Goerke Kirch Co. v. Goerke Kirch Holding Co.

Citation176 A. 902
Decision Date04 February 1935
Docket NumberNos. 115, 126.,s. 115, 126.
PartiesGOERKE KIRCH CO. v. GOERKE KIRCH HOLDING CO.
CourtUnited States State Supreme Court (New Jersey)

Appeal from Court of Chancery.

Bill by the Goerke Kirch Company against the Goerke Kirch Holding Company. From the decree, defendant appeals, and complainant cross-appeals.

Reversed and remanded, with direction.

Abe J. David, of Elizabeth, for appellant.

Lionel P. Kristeller, of Newark (Jacob L. Newman, of Newark, and Stanley Folz, of Philadelphia, Pa., on the brief), for respondent.

HEHER, Justice.

By an indenture dated July 10, 1929, defendant, Goerke Kirch Holding Company, leased to complainant, Goerke Kirch Company, a retail general merchandising concern, certain lands in the city of Elizabeth, for a term of twenty-two years and ten months, to begin on June 1, 1929. The annual rent stipulated was the money equivalent of 4 per centum of the total amount of the gross sales of goods, wares, and merchandise by the tenant upon the premises, with the proviso that the "minimum annual rental" should be $80,000. Financial adversity overtook the tenant and, in an effort to effect rehabilitation, the parties agreed, on February 1, 1932, to execute a new lease, modifying the terms of the old, "as soon as the figure for the minimum net annual rental, to be inserted in paragraph 1 thereof, shall have been determined." It was further provided that the "fair market annual rental of the premises" should be determined by arbitration, the arbiters to be three members of the Elizabeth real estate board, chosen by the president of that body; and that the "amount so determined shall be the minimum net annual rental for the period beginning February 1, 1932, and ending January 31, 1937, to be inserted in paragraph 1" of the attached draft of lease. An underlying agreement provided that this determination should be made "not later than March 1, 1932." Arbitrators were appointed pursuant to the contract. They made their determination on May 25, 1932; but it was set aside, in the Union circuit court, upon the ground of their misbehavior. A companion order, directing the parties to proceed to arbitration anew under the arbitration act of 1923 (Pamph. L. 1923, p. 291, Comp. St. Supp. 1924, § 9—21 et seq.) was set aside, on certiorari, by Mr. Justice Case as an excess of power.

The bill alleged the expiration, "without the fault or neglect of the complainant," of "the time within which the arbitrators * * could make their award as to the fair market annual rental of the premises," and prayed equitable interposition to "determine * * the fair net annual rental which the complainant must pay for the use and occupancy of the premises," during the mentioned period. The decree fixed the "fair net annual rental" for the term commencing February 1, 1932, and ending January 31, 1937, at $70,000, and directed the parties, within a specified time, to execute the modification agreement in the form agreed to, with the additional stipulation that the "minimum annual rental" shall be in the sum last mentioned. There are cross-appeals. The complainant insists that an erroneous method was employed in determining the rental value; defendant denies jurisdiction, and urges, in addition, that the evidence does not support the finding so made.

The asserted cause of action is coram non judice. The proceeding contemplated by the parties for the determination of the minimum rental is arbitral in character. The agreement expressly provides for the selection of "arbitrators" to determine the question. A submission to arbitration is essentially a contract. At common law, the authority of an arbitrator was in its essence revocable, and, generally speaking, the submission could be revoked at any time previous to an award. The remedy of the party aggrieved was an action in damages for breach of the contract. Knaus v. Jenkins, 40 N. J. Law, 288, 29 Am. Rep. 237; Crura v. Moore's Adm'r, 14 N. J. Eq. 436, 82 Am. Dec. 262; Paulison v. Halsey, 38 N. J. Law, 488; Freeborn v. Denman, 8 N. J. Law, 116; March v. Eastern Railroad Company, 40 N. H. 548, 77 Am. Dec. 732; Mills v. Bayley, 2 H. & C. 36; Vynior's Case, 8 Coke, 81b, 77 Reprint 597, 3 Eng. Rul. Cas. 357; 2 R. C. L. 366, 370; 5 C. J. 53, 61. The authority of the arbitrators is derived from the mutual assent of the parties to the terms of submission; the parties are bound only to the extent, and in the manner, and under the circumstances pointed out in their agreement, supplemented by the pertinent provisions of the arbitration act, and no further. They have a right to stand upon the precise terms of their contract. Westville Land Co. v. Handle, 112 N. J. Law, 447, 171 A. 520.

Section 1 of the statute relating to arbitration (Pamph. L. 1923, p. 291, Comp. St Supp. 1924, § 9—21) ordains that a written contractual stipulation for the settlement of a controversy by this process "shall be valid, enforceable and irrevocable, save upon such grounds as exists [sic] at law or in equity for the revocation of any contract." But, in virtue of the express terms of the contract at issue, its efficacy terminated at the expiration of the prescribed period. There was, in effect, a revocation of the submission—a termination of the authority vested in the arbitrators—by the lapse of the stipulated time. The contract had no vitality thereafter. The parties made no provision for this contingency, 1. e., a resubmission after the stipulated time, when the attempted exercise of the authority conferred upon the arbitrators proved abortive. There was a further provision that "if for any reason said Committee (of arbitration) is not appointed, or, if appointed, fails to qualify or to act, or fails to render its findings as and within the time aforesaid, then either the Lessor or Lessee may apply to any court in New Jersey having competent jurisdiction, for the appointment of a Committee of Arbitrators, to be composed of three reputable men engaged in the real estate business in Elizabeth, New Jersey, for the purposes aforesaid, and the findings of said Committee, when approved by said Court, shall be conclusive and binding upon the parties hereto." But this manifestly does not embrace the situation here presented. There is exhibited a casus omissus in the contract, which, for obvious reasons, the court cannot supply. It was the rule at common law that the authority of arbitrators to function as such terminated with the making of the award, notwithstanding its invalidity. In such event, they became functus officio. Flannery v. Sahagian, 134 N. T. 85, 31 N. E. 319; Porter v. Scott, 7 Cal. 312; In re Stringer, [1901] 1 K. B. 105; Mordue v. Palmer, L R. 6 Ch. 22; 5 C. J. 75. And it is elementary that where, as here, the parties, by the terms of the submission, have provided for the making of an award within a specified time, the authority of the arbitrators, in the absence of provision to the contrary, terminates upon the expiration of the period so limited. White v. Kemble, 3 N. J. Law, 461; Bent v. Erie Telegraph & Telephone Co., 144 Mass. 165, 10 N. E. 778; Johnson v. Crawford, 212 Pa. 502, 61 A. 1103; Marshall v. Powell, 9 Q. B. 779, 58 E. C. L. 779, 115 Reprint, 1475. The arbitration act referred to declares this fundamental principle. It provides (section 9) that "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." Pamph. L. 1923, p. 293, Comp. St. Supp. 1924, § 9—29.

It is a corrollary of the foregoing that, on a failure of arbitration, the status quo ante is restored. The rights and remedies of the parties are as they subsisted before the making of the submission agreement. Here the abortive termination of the arbitral proceeding operated to revive the rights and remedies, obligations and burdens created or imposed by the original contract, as they existed when the arbitration agreement was made.

Under these circumstances; equitable interposition was unwarranted. There is no principle of equity jurisprudence to sustain it it is elementary that the law is powerless to supply, or add to, a contract, unless the parties have invited such assistance or addition by omission expressly to define their obligations. Westville Land Co. v. Handle, supra; Assets Realization Co. v. Howard, 211 N. Y. 430, 105 N. E. 680. And this restraint is likewise imposed upon courts of equitable jurisdiction. The field of equity jurisprudence is not like unto an uncharted sea, with no compass to guide save the conscience of the Chancellor, unrestrained by principle, precept, or rule. Its jurisdiction rests upon and is limited by well-established principles; otherwise, there could be no certainty or fixity of right and remedy—its functioning would be attended with uncertainty and consequent confusion. A court of equity is not vested with arbitrary power; it does not rise above all law; nor can it substitute terms for those made by the parties to a contract. The rules of property, rules of evidence, and rules of interpretation in both courts of equity and law are, or should be, exactly the same; both ought to adopt the best, or must cease to be courts of justice. Neither a court of equity nor of law can vary men's wills or agreements, or (in other words) make wills or agreements for them. Both are to understand them truly and therefore uniformly. One court ought not to extend, nor the other abridge, a lawful provision deliberately settled by the parties, contrary to its just intent. Both courts will equitably construe, but neither pretends to control or change, a lawful stipulation or engagement. 3 Black. Comm. 433, 434, 436; Pomeroy's Equity Jurisprudence, §§ 1293, 1297; 21 C. J. 22. "It is entirely beyond the power of any judicial tribunal to make a contract for litigants, or compel them to make a contract with each other. * * * No court has power to make a contract for persons sui...

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