Appellate Division of the Supreme Court of New York, Fourth DepartmentMay 1, 1912
151 App. Div. 147 (N.Y. App. Div. 1912)
151 App. Div. 147135 N.Y.S. 642

May 1, 1912.

Robert B. Honeyman, for the appellants.

E.W. Hamn, for the respondents.

The plaintiffs resided in Wayne county and had long been engaged in shipping apples and produce to the city of New York, and prior to the transactions in question had made sales to the defendants, who were dealers in produce in New York city. The plaintiffs knew of the custom of the trade in New York city in regard to arbitrations in case of a disagreement between a buyer and a seller.

On the 16th of January, 1906, the defendants ordered of the plaintiffs "two cars of heavy packed Prime Chopped Apples," which order was accepted by wire by the plaintiffs on the following day. Car No. 40547, containing 125 barrels of "chops" was shipped in pursuance of this order on the 20th of February, 1906, and arrived in New York on the twenty-eighth, and was promptly inspected by the defendants and rejected on the ground that the apples were not prime and, therefore, did not correspond in quality to those purchased, and immediately notified the plaintiffs of their rejection; and that letter contained the following: "Car No. 40,422 has not yet arrived, but if these are of the same quality as Car No. 40,547, we will not even go to the expense of sampling same, as we absolutely refuse to accept goods of this kind."

On the sixth of March the plaintiffs wrote to the defendants that unless they heard from them by Wednesday following the goods would be sold in the open market. The defendants replied by letter bearing date the same date, referring to their preceding letter, stating that they were willing to submit the matter to arbitration "as per terms of sale, and if the arbitrators should decide that the goods are prime, we, of course, will accept them." In the letter they also advised the plaintiffs that the other car had arrived and was not prime, and they rejected the same.

On the twelfth of March the plaintiffs wrote to the defendants that they had "concluded to arbitrate car N.Y.C. 40422 and establish a grade of prime. Should this car be decided not prime, we will either tender you other goods or you can settle with us at market difference. Paul Haebler will act as our arbitrator and I have instructed him to have samples drawn and notify you as soon as he has them. You might also call him up to-morrow and see if he has the samples ready."

The plaintiffs thereupon appointed Mr. Haebler, a dealer in produce and apples, as their arbitrator, and the defendants Mr. Martin, also an expert in the business. These arbitrators met immediately, obtained samples of the apples from the official sampler of apples in car 40547, and signed a written decision to the effect that they had examined the samples of that car and "that same is not a good delivery on contract calling for Prime Bleached Chops Crop 1905;" and the defendants immediately notified the plaintiffs of this decision. On the following day the plaintiffs replied, stating that they had not agreed to arbitrate the apples in car No. 40547 and had no notice of this arbitration. This letter contained the following: "We note car No. 40422 will be arbitrated to-day, which is according to agreement. Now should this car fail to meet the standard of quality, you will please write us at once the lowest basis you will make a cash settlement on." The same arbitrators inspected this car of apples and did not agree, and they selected as an umpire another disinterested man engaged in that business, and the three of them examined the samples from this lot and all joined in a decision to the effect that they were not a good delivery, calling for "Prime Bleached Chops Crop 1905;" and the plaintiffs were promptly apprised of this decision. In answering they declined to recognize it and sold the goods in the market, and they have recovered damages for both car lots of the apples.

At the close of the evidence the defendants' counsel moved for the direction of a verdict on the ground that the arbitration award was a bar. The court, by the consent of the parties, held this under advisement and submitted to the jury the question whether the apples were prime, and the jury found a verdict in favor of the plaintiffs. Later the trial justice held that the arbitration agreement was invalid and that there was nothing in the agreement authorizing the selection of an umpire, or third arbitrator, and that the plaintiffs were entitled to the benefit of the verdict in their favor.

The agreement to arbitrate was made in the light of the custom which prevailed in New York city. Both parties understood this thoroughly. The plaintiff Thomas B. Welch, after testifying that Paul Haebler was the man selected to represent the plaintiffs in the arbitration, added: "The practice is that when the arbitrators are selected to get samples from the official sampler. I think it was Kuhlman in this case. They get a sample entirely separate from any samples the purchaser had. After it has been decided they shall arbitrate, each instructs their man to draw a sample or two samples. They are submitted to two, and if they fail to agree, a third man is called in. Q. But in this particular case I see there are only two, and if the two arbitrators did agree that obviated calling in the third one? A. Oh, yes, I expect so. Q. And when they make their decision upon the samples, that is accepted by the parties usually, is it, as binding? A. It depends on whether they consider they have had fair treatment or not. Q. You accept an arbitration according to whether you come out ahead or not? A. It depends on the parties who arbitrate, some of them." And further he was asked: "Q. Were you to appoint an arbitrator and the two arbitrators to appoint a third? A. When they failed to agree."

I think, therefore, although there was no specific direction in the letters, in which we find a somewhat informal arrangement for arbitration, for the selection of an umpire or third arbitrator, that it was the expectation of the parties that such was to be the course pursued, and that the two arbitrators did not exceed their authority in making this selection.

Again, the evidence shows that the manner in which arbitrations of this kind are conducted was for the arbitrators, when they were experienced men in the business, not to summon the parties before them or give any notice, but to make the inspection and examination themselves without any evidence and dispose of the question submitted in a somewhat summary way; and this method of procedure has been sustained. ( Cobb v. Dolphin Mfg. Co., 108 N.Y. 463.)

The court in that case in disposing of a like objection used this language (at p. 468): "But it would appear from the case and from the award of the arbitrators that they were men who were judges of the article in question, and who were to see the jute in dispute for the purpose of determining the question whether or not it came up to the standard of quality called for in the contract. This naturally explains why no evidence was given before the arbitrators as to the value of the jute in question." (See, also, Wiberly v. Matthews, 91 N.Y. 648.)

Again, it seems to me that it was the expectation of the plaintiffs whichever lot of apples was submitted to the arbitrators their determination was to be decisive as to the condition of both car lots. Their letters so indicate. It is the policy of the courts to encourage and uphold arbitrations, as they are an inexpensive, simple and expeditious method of adjusting controversies, and tend to prevent litigation. ( Fudickar v. Guardian Mutual Life Ins. Co., 62 N.Y. 392.)

I think the judgment should be reversed.

All concurred, except McLENNAN, P.J., who dissented upon the opinion of the trial court, and FOOTE, J., not sitting.

Judgment and order reversed and new trial granted, with costs to appellants to abide event.