Opinion ID: 2543734
Heading Depth: 2
Heading Rank: 2

Heading: appraisal and arbitration

Text: ¶ 31 Both parties have cited the Utah Arbitration Act (the Act), Utah Code Ann. §§ 78-31a-1 to -20, on which the courts below relied in making their rulings, in support of their respective arguments concerning the appraisal clause. Specifically, both parties present their arguments to this court as if the appraisal clause is tantamount to an arbitration clause. Accordingly, before we address the merits of the issues on appeal, we must determine whether an appraisal clause is essentially an arbitration clause to which the Act applies.
¶ 32 Arbitration is [a] method of dispute resolution involving one or more neutral third parties . . . whose decision is binding. Black's Law Dictionary 100 (7th ed.1999); see also Reed v. Davis County Sch. Dist., 892 P.2d 1063, 1065 (Utah Ct.App. 1995); 6 C.J.S. Arbitration § 1 (1975). Specifically, an arbitration is a broad, quasijudicial proceeding, complete with formal hearings, notice to parties, and testimony of witnesses. Hartford Lloyd's Ins. Co. v. Teachworth, 898 F.2d 1058, 1062 (5th Cir. 1990). In Utah, arbitration is governed by the Act, which delineates the rights of the parties in arbitration and sets forth the procedure for the courts and the arbitrators to follow. Utah Code Ann. §§ 78-31a-1 to -20 (1996). ¶ 33 Under the Act, parties can agree to arbitrate any controversy. Id. § 78-31a-3. Consequently, if a party show[s] the existence of an arbitration agreement, then the court shall order the parties to arbitrate. Id. § 78-31a-4(1). However, a court may only compel arbitration of issues that are within the scope of the matters covered by the agreement. Id. The arbitration agreement defines the scope of the controversy to be arbitrated. Pac. Dev., L.C. v. Orton, 2001 UT 36, ¶ 13, 23 P.3d 1035. ¶ 34 Once a court compels arbitration, the court must stay the action or proceeding involving the issue or issues subject to arbitration. Utah Code Ann. § 78-31a-4(3) (1996). According to the order compelling arbitration, an arbitration hearing is then held. Id. § 78-31a-7. At that hearing, each party may present evidence and examine witnesses. Id. Evaluating the evidence, arbitrators then make an award resolving the issues presented to them. Id. § 78-31a-10. The arbitration award is binding and enforceable in court. Id. § 78-31a-12; see also Reed, 892 P.2d at 1065.
¶ 35 Although appraisal may be used as another form of alternative dispute resolution, it is not arbitration. Appraisal, in a general sense, is defined as the determination of what constitutes a fair price; valuation; estimation of worth. Black's Law Dictionary 97 (7th ed.1999). An appraisal is an informal, independent investigation conducted by individuals who base their decisions on their own knowledge. Teachworth, 898 F.2d at 1062. An appraisal is conducted without hearing or judicial inquiry. 6 C.J.S. Arbitration § 3 (1975). In addition, unlike arbitration, appraisal ordinarily settles only a subsidiary or incidental matter rather than the main controversy as does an arbitration award. Id.; see also St. Paul Fire & Marine Ins. Co. v. Wright, 97 Nev. 308, 629 P.2d 1202, 1203 (1981) (An appraiser's power generally does not `encompass the disposition of the entire controversy between the parties . . . [but] extends merely to the resolution of the specific issues of actual cash value and the amount of loss.' (quoting In re Delmar Box Co., 309 N.Y. 60, 127 N.E.2d 808, 811 (1955))). ¶ 36 Further, unlike an arbitration award, an appraisal determination is not necessarily binding and enforceable in court. The appraisal determination is either evidence to be considered by the trial court or an award to be enforced, depending upon the contract terms. ¶ 37 Because of the intrinsic differences between arbitration and appraisal, we conclude that neither the Act nor our case law addressing arbitration agreements directly applies to appraisal.