Pond v. Harris , 113 Mass. 114 ( 1873 )

Devens, J.^*

The law is now settled that the mutual promises of the parties in an agreement for arbitration are sufficient consideration each for the other, and that whichever party, without right therefor, revokes the'authority of or prevents the arbitrators from acting, is liable to an action, even if he is not bound under a penalty. Charnley v. Winstanley, 5 East, 266. Marsh v. Bulteel, 5 B. & Ald. 507. Warburton v. Storr, 4 B. & C. 103. Skee v. Coxon, 10 B. & C. 483. Rowley v. Young, 3 Day, 118. Hawley v. Hodge, 7 Vt. 237.

If an action may be maintained for revocation of an agreement of submission, the next inquiry is whether the defendant was justified in thus revoking it. The report finds that the agreement was entered into by the parties under their hands and seals; that the conditions preliminary to a hearing were complied with by the plaintiff; and that immediately after the service of notice of an appointment by the arbitrators of a time of hearing, the defendant revoked the agreement of submission. It appears further, that the plaintiff thought that certain claims which he originally had against the defendant and the firm of which he was a member, and which claims passed to the plaintiff’s assignee upon his insolvency, had been bought by one Daniel E. Pond, from the assignee, and been sold to the plaintiff by said Daniel E. It appeared that the defendant was aware that the plaintiff had in some way obtained a title to any claims of his estate against defendant or his firm which had not before been settled and disposed of, if any such there were, and that it had been arranged between the parties that these claims should be settled by the arbitration agreed upon. Daniel E. Pond had in fact assigned and conveyed to the plaintiff all his claims against the defendant and his firm derived by him from the conveyance .of the plaintiff’s assignee, but there was a verbal agreement between him and the plaintiff that the plaintiff should pay over to Daniel E. whatever he might collect upon them, after deducting his expenses and charges for his trouble. Of this verbal agreement the defendant claimed to have been ignorant. Besides the plaintiff’s claim for damages on account of the violation of this agreement for submission, the present action embraced these disputed claims, and the case having been referred to an auditor by the Superior Court, nothing was found by him to be due except upon the claim for damages by reason of this revocation, upon which he found for the plaintiff.

At the trial in the Superior Court, the case was submitted to the jury upon the auditor’s report; and as the defendant claimed that he was justified in revoking the submission, because the plaintiff had concealed the fact that these claims belonged to Daniel E. Pond and that he was acting for Daniel E. Pond and not for himself in this agreement for reference, (which point the auditor had found against the defendant,) the case was submitted by the court to the jury, upon the agreement of parties, upon three inquiries. By the answers to these it is established that the plaintiff did not, before the revocation of the agreement, inform Daniel L. Harris (who was the defendant’s agent in making the negotiations which resulted in the deed of submission) that he held said claims in trust for Daniel E. Pond, or that Daniel E. Pond was the owner thereof; and it is established that such trust and ownership was not made known to the defendant, and that Daniel L. Harris had no authority to negotiate any agreement for arbitration between plaintiff and defendant in relation to matters or claims not owned or held by the plaintiff in his own right. Upon the issues presented by these inquiries, the learned judge who presided at the trial ruled that the burden of proof was upon the plaintiff, but as in our view the facts established by these answers are not material in showing that the defendant was justified in revoking the agreement, it is not important to consider whether this ruling was correct.

That the title to these claims was in the plaintiff was undisputed, and that they were to form a part or the whole of the subjects upon which the referees were to pass ,was known to the defendant. His claim that he was justified in revoking the agreement for reference, because the plaintiff had failed to inform him that if he recovered anything upon them, after payment of the expenses and for his own trouble, it was to be paid over to Daniel E. Pond, is one which cannot be sustained. If the plaintiff had title to the claims, and was authorized to deal with them'as his own, to convey or discharge them, (all which the conveyance from Daniel E. Pond enabled him to do,) what he did or was to do thereafter with the proceeds was a matter of no concern to the defendant, unless he made it so by some inquiry. He knew through what source the plaintiff must have obtained control of the claims. If he had any desire to learn whether any one else had any interest in the avails of them, before he can complain of the plaintiff for concealing any matter in relation thereto, he should at least show that he endeavored to be informed on the subject. The plaintiff had no reason, so far as the report shows, to think that it was a question of the least interest to defendant whether the plaintiff was to put the proceeds into his own pocket or pay them over to some one else. So far as appears, the defendant was not in the slightest degree .njured by his want of knowledge of this fact, or his defence in any way impaired or abridged thereby.

The case of Winchester v. Howard, 97 Mass. 303, cited by the defendant, does not sustain his view of the present case. In that case it was in evidence that in answer to inquiries of the defendant whether the oxen he was selling were the property of the plaintiffs, their agent, who was engaged in selling them, represented that they were not. The defendant, who offered to show that he had not for many years dealt and did not wish to deal with the plaintiffs, was thereby induced to purchase the oxen upon the agreement that he might return them “ if he did not find things ” as the agent told him. On hearing that they were the property of the plaintiffs, the defendant returned them. It was held that, inasmuch as he had the right to elect with whom he would deal, he was not responsible to the plaintiffs. If, however, he had bought of the agent without inquiry as to the ownership of the cattle, there could have been no doubt of his responsibility to the principal.

The defendant contends that the plaintiff had only a verbal authority from Daniel E. Pond to make the agreement; but this is a matter of no importance. Daniel E. had conveyed his whole title in the claims to the plaintiff, who could transfer, discharge and dispose of them in any way, and, under these circumstances, needed, so far as the defendant is concerned, no further authority of any kind in reference to the arbitration. It would have been impossible for Daniel E. to have broken up the agreement of submission made by the plaintiff, merely because he had a right to make him account for the net proceeds.

We are, therefore, of opinion that the plaintiff is entitled to recover upon the facts stated in the report, and are next, to consider by what rule his damages are to be assessed. It is argued that, as it is found by the auditor’s report and by the jury that there was nothing due upon these claims, the plaintiff is entitled to no damages, or at most to but nominal damages, on account of the revocation, and that it must be deemed that the arbitrators would have come to the result at which the jury have arrived. But the injury that he has sustained by the wrongful act of the defendant is that he has been deprived of his right to submit the claims to the tribunal which the parties had agreed upon. The expenses to which he has been subjected by reason of his necessary preparation for a trial before the arbitrators, on account of his own loss of time and trouble, and in employing counsel, taking depositions, payments to witnesses, arbitrators, and expenditures of a similar nature, are proper matters of claim. He is entitled to recover these so far only as he has lost the benefit of them by the act of the defendant. So far as these preparations and expenditures were available for the trial of his cause before the ordinary legal tribunals to which the revocation of the defendant compelled him to resort, he i not entitled to recover, as he has had or might have had the benefit of them. Ordinarily, it is true, as the defendant argues, counsel fees are not recoverable ; but if the plaintiff has been deprived, by the wrongful act of the defendant, of the benefit of those services of counsel for which he had incurred expense, upon the former agreement for arbitration, inasmuch as they were expenditures he might properly incur, so far as they were suitable, there is no reason why he should not recover them in this action. The principles suggested as those upon which his damages are to be computed, have been decided to be the proper ones in several cases.

In Hawley v. Hodge, 7 Vt. 237, the plaintiff had travelled four hundred miles’ to attend a session of the arbitrators; had employed and paid counsel, and had paid the arbitrator; and it was held, in an action by him for damages, that where a party revokes a submission, he must pay all damages occasioned thereby, including the cost and expenses which the party had been subjected to in preparing for trial, to which he would not have been subjected but for the submission, and which he could not recover in any other way. See also Rowley v. Young, 3 Day. 118; Blaisdell v. Blaisdell, 14 N. H. 78.

For the trouble and expense which the plaintiff had been at in making the contract, he would not, however, be entitled to re-rover ; his damages must be only for the breach of the contract.

The judgment for the defendant is therefore to be set aside, and judgment ordered for the plaintiff; and as it is impossible for us to determine by the report upon what principles the auditor assessed the damages, the amount for which such judgment is to be rendered is to be determined, upon the principles above indicated, by an assessor to be appointed by the Superior Court.

Judgment for the plaintiff.

* At the argument of this and the remaining cases at this term, Devens, J., was present, and Ames, J., absent, unless otherwise stated.