Opinion
No. FST CV 05 4005488
December 20, 2005
MEMORANDUM OF DECISION
This case involves the arbitration of a dispute between owners of real property located at 17 Midwood Drive, Greenwich, and a builder of modular homes. The plaintiffs, Martin Nussbaum and Kane Nussbaum, claim that the defendant contractor, Kimberly Timbers, Ltd., did not have a "certificate of registration" nor did it provide the "written notice" required by General Statutes § 20-417d for new home construction contracts. The plaintiffs contend that as a result their contract with the defendant, which contained an arbitration agreement, is void as against public policy.
General Statutes § 20-417d(d) provides in pertinent part that "[n]o person shall . . . (5) engage in the business of a new home construction contractor or hold himself or herself out as a new home construction contractor without having a current certificate of registration . . ." Sec. 20-417d(a) requires that a new home construction contractor shall provide a "written notice" to a prospective purchaser advising that such a person should contact previous customers of the builder regarding the quality of the builder's work.²
The plaintiffs' claim that the defendant's motion to compel arbitration should be denied was reviewed by our Supreme Court in Nussbaum v. Kimberly Timbers, Ltd., 271 Conn. 65, 856 A.2d 364 (2004), The court decided that "the plaintiffs' claim that the contract is unenforceable is within the scope of the arbitration clause and must be decided initially by the arbitrator." Id., 75. On May 19, 2005, the arbitrator, William M. Mack, decided that the contract between the plaintiffs and the defendant was not void. The arbitrator found persuasive the fact that, unlike the Home Improvement Act, General Statutes § 20-418 et seq., General Statutes § 20-417d does not provide that violations thereof render the underlying contract between the parties void. It was also determined that the defendant procured a license to build new homes on or about April 14, 2000, which was prior to the execution of the contract between the plaintiffs and the defendant in May of 2000. It was also agreed that the contract did not comply with the notice requirements of General Statutes § 20-417d.
As to the merits of the underlying claim by the defendant contractor, the arbitrator determined that there was $74,192 due and owing on the contract and $73,117 for change orders for a total due of $147,309, less $105,592 due the plaintiffs for several items, including "delayed performance" and "uncompleted work." Thus, the arbitrator awarded a net total of $41,717 to the defendant contractor, and also determined that the defendant had substantially completed its obligations under the contract.
The defendant has moved (#108) to confirm this award. The plaintiffs have moved (#101) to vacate the award in part, confirm it in part and modify the award in part, relying primarily on the defendant's failure to comply with General Statutes § 20-417d and its requirement of written notice about contacting former customers of a new home builder.
The written contract between the plaintiffs and the defendant included a section 18 which provided that: "Any controversy or claim arising out of or relating to this Contract, or breach thereof, shall be settled by arbitration in accordance with Construction Industry Arbitration rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. The provisions of this paragraph shall survive the full performance of this Contract and completion of the home."
The starting point for ruling on the motions to confirm or to vacate the arbitrator's award is General Statutes § 52-408 which provides, in part, that: "An agreement in any written contract, . . . to settle by arbitration any controversy thereafter arising out of such contract, or out of the failure or refusal to perform the whole or any part thereof, . . . shall be valid, irrevocable and enforceable, except when there exists sufficient cause at law or in equity for the avoidance of written contracts generally." Connecticut has a clear public policy in favor of arbitrating disputes. "Arbitration is [a] favored [method of dispute resolution] because it is intended to avoid the formalities, delay, expense and vexation of ordinary litigation." New England Pipe Corp. v. Northeast Corridor Foundation, 271 Conn. 329, 337, 857 A.2d 348 (2004).
"The well established general rule is that [w]hen the parties agree to arbitration and establish the authority of the arbitrator through the terms of their submission, the extent of our judicial review of the award is delineated by the scope of the parties' agreement . . . When the scope of the submission is unrestricted, the resulting award is not subject to de novo review even for errors of law so long as the award conforms to the submission . . . Because we favor arbitration as a means of settling private disputes, we undertake judicial review of arbitration awards in a manner designed to minimize interference with an efficient and economical system of alternative dispute resolution . . . Furthermore, in applying this general rule of deference to an arbitrator's award, [e]very reasonable presumption and intendment will be made in favor of the [arbitral] award and of the arbitrators' acts and proceedings." (Citations omitted; internal quotation marks omitted.) State v. New England Health Care Employees Union, 271 Conn. 127, 134, 855 A.2d 964 (2004).
"Where the language of the arbitration clause indicates an intention on the part of the parties to include all controversies which may arise under their agreement, and where the record reveals no specific questions which the parties submitted to the arbitrator, the submission will be construed as unrestricted . . . A submission is deemed restricted only if the agreement contains express language restricting the breadth of issues, reserving explicit rights, or conditioning the award on court review." (Citations omitted; internal quotation marks omitted.) United States Fidelity Guaranty Co. v. Hutchinson, 244 Conn. 513, 519, 710 A.2d 1343 (1998). The contract in this case is an unrestricted submission to arbitration because it contains no such express language restricting the breadth of issues, reserving explicit rights, or conditioning the award on a court review.
Because the submission to arbitration in this case was unrestricted and voluntary, a review by a court is limited to a determination of whether the award conforms to the submission. The award in the present matter conforms to the submission which, as noted previously, refers to "[A]ny controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration . . ." The arbitrator's award of damages to both the plaintiffs and to the defendant clearly conformed to the broad language of the submission.
"Courts allow and encourage broad discretion for arbitrators. Awards resulting from erroneous interpretations of the agreement or the law generally will not be vacated where the submissions are unrestricted. With unrestricted submissions . . . arbitrators are not required to resolve the issues presented according to the law, and courts may not review the evidence that the arbitrators used as the basis for their awards . . . Despite the wide berth given to arbitrators and their powers of dispute resolution, courts recognize three grounds for vacating arbitration awards. As a routine matter, courts review de novo the question of whether any of those exceptions apply to a given award . . . The first ground for vacating an award is when the arbitrator has ruled on the constitutionality of a statute . . . The second acknowledged ground is when the award violates clear public policy . . . Those grounds for vacatur are denominated as common-law grounds . . . The third recognized ground for vacating an arbitration award is that the award contravenes one or more of the statutory proscriptions of [General Statutes] § 52-418." (Citations omitted; internal quotation marks omitted.) International Brotherhood of Police Officers, Local 361 v. Town of New Milford, 81 Conn.App. 726, 729-30, 841 A.2d 706 (2004).
General Statutes § 52-418 provides that an arbitration award may be vacated: "(1) If the award has been procured by corruption, fraud or undue means; (2) if there has been evident partiality or corruption on the part of any arbitrator; (3) if the arbitrators have been guilty of misconduct in . . . refusing to hear evidence pertinent and material to the controversy or of any other action by which the rights of any party have been prejudiced; or (4) if the arbitrators have exceeded their powers or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made."
² The arbitrator also noted that: "Since the contract herein was at most voidable rather than void outright, if [the plaintiffs] were to effectively claim that the contract herein should be declared void, they should have done so at the beginning. Now that the claimant [the defendant] has sufficiently performed the contract, and [the plaintiffs] have paid 90% of the contract price and are in possession of the home, it is far too late equitably, for the [plaintiffs] to claim that the contract was never valid in the first place."
The plaintiffs claim that the award should be vacated because it violated public policy regarding new home construction contracts. This argument may be entertained by a court based on the footnote in Nussbaum v. Kimberly Timbers, Ltd., supra, 271 Conn. 75, n. 7, where the court states: "We note that courts routinely consider public policy claims after they have been decided by arbitration." Whether a violation of the notice provisions of General Statutes § 20-417d renders this contract void as a matter of public policy is such an issue.
There are several more recent cases referring to Nussbaum v. Kimberly Timbers, Ltd., supra, 271 Conn. 65, including Thier v. Kenyon, 49 Conn.Sup. 346, 879 A.2d 917 (2005), where the contractors for a new home were not licensed under General Statutes § 20-417a. The court in that case, however, noted the Supreme Court's decision in Nussbaum where the court stated that arbitration clauses within contracts are, in effect, separate and distinct agreements, and are not effected by claimed infirmities in the contract. "The lack of a license may render unenforceable many of the provisions of the contract and arguably may prevent a contractor from lawfully entering into a contract to build a home, but it does not prevent a contractor from entering into an arbitration contract. If, in effect, the arbitration clauses constitute an entirely separate contract, which is what Nussbaum certainly seems to hold, then, at least on the facts apparent at this point, the arbitration clauses are enforceable." Id., 349-50.
In Granato v. Young, Docket No. CV 044000192, Judicial District of Tolland at Rockville, August 15, 2005, 39 Conn. L. Rptr. 776, 2005 Conn. Super. LEXIS 2213 (Conn.Super.Ct.), a case involving a home inspector who was unlicensed contrary to General Statutes § 20-492, the court endorses the analysis in Thier v. Kenyon, supra, 49 Conn.Sup. 346, that "arbitration clauses within contracts are, in effect, separate and distinct agreements."
Thus, the contract in this present case is not void or voidable for the reasons stated by the arbitrator. First, General Statutes § 20-417d does not require that a contract not in conformance with its provisions is void. Second, the plaintiffs in this case waited too long before asserting the invalidity of their contract with the defendant builder who, by that time, had substantially completed the work required by the contract.
According to another contention by the plaintiffs, the arbitrator exceeded his powers or so imperfectly executed them that a mutual, final and a definite award upon the subject matter has not been made. This claim is also unpersuasive. A definite and final award has been made by the arbitrator. There was no manifest disregard of the law in this case as the arbitrator concluded that General Statutes § 20-417d does not provide that a contract not in conformance with the statute is void.
As to the claim about the failure of the arbitrator to credit their evidence regarding the amounts paid to complete work on the new home, it is well established that: "Courts will not review the evidence . . ." (Internal quotation marks omitted.) AFSCME, Council 4, Local 3144 v. New Haven, 81 Conn.App. 532, 536, 840 A.2d 1205, cert. denied, 268 Conn. 924, 848 A.2d 472 (2004). It would be inappropriate for a court to search the evidence presented to the arbitrator in this case to determine if the arbitrator's factual findings are correct.
In conclusion, there is no valid reason to deny the defendant's motion to confirm the arbitrator's award in this case. The award conforms to the submission and the public policy grounds urged by the plaintiffs are not sufficient to overcome this state's clear policy of favoring arbitration to resolve disputes. Thus, motion #108 to confirm the award is granted and judgment may enter in favor of the defendant in the amount of $41,717, plus costs as taxed by the chief clerk. The plaintiffs' motion # 101 to vacate and modify the award is denied.
So Ordered.