Modern System Bakery v. Salisbury

• Decision Date: 18 June 1926
• Citation: 215 Ky. 230
• Parties: Modern System Bakery v. Salisbury, et al.
• Court: United States State Supreme Court — District of Kentucky

215 Ky. 230

Modern System Bakery v. Salisbury, et al.

Court of Appeals of Kentucky.

Decided June 18, 1926.

1. Arbitration and Award — Agreement that Landlord and Tenant should Each Select Arbitrator to Settle Dispute as to Amount Latter Owed Former, and that Arbitrators should Select an Umpire in Case they Disagreed, Held Valid Common Law Arbitration Agreement (Civil Code of Practice, Section 451; Ky. Stats., Sections 69-73). — Agreement that landlord and tenant should each select arbitrator to settle dispute as to amount latter owed former, and that arbitrators should select an umpire in case they disagreed, in which case decision of any two should be binding, held arbitration agreement, which, though not conforming to Civil Code of Practice, section 451, or Ky. Stats., sections 69-73, was valid agreement under common law.

2. Arbitration and Award — Arbitrators Under Common Law Agreement Must Meet and Inquire Into Merits of Controversies and Give Parties Opportunity to be Heard, Unless Selected to Act as Experts. — Arbitrators under common law agreement, where procedure is not provided for by statute, have duty to meet and inquire into merits of controversies and give parties opportunity to be heard, unless they were selected to act as experts and adjust matter from their own knowledge.

3. Arbitration and Award — Parties to Dispute Under Arbitration Agreement had Right to Expect that Arbitrator Selected by them Would be Present at Meeting. — Parties to dispute, who had selected arbitrator under arbitration agreement, but did not desire to appear at meeting of arbitrators, had right to expect that arbitrator selected by them would be present, and that they would have benefit of his arguments and suggestions.

4. Arbitration and Award — Arbitrators Determining Amount Due Landlord from Tenant, and Who Learned Nature of Claim from Landlord, Must Hear Tenant Before Making Award. — Arbitrators determining amount due landlord for property removed or damaged by tenant, who learned nature of claim from landlord, had duty to give tenant opportunity to be heard before making award.

5. Arbitration and Award — Arbitrators are Not Required to Always Follow Technical Rules of Law, but they Must Proceed with Due Regard for Rights of Parties. — Arbitrators are not required to always follow strict and technical rules of law, since law favors and encourages settlement of controversies by arbitration, but they must proceed with due regard for rights of parties.

Appeal from Boyd Circuit Court.

DYSARD & MILLER for appellant.

S.S. WILLIS for appellees.

OPINION OF THE COURT BY JUDGE REES.

Reversing.

The appellees own a building located on the corner of Sixteenth street and Greenup avenue in Ashland, Kentucky.

Prior to January 7, 1924, a portion of this building had been rented to the appellants, James Korff and Max Logue, partners doing business under the assumed name of Modern System Bakery. Appellees desired possession of the premises and were threatening to institute an action for forcible detainer when a compromise was reached, resulting in a written contract dated January 7, 1924. By the provisions of this contract appellants were to remain in possession of the premises until March 1, 1924, at a rental of $162.00 a month and in the event they did not vacate by March 1, 1924, they were to pay a rental of $324.00 a month while holding over. The appellees reserved the right to proceed by law to obtain possession without demand or notice unless the premises were vacated on March 1, 1924. Upon vacating the building the appellants were to clean it up and remove all rubbish and to repair any and all damage done in the removal of machinery and equipment and to return the property to the appellees in as good condition as when delivered to them, ordinary wear and tear excepted.

Appellants retained possession of the building until on or about April 30, 1924. They paid the appellees $324.00 for the rent for the month of March and tendered a check for $324.00 for the April rent, which appellees declined to accept. A dispute arose over the amount due under the contract of January 7, 1924, and being unable to agree, an arbitration agreement was entered into on April 30, 1924. This agreement was as follows:

"THIS AGREEMENT, made and entered into on this 30th day of April, 1924, by and between Max Logue and James Korff, partners in business under the name of the Modern System Bakery, parties of the first part, and Dr. W.M. Salisbury, party of the second part.

"WITNESSETH: THAT WHEREAS, a dispute has arisen between the parties as to the amount due to be paid to the party of the second part by the parties of the first part under an agreement in writing dated January 7, 1924, and the parties desire to settle said matter amicably and without litigation;

"Therefore, it is agreed that each of the parties hereto shall name an arbitrator, and these two arbitrators shall meet and determine the amount to be paid, and the amount so determined by them will be paid by the parties of the first part and accepted by the party of the second part. If the two parties so selected are unable to agree, they shall select an umpire, and the decision of any two of the board so selected as to the amount due shall be binding on both parties. Each party will name their arbitrator within the next two days.

"Given under our hand in duplicate, each party taking a copy, the day and date first herein written.

                                              "MODERN SYSTEM BAKERY
                                              JAMES KORFF
                                              W.M. SALISBURY."
                

Appellants selected William Kerns as their arbitrator and appellees selected as their arbitrator John R. Simpson.

Before making any effort to agree upon the amount to be paid by appellants these two arbitrators selected Bruce Patrick as umpire. A few days later and before any meeting had been held Patrick handed his written resignation to Kerns, who delivered it to Simpson. Simpson saw Patrick and induced him to withdraw his resignation and later sent to Kerns the following notice:

                        "ADJUSTMENT OF DAMAGE TO BUILDING OVER AND
                                  ABOVE COMMON USAGE
                    9 glass doors 3/2/6/8 gone ...................  $135.00
                    Damage to show windows by paint ..............   120.00
                    Two panel columns painted ....................    40.00
                    1 partition removed ..........................   110.00
                    Damage to floor, 1/3 value ...................   115.00
                    Damage to ceiling by smoke ...................    75.00
                    Baseboards spoiled by paint ..................    15.00
                    Damage to prism glass by weighting top of
                       show windows ..............................    20.00
                    Two front door locks, keys lost ..............    25.00
                    One month's rent as per contract taken .......   324.00
                                                                  _________
                                                                    $979.00
                    "By arbitrator,                    J.R. SIMPSON
                

"Mr. Kerns: Please meet with Mr. Patrick and myself...