Opinion
(February Term, 1892)
Arbitration and Award — Compensation — Pleading — Proof — Practice.
1. Though the parties to an arbitration agree that the arbitrators shall fix their own compensation, yet upon a proper suggestion that it is extortionate or excessive, it becomes the duty of the judge to hear and, if necessary, to pass upon the question thus raised.
2. When, upon the coming in of the award, the court ordered notices to issue to the arbitrators to file itemized accounts of the time engaged and expenses incurred by each, together with the value of their services, and in response to this order such accounts were filed, to which the defendants formally excepted: Held, (1) it is too late to object to the order; (2) the ruling of the court that it had "no power to consider the evidence in the absence of sustained proof or allegation, or some affidavit of the party setting forth fraud, collusion, conspiracy, or unfairness," was error.
3. The court has power to fix the compensation of its arbitrators when it is not agreed upon; to cut it down if it is excessive; and this in the absence of formal allegation and proof.
MOTION to revise and reduce the compensation of arbitrators, heard at October Term, 1891, of DURHAM, by Winston, J.
W. W. Fuller for arbitrators. (432)
W. A. Guthrie for defendants.
SHEPHERD, J., dissenting.
The following is the ruling and order:
"The court being of the opinion that the court has no power to consider the evidence in the absence of sustained proof or allegation, or of some affidavit of a party setting forth and specifically charging fraud, collusion, conspiracy, or unfairness, refuses said motion."
The defendant excepted. Judgment for the arbitrators.
The other facts may be gathered from the opinion of the Court.
If the parties had not incorporated into the agreement to submit to arbitration a provision that the arbitrators might fix their own compensation, the duty of determining what would be a just allowance for the service rendered by them, and each of them, would have devolved upon the court, and the judge might have heard evidence in case of dispute in order to arrive at a fair estimate of the value of the work done and the expense incurred in performing it. Stevens v. Brown, 82 N.C. 463; Griffin v. Hadley, 53 N.C. 82.
Where they assume the right to determine their compensation without the assent of the parties, that portion of the report will not be sustained, and, if separate from other matters disposed of, may be set aside, while the award in other respects may be enforced as a rule of court. Stevens v. Brown, supra; Knight v. Holden, 104 N.C. 107.
The truth of the principle embodied in the old maxim, "Nemo debet esse judex in propria sua causa," is self-evident. White v. Connelly, 105 N.C. 70; Freeman v. Person, 106 N.C. 251. While it is admitted that the parties to an action may, by express agreement, clothe arbitrators with power to fix the amount of their compensation, the law attaches, by implication, the condition that the allowance shall not be unreasonable, and upon a proper suggestion that it is extortionate or excessive, it becomes the duty of the trial judge, before giving judgment to enforce the award, as a rule of court, to hear evidence, if necessary, and pass upon the question thus raised. The motion for judgment upon an award, which is by the terms of the submission to be enforced as a rule of court, may be resisted upon any ground that impeaches its validity generally, or, where it is separable, the validity (433) of a portion of the findings. Metcalf v. Guthrie, 94 N.C. 447; Cowan v. McNeely, 32 N.C. 5.
It has been the practice in our courts to attack awards for errors of law, apparent from the record, by filing exceptions. Long v. Fitzgerald, 97 N.C. 39; Duncan v. Duncan, 23 N.C. 466.
It appears, upon an inspection of the charges of two of the arbitrators (the claim of the third having been compromised pending the dispute), that they claim each about $50 per diem for every day on which they were actually sitting together, with all expenses for board and transportation; and, moreover, one account contains a charge for one day at the same rate, which was spent previous to the hearing in conference with attorneys of the plaintiff who had chosen him. The aggregate of one of the contested accounts is $1,220.50; of the other, $982.21.
Upon the coming in of the award at March Term, 1891, Judge Boykin, who then presided, ordered that notice issue to Lutz and Graham to file "verified itemized accounts of the time engaged and expenses incurred by each of them respectively in the trial of this cause, together with the value of their services." To this order no exception was entered, and in response to it the accounts were filed, to which the defendants have formally excepted. It is too late to object to the order made at March Term, 1891.
The judge who passed upon the exceptions to the accounts filed by the two arbitrators rested his ruling upon the ground that he had "no power to consider the evidence in the absence of sustained proof, or allegation, or of some affidavit of a party setting forth and specifically charging fraud, collusion, conspiracy, or unfairness." The court below adopted the language used by Morse (p. 596), and quoted from an opinion of the Supreme Court of Maine. But it must be remembered that the question under discussion there was not what was the proper method of attacking an allowance of fees, made by two or three arbitrators, each for himself, according to his own estimate of (434) the value of his own services, but how the joint work of all the arbitrators, as to which there might be collusion or conspiracy, could be impeached for fraud. His Honor adopted the English rule, which has been followed by only a portion of the American courts (Morse on Arbitration, p. 620); but admitting, for the sake of argument, that the action of the arbitrators as to all issues upon which they passed as a body could in England have been impeached only by a bill in equity, and that under our Code practice we are bound to preserve the principle by requiring that the equity shall be alleged in some proper way, it does not follow that the account for services, which the parties may have consented that each arbitrator shall make out for himself, shall be attacked only in the same manner. In the absence of such agreement, the quantum of fees would have been determined at the discretion of the court, while, if the parties had not agreed upon the trial by arbitrators of the matters in controversy between them, the issues of fact raised by the pleadings would have been settled by the jury. An excessive charge of a single arbitrator might, it seems to us, have been corrected under the former practice without resorting to a court of equity, whatever might have been the rule as to collusive fraud. The permission to each arbitrator to make out his bill of charges is subject to the power of the judge to resume his functions in case the license should appear to him to have been abused. It is a substitution of the arbitrator in his place, with the condition annexed that the allowance may be set aside if unreasonable. If the award is set aside for fraud, the right of trial by jury as to the issues is reinstated. If the allowance to an arbitrator is impeached as unreasonable, the effect is to restore to the court the right to fix a reasonable compensation.
We do not concur with the court below in the view that there (435) must be allegata and probata, or proof sustained in any specified formal manner, before the court can interpose to supervise an allowance of fees by the arbitrators to themselves. The amount of fees would be determined, in the absence of any agreement, by the court, on motion, and the judge would, in case of dispute as to the character and extent of the services, hear testimony. We see no reason why the judge, upon suggestion by exception, or by motion, that the allowance is unfair, should not set aside an unjust allowance in the way prescribed by law for making a just one. This is in harmony with The Code, and the general trend of our new practice in dispensing with useless formality where it obstructs the administration of justice. We think that the court was at liberty to hear any evidence offered as to the services performed, and upon that, and other material evidence, had the power to pass upon the question whether the charges made were unreasonable.
It would seem, however, that in America the jurisdiction of the courts of equity in setting aside awards has not been admitted to extend to all cases where there has been fraud in the arbitration; but it is needless to discuss that question, if we consider the compensation as a matter apart from the issues raised by the pleadings. We think that there was error in the ruling of the court below.