Freeman v. Ajax Foundry Products, Inc.

• Decision Date: 22 March 1960
• Docket Number: No. 279,No. 280,W,No. 281,279,280,281
• Citation: Freeman v. Ajax Foundry Products, Inc., 398 Pa. 457, 159 A.2d 708 (Pa. 1960)
• Court: Pennsylvania Supreme Court
• Parties: Walter FREEMAN, Appellant in No. 279, Walter Freeman Co., Inc., Appellant in No. 280, and Mervin Hurwitz, Appellant in No. 281, v. AJAX FOUNDARY PRODUCTS, INC., and Leon Barrett and Edmond Barrett, t/a Acorn Metal Products, a division of Ajax Foundry Products, Inc. (three cases). Appeal of WALTER FREEMAN CO., Inc. Appeal of Mervin HURWITZ.

Page 708

159 A.2d 708

398 Pa. 457

Walter FREEMAN, Appellant in No. 279, Walter Freeman Co Inc., Appellant in No. 280, and Mervin Hurwitz Appellant in No. 281, v. AJAX FOUNDARY PRODUCTS, INC., and Leon Barrett and Edmond Barrett, t/a Acorn Metal Products, a division of Ajax Foundry Products, Inc. (three cases) Appeal of WALTER FREEMAN CO., Inc Appeal of Mervin HURWITZ.

Supreme Court of Pennsylvania.

March 22, 1960.

Louis J. Goffman, Abraham L. Freedman, Wolf, Block, Schorr & Solis-Cohen, Robert E. Wachs, Philadelphia, for appellants.

Nathan L. Posner, Fox, Rothschild, O'Brien & Frankel, Stephen J. Korn, Nochem S. Winnet, Philadelphia, for appellee.

Before CHARLES ALVIN JONES, C. J., and BELL, MUSMANNO, BENJAMIN R. JONES, COHEN, BOK and EAGEN, JJ.

PER CURIAM.

The order entered in the Court below is affirmed on the Opinion of Judge Griffiths of the Court of Common Pleas No. 1, Philadelphia County.

The Opinion of Judge Griffiths follows:

This matter came before the Court on the following two interrelated petitions:

(a) Plaintiffs' petition to Modify and Correct, or Vacate Arbitration Award;

(b) Defendants' petition to strike Plaintiffs' petition.

A summary of the several contracts giving rise to the present litigation are as follows:

Plaintiffs, Walter Freeman, Walter Freeman Co., Inc., and Mervin Hurwitz (hereinafter referred to as Freeman), entered into a written agreement executed in 1954 wherein Defendants, Ajax Foundry Products, Inc. and Leon Barrett and Edmond Barrett, t/a Acorn Metal Products, a division of Ajax Foundry Products, Inc. (hereinafter referred to as Ajax) were given the exclusive right to manufacture and sell certain electric swivels (on which they owned patents), in return for which they agreed to pay Freeman royalties on all sales of the said swivel.

In 1955, by written agreement Ajax made Freeman its exclusive sales representative for the sale of the swivels on a commission basis. Both of the above agreements contained provisions for arbitrating disputes through the American Arbitration Association, which are as follows:

(1954 contract)

'11. Arbitration

'(a) Any dispute, claim, question or difference arising out of or relating to this Agreement shall be submitted to arbitration upon the initiative of either party to this Agreement upon notice to the other party under the Industrial Arbitration Rules then obtaining of the American Arbitration Association, and the parties agree to adide by and perform the award.'

(1955 contract)

'11. Arbitration

'Any controversy or claim arising out of, or relating to, this Agreement, or the breach thereof, shall be settled by arbitration, in accordance with the rules, then obtaining, of the American Arbitration Association, and judgment upon the award rendered may be entered in any court having jurisdiction thereof.'

In 1958 a dispute arose under the agreements. Freeman initiated arbitration proceedings and on October 28, 1958 an award was rendered favorable to Ajax, and thereafter Freeman filed its petition to vacate or modify and Ajax, its petition to strike Freeman's petition. It was from the Order of the Court in dismissing Freeman's petition that an appeal has been taken.

Freeman based its request for a modification of the arbitration on the assumption that the Arbitration Act of 1927 is applicable to the contracts in question, and their request in the alternative to vacate the award, on the assumption the arbitrators exceeded the powers given them under the terms of the contracts.

We will discuss these requests separately.

Regardless of the merits of the allegations contained in Freeman's petition for a modification of the award, there can be no judgicial review from an award of the arbitrators (with certain exceptions discussed hereinafter), unless the Arbitration Act of April 25, 1927, P.L. 381, 5 P.S. § 161 et seq. is applicable to the contracts.

In Pennsylvania there is recognized common law arbitration as well as that conducted pursuant to the above cited statute. Thus in Wark & Co. v. Twelfth & Sansom Corp., 1954, 378 Pa. 578, 107 A.2d 856 a case involving a dispute over the performance of a certain building contract, the Court stated on page 583 of 378 Pa., on page 858 of 107 A.2d:

'The case basically involves a common-law arbitration. Such proceedings have not been displaced by the Arbitration Act of April 25, 1927, P.L. 381, 5 P.S. § 161 et seq. See Goldstein v. International Ladies Garment Workers' Union, 328 Pa. 385, 389, 196 A. 43. The defendant freely admits that the dispute over the building contract was voluntarily submitted to the arbitrators for their determination in accordance with the rules of the American Arbitration Association; that the arbitrators conducted hearings on the merits of the controversy; and that a majority of the arbitrators (as permitted by Rule 27 of the Arbitration Association) rendered an award for the plaintiff which has not been paid.'

And in Hartmann Coal Mining Co. v. Hoke, D.C.E.D.Pa.1957, 157 F.Supp. 313, 315, the Court stated on this point:

'The Act of 1927 is remedial only; proceedings under it are cumulative and non-exclusive. The Act did not do away with the right to bring suit to recover an arbitration award. Isaac v. Donegal & Conoy Mut. Fire Ins. Co., 1930, 301 Pa. 351, 152 A. 95; Goldstein v. International, etc. 1938, 328 Pa. 385, 394, 196 A. 43; Sukonik v. Shapiro, 1939, 333 Pa. 289, 5 A.2d 108; Lowengrub v. Meislin, 1954, 376 Pa. 463, 103 A.2d 405.'

The scope of judicial review in common law arbitration is limited to situations wherein there has been a denial of a proper hearing, misconduct or some other irregularity on the part of the arbitrators.

This rule of law is succinctly set forth in Reading Tube Corp. v. Steel Workers Federation, 1953, 173 Pa.Super. 274, 279, 98 A.2d 472, 474. There the Court stated:

'It should be noted that the Arbitration Act of 1927 did not displace arbitration under the common law. Isaac et al. v. Donegal & Conoy Mut. Fire Ins. Co., 301 Pa. 351, 152 A. 95; Goldstein v. International Ladies' Garment Workers' Union, 328 Pa. 385, 196 A. 43; Philadelphia Housing Authority v. Turner Const. Co., 343 Pa. 512, 23 A.2d 426; Rosenbaum v. Drucker, 346 Pa. 434, 31 A.2d 117. Under the common law rules governing arbitration, an award of arbitrators is conclusive.

The general rule is that the award is binding unless it can be shown by clear, precise and indubitable evidence that the parties were not given a hearing, or that there was fraud, misconduct, corruption or some other irregularity on the part of the arbitrators which caused them to render an unjust, inequitable, and unconscionable award. Unless they are restricted by the submission, the arbitrators are the final judges of both law and fact and their award will not be disturbed for a mistake of either. Goldstein v. International Ladies' Garment Workers' Union, 328 Pa. 385, 196 A. 43; Philadelphia Housing Authority v. Turner Const. Co., 343 Pa. 512, 23 A.2d 426; McDevitt v. McDevitt, 365 Pa. 18, 73 A.2d 394; Electric Power Const. Co. v. Allen, Lane & Scott, Inc., 367 Pa. 319, 80 A.2d 799; Mack Mfg. Corp. v. International Union, etc., 368 Pa. 37, 81 A.2d 562; see 11 Standard Penna. Practice pp. 486, 504.' (Italics ours.)

See also Coopersmith v. Rose, 1951, 81 Pa.Dist. & Co.R. 356; Technical, etc., Employees v. United States Steel Co., 1954, 88 Pa.Dist. & Co.R. 464.

On the other hand the scope of review under the Arbitration Act of 1927 is set forth in Sections 170 and 171 thereof and includes the following:

' § 170. Motion to vacate award, grounds, rehearing

'In either of the following cases the court shall make an order vacating the award upon the application of any party to the arbitration:

'(a) Where the award was procured by corruption, fraud, or undue means.

'(b) Where there was evident partiality or corruption on the part of the arbitrators, or any of them.

'(c) Where the arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy, or any other misbehavior by which the rights of any party have been prejudiced.

'(d) Where the arbitrators exceeded their powers or so imperfectly executed them that a final and definite award upon the subject matter submitted was not made.

'Where an award is vacated and the time within which the agreement required the award to be made has not expired, the court may, in its discretion, direct a rehearing by the arbitrators. (1927, April 25, P.L. 381, No. 248, § 10).

'171. Modifying or correcting award, grounds

'In either of the following cases the court shall make an order modifying or correcting the award upon the application of any party to the arbitration:

'(a) Where there was an evident material miscalculation of figures, or an evident material mistake in the description of any person, thing, or property referred to in the award.

'(b) Where the arbitrators have awarded upon a matter not submitted to them, unless it is a matter not affecting the merits of the decision upon the matters submitted.

'(c) Where the award is imperfect in matter of form not affecting the merits of the controversy.

'(d) Where the award is against the law, and is such that had it been a verdict of the jury the court would have entered different or other judgment notwithstanding the verdict.

'The court may modify and correct the award or resubmit the matter to the arbitrators. (1927, April 25, P.L. 381, No. 248, § 11.)'

It was therefore necessary to determine whether the arbitration held in the instant case was under the Act of 1927 or at common law. We found it to be at common law.

The rule for determining this question is set forth in Rosenbaum v. Drucker, 1939, 346 Pa. 434, 436, 31 A.2d 117. There the arbitrators were required to determine who were members of a certain church. The faction that lost sought to overturn the award by...