December 1, 2016- L.D. Miller Construction v. Kirschenbaum, No. 34,253, ZSVz

IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Opinion Number: ___________
Filing Date: 	DECEMBER 1, 2016
NO. 34,253
L.D. MILLER CONSTRUCTION, INC.,
Plaintiff-Appellee,
v.
STEPHEN KIRSCHENBAUM
and BARBRO KIRSCHENBAUM,
Defendants-Appellants.
APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY
Francis J. Mathew, District Judge
Thomas E. Chism
Albuquerque, NM
for Appellee
Coberly & Martinez, LLLP
Todd A. Coberly
Santa Fe, NM
for Appellants

OPINION
ZAMORA, Judge.
{1} 	In this case, we are presented with the question—can an arbitrator designated
by the parties to conduct an arbitration be disqualified by the American Arbitration
Association (AAA) for cause if the parties do not also explicitly agree in writing that
the arbitrator shall function as a non-neutral arbitrator? The district court ruled that he
could be disqualified. We affirm.
I. 	PROCEDURAL AND FACTUAL BACKGROUND
{2} 	In the fall of 2011, Stephen and Barbro Kirschenbaum hired L.D. Miller
Construction Company (Miller) to do concrete and framing work for a garage and
run-in shed on the Kirschenbaums’ property in Santa Fe, New Mexico. Miller
contends 	the 	construction 	project 	was 	finished 	in 	late 	fall. 	However, 	the
Kirschenbaums were apparently unsatisfied with the work and hired other contractors
to correct Miller’s work.
{3} 	On December 2, 2011, Miller presented the Kirschenbaums with an invoice for
$28,576.46, for its work on their property. The Kirschenbaums paid Miller $15,000
toward the balance owed, leaving an outstanding balance of $13,576.46, which the
Kirschenbaums refused to pay. There is an allegation that the Kirschenbaums also

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kept possession of a table saw, tools, and other building materials belonging to Miller
valued at approximately $800.
{4} 	On December 20, 2011, Miller and the Kirschenbaums entered into a written
Arbitration Agreement. The full text of the Agreement is:
Contractor 	and 	Owner 	agree 	to 	binding 	arbitration 	under 	AAA
(American Arbitration Association) for any dispute (claim, work,
material, etc.) between Contractor and Owner at the following location:
Hacienda del Cerezo
100 Camino del Cerezo
Santa Fe, New Mexico 87506
(And including or for: Hacienda del Cerezo, Ltd., Stephen/Barbro
Kirschenbaum)
Contractor and Owner agree that the designated arbitrator shall be Roger
Lengyel [(Lengyel)].
{5} 	In April 2013 Miller filed a complaint in the First Judicial District Court against
the 	Kirschenbaums 	for 	debt 	and 	money 	due 	concerning 	its 	work 	on 	the
Kirschenbaums’ property. The Kirschenbaums were served with a summons by
certified mail. Though the Kirschenbaums responded informally to Miller’s counsel,
they did not enter a timely appearance or file a timely answer or other responsive
pleading with the district court. In June 2013 Miller filed a motion for default
judgment. No response to the motion was filed by the Kirschenbaums and as a result,
the district court issued an order granting Miller’s motion for default judgment,
finding the Kirschenbaums liable for $16,153.98.

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{6} 	Represented by counsel, the Kirschenbaums promptly filed an answer to
Miller’s original complaint alleging as an affirmative defense that Miller’s court
action was barred by the Arbitration Agreement. The Kirschenbaums also moved to
compel arbitration and to vacate the default judgment. In November 2013, the court
issued an order granting the Kirschenbaums’ motion to vacate the default judgment
and granting their motion to compel arbitration. In particular, the order stated:
[T]he [o]rder of [d]efault [j]udgment entered on July 2, 2013[,] is
vacated, these proceedings are stayed, and that the parties are compelled
to arbitrate this matter pursuant to the terms of the December [20,]
2011[, A]rbitration [A]greement, requiring binding arbitration under the
[AAA] with . . . Lengyel as the designated arbitrator.
{7} 	Apparently the arbitration did not progress smoothly. On January 22, 2014,
Miller sent a letter to AAA requesting disqualification and removal of Lengyel as
arbitrator “pursuant to [AAA] Rule []20” for refusing to perform his duties pursuant
to required procedures, as well as for lack of independence, i.e., non-neutrality, which
was not part of the parties’ agreement. In particular, Miller alleged that “ground rules”
set by Lengyel to govern the arbitration were mere “recitals” of the Kirschenbaums’
desire to delay the arbitration process, exclude AAA intervention, and limit
communication between the parties and Lengyel. Miller also asserted that it had
become apparent that Lengyel was having ex parte communications with the
Kirschenbaums.

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{8} 	In response, the Kirschenbaums sent a letter to the AAA contending that
Lengyel could not be disqualified pursuant to the district court’s order compelling
arbitration and designation of Lengyel as the parties’ arbitrator. In addition, the
Kirschenbaums argued that the parties intended to appoint a non-neutral arbitrator not
subject to AAA Rule 20.
{9} 	AAA responded to Miller’s complaint stating: “[i]n light of the [c]ourt [o]rder
requiring binding arbitration under the [AAA] with . . . Lengyel as the designated
arbitrator, [Miller] may seek clarification from the [c]ourt as to AAA’s authority to
address this request for removal.” Miller filed a motion with the district court seeking
clarification of its order, arguing that all AAA rules had been incorporated into the
Arbitration Agreement. At the hearing on Miller’s motion to clarify, the court
observed:
When I look at the contract that the parties entered into for the purpose
of arbitration, I note that Mr. [Lengyel] is designated but not required [to
serve as arbitrator]. What is required is that the parties arbitrate under the
rules of AAA. . . .
If it were the other way around then potentially the AAA rules
would have no meaning. If the arbitrator could as a designated arbitrator
. . . ignore or avoid those rules at his discretion then that would put at
issue the AAA rules and their requirement of the AAA rules under the
parties’ agreement.

1On June 2, 2014, the court issued an order permitting counsel for the
Kirschenbaums to withdraw from the case for professional reasons.
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{10} 	The court issued an order on June 4, 2014,1 concluding that “it was the parties’
intent that the arbitration between them would be subject to all the rules and
procedures of the [AAA], including the rule regarding disqualification of an
arbitrator[,]” and ordered that AAA “has the authority to disqualify designated
arbitrator . . . Lengyel, if the AAA determines that such a disqualification is warranted
under its rules and procedures.”
{11} 	On July 17, 2014, the Kirschenbaums moved, pro se, for reconsideration of the
June 4 order. In pertinent part, the Kirschenbaums argued, “[n]ot disclosed by prior
counsel was that both parties specifically discussed and agreed to use . . . Lengyel, an
architect very well known to them both—which was paramount to anything else.
Using the procedures of the AAA was merely an adjunct to their desire to have Mr.
Lengyel decide any dispute.” The Kirschenbaums requested an order finding the AAA
rule providing for the removal and substitution of an arbitrator did not apply to the
parties’ arbitration and order the parties to arbitrate with Lengyel serving as arbitrator.
In September 2014 AAA decided to remove Lengyel from the parties’ case.
{12} 	Two months later, in November 2014, the court denied the Kirschenbaums’
motion for reconsideration. The Kirschenbaums filed their notice of appeal on
November 14, 2014.

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II. 	DISCUSSION
A. 	The Kirschenbaums’ Appeal of the District Court’s Order Denying Their
Motion for Reconsideration Was Timely Filed
{13} 	The Kirschenbaums themselves note a potential problem with the timeliness of
their appeal and the related issue of the scope of our review. The Kirschenbaums’
motion for reconsideration was filed more than thirty days after the order it addressed.
As such, the motion was filed after the deadline for filing an appeal to this Court from
the district court’s order. See Rule 12-201(A)(2) NMRA. Our case law is clear that
Rule 1-060(B) NMRA motions brought “to correct an error of law by the district court
must be filed before the expiration of the time for appeal.” Deerman v. Bd. of Cty.
Commr’s, 1993-NMCA-123, ¶ 16, 116 N.M. 501, 864 P.2d 317; see Resolution Tr.
Corp. v. Ferri, 1995-NMSC-055, ¶ 9, 120 N.M. 320, 901 P.2d 738. Deerman held that
district courts lack authority to grant relief pursuant to a “belated” Rule 1-060(B)
motion, absent extraordinary circumstances. Deerman, 1993-NMCA-123, ¶¶ 21, 23-
24. Given the holding of Deerman, Miller argues that the Kirschenbaums’ notice of
appeal is too late to capture the order entered in June 2014 and the appeal should thus
be dismissed as untimely. We disagree.
{14} 	As we noted in Wells Fargo Bank, N.A. v. City of Gallup, 2011-NMCA-106,
¶ 8, 150 N.M. 706, 265 P.3d 1279, the rule stated in Deerman is not absolute. In Wells
Fargo Bank, we made clear that the rule in Deerman should be applied “only when

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the [Rule 1-060(B)(1)] motion is used as a substitute for a direct appeal or as a means
of circumventing the time period allowed for a direct appeal.” Wells Fargo Bank,
2011-NMCA-106, ¶ 8.
{15} 	The timeliness of the Kirschenbaums’ motion for reconsideration was not
litigated below. We are left with the real-world circumstance that the district court
considered the motion and denied it on its merits. Part of the Kirschenbaums’ motion
for reconsideration detailed the breakdown of their relationship with the attorney who
represented them at the hearing on Miller’s motion, and their unsuccessful efforts to
hire new counsel before they filed their pro se motion. Given their unrebutted
circumstance, the district court would have been within its discretion to determine that
the late motion was not simply an attempt to evade the time for appeal. Applying our
presumption in the correctness of district court actions, we will not engage an
independent assessment of the Kirschenbaums’ motives. Cf. Farmers, Inc. v. Dal
Mach. & Fabricating, Inc., 1990-NMSC-100, ¶ 8, 111 N.M. 6, 800 P.2d 1063 (“The
presumption upon review favors the correctness of the [district] court’s actions.”).
This approach also furthers our policy of construing our appellate rules liberally so as
to determine appeals on their merits. See Wakeland v. N.M. Dep’t of Workforce
Solutions, 2012-NMCA-021, ¶ 7, 274 P.3d 766 (noting that this Court has adopted
a “liberal approach” to the interpretation of the Rules of Appellate Procedure 	“in

8
order to further a policy of hearing appeals on their merits rather than dismissing them
on technical grounds”).
{16} 	“Appellate courts will not interfere with the action of the [district] court in
vacating a judgment [under Rule 1-060(B)]” or with an appeal from the denial of a
Rule 1-060(B) motion, except upon a showing of abuse of discretion by the district
court. Phelps Dodge Corp. v. Guerra, 1978-NMSC-053, ¶ 20, 92 N.M. 47, 582 P.2d
819; James v. Brumlop, 1980-NMCA-043, ¶ 9, 94 N.M. 291, 609 P.2d 1247. The
district court did not abuse its discretion in ruling on the Kirschenbaums’ motion to
reconsider 	under 	Rule 	1-060(B). 	For 	the 	foregoing 	reasons, 	we 	hold 	the
Kirschenbaums timely appealed the district court’s denial of their motion to
reconsider.
B. 	The 	District 	Court 	Did 	Not 	Abuse 	Its 	Discretion 	in 	Denying 	the
Kirschenbaums’ Motion to Reconsider
1. 	Standard of Review
{17} 	Generally, we review a district court’s ruling under Rule 1-060(B) for abuse of
discretion. Edens v. Edens, 2005-NMCA-033, ¶ 13, 137 N.M. 207, 109 P.3d 295
(holding that to reverse the district court under an abuse of discretion standard “it must
be shown that the court’s ruling exceeds the bounds of all reason or that the judicial
action taken is arbitrary, fanciful, or unreasonable” (omission, internal quotation
marks, and citation omitted)). However, insofar as determining whether the district

9
court abused its discretion in denying the Kirschenbaums’ Rule 1-060(B) motion
requires construction of the Arbitration Agreement, we proceed de novo. See Rivera
v. Am. Gen. Fin. Servs., Inc., 2011-NMSC-033, ¶ 27, 150 N.M. 398, 259 P.3d 803
(noting that the interpretation of an arbitration agreement is an issue the appellate
courts review is de novo); W. Farm Bureau Ins. Co. v. Carter, 1999-NMSC-012, ¶ 4,
127 N.M. 186, 979 P.2d 231 (recognizing that the contract interpretation is a matter
of law reviewed de novo).
{18} 	Arbitration agreements are a species of contract, subject to the principles of
New Mexico contract law. Horne v. Los Alamos Nat’l Sec., L.L.C., 2013-NMSC-004,
¶ 16, 296 P.3d 478. Accordingly, we apply New Mexico contract law in interpretation
and construction of the Arbitration Agreement. We note that the parties do not argue
that the Arbitration Agreement is ambiguous. Neither of them provided any testimony
as to their intent or thoughts with regard to the wording of the Agreement. As such,
our job is a pure legal question of interpretation and construction: what do the words
of the Agreement mean and what is their legal effect? See Fashion Fabrics of Iowa,
Inc. v. Retail Inv’rs Corp., 266 N.W.2d 22, 25 (Iowa 1978) (noting that the
“[i]terpretation involves ascertaining the meaning of contractual words; construction
refers to deciding their legal effect”).

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2. 	Rivera Does Not Control
{19} 	The Kirschenbaums contend that pursuant to the Rivera “integral[-]ancillary”
test, the second clause of the Arbitration Agreement, designating Lengyel “shall”
serve as the parties’ arbitrator, is integral, while the first clause, providing the parties
agree to arbitrate “under AAA” unmodified by mandatory contractual language like
“must” or “shall,” is ancillary. We disagree.
{20} 	The Supreme Court’s application of the “integral[-]ancillary” test in Rivera was
limited to the fact-specific issue of the unavailability of a designated institutional
arbitration provider that the parties clearly intended to use exclusively in resolving
disputes between them. Rivera addressed a consumer dispute arbitration agreement
involving the National Arbitration Forum (NAF) in the wake of the dissolution of its
consumer dispute division. 2011-NMSC-033, ¶ 20. The language of the parties’
agreement demonstrated an intent to designate NAF as the arbitration provider and to
arbitrate exclusively under NAF’s rules and procedures. Id. ¶¶ 3, 29 (noting that the
agreement provided the parties “shall” agree they arbitrate under NAF rules and
procedures). The NAF rules and procedures included a rule providing that only an
NAF arbitrator could administer the NAF rules and procedures. Id. ¶ 35. The Court
reasoned that the parties’ intent and the fact that only an NAF arbitrator could
administer the NAF rules demonstrated that arbitration under NAF was integral to the
parties’ agreement. Id. ¶ 38. However, because of NAF’s consumer dispute division’s

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dissolution, it was impossible for the parties to arbitrate under NAF’s rules and
procedures. Id. ¶ 35. As a result, the Court determined it would violate an integral
term of the parties’ agreement to compel them to arbitrate disputes under an
arbitration provider other than NAF and the NAF rules and procedures. Id. ¶¶ 55-56
(striking the parties’ arbitration provisions in their entirety).
{21} 	Rivera 	did not consider the fact-specific issues presented in this case:
interpretation of arbitration agreement terms naming an individual arbitrator to resolve
the parties’ disputes “under AAA,” an existing institutional arbitration provider with
a set of rules controlling proceedings held under its auspices. In contrast, only one
material provision was at issue in Rivera—NAF “shall” serve as the parties’
arbitration provider. A particular arbitrator was not named in the agreement to serve
as the parties’ designated arbitrator, and so the Court did not consider this variable in
Rivera. Here, AAA is available to administer the parties’ arbitration, unlike Rivera.
Also, the AAA rules provide that in certain circumstances, a designated arbitrator may
be disqualified and replaced. Interpretation of the Arbitration Agreement in this case
goes beyond the scope of the Court’s analysis in Rivera. See State v. Sanchez,
2015-NMSC-018, ¶ 26, 350 P.3d 1169 (holding that “cases are not authority for
propositions not considered” (internal quotation marks and citation omitted)).
Accordingly, we decline to adopt the Kirschenbaums’ interpretation of the Arbitration
Agreement under Rivera. To do so would unreasonably treat as equivalent an

12
unavailable arbitration provider and a disqualifiable arbitrator. State ex rel. Udall v.
Colonial Penn Ins. Co., 1991-NMSC-048, ¶ 30, 112 N.M. 123, 812 P.2d 777 (“In
construing 	a 	contract, 	the 	law 	favors 	a 	reasonable 	rather 	than 	unreasonable
interpretation.”).
{22} 	In addition, Rivera did not use the integral-ancillary test in Brown v. ITT
Consumer Financial Corp., 211 F.3d 1217, 1222 (11th Cir. 2000), to gauge the
relative importance of two contract provisions; rather, it used it to determine whether
a contract condition was so central to the parties’ intent in contracting that to arbitrate
without it would be to “eviscerate the core of the parties’ agreement.” Rivera, 2011-
NMSC-033, ¶ 38 (internal quotation marks and citation omitted). Interpretations of
the meaning and relative value of contract provisions is best left to established
contract interpretation and construction doctrines, with their overarching goal of
enforcing contracts according to their terms, and eschewing the nullification of
provisions.
C. 	The District Court Correctly Interpreted the Terms of the Arbitration
Agreement
{23} 	The district court found in its June 4, 2014, order “[t]hat it was the parties’
intent that the arbitration between them would be subject to all the rules and
procedures of the [AAA], including the rule regarding disqualification of an

13
arbitrator.” We agree with the district court that this is the legal effect of the parties’
chosen language.
{24} 	The first clause of the Arbitration Agreement provides: “Contractor and Owner
agree to binding arbitration under AAA.” The most reasonable construction of this
language is that “under AAA” incorporates all of the AAA rules normally applicable
to proceedings held under AAA’s auspices. See ConocoPhillips Co. v. Lyons,
2013-NMSC-009, ¶ 67, 299 P.3d 844 (holding that a court may “impl[y] a reasonable
term to cover” an omitted logistical issue if the implied term is consistent with the
language of the agreement (internal quotation marks and citation omitted)); Am. Arb.
Ass’n, Rule 2 (2009) (providing when parties agree to arbitrate under the AAA
“[r]ules, or when they provide for arbitration by the AAA and an arbitration is
initiated under th[e AAA r]ules, they thereby authorize AAA to administer the
arbitration”). Additionally, there is no language of limitation in the Arbitration
Agreement demonstrating intent to limit the scope of the AAA rules’ application to
the parties’ arbitration. Cf. Centex/Worthgroup, LLC v. Worthgroup Architects, L.P.,
2016-NMCA-013, ¶ 18, 365 P.3d 37 (holding that “where a subcontract contains
words of definite limitation, those words are given effect and the incorporation of the
prime contract is limited accordingly” (internal quotation marks and citation omitted)).
As a result, the language of the Arbitration Agreement reasonably demonstrates an
intent to arbitrate under all of the AAA rules.

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{25} 	The second clause of the Arbitration Agreement provides: “Contractor and
Owner agree that the designated arbitrator shall be . . . Lengyel.” Employment of the
language that the parties agree they shall designate Lengyel as their arbitrator is strong
evidence of intent to appoint the specified person. See Rivera, 2011-NMSC-033, ¶ 31;
Am. Arb. Ass’n, Rule 15(a) (2009) (providing that “[i]f the agreement of the parties
names an arbitrator or specifies a method of appointing an arbitrator, that designation
or method shall be followed”). However, there is no indication in the language of the
Arbitration Agreement that the parties intended that Lengyel would serve as a
non-neutral arbitrator contrary to American Arbitration Association, Rule 20 (2009).
See ConocoPhillips, 2013-NMSC-009, ¶ 67 (recognizing that the “[c]ourts cannot
create a new agreement for the parties” (internal quotation marks and citation
omitted)). Under the AAA rules, arbitrators are required to adhere to all of the AAA
rules generally. Am. Arb. Ass’n, Rule 8 (2009). Arbitrators, including arbitrators
specifically designated by the parties, are presumed and expected to function as
neutral arbitrators, unless the parties specifically agree in “writing” that a specifically
designated arbitrator shall function as a non-neutral arbitrator. Am. Arb. Ass’n, Rule
20(a) (2009). In all other circumstances, an arbitrator, including an arbitrator
specifically designated by parties in an agreement, may be disqualified under the AAA
rules for non-neutrality. Am. Arb. Ass’n, Rule 20 (2009). As recognized by the district
court, “[i]f the arbitrator could . . . ignore or avoid [the] rules at his discretion then that

15
would put at issue the AAA rules” and potentially cause them to have no meaning.
Lengyel should thus be treated as a neutral arbitrator based on the absence of an
explicit agreement to appoint him as a non-neutral arbitrator.
{26} 	The Kirschenbaums argue the parties intended to designate Lengyel as a
non-neutral arbitrator based on both parties’ long relationships with him, his
background as an architect, and his lack of legal or mediation training. However, there
is simply no evidence in the record and no indication in the Arbitration Agreement
that such a proposition made it into the final agreement. Accordingly, Lengyel will be
treated as a neutral arbitrator. Lengyel was not explicitly denominated as a non-neutral
arbitrator, and the Kirschenbaums failed to demonstrate by clear and convincing
evidence he was intended to serve as a non-neutral arbitrator. See Borst v. Allstate Ins.
Co., 2006 WI 70, ¶ 43, 717 N.W.2d 42 (holding that the 	arbitrators—whether
designated by the parties or not—are presumed to be neutral and impartial in the
absence of clear and convincing evidence in the parties’ agreement to the contrary).
D. 	The 	District 	Court’s 	Denial 	of 	the 	Kirschenbaums’ 	Motion 	for
Reconsideration Was Not Unreasonable, Arbitrary, or Fanciful
{27} 	The most natural construction of the Arbitration Agreement is that the parties
intended to arbitrate disputes between them concerning Miller’s construction work
under all of the AAA rules, with Lengyel serving as a neutral arbitrator. To interpret
the Arbitration Agreement designating Lengyel to trump the AAA rule permitting

16
replacement of a neutral arbitrator in certain circumstances would risk rendering the
AAA Rules meaningless. Accordingly, we hold that the district court did not act
unreasonably, arbitrarily, or fanciful in denying the Kirschenbaums’ motion for
reconsideration. See Edens, 2005-NMCA-033, ¶ 13.
III. 	CONCLUSION
{28} 	For the foregoing reasons, we affirm.
{29} 	IT IS SO ORDERED.
M. MONICA ZAMORA, Judge
WE CONCUR:
__________________________________
JONATHAN B. SUTIN, Judge
__________________________________
LINDA M. VANZI, Judge