Keppler v. Terhune, A--503

• Citation: 212 A.2d 683,88 N.J.Super. 455
• Decision Date: 29 July 1965
• Docket Number: No. A--503,A--503
• Parties: Albert R. KEPPLER, Plaintiff-Respondent, v. Alberta TERHUNE, Defendant-Appellant.
• Court: New Jersey Superior Court – Appellate Division

Page 455

88 N.J.Super. 455

212 A.2d 683

Albert R. KEPPLER, Plaintiff-Respondent, v. Alberta TERHUNE, Defendant-Appellant.

No. A--503.

Superior Court of New Jersey Appellate Division.

Argued April 12, 1965.

Decided July 29, 1965.

Edward F. Merrey, Jr., Paterson, for appellant (Merrey & Merrey, Paterson, attorney, John P. Goceljak, Paterson, on the brief, Edward F. Merrey, Jr., Paterson, of counsel).

John T. Mooney, Hackensack, for respondent (Hein, Smith & Mooney, Hackensack, attorneys).

Before Judges GOLDMANN, SULLIVAN and LABRECQUE.

The opinion of the court was delivered by

LABRECQUE, J.A.D.

Defendant appeals from a judgment of the Chancery Division denying her motion for summary judgment and ordering her to proceed with arbitration to fix the purchase price of certain lands leased to plaintiff with an option to purchase.

Plaintiff is the son-in-law of defendant. On March 25, 1947 defendant and her husband (now deceased) leased to plaintiff for 20 years a tract of land 125 100 feet located on Route 4, in the Borough of Fairlawn, Bergen County. The lease contained a provision whereby plaintiff was given the right to purchase the leased premises for the fair market value thereof.

The option clause specifically provided as follows:

'5. The Lessee is hereby given the option to purchase the land hereinbefore described at any time prior to the expiration of the term hereinbefore mentioned for the fair market value of the land at the time he shall exercise said option, but in the event the Lessor and Lessee cannot agree upon a price, then the said land shall be caused to be appraised by a competent real estate expert and if his appraisal should not be satisfactory to both parties, each party shall have the right to choose an Arbitrator, and submit the matter to them for their decision; but in the event said Arbitrators cannot agree, they are to choose a third Arbitrator and the decision of the majority of them shall be conclusive and binding upon both parties hereto; but should the Lessee fail within a period of ninety days thereafter to pay the amount fixed for said land by said Expert or Arbitrators, then his right to purchase said premises shall terminate and become valueless and all interest in the buildings and improvements of said land, after the termination of the period of twenty years aforesaid, shall become the property of the Lessors; otherwise, upon payment of the amount so fixed by the expert or arbitrators, the Lessors for themselves, their heirs and assigns, covenant and agree to convey by Warranty Deed, free and clear of all encumbrances except such encumbrances as may have ben caused by the purchaser himself, the demised lands and premises by delivering said Warranty Deed to the Lessee upon payment, in cash or certified check, the amount of the purchase price as fixed.

6. It is further agreed that in the fixing of the value of said land the real estate expert and the Arbitrators are only to consider the land as land and not the value of any building, improvements or business carried thereon.'

The leased tract was surrounded by other lands of the lessors which also fronted on Route 4. Plaintiff has been and continues in possession of the leased premises.

On December 3, 1956 defendant and her husband conveyed a ten-foot strip of their land fronting Route 4, including a strip along the lot in question, to the State of New Jersey for highway purposes. On December 4, 1956 plaintiff and his wife joined in executing a quitclaim deed to the State of any interest they had in the strip in question, and on March 26, 1957 plaintiff conveyed to the State his leasehold interest in the portion of the ten-foot strip located within the lines of the leased premises.

On February 18, 1963 plaintiff notified defendant by letter of his intention to exercise his option to purchase. He followed this up with a letter, dated March 1, 1963, in which he made an offer of $12,500 for the tract. Defendant replied through her attorney that:

'We have copies of your letters of February 18 and March 1, 1963 addressed to Mrs. Alberta Terhune regarding Mr. Keppler's option and his exercise thereof. We have reviewed the situation with Mrs. Terhune and have come to the conclusion, and have so advised her, that Mr. Keppler has no option.'

Sometime thereafter, and before the filing of the amended complaint, plaintiff caused the land to be appraised and offered the appraisal figure of $25,000. This in turn was rejected by defendant.

Following defendant's initial refusal, and on March 12, 1963, plaintiff instituted suit in the Chancery Division seeking specific performance of the agreement. Defendant's answer alleged that (1) the deeds to the State concluded any rights plaintiff might have possessed under the option; (2) since defendant had conveyed a portion of the leased premises to the State, specific performance was impossible; (3) plaintiff had waived and released his alleged rights under the option; (4) there was no arbitrable issue between the parties, and (5) assuming the existence of an option, plaintiff failed to take the steps required of him as a prerequisite to a suit for specific performance.

Plaintiff moved, unsuccessfully, for summary judgment in his favor. Later he was granted leave to file an amended complaint alleging an additional cause of action under the Arbitration Act, N.J.S. 2A:24--5, N.J.S.A. A cross-motion by defendant for summary judgment was denied. The trial judge ruled that:

'It is true that specific performance will be denied where a contract contains an arbitration clause and the arbitration as such has not taken place. However, I see no reason why specific performance cannot be granted where arbitration has taken place and a price in fact has been determined by the arbitrators. When this has been determined by those arbitrators, when the subject matter of the amended complaint has fully come to realization, then the price will have been fixed, and absent any extenuating circumstances unknown to me at the moment, once that price is fixed specific performance could absolutely and unequivocally be granted. There is nothing to stand in the way.'

The order appealed from is dated January 23, 1964. It denies defendant's motion for summary judgment and orders that defendant appoint an arbitrator within ten days from the date thereof. Upon defendant's failure to do so, plaintiff was authorized to apply for appointment of an arbitrator by the court on behalf of defendant. The notice of appeal is dated January 31, 1964.

No question is raised by the parties as to defendant's standing to prosecute the present appeal. While on its face it appears to be an appeal from an interlocutory order, in effect it amounts to a final disposition of the key issue in the case, i.e., plaintiff's right to arbitration. In any event, in the absence of objection, and in view of the importance of the issues presented, we pass the question and proceed to consideration of the merits. Delaware River and Bay Authority v. International Organization of Masters, Mates & Pilots, 45 N.J. 138, 211 A.2d 789 (1965).

Defendant first urges that equity will not decree specific performance of an agreement to have arbitrators appointed to determine the price of land. We disagree.

Arbitration is favored by our courts. Public Utility Construction and Gas Appliance Workers, etc. v. Public Service Elec. & Gas Co., 35 N.J.Super. 414, 419, 114 A.2d 443 (App.Div.1955), certification denied 19 N.J. 333, 116 A.2d 828 (1955). The Arbitration Act of 1923, N.J.S. 2A:24--1 et seq., N.J.S.A., provides a complete scheme covering the subject. City of Rahway v. Cleary, 10 N.J.Misc. 545, 159 A. 813 (Sup.Ct.1932), affirmed o.b. Rahway Valley Joint Meeting v. Cleary, 109 N.J.L. 348, 162 A. 590 (E. & A. 1932). The aim of the act is to make an arbitration agreement a binding instrument and to authorize the courts to effectuate it, and hence to compel arbitration in proper situations. Ench Equipment Corp. v. Enkay Foods, Inc., 43 N.J.Super. 500, 503, 129 A.2d 313 (App.Div.1957). By section 1 of the act, provisions in contracts to settle by arbitration controversies arising thereunder are, with certain exceptions not here relevant, valid, enforceable and irrevocable.

An arbitration agreement is to be contrued according to the usual methods of contract interpretation whereby a mutual, reasonable and meaningful design is sought from the language used by the parties and maximum effect is given to their intention. Wm. J. Burns, etc., Inc. v. N.J. Guards Union, Inc., 64 N.J.Super. 301, 165 A.2d 844 (App.Div.1960). Since submission to arbitration is essentially a contractual matter, the parties are bound only to the extent of their contract and the matters subject to submission to arbitration are restricted to those embraced within the contract. id.

Where one of the parties fails to perform the agreement to arbitrate, the court is empowered to 'direct that the arbitration proceed.' Ench Equipment Corp. v. Enkay Foods, Inc., supra, 43 N.J.Super. at p. 503, 129 A.2d at p. 315. Where a party fails to avail himself of the procedure provided in the contract for the appointment of an arbitrator, the court may designate and appoint an arbitrator--who thereafter acts with the same force and effect as if specifically named therein. N.J.S. 2A:24--5, N.J.S.A.; Mitchell v. Alfred Hofmann, Inc., 48 N.J.Super. 396, 407, 137 A.2d 569 (App.Div.1958).

Here the agreement in question specifically committed the determination of the fair market value of the leased lands to arbitration and the Chancery Division had jurisdiction to decree specific performance thereof. Ench Equipment Corp. v. Enkay Foods, Inc., supra. See also Gould Storage Battery Corp. v. United Electrical etc., 137 N.J.L. 522, 61 A.2d 50 (Sup.Ct.1948) ; Public Utility Construction and Gas Appliance Workers, etc. v. Public Service Elec. & Gas Co., supra; Mitchell v. Alfred Hofmann, Inc., supra; Shribman v....