LOWE, J., delivered the opinion of the Court.
A motion to vacate an arbitration award may give rise to an infrequent instance where even an equity court may not do equity. The Maryland Uniform Arbitration Act, codified as Subtitle 2, Title 3, of the Courts and Judicial Proceedings Act, provides that a court shall not vacate an award of arbitration "on the ground that a court of law or equity could not or would not grant the same relief." Cts. Art., Sec. 3-224 (c). This legislative limitation upon judicial review is premised upon the common law consideration of arbitration as a "favored" action,
Adopting that concept statutorily, the General Assembly articulated it by restrictively defining the grounds upon which a court might vacate an award, and expressly
Cts. Art., Sec. 3-224.
At the heart of this appeal from the Circuit Court of Baltimore City is the question of whether either or both of these grounds permit judicial relief from an award for any reasons other than an apparent improbity. Is there judicial relief available from an arbitration award that was arrived at in good faith but, because of grossly misguided judgment, is shockingly absurd?
It is appellants' contention that (1) the Maryland Uniform Arbitration Act by employing the words "undue means" and "exceeded their powers," intended to require a reviewing court to vacate an award which is rendered without any rational basis, and (2) the award rendered in this case is of that type. Appellee concedes that, despite the favor and finality with which arbitration is viewed, a line of cases has developed which holds that there is a distant threshold beyond which reason is so affronted that judicial remedy may be applied. From argument of counsel and from a similarity of authority cited in their briefs, we glean that the parties here may have approached some general agreement of the state of the law, though neither acknowledged it. Essentially appellants would permit us to vacate an "arbitrary" award while appellee concedes us such authority only when the award is "completely irrational." Our interpretation of the law accords more with appellee; however, its application to the facts in this case does not bode him well.
We hold that when reviewing the fruits of an arbitrator's
The complete irrationality rule has as its genesis the New York Court of Appeals
An adoption of this standard would permit a review of an interpretation of a contract under arbitration. It is our view that such review is beyond our authority.
If, however, the language of the contract under arbitration permits but one meaning, an arbitrator who does not follow such a clear contractual mandate exceeds his authority as surely as if he had gone beyond the scope of his express arbitration authority. An award so based does not derive from an arbitrary interpretation. Such a result is rather "completely irrational" since the words of the contract are so clear that there is nothing to interpret. We must judicially accept an arbitrary interpretation of a contract by an arbitrator. We shall vacate a completely irrational one. Of the four questions we will consider in light of these limits, only one has been found to be completely irrational.
Appellee contracted to build a condominium apartment building for appellants. Although the lengthy contract was in considerable detail, for simplicity's sake we will describe it as one in which the basis of payment was to be the cost of the work plus a fee, subject to an "upset price."
Procedurally our review is similar to a review under Md. Rule 1086 when we are called upon to review actions tried by a lower court without a jury. In such case we may not substitute our judgment for that of the lower court on the evidence, but may only set aside the court's judgment when it is "clearly erroneous." On the other hand, our review here need not seek a preponderance of the evidence to support the award, nor even substantial evidence. There need be only some evidence to meet the test of rationality, i.e., it may be so little as to make the result "arbitrary", so long as it is not completely irrational.
In addition to the "fixed fee," appellants contracted to reimburse appellee for "Cost of the Work." That term was defined by the contract in pertinent part as:
COSTS TO BE REIMBURSED
It is conceded that appellee was awarded more than appellee paid out for labor. Appellee billed appellants for labor reimbursement in an amount equal to the number of hours worked multiplied by the hourly wage appearing in the wage schedule referred to in Sec. 9.1.1 for each type of employee. Appellants contend that the contract provides for reimbursement for hours worked multiplied by the amount per hour actually paid to the workmen. The arbitrators awarded appellee the wages reflected in the schedule rather than limiting the award to wages appellee had actually paid. Further, the arbitrators added 15% of the appellee's billings to the award for reimbursement of insurances, such as unemployment compensation, social security, etc. under Sec. 9.1.3.
All pertinent language to be analyzed is found in Section 9 under the subtitle "Costs to be Reimbursed," i.e., repaid, paid back, compensated for money spent, or losses or damages incurred. See definition of "reimburse" in The American Heritage Dictionary of the English Language. That which is to be "reimbursed" is:
Read in the light most favorable to appellants as limitedly as can rationally be accomplished, it would read:
In order to arrive at the result reached by the arbitrators, the verb "paid" must be interpreted as meaning not paid, but rather "established," or "agreed to." It is completely irrational to hold that wages paid under a schedule means wages set or wages established under a schedule whether paid or not. The only conceivable interpretation which would provide the result reached would not only have to fail to give meaning to participle of the verb "paid" but would have to ignore that the expressed subject of Article 9 was "Costs to be Reimbursed." It would also have to define the term "Wages paid" as not referring to those paid by the contractor, but as referring to those paid by the owner to the contractor in an amount equal to the "Wages ... under a
We then turn to the record, seeking aught that might provide any possibility of interpreting the contract's disputed section other than as reimbursement of wages paid. Appellee points to testimony indicating that an agent of appellants discussed the wage schedule, told another agent of appellants that the wage rates charged were not actual costs, that the labor charges were reduced between the first requisition and the second; that appellants' attorney asked what was meant by "wage schedule" and received the reply, "That's what we [appellants] have been paying them [appellee]"; and that a field agent of appellants who negotiated the reduced wage schedule stated that if it had been refused, he would have given the work to a subcontractor. We find nothing here that would permit an interpretation of an uninterpretable clause. The existence of a wage schedule was acknowledged by appellants' agents and payments thereunder were concededly made. If we assume that appellants' agent had knowledge that the wage rates charged were not actually those paid by appellee for his labor,
Appellee next notes that Meyerhoff admitted that the phrase made no sense as written with the "or" stricken through, rather than having it left in to indicate an alternative, i.e., reimbursement of wages paid or payment on the basis of an agreed schedule. However, even Meyerhoff cannot put words where words are not. That Meyerhoff denied ever knowing about a schedule, let alone consenting thereto, creates an evidentiary conflict with his own agent, but does not give an interpretive possibility to a clear contract. Nor is such a possibility created by his inability to explain why "wage schedule" was permitted to remain, if he could not explain its purpose. Of course, if there was no rational purpose for the words, the dilemma we faced with
We do not find the reference to a wage schedule left without any interpretable purpose as we did with "wages paid." Such schedule, which was substantially in excess of the wages actually paid, may have been established to set the maximum referred to in the item immediately preceding (Sec. 9.1) providing that:
It would be interpretive logic, explaining the retention of the reference to a wage schedule, to read the two sections together, i.e., that the wages paid for labor would not exceed a wage schedule, the rates of which, if in excess of the standard paid in the locality, were nonetheless consented to by the owner.
Having exhausted every remote possibility of interpreting the contract language to arrive at the result reached, we will remand for the chancellor to vacate so much of the award as was credited to wages which had never been paid by anyone. It necessarily follows that he should vacate as well the award credited to the peripheral wage costs alluded to in Sec. 9.1.3:
Thus the 15% allowance in lieu of compensation insurance, taxes, etc., should apply only to the amounts reimbursed for wages actually paid.
Finally, it need hardly be explained why we find no merit in appellee's theory that appellants are equitably estopped from asserting the claim for wages because the bills based on the schedule were paid by appellants. If we find a contractual interpretation allowing such payment to be "completely irrational," it would be "shockingly absurd" to then permit the unjustified sum to be retained. The billing
The arbitrators decided among other things:
By not holding appellee responsible for $76,000 of field overhead caused by contractual changes at appellants' behest, the final cost was commensurately reduced. Appellee was entitled to 25% of any savings below a guaranteed maximum, thus enhancing his profit by $19,000 in this instance.
Appellants' arguments have a persuasive ring to them but because of conflicting clauses of the contract, the question must be ultimately viewed as an interpretive one. Appellants recognize this in their "Post-Trial Memorandum." They contend that Sec. 10.1.4 of the contract excludes overhead or general expenses from reimbursable costs except as expressly included in Article 9. They continue:
Although appellants go on to say that costs of operation of the field office are not part of appellee's overhead claim for delay, we find portions of the record pointed out by appellee
Half of the ninth floor of the apartment building was to be appellant Meyerhoff's personal apartment. One hundred thousand dollars worth of "extras"
Appellee contends that the Meyerhoff apartment should be treated as were other apartments which were improved at the behest of the tenant purchasers. Appellants argue to the contrary setting forth three basic reasons:
The testimony clearly indicates that Meyerhoff agreed that all changes made by appellee for the apartments generally would be at a cost plus 20% fee to appellee. Not only do we find sufficient evidence to overcome the test of complete irrationality, there was sufficient to justify the result reached even under a more stringent test.
Meyerhoff's contention that he did not have to pay because his apartment was within the scope of the contract is presumably based upon his ownership of the contracting corporation. He then points to contract provisions that
Whether or not Meyerhoff's improvements were within the scope of the contract was clearly interpretive and in light of the evidence an award either way could not have been vacated as in excess of the arbitrators' powers.
But appellants further claim that since that result necessarily treats Meyerhoff qua apartment purchaser as distinguished from Meyerhoff qua the contracting owner of the building, the award cannot go against him because he was not a party to the arbitration.
In addition to the tenor of Meyerhoff's testimony accepting, if not recognizing, his participating role in the arbitration, we find in the record the following letter dated July 25, 1973:
This is an indication of Meyerhoff's understanding that he personally assumed liability for the results of the arbitration.
It becomes clear from the testimony that the issue of Apartment 901 was an arbitrable question as one aspect of the dispute. It is not questioned that this issue was submitted first to the architect as a condition precedent to arbitration under the "GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION." Thereafter the scope of arbitration is broad:
In Bel Pre Med., supra, 21 Md. App. at 327, Judge Davidson said for this Court:
No express and specific exclusion was brought to our attention as to Apartment 901. We, therefore, find the additional costs of improving that Apartment within the scope of arbitration and that the award did not exceed the arbitrators' powers.
Appellants concede that equipment rental for use on the job was a reimbursable expense if statements therefore were submitted timely as required by Article 14:
Appellee failed to submit such timely statements which appellants contend deprived them of making their own inspection as to whether the equipment was present and necessary. Appellants' factual arguments as to the substantial savings they might have made by purchasing rather than leasing certain equipment is again persuasive but not so compelling as to render an arbitrator's award to the contrary completely irrational. The award for equipment rental will stand.
Judgment affirmed in part and reversed in part.
Case remanded: the trial judge is directed to vacate that portion of the award allocated to wages scheduled but not actually paid.
Costs to be divided equally between the parties.
The record is disjointed and unclear, being more in the nature of incomplete record extracts than the full report of the arbitration testimony. The record was compiled below by appellee to meet the motion to vacate, but presumably a complete and coherent transcript was not submitted upon appeal. Appellee explained in his brief: