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Ench Equipment Corp. v. Enkay Foods Inc.

Decided: February 4, 1957.


Clapp, Jayne and Francis. The opinion of the court was delivered by Clapp, S.j.a.d.


Defendant appeals from two orders of the Superior Court, Chancery Division. But we are concerned primarily with one of them, an order vacating a prior order dated November 2, 1955.

The order of November 2, 1955, entered pursuant to a stipulation and an agreement supplementary thereto, directed three persons named therein to submit certain matters to arbitration. In conformity with the stipulation, two arbitrators were chosen, and they in turn appointed a third as umpire. Shortly thereafter, and before making any award, the three arbitrators, in effect, resigned; they wrote the Chancery Division saying they were "turning this matter back to the courts." Thereupon the then attorneys for the parties made an attempt, without success, to settle all matters in dispute; that failing, the defendant appointed a new arbitrator and called upon the plaintiffs to do likewise. Plaintiffs refused. Instead they moved to vacate the order of November 2, 1955. Defendant countered with a motion to compel arbitration in accordance with the parties' stipulation and agreement above mentioned.

The Chancery Division granted plaintiffs' motion and vacated the order to arbitrate. The plaintiffs now rely, in part (as did the Chancery Division), upon the fact that the stipulation and agreement contain no provision requiring a resubmission of the controversy to arbitration if the arbitrators fail to make an award. But a very similar contention was advanced and rejected in Public Utility Construction and Gas Appliance Workers, etc., v. Public Service Electric & Gas Co. , 35 N.J. Super. 414, 419-421 (App. Div. 1955), certification denied, 19 N.J. 333 (1955), 11

Rutg. L. Rev. 191 (1956). In support of their argument, plaintiffs cite Goerke Kirch Co. v. Goerke Kirch Holding Co. , 118 N.J. Eq. 1 (E. & A. 1935); cf. Goerke Kirch Holding Co. v. Union County Circuit Court , 14 N.J. Misc. 624 (Sup. Ct. 1934), affirmed Goerke Kirch Holding Co. v. Goerke Kirch Co. , 116 N.J.L. 427 (E. & A. 1936). However, in Public Utility Workers the court distinguished the case on the ground that it was of the very essence of the arbitration agreement in Goerke Kirch Co. , that the award be made by a specified date. It followed that after that date had passed, the right to compel arbitration ceased. Here though the parties did agree that "requests will be made of the arbitrators to make a speedy determination" and further, that "the arbitration shall begin and carry on as expeditiously as possible," still no mandatory time limit was imposed upon the arbitrators. Accordingly, Goerke Kirch Co. is not controlling on the issues presented.

It is true that in Public Utility Workers -- which was a case where an award was vacated -- the decision rests upon a particular statutory provision, namely, the following (N.J.S. 2 A:24-8):

"When an award is vacated and the time within which the agreement required the award to be made has not expired, the court may, in its discretion, direct a rehearing by the arbitrators."

In the instant case there has been no award, and hence the statute is inapplicable. However, the whole arbitration act aims to make an arbitration agreement a binding instrument (N.J.S. 2 A:24-1) and also to authorize the court to effectuate it, and hence to compel arbitration under the circumstances presented. Indeed, N.J.S. 2 A:24-3 by its terms empowers the court to "direct that the arbitration proceed" where one of the parties fails to perform the agreement to arbitrate.

It must be borne in mind that the very design of a contract of arbitration is to secure an effective award from the arbitrators to be appointed. See Public Utility Workers , 35 N.J. Super. , at page 420. Where arbitrators resign before

making that award, the contract remains unsatisfied. Accordingly, in order to effectuate the agreement, the court may on their resignation require a matter to be submitted to new arbitrators.

The various provisions of the Arbitration Act lend themselves to this view. Thus, for example, N.J.S. 2 A:24-8 enables a court to vacate an award and order a rehearing by the arbitrators where they "imperfectly executed their powers." With that provision in view, are we to say that the Arbitration Act envisages an end to arbitration when the arbitrators decline to execute their powers? Does the act contemplate that the whole arbitration process is to be frustrated by the resignation of the arbitrators? The construction we have put upon the act, we think, is ...

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