Court Opinion

ID: 4226443
Source: CourtListenerOpinion
Date Created: 2017-12-06 21:15:11.348222+00
Date Added: 2024-06-11T09:36:44.802053
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                  No. COA17-416

                             Filed: 5 December 2017

Carteret County, No. 15-CVS-523

LEE VANDER THOMPSON, Plaintiff,

            v.

WALTER SPELLER, Defendant.

      Appeal by Unnamed Defendant from judgment entered 27 September 2016 by

Judge John E. Nobles, Jr. in Carteret County Superior Court. Heard in the Court of

Appeals 21 September 2017.

      Dodge Jones Law Firm, LLP, Robert C. Dodge, for the Plaintiff-Appellee.

      Harris, Creech, Ward & Blackerby, P.A., by Heather M. Beam and Jay C.
      Salsman, for the Unnamed Defendant-Appellant.

      DILLON, Judge.

      The Unnamed Defendant, North Carolina Farm Bureau Mutual Insurance

Company (“Farm Bureau”) appeals from a judgment entered by the trial court

confirming an arbitration award in favor of Lee Vander Thompson (“Plaintiff”). The

arbitration panel awarded Plaintiff $110,000. In confirming the award, the trial
                                     THOMPSON V. SPELLER

                                        Opinion of the Court

court also granted Plaintiff pre-award and post-award/pre-judgment1 interest on the

$110,000 figure, as well as approximately $1,100 in costs associated with the action.

For the following reasons, we affirm in part and reverse in part.

                                          I. Background

       In October 2013, Plaintiff and Walter Speller (“Defendant”) were involved in a

motor vehicle collision in which Plaintiff was injured. At the time of the accident,

Farm Bureau was Plaintiff’s underinsured motorist insurer. Under Plaintiff’s policy

(the “Policy”), Farm Bureau was obligated to pay compensatory damages to Plaintiff

in the event that Plaintiff was injured by an at-fault driver whose liability coverage

limits were too low to cover his damages.

       Following the accident, Plaintiff settled with Defendant’s liability insurance

carrier. Also, Farm Bureau advanced to Plaintiff a total of $35,000, which included

the following: (1) $5,000, the maximum medical payment under the Policy, and (2)

$30,000, representing the liability limits of Defendant’s liability policy.2 However,

because Farm Bureau and Plaintiff were ultimately unable to settle on the amount

       1   Our case law often refers to the interest which accumulates during the period before an
arbitration award is entered as “prejudgment interest.” In the interest of clarity, we refer to any
potential interest which accumulates before an arbitration award is entered as “pre-award interest.”
Any potential interest which accumulates after the entry of an arbitration award but before entry of
the trial court’s judgment confirming the award is referred to as “post-award/pre-judgment interest.”
        2 N.C. Gen. Stat. § 20-279.21(b)(4) requires an insurer to advance a payment to its insured in

an amount equal to the tentative settlement within thirty (30) days in order to preserve its right to
exercise any right of subrogation. N.C. Gen. Stat. § 20-279.21(b)(4) (2015).

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                                THOMPSON V. SPELLER

                                  Opinion of the Court

of total damages Plaintiff was entitled to recover, Plaintiff demanded arbitration

pursuant to the arbitration provision of the Policy.

      The case was heard by a three-member arbitration panel which rendered a

unanimous arbitration award of $110,000. The award specifically provided that

“[t]he arbitrators did not consider interest or costs in the determination of th[e]

award.” (Emphasis added.)

      Plaintiff filed a motion with the trial court for an order confirming the $110,000

arbitration award and for interest and costs. In confirming the arbitration award,

the trial court entered judgment for Plaintiff for $110,000 plus $8,000 in pre-award

interest (calculated from the filing of the complaint to the date of the arbitration

award) plus $805 in post-award/pre-judgment interest (calculated from the date of

the arbitration award to the date of the judgment confirming the award) plus $1,100

in costs. Farm Bureau timely appealed.

                                     II. Analysis

      On appeal, Farm Bureau makes no argument concerning the confirmation of

the $110,000 award. Rather, Farm Bureau argues that trial court exceeded its

authority when it awarded Plaintiff costs, pre-award interest, and post-award/pre-

judgment interest in its judgment confirming the arbitration award.

      Our Supreme Court has stated that our courts have very limited authority to

modify an arbitration award under our Revised Uniform Arbitration Act, codified in

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                                   Opinion of the Court

Article 45C of our General Statutes. Nucor Corp. v. General Bearing Corp., 333 N.C.
148, 155, 423 S.E.2d 747, 751 (1992) (noting that the Act is “virtually a self-contained,

self-sufficient code, [providing] controlling limitations upon the authority of our

courts to vacate, modify, or correct an arbitration award”); see also Cyclone Roofing

Co., Inc. v. David M. LaFave Co., Inc., 312 N.C. 224, 236, 321 S.E.2d 872, 880 (1984)

(holding that “[j]udicial review of an arbitration award is confined to determination

of whether there exists one of the specific grounds for [modification] of an award

under the Uniform Arbitration Act”).

      And our Supreme Court has specified that a trial court may modify an

arbitration award only where the arbitrators make (1) a mathematical error, (2) an

error relating to form, or (3) an error resulting from arbitrators’ exceeding their

authority. Id. at 236, 321 S.E.2d at 880; N.C. Gen. Stat. § 1-569.24 (2015). None of

these grounds, however, apply in the present case.

      On appeal, we must determine whether the trial court’s grant of (1) pre-award

interest, (2) post-award/pre-judgment interest, and (3) costs was proper. For the

reasons stated below, we conclude that the trial court’s grant of pre-award interest

and costs constituted an impermissible modification of the arbitration award. See

Eisinger v. Robinson, 164 N.C. App. 572, 576-77, 596 S.E.2d 831, 833-34 (2004).

However, we further conclude that the trial court’s grant of post-award interest was

appropriate.

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                                THOMPSON V. SPELLER

                                  Opinion of the Court

                          A. Pre-Award Interest and Costs

      We hold that the trial court exceeded its authority by adjudging that Plaintiff

was entitled to recover pre-award interest and costs in this case.

      In the absence of a policy exclusion, pre-award interest is considered part of

compensatory damages for which an uninsured motorist insurer may be liable. See

Baxley v. Nationwide Mutual Ins. Co., 334 N.C. 1, 11, 430 S.E.2d 895, 901 (1993)

(holding that “prejudgment interest . . . is within the term ‘damages’ as that term is

used in the UIM portion of plaintiff’s policy”). Whether to include pre-award interest

as part of compensatory damages is a matter within the authority of the arbitrators

– not the trial court – to decide. Hamby v. Williams, 196 N.C. App. 733, 736, 676
S.E.2d 478, 479 (2009) (applying Baxley in an arbitration context); Sprake v. Leche,

188 N.C. App. 322, 658 S.E.2d 490 (2008) (holding that the arbitration panel had

authority to award pre-award interest and the trial court properly confirmed the

arbitration award as written); Faison & Gillespie v. Lorant, 187 N.C. App. 567, 654
S.E.2d 47 (2007) (holding that an arbitrator’s authority was not exceeded by including

pre-award interest in an arbitration award).

      Typically, where the arbitration award fails to make any provision for pre-

award interest, “the trial court [is] obligated to confirm the award as written, unless

there was some mathematical error, error relating to form, or error resulting from

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                                   Opinion of the Court

the arbitrator exceeding his/her authority[.]” Palmer v. Duke Power Co., 129 N.C.

App. 488, 498, 499 S.E.2d 801, 807 (1998).

      A trial court may grant pre-award interest only if the arbitrators expressly

defer the issue of interest to the trial court’s discretion as part of their award. See

Lovin v. Byrd, 178 N.C. App. 381, 382, 631 S.E.2d 58, 59 (2006) (finding no error

where a trial court added pre-award interest where the arbitration award provided

that the issue of pre-award interest “is expressly left to counsel for the parties and a

Superior Court Judge . . . to decide”); see also Hamby, 196 N.C. App. at 738, 676 S.E.2d

at 481 (concluding that a grant by the trial court of pre-award interest is not a

modification of an arbitration award where the arbitrators expressly deferred the

issue to the trial court). In such cases, the trial court is merely enforcing the terms

of the arbitration award.

      Unlike in Lovin and Hamby, however, the arbitrators in the present case did

not expressly defer the issue of pre-award interest to the discretion of the trial court.

Here, the award simply provided that they “did not consider interest or costs in the

determination of th[e] award.” If the arbitration panel had wanted to authorize the

trial court to award pre-award interest and costs, it could have done so in its

arbitration award. But even if language to this effect was omitted in error by the

arbitrators, our Supreme Court has held that such a mistake is not, by, itself a

sufficient ground to set aside an award:

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                                    Opinion of the Court

              If an arbitrator makes a mistake, either as to law or fact, it
              is the misfortune of the party, and there is no help for it.
              There is no right of appeal, and the Court has no power to
              revise the decisions of “judges who are of the parties’ own
              choosing.” An award is intended to settle the matter in
              controversy, and thus save the expense of litigation. If a
              mistake be a sufficient ground for setting aside an award,
              it opens a door for coming into court in almost every case;
              for in nine cases out of ten some mistake either of law or
              fact may be suggested by the dissatisfied party. Thus the
              object of references would be defeated and arbitration
              instead of ending would tend to increase litigation.

Patton v. Garrett, 116 N.C. 847, 21 S.E. 679, 682–83 (1895) (citing Eaton v. Eaton, 43
N.C. 102, 106-07 (1851)).

       The trial court also lacked the authority to grant Plaintiff costs in this case.

Although N.C. Gen. Stat. § 1-569.25 does allow the trial court to include “reasonable

costs” in its judgment, these costs are limited to “reasonable costs of the motion [to

confirm the award]” filed by the party after the arbitration award is entered. See N.C.

Gen. Stat. §§ 1-569.22, 1-569.23, 1-569.24, 1-569.25. Here, however, the trial court

granted Plaintiff costs related to the filing of the original action, the cost of the court

reporter for depositions, an expert witness fee, and subpoena service fees.

       In sum, we conclude that the trial court’s modification of the arbitration award

requiring Farm Bureau to pay pre-award interest and costs to Plaintiff was error.

See Eisinger, 164 N.C. App. at 576, 596 S.E.2d at 834 (concluding that because

plaintiff’s request for pre-award interest and costs did not fall within any of the three

grounds permitting modification, the trial court was without authority to modify the

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                                THOMPSON V. SPELLER

                                   Opinion of the Court

award to include pre-award interest or costs); see also M. Domke, Domke on

Commercial Arbitration § 35:6 (3d ed. 2012) (“[C]ourts cannot add interest from a

date prior to the award, since this would infringe on the arbitrators’ authority.”).

                        B. Post-Award/Pre-Judgment Interest

      The trial court also awarded Plaintiff approximately $800 in post-award/pre-

judgment interest, calculated from the date of the arbitration award to the date Farm

Bureau paid Plaintiff in full. For the reasons detailed below, we conclude that the

trial court acted within its authority in granting interest from the date of the

arbitration award to the date of Farm Bureau’s payment to Plaintiff.

      Neither party cites a North Carolina case which directly addresses the power

of a trial court to grant interest which accrues after the arbitration award but before

the trial court enters judgment confirming the award.        The seminal treatise on

commercial arbitration states that, generally, a trial court does have the discretion to

grant interest which may accrue after the date of the award:

             If an arbitrator does not include a determination of interest
             in the award, courts have the discretion to award
             postarbitration award interest and postjudgment interest
             on actions to confirm arbitration award. . . . [G]enerally,
             prejudgment interest runs from the date of the arbitration
             award to the date that judgment is rendered, while
             postjudgment interest runs from the time that the award
             is confirmed.

M. Domke, Domke on Commercial Arbitration § 35:6 (3d ed. 2012). We agree with

this general rule as stated. The time it will take for the arbitrators’ award to be

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                               THOMPSON V. SPELLER

                                 Opinion of the Court

confirmed by a trial court is unknown to the arbitrators at the time they make the

award. Consider a situation in which an arbitration award is entered against an

insurer for $100,000, but the insurer obtains continuances such that the trial court

does not enter its judgment pursuant to N.C. Gen. Stat. § 1-569.25 for some period of

time. The arbitrators certainly could not anticipate this delay between the entry of

the arbitration award and the trial court’s entry of judgment on the award, and the

trial court should be allowed to compensate the insured for the “time value” of the

award between the time the award is made and the time the award is paid.

                                   III. Conclusion

      We affirm the trial court’s judgment confirming the $110,000 arbitration

award and its grant of post-award/pre-judgment interest. We reverse the trial court’s

grant of pre-award interest and costs.

      AFFIRMED IN PART, REVERSED IN PART.

      Judges HUNTER, JR., and ARROWOOD concur.

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