Washington v. Washington, ___Mich App___ (2009), #281174, 5/12/09
Domestic Relations ReviewDefendant wife appealed the judgment of divorce entered based on the parties’ partial settlement and subsequent arbitration award. The wife challenged the trial court’s denial of her motion to set aside, vacate or modify the arbitration ruling as inconsistent with Michigan law. The Court of Appeals affirmed the trial court.
The parties reached a partial settlement (custody, parenting time, spousal support and the sale of the marital home) through mediation. They then entered an arbitration agreement to resolve the division of debts & property. In December, 2006 the arbitrator submitted his ruling. That ruling is the subject of the appeal.
The husband’s dental practice was valued by the arbitrator at $165,000. However, the allocation of practice’s value awarded to the husband was reduced to $99,000 given that the husband was paying spousal support from the dental practice’s earnings which earnings were used to calculate that value. Thus, the arbitrator theorized that including the full $165,000 value would be “double dipping” in favor of the wife.
The arbitrator also valued the practice’s realty and the parties’ cars, loan receivable, play structure and debt. He determined that the $50,000 of economic damages flowing from the wife’s lawsuit were marital property while the $212,500 of non economic damages were the wife’s separate property. Bottom line, $177,428 fewer assets were awarded to the wife than to the husband. Yet the arbitrator found that division equitable for two reasons. First, $80,555 of home improvements made by the wife from the home equity line of credit were less than necessary and beyond the parties’ means. Thus, those expenses were the wife’s “separate responsibility”. Second, he took into account a portion of the wife’s non economic damages in justifying that overall award maintaining the $177,428 disparity as equitable. The wife filed a motion in the trial court to set aside, vacate or modify the arbitration award contending the arbitrator exceeded his powers, showed partiality against the wife and that the award was issued beyond the time limits afforded by statute. The court found no basis to set aside the award under MCL 600.5081 and denied the wife’s motion. She appealed.
There are four very limited circumstances under which a reviewing court may vacate a domestic relations arbitration award. One, the award was procured by corruption, fraud or other undue means. Two, there was evident partiality by the arbitrator. Three, the arbitrator exceeded his powers. Four, the arbitrator refused to postpone a hearing on a showing of sufficient cause, refused to consider material evidence or otherwise conducted the hearing to substantially prejudice a party’s rights.
The arbitrator may be found to have exceeded his authority only if the error is discernible on the face of the award itself or if it is shown to be so substantial that, but for the error, the award would have been substantially different.
Defendant’s primary argument was that the award was facially inequitable and, thus, contrary to Michigan law because the wife received ¼ of the assets and ¾ of the debt. A Michigan property award is equitable even though it is not equal as long as there is an adequate explanation for the chosen distribution. As a result, an unequal division in the range of 70 percent to 30 percent is not contrary to Michigan law so long as it is based on an appropriate criterion.
Assuming the wife’s arithmetic is correct, the Court of Appeals found no basis on the face of the award to find it was in contravention of controlling law. The arbitrator recognized the above property division principles of Michigan divorce law and applied that law to the facts as he found them in this case. At that point, unless there is some error appearing on the face of the award, the Court of Appeals’ review is complete. Here, the Court of Appeals found no such error. In this case, the arbitrator addressed the unequal award by finding that it was justified based on the wife’s dissipation of assets through unreasonable spending. The Court of Appeals further concluded that it could not review the legal soundness of the arbitrator’s application of Michigan law so long as the arbitrator understood and used applicable law in making his decision. The Court of Appeals did find that the arbitrator did understand and use applicable law in making his decision.
The wife also argued the arbitrator improperly considered her non economic damages in rendering his decision. Such non economic damages are normally considered separate property. However, such separate property is available for distribution as a marital asset in order to ensure an equitable distribution of property. Thus, again, there was no basis to find the arbitrator (in utilizing Michigan law in his decision) exceeded his authority.
Defendant wife also claimed the arbitrator erred in his valuation of most of the parties’ assets. However, courts may not substitute their judgment for that of the arbitrator by vacating or modifying an award. It is outside the province of the courts to engage in a fact-intensive review of how an arbitrator calculated values and whether the evidence he relied on was the most reliable or credible evidence presented.
Further, the appellant claimed the arbitrator put too much weight on her own conduct and not enough on the appellee’s conduct. Fault is clearly a consideration that can be addressed by the arbitrator. However, the Appeals Court concluded that the wife was merely reasserting substantive factual questions already addressed by the arbitrator and that the Court of Appeals was not the proper forum for re-litigation of those questions.
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