Snyder v. BERLINER CONSTRUCTION CO.

KARWACKI, Judge. Morris Snyder appeals from an order of the Circuit Court for Anne Arundel County which vacated an award that had been entered in his favor by the arbitrator of his contractual dispute with the appellee, Berliner Construction Co., Inc. (Berliner). Appellant’s challenge to that judgment arises under the following circumstances. In October of 1985, Berliner agreed to perform extensive renovations to an apartment house in Annapolis owned by appellant for $256,000.

Alleging defective workmanship by Berliner, appellant refused to pay the final $86,767.28 installment called for by their contract. Berliner then filed a petition to establish and enforce a mechanics’ lien in the amount of the unpaid installment plus interest. Appellant answered alleging inter alia that his contract with Berliner ³² required that all claims or disputes between the parties be submitted to arbitration. After a hearing, the court on May 20, 1987, issued an order pursuant to Md.Cts. & Jud.Proe.

Code Ann. § 3-209, staying all proceedings in the mechanics’ lien action pending the completion of the arbitration of the parties’ dispute. 1 Appellant, by letter dated July 6, 1987, submitted the dispute to the American Arbitration Association (AAA). This letter of submission averred that the appellee’s work was unacceptable and prayed for the following relief: [T]he remedy sought by the owner through arbitration is that a finding be made by the arbitrator that the work is not substantially complete, that defective work has not been remedied, that there has been a persistent failure to carry out the work in accordance with the contract documents, and that no money is due from the owner to the contractor. (Emphasis supplied). The appellant also enclosed a $500.00 check as “the administrative fee required based on the fact that no monetary claim is being made by the owner.” (Emphasis supplied).

Berliner, on July 20, 1987, sent its “Answer and Counterclaim” to AAA, claiming that all work performed under the contract was substantially free of fault and that the disputed $86,767.28 installment was therefore due and owing. AAA then apparently advised Berliner that because the question of liability for the installment had been put in issue by the appellant’s initial letter of submission, a counterclaim was unnecessary to assert any relief that Berliner was due. On this advice, Berliner withdrew its counterclaim, as indicated by a September 20, 1987 letter from the Tribunal Administrator of AAA to counsel for the parties, ³³ which stated in pertinent part: “This will confirm that [Berliner] wishes to withdraw [its] counterclaim but reserves the right to introduce same as a defense to the claim.” The arbitration hearing was held on October 26, 1987, and each party adduced evidence relating to appellee’s performance under the contract. This evidence obviously was introduced to establish appellant’s liability for the contested final installment or any part thereof.

The arbitrator on December 4, 1987 issued his order and opinion granting appellant’s claim that it was not liable to Berliner for the $86,767.28. In the same breath, however, the arbitrator stated that Berliner’s claim was meritorious, lacking only a request for monetary relief. The arbitrator concluded that he did “not have the authority to award monies to [Berliner]” since the counterclaim in which Berliner requested such relief had been withdrawn. He nevertheless granted appellant a monetary award of $1,500.00, “in full settlement of all claims submitted.” Unsatisfied with this result, Berliner, on January 8, 1988, returned to the Circuit Court for Anne Arundel County and moved in the alternative that the original May 20, 1987 stay of its petition to enforce mechanics’ lien be lifted or that the arbitrator’s award be vacated.

Finding the arbitrator’s award “clearly irrational,” the trial court (Cawood, J.) vacated the award and remanded the case to AAA for a determination of appellant’s liability to Berliner, if any. In a timely appeal from that order, appellant raises the following question for our review: Whether an arbitrator’s award which specifically states that it “is in full settlement of all claims submitted to this arbitration” can be considered “completely irrational” if the losing party voluntarily withdrew a counterclaim pr[i]or to the arbitration and presented the same as a matter of defense to the action. We shall affirm for the reasons we now explain. The Court of Appeals in Charles J. Frank, Inc. v. Associated Jewish Charities of Baltimore, Inc., 294 Md. 443 , 450 ³⁴ A.2d 1304 (1982), succinctly defined arbitration as “the process whereby parties voluntarily agree to substitute a private tribunal for the public tribunal otherwise available to them.” Id. at 448, 450 A.2d 1304 .

As the trial judge in the instant case observed in his written opinion, “The full panoplies of Court proceedings are often cumbersome and expensive, and efforts to alleviate these [burdens] are to be applauded.” By affording parties an inexpensive and expedited process by which to resolve their disputes, arbitration also conserves the State’s heavily taxed judicial resources. Moreover, arbitration offers the parties an opportunity to submit disputes to an arbitrator who is experienced in the parties’ field of business and thus sensitive to the parties’ individualized needs. Recognizing the many benefits of consensual arbitration, the Legislature in 1965 enacted the Maryland Uniform Arbitration Act (MUAA), codified at Md.Cts. & Jud.Proc. Code Ann. §§ 3-201 through 3-234 (1984 & Supp.1988), encouraging creation and enforcement of arbitration agreements.

See Gold Coast Mall, Inc. v. Larmar Corp., 298 Md. 96, 103 , 468 A.2d 91 (1984); Aetna Cas. & Sur. Co. v. Ins. Comm’r., 293 Md. 409, 421 , 445 A.2d 14 (1982). We held in Bel Pre Medical Center, Inc. v. Frederick Contractors, Inc., 21 Md.App. 307 , 320 A.2d 558 (1974), rev’d on other grounds, 274 Md. 307 , 334 A.2d 526 (1975), that with this legislation the “General Assembly established a policy in favor of the settlement of disputes through the arbitration process and ended the ambivalence of courts under the common law____ [S]uits to compel arbitration and suits to stay court action pending arbitration are now to be viewed as ‘favored’ actions.” Id. at 320 , 320 A.2d 558 .

To encourage arbitration as a method of alternative dispute resolution, both the legislature and appellate courts of this State have narrowly circumscribed the scope of judicial review available upon the merits of an arbitrator’s award. Bd. of Ed. of Prince George’s County v. Prince George’s County Educators’ Assoc., Inc., 309 Md. 85, 98 , 522 A.2d 931 (1987) (extensive judicial review would defeat the pur ³⁵ pose of simple and inexpensive arbitration). The Court of Appeals in Prince George’s County Educators’ Assoc., Inc., explained the rationale for giving such deference to the decisions of arbitrators: Arbitrators are judges chosen by the parties to decide the matters submitted to them, finally and without appeal. As a mode of settling disputes, it should receive every encouragement from courts of equity.

If the award is within the submission, and contains the honest decision of the arbitrators, after a full and fair hearing of the parties, a court of equity will not set it aside for error, either in law or fact. A contrary course would be a substitution of the judgment of the chancellor in place of the judges chosen by the parties, and would make an award the commencement, not the end, of litigation. 309 Md. at 98 , 522 A.2d 931 (quoting Burchell v. Marsh, 17 How. 344, 349 , 15 L.Ed. 96 (1854)). We similarly stated in Southern Maryland Hospital Center v. Edward M. Crough, Inc., 48 Md.App. 401 , 427 A.2d 1051 (1981), cert. denied, 290 Md. 721 (1981), that [i]n reviewing the determination of an arbitration panel it has been held that a mere error in the laws or failure on the part of the arbitrators to understand or apply the law will not justify judicial intervention, and the courts’ function in confirming or vacating a commercial award is “severely limited.” Id. at 407, 427 A.2d 1051 (citation omitted). See Parr Constr.

Co. v. Pomer, 217 Md. 539, 543-44 , 144 A.2d 69 (1958) (“award will not be set aside for any mistake of law or fact”). Section 3-224(c) of the MUAA, moreover, mandates that “[t]he court shall not vacate the award or refuse to confirm the award on the ground that a court of law or equity could not or would not grant the same relief.” Even an arbitrator’s arbitrary interpretation of a contract must generally be accepted by the courts. O.S. Corp. v. Samuel A. Kroll, Inc., 29 Md.App. 406, 410 , 348 A.2d 870 (1975). Nevertheless, the legislature has empowered the courts to modify or vacate an arbitrator’s award under a number ³⁶ of narrowly defined circumstances.

Section 3-223 of the MUAA provides that the court shall modify or correct an arbitrator’s award if: (1) There was an evident miscalculation of figures or an evident mistake in the description of any person, thing, or property referred to in the award; (2) The arbitrators have awarded upon a matter not submitted to them and the award may be corrected without affecting the merits of the decision upon the issues submitted; or (3) The award is imperfect in a matter of form, not affecting the merits of the controversy. Section 3-224(b) further provides that an arbitrator’s award will be vacated if: (1) An award was procured by corruption, fraud, or other undue means; (2) There was evident partiality by an arbitrator appointed as a neutral, corruption in any arbitrator, or misconduct prejudicing the rights of any party; (3) The arbitrators exceeded their powers; (4) The arbitrators refused to postpone the