any, will be addressed and fixed in arbitration." The arbitrator found that the Smiths were entitled to $99,827. The arbitrator also found that CHG was owed $80,829.39, subject to a $7,650 deduction for arbitration fees.
On motion by the Smiths, the trial court issued an order lifting the stay on the foreclosure of lien claim and confirming the arbitrator's award. CHG filed an objection stating its lien foreclosure claim "remains pending." The trial court disagreed, and entered a judgment conforming with the arbitrator's award. This appeal followed.
II. SCOPE OF AUTHORITY
On appeal, CHG first argues the arbitrator exceeded the scope of his authority and made fundamental errors of law warranting reversal of the award. We disagree.
"We review de novo a trial court's decision to enforce, vacate, or modify a statutory arbitration award." Tokar v Albery, 258 Mich App 350, 352; 671 NW2d 139 (2003). "Whether an arbitrator exceeded his or her authority is also reviewed de novo." Washington v Washington, 283 Mich App 667, 672; 770 NW2d 908 (2009). "Interpretation of a court rule, which, like matters of statutory interpretation, is a question of law that we review de novo." Jerico Constr, Inc v Quadrants, Inc, 257 Mich App 22, 28; 666 NW2d 310 (2003) (quotation marks and citation omitted).
The arbitration clause at issue states:
Any controversy or claim arising out of or relating to this agreement, or the breach thereof, shall be settled by arbitration in accordance with the American Arbitration Association (AAA) under its Construction Industry Arbitration Rules, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.
Even when, as is the case here, an arbitrator is given broad authority, that authority is not absolute and the law has carved a narrow path on which a losing party may seek relief. On motion by a party, a trial court shall vacate an award when an arbitrator exceeds his or her powers. MCR 3.602(J). "Arbitrators exceed their power when they act beyond the material terms of the contract from which they primarily draw their authority, or in contravention of controlling principles of law." Nordlund & Assoc, Inc v Village Of Hesperia, 288 Mich App 222, 228; 792 NW2d 59 (2010) (quotation marks and citation omitted).
[W]here it clearly appears on the face of the award or the reasons for the decision as stated, being substantially a part of the award, that the arbitrators through an error in law have been led to a wrong conclusion, and that, but for such error, a substantially different award must have been made, the award and decision will be set aside. [Saveski v Tiseo Architects, Inc, 261 Mich App 553, 555; 682 NW2d 542 (2004), quoting DAIIE v Gavin, 416 Mich 407, 443; 331 NW2d 418 (1982)]In reviewing an arbitration award, we may not engage in contractual interpretation, nor may we review the arbitrator's factual findings. Konal v Forlini, 235 Mich App 69, 74; 596 NW2d 630 (1999). This Court is also precluded from substituting its own judgment for that of the arbitrator. Gordon Sel-Way, Inc v Spence Bros, Inc, 438 Mich 488, 497; 475 NW2d 704 (1991). On appeal, CHG alleges a number of errors by the arbitrator which CHG believes warrant reversal of the judgment. We address each in turn.
1. The Smiths' Breach of Contract
CHG first alleges the arbitrator erred in finding the Smiths never breached their contract with CHG. Specifically, CHG disagrees with the arbitrator's conclusion that because the lender "would not make the final construction payment, that the Smiths had no independent obligation to do so under the terms of the construction contract." CHG avers that "it is . . . clear from the language in the Construction Contract that final payment is due from the Purchaser (the Smiths) at the time that the Certificate of Occupancy was issued." CHG argues that under the terms of the contract between the parties, the Smiths should have paid CHG the final amount owed after the certificate of occupancy was issued.
In making this argument, CHG essentially asks this Court to do exactly what it is precluded from doing—engage in contract interpretation. Konal, 235 Mich App at 74. Even though CHG asserts the arbitrator's conclusion on this basis was a "material error of law," CHG only cites to contractual provisions in support of its argument. Indeed, CHG fails to explicitly point out any "controlling principles of law" from which the arbitrator deviated. Nordlund & Assoc, Inc, 288 Mich App at 228. Because we cannot engage in contractual interpretation, and in the absence of any argument to this contrary, the trial court did not err in confirming the award on this basis.
2. CHG's Breach of Contract
CHG next challenges the arbitrator's conclusion that "CHG breached the construction contract multiple times." CHG believes the arbitrator reached this conclusion on the basis of the arbitrator's interpretation of a township ordinance governing the construction of "walls."
In reaching the conclusion on CHG's breach of contract, the arbitrator made a number of findings that are unreviewable by this Court. Konal, 235 Mich App at 74. Apparently recognizing this Court's limitation in this regard, CHG attacks the arbitrator's interpretation of the township ordinance—stating that the arbitrator made a "fundamental error of law" in finding that the ordinance applied to the design of the boulder retaining wall. Initially, we are not convinced that the arbitrator's interpretation of the ordinance at issue should even be considered a "controlling principle[] of law" because the ordinance was only one of the bases on which the arbitrator reached the conclusion that CHG breached the contract. Nordlund & Assoc, Inc, 288 Mich App at 228. From the context of the arbitrator's analysis, the controlling elements were the parties' agreements within the contract and the opinion of a structural engineer and others that CHG should have consulted a structural engineer when designing the boulder retaining wall.
Specifically, the arbitrator concluded that under the terms of the contract, "the work necessary to achieve the intended result of the boulder retaining wall was design work; soils material; drainage and irrigation behind the retaining wall, and any fall protection on top of the retaining wall." The arbitrator also found that "CHG performed all this work, albeit deficiently, without requested extra compensation and agreed it was within their scope of work." Further, the arbitrator concluded the industry standard and the township each demanded that CHG obtain a design from a structural engineer before constructing a boulder retaining wall. Citing Oxford Township Ord. No. 106A § 8.5 12-12-2007, the arbitrator noted that this design should "show cross sections, heights, foundations, drainage, and proposed materials." The arbitrator also considered CHG's failure to retain a structural engineer and its failure to "submit a detailed design ahead of construction as Oxford Township had directed," in reaching the conclusion that CHG failed to "properly design the retaining wall." This, the arbitrator opined, resulted in a breach of CHG's obligations under the contract.
As noted, we may reverse an arbitrator's erroneous conclusion where "but for such error, a substantially different award must have been made . . . ." Saveski, 261 Mich App at 555. Even if we believed the arbitrator's interpretation of the ordinance could be classified as an "error," we are not convinced that "but for" the error, a substantially different award would have been made. The arbitrator's conclusion that CHG breached its duty to properly design a boulder retaining wall was based primarily on the arbitrator's conclusion that the "industry standard" is to have a structural engineer design the retaining wall and in failing to procure a design of this nature, CHG breached its contract with the Smiths. In referencing the township's ordinance, the arbitrator was concerned about the absence of a design rather than the nature of the design. And, the reference to the ordinance was to support the arbitrator's conclusion that CHG breached its agreement with the Smiths by failing to procure the design.
Thus, even if we were to believe that the arbitrator misconstrued the requirements of the ordinance, it would not change the ultimate conclusion that CHG breached the agreement by not procuring a structural engineer design. Accordingly, any "error" by the arbitrator in interpreting the ordinance at issue would not have resulted in a "substantially" different award. Therefore, there was no error with respect to the arbitrator's analysis of CHG's breach of contract.
We also note CHG's other arguments on this issue. Specifically, CHG disputes the arbitrator's findings of fact with respect to the number of boulder retaining walls and a building inspection by the township. Again, consideration of these issues would require this Court to venture into the arbitrator's findings of fact—something this Court cannot do. Konal, 235 Mich App at 74.
3. Betterments
CHG's next argument is unclear—it appears that CHG believes the arbitrator ignored Michigan caselaw in reaching the conclusion that the Smiths were entitled to reimbursement for their installation of the block retaining wall. CHG cites to this Court's decision in Oakwood Villa Apartments, Inc v Gulu, 9 Mich App 568, 578; 157 NW2d 816 (1968), as standing for the proposition that a plaintiff cannot "recover more than it contracted for." CHG apparently believes that in awarding damages to the Smiths for the block retaining wall, as opposed to the boulder retaining wall cited in the contract, the Smiths somehow received "more than [they] contracted for."
CHG also cites to, Ciminelli v Umland Bros, 236 AD 154, 155; 258 NYS 143 (1932), a decision by the New York Supreme Court, as standing for a similar proposition.
This argument by CHG is problematic in several ways. First, CHG's cited caselaw is not binding precedent on this Court. Second, this Court's intervention on this issue would be considered an attempt by this Court to substitute its judgment for that of the arbitrator's. Gordon Sel-Way, Inc, 438 Mich at 497. Indeed, the contract between the parties states that any controversy arising from the contract "shall be settled by arbitration." In awarding the Smiths some of their replacement costs for the retaining wall, the arbitrator was exercising the power given by the parties to settle contractual disputes. The arbitrator found that CHG presented no evidence that the block retaining wall was better than a boulder retaining wall in general the Smiths properly mitigated their damages by constructing the block retaining wall and it was not a betterment. We will not interfere with the factual conclusion reached by the arbitrator. Moreover, as noted, to reverse an arbitrator's decision on the basis of an error of law, a party must show that a "substantially different" award would have been given. Saveski, 261 Mich App at 555. Even if we were to agree that the arbitrator's analysis was an "error of law," CHG fails to explain how this error resulted in a "substantially different" award—i.e., reimbursement for the block retaining wall. Indeed, the arbitrator discussed this very issue finding the Smiths were limited to the "original estimate" of the boulder retaining wall which was smaller.
Under MCR 7.215(J)(1), cases decided by this Court before November 1990 are not binding on the present Court. And "[c]aselaw from sister states and federal courts is not binding precedent but may be relied on for its persuasive value." Haydaw v Farm Bureau Ins Co, ___ Mich App ___, ___; ___ NW2d ___ (2020) (Docket No. 345516), p 5 n 5. --------
CHG next argues the arbitrator erred in concluding that a fence at the top of the retaining wall was not a betterment, thus permitting recovery by the Smiths. Again, resolution of this issue requires this Court to consider the basis on which the arbitrator reached this conclusion. CHG argues the arbitrator misinterpreted a township ordinance about the construction of "walls" when he concluded that fencing was required along the top of the retaining wall.
CHG misconstrues the arbitrator's analysis on this point. Specifically, the arbitrator found,
per the plain language of the ordinances and the communication between Oxford Township and CHG during the plot plan review, the fence was required under the ordinances. More importantly, the principal of CHG testified that a fence on top of the retaining wall was within the scope of work. Thus, regardless of the ordinances, the Smiths were entitled to a fence or credit against the contract price. As the original scope of work included a fence on top of the original boulder retaining wall, a fence on top the new retaining wall is not a betterment.The above statement shows the arbitrator would have reached the same conclusion notwithstanding the township ordinance. Because the resolution of this issue was on the basis of contractual interpretation by the arbitrator—that the original scope of work included a fence—we need not go further in our analysis because this Court may not review the contractual interpretations of the arbitrator. Konal, 235 Mich App at 74. Thus, CHG's argument on this issue also holds no merit.
4. Limited Liability and Limited Warranty Provisions
CHG next contends that the trial court erroneously applied the contract's limited warranty and limited liability provisions. As an initial matter, CHG waived any argument with respect to the arbitrator's analysis of the contract's limited warranty provision. While CHG's brief on appeal cites to the provision within the contract pertaining to the "limited warranty," CHG's arguments on appeal rest entirely on the arbitrator's analysis of the "limited liability" provision of the contract. "It is not enough for an appellant in his brief simply to . . . assert an error and then leave it up to this Court to . . . unravel and elaborate for him his arguments, and then search for authority either to sustain or reject his position." Mettler Walloon, LLC v Melrose Twp, 281 Mich App 184, 220; 761 NW2d 293 (2008). By failing to present an argument in support of its position that the arbitrator erroneously interpreted the limited warranty provision of the contract, CHG has waived this issue on appeal.
With respect to the limited liability provision of the contract, CHG argues that the arbitrator erred in concluding that CHG never exercised its rights under this provision. The arbitrator reached two separate conclusions with respect to the limited liability clause of the contract. First, the arbitrator found that under the terms of the contract, "repair or replacement" of defects was intended to be the parties' only remedy and CHG was solely responsible for its failure to exercise that remedy. The arbitrator found that after it was informed that full payment would not be released until the retaining wall was investigated, CHG unequivocally declared it would not perform further work. Again, this Court cannot review an arbitrator's findings of fact. Konal, 235 Mich App at 74.
Second, the arbitrator determined that Michigan caselaw and public policy support the conclusion that CHG's failure to repair or replace the defect rendered the damage limitations provision of the contract inapplicable. CHG apparently believes the arbitrator exceeded the scope of his authority by factoring in legal bases not contemplated by the contract. Again, this Court is precluded from engaging in contractual interpretation—indeed, review of this issue would require this Court to consider the intent of the parties as to the arbitration clause of the contract. However, even if we could engage in such review, we could only overturn the award when, "the arbitrator[] through an error in law has been led to a wrong conclusion, and that, but for such error, a substantially different award must have been made . . . ." Saveski, 261 Mich App at 555. In an apparent attempt to meet this standard, CHG tries to explain that the arbitrator wrongly interpreted a number of cases by Michigan appellate courts. Without taking a position on CHG's interpretation of these cases, we emphasize that CHG's analysis on this point again fails to show how a "substantially different," award would have resulted. Put another way, even if CHG's interpretation of the cases is correct, CHG fails to meet the second "but for" showing required to prove that an arbitrator exceeded his authority. Because this Court's review of an arbitration award is highly limited, CHG has failed to adequately show that the arbitrator's analysis of the limited liability provision would have resulted in a "substantially different" award. Id.
5. Arbitration Fees
CHG's final argument is that the arbitrator exceeded his authority when he assessed arbitration fees against CHG. Notably, CHG cites to no authority that precludes an arbitrator from assessing fees. Indeed, CHG's argument is almost entirely premised on the arbitrator's factual findings that CHG "lacked defenses" and "acted in bad faith" throughout the arbitration process. Again, CHG asks us to engage in a process of reviewing the arbitrator's factual findings, which this Court cannot do. Moreover, a Michigan statute explicitly allows an arbitrator to award "other reasonable expenses of arbitration if such an award is authorized by law in a civil action involving the same claim or by the agreement of the parties to the arbitration proceeding." MCL 691.1701(2). Because a Michigan statute explicitly permits the award of "reasonable fees," and because this Court is precluded from reviewing an arbitrator's factual findings, CHG's argument on this point is meritless.
In sum, CHG has failed to adequately show the arbitrator exceeded his authority in recommending the award at issue. Therefore, the trial court did not err when it confirmed the award.
III. DUE PROCESS
Next, CHG argues the trial court's dismissal of its lien foreclosure claim violated principles of fundamental fairness, and effectively denied CHG its due-process rights under the law. We disagree.
Because the issue of fundamental fairness was arguably "raised before and addressed and decided by the trial court" is properly preserved for appellate review. Lenawee Co v Wagley, 301 Mich App 134, 164; 836 NW2d 193 (2013). However, because CHG did not proffer an argument that it was a violation of CHG's constitutional rights for the trial court to dismiss its foreclosure lien claim, this issue is unpreserved for appellate review. Bay Co Prosecutor v Nugent, 276 Mich App 183, 192; 740 NW2d 678 (2007) ("Plaintiff did not assert a due process claim below; therefore, this issue is unpreserved.").
Unpreserved questions of constitutional interpretation are reviewed for plain error affecting substantial rights. Bay Co Prosecutor, 276 Mich App at 193. "To avoid forfeiture under the plain error rule, three requirements must be met: 1) the error must have occurred, 2) the error was plain, i.e., clear or obvious, 3) and the plain error affected substantial rights." Bennett v Russell, 322 Mich App 638, 643; 913 NW2d 364 (2018). "[A]n error affects substantial rights if it caused prejudice, i.e., it affected the outcome of the proceedings." Lawrence v Mich Unemployment Ins Agency, 320 Mich App 422, 443; 906 NW2d 482 (2017) (quotation marks and citation omitted).
As an initial matter, CHG avers that "[t]he action of the [t]rial [c]ourt in overruling CHG's objection, and involuntarily dismissing CHG's lien foreclosure claim was without providing CHG substantive or procedural due process . . . ." It is unclear to us whether, in making this statement, CHG believes it should have been offered oral argument on the entirety of its lien foreclosure claim, or whether there should have been oral argument on CHG's objection to entry of judgment because CHG maintained that the lien foreclosure claim remained open. In any event, both positions are meritless.
Whether a trial court has afforded a party due process is a question of law. Al-Maliki v LaGrant, 286 Mich App 483, 485; 781 NW2d 853 (2009) (citation omitted). "Due process is a flexible concept, the essence of which requires fundamental fairness. The basic requirements of due process in a civil case include notice of the proceeding and a meaningful opportunity to be heard." Id. And, under MCR 2.119(E)(3), "[a] court may, in its discretion, dispense with or limit oral arguments on motions, and may require the parties to file briefs in support of and in opposition to a motion."
In its order compelling arbitration, the trial court stated, "[t]he foreclosure of construction lien claim (Count I) and the remainder of the case is stayed in its entirety pending the outcome of arbitration (as the validity of the lien between [CHG] and the [Smiths] and amount, if any, will be addressed and fixed in arbitration)." The case then moved to arbitration where the arbitrator determined that "[t]his Clarified Award is in full settlement of all claims and counterclaims submitted to this Arbitration. All claims not expressly granted herein are hereby, denied."
The trial court's order explicitly provides that the lien foreclosure was to be considered at arbitration, and the latter statement by the arbitrator suggests the lien foreclosure claim was considered, but ultimately denied. There is no evidence—and CHG cites none—showing that CHG did not have notice of the proceeding, or that it was denied the opportunity to be heard at arbitration. Indeed, the record shows that CHG was an active participant in the arbitration process. Thus, CHG's argument that it was denied due process for the lien foreclosure claim is without merit.
Addressing CHG's argument that it was denied due process with respect to its objection to the entry of judgment against the lien foreclosure claim, we note that on May 8, 2020, the Smiths filed a proposed judgment asking the trial court to confirm the award. CHG filed an objection to entry of judgment stating that judgment "would improperly dispose of the claim made in Count I of CHG's complaint." The Smiths responded stating "[t]here is simply nothing left to do in this case. The final loan payment, which was [sic] been held by the [l]ender for the duration of this dispute, is simply awaiting the entry of this [j]udgment to make final distribution to [CHG] and [the Smiths]." The trial court entered an order stating:
For the reasons articulated in the Response in Opposition to [CHG's] Objection to Proposed Judgment Pursuant to Confirmation of Award of Arbitrator, the Objection to the Proposed Judgment Pursuant to Confirmation of Award of Arbitrator ("the Objection") should be OVERRULED. Oral argument is dispensed as it would not assist the Court in rendering a decision. MCR 2.119(E)(3).Thus, court filings show that CHG was given an opportunity to object to entry of the judgment. Moreover, MCR 2.119(E)(3) does not require that a trial court offer oral argument. Given that due process is a "flexible concept," we cannot see how CHG was not afforded due process with respect to its objection.
Affirmed.
/s/ Jonathan Tukel
/s/ Deborah A. Servitto
/s/ Michelle M. Rick