Jones v. Enoree Power Co

• Decision Date: 12 August 1912
• Citation: 75 S.E. 452,92 S.C. 263
• Court: South Carolina Supreme Court
• Parties: JONES. v. ENOREE POWER CO.

75 S.E. 452

(92 S.C. 263)

JONES.

v.ENOREE POWER CO.

Supreme Court of South Carolina.

Aug. 12, 1912.

1. Arbitration and Award (§ 9^*)—Agreements to Arbitrate — Condition Precedent to Action.

Under a contract providing expressly or impliedly that the determination of some specific question of fact by arbitration shall be a condition precedent to a right of action thereon, the failure of a party without good excuse to so arbitrate held to be a good defense to a suit on the contract by such party.

[Ed. Note.—For other cases, see Arbitration and Award, Cent. Dig. § 30; Dec. Dig. § 9.*]

2. Arbitration and Award (§ 16*)—Agreements to Arbitrate—Revocability.

A valid agreement by the parties to a contract, made before any dispute has arisen, to submit to arbitration some specific question of fact, with a further provision that such arbitration shall be a condition precedent to a right of action on the contract, held to be irrevocable.

[Ed. Note.—For other cases, see Arbitration and Award, Cent. Dig. §§ 64-76; Dec. Dig. § 16.*]

Gary, C. J., dissenting.

Appeal from Common Pleas Circuit Court of Spartanburg County; Robt. Aldrich, Judge.

"To be officially reported."

Action by W. H. Jones against the Enoree Power Company. Judgment for defendant, and plaintiff appeals. Affirmed.

Johnson, Nash & Daniel, of Spartanburg, for appellant.

Bomar & Osborne, of Spartanburg, for respondent.

WOODS, J. By a contract executed February 27, 1900, W. H. Jones, the plaintiff, and others, conveyed to A. B. Groce, his heirs and assigns, "the right and privilege to raise a dam on the Van Patton Shoals, now owned by the Westmoreland estate and S. H. Calvert, to such height as he may desire." The questions made by this appeal arise under the following stipulation of the contract: "It is further agreed that if the land of the parties above named become in any way injured or damaged by water from said raising of the dam on said Van Patton Shoals on Enoree river, the said A. B. Groce hereby binds himself, his heirs, executors, administrators, and assigns, to pay the amount of such damages to the said parties above named, their heirs, executors, administrators, and assigns. The amount of such damages shall be derived and determined in the following manner, to wit: The said Abraham Cook, W. L. Hudson, P. B. Cooper, T. E. Bragg, R. T. Newman, Mrs. M. T. Newman, R. B. Newman, B. F. Newman, W. H. Jones, J. F. King, O. E. Godfrey, M. E. Jones, W. P. Fowler, the heirs, executors, administrators, or assigns, are to select one arbitrator, and the said A. B. Groce, his heirs, executors, administrators, or assigns, the other, and these two a third; and if these two cannot agree on a third, then such third arbitrator is to be selected by the clerk of the court, and if he will not then the probate judge, and if he will not select then the third arbitrator shall be selected by the sheriff, and if for any reason the arbitrators cannot be chosen or a majority of them cannot agree, then the amount of such damage is to be determined by action at law. The award of said arbitrators shall be final and conclusive."

The defendant, Enoree Power Company, acquired by assignment of the contract the rights of Groce. On July 19, 1907, the plaintiff served on the defendant a notice that he would contest the validity of the contract, and that, even if the contract should be declared valid, the plaintiff revoked the agreement to arbitrate. Afterwards the plaintiff, disregarding the agreement, brought this action for damages and injunction, alleging in his complaint: "That about the first of the year 1908, the defendant, Enoree Power Company, erected a dam across Enoree river, at what is known as Van Patton Shoals, of considerable height just below plaintiff's land, thereby impeding the water in said stream and backing it up into the small stream running through plaintiff's land referred to in such manner as to impede its progress and flow and caused said land to be saturated and sobbed with water and become unlit for cultivation, to the plaintiff's great damage. That plaintiff is a farmer and is dependent on the products of his farm for a living; and the defendant, by its said unlawful act, has so impeded the water, as it was wont to flow above, over, and along his said lands, as to cause mud, sand, and debris, in case of even ordinary freshet, to be deposited in the bed of said stream and out upon the cultivated land, to his damage in the sum of $500." The defendant set up as a defense that the action could not be maintained until the plaintiff had submitted the amount of damage, if any, to arbitration. In reply, the plaintiff alleged that the contract was without consideration, that it had been obtained by fraud, and that the agreement to arbitrate had been annulled by revocation.

The verdict of the jury was in favor of the defendant. The circuit judge instructed the jury: (1) That if the contract was obtained by fraud, it was of no effect; the plaintiff should have a verdict for whatever damage he had proved. (2) That if the contract was not obtained by fraud, then the plaintiff was bound by its terms; that he could not revoke the agreement to arbitrate, and could not maintain his action until he had offered to submit to arbitration the amount of the damage. The issue of fraud is out of the case, having been settled by the jury against the plaintiff.

Before considering the real question involved, it may be well to remark that no question under our Constitution or statute law is involved, for the arbitration provided for in this contract is a common-law arbitration falling entirely without the statute enacted by the General Assembly under the mandate of the Constitution. The Constitution provides: "The General Assembly shall pass laws allowing differences to be decided by arbitrators, to be appointed by the parties who may choose that mode of adjustment." Article 6, § 1.

Section 2849 of the Civil Code provides for arbitration agreements as required by the Constitution; but the statute contemplates arbitration of differences which have already arisen, and requires as a part of the contract "each party to enter into bond in double the amount involved to faithfully abide the result of the arbitration." Thus on its face the statute shows, without analysis, that it does not cover agreements contained in written contracts made before any difference has arisen to have any specific question of damage, loss, measurement, or the like arising under the contract settled by arbitration; and certainly it could not be contended for a moment that the statute or the Constitution expresses or implies any intention to take away the common-law right to make such an agreement. The indisputable right to make such a common-law agreement, not falling under the statute, was expressly recognized in Bishop v. Valley Falls Mfg. Co., 78 S. C. 312, 58 S. E. 939.

The exceptions raise two questions: First, was the agreement for arbitration binding on the plaintiff in the absence of fraud? Sec-and, did the plaintiff have the right to revoke the agreement that the amount of damage should be ascertained by arbitration?

We shall not discuss in detail the numerous cases in which the validity of arbitration agreements under the common law and the right to revoke them have been considered. As to the validity of such contracts, the authorities with entire unanimity now lay down this rule. An agreement to submit to arbitration all questions of law and fact that may arise under a contract is contrary to the public policy and void, as an attempt to oust the courts of their jurisdiction and establish in their place a contract tribunal. But an agreement that any particular issues of fact that may arise, such as quality of goods or amount of loss or damage, or the like, shall be submitted to arbitration, leaves the question of ultimate liability open for the decision of the courts and is valid; and if the contract expressly or by necessary implication makes the ascertainment of such fact by arbitration a condition precedent to a right of action, it is a good defense to a suit on the contract that the plaintiff has, without such good excuse, failed to arbitrate. Freedom to contract for arbitration to this extent imports no invasion of the province of the courts, and there is no ground upon which a right so essential to the convenient transaction of modern business affairs can be denied.

It is true that the case of Herbemont v. Percival, 1 McMul. 69, decided in 1840, does lay down in very broad language the general rule that a suit may be brought in disregard of any sort of agreement to arbitrate, though it is important to observe that the court also held in that case that the terms of the contract were too indefinite for enforcement. The case, however, is no longer authority in this state against the rule we have stated as to the validity of arbitration agreements, for in the case of Maxwell v. Thompson, 15 S. C. 612, decided in 1881, it was held that agreements to arbitrate are not against public policy. In the still later case of Brooke v. Laurens Milling Co., 78 S. C. 200, 58 S. E. 806, 125 Am. St. Rep. 780, and Id., 84 S. C. 299, 66 S. E. 294, the court held an agreement like that in this case binding on the parties. Since the decisions in Hamilton v. Liverpool, etc., Ins. Co., 136 U. S. 242, 10 Sup. Ct. 945, 34 L. Ed. 419, and Hamilton v. Home Ins. Co., 137 U. S. 370, 11 Sup. Ct. 133, 34 L. Ed. 708, we think no authority can be found which questions the following summary of the law made in the latter case: "A provision, in a contract for the payment of money upon a contingency, that the amount to be paid shall be submitted to arbitrators, whose award shall be final as to that amount, but shall not determine the general question of liability, is undoubtedly valid. If the contract further provides that no action on it shall be maintained until after such an award, then, as was adjudged in Hamilton v. Liverpool & L. & G....