Zelle v. Chicago & N. W. R. Co.

• Decision Date: 02 July 1954
• Docket Number: No. 36303,36303
• Citation: 242 Minn. 439,65 N.W.2d 583
• Parties: ZELLE et al. v. CHICAGO & N.W.R. CO.
• Court: Minnesota Supreme Court

Page 583

65 N.W.2d 583

242 Minn. 439

ZELLE et al. v. CHICAGO & N.W.R. CO.

No. 36303.

Supreme Court of Minnesota.

July 2, 1954.

Syllabus by the Court.

1. Minnesota arbitration Act, M.S.A. c. 572, plainly preserves the common-law right of arbitration, and if the parties to an arbitration agreement have by their own action substituted a common-law arbitration for one within the terms of the statute, that agreement will be given effect.

2. Arbitrators derive their powers from the parties, and if the parties by their agreement do not insist that the applicable law shall govern the decision on the facts, the arbitrators may decide the dispute according to their own notion of justice without regard to the applicable law, and the parties are bound thereby.

3. It is not necessary that the demands arising from a controversy between parties which are to be submitted to arbitration be in the same specific form as required in a pleading. The only requirement is that the demands be sufficiently described as to be identifiable either from the terms of the contractual provision or with the aid of parol evidence if that be necessary.

4. The matter of the required approval by the Interstate Commerce Commission of any revision of a pooling agreement arrived at pursuant to an arbitration award is not before a state court which is concerned only with the validity and interpretation of an arbitration clause in such agreement.

5. Any arbitration award made within the scope of the authority of the arbitrators becomes a part of the contract which the parties voluntarily assented to on execution and the parties are bound thereby.

Warren Newcome, Gerald F. Fristensky, George H. Henke, St. Paul, Nye F. Morehouse, Chicago, Ill., of counsel, for appellant.

James E. Dorsey, Donald West, and Dorsey, Colman, Barker, Scott & Barber, Minneapolis, William J. Quinn, Minneapolis, for respondents.

NELSON, Justice.

The present action is for a declaratory judgment that the alternative remedy provided for by the parties in a pooling agreement voluntarily entered into is a valid remedy. It is not an action for specific performance. We may for all necessary purposes herein refer to plaintiffs-respondents as the Wisconsin Central and to defendant-appellant as the North Western. The Wisconsin Central and the North Western have separate lines serving the mines on the Gogebic Iron Range of upper Wisconsin and Michigan, extending from the mines to their separate ore docks at Ashland, Wisconsin, on Lake Superior. The North Western has another line extending from said mines to ore docks at Escanaba, Michigan, on Lake Michigan. The Wisconsin Central has no line running between the mines and Escanaba.

Prior to the year 1934 the ore traffic between the Gogebic Iron Range and Ashland, Wisconsin, was handled separately by each competing railroad without any plan or voluntary agreement between them with respect to the traffic. But by agreement bearing date March 26, 1934, the Wisconsin Central and the North Western voluntarily entered into a pooling agreement whereby the iron ore tonnage transported from the Gogebic Iron Range to their respective Ashland ore docks was to be pooled and revenues divided with the Wisconsin Central receiving 31 percent and the North Western 69 percent thereof. The agreement further provided for the parties to furnish crews and equipment in accordance with the pool percentages. The laborschedule agreement entered into between the Wisconsin Central and the North Western and the employees provided that labor was also to be distributed according to the percentages of the pooling agreement. The latter agreement was entered into for a term of 99 years. It contained no cancellation clause, short term or otherwise, except upon default.

The pooling agreement did, however, provide for revision in the event of changed circumstances. Section 4 of the agreement, which provides the method for revision, reads as follows:

'4. This agreement is based upon the assumption that the principal movement of ore from the Range will be to Ashland docks, and only such ore movement is to be pooled and divided, but if at any time ore shall move from the Range to other points in such quantities as to make this agreement inequitable, or if economical and efficient service shall require the use of some different or additional lines of railroad and facilities of the parties, or extensions thereof, and different routing of ore than herein provided, this agreement shall be revised, upon the request of either party hereto, to the extent made necessary by changed conditions. If the parties are unable to agree upon a proper revision, the matter shall be submitted to arbitration as hereinafter provided.'

Since any revision of the pooling agreement shall by the terms of § 4 thereof be by submission to arbitration, we must consider § 75 of the agreement which sets up the arbitration machinery or mechanics to be used if and when the parties disagree giving rise to a demand for arbitration. The first sentence of § 75 reads as follows:

'75. Should the North Western and Wisconsin Central disagree upon any question as to the true construction of any provision in this contract or concerning any violation of any such provision, such question shall be submitted to the arbitrament of three (3) disinterested persons familiar with such business and experienced in railway management.' ¹

Section 75 provides that the award in arbitration shall be made in writing after the parties have been heard and that the same, when signed by two or more of the arbitrators, shall be final, binding, and conclusive upon the parties, subject to the approval of the Interstate Commerce Commission if required by law; and that if either the North Western or Wisconsin Central shall refuse to perform any award so approved by the Interstate Commerce Commission, the adverse party may enforce the same by apt proceedings in any court of law or equity.

The arrangement constituting the pooling agreement was assented to by all the carriers involved when entered into and thereafter approved by the Interstate Commerce Commission for the term of 99 years. See 201 I.C.C. 13, 14, as to approval under the Interstate Commerce Act, 41 Stat. 480, 49 U.S.C.A. § 5(1).

Prior to the year 1934, as far as the record discloses, all of the ore mined on the Gogebic Iron Range moved to the ore docks at Ashland, Wisconsin, except for a small or very limited amount which was moved to the ore docks at Escanaba, Michigan, over the North Western line. It seems quite clear that this fact was recognized in the pooling agreement. Since the year 1950, however, conditions have changed and there has been a heavy movement of ore shipments over the North Western line to its Escanaba ore docks. In the years 1951 and 1952 the Escanaba shipments were 30 percent and 34 percent respectively of the total ore movement from the Gogebic Range, while as of the date the agreement was entered into and prior thereto such ore movement to Escanaba, Michigan, constituted only a fraction of one percent of the total ore moved.

The Wisconsin Central claims that this unexpected change in the movement of ore since 1950 between Ashland, Wisconsin, and Escanaba, Michigan, has been in such quantities as to make the pooling agreement inequitable. It further contends that if it were not for the agreement the Wisconsin Central would, in all probability, under competitive conditions successfully solicit and transport to Ashland approximately 31 percent of the total movement from the range instead of only 31 percent of the reduced Ashland movement which now amounts to only approximately 21 percent of the total movement. The Wisconsin Central does not assert that there is anything improper in this movement or that the North Western should or could have refused to transport this ore to Escanaba, but it claims that present ore movements make the pooling agreement inequitable and therefore a revision is required under § 4 thereof by voluntary negotiation and if such negotiations are unsuccessful then by arbitration since the parties have been unable to agree upon a proper revision.

It appears that negotiations finally proved unsuccessful and that in March of 1953 the Wisconsin Central demanded arbitration. Subsequent proceedings under the declaratory judgments act, M.S.A. § 555.01 et seq., brought the matter on for hearing in the district court below. After each party had been heard and each party had moved for an order for summary judgment, the motion of the Wisconsin Central was granted and an order entered declaring the arbitration provisions of the agreement valid and enforceable and further ordering that the parties forthwith proceed to take such action as is required to carry plaintiffs' demand for arbitration through to completion. Judgment was entered pursuant thereto on November 20, 1953. The North Western appeals from the judgment.

It is established beyond dispute that only the ore transported to Ashland, Wisconsin, is pooled and that what the Wisconsin Central seeks is a revision of the Ashland pool because it claims that a very substantial and unprecedented Escanaba ore movement has created an inequity to its detriment. The Wisconsin Central does not claim a 'vested right' or any proprietary right in any Gogebic ore shipment. Its claim is that the pooling agreement was entered into upon the assumption that the principal movement of ore from the Gogebic Range would continue to be to the docks at Ashland and that, because of that fact and because of the 99-year term of the contract and the absence of any cancellation provision except upon default, the parties included in the agreement a provision for its revision if at any time during its 99-year term ore should move to other points in such quantities as to make the agreement inequitable. It is on this contractual provision that the Wisconsin Central relies in making its demand for...