Park Const. Co. v. Independent School Dist. No. 32

• Decision Date: 17 January 1941
• Docket Number: No. 32440.,32440.
• Citation: 296 N.W. 475,209 Minn. 182
• Parties: PARK CONST. CO. v. INDEPENDENT SCHOOL DIST. NO. 32, CARVER COUNTY.
• Court: Minnesota Supreme Court

296 N.W. 475

209 Minn. 182

PARK CONST. CO. v. INDEPENDENT SCHOOL DIST. NO. 32, CARVER COUNTY.

No. 32440.

Supreme Court of Minnesota.

January 17, 1941.

Rehearing Denied February 28, 1941.

Appeal from District Court, Carver County; Joseph J. Moriarty, Judge.

Action by the Park Construction Company against Independent School District No. 32, Carver County, Minnesota, to recover an award made to the plaintiff in an arbitration. From an order sustaining defendant's general demurrer to the complaint, the plaintiff appeals.

Order reversed.

O. A. Brecke and E. T. Chesnut, both of Minneapolis, for appellant.

W. F. Odell, of Chaska, for respondent.

STONE, Justice.

Plaintiff appeals from an order sustaining defendant's general demurrer to the complaint.

In December, 1938, defendant contracted with plaintiff to grade an athletic field. The contract required that "all questions" subject to arbitration thereunder "shall be submitted to arbitration at the choice of either party." Another provision was that "such decision [of the arbitrators] shall be a condition precedent to any right of legal action." The contract did not name the arbitrators but provided for their selection in the event that arbitration was demanded by either party.

Work under the contract progressed until August of 1939, when, dispute having arisen, plaintiff demanded arbitration of five issues. An arbitration resulted, the three arbitrators having been selected pursuant to the contract. Defendant objected to any arbitration on the grounds that there was "no foundation laid for arbitration" and that four of the stated issues were "not matters proper for arbitration" under the specifications.

Notwithstanding such objection, there was a completed arbitration with an award to plaintiff for the recovery of which this action is brought. All matters designated in plaintiff's demand "were fully tried and submitted to the arbitrators." So, we consider that there was no revocation of the agreement to arbitrate.

1. There is much argument whether this arbitration was intended to be under statute or common law. If the former, the award is summarily reviewable and enforceable under 2 Mason's Minn.St.1927, § 9516, rather than by suit on the award. But if the proceeding was under the common law, this action lies on the award. From the complaint, we have difficulty in saying what was the original intention. On that point the contract is not clear. There is material for argument either way. But some months after the contract was signed came the submission. It was executed by a full hearing before the arbitrators and their decision. The decisive thing is that in the submission, hearing, and award, the parties intended and accomplished what was a common-law arbitration. The agreement for arbitration and the proceedings in pursuance to it failed in so many respects to meet the requirements for statutory arbitration under 2 Mason's Minn.St. 1927, § 9513 et seq., that it is impossible to suppose an intention to proceed thereunder. In what the parties did finally, as distinguished from what at the outset they agreed to do, there was plainly no thought of statutory, as distinguished from common-law, arbitration.

The statute authorizing arbitration, 2 Mason's Minn.St.1927, § 9513, declares "nothing herein shall preclude the arbitration of controversies according to the common law." So the case comes to just this: There was actual submission, full hearing and award. All was the action of competent parties. They got the result intended and for which they had the right to contract. Because of their competence and the lawful nature of both means and end, it would be sheer caprice for us to nullify the whole preceeding.

In Holdridge v. Stowell, 39 Minn. 360, 40 N.W. 259, it was held that where a controversy has been submitted to arbitrators and it is clear that a statutory arbitration was the thing intended, but the statute has not been obeyed, the proceeding cannot have effect as a common law submission. That proposition has had the best reconsideration of which we are capable.

This is a problem concerning which there has been much judicial disagreement. The then leading cases on both sides were considered in the Holdridge case. The reasoning adopted in that decision was taken from Sargent v. Inhabitants of Hampden, 32 Me. 78. The gist of it is this: The report (of the arbitrators) "cannot be treated as an award at common law, without annulling the agreement of the parties, and substituting in its place a new and different contract." [39 Minn. 360, 40 N.W. 260.]

At that determinative point we disagree with the thesis that a completed arbitration, not complying with the applicable statute, cannot be sustained under the common law, where, as here, the statute so plainly preserves the common-law right of arbitration. Our deferential submission is that even though the initial agreement of the parties contemplated a statutory arbitration, they have not thereby lost their right later to proceed under the common law.

So, even though first intention was to stick to the statute, if later they have set up a common-law arbitration, the parties themselves have annulled their first agreement for a statutory proceeding. Their own effective action has substituted one at common law. We just cannot discover why we have any right to thwart such a legitimate purpose so lawfully accomplished. Insofar as Holdridge v. Stowell, supra, runs counter to the foregoing, it is overruled.

2. The question has been raised whether the determinative contract, insofar as it provides for arbitration of all disputes, is void as against public policy. Possibly by a restrictive construction of the provision for arbitration, we might avoid decision of the question of law. We elect not to do so.

The historical and only basis for the opinion that executory agreements to arbitrate all issues to arise under a contract are void, as against public policy, is open to serious question. There is eminent authority (Lord Campbell, in Scott v. Avery, 25 L. J. [N. S. Exch.] 308), that the rule was the product of judicial jealousy rather than judicial reasoning. He said that it arose in the time when "the emoluments of the Judges depended mainly, or almost entirely, upon fees." In those days they had no fixed salary and so "there was great competition to get as much as possible of litigation into Westminster Hall, and a great scramble * * * for the division of the spoil." In consequence, "they had great jealousy of arbitrations * * *. Therefore they said that the Courts ought not to be ousted of their jurisdiction, and that it was contrary to the policy of the law to do so."

To that doctrine, its questionable origin aside, there are two destructive objections:

First, there appears never to have been any factual basis for holding that an agreement to arbitrate "ousted" jurisdiction. It has no effect upon the jurisdiction of any court. Arbitration simply removes a controversy from the arena of litigation. It is no more an ouster of judicial jurisdiction than is compromise and settlement or that peculiar offspring of legal ingenuity known as the covenant not to sue. Each disposes of issues without litigation. One no more than the other ousts the courts of jurisdiction. The right to a jury trial, even in a criminal case, may be waived. So, also, may the right to litigate be waived. Such waiver may be the result of contract or unilateral action.

"The decision by arbitration is the decision of a tribunal of the parties' own choice and erection." Daniels v. Willis, 7 Minn. 374, 7 Gil. 295, 303. The tribunal is one that they have a legal right to erect. That being so, what self-justification can judges assert for nullifying such rightful choice? In the field of industry, a chorus of deserved derision would silence declaration that a collective bargaining agreement for arbitration of future issues was violative of public policy.

Second, if there ever was public policy against agreements to arbitrate, it has disappeared. Now, the policy of this state, as declared by the legislature, Mason's Minn. St.1927, § 9513, et seq., and applied by this court, Daniels v. Willis, supra, and Larson v. Nygaard, 148 Minn. 104, 108, 180 N.W. 1002, favors arbitration.

Public policy, where the legislature has spoken, is what it has declared that policy to be. So far as the question of policy is concerned, our statute settles the matter. It not only establishes the process of statutory, but confirms that of common-law, arbitration.

Here again our conclusion opposes that of many earlier decisions of this court. Insofar as they have ruled that a general agreement to arbitrate all differences to arise under a contract is contrary to public policy and therefore void, they are overruled. They include: Gasser v. Sun Fire Office, 42 Minn. 315, 44 N.W. 252; Whitney v. National Masonic Acc. Ass'n, 52 Minn. 378, 54 N.W. 184; Aaberg v. Minnesota Commercial Men's Ass'n, 152 Minn. 478, 189 N.W. 434; Abramowitz v. Continental Ins. Co., 170 Minn. 215, 212 N. W. 449; Glidden Co. v. Retail Hardware Mut. Fire Ins. Co., 181 Minn. 518, 233 N. W. 310, 77 A.L.R. 616. They are disapproved notwithstanding their accord with a prevailing view of decision law elsewhere. Restatement, Contracts, § 551.

For this departure from a doctrine of long standing, we make no apology. To us, the reasons assigned are so compelling as to allow no other course. It is enough that the legislature has declared for arbitration, both statutory and common law. That fixes the policy of this state for, rather than against, arbitration. The apology should be rather for the regrettable fact that our decision law did not promptly reflect the legislative declaration.

3. No rights of property involved, nor rule of practice, the American doctrine of stare decisis is guiding policy, not inflexible rule.¹ 14 Am.Jur., Courts, § 124, et seq. It is no shield for plain error. Neither does it...