Case Title: Stephens III v. Applejack Art Partners, Inc.

Citation: 

Docket Number: 2010-089

State: vermont

Court: Vermont Supreme Court

Date: 2011-04-05T00:00:00Z

Document:
2011 VT 40













Stephens III v. Applejack Art Partners, Appelman,
Young and Colvin (2010-089)
 
2011 VT 40
 
[Filed 05-Apr-2011]
 
ENTRY ORDER
 
2011 VT 40
 
SUPREME COURT
  DOCKET NO. 2010-089
 
OCTOBER TERM, 2010 
 
Albert Leonard Stephens III
}
APPEALED FROM:
 
}
 
  v.
}
 Bennington Superior Court
 
}
 
Applejack Art Partners, Inc.,
  Jack P. Appelman, Aaron S. Young and William Colvin
}
}
DOCKET NO. 269-7-08 Bncv
 
 
Trial Judge:  John P. Wesley
 
In the above-entitled
cause, the Clerk will enter:
 
¶ 1.            
Defendant Applejack Art Partners, Inc., appeals from the trial court's
order enforcing an arbitration award and entering judgment in plaintiff's favor
for $1,538,164.50 plus interest.  It argues that the court erred by: (1)
failing to remand the case to the arbitrator for clarification; and (2)
ordering immediate payment of the full amount due.  We affirm.
¶ 2.            
Applejack Art Partners, Inc., is a Vermont
corporation whose primary business is the production and sale of artwork. 
Plaintiff began working with the company in September
2006 and subsequently invested $1,125,000 in the company in exchange for stock
shares.  In April 2008, Applejack terminated plaintiff's employment. 
Plaintiff filed suit against defendants Applejack, Jack P. Appelman,
Aaron S. Young, and William Colvin; and Applejack counterclaimed. 
Applejack also sought an order enforcing its right to repurchase plaintiff's
stock.  The parties engaged in binding arbitration and following four days
of evidentiary hearings, the arbitrator issued his decision.  He found as
follows.  In October 2006, plaintiff executed an employment contract,
stock purchase agreement, and shareholders' agreement.  Pursuant to the
stockholder's agreement, the executive stockholders (Jack Appelman,
Aaron Young, and Applejack) had the right to buy out plaintiff's shares in the
event that plaintiff's employment was terminated.  The agreement
identified a specific formula for valuing the stock shares.  It also
provided that Applejack could either pay for the stock in full or provide a 10%
down payment and a promissory note for payment of the balance in three equal
annual installments, plus interest.  
¶ 3.            
Following plaintiff's termination, Applejack proposed to purchase
plaintiff's shares for $1,538,164.50.  Plaintiff refused, in part because
he misunderstood the terms of the stock purchase agreement.  The
arbitrator concluded that Applejack had the right to buy the shares at the price
cited above, and it ordered plaintiff to transfer his stock into an escrow
account, pending full performance of all payment obligations.  Applejack
was directed to provide plaintiff the cash down payment within thirty days of
the final arbitration order and to provide plaintiff with a promissory note for
three equal annual payments commencing one year after the down payment. 
The arbitrator noted that he had not accelerated the payments because
plaintiff, not Applejack, was responsible for the delay in closing that had
occurred to date.  The arbitrator issued his final award in September
2009.  The superior court confirmed the award in October 2009.  In
December 2009, the court entered judgment on the order pursuant to 12 V.S.A. §
5679.  Specifically, it entered judgment of specific performance requiring
plaintiff and Applejack to attend a closing no later than November 14, 2009, at
which time plaintiff would provide all documents required to convey his stock
ownership, and Applejack would convey $153,816.45, plus a promissory note in
the amount of $1,384,348.05 using the promissory note form that had been
attached to the final arbitration award.  
¶ 4.            
Applejack did not meet its obligation on the first payment and plaintiff
brought an enforcement action.  Plaintiff sought both a judgment
confirming the arbitration award as well as an immediate judgment for all
amounts awarded by the arbitrator due to Applejack's default.  The court
granted plaintiff's request.  It found that Applejack's default went to
the essence of the arbitrator's award and that Applejack could not now resort
to the terms of the promissory note to delay its payments.  It would be an
unreasonable construction of the award, the court explained, to conclude that
Applejack was entitled to the benefit of the installment payments contemplated
by the promissory note when it completely failed to tender the initial payment
due at the closing.  Given Applejack's fundamental default, the court
found that the only just construction of the arbitrator's award compelled the
conclusion that the judgment be entered in the full amount contemplated. 
The court's interpretation was informed by the arbitrator's inclusion of an
acceleration clause in the promissory note, the note that Applejack would have
been required to tender had it been prepared to fulfill its other obligations
at the closing required by the award.  
¶ 5.            
The court rejected Applejack's argument that it was usurping the
authority of the arbitrator by imposing terms "clearly at odds" with the
arbitration award.  To the contrary, the court found that its remedy was
entirely in keeping with the careful relief constructed by the
arbitrator.  In short, the court reasoned that by failing to comply with
the expectation of a cash payment at the closing required by the arbitration
award, Applejack forfeited any claim to the further deferral of payments to
which it would have been entitled had it tendered the first payment.  The
court thus ordered judgment against Applejack in the amount of $1,538,164.50,
plus interest accruing from November 14, 2009.  Applejack appealed.
¶ 6.            
Applejack argues that the court should have remanded this case to the
arbitrator for clarification, although it is not clear what part of the award
Applejack believes is ambiguous.  Applejack also suggests, apparently for
the first time on appeal, thatnotwithstanding the arbitrator's
decisionplaintiff should simply keep the stock shares because Applejack is
unable to pay for them.  Finally, Applejack asserts that the court erred
in ordering full payment of the award.  It suggests that, by doing so, the
court modified the arbitration award under Vermont Rule of Civil Procedure
60(b) without authority to do so.  It also argues that there was no clear basis
for accelerating the payments due.  
¶ 7.            
Applejack's arguments are without merit.  Arbitration awards are
remanded only under very limited circumstances, including when the award is
incomplete or ambiguous.  Ottley v. Schwartzberg, 819 F.2d 373, 376 (2d Cir. 1987). 
The purpose of such a remand is to enable the court to "know exactly what it is
being asked to enforce."  Id. (quotation omitted).  There was
no ambiguity in the arbitrator's award here and no need for a remand.  The
arbitrator ordered the parties to attend a closing by November 14, at which
time they would exchange the stock certificates for a cash payment and a
promissory note.  Applejack defaulted on its obligation.  It provided
plaintiff neither the cash payment nor the promissory note.  The only
remaining question was the remedy for Applejack's default and that was a
question for the trial court, not the arbitrator.  See 12 V.S.A. § 5679
("Upon the granting of an order confirming or modifying an [arbitration] award,
judgment shall be entered in conformity therewith and be enforced as any other
judgment.").  As in Ottley, "we are
directed to no authority for the proposition that arbitrators may review
compliance with their own awards."  819 F.2d  at 376. 
In fact, as the Ottley court recognized, the
general rule is to the contrary"once an arbitration panel decides the
submitted issues, it becomes functus
officio and lacks any further power to act."  Id. (quotation
omitted).  We find Applejack's attempt to rewrite the arbitration award
equally unavailing.  While it might prefer that plaintiff keep his shares,
plaintiff has a judgment order entitling him to payment.  The trial court
was asked to enforce this award, and it was plainly authorized to grant the
relief requested.  
¶ 8.            
Finally, the court did not modify the arbitration award under V.R.C.P.
60(b), as Applejack suggests.  It merely enforced it.  Its decision
is consistent with the underlying award, and the court acted well within its
discretion in ordering Applejack to pay the full amount due as a consequence of
its default.  As the superior court explained, Applejack's default went to
the heart of the agreement between the parties.  Moreover, the promissory
note endorsed by the arbitratorhad it been provideddid contain an
acceleration clause.  Indeed, the arbitrator noted that, at the time of
his decision, he had chosen not to accelerate the payments because up to that
point, plaintiff was responsible for the delay in closing.  The opposite
is true now, and it was fair and reasonable to hold Applejack immediately
responsible for its full obligation to plaintiff.  None of the cases cited
by Applejack persuade us otherwise.  None involve facts similar to those
presented here.  See, e.g., Briggs v. Briggs, 711 A.2d 1286, 1289
(Me. 1998) (construing terms of promissory note that provided only for fixed
succession of installment payments and included no right to accelerate such
installment obligations); Hills v. Gardner Sav. Inst., 309 A.2d 877, 882-83 (Me. 1973) (same).  We are not here
construing the terms of a promissory note.  Rather, as previously
discussed, plaintiff holds a judgment order that entitles him to specific
performance, and Applejack failed to perform its obligation under that
order.  The court imposed an appropriate remedy for Applejack's default,
and there was no error.  
Affirmed.
 
BY THE COURT:
 
 
 
 
 
 
 
Paul L. Reiber,
  Chief Justice
 
 
  
 
 
John A. Dooley, Associate
  Justice
  
 
 
 
 
Denise R. Johnson,
  Associate Justice
 
 
 
 
 
Marilyn S. Skoglund, Associate Justice
 
 
 
 
 
Brian L. Burgess, Associate
  Justice