Sewart v. Silvercryst Ltd.
Sewart v. Silvercryst Ltd.
Opinion of the Court
¶ 1. Michael and Lynn Sewart appeal from an order denying their motion for confirmation of
FACTS
¶ 2. On February 28, 2003, Michael and Lynn Sewart purchased a newly constructed home from the seller Silvercryst Limited, Inc. Shortly after buying the house, the Sewarts began to experience flooding in their basement and alerted Silvercryst. Silvercryst failed to remedy the situation, and the flooding continued into 2005. The Sewarts invoked the arbitration clause found in their home purchase contract.
Arbitration Agreement
¶ 3. The Sewarts and Silvercryst executed a written arbitration agreement on July 5, 2006. The agreement provided that the controversy would be submitted to the Construction Arbitration Board (CAB) of the Metropolitan Builders Association (MBA) for a hearing and decision utilizing the "procedures" of the CAB. The arbitration agreement expressly provided that "any decision requiring the payment of money may be entered as a judgment by a court of competent jurisdiction if payment is not made pursuant to the ruling of the arbitrators."
¶ 4. The CAB Complaint Processing Procedures set forth the steps of the arbitration process. Initially,
November 15, 2006 Award
¶ 5. On November 7, 2006, a hearing was held before the CAB. The hearing was memorialized in a three-page award dated November 15, 2006. The award found that there was an excessive amount of water flowing into the Sewarts' basement and that Silvercryst knew of this problem during the construction of the home, yet failed to disclose it to the Sewarts when they purchased the property. Instead of awarding monetary damages to the Sewarts, the CAB gave Silvercryst the opportunity to repair the basement. The CAB also ordered Silvercryst to complete all of the necessary repair work within ninety days (barring delays), and to provide the Sewarts with a one-year warranty against water infiltration from the date the work was completed. Finally, the award noted that the CAB retained the "right to assign monetary values to any items of work not completed in a timely fashion," and that monetary awards represent the CAB's "final decision on a particular issue."
¶ 6. Weather delays and disagreements over the quality of the repair work ensued, and the dispute between the Sewarts and Silvercryst dragged on for the
July 15, 2008 Ruling
¶ 7. On July 7, 2008, the CAB performed a site inspection at the Sewart residence. In a written report dated July 15, 2008, the CAB ruled that Silvercryst had thirty days to disconnect the downspouts and install bentonite at the Sewarts
¶ 8. While Silvercryst performed repair work, it was not to the satisfaction of the Sewarts and on December 28, 2008, the Sewarts' basement flooded again. The Sewarts informed the CAB of the flooding and provided a cost estimate for installing a drainage system. On February 16, 2009, Silvercryst wrote to the CAB/MBA and stated that the December 28, 2008 flooding was due to "severe and unusual weather," that the CAB/MBA did not have jurisdiction over the matter because the Sewarts failed to reduce the original arbitration award to a judgment, and that Silvercryst was no longer a member of the MBA and therefore the CAB/MBA did not have legal authority over Silvercryst.
¶ 9. The CAB responded to the parties on March 10, 2009, and indicated it would review all of the
May 13, 2009 Decision
¶ 10. On May 13, 2009, the CAB issued another written decision. The decision rejected Silvercryst's claim that the CAB lost jurisdiction, finding that Silvercryst's departure from the MBA was irrelevant given that both parties signed an arbitration agreement. The arbitrators also found that the flooding in the Sewarts' home on December 28, 2008 was not caused by extraordinary weather. Finally, the CAB awarded $92,030.93 in damages to the Sewarts.
¶ 11. On May 21, 2009, the Sewarts filed a petition in circuit court to confirm the arbitration award pursuant to Wis. Stat. § 788.09 (2007-08).
At any time within one year after the award is made any party to the arbitration may apply to the court in and for the county within which such award was made for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified or corrected under s. 788.10 or 788.11. Notice in writing of the application shall be served upon the adverse party or the adverse party's attorney 5 days before the hearing thereof.
The circuit court denied the petition for confirmation finding that § 788.09 required the Sewarts to confirm the November 15, 2006 arbitration award within one
¶ 12. Two issues are presented to us on appeal: (1) did the CAB lose "jurisdiction" when the Sewarts did not confirm the November 15, 2006 arbitration award within a year?; and (2) is Silvercryst estopped from asserting the defense of untimely confirmation? In the event that this court reverses the circuit court, Silvercryst cross-appeals and argues that the award should be vacated as the arbitrators were biased.
STANDARD OF REVIEW
¶ 13. Our role in reviewing an arbitration award is supervisory in nature. City of Madison v. Madison Prof'l Police Officers Ass'n, 144 Wis. 2d 576, 585, 425 N.W.2d 8 (1988). We want to ensure that the parties receive the arbitration process they contracted for. Id. at 585-86. Furthermore, arbitration awards are presumed to be valid, and the invalidity of the award must be demonstrated by clear and convincing evidence. Milwaukee Bd. of Sch. Dirs. v. Milwaukee Teachers' Educ. Ass'n, 93 Wis. 2d 415, 422, 287 N.W.2d 131 (1980).
¶ 14. While arbitrators obtain their authority from a contract, the task of interpreting the contract to determine whether the arbitrators have jurisdiction is for a court. Joint Sch. Dist. No. 10 v. Jefferson Educ. Ass'n, 78 Wis. 2d 94, 101, 253 N.W.2d 536 (1977). When we review an arbitration contract, however, we must exercise great caution. See id. at 111. We have no business weighing the merits of the dispute because the parties bargained for the arbitrators' decision, not ours. Id.
The CAB's Jurisdiction Over the Arbitration Proceedings
¶ 15. Whether the CAB lost jurisdiction on November 15, 2007, requires examination of the arbitration agreement. The parties expressly agreed to have the CAB hear and decide the dispute pursuant to the CAB's procedures which included an "opportunity to make repairs" remedy rather than a monetary award. Paragraph fifteen of the CAB's Complaint Processing Procedures states that "[t]he Contractor [Silvercryst] shall be given the opportunity to make repairs if required by the Decision." This "opportunity to make repairs" provision is a contractual agreement that presumably benefits both the Sewarts and Silvercryst; the Sewarts have an independent body to determine whether repairs need to be made and Silvercryst obtains the possibility of cost savings by doing the repairs itself. Both parties also avoid the time and expense incurred in the litigation process.
¶ 16. The parties also contractually agreed that in the event an "opportunity to make repairs" decision was issued, the CAB would retain the authority to ensure that the repairs were properly performed by Silvercryst and that the Sewarts did not frustrate Silvercryst's opportunity to repair the basement. Paragraph sixteen of the Complaint Processing Procedures expressly gave the CAB the authority to issue a monetary award if Silvercryst failed to make the necessary repairs, or alternatively required no further action by Silvercryst if the Sewarts failed to cooperate:
The CAB retains jurisdiction and may take any action it deems necessary in order to enforce its Decision. If either party fails to complete any items required as part of the Decision within the time frame specified*782 in the Decision, the CAB retains the authority and jurisdiction to make a Supplemental Decision.
¶ 17. On November 15, 2006, the CAB issued an "opportunity to make repairs" decision. The CAB reserved the right, as provided by the arbitration agreement, to assign monetary values in the future if Silvercryst did not make the required repairs. Additionally, the CAB had the power to require no further action by Silvercryst if the Sewarts failed to cooperate. On July 15, 2008, the CAB found that Silvercryst failed to comply with the November 15, 2006 decision, and thus issued a supplemental decision ordering Silvercryst to fix the flooding problem within thirty days. While further repair attempts were made, the CAB ultimately determined that Silvercryst failed in its "opportunity to make repairs," and issued a monetary award to the Sewarts on May 13, 2009.
¶ 18. The circuit court found that the CAB lost jurisdiction on November 15, 2007. Examining the arbitration agreement entered into by the parties, this court concludes that the Sewarts and Silvercryst bargained for the continuing arbitration process that the CAB engaged in. The parties agreed that an "opportunity to make repairs" option would be one of the benefits of their agreement. Both parties agreed that the failure to make the necessary repairs could result in a monetary award that was confirmable in court.
¶ 19. Wisconsin courts encourage arbitration. See McKenzie v. Warmka, 81 Wis. 2d 591, 598, 260 N.W.2d 752 (1978). Arbitration must, however, be final prior to it coming to the court for confirmation. Id. at 599. Seeking to confirm an arbitration award that is not final would lead to additional litigation, a result con
¶ 20. Silvercryst argues that the arbitration agreement conflicts with Wis. Stat. § 788.09 because the agreement allows for the continuing jurisdiction of the arbitration board. While it is true that a private arbitration agreement cannot violate Wisconsin arbitration statutes, see City of Madison v. Frank Lloyd Wright Found., 20 Wis. 2d 361, 383-84, 122 N.W.2d 409 (1963),
Estoppel
¶ 22. On June 30, 2008, nineteen months after the November 15, 2006 decision and prior to the CAB issuing a supplemental decision, Silvercryst asked the CAB to reconsider its original November 15, 2006 decision. This court has held that participation in the arbitration process can estopp a party from later challenging the arbitration agreement. See Pilgrim Inv. Corp. v. Reed, 156 Wis. 2d 677, 685-86, 457 N.W.2d 544 (Ct. App. 1990). From November 2007 through early 2009, Silvercryst continued to participate in the arbi
Arbitrator Impartiality
¶ 23. Finally, Silvercryst seeks to vacate the CAB's decision on the grounds that the arbitration board was not impartial. We start with the presumption that all arbitrators are neutral. See Borst v. Allstate Ins. Co., 2006 WI 70, 3, 291 Wis. 2d 361, 717 N.W.2d 42. While this presumption can be rebutted, Silvercryst has not demonstrated that the arbitrators were biased. Initially, we note that the circuit court judge did not find any evidence of bias amongst the arbitrators. As a rule, this court will not set aside factual findings by the circuit court unless we find them "clearly erroneous." Wis. Stat. § 805.17(2). Aside from a few e-mails from the arbitrators who appeared frustrated with the length of time Silvercryst was taking to make the repairs, Silvercryst offers no evidence that the arbitrators were biased.
¶ 24. The role of a court when examining arbitration proceedings is to ensure that the parties receive the arbitration process they contracted for. See Professional Police Officers Ass'n, 144 Wis. 2d at 586. The Sewarts and Silvercryst agreed to the CAB arbitration process. Contractually, the CAB's arbitration procedures provided for an interim order (the "opportunity to make repairs" period). As Chapter 788 of the Wisconsin Statutes does not prevent parties from contracting for an arbitration agreement that provides for continuing jurisdiction following interim orders, the Sewarts were entitled to confirm the final monetary award of $92,030.93. We thus reverse the circuit court's order that the Sewarts' motion for confirmation of the arbitration award was untimely filed, and remand to the circuit court to confirm the arbitration award pursuant to Wis. Stat. § 788.09 and the parties' agreement.
By the court. — Order reversed and cause remanded with directions.
All references to the Wisconsin Statutes are to the 2007-08 version unless otherwise noted.
Note that Wis. Stat. ch. 788 was previously numbered Wis. Stat. ch 298.
While the November 15, 2006 decision does stipulate at the end that "THE ABOVE AWARD IS THE DECISION OF
Additionally, both decisions stated that "[m]onetary sums awarded by the [CAB] represent the [CAB's] final decision on a particular issue."
Silvercryst cites two e-mails as evidence of the CAB's bias. One was from a CAB member to the MBA's Director of Consumer Affairs. On June 12, 2008, the board member stated that the arbitrators would not give Silvercryst any more extensions due to weather, "I don't care, [Silvercryst] can watch and pay." Then, on July 23, 2008, the Director wrote to an unidentified person that the arbitration proceedings are "going to get ugly," and that the CAB "is holding [Silvercryst] responsible."
Case-law data current through December 31, 2025. Source: CourtListener bulk data.