Johnston v. Security Ins. Co.
Decision Date | 22 April 1970 |
Citation | 6 Cal.App.3d 839,86 Cal.Rptr. 133 |
Court | California Court of Appeals Court of Appeals |
Parties | In the Matter of the Arbitration between John M. JOHNSTON, Mab Johnston, and Mary E. Butcher, Claimants and Appellants, v. SECURITY INSURANCE COMPANY OF HARTFORD, Defendant and Respondent. Civ. 34529. |
Wellington Y. Kwan and Irene S. Chait, Los Angeles, for claimants and appellants.
Ives, Kirwan & Dibble and Martin J. Kirwan, Los Angeles, for defendant and respondent.
Claimants John M. Johnston, Mab Johnston, and Mary E. Butcher (hereafter 'claimants') made a claim for the payment of a fire loss under a policy issued by defendant (respondent) Security Insurance Company of Hartford (hereafter 'respondent'). Differences arose as to the amount payable and the parties resorted to arbitration for resolution of their dispute pursuant to terms of the policy. 1 Respondent selected Jairus H. Watson as its 'competent and disinterested appraiser'; claimants designated attorney Leo A. Burgard as their 'competent and disinterested' appraiser; and Watson and Burgard selected attorney William R. Walsh as the 'competent and disinterested umpire.' Umpire Walsh made an award in favor of claimant Mary Butcher for $10,600, which was concurred in by appraiser Burgard only. Upon cross-petitions by claimants to confirm the award and by respondent to vacate the award, the superior court made a minute order which provides in part here relevant: From this order claimants appeal.
Issues dispositive of the appeal are: (1) Should the rule enunciated in Commonwealth Coatings Corp. v. Continental Casualty Co. (1968) 393 U.S. 145, 89 S.Ct. 337, 21 L.Ed.2d 301, rehearing denied, 393 U.S. 1112 (21 L.Ed.2d 812, 89 S.Ct. 848), be adopted as a legal cause for vacating an arbitration award? (2) Did the superior court's failure to make findings of fact and conclusions of law in the context of this case render the order appealed from invalid?
We answer the first question, 'yes,' and the second question, 'no,' for the reasons set forth below.
Two possible grounds upon which a federal court can vacate an arbitration award upon the application of either party to an arbitration are: (9 U.S.C.A. § 10, subds. (a) and (b).) The California statutory provisions in this respect are practically identical: '* * * the court shall vacate the award if the court determines that: (a) The award was procured by corruption, fraud or other undue means; (b) There was corruption in any of the arbitrators; * * *.' (Code Civ.Proc. § 1286.2, subds. (a) and (b).) Notwithstanding this express enumeration by statute as to the grounds upon which a federal court can vacate an arbitration award, the United States Supreme Court in the Commonwealth Coatings case, Supra, held that even in the absence of any showing of actual fraud, corruption, or partiality on the part of the third (neutral) arbitrator, his failure to disclose even sporadic but substantial business relationships with a party to the arbitration constituted legal cause for vacating the award.
Justice Black speaking for the court stated: (Italics added.) (393 U.S. at pp. 148--149, 89 S.Ct. at p. 339, 21 L.Ed.2d at pp. 304--305.)
Justice White in concurring added in part: (393 U.S. at p. 151, 89 S.Ct. at p. 340, 21 L.Ed.2d at p. 306.)
The policy considerations pointed out by Justices Black and White commend the rule enunciated in Commonwealth Coatings as a salutary one. We bear in mind (Morris v. Zuckerman (1968) 69 Cal.2d 686, 691, 72 Cal.Rptr. 880, 884, 446 P.2d 1000, 1004.)
The basis of respondent's petition for vacation of the award as set forth in its petition and its counsel's declaration purportedly in support thereof is that the neutral umpire failed to disclose his acquaintanceship with the claimants' counsel and the attorney appointed by claimants as an appraiser and of the business dealings past and projected with that attorney-appraiser. The petition to vacate the award further alleges that if those matters had been disclosed at the outset, respondent 'would have objected to the appointment of William R. Walsh as 'neutral' umpire.'
The record on appeal, augmented upon the claimants' request under Rule 12 of the California Rules of Court, by the trial court file and the policy of insurance (introduced in the superior court as an exhibit), discloses no responses filed either to respondent's petition to vacate or to claimants' petition to confirm the award. In absence of a response, the allegations of a petition are deemed admitted. (Code Civ.Proc. § 1290.) 2 Even if we should consider claimants' petition to confirm the award and the declarations purportedly in support thereof as responses, they do not deny the allegations concerning the acquaintanceship of the neutral umpire with claimants' counsel and the appraiser designated by them. In fact, in appraiser Burgard's declaration in support of the petition to confirm the award, he states in part: The $10,600 figure as the amount of the award resulted from the neutral umpire adopting appraiser Burgard's figure, rather than appraiser Watson's figure.
Thus the undisputed facts bring this facet of the arbitration proceedings under review within the zone where the rule of Commonwealth Coatings is applicable. The difference in the acquaintanceship being with claimants' counsel and appraiser Burgard and the business dealings being with Burgard instead of directly with the claimants, or any of them, is insufficient to remove the acquaintanceship and dealings beyond the scope of creating an impression of bias.
Walsh, the neutral umpire or arbitrator, should have disclosed his acquaintanceship with claimants' counsel and Burgard and his past and prospective business dealings with Burgard. The fact that no actual fraud or bias was charged or proved against the neutral umpire is immaterial. We do not intend by our decision to imply any actual wrong dealing by Burgand, Walsh, or by claimants' counsel. Nevertheless Walsh was...
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