DRAGO CUSTOM INTERIORS, LLC v. CARLISLE BUILDING SYSTEMS, INC., et al.
No. 2011-280-Appeal.
Supreme Court of Rhode Island.
Dec. 19, 2012.
668
Justice GOLDBERG, for the Court.
Present: SUTTELL, C.J., GOLDBERG, FLAHERTY, ROBINSON, and INDEGLIA, JJ.
Peter L. Kennedy, Esq., Providence, for Defendant.
OPINION
Justice GOLDBERG, for the Court.
This case came before the Supreme Court on October 25, 2012, pursuant to an order directing the parties to appear and show cause why the issues raised in this appeal should not summarily be decided. The defendant, International Fidelity Insurance Company (IFIC or defendant), appeals from a Superior Court judgment in favor of the plaintiff, Drago Custom Interiors, LLC (Drago or plaintiff). The defendant contends that the Superior Court was without authority either to remand the case back to the arbitrator for clarification of the record or to modify the arbitration award. After considering the memoranda submitted by the parties and the arguments of counsel, we are satisfied that cause has not been shown and that the appeal may be decided at this time. We affirm the judgment.
In April 2003, Carlisle Building Systems, Inc. (Carlisle), the general contractor for a construction project (project) at the Charlestown Fire Station at Routes 2 and 112, contracted with Drago to perform carpentry work for the project. In accordance with the contract between Carlisle and the Charlestown Fire District (fire district), a Labor and Material Payment Bond (bond) was issued for the project; Carlisle was principal on the bond, and IFIC was the surety. Drago alleges that the bond guaranteed payment, from either Carlisle or IFIC, to any entity supplying labor or material to the project and that
In its answer, IFIC admitted that it was the surety on the bond. However, because the project fell under the purview of the Public Works Arbitration Act (PWAA or act),
After two days of hearings, the arbitrator issued his first award on March 26, 2008, finding Carlisle liable to Drago for $43,543.02, plus interest. However, because there was no evidence introduced that IFIC issued any bonds relative to the project or was responsible for any damages claimed by Drago, the arbitrator determined that IFIC was not liable to Drago. Because Drago was unaware that IFIC was contesting its responsibility for Carlisle‘s liability to Drago for payment—IFIC having admitted in its answer that it was the surety—it requested that the arbitrator reopen the proceedings so that the bond could be received into evidence.
Instead, the arbitrator issued two amended awards. The arbitrator first amended his findings of fact by repeating his earlier finding that no evidence had been presented that IFIC had issued any bonds relative to the project, but adding that “[t]he issue of IFIC‘s liability was not asserted or denied during the arbitration hearings.” Nonetheless, the arbitrator concluded that IFIC was not liable to Drago but that the arbitration award was “without prejudice to any rights of Drago as asserted in any pending litigation involving Drago and IFIC.” In his second amended award, the arbitrator deleted the finding that the issue of IFIC‘s liability was neither asserted nor denied during the arbitration hearings, but once again declared that his finding that IFIC was not liable to Drago was “without prejudice to any rights of Drago as asserted in any pending litigation involving Drago and IFIC.”
Drago then returned to Superior Court and moved to confirm the second amended award concerning Carlisle‘s liability and to modify it as to IFIC so that IFIC would be liable if Carlisle did not pay.1 IFIC objected to the proposed modification, contending that none of the statutory grounds for modification of an arbitration award applied in this case. IFIC also moved to confirm the original award, asserting that the arbitrator had no authority to issue amended awards.
A hearing eventually was held on the parties’ competing motions on February 11, 2011. The trial justice determined that, because IFIC failed to file a pre-arbitration statement and, in its answer to Drago‘s complaint, had admitted that it was on the bond, the issue of whether IFIC ever had disputed liability under the bond was “unclear.” The trial justice found that the arbitration hearings focused entirely on Carlisle‘s liability to Drago and that there was nothing to suggest that IFIC disputed its liability under the bond during the arbitration proceedings. The trial justice also pointed to two features of the arbitration awards that caused further uncertainty: (1) in his first amended award, the arbitrator had stated that the issue of IFIC‘s liability was neither assert-
Upon remand, the arbitrator issued a new award in which he found that, although there was no evidence presented at the initial arbitration hearings that IFIC issued a bond for the project, the issue of IFIC‘s liability was not raised in the initial proceedings and IFIC did not dispute either the existence of the bond or that it covered Drago‘s claims.2 The arbitrator concluded that both Carlisle and IFIC were liable to Drago for $43,543.02, plus interest, and the post-remand award reflected this conclusion.
Drago then moved to confirm the arbitrator‘s latest award. IFIC objected and moved to vacate that award and to confirm the original award. The trial justice expressed her concerns that IFIC contributed to this case‘s tortured travel, having admitted that it was the surety in its answer—thereby inducing Drago to refrain from introducing the bond at the arbitration proceedings—and then attempting to capitalize on this omission after the proceedings were closed. The trial justice accordingly granted Drago‘s motion to confirm the post-remand arbitration award. Additionally, the trial justice noted that, even if she was without authority to order the remand, she would have granted Drago‘s motion to modify the second amended award because IFIC never had disputed the existence of the bond or its liability thereunder. Before this Court, IFIC contends that the trial justice was without authority to remand this case back to arbitration or to modify the second amended award as requested by Drago. Nine years after commencement of the project, this dispute is before us.
It is well settled that, in the typical case, the judiciary‘s role in the arbitration process is limited. Metropolitan Property & Casualty Insurance Co. v. Barry, 892 A.2d 915, 918 (R.I.2006) (citing Aponik v. Lauricella, 844 A.2d 698, 703 (R.I.2004)); State v. Rhode Island Employment Security Alliance, Local 401, SEIU, AFL-CIO, 840 A.2d 1093, 1096 (R.I.2003). When, as here, an arbitration provision is contained in a “contract for the construction, alteration, repair, painting, or demolition of any public building * * * one party to which is the state, a city, a town, or an authority, a board, a public corporation, or any similar body created by statute or ordinance * * *”
Before this Court, IFIC contends that the PWAA delimits the universe of options available to a trial justice; the arbitration award can be affirmed, vacated, modified or corrected, but nothing more. The trial justice disagreed, reading our opinion in Pier House Inn as vesting her with the inherent authority to remand an arbitration case for clarification of the record. We disagree with the trial justice‘s reading of Pier House Inn.
In Pier House Inn, an arbitrator awarded approximately $4,000 in “compensatory damages” and $150,000 in what the arbitrator termed “punitive damages” on a commercial lessee‘s counterclaim for breach of contract. Pier House Inn, 812 A.2d at 801. The Superior Court vacated the punitive damages award and remanded the matter back to arbitration “to determine whether that [portion of the award awarding punitive damages] was in whole or in part intended to be compensatory.” Id. at 804. On appeal, this Court affirmed the trial justice‘s decision to vacate the punitive damages award, id. at 803, and then tackled the thorny issue of the Superior Court‘s authority to remand. See id. at 804-07.
Despite holding that the trial justice erred in relying on
“Although
§ 10-3-14 requires the reviewing court to modify the award as necessary and does not expressly limit the hearing justice‘s scope of review, under the circumstances of this case, the remand to the arbitrator was appropriate, given the insufficient evidence before the * * * hearing justice regarding the rationale for the punitive damages award.” Pier House Inn, 812 A.2d at 806.
Elaborating on the paucity of evidence, we noted that there was neither a transcript of the arbitration proceeding, nor an explication of the arbitrator‘s reasoning. Id. This Court thus declared that “[r]ather than rely on defendant‘s representations to modify the punitive damages award, the court properly sought a clarification from the arbitrator.” Id.
The precise holding of Pier House Inn, 812 A.2d at 805-06, although perhaps lacking pristine clarity, was that
In Pier House Inn, we cited our decision in Lemoine v. Department of Mental Health, Retardation and Hospitals, 113 R.I. 285, 290, 320 A.2d 611, 614 (1974), wherein we held that a remand for clarification for the purpose of taking further evidence under the Administrative Procedures Act,
In the case before us, although we disagree with the trial justice‘s reading of Pier House Inn, we nonetheless affirm the decision on other grounds. See Pier House Inn, 812 A.2d at 805. After carefully reviewing the record, we are convinced that the trial justice had clear grounds to vacate the second amended award. Once an award is vacated, the PWAA vests the Superior Court with discretion to order a rehearing before the original arbitrator(s) or before a new arbitrator or arbitrators.
“(1) When the award was procured by fraud.
“(2) Where the arbitrator or arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final, and definite award upon the subject matter submitted was not made.
“(3) If there was no valid contract, and the objection has been raised under the conditions set forth in
§ 37-16-13 .”
In this case, a decision vacating the second amended award clearly was warranted. The trial justice properly determined that the arbitrator‘s findings with respect to the existence of the bond were indefinite and inconsistent. In his first award, the arbitrator found “that there was no evidence presented that IFIC issued any bonds relative to the [p]roject.” Soon after, the arbitrator issued his first amended award, which added that “[t]he issue of IFIC‘s liability was not asserted or denied during the arbitration hearings.” Just days later, the arbitrator deleted this additional finding in his second amended award.
The grave uncertainties infecting the second amended award, especially with respect to the “without prejudice” language, compel our conclusion that the arbitrator so imperfectly executed his powers that a final and definite award with respect to IFIC‘s liability was not made. See
For these reasons, we are of the opinion that the second amended award should have been vacated under
Conclusion
For the reasons articulated above, we affirm the judgment below. The papers in this case may be remanded to the Superior Court.
Notes
“(a) If a contractor principal on a bond furnished to guarantee performance or payment on a construction contract and the claimant are parties to a written contract with a provision to submit to arbitration any controversy thereafter arising under the contract, or subject to arbitration as provided in
“(b) The arbitrator or arbitrators, if more than one, shall make findings of fact as to the compliance with the requirements for recovery against the surety, and those findings of fact shall be a part of the award binding on all parties to the arbitration.”