Collins v. Vanderbilt — 21 N.Y. Super. Ct. 313

Majority

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James Collins, Plaintiff and Respondent, v. Cornelius Vanderbilt, Defendant and Appellant.

Headnote

1. Where there is an agreement between two parties to submit any matter of difference between them to the decision of a third nerson, it is essential to a final and conclusive decision that both parties should have notice of the time and place when such third person is to investigate the matter with a view to such decision, unless there be something in the terms of the agreement declaring or clearly importing that such notice need not be given.

2. The same rule applies whether the third person is in the employment of one of the parties to the work, or is a stranger.

3. Where, under such a contract, the third person designated in it, and another, at the request of the defendant, the employer, went to look at the work, the employer saying that if they said it was all right he would pay, and on looking at the work they found it was not done, and stated to the contractor what he must do to complete it, and subsequently the arbiter named in the contract visited the work alone, and being satisfied it was done, gave a certificate to that effect: Held that this was insufficient, as the subsequent examination was without notice to the defendant.

(Before Bosworth, Oh. J., and Moncrief and White, J. J.)

Heard, May 10;

decided, June 29, 1861.

Appeal from a judgment entered on- the report of Livingston K. Miller, Esq., Referee, in favor of the plaintiff.

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This was an action brought to recover a balance alleged to be due, as part of the last installment, on a contract for filling in land under water, on the shore of Staten Island to a level of four feet above ordinary high water-mark.

The contract, under which the work was done, contained a provision, “that it should be submitted to one, Minthorne Tompkins, to decide when said several portions of said work were respectively done, so as to entitle said contractor to receive, and to oblige said defendant to pay the respective installments; and that the decision of said Tompkins, when made on the said matter, should be binding on both parties.”

It was proved, on the trial, and the Referee found accordingly, that on or about the 15th of June, 1859, Tompkins, at the request of defendant, met one Amos on the premises, to inspect the work and determine whether the same was completed; that Amos, on behalf of defendant, pointed out what he considered to be the deficiencies in said filling, which plaintiff was then and there directed by Tompkins to supply. That thereafter plaintiff did additional work and filling in, and on the 25th day of June, 1859, Tompkins again examined said premises, alone, and thereupon gave a certificate, addressed to the defendant, and in the following terms:

“I have examined the filling in done by Mr. Collins and am satisfied that he has fully performed the contract, that is, he has filled up within the bulkhead to the height of four feet above ordinary high water; I went down last Saturday with Amos, and having then measured it with him, we informed Mr. Collins as to what was necessary to be done; I have this morning inspected it, and find that he has performed satisfactorily the work which we required him to do. I believe there is still remaining due to him the sum of eight hundred and thirty-three 33-100 dollars, to be paid by you.”

The Referee’s report also stated that evidence was offered and received under objection, to show that the dock was not sufficiently filled in, and the nature and

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extent of the deficiencies; also, to show that the defendant had not notice from Tompkins of his final examination of said work. The defendant insisted on the trial that the evidence was admissible, and that the want of notice rendered the award void. He found, as a conclusion of fact, that the defendant had notice of Tompkins’ first inspection in company with Amos, but no notice of any subsequent inspection; and also, that on the 6th day of July, 1859, there was a deficiency, in the filling, of 3,040 feet from the point required; and that the last installment of said contract price had never been paid, viz., $833.33.

From the foregoing facts, he found, as a conclusion of law, that the matters submitted to said Tompkins, were passed upon by him, after examination and inspection, and that his finding and decision thereon was conclusive and binding upon the defendant, and that the plaintiff was, therefore, entitled to judgment against the defendant, for the amount therein specified, with interest and costs.

Lot C. Clark, for the appellants.

I. The provision in the contract for the submission to Mr. Tompkins, and his decision upon the question of fulfillment, so as to entitle the plaintiff to his pay, is a submission to arbitration. (McMahon v. N. Y. & Erie R. R. Co., 20 N. Y. R., 464 ; The Mayor, &c., v. Butler, 1 Barb., 325 ; Van Cortlandt v. Underhill, 17 Johns., 405 ; Peters v. Newkirk, 6 Cowen, 103 ; Caldwell on Arbitrations, 119.)

II. It follows, from embodying this clause in the agreement, that without a submission and decision thereon, the plaintiff cannot recover. He must recover on the award or not at all.

IH. These points conceded, the only questions are, first, have the parties legally submitted it to Mr. Tompkins to decide; and second, has Mr. Tompkins made a legal decision or award.

First. It is manifest from the whole evidence, that the parties have never had a legal or formal hearing before

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Mr. Tompkins. There has been no time or place fixed by the arbitrator for a heáring. Ho notice of the time, place or hearing was given the parties. Ho judicial investigation—no formal hearing—no taking of testimony has been had in the case. This requirement is not satisfied by an informal letter or certificate, obtained by one party without notice to the other, upon a casual looking at the work, without taking any testimony or making any formal survey or examination. The contract does not say that the “ certificate ” of Tompkins shall be binding, but his “ decision ” upon a “ submission.” The arbitrator was not sworn.

These requirements belonged to common law as well as statutory submissions. But this submission, being in writing, sections 3-7 of 3 Rev. Stat., 5th ed., p. 356, apply. (Cope v. Gilbert, 4 Den., 348 ; Peters v. Newkirk, 6 Cow., 106 ; Bloomer v. Sherman, 5 Paige, 575.)

Second. Has there been a legal award ? The paper purporting to be a decision has none of the ordinary formalities of an award. The arbitrator, clearly was ignorant of the necessity of notice, &c. He supposed it was only necessary that he should be satisfied, and express that satisfaction. But if his letter was intended to be a formal award, yet if he omitted to give notice of the time and place of hearing, and to afford an opportunity to be heard, it is a nullity. (Elmendorf v. Harris, 23 Wend., 628 ; Peters v. Newkirk, 6 Cow., 106 ; Jordan v. Hyatt, 3 Barb., 283 .)

IV. The plaintiff endeavors to get rid of the force of these points, by urging that Mr. Amos met Mr. Tompkins to look at the dock on the Saturday previous to the date of the certificate, and that he represented the defendant.

How, the only evidence as to the authority of Mr. Amos • there is Mr. Tompkins’ testimony that he “ understood Mr. Vanderbilt wished Mr. Amos to look at the work with him.” This was when Tompkins and Collins both said the work was done. It turned out on inspection that it was not done. Therefore Amos had performed all that

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was required of Mm at that time, by pronouncing the work incomplete. Collins then worked five days longer. At the end of that time TompMns went alone, and gave neither Vanderbilt nor Amos any notice. They clearly had a right to be heard on the question, whether Collins had then completed the dock.

But there is no evidence in this case that Mr. Vanderbilt ever authorized Amos to decide with TompMns for him. The fair construction of Ms request that Amos might look at it, is that he wished to have him report afterwards. (McKinney v. Page, 32 Maine, 513, [2 Red. ;] Hook v. Philbrick, 3 Foster, [N. H.,] 288 ; Lincoln v. Taunton Manuf. Co., 8 Cush., 415 .)

V. It being manifest that there has been no legal sub- . mission or award, the plaintiff must be nonsmted. He should have offered to submit the question as to the completion of the contract to the arbitrator, if he wished to conclude the defendant. If the defendant complied, the award would have concluded him. If he refused, the plaintiff might have proceeded ex parte, after notice, or might sue on the agreement to submit. TMs is now Ms only remedy. (McMahon v. N. Y. and Erie R. R. Co., 20 N. Y. R., 464.) An arbitrator cannot proceed a single step without notice to the parties.

Tompkins Westervelt, for the respondent, (after reviewing the evidence in support of the Referee’s conclusions,) urged.

I. If there were not a sufficient passing upon the matters submitted to TompMns, such insufficiency must arise from the omission of some necessary requisites; and it was urged on the trial that this was a case of common law arbitration, and that some of the requirements had not been complied with so as to make Tompkins’ certificate a valid award. The answer to this is twofold.

1. This is not a case of arbitration, and the rules applicable thereto do not apply.

2. If it be subject to the rules of proceedings on common

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law arbitrations, the evidence shows that such rules were sufficiently complied with.

II. This is not a case of common law arbitration.

Submission to arbitration is defined as “That act by which parties refer any matter in dispute between them to the decision of a third person.” (See Kyd on Awards, p. 6.)

There was no “matter in dispute” in this case. The only matter on which any question could arise was the place of “ordinary high water-mark,” which was necessarily a matter of opinion; and the parties to the contract, to prevent dispute from a clashing of opinions, agreed to substitute the opinion of Tompkins for their own, and be bound by it. Tompkins has expressed that opinion, and they are so bound, Ho notice to, or hearing of, the parties was needed, although both were in fact given.

The existence and legality of such provisions in contracts is recognized by the Courts as something different and distinct from arbitrations. (See United States v. Robertson, 9 Peters U. S. R., 319. McMahon v. N. Y. and E. R. R. Co., 20 N. Y. R., 463.)

III. Ho notice to the defendant of the examination by Tompkins was necessary in this case. (M. McMahon v. N. Y. and E. R. R. Co., 466.)

The Court says that the question whether in cases like that then before the Court, “ the contractor or party doing the work has a right to be present when the measurements are made,” is a new one, and “open to the application of such principles as are best calculated to secure the rights of the parties.”

The reasoning of that case does not make notice to the defendant here necessary.

IV. If this case, however, be considered as so similar to a common law arbitration; nevertheless sufficient notice was given to the defendant, of the examination made June 15th, 1859, and Amos then attended as the defendant’s representative before Tompkins on the premises, and

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made certain suggestions on behalf of the defendant which were complied with.

1. All the matters on which a hearing could have been necessary, were then passed upon in presence of Amos, defendant’s agent, and Avith his sanction the ordinary high water-mark, and the level to which the filling should be raised was fixed — and nothing remained to be done; and it was agreed to by Amos, the defendant’s agent, that Tompkins should come alone and pass upon the work.

2. If any notice of the subsequent examination of the work by Tompkins would otherAvise have been necessary, it Avas expressly waived by Amos, the defendant’s agent, by the agreement that Tompkins should make his subsequent examination alone.

3. At any rate, it was for Tompkins to decide what was reasonable notice. (See Elmendorf v. Harris, 23 Wendell, 628.)

V. Even if this be regarded as a common law arbitration, failure by the arbitrator to be sworn does not affect his jurisdiction, and is waived if not. insisted on at the time. (Howard v. Sexton, 4 Comst., 158 ; Bergh v. Pfeiffer, Lalor’s Supp., 110.)

No witnesses having been called by either party, of course none could be sworn.

VI. The finding and decision of Tompkins is conclusive and binding upon defendant.

VII. All the evidence introduced to contradict that finding was inadmissible, and is not to be considered in this case.

Further, it does not contradict Tompkins’ finding, for it is evidence of the condition of the filling at another time, July 6th and not July 25th, and it does not appear that the testimony of Boot, (the surveyor,) is based on the same high water-line agreed upon between Tompkins and Amos.

The Beferee has found “ that on the 6th of July, 1859, there was a deficiency in the filling of 3,040 feet from the point required.”

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This is equivalent to - finding that the plaintiff has not performed the contract on his part. If the judgment is upheld, the defendant will be required to pay for labor that has not been performed; and will be so required on the ground that the certificate of Mr. Tompkins, of June 25th, 1859, is an estoppel against the defendant, precluding any inquiry whether the plaintiff has performed the contract on his part. It is found, as a fact, that the defendant had no notice prior to the last inspection of the work by Tompkins, that it was to be made. He had, therefore, no opportunity to be present and see that the measurement was accurate, and free from mistakes as to the actual point of high water-mark, and as to the height to which the dock had been filled.

The first and important question is, would an ex parte inspection of the work by Tompkins, and a decision by him, in good faith, that the work had all been done, conclude the defendant ?

In McMahon v. The N. Y. and E. R. R. Co., (20 N. Y. R., 465,) the contract was, inter alia, that the measurements and calculations of the quantities and amounts of the several kinds of work performed under it, should be determined by the Company’s engineer, and that he should “ decide every question which can or may arise between the parties, relative to the execution ” of the contract, “ and his decision shall be final and binding upon both parties.” It was held, that an ex parte estimate and measurement by the Engineer, without notice to the contractor, would not bind him. That case is treated as one in which no testimony was to be given before the arbitrator or Referee, but it was nevertheless held essential to a final and conclusive estimate, that notice of making it should be given to the contractor, so that he could be present and enabled to guard against mistakes.

The parties to the contract before us, covenant “ that it shall he submitted to Minthorne Tompkins, to decide when the several portions of the work of filling aforesaid are respectively done, so as to enable said party of the second

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part to receive, and to oblige said party of the first part to pay the respective installments of the price aforesaid, and that the decision of said Minthorne Tompkins, when made on the matters aforesaid, should be binding on both parties.”

The literal import of this provision is, that if the parties do not agree upon the question whether either of the three installments in which payment was to be made, was due when payment was claimed, the parties shall submit the question to Mr. Tompkins. There is nothing in the instrument implying an understanding, that he was to decide the question without notice to either party. In the case above cited the contract work was to be done under the direction and constant supervision of the engineer, and he was authorized to reject and condemn all work or materials, which in his opinion did not fully conform to the •spirit of the contracts. Notice of his estimates and measurements, so as to be present when they were made, was of no consequence to the contractor, except to guard against mistakes and bad'faith.

Notice is as important, in the present case as in that, to guard against mistakes. It is equally important to guard against inattention or bad faith of the arbitrator, unless it is a legal presumption that a person in the position of the engineer would practice bad faith towards the contractor, when a person not employed by either party would not be guilty of it.

I see no just grounds for withholding from this case the application of the rule enforced in the case cited. The fact that the arbitrator or umpire in the present case, presumptively might know nothing of the work as it progressed, and the further fact that the agreement is in terms, “ that it shall be submitted to ” the person named, to decide, &c., present forcible considerations for holding* that the agreement indicates an understanding of the parties, that he was not to decide ex parte, but that they were at least to have notice and an opportunity to be present, and call his attention to whatever was necessary to secure an accurate measurement.

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¡No such notice was given or opportunity had.

The only evidence that Amos was present at the time Mr. Tompkins first examined the work, by request of the defendant, is the testimony of the defendant. “ I recollect when Tompkins said the work was done, that I said, you and Amos can go and look at it, and if you and he say it is done, it is all right and we will pay it; T don’t know whether that was before or after he gave the certificate;”— and the testimony of Mr. Tompkins,—“I understood from defendant, before I went to look at the work with Amos, that he would like Amos to look at it; I met Amos there by appointment.”

Mr. Tompkins, although he testifies that Amos agreed to look at the work again on Tuesday night, yet he also says “ there was no understanding that I was to meet him there again.” Mr. Amos testifies that there was no agreement between him and Tompkins, that the latter should examine the work at any subsequent day.

It is quite clear that the two agreed when they together looked at the work that it was not completed, and that the defendant had no notice of any intended examination of it subsequently; and that the defendant, when shown the certificate of the 25th of June, 1859, immediately looked at the work and declared himself dissatisfied; had a survey made on the 6th of July, which the Referee has found to be accurate, and immediately notified Mr. Tompkins of the result of such survey, and refused to pay on the ground that the contract was not performed.

The certificate signed on the 25th of June, 1859, should not conclude the defendant, as it was given upon an ex parte examination by Mr. Tompkins, of which the defendant had no previous notice. The defendant (according to the evidence before us,) has not refused to attend upon a subsequent examination and measurement, nor manifested any disposition to deal inequitably with the plaintiff.

I think it should be held, as a rule applicable to all agreements'between two parties, to submit any matter of difference between them to the decision of a third person;

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that it is essential to a final and conclusive decision that both parties should have notice of the time and place when such third person is to investigate the matter with a view to such decision, unless there be something in the terms of the agreement declaring or clearly importing that such notice need not be given.

I also think there is nothing in the contract, in question, of that import, but on the contrary, that the words, “it shall be submitted,” imply that the parties to the agreement were to go before the arbitrator named, and submit the question to him for his decision.

The complaint alleges full performance of the work, “ in accordance with the terms and requirements of said contract or agreement.” This the answer denies. The answer also alleges a deficiency, in the filling in, of over 3,000 cubic yards, and that the contractor has abandoned and left the work in such unfinished state. By the terms of the contract, the filling was to be completed by the 1st of May, 1859. No agreement extending the time allowed the contractor for completing his work, is alleged or shown. The strongest evidence of waiver of the time fixed by the contract is that given by the defendant to the effect that he said to Tompkins: “ You and Amos go and look at it, and if you and he say it is done, it is all right and we will pay it.”

That contingency has not occurred, whether this was said before or after the certificate was received by the defendant. If said before that, then the fact is that they said it was not all right,—that the work was not finished. If said subsequently, then the fact is that the two have not looked at it together since.

For these reasons I think the Referee erred, and that the judgment should be reversed, the report set aside and a new trial granted, with costs to abide the event.

Mobcbbef, J., concurred in this opinion.