Hughes v. National Fuel Co.

• Court: West Virginia Supreme Court
• Writing for the Court: MAXWELL, Judge.
• Citation: Hughes v. National Fuel Co., 121 W.Va. 392, 3 S.E.2d 621 (W. Va. 1939)
• Decision Date: 20 June 1939
• Docket Number: 8848.
• Parties: HUGHES et al. v. NATIONAL FUEL CO.

3 S.E.2d 621

121 W.Va. 392

HUGHES et al. v. NATIONAL FUEL CO.

No. 8848.

Supreme Court of Appeals of West Virginia.

June 20, 1939

Terence D. Stewart and Ezra E. Hamstead, both of Morgantown, for appellant.

William T. Hughes, Jr., and Geo. R. Farmer, both of Morgantown, for appellees.

MAXWELL Judge.

The plaintiffs, W. T. Hughes, Retta D. Hughes, Ernest H. Gilbert Jr., Mary Gilbert, W. F. McKain, Hallie McKain, Alice Davis Trotter and James F. Trotter, instituted this chancery suit in the circuit court of Monongalia County against National Fuel Company, a corporation, defendant, for the purpose of abrogating an arbitration award unfavorable to the plaintiffs and in favor of the defendant, and, notwithstanding the award, to obtain a decretal judgment in favor of the plaintiffs against the defendant for an amount claimed on account of unmined coal. From a decree granting the plaintiffs relief in conformity with the prayer of their bill, an appeal was awarded the defendant.

The background of the suit lies in a lease, for coal mining purposes, of a tract of 19.9 acres of Pittsburgh coal in Monongalia County, executed by the plaintiffs to the defendant in 1931. Under authorization of the lease, the defendant proceeded to mine the coal, but, in the course of the operations, the plaintiffs complained to the defendant that it was not taking the coal to a sufficient height. This coal seam is eight or nine feet in thickness, but the defendant, generally speaking, did not remove any coal above what is known in the record as the six-foot binder which is a very thin stratum of slate extending longitudinally through the coal at a height of from six to six and one-half feet from the bottom of the seam. The plaintiffs assert that the defendant should have mined at least one more foot of top coal. The defendant claims that it took all of the top coal which was marketable and all that could properly be removed in accordance with safe mining methods.

The lease contains this paragraph: "Sixteenth: In the event of difference arising between the lessors and the lessee under the terms of this agreement, or the construction of any clause thereof, or the rights and obligations of the lessors or the lessee hereunder, all such questions shall be determined by arbitration, but pending arbitration between the parties hereto, there shall be no cancellation or forfeiture of this agreement. In all such cases the matters in difference shall be referred to two arbitrators, one to be chosen by the lessors and one by the lessee, and if said arbitrators cannot agree, they shall select a third, and the decision of any two of such three arbitrators shall be final and binding, and shall be accepted as such by the parties hereto."

After there arose the controversy whether the defendant had removed a sufficient quantity of the top coal, the parties, in compliance with the above quoted provision of the contract, after the defendant had ceased operations, submitted to arbitration the question of whether the defendant was obligated under the lease to mine and ship more coal from the premises than it had mined and shipped, and, if so, how much the defendant owed the plaintiffs for coal unmined and not paid for, and for which payment had been demanded by the plaintiffs. Thereupon, the plaintiffs selected as arbitrator S. Dunlap Brady, and the defendant selected C. W. McCutcheon. These two chose A. C. Beeson as the third arbitrator. The three conducted a hearing, following which Beeson and McCutcheon made a finding adverse to the claim of the plaintiffs. Soon after the award against the plaintiffs, they instituted this suit.

As disclosed by the bill, the bases of the attack on the award are (1) that arbitrator McCutcheon acted as an advocate, witness and agent for the defendant when the matter in controversy was being heard by the arbitrators; (2) that the award was not responsive to the questions submitted for arbitration; (3) that the award on its face discloses palpable error.

The defendant's answer and first amended answer, in their entirety, were held insufficient on demurrer. The second amended answer was held good with respect to parts thereof, but the paragraphs wherein the defendant undertook to meet the allegations of the bill attacking the award were held insufficient and were stricken out because, in the court's opinion, they did not constitute a defense to the portions of the bill charging impropriety in the award. Following that adjudication of insufficiency the court decreed: "And the Court being further of the opinion that no further amendments should be permitted to said answer of the defendant, and the said bill of complaint having alleged that the award exhibited with said bill of complaint made by A. C. Beeson and concurred in by C. W. McCutcheon is invalid, and the Court from inspection of said award is of the opinion that said award is invalid, and that said plaintiffs having prayed in their bill that said award as filed by Beeson and concurred in by C. W. McCutcheon be set aside and held to be invalid and of no effect, it is, therefore, adjudged, ordered and decreed that the said award be and the same is hereby set aside and held for naught." Following this ruling of the chancellor rejecting the award, there was directed an issue out of chancery resulting in a jury verdict in favor of the plaintiffs and against the defendant for $2,400.00. The court approved the verdict and entered a decretal judgment thereon.

In the rejected portions of the second amended answer, by way of avoidance of the paragraphs of the bill attacking the award, the defendant alleges that after the arbitrators had been chosen, but prior to the hearing on the arbitration, Brady and McCutcheon, arbitrators, agreed that they would present the evidence for the respective sides which had chosen them and that the third arbitrator, Beeson, should pass upon the evidence presented at the hearing and, after full consideration, would make a report thereon and present the same to the other two arbitrators for their approval or disapproval; that the plaintiffs had full knowledge of that arrangement and made no objection thereto, and that Brady did represent the plaintiffs at the hearing with their acquiescence; that at the conclusion of the hearing the arbitrators agreed that Beeson should prepare a written report or award and would present the same to Brady and McCutcheon for their action thereon, and that the plaintiffs knew of that arrangement and made no objection to the same, and that such course was followed without protest. Also, there is full denial by the defendant of every element of impropriety charged by the plaintiffs against the award.

On this setting, there necessarily arises the question whether the trial chancellor acted with warrant of law in sustaining the plaintiffs' demurrer to those portions of the defendant's second amended answer presenting matters of defense to the plaintiffs' attack on the award. Did the chancellor properly hold that the condemned paragraphs of the second amended answer constituted no defense?

"Arbitration is a process of settlement of controversies allowed by the common law, and favored by it as tending to end them speedily and cheaply." Turner v. Stewart, 51 W.Va. 493, 499, 41 S.E. 924, 927. "The settlement of disputes by arbitration is a matter of ancient practice at the common law." Miller v. Brumbaugh, 7 Kan. 343, 350. Consult:Burke Grain Co. v. Stinchcomb, 70 Okl. 89, 173 P. 204; 6 Corpus Juris Secundum, Arbitration and Award, page 155, § 4. On this subject, many of the states have enacted statutes generally considered supplementary to, but not exclusive of, the common law procedure. 3 Am.Jur., p. 838. The statutes are cumulative merely. Turner v. Stewart, supra, 51 W.Va. page 505, 41 S.E. 924.

At common law an agreement to submit to arbitration was revocable at any time before award. IV Minor's Institutes, 2d Ed., p. 150; White Eagle Laundry Co. v. Slawek, 296 Ill. 240, 129 N.E. 753. Also, though an award was conclusive of the matter arbitrated and extinguished the original demand, it did not have the standing of a judgment or decree. IV Minor's Institutes, 2d Ed., p. 147. An award was enforceable only by action based thereon. 6 Corpus Juris Secundum, Arbitration and Award, page 268, § 123. The purpose of statutory enactments on the subject is to afford a more efficacious procedure for the arbitration of controversies. Notably, as evidenced by the West Virginia act, a statutory agreement to arbitrate a matter in controversy cannot be revoked except by leave of court. Code 55-10-2. And, under the statute, an award may be entered as a judgment or decree of the court and enforced as such. Code 55-10-3. Such award may not be set aside except for errors apparent on its face, "unless it appears to have been procured by corruption or other undue means, or by mistake, or that there was partiality or misbehavior in the arbitrators, or any of them, or that the arbitrators so imperfectly executed their powers that a mutual, final and definite award upon the subject matter submitted was not made." Code, 55-10-4.

A contract to submit future differences to arbitration is not binding. Kinney v. Baltimore & O. Ass'n., 35 W.Va. 385, 14 S.E. 8, 15 L.R.A. 142; IV Minor's Institutes, 2d Ed., p. 154. But where a contract for future arbitration of possible controversies has become executed in respect of any pertinent matter of difference between the parties, the award is binding. 3 Am.Jur., p. 856.

At bar there is presented an executory contractual provision for common law arbitration. The arbitration paragraph of the contract could have been repudiated by either of the parties prior to the award of the arbitrators. But neither party...