Nix v. Scarbrough

894 S.E.2d 658

NIX

v.SCARBROUGH.

A23A0790

Court of Appeals of Georgia.

November 3, 2023

James Clayton Metts III, Savannah, Kenneth Paul Johnson, for Appellant.

Molly M. Howard, Andrew’ M. Wilkes, Irving William Drought III, Savannah, for Appellee.

Barnes, Presiding Judge.

We granted Lucy Bedelle Nix’s application for discretionary review of the trial court’s final judgment and decree of divorce from her husband, Frank Eugene Scarbrough. On appeal, Nix asserts that the trial court erred by compelling arbitration after Scarbrough substantively breached the arbitration agreement, and erred by confirming and adopting the arbitrator’s award. Upon review, we affirm the judgment of the trial court.

Scarbrough and Nix, the parents of two, at the time of this action, teenage boys, were married in 1998. Scarbrough filed a complaint for divorce on July 10, 2019, and Nix answered and filed a counterclaim for divorce. On January 27, 2020, the couple, who were then separated, entered into an Arbitration and Interim Agreement ("the Agreement") providing that they would "resolv[e] all issues of child custody and visitation, property division, support, and all of the matters arising out of the marriage of the parties, and the dissolution of that marriage by submitting the same to arbitration." The Agreement further provided that the parties would forgo the scheduled temporary hearing and "all noticed depositions and [would] submit to arbitration within the month of March." It was also agreed that the Arbitra- tor would "arbitrate all matters attendant to this divorce action." Additional interim provisions in the Agreement assigned responsibility for ongoing expenses, including school expenses, mortgages, and car payments.

Additionally, the Agreement included the following provision:

Encumberances. The Husband may draw on the variable life insurance policy for the limited purpose of paying the premiums for the insurance policies, and the parties recognize that the Wife is not waiving her right to seek reimbursement of these funds or an accounting for the same as part of the equitable distribution to be adjudicated at arbitration. Similarly, the Wife may draw on the LBN account as necessary to make repairs to the Waters Avenue property. Except as otherwise stated herein, neither party shall draw down, borrow against, or otherwise encumber or encroach upon any marital assets pending arbitration. (Emphasis supplied.)

The parties originally planned to arbitrate their case on March 23 and 24, 2020, but it was delayed until October 27, 28, and 30 of 2020.¹ The Arbitrator partially attributed the delay to Nix, and although she recognized the legitimacy of health concerns relating to the pandemic, noted that Nix had taken advantage of the pandemic to delay moving the divorce proceedings forward, and that Nix had "felt there was no advantage to her in concluding this divorce."

Before the arbitration could be held, on March 30, 2020, Scarbrough’s partnership with his oral surgery practice was terminated and he accepted a buy-out of his shares for $1,000. He had been earning more than $50,000 per month, but his partners insisted that he either resign or be terminated. Nix also alleged that Scarbrough had received money from refinancing one of the real properties in the marital estate. Nix resisted moving forward with arbitration, and expressed that Scarbrough’s transactions had breached certain provisions in the Agreement, and thus the Agreement was no longer binding.

Thereafter, in July 2020, Scarbrough filed a "Motion to Stay and Refer All Pending Matters for Arbitration," and requested that the trial court

stay further proceedings in this case related to "all issues of child custody and visitation, property division, support, and all of the matters arising out of the marriage of the parties and the dissolution of the marriage" pursuant to their Agreement and defer to the arbitrator on all further rulings related thereto."

According to Scarbrough, even Nix’s assertion that Scarbrough had waived arbitration because of his alleged failure to comply with certain interim provisions in the Agreement, "is a matter that grows out of the parties’ underlying dispute and is, therefore, for the arbitrator rather than the Court to resolve." Nix objected, requested that the Agreement be declared void, and argued that Scarbrough had waived his right to arbitration by dissipating the marital estate in violation of the parties’ Agreement. She further asserted that such "prohibition against dissipation of marital assets was clearly a significant part of the consideration for the contract for arbitration." Nix maintained that the consequences of the breach of the Agreement were not reserved for the arbitrator's determination.

The trial court concluded the contrary and granted Scarbrough’s motion and referred all pending matters in the case to arbitration. The trial court held that

[g]ateway issues of substantive arbitrability, such as allegations of conduct-based waiver of arbitration rights are generally decided by the trial court…. Procedural questions which grow out of the dispute and bear on its final disposition are presumptively not for the judge, but for an arbitrator, to decide. The issue of the alleged breach relates to the dispute itselfwhich is the dissolution of the marriage and if true, ultimately affects the distribution of the property despite the fact that it is alleged to be a violation of the arbitration agreement itself. Moreover, the parties agreed to arbitrate all matters arising out of the marriage and property division. As this is an issue growing out of the dispute and pursuant to the parties’ agreement, the Court finds this is an issue for the arbitrator rather than the trial court to decide.

(Citations, punctuation, and footnotes omitted.) Nix did not object, and the arbitration was conducted on October 27, 28, and 30, 2022. Thereafter, the arbitrator entered an extensive 77-page arbitration award, which covered in great detail, the division of marital assets and value thereof, the net value of the marital estate, the division of the marital estate, income of both parties for purposes of child support and spousal support, whether spousal support should be awarded, custody and visitation for the parties’ two minor children, and child support. Scarbrough filed a motion to confirm arbitration award, and Nix objected to the confirmation and asserted that the Arbitrator manifestly disregarded the law, and was not impartial, but rather was biased toward Scarbrough. The trial court confirmed the Arbitrator’s award, "having carefully reviewed the Arbitration Award, and considered [Nix’s] Objections, [Scarbrough’s] Response, [Scarbrough’s] Motion, and the applicable law." The award was incorporated into the final divorce decree, and this appeal ensued.

1. Nix argues that the trial court erred by forcing her to arbitrate the case after Scarbrough breached the Agreement. She contends that the provision barring the parties from dissipating the marital estate pending arbitration was a material term of the parties’ Agreement, and that, because Scarbrough breached that term, the trial court should have proceeded with a jury trial. Nix cites Scarbrough’s relinquishment of his ownership interest in his dental practice for much less that its actual value, and refinancing one of the marital real properties to borrow money as the specific breaches of the Agreement. We are not persuaded.

[1, 2] We review a trial court’s order granting or denying a motion to compel arbitration de novo. Miller v. GGNSC Atlanta, 323 Ga. App. 114, 117 (1), 746 S.E.2d 680 (2013). Additionally, "[t]he construction of an arbitration agreement, like any other contract, presents a question of law, which is subject to de novo review." (Citation and punctuation omitted.) Order Homes v. Iverson, 300 Ga. App. 332, 333, 685 S.E.2d 304 (2009). See United Health Svcs. of Ga. v. Alexander, 342 Ga. App. 1, 2 (2), 802 S.E.2d 314 (2017) ("Arbitration is a matter of contract, meaning that arbitrators derive their authority to resolve disputes only from the parties’ agreement.") (citation and punctuation omitted).

[3–5] "The limits of an arbitrator’s authority are defined by the parties’ arbitration agreement." Henderson v. Millner Developments, 259 Ga. App. 709, 711 (1), 578 S.E.2d 289 (2003). Moreover,

an arbitrator is bound by the terms of the parties’ agreement in crafting his award. An arbitrator imperfectly executes his or her authority where there is a significant failure to fully and clearly address the issues presented, and whether there has been such a failure turns on what the parties’ arbitration agreement required of the arbitrator.

(Citations and punctuation omitted.) King v. King, 354 Ga. App. 19, 25 (2) (b), 840 S.E.2d 108 (2020).

[6] To that end, while "gateway issues of substantive arbitrability, such as allegations of conduct-based waiver of arbitration rights, are generally decided by the trial court[,] … procedural questions which grow out of the dispute are generally for the arbitrator to decide." (Citations and punctuation omitted.) Web IV, v. Samples Constr., 349 Ga. App. 607, 610 (1) (a), 824 S.E.2d 107 (2019). See Archer W. Contractors v. Holder Constr. Co., 325 Ga. App. 169, 175 (3), 751 S.E.2d 908 (2013) (recognizing that "procedural questions which grow out of the dispute" are generally for the arbitrator to decide and that an "arbitrator shall decide whether a condition precedent to arbitrability has been fulfilled, and where the parties have not ex- plicitly agreed otherwise, prerequisites such as time limits, notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate are for the arbitrators to decide") (citations, punctuation, and emphasis omitted.) (physical precedent only).

In its order granting Scarbrough’s motion to stay and refer all pending matters to arbitration, the trial court considered Nix’s contention that Scarbrough...