Lead Opinion
delivered the opinion of the court:
Plaintiff, Mary Spencer, appeals from an order of the circuit court dismissing her complaint pursuant to section 2—615 of the Code of Civil Procedure (735 ILCS 5/2—615 (West 2004)). In her complaint, Spencer alleged that the arbitrator in a dispute between her and defendant, The Ryland Group, Inc. (Ryland), exceeded his powers by not awarding her attorney fees as required by an agreement of sale between her and Ryland. The circuit court held that, although it disagreed with the arbitrator’s decision not to award attorney fees, it was prohibited by stare decisis from amending that award. For the reasons that follow, we reverse and remand.
BACKGROUND
On June 19, 2003, Spencer entered into an agreement of sale (sales agreement) with Ryland for the purchase of a new townhome in Lock-port, Illinois. At that time, Spencer paid Ryland $6,000 in earnest money. Paragraph 10 of the sales agreement, entitled “Arbitration,” provided: “[a]ny controversy, claim or dispute arising out of or in any way relating to this agreement, the property, your purchase of the property or our construction of the home shall be settled by binding arbitration with the American Arbitration Association.” Paragraph 20 of the sales agreement, entitled “Attorneys’ Fees and Costs,” provided: “[t]he non-prevailing party in any proceeding to enforce or contest any provision(s) of this Agreement of Sale shall pay all reasonable costs, attorney’s fees and expenses incurred by the prevailing party.” On September 18, 2003, Spencer received a letter from Ryland, claiming that she was in default of the sales agreement and that her earnest money was being retained as damages. On November 22, 2003, Spencer submitted a demand for arbitration in which she sought $6,000 as a refund of her earnest money, $2,000 for her inconvenience and aggravation; punitive damages of up to $10,000, and attorney fees and costs pursuant to paragraph 20 of the sales agreement.
On March 16, 2004, an arbitrator from the American Arbitration Association (AAA) issued a written award, in which he ordered Ryland to return Spencer’s $6,000 in earnest money and pay $150 in interest. The arbitrator further stated:
“The administrative fees and expenses of the [AAA] totaling $500.00 and the compensation and expenses of the arbitrator totaling $750.00 shall be borne by [Ryland], Therefore, [Ryland] shall pay to [Spencer] the sum of $875.00, representing [Spencer’s] share of deposits previously advanced the [AAA].
This Award is in full settlement of all claims submitted to this Arbitration. All claims not expressly granted herein are, hereby denied.”
The arbitration award did not mention attorney fees or specifically designate Spencer as the “prevailing party.”
Spencer requested reconsideration and modification of the award based on paragraph 20 of the sales agreement and on the federal Equal Credit Opportunity Act (ECOA) (15 U.S.C. §1691 et seq. (2000)), both of which, she argued, expressly entitled her, as the prevailing party, to attorney fees and costs. The arbitrator denied Spencer’s request for reconsideration on March 31, 2004.
On June 3, 2004, Spencer filed a timely, three-count complaint in the circuit court. Only count I is at issue in this appeal. In that count Spencer requested that the circuit court vacate the arbitration award as to attorney fees pursuant to section 12(a)(3) of the Uniform Arbitration Act (Act) (710 ILCS 5/12(a)(3) (West 2004)) because the arbitrator exceeded his powers by not adhering to the parties’ agreement. Ryland filed a motion to dismiss the complaint under section 2—615 of the Code (735 ILCS 5/2—615 (West 2004)), arguing that Spencer could not show that the arbitrator committed a gross mistake of fact or law that appeared on the face of the award.
On February 18, 2005, the circuit court issued a written memorandum and order in which it granted Ryland’s motion to dismiss. The court opined that because Spencer was successful in obtaining a return of her earnest money, she qualified as a prevailing party and, therefore, should have been additionally awarded attorney fees pursuant to paragraph 20 of the sales agreement. However, the court held that despite its interpretation of Spencer’s contractual right to attorney fees, it could not overturn the arbitration award due to the rule stated in Perkins Restaurants Operating Co. v. Van Den Bergh Foods Co.,
On appeal, Spencer contends that circuit court erred in dismissing count I of her complaint on the basis of stare decisis because Perkins is, in fact, distinguishable from the instant case. Spencer also contends that even if we do not distinguish the facts of Perkins from those in this case, we should, nevertheless, choose not to follow that case on public policy grounds. Ryland contends that the circuit court was correct to dismiss the case because there was no gross mistake of fact or law appearing on the face of the arbitration award. Ryland also contends that Spencer was not entitled to attorney fees because she did not qualify as a prevailing party.
We note that the record on appeal and the parties’ briefs mention Spencer’s claims under the ECOA (15 U.S.C. §1691(b) (2000)) and the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 1998)). However, because Spencer states in her reply brief that she is not pursuing these claims on appeal, we need not address them.
ANALYSIS
A motion to dismiss under section 2—615 of the Code (735 ILCS 5/2—615 (West 2004)) challenges the legal sufficiency of the complaint by alleging defects on its face. City of Chicago v. Beretta U.S.A. Corp.,
Courts encourage the settlement of disputes by arbitration and judicial review of arbitration awards is, accordingly, far more restricted than appellate review of a trial court’s decision. Garver v. Ferguson,
Spencer contends that the arbitrator here exceeded his powers by disregarding the plain language of the sales contract that the “non-prevailing party” would pay “all reasonable costs, attorney’s fees and expenses incurred by the prevailing party.” In that regard, Spencer contends that because the arbitrator awarded her the $6,000 in earnest money she requested along with interest, and because the arbitrator assessed the costs of the arbitration to Ryland, she must be considered the prevailing party. Therefore, according to Spencer, the arbitrator exceeded his powers by ignoring the clear mandate of the sales agreement that the prevailing party be awarded attorney fees. As noted, the circuit court essentially agreed that Spencer was the prevailing party and should have been awarded attorney fees but, nevertheless, determined that the precedent set in Perkins required that the arbitration award stand.
In Perkins, the plaintiff restaurant purchased a used bakery oven from defendant. Perkins,
Arbitration proceedings were held over a period of five days and, on the last day, the arbitration panel asked the parties to provide additional briefs regarding the meaning of the words “prevailing party” and “non-prevailing party” as used in section 8.16 of the agreement. Perkins,
On appeal, plaintiff argued that the arbitrators exceeded their powers by failing to award fees as provided in section 8.16. Perkins,
“If *** the [arbitration] award is within the submission and contains the honest decision of the arbitrators, after a full and fair hearing, a court will not set it aside for errors of fact or law. (Rauh,143 Ill. 2d at 394-95 .) ‘A court may not set aside an arbitration award merely because the court would have reached a different result.’ [Water Pipe Extension, Bureau of Engineering Laborers’ Local Union 1092 v. City of Chicago,238 Ill. App. 3d 43 , 46,592 N.E.2d 483 (1992)].” Perkins,276 Ill. App. 3d at 310 ,657 N.E.2d at 1089 .
The court then affirmed the circuit court:
“The fee decision by the arbitrators is presumed valid and cannot be vitiated by even gross mistakes in law. As long as the arbitrators’ interpretation of the agreement is a reasonably possible one, courts will not set aside the award. Here, the arbitrators, after being fully briefed on the issue by both parties, determined that neither party was entitled to attorney fees. A court is not empowered to overturn or change an arbitration award even if a court would have reached a different conclusion from the language of section 8.16 and the legal definitions advanced. Section 8.16 was properly presented to and conclusively decided by the arbitration panel.” Perkins,276 Ill. App. 3d at 311 ,657 N.E.2d at 1089 .
While acknowledging that the cost and fee provision in Perkins is virtually identical to that in this case, Spencer nevertheless contends that Perkins is distinguishable. Spencer first points out that the arbitrators in Perkins made an express determination that neither party was entitled to attorney fees or costs, while, here, the arbitrator made no reference whatsoever to attorney fees in his award. Spencer also points out that, in Perkins, the arbitrators specifically asked the parties to address the meaning of “prevailing party.” Thus, the Perkins arbitration panel’s subsequent denial of costs and fees amounted to a tacit determination that, despite its $10,000 award to plaintiff, neither party qualified as a prevailing party. In contrast, Spencer points out that, here, the arbitrator never requested guidance regarding the meaning of “prevailing party.” Moreover, Spencer contends that the arbitrator in this case must have considered her the prevailing party because he awarded her the $6,000 she requested as well as the costs of the arbitration. In that regard, Spencer further points out that in Perkins, plaintiff sought over $1 million and was awarded only $10,000, while, here, Spencer was awarded the full amount she requested as a refund of her earnest money, but was merely denied additional compensation for her inconvenience and punitive damages.
While we agree that Perkins is factually distinguishable for the reasons Spencer points out, there is a remarkably greater, dispositive difference between Perkins and the instant case. In Perkins, the arbitration panel determined that neither party qualified as the “prevailing party” and, accordingly, awarded neither party costs or attorney fees. Thus, regardless of whether a court would agree with those arbitrators’ determination of who could qualify as a “prevailing party,” the arbitration award was consistent with the contract, which required that the prevailing party be reimbursed for costs and fees, and was, therefore, not subject to vacature. See Rauh,
As noted, the parties’ sales agreement stated that the “non-prevailing party” would pay “reasonable costs, attorney’s fees or expenses incurred by the prevailing party.” This provision is the basis for both costs and fees. The provision does not distinguish or leave room for any distinction to be made with respect to costs, as opposed to fees. It is an all-or-nothing provision. Either one prevails and therefore becomes entitled to fees, as well as costs, or does not prevail and is therefore not entitled to either costs or fees. Under this sales agreement, there is no basis whatsoever upon which to provide for the one without also providing for the other. See Perkins,
However, the arbitrator awarded costs and denied attorney fees, blatantly ignoring the undisputable fact that under the sales agreement the award of fees and costs travel in tandem, without any basis for differentiation. If a party is deemed to be the prevailing party so as to meet the award of costs, he ipso facto is the prevailing party for fees as well. Thus, the award shows on its face that the arbitrator was not attempting to follow the sales agreement, but was simply imposing his own compromise arbitrarily, without the semblance of contractual authorization. See Shearson,
Ryland, nevertheless, contends that, like in Perkins, Spencer is not entitled to attorney fees because she was not the prevailing party. Specifically, Ryland contends that Spencer cannot be considered the prevailing party because the arbitration award simply returned the parties to the same position they were in prior to the sales agreement without awarding Spencer any additional compensation. The dissent in this case makes a similar averment, that although Spencer prevailed in obtaining the return of her earnest money, she did not prevail in her claims for compensatory and punitive damages. In that regard, the dissent avers that since both parties won and lost claims — Ryland winning in the sense that it did not have to pay compensatory or punitive damages — neither party could be considered the prevailing party.
While we note that several courts have defined “prevailing party” in such a way that would clearly include Spencer (see Grossinger Motorcorp, Inc. v. American National Bank & Trust Co.,
The dissent, however, contends that there is no error apparent on the face of the arbitration ¿ward because paragraph 20 of the sales agreement can be read in such a way as to apply solely to “attorney fees,” “attorney costs” and “attorney expenses,” but not to arbitration costs. The dissent further contends that since such a reading is plausible, the sales agreement is ambiguous and, therefore, can only be interpreted by the arbitrator. See Nagle v. Nadelhoffer, Nagel, Kuhn, Mitchell, Moss & Saloga, P.C.,
As noted, paragraph 20 of the sales agreement states in its entirety: “Attorneys’ Fees and Costs. The non-prevailing party in any proceeding to enforce or contest any provision(s) of the Agreement of Sale shall pay all reasonable costs, attorney’s fees and expenses incurred by the prevailing party.” When read out of context, the title of this paragraph, by itself, could conceivably conform to the interpretation the dissent suggests, that, with regard to costs, only attorney’s costs are invoked to the exclusion of any other type of costs. However, there is no conceivable way that such an interpretation could be imposed on the substantive body of that paragraph. The paragraph first refers to “all reasonable costs,” and only then refers to “attorney’s fees.” Thus, the costs anticipated by this paragraph are not limited to those specifically involving an attorney. Rather, the paragraph clearly imparts that all costs are to be paid to the prevailing party by the nonprevailing party with the sole qualification on those costs being that they are reasonable. This reading comports with the plain language of the paragraph as well as with the rest of the contract (see generally 11 R. Lord, Williston on Contracts §§32:3, 32:4, 408-20 (4th ed. 1999)); the dissent’s interpretation does not.
CONCLUSION
Having determined that the arbitrator’s award in this case is facially inconsistent with the unambiguous language of the parties’ contract, we need not address Spencer’s additional public policy arguments. For the foregoing reasons, we reverse and remand for proceedings consistent with this opinion.
Reversed and remanded.
McBRIDE, EJ., concurs.
Dissenting Opinion
dissenting:
I respectfully dissent.
The majority concludes that error is apparent on the face of the award because the arbitrator assessed arbitration costs but not attorney fees. This is correct if paragraph 20 of the agreement is read to govern not only attorney fees, costs and expenses but arbitration costs as well. But paragraph 20 can be read as governing only “attorney fees,” “attorney costs” and “attorney expenses,” not arbitration costs. Earagraph 10 of the agreement, which addresses the topic of “Arbitration,” imposes no restrictions on how an arbitrator is to determine arbitration costs. Nor does paragraph 10 mention prevailing or non-prevailing parties. It is not unreasonable, in reading paragraphs 10 and 20 together, to conclude that the arbitrator must assess the costs, expenses and fees of attorneys to the prevailing party but has no constraints on the assignment of arbitration costs.
I am not suggesting that this reading is as sophisticated as that tendered by the majority; only that the language of the contract permits both readings and the possibility that an arbitrator could find an ambiguity within the agreement itself. Where there is ambiguity in a contract with an arbitration clause, the arbitrator is designated to interpret the ambiguity. Nagle,
Perkins Restaurants Operating Co. v. Van Den Bergh Foods Co.,
Here, Spencer prevailed in her pursuit of her earnest money and arbitration costs but lost on her claims for compensatory and punitive damages. Ryland prevailed in that it was not required to pay Spencer compensatory or punitive damages but was defeated in its effort to keep Spencer’s earnest money as damages for default. Both parties won and lost on claims. Under the reasoning in Perkins, neither Spencer nor Ryland was the prevailing party. Perkins,
“A court is not empowered to overturn or change an arbitration award even if a court would have reached a different conclusion from the language of [the agreement] and the legal definitions advanced.” Perkins,
The judgment of the circuit court, rendered reluctantly but correctly in adherence to Perkins, should be affirmed.
