Continental Materials Corp. v. Gaddis Mining Co., 6894.

• Citation: 306 F.2d 952
• Decision Date: 30 August 1962
• Docket Number: No. 6894.,6894.
• Parties: CONTINENTAL MATERIALS CORPORATION, a Delaware corporation, and Continental Uranium Company of Wyoming, a Wyoming corporation, Appellants, v. GADDIS MINING COMPANY, a Colorado corporation, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

306 F.2d 952 (1962)

CONTINENTAL MATERIALS CORPORATION, a Delaware corporation, and Continental Uranium Company of Wyoming, a Wyoming corporation, Appellants, v. GADDIS MINING COMPANY, a Colorado corporation, Appellee.

No. 6894.

United States Court of Appeals Tenth Circuit.

July 27, 1962.

Rehearing Denied August 30, 1962.

Coleman Hayes, Oklahoma City, Okl. (Fred A. Deering, Jr., and Leonard M. Campbell, Denver, Colo., and Monnet, Hayes, Bullis, Grubb & Thompson, Oklahoma City, Okl., and Gorsuch, Kirgis, Campbell, Walker & Grover, Denver, Colo., of counsel, on the brief), for appellants.

Fred M. Winner, Denver, Colo. (Raymond J. Gengler and John-David Sullivan, Denver, Colo., and A. G. McClintock and Walter C. Urbigkit, Jr., Cheyenne, Wyo., on the brief), for appellee.

Before PHILLIPS, LEWIS and HILL, Circuit Judges.

LEWIS, Circuit Judge.

This is an appeal from a judgment entered by the United States District Court for the District of Wyoming allowing the plaintiff Gaddis Mining Company certain remedial relief within the State of Wyoming in aid of an arbitration award determined by the court to be valid and enforceable. Jurisdiction is based upon diversity of citizenship combined with the requisite statutory amount in controversy and error below is claimed only to the extent the judgment is premised upon the finding that the subject arbitration award is valid. The decision of the trial court, 196 F.Supp. 860, contains a comprehensive statement of the factual background and legal reasoning supporting the conclusion that the arbitration award is enforceable. We are in general accord with the views expressed by the trial court and so affirm the judgment.

The dispute arose out of a purchase agreement dated July 3, 1956, whereby the appellant, Continental, was to buy and the appellee, Gaddis, was to sell uranium properties in Fremont County, Wyoming, for a price to be determined by the net value of ore developed upon exploration and production. The parties chose the purchase transaction rather than an operating agreement in order to effect tax advantages, but the purpose of the sale was to share the profits of production in exchange for exploration and operation by Continental. It was agreed that Continental's services should be valued at a price equal to 35 percent of the net value of the ore developed and that, therefore, Gaddis was to receive as a sales price 65 percent of such value.

The determination of the extent of the ore body capable of extraction and the grade of ore to be anticipated was to be made preliminarily by Continental, which was to conduct a one and one-half year exploration program. A procedure of protest and arbitration was provided in the event Gaddis disagreed with the determination of the net value of the ore developed.

Thus, by letter dated December 18, 1957, Gaddis claimed the error had occurred, specified nine errors in Continental's calculations, and finally invoked the agreement's arbitration procedures. On May 27, 1958, the parties entered into an arbitration stipulation, wherein they agreed that the arbitration proceeding should be held in accordance with the laws of the State of Colorado and submitted a single question for the decision of the arbitrators:

"4. What is the `net value of ore developed\' under the provisions of the purchase Agreement?"

The question was specifically answered by the arbitrators and thereupon and in accordance with the agreement and Colorado law, Gaddis filed the final arbitration award in Mesa County, Colorado, and judgment was rendered in the amount of $1,056,058.90.

The power to review, directly or indirectly, the decision of arbitrators is a limited one under Colorado law. Rule 109 of the Colorado Rules of Civil Procedure pertinently provides:

"(g) Arbitrated Matters Held Adjudicated; Except for Fraud, etc. Whenever it shall appear in any action that the subject matter of such action, or proceeding, or any part thereof, or the defense thereto, or of any part thereof, has been submitted to and decided by arbitrators, according to the terms of this rule, such matters so arbitrated shall be held to have been adjudicated and settled, and not open, either directly or indirectly, for review; but this shall not be construed to prevent an adjudication by arbitrators from being impeached and set aside for fraud or other sufficient cause, the same as a judgment of a court of record, nor to prohibit relief on the ground of mistake, inadvertence, surprise or excusable neglect, as in case of other judgments, orders or proceedings of the court."

And it is of course fundamental that this court cannot disturb the judgment of the trial court unless based upon error in law or upon a finding of fact that is clearly erroneous.

In an effort to sustain its burden, Wright Lumber Co. et al. v. Herron, 10 Cir., 199 F.2d 446, Continental contends that the arbitrators exceeded their jurisdiction and takes issue in this regard with a somewhat equivocal statement in the trial court's opinion:

"The arbitrators\' construction of the submission and their interpretation of their duties is not subject to attack." 196 F.Supp. 860, 865.

Taken in its context it is apparent that the quotation does not signify the court's belief that the arbitrators have the power to determine their own jurisdiction, as appellant would read it, but rather that the court regarded the lucidity and thoroughness of the arbitrators' reports as convincing of their diligence and intellectual honesty in its preparation. Clearly, the decision of the arbitrators, if beyond their jurisdiction, has no more effect than a similar judgment by a court. See Skinner v. Davidson, Inc., 142 Colo. 423, 351 P.2d 872; 6 C.J.S. ...