Kaplan v. Niagara Fire Insurance

1. The court will presume, after an award is made, that the appointment by the arbitrators of an umpire has been rightly done, unless the contrary is shown; every intendment to substantiate the award will be made. 2. In an action involving the validity of an award of arbitrators in which the umpire has taken no part, his qualifications for his office are immaterial. 3. The omission from the appraisement and award of arbitrators of one of the items in controversy between the parties, within the terms of their submission (no misconduct being imputed to the arbitrators) cannot at law be shown by parol. 4. The award cannot be impeached at law for erroneous judgment of the arbitrators upon facts, except only for their misconduct as expressed in Ruokman v. Ransom, 6 Vroom 570. Even in equity, except in cases of accident or mistake, it is final against such attack unless corruption or misconduct be imputed.

On error to the Supreme Court. Action of contract by Michael Kaplan against said company to- recover loss upon policy of fire insurance. Plea of general issue, with notice setting up an award by appraisers under the terms of the policy. Judgment for amount fixed by the award and plaintiff brings error. Affirmed. The plaintiff declared in contract upon a policy of fire insurance insuring him against loss by fire on his stock of glass, * * * paints and certain other personal property; averred its destruction and damage by fire, and defendant’s liability to pay his loss, not to exceed a certain sum named in the policy, and that he (plaintiff) had performed all the conditions of the policy on bis part to be complied with, but that the defendant had not paid said loss, &c. The defendant pleads the general issue, with a notice attached that it would give in evidence in the trial and insist in bar of plaintiff's claim upon certain conditions contained in the policy, the most material being a stipulation to the effect that, in the event of disagreement as to the amount of loss, the same should be ascertained by two competent and disinterested appraisers (the insured and this company each selecting one); that the two so chosen should first select an umpire; that they together should then estimate and appraise the loss, stating separate^ sound value and damage, and failing to agree should submit their differences to the umpire ; and that the award in writing of any two should determine the amount of such loss; that after the occurrence of the fire a disagreement arose between the plaintiff and the defendant as to the amount of the loss and damage to be paid by defendant, and that they (the parties) thereupon selected two competent and disinterested appraisers to ascertain the amount of the said loss or damage, tire plaintiff and defendant each selecting one of the appraisers, and that the two appraisers so chosen, after selecting an umpire, together estimated and appraised the said loss or damage, stating separately sound value and damage, and agreed that the sound value was $1,200 and that the loss or damage was $451.25, and by an award in writing, made on February 25th, 1902, so determined the amount of such loss, and that tire defendant has at all times since the making of the said award been ready and willing to pay the plaintiff the said sum, &c. At the trial of these issues at the Middlesex Circuit, before Mr. Justice Fort and a jury, the plaintiff having proved in evidence his policy, and the injury by fire of fyis insured property, and the furnishing by him to the defendant of the proofs of loss required by the policy, rested his case; whereupon the defendant introduced in evidence (without objection by plaintiff) a written agreement purporting to be an “agreement for submission to appraisers,” duly signed by the plaintiff and defendant, reading as follows, viz.: “This agreement, made and entered into by and between Michael Kaplan, insured as M. Kaplan, of the first part, and the insurance company or companies, whose name or names are signed hereto, of the second part, each for itself and not jointly, witnesseth that Aaron Buzzee and Frederick Webster shall appraise and ascertain the sound value of and the loss upon the property damaged and destroyed by the fire of Febraury 5th, 1902, as specified below; provided, that the sa'id appraisers shall first select a competent and disinterested umpire, who shall act with them in matters of difference only. The award of any two of them, made in writing, in accordance with this agreement, shall be binding upon both parties to this agreement as to the amount of such loss. It is expressly understood thát this agreement and appraisement is for the purpose of ascertaining and fixing the amount of sound value and loss and damage only to the property hereinafter described, and-shall not determine, waive or invalidate any other right or rights of either party to this agreement. The property on which the sound value and the loss or damage is to be determined is as follows, to wit: “M. Kaplan. “On his stock of glass, window fixtures and shades, wall paper, oils, varnishes, turpentines, benzine, gasoline, paints, white lead, and dry colors and brushes. All while contained in the three-story frame building corner of Albany and Neil-son streets, and known as 76 Albany street, occupied as dwelling and stores. 80 per cent, co-insurance reduced rate and lighting clauses attached. Other insurance permitted. Attached to and forming part of Policy No................, agents. It is further expressly understood and agreed that in determining the sound value and the loss or damage upon the property hereinbefore mentioned, the said appraisers are to make an estimate of the actual cash cost of replacing or repairing the same, or the actual cash value thereof, at and immediately preceding the time of the fire; and in case of depreciation of the property from use, age, condition, location or otherwise, a proper deduction shall be made therefor.” The plaintiff also introduced in evidence the written award, signed by the two appraisers, named in the submission, -which, after reciting the taking and- signing by the appraisers of their oaths of office in proper form, and their selection and appointment of a named umpire, “to settle matters of difference that might exist between us by reason of and in compliance with the foregoing agreement and appointment,” concludes in the following words, viz.: “ylward. — To the Parties in Interest: We have carefully examined the premises and remains of the property herein-before specified, in accordance with the foregoing appointment, and have determined the sound value to be twelve hundred dollars, and the loss and damage to be four hundred and fifty-one dollars and twenty-five cents.” The evidence showed no failure of the appraisers to agree, and no difference of opinion between them. Upon the defendant’s motion, at the conclusion of the testimony, the learned trial justice directed the jury to render a verdict for the sum fixed by the award, stating his reasons as follows, viz.: “The plaintiff concedes that if the award in question cannot be attacked here, upon any of the grounds they allege, that their recovery in this action must be so limited. The appointment of appraisers or arbitrators was not by rule of court, but was done in compliance with the condition of the policy of insurance sued upon, and may be considered as a common law arbitration. By the common law the award of the arbitrators is like a judgment. Courts of common law cannot listen to suggestions contradicting the award or impeaching the condúct of the arbitrators. Barlow v. Todd, 3 Johns. (ÍV. 7.) 263. Professor G-reenleaf states the rule this way: Tn regard to corruption, or other misconduct or mistake, of the arbitrators in making their award, the common law seems not to have permitted these to be shown in bar of .■an action at law for non-performance of the award, but the remedy must be pursued in equity.’ 2 Greenl. Evid., § 78; •Cranston v. Kenny, 9 Johns. 212; 2 Tayl. Ev., § 1758; Story Eq. Jur. (12th ed.), § 1452. In Bwlow v. Todd, supra, Justice Spencer says: Tt is now well settled that at law nothing dehors the award invalidating it can be pleaded or given in evidence to the jury/ The cases are numerous, both in this country and in England, on this proposition. In our own state, without quoting further from other authorities, the question appears to be settled. In Sherron v. Wood, Chief Justice Ewing says: ‘The arbitrators are judges chosen by the parties themselves, and their awards are not examinable in a court of law unless the condition- is to be made a rule of court, and then only for corruption or gross partiality. Courts of law cannot listen,to suggestions contradicting the award or impeaching the conduct of the arbitrators. * * * In an action at law on an award, even the corruption or misconduct of the arbitrator is no defence/ Sherron v. Wood, 5 Halst. 7, 14. In Ruckman v. Ramson, Chief Justice Beasley, speaking for the Court of Errors and Appeals, followed and approved this decision. Ruckman v. Ransom, 6 Vroom 565; Hoagland v. VegMe, 3 Zab. 92. Two contentions are especially pressed upon the court in this case as grounds for taking it out of the rule excluding parol evidence to avoid or contradict a report of arbitrators. First. That the appraisers failed to take into account, in appraising, certain glass on the premises. Second. That the appraisers made their appraisement and award without giving notice to the parties of the time when or place where they would consider the matter. As to the first point, the only arbitrator sworn testifies that the glass they saw was not injured, and was not therefore considered in estimating the damages. In Harlcer v. Hough, 2 Halst. 4,28, on a demurrer to a plea alleging that the arbitrators had ‘refused to act upon a claim which was a matter in dispute between the parties/ the court said: ‘On demurrer the fact must be presumed as pleaded, and if so, there cannot remain a doubt that the' award is a nullity/ The matter upon which the arbitrators had failed to act there- was one of several independent matters submitted to them for decision, and upon which they refused'to act at all. Here the alleged failure was to take into account one item in the many items in the same matter submitted to the appraisers, and not an independent subject-matter of arbitration. If this error existed, it would only be a mistake. It nowhere appears there was a refusal to consider. On the other hand, the only proof is that the appraisers did consider it, and did not award any damage as to it, as no damage existed. In that state of fact, it was, if anything, an error of judgment of the arbitrators, and not reversible in this action. In Cranston v. Kenny, supra, Justice Spencer says: ‘If there had been a plain mistake committed by the arbitrators, the relief lies only in equity.’ In Newland v. Douglass, 2 Johns. 62, the court said: ‘A suit at law will not lie to re-examine the merits of an award. A Court of Chancery may correct a palpable mistake or miscalculation made by the arbitrators, or relieve against their partiality or corruption, but there is no such remedy at law in a case of submission not within the statute.’ The second contention was passed upon in Sherron r. Wood, supra. Justice Drake says: ‘The fourth plea alleged in bar of the action that the defendant was, by the said arbitrators, denied the privilege of hearing and examining witnesses relative to the matters submitted, and that the said arbitrators heard the said William Sherron, and examined witnesses ex parte, in the absence of .the defendant and without notice to him, &c. If this be so, it is ground for relief by bill in equity,’ * * * but it cannot be set up as a defence to an action on the arbitration bond.’ And Chief Justice Ewing, in the same case, says: ‘Improper conduct in an arbitrator in making the award without hearing the defendant and his witnesses cannot be pleaded in bar to an action on the bond conditioned for the performance of the award, but it is only matter of application to the equitable jurisdiction of the court to set aside the award.’ Citing 2 Chit. 477. Relief is given by our courts in equity for such misconduct on the part of arbitrators — just such conduct as that, the appraisers, having failed to give the parties notice and to hear them.. Thomas v. West Jersey Railroad Co., 9 C. K. Or. 567. The-' federal courts seem to hold that even in equity an award by appraisers such as the one in this caée will not be set aside from the mere fact that no notice was given, if the submission. does not in terms require notice. Continental Insurance Co, v. Garrett, 125 Fed. Rep. 589. A third suggestion was made by plaintiffs counsel, that the umpire chosen was not sworn, nor did he agree to accept. The appraisers agreed. His services were therefore not required. His failure to qualify, therefore, is quite immaterial. The authorities seem to sustain this conclusion. Joyce Ins., § 3240; Chanders v. American Fire Insurance Co., 34 N. IF. Rep. 390; Caledonian Insurance Co. v. Traub, 35 Atl. Rep. 15; American Central Insurance Co. v. Landau, 17 Dick. Ch. Rep. 73. There is no requirement that the appraisers be sworn, and if they are not it will not invalidate the award. See opinion of Vice Chancellor Reed in Stout v. Phoenix Assurance Co., 56 Atl. Rep. 691. Under the well-established practice in this and other states in which legal and equitable jurisdiction has not been blended, the award in evidence in this cause cannot be attacked in a suit at law upon any of the grounds so forcibly urged by counsel of the plaintiff. The distinction in this regard between the practice in the several states is clearly pointed out by the court in Robertson v. Scottish Union and National Insurance Co., 68 Feci. Rep. 173. One of the cases cited by counsel to the court in this case on this point is Day v. Hammond, 57 N. 7. 479, but an examination of the concluding paragraph of that opinion, which otherwise sustains counsel, shows that it is expressly stated that the reason for that decision is that in New York the law and equity jurisdiction is blended, and therefore there is no necessity for the separation of the rights of action, as there is in the practice under the common-law states. * * * I have no difficulty with regard to the allegation that there was a failure to take into account the property which was totally destroyed. In the first place, there is not any proof in this case that anything yras totally destroyed; but if there were, I should still' hold that the subject-matter of the arbitration being the ascertainment of the loss by this fire, even though the arbitrators did'not take into account some of the particular subject-matter, but did take into account such matters as were brought to their attention, that their award, even though wrong, cannot be attacked at law, but must be set aside in equity. The parties must go there for their relief. The award in evidence is conclusive upon the parties in this court, and the plaintiff is entitled to recover only the amount of the award and interest.”