The plaintiff and defendant, who were partners in the business of selling furniture, submitted their various disagreements, including the question as to which of them should retire from the business, to a board of three arbitrators under an agreement to abide by any decision rendered. After a full hearing of all the questions involved, the arbitrators delivered to each of the parties a written award that the defendant should pay $400 to the plaintiff, the retiring partner. They also reached a decision, which was not incorporated in the writing but which they instructed their chairman to communicate orally to the parties, that in consideration of this payment, the plaintiff should not thereafter engage in a competing business. The chairman so advised the defendant, but not the plaintiff. Immediately after the award the defendant refused the plaintiff's demand for payment of the $400 unless the latter would agree in writing not to engage in competition; and in the present action to collect the amount awarded, the defendant pleaded a general denial and, as an equitable defense, that the plaintiff had refused to agree not to engage in competition and had, in fact, opened a rival business which had rendered his own worthless. Held:
1. That an award, under a general common-law submission of all disputes, may, if the method of making it is unrestricted, be made in one or more writings, or orally, or partly in writing and partly oral. 2. That an award must operate in the manner intended by the arbitrators and be enforced, if at all, in its entirety. 3. That the equitable defense offered by the defendant was a valid one and admissible either under his general denial of the plaintiff's allegation as to the scope of the award, or under his special defense. 4. That the plaintiff's claim that the defendant's remedy was a timely action to correct the award was based upon the erroneous assumption that the award was entirely in writing.
Argued October 3d 1928
Decided December 18th, 1928.
ACTION to recover the amount of an award alleged to have been made to the plaintiff by arbitrators to whom the parties had submitted a controversy between them, brought to the City Court of the City of Hartford and tried to the court, Ross, J.; judgment for the plaintiff and appeal by the defendant. Error; judgment directed for defendant for costs.
The plaintiff and defendant, having various disagreements concerning their partnership in buying and selling furniture, submitted them to three arbitrators under an agreement to conform with any decision which they should render. The arbitrators considered all questions in dispute. Both parties appeared before them, but neither said anything about the retiring partner not engaging in business in competition with the partner who should continue the business. Dressler, the chairman of the arbitrators, on the day succeeding the submission, delivered to each partner a memorandum signed by the arbitrators providing that the plaintiff, Schoolnick, the outgoing partner, should receive from Finman and Company, the defendant, $400. The arbitrators in discussing and making the award of $400 agreed that in consideration of it the plaintiff should not engage in business in competition with the defendant, the continuing partner, and agreed that the chairman should orally inform the plaintiff and defendant that in addition to the award the plaintiff should not engage in such competition. Dressler did not so inform plaintiff or defendant. The defendant Finman, upon being handed the written award by Dressler, and upon being told by him that he, Finman, was to pay $400, asked why did he have to pay $400, upon which Dressler replied, "That is for the good will of the business. Mr. Schoolnick isn't going to be in the business any more, so you better give him $400." Neither the arbitrators nor any of them directly informed the plaintiff or the defendant that they had considered the question of the outgoing partner not engaging in business in competition with the continuing partner until November, 1927, after suit brought and just before the trial of this action.
The defendant made no attempt to have the award reformed prior to this action. Immediately after the delivery of the memorandum of award the plaintiff made demand upon defendant for the $400, which defendant refused unless plaintiff would in writing agree not to engage in business in competition with defendant. Two days later, plaintiff brought this action. The plaintiff engaged in business in competition with the defendant at all times after the award and called upon the outside customers of the former partnership seeking their trade, and sold to the customers of the partnership. After the award the business of the defendant declined and in a few weeks, since it was not conducted at a profit, he discontinued it.
Louis Y. Gaberman, with whom, on the brief, was Simon Kramer, for the appellant (defendant).
Walter F. Foley, for the appellee (plaintiff).
The submission to the arbitrators by these partners was a general common-law submission of all of their disputes and disagreements. The submission did not provide, as it might have, the method of the award, whether it should be in writing or oral. The arbitrators might have made the award in writing or orally. Jones v. Dewey, 17 N. H. 596, 598; Gay v. Waltman, 89 Pa. 453, 456; Philbrick v. Preble, 18 Me. 255; Phelps v. Dolan, 75 Ill. 90.
A submission to arbitration is an agreement by the parties that the decision of the arbitrators shall be final as to all matters properly within the submission and that they will do whatever the arbitrators direct shall be done by each. Penniman v. Rodman, 54 Mass. (13 Metc.) 382, 384. Both partners concede that the submission contemplated the withdrawal of one of the partners and the continuance of the business by the other.
The terms of the submission indicate the purpose of the parties to have been the adjustment of all of their partnership affairs upon a basis deemed just by the arbitrators. Ford v. Burleigh, 60 N. H. 278, 282.
The award under a submission, unrestricted as to method, may be in one writing or several and all papers made by the arbitrators which are relevant and material to the award and delivered with the award may be considered as a part of it. Bell v. Price, 22 N.J.L. 578; Mathews v. Miller, 25 W. Va. 817, 828; Cameron v. Castleberry, 29 Ga. 495.
Whatever is written upon any part of the award, or written upon the back of the award and relevant and material to the matters submitted, will be regarded as a part of the award; since they were simultaneous acts of the arbitrators they all constitute one instrument. Ott v. Schroeppel, 5 N.Y. 482, 484; Rhodes v. Hardy, 53 Miss. 587; 5 Corpus Juris, 115.
The arbitrators having power to make the award in writing, or orally, and if in writing in separate papers, were at liberty to make the award partly in writing and partly orally.
The trial court held that the arbitrators had made their report in writing to the parties and that having so made it, without oral amendment, communicated to the parties at the time, the writing comprised the entire award. If that were true, any evidence of a parol addendum to the written award would be inadmissible and the second defense setting up as a part of the award a provision that the defendant should not engage in business directly or indirectly in competition with the continuing partner — if parol — would have been demurrable, and although established upon the record is unavailable to this defendant. The result under the judgment is that the award of $400 to be paid by the defendant, which was made in consideration of the plaintiff not engaging in business in competition with the defendant, must be paid by him without securing the consideration to him upon which the award was made. Rarely does the enforcement of a rule of the common law invite such an unjust consequence.
The defendant was entitled under his first defense of a general denial that the arbitrators had awarded the plaintiff $400 to have shown that this award was made in consideration of that which we have already stated.
Unless the oral and written parts of the award are treated as a single award the intention of the arbitrators will not have been carried out. The award cannot be enforced as to one of its obligations while ignoring others of its obligations. No award which operates prejudicially to one of the parties to the submission and in a manner the arbitrators did not intend it to operate will be enforced in favor of the other party. Carter v. Carter, 109 Mass. 306, 311; 5 Corpus Juris, p. 181, § 466. An obligation arising under an award can only be enforced if the award is an entire award. It cannot be enforced in parts. The award must stand or fall as an entirety.
The plaintiff's contention that if the defendant desired to have the award corrected he should have sought his relief within a reasonable time is based upon the premise that the entire award was in writing, which is not the situation before us.
"Defendant, by the provisions of the Practice Act, undoubtedly had the right to plead an equitable defense in the present action, . . . and was not compelled to resort to a separate action to enforce an equitable claim which he sought to establish." LeWitt v. Park Ecclesiastical Society, 103 Conn. 285, 299, 130 A. 387.