This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1998).
IN COURT OF APPEALS
E & H Earth Movers, Inc.,
Builder’s Mortgage Corporation,
Affirmed in part and reversed in part.
Washington County District Court
File No. C6971576
Robert J. Huber, Leonard, Street and Deinard, 150 South Fifth Street, Suite 2300, Minneapolis, MN 55402 (for respondent)
Michael C. Flom, Charles K. Maier, Gray, Plant, Mooty, Mooty & Bennett, P.A., 3400 City Center, 33 South Sixth Street, Minneapolis, MN 55402 (for appellant)
Considered and decided by Anderson, Presiding Judge, Schumacher, Judge, and Peterson, Judge.
Appellant Waland Companies seeks review of a judgment confirming an arbitration award in favor of respondent E & H Earth Movers, Inc., and awarding E & H attorney fees. We affirm the confirmation of the arbitration award, but reverse the portion of the attorney-fee award attributable to fees incurred in an earlier appeal in the underlying mechanic’s-lien-foreclosure action.
Waland, a real-estate developer, purchased a parcel of undeveloped land and subdivided the parcel into ten residential lots. Waland then contracted with E & H to grade the lots and perform other site-preparation work. The contract price was $74,998.75.
After a dispute arose over whether E & H properly performed its work under the contract, E & H commenced an action to foreclose a mechanic’s lien on the property. The complaint also included a breach-of-contract claim. Waland counterclaimed, asserting that E & H had materially breached the contract. Waland also challenged the validity of E & H’s mechanic’s lien on grounds that E & H failed to give prelien notice and that the lien amount was overstated. The district court concluded that the lien was invalid because E & H had not given prelien notice as required by Minn. Stat. § 514.011 (1996) and granted Waland’s motion for partial summary judgment. E & H appealed, and this court reversed and reinstated the lien.
E & H and Waland agreed to arbitrate all claims and counterclaims, except for the validity of the lien and attorney fees, which were reserved for the court. E & H presented a demand for arbitration, and Waland presented an answering statement, in which it asserted a counterclaim. An arbitration hearing was held before a panel of three arbitrators on December 21-22, 1998.
On December 30, 1998, Waland received a letter from the Minnesota Pollution Control Agency (MPCA), which indicated that a sediment basin in the development “was designed and built without adequate treatment volume.” Because Waland believed that the letter was directly relevant to its claim that E & H’s work was deficient, it moved to reopen the hearing to consider “newly discovered material evidence.”
On January 25, 1999, the arbitrators denied Waland’s motion to reopen the hearing and awarded E & H $86,867.27 on its claim plus $2,622.25 for administrative expenses and $4,391.60 in arbitrators’ compensation.
E & H moved the district court to confirm the arbitration award and for an award of attorney fees. Waland moved to vacate the arbitration award and opposed E & H’s request for attorney fees. The district court denied Waland’s motion to vacate, confirmed the arbitration award, and awarded E & H $57,448.57 for attorney fees, which included $16,291.25 for fees incurred in the earlier appeal to this court in the mechanic’s-lien-foreclosure action.
D E C I S I O N
An appeal from an arbitration decision is subject to limited review and the reviewing court must exercise “[e]very reasonable presumption” in favor of the arbitration’s finality and validity. State, Office of the State Auditor v. Minnesota Ass’n. of Prof’l Employees, 504 N.W.2d 751, 754 (Minn. 1993). A party seeking to vacate an arbitration award has the burden of proving the invalidity of the award. National Indem. Co. v. Farm Bureau Mut. Ins. Co., 348 N.W.2d 748, 750 (Minn. 1984).
The district court shall confirm an arbitration award upon application of a party unless grounds are presented for vacating, modifying, or correcting the award. Minn. Stat. § 572.18 (1998). An arbitration award may be vacated only on the grounds listed in Minn. Stat. § 572.19, subd. 1 (1998). Hunter, Keith Indus., Inc. v. Piper Capital Management., Inc., 575 N.W.2d 850, 854 (Minn. App. 1998).
A. Newly Discovered Evidence
During an arbitration hearing,
[t]he parties are entitled to be heard, to present evidence material to the controversy and to cross-examine witnesses appearing at the hearing
Minn. Stat. § 572.12(b) (1998). An award must be vacated if the arbitrators “refused to hear evidence material to the controversy.” Minn. Stat. § 572.19, subd. 1(4). Also, Am. Arb. Ass’n Constr. Indus. Arb. R. 36 provides:
The hearing may be reopened on the arbitrators’ initiative, or by direction of the arbitrator upon application of a party, at any time before the award is made. If reopening the hearing would prevent the making of the award within the specific time agreed to by the parties in the arbitration agreement, the matter may not be reopened unless the parties agree to an extension of time.
Waland argues that the arbitrators failed to meet their duty to assess the evidence when they refused to reopen the arbitration proceeding to permit Waland to present the MPCA letter it received after the hearing closed. Waland contends on appeal that because the information in the letter “goes directly to the question of whether E & H performed its work on the project in an appropriate manner, in conformance with the parties’ agreement,” the letter was material to the controversy, and the district court’s decision should be reversed because the arbitrators refused to consider material evidence as required under Minn. Stat. § 572.19, subd. 1(4).
We recognize that Waland did not know at the time of the arbitration hearing that the MPCA would not approve the basin. But in its answer to the demand for arbitration, Waland claimed that E & H’s work “was performed in an unworkmanlike manner; failed to meet industry standards, and was not performed according to the requirements of the contract.” The essence of Waland’s arbitration claim was that E & H constructed a basin that was smaller than required by the contract.
In its request to reopen the arbitration, Waland characterized the MPCA letter as “newly discovered material evidence which shows that [E & H] improperly constructed a sediment basin.” But the letter does not indicate that the sediment basin was improperly constructed. The letter states that “the wet detention pond for storm water treatment was designed and built without adequate treatment volume.” At most, the letter states the MPCA’s conclusion that the basin was too small. It does not indicate that E & H did anything improper.
Waland’s president stated in an affidavit that an MPCA crew measured the sediment basin on December 29, 1998, and discovered that it had been constructed approximately 70 feet shorter and some amount narrower than was shown on the plans. Apparently, this measurement was at least part of the basis for the MPCA’s determination that the basin was too small. This measurement is evidence that the basin was not constructed according to specifications. But it is evidence that was available to Waland from the time the basin was constructed. With due diligence, this measurement could have been obtained before the arbitration hearing.
Under the plain language of rule 36, the arbitrators “may” reopen the hearing; they are not required to do so. “Absent a clear showing that the arbitrators were unfaithful to their obligations, the courts assume that the arbitrators did not exceed their authority.” Hilltop Constr., Inc. v. Lou Park Apartments, 324 N.W.2d 236, 239 (Minn. 1982) (citations omitted). Waland did not make a clear showing that the arbitrators were unfaithful to their obligation to hear evidence material to the controversy when they refused to reopen the hearing to consider evidence that did no more than indirectly present evidence that, with due diligence, could have been presented directly before the hearing was closed.
B. Corruption or Fraud
A district court’s denial of a motion to vacate an arbitration award on grounds of fraud, corruption or other undue means is reviewed by this court de novo. Aaron v. Illinois Farmers Ins. Group, 590 N.W.2d 667, 669 (Minn. App. 1999). The burden of proving fraud or other permissible grounds rests with the party asserting it. Mork v. Eureka-Security Fire & Marine Ins. Co., 230 Minn. 382, 391 42 N.W.2d 33, 38 (1950). Fraud or the other ground relied upon must be established “by clear allegations and proof.” Id.
Waland contends that the district court erred by not vacating the arbitration award under Minn. Stat. § 572.19, subd. 1(1), on grounds that the award was procured through corruption, fraud, or other undue means. Waland claims that E & H submitted to the arbitrators an exhibit that was not produced in discovery, included on E & H’s exhibit list, or introduced at the arbitration hearing.
To support this claim, Waland submitted: (1) an affidavit from its president stating that after the hearing, he obtained an exhibit binder from E & H that contained a three-page document with a handwritten “18” at the top and that he had no recollection of ever seeing the document before, either in discovery or at the arbitration hearing; (2) two affidavits from its arbitration attorneys, each stating that exhibit 18 was never produced in discovery, introduced as evidence at the arbitration, or given to them during the arbitration hearing; and (3) a letter from the chairman of the arbitration panel, which stated that one of the arbitrators had no recollection one way or the other regarding exhibit 18.
This evidence presented by Waland was, however, directly contradicted by the affidavits of E & H’s president and its attorney, who stated that they recalled that exhibit 18 was introduced into evidence at the arbitration hearing and that a copy of exhibit 18 was given to Waland’s attorney. Furthermore, the letter from the chairman of the arbitration panel that stated that one of the arbitrators did not recall exhibit 18 also stated that the other two arbitrators recalled that exhibit 18 was introduced at the arbitration hearing. The letter also stated that copies were provided to the arbitrators and all parties without objection.
Based on this conflicting evidence regarding the presentation of exhibit 18 at the arbitration hearing, we cannot conclude that Waland met its burden of producing clear proof of its allegation that the award was procured through corruption, fraud, or other undue means.
C. Failure to Consider Exhibit 18
Waland also contends that even though exhibit 18 was not properly admitted at the hearing, the arbitration award should be vacated because the arbitrators violated their duty under Minn. Stat. § 572.19, subd. 1(4), to consider the evidence presented by the parties when they failed to consider exhibit 18. Waland bases its claim that the arbitrators did not consider exhibit 18 on a letter from the chairman of the arbitration panel, which states that “all of the Arbitrators agree Exhibit 18 played no part one way or the other in the Arbitrators’ deliberations or decision.”
The record does not demonstrate that the arbitrators failed to consider exhibit 18. We do not interpret the statement that exhibit 18 “played no part one way or the other” as meaning that the arbitrators never considered exhibit 18. Instead, we interpret this statement as meaning that the arbitrators did not give exhibit 18 any particular weight when reaching their final decision. Their decision would have been the same with or without exhibit 18 in the record. Waland has not met its burden of demonstrating that the arbitrators violated their duty to consider the evidence presented by the parties.
Attorney Fees Incurred in First Appeal
Waland contends that the district court erred by including in the attorney-fee award $16,291.25 in fees that E & H incurred in the earlier appeal of the prelien-notice issue. Waland contends that attorney fees incurred in an appeal in a mechanics-lien action may not be recovered under Minn. Stat. § 514.14 (1998). We agree.
In McCarron’s Bldg. Ctr., Inc. v. Einertson, 482 N.W.2d 529, 533 (Minn. App. 1992), this court concluded that the sole statutory authority for attorney fees pursuant to foreclosure of a mechanic’s lien is Minn. Stat. § 514.14. This court then denied the materialman’s request for attorney fees on appeal because the supreme court has held that Minn. Stat. § 514.14 does not expressly provide for attorney fees on appeal, and, therefore, attorney fees on appeal in a mechanic’s-lien action are not allowed. Under McCarron’s Bldg. Ctr., Inc., attorney fees that may be recovered in a mechanic’s-lien action do not include fees incurred on appeal. We, therefore, reverse the district court’s award of $16,291.25 to E & H for attorney fees incurred on appeal of the mechanic’s-prelien-notice issue.
Affirmed in part and reversed in part.