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Harsen v. Board of Education of Township of West Milford

Decided: January 31, 1975.

FREDERICK W. HARSEN AND GEORGE R. A. JOHNS, PARTNERS DOING BUSINESS AS AND TRADING UNDER THE FIRM NAME AND STYLE OF HARSEN & JOHNS, PLAINTIFFS,
v.
THE BOARD OF EDUCATION OF THE TOWNSHIP OF WEST MILFORD IN THE COUNTY OF PASSAIC, A SCHOOL DISTRICT, DEFENDANT



Doan, J.s.c.

Doan

Plaintiffs sue for entry of judgment on an arbitration award handed down June 12, 1974 in the amount of $42,015.04 plus fees totaling $197.27 to reimburse plaintiffs for sums previously advanced to the American Arbitration Association.

The following facts are uncontested. The parties on June 10, 1971 entered into a contract for architectural services to be rendered by plaintiffs to defendant regarding construction of a new school. Dispute arose between the parties over billings submitted by plaintiffs, and on March 26, 1973 plaintiffs instituted proceedings before the American Arbitration Association pursuant to Article 10 of the June 10, 1971 contract. That the board of education had specific statutory authority to enter into an agreement containing a provision for the submission of disputes and controversies for determination by arbitration is not disputed. N.J.S.A. 18A:11-2(a). Defendant submitted to the jurisdiction of the association, appeared, answered and counterclaimed.

A series of hearings, totaling seven full days, was held before a tribunal of arbitrators duly appointed by the association between October 30, 1973 and April 23, 1974, at which both sides had opportunity to present evidence, cross-examine parties and witnesses, and argue such legal matters as they deemed fit. There is no contention made by defendant that it was not given ample opportunity to be heard or that the arbitrators had no jurisdiction.

On June 12, 1974 the above-mentioned award in plaintiffs' favor, in the amount of $42,015.04, was handed down. This was $10,298.49 less than had been demanded by plaintiffs. It was also $23,546.62 greater than the $18,468.92, the admitted remainder of the funds authorized for the project by the school district's voters, creating, as will be seen, the prime issue to be resolved. Defendant's cross-demands were denied in toto. The award omitted to detail the reasoning supporting the decisions reached. No part of the award has been paid by defendant, despite its admission at the argument of being indebted to plaintiffs for said $18,468.92.

Plaintiffs filed this action July 23, 1974 within the statutory limitation period, and answer and counterclaim were filed August 21, 1974. The counterclaim seeks a declaration of the invalidity of the award and to have it set aside. Plaintiffs presently seek entry of summary judgment confirming the arbitrators' main award and entering judgment thereon plus interest from June 13, 1974, and the same as to the award for reimbursement of fees plus interest from June 15, 1974.

A few prefatory comments concerning the nature of arbitration and the role of the court therein are appropriate.

The ancient practice of arbitration [i]n its broad sense, * * * is a substitution, by consent of the parties, of another tribunal for the tribunal provided by the ordinary processes of law. The object of arbitration is the final disposition, in a speedy, inexpensive, expeditious, and perhaps less formal manner, of the controversial differences between the parties. "The submission * * * is the commission of the arbitrator. By force of it he becomes a judge, with absolute power over the things submitted to his judgment." (citations omitted) [ Carpenter v. Bloomer, 54 N.J. Super. 157, 162 (App. Div. 1959) citations omitted]

Cf. Local Union 560 v. Eazor Express, Inc., 95 N.J. Super. 219, 227 (App. Div. 1967). Submission to arbitration is contractual, the parties being bound by the arbitration only to the extent they have so agreed. Wm. J. Burns, Inc.

v. N.J. Guards Union, 64 N.J. Super. 301, 307 (App. Div. 1960). Likewise, the scope of the arbitrators' jurisdiction and authority is delineated by the terms of the parties' agreement, Wm. J. Burns, supra, and the arbitrator may not rewrite contract terms for the parties. Cf. Belardinelli v. Werner Continental, Inc., 128 N.J. Super. 1, 6-7, 11 (App. Div. 1974).

Where properly functioning within the agreement terms, however, "the essence of arbitration is, of course, that the arbitrators decide both the facts and the law," Daly v. Komline-Sanderson Engineering Corp., 40 N.J. 175, 178 (1963); Carpenter v. Bloomer, supra. The forum chosen by the parties operates as a trial court, and judicial review of the awards rendered by it is extremely narrow and restricted to ascertaining whether one of the situations set forth in N.J.S.A. 2A:24-8 exists. Daly v. Komline-Sanderson Engineering Corp., supra; Local Union 560 v. Eazor Express, Inc., supra.

N.J.S.A. 2A:24-8 pertinently reads:

The court shall vacate the award in any of the following cases:

a. Where the award was procured by corruption, fraud or undue means;

b. Where there was either evident partiality or corruption in the arbitrators, or any thereof * * *;

d. Where the arbitrators exceeded or so imperfectly executed their powers that a mutual, final and definite award upon the subject matter was not made.

Clearly, the arbitrators' factual determinations concerning the merits of the controversy are not reviewable as such by the court. Further, only issues of fact bearing on a statutory criteria will suffice for withholding of summary judgment.

The term "undue means" in N.J.S.A. 2A:24-8(a) has been defined by decisional law to include

Previous case law triggered this rule only where the arbitrator made clear he intended to decide the case according to the law, rather than exercise his right to ignore it and decide the matter on his own view of the equities, cf. Anco Products v. T.V. Products Corp., 23 N.J. Super. 116, 123 (App. Div. 1952), and exempted from its coverage situations where "the applicable rule of law is doubtful," Collingswood Hosiery Mills v. Amer., etc., Workers, 31 N.J. Super. 466, 471 (App. Div. 1954). The recent case of Brooks v. Pa. Mfrs. Ass'n Ins. Co., 121 N.J. Super. 51, 54-55 (App. Div. 1972), mod. on other grounds 62 N.J. 583 (1973), has, however, worked changes therein. The Appellate Division there found an intention on the part of the arbitrator to decide the case in accordance with applicable law merely because "there is nothing in the record below to suggest otherwise," creating a presumption in favor of such intent's existence absent affirmative indication to the contrary. Furthermore, the question of law was a novel one in this State, no prior case on it previously having been reported. The court unhesitatingly undertook review of the award's propriety:

Thus, the issue to be considered is whether the arbitrator as a matter of law, mistakenly allowed a credit for the present value of a prospective future award in a pending workman's compensation action. 121 N.J. Super., at 55.

The Supreme Court's failure to even mention the issue of reviewability leads one to the conclusion that where no affirmative indication exists that the arbitrator was not utilizing the applicable law, or attempting to, and the legal question is res nova in this State, the court reviewing the award is to entertain and decide the merits of the legal question involved and evaluate the award's legitimacy against the resolution thereof.

In determining the validity of an award when challenged, however, it must be borne in mind that "once an award is made, there should be much reluctance at interfering with it. So far as may be, an arbitration should be an end to litigation, not the beginning of it," Collingswood Hosiery Mills v. Amer., etc., Workers, supra, 31 N.J. Super. at 473. "In line with the design of the parties to have their disputes speedily, economically, and finally settled, every intendment is indulged in favor of the award and it is subject to impeachment only in a clear case", Carpenter v. Bloomer, supra, 54 N.J. Super. at 168.

Turning to the case at bar, defendant's pleadings, supporting papers and oral argument reveal four grounds which allegedly require nonconfirmation and vacation of the award. These are: (a) evident partiality on the part of the arbitrators; (b) the failure of the arbitrators to state the reasoning behind the award; (c) the arbitrators exceeded their power by rewriting the contract, and (d) the award is contrary to law in that it will result in defendant making payments on account of the project, which is the subject matter of the disputed contract, in excess of the funds authorized for it by the district's voters. These will be considered in the above sequence.

I

The partiality question is easily disposed of since it is presented as a "mere sworn conclusion of ultimate facts without basis or supporting affidavits," and thus insufficient to withstand a motion for summary judgment. James Talcott, Inc. v. Shulman, 82 N.J. Super. 438, 443 (App. Div. 1964). This is especially so in light of the arbitrators trimming plaintiffs' demands by over $10,000 and the rule that "every intendment favors the validity of ...


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