Litman v. Holtzman

• Decision Date: 18 March 1959
• Docket Number: No. 168,168
• Citation: 149 A.2d 385,219 Md. 353
• Parties: Samuel LITMAN et al. v. Samuel J. HOLTZMAN et al.
• Court: Maryland Court of Appeals

Page 353

219 Md. 353

149 A.2d 385

Samuel LITMAN et al. v. Samuel J. HOLTZMAN et al.

No. 168.

Court of Appeals of Maryland.

March 18, 1959.

Lawrence I. Weisman, Baltimore (J. Francis Ford, Baltimore, on the brief), for appellants.

Albert L. Sklar and Theodore S. Miller, Baltimore (Sklar & Sullivan, Baltimore, on the brief), for appellees.

Before HENDERSON, HAMMOND, PRESCOTT and HORNEY, JJ., and J. DUDLEY DIGGES, Special Judge.

HAMMOND, Judge.

An accountant, selected as a disinterested umpire, determined that a construction company was due some $15,000 by a couple for whom it had partially built a home. At the suit of the couple, the chancellor set aside the award, primarily, it would seem, because of his conviction that the parties should have selected an architect rather than an accountant to act as umpire.

Mr. and Mrs. Samuel Holtzman agreed to purchase from Admiral Realty & Bldg. Co., Inc., a dwelling to be erected in Baltimore County at a price of some $57,000. When the house was partially completed, the Holtzmans ordered Admiral off the job and employed another builder, one Kroll, to complete the house. Admiral sued the Holtzmans in Baltimore on the contract and filed a mechanics lien in Baltimore County. The Holtzmans sued Admiral in Baltimore County seeking damages. The parties agreed in writing to settle their differences. The preambles set forth the pending litigation, that Admiral claimed $17,000 to be due it, that the Holtzmans desired to have their own accountant audit the books and records of Admiral, that the objective of the parties was 'to determine the actual cost of the work done', and that the respective auditors of the parties in attempting to agree as to actual cost, should not only separately audit the books and records of Admiral but 'obtain and consider such other data and information, including an analysis and comparative audit of other properties' erected by Admiral 'as may be relevant.'

The agreement was that Admiral's auditor, Jerome Schuman, and the Holtzmans' auditor, Sydney D. Rapkin, should act as 'auditors and arbitrators' to determine the 'actual cost figures incident to the erection of the dwelling house.' The auditors were directed to add to the agreed land cost, 'the reasonable costs of labor, Social Security and Unemployment Compensation taxes, Workmen's Compensation Insurance, cost of materials purchased and * * * subcontractors paid', plus 10% overhead and 10% profit. It was stipulated that 'actual cost' was to mean 'moneys reasonably expended' by Admiral in the building of the house and was to be limited to 'the type and mode of expenses normally and customarily incurred by a builder in residential construction.' If the auditors were unable to agree, they were to select 'a Certified Public Accountant or a Certified Public Accounting firm to serve as umpire.' The umpire was 'to independently examine their respective audits, and the books, original records and such other data and information as he may require in connection with this matter, and determine therefrom the correct reasonable figures in accordance with the formula as above set forth.' It was agreed that Admiral might have its auditor Schuman always present during any audit of Rapkin or the umpire.

The parties contracted that each would be finally bound by the decision of the arbitrators, or the umpire, that the amount awarded was to be paid within ten days of the award, and, finally, that upon payment of the award, the litigation in Baltimore City and Baltimore County was to be dismissed.

The Holtzmans, in their bill to set aside the award, claim that Harry B. Gorfine, individually, and not his firm of Harry B. Gorfine and Co., had been selected as umpire and that Gorfine improperly and unlawfully had delegated his duties to associates, that the umpire had held meetings with, and obtained in formation from, Admiral's representatives and others without notice to, or in the presence of, the Holtzmans, and that such conduct voided the award, and, finally, that the umpire used improper standards in arriving at his decision.

The chancellor found that there had been no wrongful delegation and we agree. Soon after the submission was signed, it became apparent that Schuman and Rapkin could not concur, and Schuman suggested as umpire any of several nationally known accountants, such as Haskins and Sells, Price, Waterhouse & Co., and Ernst and Ernst. Rapkin rejected these and submitted a counter list which included the name of Harry B. Gorfine and Co. Schuman agreed to this nomination and wrote a letter to Harry B. Gorfine, using the salutation 'Dear Harry' and advising him that it had been decided by Rapkin and the writer that he was to serve as umpire. A reply was sent immediately to Schuman which said: 'This letter is to acknowledge and accept your appointment of us to act as umpire.' The letter was signed Harry B. Gorfine and Co. by Peter J. Woytowitz. The testimony is that Woytowitz, who is a certified public accountant and a lawyer, was particularly well-versed in accounting procedures and problems of building and construction firms and for this reason was selected by his employer to do the 'leg work' in connection with the determinations to be made. The record leaves no doubt that Gorfine directed and guided Woytowitz at all times and that he personally made all decisions during the course of the investigation and in the final determinations. It is likewise clear that Holtzman, Rapkin and Kroll were fully aware over a period of many months that Woytowitz was assembling data and information for Gorfine to assess, and not only made no objection whatever but cooperated fully with Woytowitz and accepted and seemingly acquiesced in his participation.

The Holtzmans cite cases such as Frankfort Distilleries v. Burns Bottling Machine Works, 174 Md. 12, 17, 197 A. 599, in relying on the principle that an arbiter may not delegate to another the duty which he is chosen to discharge; because if he did, the judgment exercised would be that of one not within the contemplation of the parties. The rule contended for is established and sound, but it does not come into play on the facts before us now. If the liberal assumption be made that Gorfine and not his firm was intended as the umpire, it is apparent that Gorfine gave to the fullest his individual and personal attention and that although he was aided by his employee in procuring the facts, figures, data and verifications, all pertinent and essential judgments, tentative and final, were his. There was no improper delegation.

We come, then, to the heart of the case--was the agreement of Admiral and the Holtzmans for submission to independent determination of the cost of Admiral's work intended to be an arbitration or an appraisal? These legal labels have significance, because where the agreement is to arbitrate differences or disputes, those who are to decide act quasi-judicially and may receive the evidence or views of a party to the dispute only in the presence of, or upon notice to, the other side, and may adjudge the matters to be decided essentially only on what is presented to them in the course of an adversary proceeding. On the other hand, where the intent of the submission is that the impartial determiners are primarily to ascertain facts, they may act upon their own knowledge and special skills and upon their own investigations; they are not required to hear evidence from, or the views of, a party only in the presence of, or upon notice to, the other side; and they are allowed a wide discretion as to procedures and sources of information, within the limits of the agreement defining their authority. 6 Williston, Contracts, Rev.Ed Sec.1921A; 3 Am.Jur., Arbitration and Award, Sec. 3, pp. 830-831; 6 C.J.S. Arbitration and Award § 1 pp. 153-154. The distinction is discussed by Judge Chesnut in Seldner Corporation v. W. R. Grace & Co., D.C., 22 F.Supp. 388. In Wilson v. Boor, 40 Md. 483, 489, it is said that if the agreement of submission by its terms does not contemplate testimony or adversary hearings, they are not required.

In Eliot v. Coulter, 322 Mass. 86, 76 N.E.2d 19, 21, the Supreme Judicial Court of Massachusetts said that although the disinterested...