Opinion
June 2, 1954.
June 28, 1954.
Equity — Practice — Adjudication — Exceptions — Accounting — Stipulation of parties — Arbitration — Review of accounts and report by accountant — Depositions.
1. In a suit in equity for an accounting, in which it appeared that the parties stipulated that, pursuant to Rule 65, a named certified public accountant be appointed as an assessor, that he review the accounts of the parties and submit a report setting forth the amount which either party should pay to the other party, and that the cost of the assessor should be paid as provided in the stipulation; that exceptions to the accountant's report, filed by defendants and heard by the court in banc, were dismissed and a decree was entered in favor of plaintiffs in the amount found by the assessor; and that the court below held that the accountant selected by the parties was, in effect an arbitrator, and that in view of the procedure adopted by the parties, it was not required to file an adjudication and to permit exceptions after the filing of the adjudication; it was Held that the decree of the court below should be affirmed. [571-7]
2. It was Held, in the circumstances, that the court below did not commit reversible error in refusing defendants permission to take the deposition of a third person. [577]
Before STERN, C. J., STEARNE, JONES, BELL, CHIDSEY, MUSMANNO and ARNOLD, JJ.
Appeals, Nos. 68 and 69, Jan. T., 1954, from decree of Court of Common Pleas No. 1 of Philadelphia County, Sept. T., 1951, No. 534, in case of George Cohen and Boris Cohen, trading as All-Luminum Products v. Joseph Pucci et al., trading as PBR Manufacturing Co. Decree affirmed; reargument refused August 24, 1954.
Complaint in equity for an accounting.
The parties stipulated that Elmer I. Rosen, a certified public accountant, review the accounts, and submit a report to the court setting forth the amount which either party should pay to the other party and how he arrived at his conclusion. They also stipulated that Mr. Rosen's bill should be paid by the defendants if the amount determined to be due the plaintiffs was $10,000 or more. After examining records and hearing witnesses Mr. Rosen filed a report stating that defendants were indebted to plaintiffs in the sum of $10,633.96. Plaintiffs filed a motion for judgment and defendants filed exceptions to the report. The court below entered a final decree directing the defendants to pay the amount found to be due the plaintiffs and to pay Mr. Rosen for his services.
Other facts appear in the opinion per curiam, of the court below, PARRY and HAGAN, JJ., a portion of which is as follows:
Defendants object to the form of the court's decree, and argue that it does not conform to Equity Rules Nos. 1517 and 1518. The decree was not intended to conform to a decree in equity. The stipulation entered into by the parties is equivalent to the appointment of Mr. Rosen as an arbitrator. The first paragraph of the stipulation states that Mr. Rosen was appointed pursuant to Equity Rule No. 65, in effect as of the date of the stipulation. However, the stipulation clearly gives his decision an effect far beyond the provisions of that Rule, which provided for the appointment of an assessor by the court to aid and assist the Court. Mr. Rosen, however, was appointed by the parties themselves, for the purpose of determining the rights of the parties and ascertaining the amount that was due by one party to another. The parties voluntarily agreed upon the all-inclusive issues he was to decide and the compensation he was to receive for his services.
Mr. Rosen performed his duties and then submitted his accounting and report to the court for enforcement. Defendants treated this report as a final determination of the case and they filed extensive exceptions to the report, which the court dismissed, after argument, and after the depositions of Mr. Rosen had been taken at the request of defendants. The report was, in effect, adopted by the court, and a decree was entered based thereon.
By agreeing to have the exceptions heard by the court en banc, the defendants themselves gave the effect of a final determination to the assessor's report and so interpreted the stipulation. Defendants argued in support of their exceptions quite fully, and also submitted a brief.
No objection of any kind was raised by defendants to this procedure until the adverse judgment was entered. On the contrary, defendants agreed to the procedure; they named the assessor, and they accepted every advantage the procedure offered. Defendants cannot now be heard for the first time to say that the procedure followed was improper.
Thus, in the case of Buckman v. Davis, 28 Pa. 211, the parties in a pending suit agreed to refer determination of the issues to a referee. The reference was made, the arbitrator made an award and exceptions were filed thereto. The Supreme Court upheld the award, holding that it had been made in accordance with a valid arbitration; and that it was not necessary that the stipulation under which the matter had been submitted to the arbitrator should have been entered in pursuance of a rule of court. This same principle has also been applied in equitable actions: White's Appeal, 108 Pa. 473.
In Rosenbaum et al. v. Drucker et al., 346 Pa. 434, there was a dispute between two groups within a church. A bill in equity was filed by one group against the other. Subsequent to the institution of the action, the matter was referred to arbitrators by stipulation of the parties. After an award by the arbitrators, the loser sought to reverse the decision of the arbitrators on the ground that the arbitrators had failed to follow the procedure set forth in the Arbitration Act of April 25, 1927, P. L. 381, 5 P. S. 161. The court said that there had been no attempt in the procedure used to follow the Arbitration Act, and that, therefore, the stipulation constituted a common law arbitration and the award could be enforced by the court and was final as to law and fact. See also Brock v. Lawton, 210 Pa. 195.
From these decisions, it is clear that Mr. Rosen was, in effect, a common law arbitrator, and that, therefore, the usual adjudication-exception provisions in equity are not applicable here.
There are several statutory provisions for arbitration. Thus, the Act of June 16, 1836, P. L. 715, Section 3, 5 P. S. 3, provides that it is lawful for parties in any suit to consent to referrals of all matters of fact to a referee, reserving the questions of law to the court. The decision of the referee constitutes a special verdict, upon which judgment may be entered. Under this section, only where there is obvious error is the court justified in interfering with the referee's conclusions: Thompson v. Jennings, 111 Pa. Super. 80.
Section 4 of the foregoing Act specifically provides that the court may entertain exceptions to the referee's report only if they go to his misbehavior, or charge fraud, corruption, or a plain mistake of fact or law.
Section 8 of the Act of 1705, 1 Sm. L. 49, 5 P. S. 8, provides that in all cases where the plaintiff and defendant have accounts to produce, one against the other, and they consent to a reference to persons mutually chosen by them, the award of the referee, after approval by the court and entry on the record, shall have the same effect as a verdict; and that the party in whose favor an amount is awarded shall have judgment. While this section refers to a rule of court, it has been specifically held that this is not necessary, since the rule of court is implied where the referral is made in a matter which is pending before the court: McAdams's Executors v. Stilwell, 13 Pa. 88.
Whether Mr. Rosen be considered a statutory arbitrator or a common law arbitrator, it is clear that his decision is final and that any exceptions thereto can properly be heard by the court en banc which, upon disposing of them, may enter a judgment or decree in accordance with the report.
The parties in this case, including the defendants, treated the assessor's report as final. Exceptions were taken and heard by the court en banc. It is not necessary that the court en banc make specific findings. These are contained in the assessor's report. Nor is it required that a decree nisi be entered by the court, for the court en banc has the power to enter a final decree. Furthermore, it is not necessary that the court permit exceptions to its findings. Such exceptions had already been taken to the report and were considered and passed upon by the court. No useful purpose could be served by an additional set of exceptions to be heard before the same judges; nor do the rules require such procedure. The proper course to be followed by defendants following an adverse decision of the court en banc is to appeal to the proper appellate court, if grounds for appeal exist.
For the foregoing reasons, we hold that the decree entered in this case does not violate Equity Rules Nos. 1517 and 1518. It is extremely doubtful whether Rules Nos. 1517 and 1518 apply at all in the instant case. Rather, the procedure applicable here would seem to be that set forth in Rule No. 1530(e) under the heading "Special Relief Accounting." That Rule provides that questions involving an accounting may be referred to an auditor who shall file a report to which exceptions may be taken within twenty days. If no exceptions are taken, the court shall enter judgment for the amount determined by the auditor to be due; and if exceptions are filed, the court shall determine the amount, if any, which may be due. That is precisely the procedure followed in the instant case. Furthermore, if any procedural defect did exist here, it would constitute harmless error under Rule No. 126, which provides, in part, that "The court at every stage of any such action or proceeding may disregard any error or defect of procedure which does not affect the substantial rights of the parties." Clearly, the defendants here were not deprived of any substantial rights, and their only complaint appears to be that they did not prevail.
Defendants also contend that the court improperly refused them permission to take the depositions of Howard Chester, a person with no prior connection with this action.* * *
But even if defendants had properly petitioned for permission to take the depositions of Mr. Chester, permission was properly denied because, as pointed out above, the stipulation under which Mr. Rosen was appointed assessor effectively submitted the matter to arbitration. Therefore, the decision of Mr. Rosen is final both as to the facts and the law, and it is subject to attack only on the ground of fraud or misbehavior on the part of the referee or assessor: Rosenbaum et al. v. Drucker et al., 346 Pa. 434; see also the Pennsylvania Arbitration Statute, 5 P. S. Secs. 3 and 4.
Defendants moved to take Mr. Rosen's deposition, and the court granted this motion, so that the question of Mr. Rosen's good faith could be explored. During the taking of the deposition, defendant's counsel conceded Mr. Rosen's honesty, and nothing in the transcript of his deposition gives any basis for any finding of fraud or dishonesty. That issue having been determined, it would have been error for the court to have allowed additional depositions. The granting of the right to take additional depositions would have completely vitiated the stipulation, for, if additional depositions had been taken by defendants, plaintiffs would have undoubtedly found it necessary to secure additional depositions to support their position. Then, instead of having the findings of Mr. Rosen, there would have been findings by additional parties. In such case, the court would have had to decide among these diverse findings; — and thus there would have been no finality of the decision of the arbitrator selected by the parties.
Defendants were given full opportunity to present to Mr. Rosen any and all information, from whatever source, bearing on the subjects of his inquiry, prior to the filing of his report. In fact, defendants did produce witnesses whose views were considered by Mr. Rosen. It is also to be noted that defendants did not take any steps to take the depositions of Howard Chester until many months after the report of Mr. Rosen had been filed.
Defendants appealed.
Edward Unterberger, with him Albert H. Gold, for appellants.
Arlin M. Adams, with him Bancroft D. Haviland and Schnader, Harrison, Segal Lewis, for appellees.
The decree in this case is affirmed on the opinion of the court below.