(December Term, 1851.)
1. A mistake by arbitrators, however gross, or clear (as an omission to take into the account and give the plaintiff credit for a large sum, which was admitted by the defendant to be due), does not, of itself, furnish a ground for setting aside an award; although the arbitrator admits the mistake, and wishes the case referred back, so that he may correct it.
2. Corruption or partiality is a ground for setting aside an award, and so is a mistake, into which the arbitrators have been led by undue means, or into which they have been permitted to fall by the fraudulent concealment of a party or his agent. A Court of Equity does not, in such cases, correct the award or revise the decision of the arbitrators, but holds it to be against conscience to take advantage of the award, in seeking to enforce it, or by using it as a plea in bar of a bill for an account.
3. Where to a bill for an account of a copartnership the defendant pleads in bar an award, which is impeached by the plaintiff, the plea ought neither to be sustained nor overruled, but be kept in suspense until the parties can be heard upon the proofs, in reference to the matter alleged to impeach the award. If the matter be proven, then the plea will be overruled, and the defendant be required to answer as to the copartnership dealings. If it be not proven, the plea will be sustained and the bill dismissed. The benefit of the plea should be saved until the hearing.
4. In such cases, the modern practice is, that the bill, anticipating the defense, sets out the matters relied on to avoid the plea, or the plaintiff brings them forward by an amended bill, and in this way obtains an answer and discovery form the defendant.
APPEAL from the Court of Equity of GRANVILLE, at Spring Term, 1850.
W. H. Haywood and Gilliam for the plaintiff.
Graham and Moore for the defendant.
RUFFIN, C. J. dissented.
The bill alleges that the plaintiff and defendant had been copartners as merchants for many years, and the copartnership being dissolved the prayer is for an account. The bill further, by (103) way of anticipating the defense, admits that the matters in controversy had been referred to arbitration and an award made in favor of the defendant for a large sum; and to impeach the award, it is alleged:
First. The arbitrators made many gross mistakes to the prejudice of the plaintiff. One ex. gr. in this: The plaintiff had entered a charge against himself of $1,000. This entry he had erased and made the charge against himself in another part of the book. The arbitrators reinstated the first entry without charging off the second entry, and so in the award the plaintiff is charged twice for the same sum of $1,000. Another ex. gr. in this: The account was stated between the firm and the defendant, exhibiting a balance due by the firm to the defendant of $4,000; yet the arbitrators by mistake treated it as an account between the plaintiff and defendant and awarded that the plaintiff should pay to the defendant the whole sum of $4,800, whereas the plaintiff ought only to have been charged with one-half of the said balance against "the firm."
Second. The books were kept by double entry, with which method of bookkeeping the arbitrators were not conversant. That one Cargill, who was an expert bookkeeper and had been the clerk of the parties and understood all of the entries, had been in the employment of the defendant after the dissolution, and at his instance appeared before the arbitrators and remained with them while they were making up the award after the parties had withdrawn, without the plaintiff's consent; and the charge is that Cargill either willfully deceived and misled the arbitrators or by fraudulent concealment permitted them to fall into the many gross mistakes complained of.
The defendant pleads the award in bar of the plaintiff's equity for an account, and supports his plea by negative averments of the matters charged to impeach the award and by an answer in which he (104) denies that the arbitrators committed the mistakes alleged, so far as he has any knowledge, and avers that if there be mistakes to his prejudice, and these mistakes against both make the result as accurate as could be expected in the investigation of a long and very intricate account. As to the alleged mistake in charging the plaintiff with the whole balance against the firm he supposes the charge was so made, not by mistake, but because the arbitrators were satisfied that the had been grossly negligent in managing the affairs of the firm. In reference to Cargill, he admits he was an expert bookkeeper, well acquainted with the books of the firm, and was in his employment and appeared before the arbitrator at his instance. But he denies that he remained with the arbitrators after the parties had withdrawn "without the plaintiff's consent"; on the contrary, he avers that he so remained by the consent of both parties to explain the books if it became necessary, and to write for the arbitrators.
The plea was set down for argument, and is now before us upon the question thereby raised.
The first question is upon the form of the plea and the manner in which it is supported by the negative averments and the answer. The truth of the plea and its sufficiency, if well pleaded, being admitted by the bill, is conclusive, unless it can be avoided by matter relied on to impeach the award. We see no defect in the form of the plea or of the negative averments and answer by which it is supported.
The next question is as to the sufficiency of the matters relied on in the bill to avoid the plea by impeaching the award upon which it rests.
First. A mistake committed by an arbitrator is not of itself sufficient ground to set aside the award. If an arbitrator makes a mistake, either as to law or fact, it is the misfortune of the party and there is no help for it. There is no right of appeal, and this (105) Court has no power to revise the decisions of "judges who are of the parties' own choosing." An award is intended to settle the matter in controversy and thus save the expense of litigation. If a mistake be a sufficient ground for setting aside an award it opens the door for coming into court in almost every case, for in nine cases out of ten some mistake, either of law or fact, may be suggested by the dissatisfied party. Thus the object of the reference would be defeated, and arbitration instead of ending would tend to increase and encourage litigation.
In the earlier cases the Court, yielding to "particular hardships," assumed jurisdiction to set aside awards for mistakes. The inconvenience was soon felt, and it was found that if a mistake was ground for setting aside an award no award could stand; "it was labor lost," and litigation was commenced with more excited feelings. To remedy this inconvenience and put a restraint upon the jurisdiction, in some few of the old cases, a middle course was adopted, and in analogy to the practice of taking exceptions to an account of the clerk and master and of surcharging and falsifying an account stated, the award was permitted to stand, except as to particular items in which a mistake was shown, and these were referred back to the arbitrators to be corrected. In adopting this middle course many difficulties had to be encountered. The arbitrators, after their award, were functi officio; some of them might have died or might refuse to act. The particular difficulties arose out of the fact that arbitrators were not bound to assign any reasons or to set out any account (Patton v. Baird, 42 N.C. 260), so that to enable a party to except to particular items or to surcharge or falsify on the ground of mistake, it was necessary to make the arbitrators parties defendant to compel a discovery, and then it was inconsistent (106) to refer the matter back to them for correction. When, as in the present case, the award was pleaded in bar of an account, and matter of impeachment was relied on to avoid the plea, this middle course was wholly impracticable. This mode of restraining the jurisdiction to set aside awards for mistakes was therefore abandoned.
The next attempt at restraint was the adoption of the rule that to set aside an award the mistake must be a plain one, and there are many cases going on the distinction between a mistake and a plain mistake. The distinction was not easily defined and was found impracticable, so this restraint was abandoned. It was then attempted to put a restriction upon this very inconvenient jurisdiction by holding that a mistake, however clear and plain, was no ground to set aside an award unless the arbitrators were satisfied they had made a mistake and filed an affidavit of the fact. There is an obvious objection to this doctrine: it makes the right of relief depend not on the mistake, but on the fact that the arbitrators have intelligence enough to see it when pointed out, and frankness enough to admit it, whereas if there be a mistake, and this under any circumstances is a ground for relief, it is difficult to perceive a reason for refusing it, because it so happens that the arbitrators are too dull to comprehend or too disingenuous to admit their mistake. This, so far from being a ground for refusing relief, would seem to be a good reason to induce the Court to interfere, because it furnishes an inference that the arbitrators are totally unfit or dishonest, or both unfit and dishonest.
These attempted restrictions prove clearly a desire on the part of the courts to get rid of the jurisdiction, and the modern decisions in England repudiate the right of the courts of law or equity to interfere and set aside an award simply because of a matter of mistake in a (107) matter of law or of fact. In a late case, Hall v. Hind, 2 M. and G., 847, 40 E. C. L., 656, where there were two gross mistakes, and the arbitrators filed an affidavit admitting them, the Court does not put the decision setting aside the award on the ground of mistake or make any allusion to the affidavit of the arbitrators, but put it on the ground of misconduct, and hold that such gross mistakes of the arbitrators was evidence of legal misconduct, and in effect abandoned the old doctrine of a right to interfere simply on the ground of mistake. In a case still later, Phillips v. Evans, 12 M. and W., 309, the Court of Exchequer expresses dissatisfaction with the decision in Hall v. Hind, and holds that a mistake, however gross or clear (as an omission to take into account and give the plaintiff credit for a large sum, which was admitted by the defendant to be due), did not of itself furnish a ground for setting aside an award, although the arbitrator admitted the mistake and wished the case referred back so that he might correct it. We fully concur in this decision, and believe the law is settled by it on sound reasoning. Russell on the Power and Duty of Arbitrators, 53 Law Library, 245, 299.
Second. Corruption or partiality are admitted grounds for setting aside an award, and so is a mistake into which the arbitrators have been led by undue means, or into which they have been permitted to fall by the fraudulent concealment of a party or his agent. Metcalf v. Ives, 1 Atkins, 63; Russell Arbitrators, 53, L. Lib. (new series), 636. A court of equity does not in such cases correct an award or revise the decision of the arbitrators, but hold it to be against conscience to take advantage of the award in seeking to enforce it or by using it as a plea in bar of a bill for an account.
If, therefore, the plaintiff can establish the fact that Cargill, the agent of the defendant, remained with the arbitrators after the parties had retired, "without the plaintiff's consent," or if he can (108) establish the fact that the arbitrators have made a mistake in consequence of fraudulent concealment on the part of Cargill or of a willful omission to explain the entries when he saw that the arbitrators did not understand the, supposing him to have remained with the plaintiff's consent — for in that event he will be presumed to have undertaken to act as the agent of both parties — the award ought not to stand as a bar, and the plaintiff will be entitled to have the account taken in the same way as if there had never been an award.
The remaining question is as to the proper order for the purpose of giving the plaintiff an opportunity to prove his allegations without in the meantime prejudicing the bar set up in the plea.
If the plea be overruled the defendant must answer and make a full discovery as to the partnership accounts, which, by his plea, he seeks to avoid. If the plea be sustained the plaintiff must reply, and his replication will only put in issue the fact affirmed by the plea, towit, the existence of the award, which is admitted by the bill.
If the plea is overruled, but is allowed to stand for an answer, with leave to except, the plaintiff can have no ground of exception, for it has been declared that the plea is found and is duly supported by the negative averments and the answer; so the plaintiff would be forced into the investigation of the accounts without the benefit of discovery in reference to the accounts, which, in a case where the defendant has been acting partner, might be very important.
We think the plea ought neither to be sustained nor overruled, but be kept in suspense until the parties can be heard upon the proofs in reference to the matter alleged to impeach the award. If the matter be proven, then the plea will be overruled and the defendant (109) required to answer as to the copartnership dealings. If it be not proven the plea will be sustained and the bill dismissed. The benefit of the plea should be saved until the hearing.
The plea in this case is what is termed an "anomalous plea." It sets up the award in bar of the plaintiff's right to an account and negatives the allegations relied on in the bill to impeach the award and is supported by an answer making a discovery in reference to those allegations.
The propriety of the order will be more apparent by adverting to the mode of pleading formerly in use. Suppose the bill simply alleged the copartnership and prayed for an account; the award is pleaded in bar; a special replication is put in confessing and avoiding the allegations to impeach the award; the replication is set down for argument; it is held that one of the allegations is sufficient; the defendant rejoins to this allegation and the parties proceed to proofs. If the plaintiff fails to establish the allegation the bill is dismissed. If he succeeds, the defendant is required to answer as to the matters of account and the partnership dealings. This was the old mode. The plaintiff then labored under this advantage: upon the issue made by the rejoinder he was without the benefit of a discovery. To give the plaintiff this benefit the present mode was adopted, and the bill anticipating the defense sets out the matters relied on to avoid the plea or brings them forward by an amended bill, and in this way obtains an answer and discovery from the defendant. Mitford's Pleadings, Lube's Pleadings.
In this opinion Judge NASH concurred.