Dworkin v. Caledonian Ins. Co.

• Citation: 285 Mo. 342,226 S.W. 846
• Decision Date: 13 December 1920
• Docket Number: No. 21201.,21201.
• Parties: DWORKIN et al. v. CALEDONIAN INS. CO.
• Court: United States State Supreme Court of Missouri

226 S.W. 846

285 Mo. 342

DWORKIN et al. v. CALEDONIAN INS. CO.

No. 21201.

Supreme Court of Missouri, in Banc.

December 13, 1920.

Appeal from Circuit Court, Jackson County; Harris Robinson, Judge.

Action by Harry Dworkin and another against the Caledonian Insurance Company. From a judgment for plaintiffs, defendant appeals. Reversed and remanded.

C. C. Crow, of Kansas City, for appellant. George Halpern and Bruce Barnett, both of Kansas City, for respondents.

Xenophon P. Wilfley, of St. Louis, and William S. Hogsett and Murat Boyle, both of Kansas City, amid curiae.

GOODE, J.

This appeal requires us to decide whether the statute, presently to be quoted, annuls the clause in a contract of insurance for the ascertainment by appraisement of the amount of the damage done by a fire to the property insured, if the insured and the company could not agree as to the amount of the loss. The policy is not set out in full in the record, and we must get at the intention of the parties to it by what is before us, part of which we abridge and copy a part.

The policy provided, regarding a loss by fire, that it should be ascertained or estimated according to the cash value of the property consumed or damaged, with a proper deduction for depreciation; that the amount of the loss should not exceed what it would cost the company to repair or replace the property with material of like kind and quality; that the estimate of the damages should be made by the insured and the company, and if they should differ, by appraisers; that, the amount of the loss having been thus ,ascertained, it should by payable 60 days after the estimate and satisfactory proof of the loss had been received by the company; but that the company should have the option "to take all, or any part, of the articles at such ascertained or appraised value," or to repair or replace what were lost or damaged, with others of like kind and quality, on giving notice of the intention to do so within 30 days after proof of loss was received. This clause follows those terms:

"In the event of disagreement as to the amount of loss the same shall, as above provided, be ascertained by two competent and disinterested appraisers, the insured and this company each selecting one, and the two so chosen shall first select a competent and disinterested umpire; the appraisers together shall then estimate and appraise the loss, stating separately sound value and damage, and, failing to agree, shall submit their differences to the umpire; and the award in writing of any two shall determine the amount of such loss; the parties thereto shall pay the appraiser respectively selected by them and shall bear equally the expenses of the appraisal and umpire."

The policy covered a stock of merchandise and also the furniture and fixtures in the storeroom. There was a policy written by another company covering the same property, and the defendant is only liable for one-half of the loss.

The first count of the petition was for the loss on the merchandise, which plaintiffs alleged was in excess of $2,400, that being the total amount of insurance on the stock; wherefore they asked judgment against the defendant for $1,200. In the second count the loss on the furniture and fixtures was alleged to be in excess of $600, or the total insurance on the property, and judgment was demanded against the defendant for $300.

1. The only dispute between the parties was regarding the amount of the loss, and to have this ascertained by the method provided in the policy the company demanded an appraisement, which demand, for the purpose of this case, we may say was refused by the plaintiffs. One of the instructions to the jury was "that the plaintiffs were not required to enter into an appraisal with the defendant as to the amount of the loss." The full amount of damages prayed for in each count was assessed by the jury, and judgment having been entered on the verdict, this appeal was taken.

The statute to be interpreted is section 868, and is contained in the revision under the title "Arbitration," and in the Session Laws of 1909 under the title "Contracts and Promises"; it having been enacted as an amendment to chapter 10 of the Revised

Statutes of 1899, relating to Contracts and Promises, by adding thereto a new section, to be known as section 899a. 1 R. S. 1909, § 868; Session Laws 1909, p. 347. As found in the Session Laws, omitting the title, the enactment reads as follows:

"Section 1. Contract to arbitrate not to preclude filing of suit.

"Be it enacted by the General Assembly of the state of Missouri, as follows:

"Section 1. Contract to arbitrate not to preclude filing of suit.—That chapter 10 of the Revised Statutes of Missouri, 1899, relating to contracts and promises, be and the same is hereby amended by adding thereto a new section, to be known as section 899a, said section to read as follows: Section 899a. Any contract or agreement hereafter entered into containing any clause or provision providing for an adjustment by arbitration shall not preclude any party or beneficiary under such contract or agreement from instituting suit or other legal action on such contract at any time, and the compliance with such clause or provision shall not be a condition precedent to the right to bring or recover in such action.

"Approved June 14, 1909."

The defendant contends the statute does not operate to annul a stipulation in an insurance policy that, in case the parties do not agree on the amount of the loss, it shall be estimated by two appraisers and an umpire. In support of this position it is argued the statute was intended only to annul a stipulation in a contract for an arbitration, which is a method of settling controversies so long in use that the word "arbitration" has acquired a settled technical meaning different from a mere appraisement or estimate of losses and value; in short, that an appraisement is not an arbitration.

Agreements for the two proceedings have been regarded by the courts well-nigh universally as agreements for separate and distinct proceedings, and this for various reasons. Sometimes it has been pointed out that an agreement for an arbitration implies a controversy between the parties at the time of the submission, which is to be the subject-matter of the arbitration; whereas, a stipulation for an appraisement of values does not presuppose a controversy. Garred v. Macey, 10 Mo. 161, 164; Curry v. Lackey, 35 Mo. 389, 394. No one would say a contract between two persons, which contemplated the fixing by a third person of the value of property or the amount of the damages suffered by a breach of the contract, without regard to whether the parties might differ on the question, would constitute an agreement to arbitrate. For example, if the parties to a lease should stipulate, as has often happened, that at the end of a given period the future rental should be a certain per cent. of the value of the leasehold, to be determined by some one else. Holmes v. Shepard, 49 Mo. 600; Sholz v. Mills, 176 Mo App. 352, 158 S. W. 696. The policy we are dealing with looked to an appraisement only in the contingency of a controversy arising between the parties over the amount of a loss, thus carrying into their stipulation one essential element of an arbitration.

But there have been many cases in which the court held there was not an agreement to arbitrate, although, as in this case, the stipulation for an appraisal was to come into play only in case the parties disagreed about values or the amount of a loss. Kent & Purdy Paint Co. v. Ætna Ins. Co., 165 Mo. App. 30, 146 S. W. 78; Harmon v. Ins. Co., 170 Mo. App. 309, 156 S. W. 87; Non-Royalty Shoe Co. v. Fhcenix Assurance Co. (Mo. App.) 178 S. W. 246; same case (Mo. Sup.) 210 S. W. 37.

It has been held, too, that an appraisal of values or losses, does not amount to an arbitration because it leaves the question of ultimate liability under the contract open and therefore does not oust the jurisdiction of the courts. Methodist Episcopal Church v. Seitz, 74 Cal. 287, 291, 15 Pac. 833; Guild, Adm'r, v. Railroad Co., 57 Kan. 70, 45 Pac. 82, 33 L. R. A. 77, 57 Am. St. Rep. 312; Hamilton v. Insurance Co., 136 U. S. 242, 255, 10 Sup. Ct. 945, 34 L. Ed. 419. But when the only dispute about a party's liability is as to the amount he ought to pay, which was the fact in the present case, an agreement to determine it by appraisers, if enforced, does operate to take away from the courts the decision of a controversy; and the distinction last mentioned is not valid in such a case; and the validity of the agreement will depend on whether the rule of public policy, which renders an agreement to arbitrate not binding, ought to be extended to one for an appraisal of an amount in dispute.

Again it has been held an appraisal was not an arbitration or an agreement for an appraisal equivalent to an agreement to arbitrate, because the appraisers appointed by the respective parties were their agents instead of impartial judges; but that would not often be true. Bottomly v. Ambler, 38 L. T. 545.

The two proceedings have been distinguished by the fact that an appraisal settles a subsidiary and incidental matter and not the main controversy. Black v. Rogers, 75 Mo. 441, 449; Noble v. Grandin, 125 Mich. 383, 84 N. W. 465; Garr v. Gomez, 9 Wend. (N. Y.) 649. But in the case under examination the amount of the loss is the substance of the controversy between the parties and not a subsidiary or incidental matter.

In our opinion the fundamental difference between the two proceedings lies in the procedure to be followed, and the effect of the findings. Sebree v. Board of Education, 254 Ill. 438, 453, 98 N. E. 931: An agreement to arbitrate is really an agreement between parties who are in a controversy, or look forward to the possibility of being in one, to substitute a tribunal other than the courts of the land to determine their rights. Reily, Adm'r, v. Russell...