50 N.Y. 250 | NY | 1872
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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *255 [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *258 It appears to be well settled by authority that an agreement to refer all matters of difference or dispute that may arise to arbitration, will not oust a court of law or equity of jurisdiction. The reason of the rule is by some traced to the jealousy of the courts, and a desire to repress all attempts to encroach on the exclusiveness of their jurisdiction; and by others to an aversion of the courts, from reasons of public policy, to sanction contracts by which the protection which the law affords the individual citizens is renounced. An agreement of this character induced by fraud, or overreaching, or entered into unadvisedly through ignorance, folly or undue pressure, might well be refused a specific performance, or disregarded when set up as a defence to an action.
But when the parties stand upon an equal footing, and intelligently and deliberately, in making their executory contracts, provide for an amicable adjustment of any difference that may arise, either by arbitration or otherwise, it is not easy to assign at this day any good reason why the contract should not stand, and the parties made to abide by it, and the judgment of the tribunal of their choice. Were the question resnova, I apprehend that a party would not now be permitted, in the absence of fraud or some peculiar circumstances entitling him to relief, to repudiate his agreement to submit to arbitration, and seek a remedy at law, when his adversary had not refused to arbitrate, or in any way obstructed or hindered the arbitration agreed upon. But the rule that a general covenant to submit any differences that may arise in the performance of a contract, or under an executory agreement, is a nullity, is too well established to be now questioned; and the decision of the appeal of the present defendant does not make it necessary to inquire into the reasons of the rule, or question its existence. The better way, doubtless, is to give effect to contracts, when lawful in themselves, *259 according to their terms and the intent of the parties; and any departure from this principle is an anomaly in the law, not to be extended or applied to new cases unless they come within the letter and spirit of the decisions already made. The tendency of the more recent decisions is to narrow rather than enlarge the operation and effect of prior decisions, limiting the power of contracting parties to provide a tribunal for the adjustment of possible differences, without a resort to courts of law; and the rule is essentially modified and qualified.
The agreement, which is the subject-matter of litigation in this action, was carefully prepared by astute counsel, and the contracting parties themselves were intelligent, shrewd and practical business men of large experience; and no injustice, therefore, will be done to either by interpreting the instrument, and every part of it, by the ordinary rules for the interpretation of written instruments. It may be assumed that every provision which was essential to protect the interests of either, and give effect to the actual intention of both was inserted in words well chosen to give clear and distinct expression to the views of the parties, and exclude every construction inconsistent with such intention or the agreement as actually made.
The plaintiffs, under the agreement, secured to themselves the right to certain tolls absolutely for the use of their canal, to be ascertained from year to year in the manner and by the rules prescribed. Although they were not fixed and certain in amount, they were capable of being ascertained and made certain. An enlargement of the canal was contemplated, which it was supposed would inure to the benefit of the defendant by reducing the actual cost of transportation, and entitle the plaintiffs, under the arrangement and the terms of the agreement, to additional toll. But the amount of the toll to which the plaintiffs should be entitled, in addition to the toll as agreed upon, could not then be determined; and hence a provision was necessary for the ascertainment and adjustment of this additional toll when the right to it should *260 accrue. The parts of the agreement relating to this additional toll are separate and independent of every other part of the instrument, and are complete and perfect by themselves as an agreement by which the plaintiffs should be entitled, in the contingency named, to charge and collect the contemplated additional toll. Every part of the agreement, as to this additional toll, should be read as one instrument and one agreement. No part of it is collateral to and independent of any other part of it, and effect cannot be given to any one provision or paragraph, except in reference to and as modified by the other parts of the agreement relating to the same subject-matter. This is a leading canon in the interpretation of all covenants and written instruments.
The plaintiffs were secured the right to "charge and collect" toll on the defendant's coal; and it may be conceded the defendant undertook to pay, in addition to the toll before then chargeable, at a rate to be established after the canal enlargement should be completed in the manner particularly prescribed, and an arbitration was the final resort agreed upon to establish the rate and amount of toll, in case the contracting parties should not be able to agree, and the decision of the arbitrators was to be final in the premises. Both parties were to be concluded by it as to the amount or rate of toll which the one might exact and the other be compelled to pay. The manner by which the rate of toll was to be established was by the agreement of the parties, or, that failing, by arbitration. No other mode or manner was thought of or prescribed; and this manner being prescribed necessarily excludes every other method, as clearly and effectually as if the parties had said in terms that the rate should not be established by a resort to the courts or in any other manner, except by the parties, or, in case of their disagreement, by disinterested persons to be chosen for that purpose. Expressio unius est exclusio alterius. The parties have agreed to a rate "to be established in manner following;" and it would have added nothing to the legal effect to have added in terms that it should not be otherwise established, and excluded in *261 words the interposition of the courts. It is true the data from which and the rule and method of computation and calculation by which the additional rate was to be ascertained and adjusted is prescribed for the government of the parties, or those who, in their stead and as arbitrators or umpires, should act under this part of the agreement. That is, doubtless, a part of the process or formula for establishing the additional rate; but that alone did not and could not determine the rate. Action was to be had by the agents provided for, in conformity to and under the prescribed rule, and the manner of establishing the additional rate of toll was by the selection of the arbitrators, and their proceeding to ascertain the facts, and make the necessary estimates and the resulting calculations and computations.
Should the "manner following" receive a more restricted interpretation, and be regarded as strictly and literally referring to the rule given for estimating or ascertaining the reduction in the cost of transportation produced by the enlargement, and by no other cause, the fact still remains that the right of the plaintiffs is only to an additional rate of toll "to be established;" and the agreement prescribes the rule and designates the means and agency by which the additional toll is to be computed and estimated, and thus "established." The right of the plaintiffs to demand, and the obligation of the defendant to pay additional toll is restricted to the rate to be established pursuant to the agreement. The extent of the duty and the right were to be measured by the judgment and decision of the arbitrators, and not otherwise. The clear and plain intent of the parties was that the additional rate of toll should "be established," as preliminary to the right of the plaintiffs to charge and collect, and a formula was given by which it was contemplated that the parties would be able to agree upon the rate to be paid; but they also provided for the contingency of a disagreement in respect to the principal facts and estimates, upon the basis of which the additional toll was to be computed and established, and which, being ascertained, the rate of toll would be arrived at *262 by a simple arithmetical computation. The process by which the additional rate of toll was to be established was by ascertaining or estimating the cost of transportation prior to the enlargement, and the cost of transportation after the enlargement, and the amount of the reduction which should be produced by the enlargement, and by no other cause; and the one-half of the latter sum was agreed upon as the additional toll to be "thereafter permanently charged." If the managers should not be able to agree as to the amount of the reduction in the cost of transportation, and in the portion of such reduction which should be produced by the said enlargement, "the questions between them in respect thereto" were to be submitted to arbitration. Now while it is true that the parties have not intotidem verbis agreed that the additional rate of toll to be exacted shall be established by arbitrators, they have, in substance and effect, done so, by providing that in case of difference between the contracting parties the arbitrators shall determine and establish an amount, which, divided by two, will give the additional rate of toll intended to be established.
The amount of reduction produced solely by the enlargement of the canal was to be determined by arbitration, and the parties agreed that the one-half of that sum should be the additional rate. This was, in substance and effect, a provision for establishing the rate of toll to be charged and collected, in case of a difference between the parties, and equivalent to an agreement in words that, in case the parties should differ, arbitrators should be chosen who should, by the rules and formula prescribed, establish and determine the rate of additional toll, and that their award should be final. The subject-matter in view was peculiarly fit and proper for submission to the arbitrament of experts and practical business men rather than courts and juries; and the manner agreed upon was a provident and reasonable provision for the adjustment of rights and differences, which, in their nature, could not be as well or satisfactorily settled and determined in any other way. The relation of the parties to each other *263 and the character and extent of the business contemplated under the contract called for an amicable and speedy adjustment of the rate of toll, and the charges which should be imposed upon the property of one for the benefit of the other. Neither party contemplated the possibility of, or would have agreed to a rate of toll to be determined by a jury in an action which the plaintiffs might bring for the recovery of the toll upon the first cargo of coal that might pass through the canal after the enlargement. The right to the additional toll was given by the agreement, and could be enforced either by detention of the boat and cargo or by action; but the amount and measure of such additional toll was to be determined by arbitration, and as prescribed in the agreement.
The defendant only undertook to pay such rate of toll as should be established, as prescribed in the instrument, and cannot be compelled to acquiesce in the determination in any other manner, and until a rate is established, no liability is incurred under the contract or right of action given. This mode of adjustment and settlement of the rate is a part of the agreement for the additional toll, and modifies and qualities the reservation of the right so that the right does not attach until the same is established. The determination and adjustment is a condition precedent to the right to demand and receive the toll, and no action will lie until the condition has been performed. Whether, when established, it would retroact and give a right to the additional toll from the time of the completion of the enlargement need not be considered. Neither need the effect of a refusal of the defendant to arbitrate nor any act on its part hindering and obstructing an arbitration be considered as the omission to arbitrate, and the failure to establish the additional rate of toll according to the terms of the agreement was not caused by the defendant. The plaintiffs seek without any valid reason, so far as appears by the case, to enforce the payment of an additional toll not established in the manner, and by the agents agreed upon, but by another tribunal. The defendant may well say that *264 is not the measure of liability to which it assented. Thus understood and interpreted, the case is not within the rule which nullifies contracts ousting the courts of their jurisdiction, but is within another rule equally well established by authority, and founded in good reason, that a person may covenant that no right of action shall accrue till a third person has determined any differences that may arise between the parties to the covenant or determined the measure of the liability of the covenant or, and the amount to which the covenantee shall be entitled.
The decisions of the courts of this state are to this effect, and are authoritative, and would be obligatory upon us even if they were not as well grounded in principle as they are. The principle was recognized by the chancellor and Senator TRACY inDel. and Hud. Canal Co. v. Dubois (15 W.R., 87), although not applied for the reason that the contract by which, among other things, it was referred to the engineer of the plaintiffs to estimate the amount and value of the work, and also to determine every other question necessary for the adjustment and final settlement of the contract, had been rescinded. In Butler v.Duncan (24 W.R., 447), the plaintiff had covenanted to do certain work to the satisfaction of third persons, and a declaration not averring that the work had been done to the satisfaction of the arbiters, was held bad on demurrer. To the same effect is Smith v. Briggs (3 Denio, 73), where the contract of the defendants was to pay the plaintiff, a builder, when he should receive the certificate of the architect that the work was finished according to the contract. Smith v. Brady
(
Hurst v. Litchfield (
Wood v. Lafayette (
The agreement before the court in Huggart v. Morgan (1 *266 Selden, 422) was that all disputes which should arise should be settled forthwith by arbitration, and therefore, if valid, would have ousted the courts of all jurisdiction, and within the settled rule, was held no bar to an action, the agreement to arbitrate only entitling the party to damages. These are all the cases from our own courts that need be referred to. The distinction between the two classes of cases is marked and well defined. In one class the parties undertake by an independent covenant or agreement to provide for an adjustment and settlement of all disputes and differences by arbitration, to the exclusion of the courts, and in the other they merely, by the same agreement which creates the liability and gives the right, qualify the right by providing that before a right of action shall accrue certain facts shall be determined or amounts and values ascertained, and this is made a condition precedent either in terms or by necessary implication.
This case is within the latter class, and the condition being lawful, the courts have never hesitated to give full effect to it. The cases of Kill v. Hollister (1 Wils., 129); Thompson v. Charnock (8 T.R., 139); Horton v. Sawyer (4 H. N., 643); Gray v. Wilson (4 Watts., 39); Mitchell v. Harris (2 Vesey, 129); Roper v. Landon (1 Ellis, [Q.B.] 825), and the other cases cited and relied upon by the plaintiffs, belong to the first class, and involved the validity of covenants which deprived the parties of the protection of the courts and ousted the courts of all jurisdiction. In none is the rule as qualified by the other class of cases questioned, and in some it is referred to with approval. The reports abound in cases in which the principle has been affirmed and applied. (See Herrick v.Belknap, 27 Vermont, 673.) In United States v. Robeson (9 Peters, 319), it was held that when the parties in the contract fix on a certain mode by which the amount to be paid shall be ascertained, the party that seeks the enforcement of the agreement must show that he has done everything on his part which could be done to carry it into effect; that he cannot compel the payment of the amount claimed unless he shall procure the kind of evidence required by the contract, *267 or show that, by time or accident, he is unable to do so. Judge Story, in his work on Equity Jurisprudence, § 1457 a, thus states the rule: "But under a contract to pay the covenantee such damages in a certain contingency as a third person shall award, there is, in the absence of fraud, no cause of action either at law or in equity, unless the award is made," citing Herrick v.Belknap (supra), and Scott v. Corporation of Liverpool (3 De Gex J., 334), as authorities. Scott v. Liverpool was the case of a contract for work, containing a provision for putting an end to the contract by the employer in a certain contingency, and that in such case they should pay the contractor such sum as the engineers should determine had been reasonably earned, and it was held that, in the absence of fraud or collusion, no action could be maintained, until after an award was made. Here the contract is to pay an additional rate of toll to be established by arbitrators to be chosen. And see Brown v. Overbury (11 Exch., 715).
Scott v. Avery (5 H. of Lords Cases, 811) is in principle on all fours with the case at bar, and, unless we are prepared to overrule or disregard it, is decisive. That was an action on policies of insurance, one of the conditions of which was that the sum to be paid for loss should, in the first instance, be ascertained by the committee, but if a difference arose between the insured and the committee, the difference was to be referred to arbitration in a way pointed out by the conditions, with a proviso that no one who refused to accept the amount settled by the committee, should be entitled to maintain an action at law or suit in equity on his policy until the matter had been decided by arbitration, and then only for such sum as the arbitrators should award. It was held that these conditions were lawful, and that till the award was made no action was maintainable. The House of Lords affirmed the judgment of the Court of Exchequer Chamber, reversing that of the Court of Exchequer. There, as in this case, in the language of Lord CAMPBELL. the rules and regulations for ascertaining the amount to be paid made part of the contract, and it is not material that there the contract was express that no *268 action should be brought until after the award, while in the contract before us it is implied. It is not necessary that it should be put in the technical form of a "condition precedent," and the courts will give effect to the real intention of the parties, as clearly indicated by the agreement. (See American note to Braunstein v. Accidental Death Ins. Co., 1 Best Smith, 101 Eng. Com. Law R., 783.) When, as here, the agreement is that the covenanter shall pay such sum, and only such sum, as shall be determined by arbitrators, the procuring an award is as clearly a condition precedent to an action, as if the parties had added, "and no action shall be maintainable until after the award of the arbitrators." Such a clause would be surplusage, and its insertion a work of supererogation. Mr. Justice CROWDER, in making response to the question propounded by the lords to the judges, in Scott v. Avery, thus states the question and the answer to it: "Can a shipowner and an insurer enter into a valid agreement that the shipowner shall pay down a given sum, and that in consideration of such payment the insurer upon the loss of a given ship shall pay to the said owner, not the amount of the loss sustained by her through the perils of the sea, but only such sum of money as shall be settled and ascertained by arbitration? I am not aware of any legal objection to such a contract, whatever may be thought of its prudence. And I think the effect of such a contract is, that no action lies for the breach of it, until the same has been ascertained by arbitration." The judge lays no stress upon the form of the contract, but regards the provision for determining the amount to be paid by arbitration as in legal effect postponing the right of action until after the award is made.
The lord chancellor (CRANWORTH), in assigning his reasons for an affirmance of the judgment of the Court of Exchequer Chamber, says: "That the meaning of the parties, therefore, was that the sum to be recovered should be only such sum as, if not agreed upon in the first instance between the committee and the suffering member, should be decided by arbitration, and no other, should be the sum to be recovered, appears *269 to me to be clear beyond all possibility of controversy. And if that was their meaning, the circumstance that they have not stated that meaning in the clearest terms, or in the most artistic form, is a matter utterly immaterial. What the court below had to do was to ascertain what was the meaning of the parties, as deduced from the language they have used."
The intention of the parties, as deducible from the contract, in his opinion was, "that the right of action should be not for what a jury should say was the amount of the loss, but for what the persons designated in that particular form of agreement should so say." Although the judges responding to the lords differed in opinion, there does not appear to have been any dissent from the judgment in the House of Lords by those taking part in the decision. (Braunstein v. Accidental Death Ins.Co., supra; Tredman v. Holman, 1 Hurls. Colt., 72, followedScott v. Avery.) In Braunstein's case the policy did not, in terms, declare that the award of arbitrators should be a condition precedent to the bringing of an action. The condition was to the effect that, in case of difference of opinion as to the amount of compensation, the question should be referred to arbitration, and the award made should be taken as a full settlement of the question, and the legal effect was to prohibit an action until the amount was determined by the award. The court held that the parties had used sufficient words to make the reference to arbitration a condition precedent. The defendant has, in substance, covenanted to pay additional toll at such rate as should be established by the parties, or, in case of their disagreement, by arbitrators to be selected for that purpose, and neither party has agreed to acquiesce in a rate of toll to be established by any other tribunal. As before suggested, while the arbitrators are not required, in terms, to halve the sum estimated as the reduction in the cost of transportation, produced solely by the enlargement of the canal, and in form award the quotient to be the additional rate of toll thereafter to be charged, it is declared and agreed that they shall ascertain and determine the reduction of the cost thus produced, and *270
that one-half of the reduction thus ascertained shall be the additional toll. In substance, therefore, the arbitrators are to establish the toll, Id certum est quod certum reddi potest. Every essential fact was to be settled by arbitration in case of a difference of opinion, and the award of the arbitrators would have been a substantial establishment of the additional rate of toll, and such was clearly the intent and meaning of the parties. It is the toll which should be established in this particular manner and none other that the plaintiffs are authorized to charge and collect either by distress or action; and this, and this only, is the toll which the defendant has undertaken to pay. The boats of the defendant could not be detained or its coal seized for the collection of the toll, without the amount was established, that is, ascertained and made certain. (Penn. CoalCo. v. Del. Hud. Canal Co.,
There is another objection equally fatal to the plaintiffs' action. As it is elaborately considered by Judge PECKHAM in the court below, a very brief statement of it here is all that is necessary. In adjusting and establishing the rate of toll to be paid upon the coal transported upon the plaintiffs' canal, prior to the completion of the enlargement, the parties had in view and estimated the actual cost, to the defendant, of the mining and carrying its coal to its place of deposit at or near the terminus of the plaintiffs' canal on the Hudson river, and one-half of the difference between this amount and the price at which sales of coal were made to be ascertained as particularly prescribed from year to year, was agreed upon as the rate of toll prior to the enlargement. The toll to be paid to the plaintiffs was to be a specified portion of the price at which coal should be sold in excess of such cost. This was the profit upon the sale of the coal at Rondout which would be realized, estimating the actual cost of the coal laid down at that point at two dollars and fifty cents per ton. But in all the negotiations and estimates upon which the negotiations were based and the final agreement made, the parties had in view the actual cost to the defendant of placing its coal at Rondout.
The defendant was protected against loss under this arrangement, resulting from an increase in the cost of transportation, or other increase in its expenditures in the business, from any cause, by the fact that it was not under obligations to send a ton of coal over the canal. If, by reason of an increase in the price of labor, the cost of provisions or other cause it should find itself unable to lay its coal down at Rondout, at a cost of two dollars and fifty cents per ton, it could cease to send its coal under the agreement. If the language of the agreement were less explicit than it is, it would be a reasonable and almost necessary inference that the parties did not intend, in providing for a future provisional increase of toll, to depart from this safe and certain *272 basis of the actual cost of the transportation, which was one of the items entering into the cost to the defendant, of laying its coal down at tide water, and adopting the uncertain, visionary and chimerical basis which was adopted by the referee in this case; an estimate wanting every element of certainty, in every stage of its progress, and all the parts that went to make up the whole; an estimate that was little better than a conjecture, and leading to results unjust in the extreme to the defendant.
The direct effect of the rule of interpretation adopted by the referee, as carried out in his estimates and by his report, was to subvert the scheme of the contract and destroy the equitable rule by which the parties had agreed to participate in the proceeds of or profits upon the sale of the defendant's coal at tide-water, and give to the plaintiffs a portion not contemplated, and to cast upon the defendant the entire risk of a contingent or possible increase in the cost of the service to be rendered by it in the promotion of what may, under the circumstances, be regarded as somewhat in the nature of a joint adventure for the mutual benefit of each. It would require positive and explicit language, indicating clearly an intent thus to vary the relative position of the parties under the contract, to justify an interpretation which would accomplish such a result.
So far from the terms of the contract calling for such a construction, they do not, upon a fair and reasonable interpretation, admit of it. The words are well chosen to declare a very different meaning, and one more in harmony with the general purpose and intent of the parties. But little will be derived in seeking after the meaning of the parties by a recourse to the technical meaning of the words used. The facts to be arrived at in the process of establishing the additional tolls were capable of being certainly known; and they were of such a character that it was essential that they should be certainly known and not conjectured. Accuracy in the data for the fixing the additional toll was important to both parties; and it cannot be assumed that they intended to substitute *273 opinion or conjecture for positive and certain evidence. The two facts to be ascertained were, first, the cost per ton of transportation before the enlargement; and, second, the cost of transportation after the enlargement. The cost of transportation at these two periods was to be "ascertained or estimated;" the same terms being employed as to each. As used, the words simply required the cost to be made certain, either by trial, examination or experiment, or by computation or calculation, that way in which, under the circumstances, the cost could be most certainly known. But whatever might be the process, the actual cost was the precise thing to be ascertained and known, and not the judgment or opinion of the parties, or of the arbitrators, as to what the coal might be transported for. That which was capable of being certainly ascertained was to be ascertained, and from the best and most reliable data. The portion of the reduction, or the actual cost, which should be produced solely by the enlargement of the canal, was not capable of being certainly ascertained, and, therefore, that was to be estimated; that is, determined by the best judgment of those competent to form an opinion. But before there could be occasion for an opinion or action, under this head of the agreement, a reduction in the actual cost of transportation must exist; and this is to be established by ascertaining the actual cost both before and after the enlargement.
The fact that there has been no reduction in the cost of transportation since the enlargement cannot affect the reading of the contract. The cost to be ascertained could not, in the nature of things, mean anything but the actual expenditure or outlay in the transportation. Before the enlargement was to be credited with any result, or to affect the tolls, the cost was to be reduced. Had not the parties intended that an actual reduction in the cost of transportation should be established as a condition precedent to the right to increased tolls, they would not have referred to the cost of transportation at either of the periods referred to, as such cost would have had no practical bearing upon the question to be determined, or *274 the rate of toll to be paid on account of the enlargement. The provision would have been much more simple, and would have required merely an estimate of the pecuniary benefit to the defendant of the enlargement; an estimate of the saving in expense to the carrier in the enlarged over the smaller canal. But that was not the view or intent of the parties when the contract was made. In the opinion of the court it is clearly deducible from the terms of the contract that the parties intended to entitle the plaintiffs to demand and collect additional tolls; that, first, the cost of transportation upon the canal should be actually reduced or diminished; and, second, that some part of such reduction should be produced by the enlargement and no other cause.
It is conceded that there has been in fact no reduction or diminution in the cost of transportation since the enlargement, but, on the contrary, the cost has largely increased. It follows that there is no foundation for any claim to additional toll under the contract.
The judgment must be reversed and a new trial granted, costs to abide event.
All concur, PECKHAM, J., not sitting.
GROVER, J., concurs on the second ground, without expressing an opinion on the ground first considered by ALLEN, J.
Judgment reversed.