John W. Johnson, Inc. v. 2500 Wisconsin Ave.

• Decision Date: 16 February 1956
• Docket Number: No. 12614.,12614.
• Parties: JOHN W. JOHNSON, Inc., a Corporation, Appellant, v. 2500 WISCONSIN AVE., Inc., et al., Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

98 US App. DC 8, 231 F.2d 761 (1956)

JOHN W. JOHNSON, Inc., a Corporation, Appellant, v. 2500 WISCONSIN AVE., Inc., et al., Appellees.

No. 12614.

United States Court of Appeals District of Columbia Circuit.

Argued October 19, 1955.

Decided February 16, 1956.

Mr. Dexter M. Kohn, Washington, D. C., with whom Mr. J. E. Bindeman, Washington, D. C., was on the brief, for appellant.

Mr. Harry L. Ryan, Jr., Washington, D. C., with whom Mr. Roger J. Whiteford, Washington, D. C., was on the brief, for appellees.

Before BAZELON, WASHINGTON and DANAHER, Circuit Judges.

DANAHER, Circuit Judge.

Appellant (plaintiff) appeals from a judgment awarding it damages of $617.48, following arbitration proceedings. Appellant claims the court erred in refusing to permit it to withdraw prior to the award of the arbitrators and in ordering the arbitration to continue after appellant's notice of withdrawal. An understanding of the controversy depends largely upon the factual situation.

Appellant contracted for the sum of $73,000 to paint certain premises located at 2500 Wisconsin Avenue, N. W., District of Columbia, owned by one appellee, and managed by the other. A dispute having arisen over changes and additions as the job progressed, appellant filed notice of its intention to assert a mechanic's lien for a $17,000 balance of a total of some $112,000 claimed, and instituted action in the District Court to enforce its lien. Answer having been filed, the case was calendared for trial, December 21, 1951.

The action had been commenced notwithstanding that the original contract contained an arbitration clause. After taking the depositions of the appellees, appellant on March 18, 1952, for the first time invoked the arbitration clause and sought the appointment of arbitrators. Appellees replied that by the commencement of this action, appellant had waived its right to arbitration and was estopped from proceeding. Again on April 29, 1952, appellant insisted upon arbitration, whereupon the American Arbitration Association advised appellees that arbitration must proceed unless stayed by agreement of the parties or by court order. The appellant then moved the court to stay its hand and to compel arbitration. After argument, the motion was denied by Judge Holtzoff. Appellees then counterclaimed, seeking $30,000 damages for alleged breach of contract, and reply having been filed, pre-trial proceedings were conducted by Chief Judge Laws on May 28, 1953.

As the case was readied for trial, the respective parties on December 3, 1953, entered into a separate and new agreement for the determination and settlement of their controversies by arbitration. Their agreement expressly recited the pendency of the complaint and counterclaim and made provision for the entry of judgment upon an award to be rendered by the arbitrators chosen by the parties. The respective parties reduced their claims to writing, a series of hearings were scheduled, and, commencing April 26, 1954, until August 9, 1954, were conducted by the arbitrators on dates and at times mutually agreeable. The pending court action in May 1954, was reached for assignment, and appellant was so notified by the Assignment Commissioner, but the case was continued on the calendar due to the pendency of the arbitration hearings, then under way. On two occasions, actually, prior to October 12, 1954, the Assignment Commissioner notified the parties that the case had been reached for trial. Appellant finally was notified that the case had been assigned for trial October 18, 1954. About this time, the arbitrators concluded their deliberations and scheduled a meeting among themselves for October 16, 1954, for the purpose of reducing their award to written form.

Appellant's notice of withdrawal, dated October 12, 1954, without prior notice to or consent of the appellees, and without court approval of the attempted change of position, stimulated the appellees forthwith to move the court to permit the arbitrators to conclude their proceedings and to consummate the same by the rendition of an award. The court after consideration of the papers and after oral argument, so ordered, and within the ten days permitted for the termination of deliberations and for entry of the award, the arbitrators filed their award with the court. The appellants were awarded the sum of $11,427.30, and appellees the sum of $10,809.89. The arbitrators directed a set-off, resulting in a net recovery against appellees of $617.48. Judgment was entered accordingly.

It should be noted that the original contract contained the standard clause relating to arbitration proceedings sponsored by the American Institute of Architects, which in turn provides for arbitration through the facilities of the American Arbitration Association. However, the superseding agreement, in far more limiting fashion, provided only that "The hearing shall be conducted in accordance with procedure for oral hearing as contained in the Commercial Arbitration Rules of the American Arbitration Association, same being attached hereto and being Rules 20 to 35, inclusive." (Emphasis added.) The parties expressly agreed that their dispute was to "be determined and settled" by the arbitrators, that their award "shall be final and binding," that the "parties do herewith agree to abide by, observe, and perform the directions and award of the arbitrators," and "the judgment upon the award rendered by the arbitration may be entered in said Civil Action No. 4936-51 in the United States District Court for the District of Columbia," this very action. Nothing whatever was said about a time limitation within which the award was to be made, rather it was declared to be "the intention of the parties that all said matters in controversy between them shall be considered and decided in such way as to cause justice to be done between the parties."

Appellant purported to base its attempted withdrawal from arbitration upon the failure of the arbitrators to come to a decision by October 12, 1954, asserting such failure "is in violation of Articles 35 and 40 of the Commercial Rules of the American Arbitration Association." But there was no claim that the arbitrators were reopening the hearings, and we see no evidence of violation of Article 35. Moreover, there was no time specified in the agreement within which an award was to be made, and it does not appear that either party ever notified the arbitrators that it was expected their award would be made within thirty days from the date of closing the hearings. A fair reading of the source of their authority, the agreement of the parties, could have indicated to the arbitrators that they were to take such time as was reasonably necessary to consider the evidence and the opposing claims, and "to cause justice to be done." We conclude, therefore, that an attempt to justify withdrawal on an alleged violation of Articles 35 and 40 lacks merit.

Appellant next argues that, in any event, the federal courts will not enforce specifically any agreement to arbitrate not so enforceable at common law so that appellant was privileged to withdraw its agreement at any time before the award was made. Appellant relies upon Red Cross Line v. Atlantic Fruit Co., 1924, 264 U.S. 109, at pages 120-121, 44 S.Ct. 274, at page 276, 68 L.Ed. 582, particularly the statement of the rule reading:

"The federal courts — like those of the states and of England — have, both in equity and at law, denied, in large measure, the aid of their processes to those seeking to enforce executory agreements to arbitrate disputes. They have declined to compel specific performance * * * or to stay proceedings on the original cause of action. * * * They have not given effect to the executory agreement as a plea in bar, except in those cases where the agreement, leaving the general question of liability to judicial decision, confines the arbitration to determining the amount payable or to furnishing essential evidence of specific facts, and makes it a condition precedent to the cause of action."

A long line of cases supports appellant's contention, indeed as recently as Bernhardt v. Polygraphic Co.,¹ the Court recognized the law of Vermont to be that an agreement to submit to arbitration would not be binding and could be revoked at any time before an award was made. The statute considered in that case, the United States Arbitration Act,² is the only one possibly applicable to arbitration in the District of Columbia. But as in Bernhard, we cannot say that a contract to paint a building in the District is a "`transaction involving commerce'" within the meaning of § 2 of the Act, and neither party so contends. Accordingly, absent an applicable statute, local common law must govern. However, we need not at this time decide what the law of the District of Columbia is generally as to specific enforcement of arbitration agreements, because there is a special factor in this case which, we feel, is controlling.

Appellees contend, as Judge McGuire concluded, that under the circumstances of this case, the agreement to arbitrate became a stipulation.³ In its brief, "Appellant concedes that if a stipulation is filed in a court proceeding, it becomes a rule of court. Hernandez v. Siciliano, 1953, 93 U.S.App.D.C. 122, 208 F.2d 33; Smith v. Whittier, 1892, 95 Cal. 279, 30 P. 529." But, appellant contends the agreement could not become a rule of court or a "stipulation" in the court proceeding until it was filed therein. We do not doubt that the respective parties have taken into account the language of Mr. Justice Brandeis in Red Cross Line v. Atlantic Fruit Co., supra, 264 U.S. at pages 121-122, 44 S.Ct. at page 276: "And, although there is no federal legislation on the subject, an executory agreement, however comprehensive, will, if made a rule of court, be enforced in courts of the United States by any appropriate process. Heckers v. Fowler, 2 Wall. 123, 17 L.Ed. 759."⁴

We have here no...