Opinion
No. 28505.
May 19, 1930.
1. ARBITRATION AND AWARD.
Award, to be valid, must be final and responsive to all matters of difference included in submission.
2. ARBITRATION AND AWARD.
Where arbitrators have done everything they could do upon matters submitted to make award final, award is sufficient.
3. ARBITRATION AND AWARD.
In interpreting agreements to submit to arbitration, courts seek to give effect to intent of parties.
4. ARBITRATION AND AWARD.
Parties submitting controversy to arbitrators are presumed to have acted in good faith, and must be held to have assented to that which would make submission valid.
5. ARBITRATION AND AWARD.
Intent of parties in making submission must be construed as such that it is possible for arbitrators to act justly within terms of submission.
6. ARBITRATION AND AWARD.
Where parties submitted controversy regarding compensation due under profit-sharing agreement as regards certain sales contract not fully consummated, award finding in favor of one party as to parts of contract which had been consummated and outlining principles to be applied if option should be exercised held sufficient.
APPEAL from chancery court of Washington county. HON. J.L. WILLIAMS, Chancellor.
Ernest Kellner, Jr., of Greenville, for appellants.
An award to be valid must finally dispose of the subject-matter submitted to the arbitrators.
5 C.J., p. 139; 2 R.C.L., p. 385; Anno. Cases, 1916A, p. 345; Rhodes v. Hardy, 53 Miss. 587.
The reservation of further authority vitiated the award.
Carter v. Calvert, 4 Md. Chancery Decisions; Miller v. Detroit Y. A.A. Ry. Co. (Minn.), 84 N.W. 48.
In order that an award may be final, it should be such an award upon which a court can render a judgment which can be enforced by execution.
Anno. Cases, 1918D, p. 705.
D.S. Strauss, of Greenville, for appellee.
Every reasonable intendment will be indulged to give effect to the proceedings of the arbitrators.
5 C.J., p. 241; Stout v. Gerrard, 128 Miss. 418; Clarke v. Insurance Company, 75 S.E. 944; Anno. Cases 1914C, 367; Scottish Union Ins. Co. v. Scaggs, 114 Miss. 618.
Courts will never set aside an award, or refuse to enforce it, because the arbitrators have not followed strictly legal rules in hearing and deciding a case unless it be shown that thereby manifest injustice has been done.
Remelee v. Hall, 76 Am. Dec. 140.
It is not unusual nor unheard of to submit to arbitration a determination as to a damage which may occur in the future.
13 C.J. 651; 3 Elliott on Contracts, sec. 2028; Tennessee Coal Co. v. Roussell, 130 Am. St. 56; Clarke Millinery Co. v. National Union Co., Anno. Cas. 1914C, 367.
Although an award may be wanting in certainty and definiteness, yet, if it is designed for the benefit of the party objecting it is not for him to take advantage of such defect.
Byers v. Thompson, 37 Am. Dec. 680; Kansas City, etc., R.R. v. Doggett, 67 Miss. 250; 4 Corpus Juris, 924; Karthaus v. Ferrer, 7 Law Ed. 121.
Emmet Harty, of Greenville, for appellee.
An award is deemed sufficiently certain when it is as much so as the nature of the case will admit.
3 Jones Eq. 462; Borretts v. Patterson, 1 Am. Dec. 576; Clark Millinery Co. v. Nat. Union Fire Ins. Co., 33 A. E. Ann. Cas. 367; Caldwell on Arbitration, p. 123.
Every reasonable presumption will be indulged in favor of the validity of the arbitration proceedings.
Stout v. Gerrard, 128 Miss. 418; Underhill v. Van Courtland, 2 Johns Ch. (N.Y.) 339; Railway Co. v. Callahan, 34 N.W. 678; Smith v. Cutler, 25 Am. Dec 581.
W.A. Percy, of Greenville, amicus curiae.
An award may be lacking in mutuality, finality and definitness and still be a good award, if the lack of those qualities is inherent in the matter submitted to the arbitrators; but when mutuality, finality and definiteness are lacking from an award because the arbitrators have imperfectly executed the powers vested in them, then the award is bad and may be set aside. I submit that if this court will carefully consider the submission of the award and the testimony it will perceive that these arbitrators did not imperfectly execute their powers and that such questions as were not definitely decided were left indefinite because the arbitrators did not wish to do anything which could possibly jeopardize Leavenworth's rights.
Argued orally by Ernest Kellner, for appellant, and by D.S. Strauss and Emmet Harty, for appellee.
Appellee was in the employ of appellants under a profit-sharing agreement. A dispute arose between them about the compensation due under the employment as regards the subject of a certain contract of sale hereafter to be mentioned and as to the manner of payment thereunder. On December 17, 1928, the parties submitted the controversy to arbitrators, and the stipulation touching the subject-matter is in the following words: "The subject-matter to be submitted to the arbitrators for award is the sum of money due R.V. Kimble from either J.H. Leavenworth Son, Inc., or George Leavenworth, or which may be due him on the consummation of the contract of sale and merger made between J.H. Leavenworth Son, Inc., and the Chicago Mill Lumber Corporation, or Horton Richards Co., Inc."
The arbitrators knew nothing of the said subject-matter when they accepted their appointment, but as soon as they had entered upon their duties, they ascertained that the said sales and merger contract was in three parts, one part of which had been consummated at the time of the submission, but as to the second and third parts, these were only options which the proposed purchasers were not bound in any event to exercise and which, if they did exercise, could not, as to the second part, be consummated prior to January 1, 1929, and as to the third part, might not be prior to December 31, 1931. The arbitrators were therefore at once confronted with the proposition that to deal in all respects finally with the said second and third parts, they would have to assume either that these options would be exercised when it might happen that they would not be consummated, or else to assume that the options would not be exercised, whereas the events of the future might result in the very opposite of that assumption. Of course, if the options were exercised and the same were consummated there would be further profits to be shared, otherwise not.
The arbitrators therefore proceeded to make an award, finding in favor of appellee as to all parts of the contract which had been consummated and in so far fully as the several component items had matured into a reality; and as to all further parts and items, which depended upon the unknown and unknowable events of the future, they made an award of the principles upon which these future accruals, if any, should be computed and allowed; and said award, having been produced before the court, was by the court, over the objections of appellants, confirmed.
The objections to the award, and the only objections, are: (1) That the arbitrators exceeded their powers, and (2) that they so imperfectly executed them that a mutual, final, and definite award on the subject-matter was not made. See paragraph (d), section 107, Code 1906, section 94, Hemingway's 1927 Code. The argument of appellant on the first objection is that the subject-matter submitted to the arbitrators was the entire contract of sale and merger, and that when the arbitrators undertook to make an award final only as to the items that had matured and have become existing realities, and did not make a like final award, so called as to the future features, they exceeded their powers. It is manifest, however, that this objection goes not to the first, but rather to the second, ground as above stated. Thus the assigned grounds may be considered together.
It is the settled general rule that "it is essential to the validity of an award that it shall be final and complete, responsive to all the matters of difference included in the submission." Rhodes v. Hardy, 53 Miss. 592. But since every rule must be given such an interpretation that it may have a sensible and practical operation, there is the essential qualification upon that rule that where the arbitrators have done everything that they could do, upon the matters submitted, to make an award final, and the award is therefore "as final as the nature of the thing [submitted] will admit of, it is sufficient." Borretts v. Patterson, 1 N.C. 126, 1 Am. Dec. 576. "There is nothing peculiar in the rules of interpretation applied to agreements to submit to arbitration. As in the case of all agreements the courts seek to give effect to the intent of the parties. . . . It is possible for the parties in the agreement to limit the scope of the arbitration in any way that is desired." 2 R.C.L., pp. 365, 366. To these statements we add a quotation taken from the recent case Rayl v. Thurman (Miss.), 125 So. 912, 914: "And, since parties must be presumed to have acted in good faith — and in a matter of this kind they will not be heard to aver to the contrary — it must be held that in the submission they assented to that which would make the submission valid." To which we now add, further, that in a submission to arbitration, the intent of the parties in making the submission must be construed as such that it is possible for the arbitrators to act justly within the terms of the submission, and as to this also, the parties will not be heard to say to the contrary.
The objection here is that the arbitrators have not made a complete and final award within the subject-matter submitted, because they did not finally fix the exact sums to be recovered, or did not or the other hand finally reject any claims for said sums, as the proceeds of the exercise in the future of the options in the sale and merger contract, and did not likewise fix or reject as to the several other future and immature items urged before the arbitrators. How were the arbitrators to act justly with respect to these future features otherwise than they did act? Were the arbitrators to wholly reject any claim or interest of appellee in the second and third items of the sales and merger contract on the assumption that the options would not be exercised, when only the future can reveal whether this will be true or not? On the other hand, were they to allow a present fixed sum on the assumption that the options would certainly be exercised and the profits to be derived therefrom would be gained, when it might turn out in the future that no such would happen? How could the arbitrators within justice have acted on either one or the other of such assumptions? These questions answer themselves, and the parties well knew these answers when they made their agreement of submission, and well knew that within the boundaries of justice the arbitrators could, as to these future matters, do no more than they did do, to-wit, outline the principles of the award and leave the facts, as of necessity they must be left, to be applied to the principles as those facts should in the future come into existence.
To uphold the objections made here would be to allow a party, who knows or ought to know the inherent limitations of the subject-matter as respects the possibility, within justice, of any complete and final determination, to submit to arbitration, and if the result did not suit him, then to avoid the award because it did not undertake to do the impossible and to cover all future features as if all that the unknown future holds in suspense had already happened. This would allow the parties, or one of them, to pretend in such a case to submit to arbitration, but without any binding force. Every principle of procedural law as well as those of good faith and fair conduct would condemn such an allowance, and it cannot be permitted.
Affirmed.