Nelson v. Reinhart , 41 Nev. 69 ( 1917 )

By the Court,

McCarran, C. J.

(after stating the facts):

1. As to the contention of appellant that by entering into the agreement to submit the controversy to arbitration the case was thereby discontinued and dismissed, such is untenable in our judgment. It is not to say that the contention of appellant in this respect is without support in the way of authority, but it would appear to us that the better rule is that the intention of the parties as made manifest by their acts and conduct, together with their intention as set forth in their agreement, must govern in determining the question as to whether or not the case was to be discontinued or dismissed. Where, as here, the submission provides that judgment may be entered on the report or award, such has been regarded as keeping the suit alive for such purpose. (Ryan v. Dougherty, 30 Cal. 218.) Where, from the agreement for submission or from the acts or conduct of the parties, it appears that they did not intend that the cause should be discontinued, no discontinuance or dismissal will be -presumed. (Jacoby v. Johnston, 1 Hun, 242.) See, also, Lawson’s Rights and Remedies, sec. 3322.

In the case of Wilkinson v. Prichard, 145 Iowa, 65, 123 N. W. 964, Ann. Cas. 1912a, 1259, this very question was considered. There, as here, the court had before it a stipulation providing for the submission of the cause to arbitration while the case was pending at issue in the trial court.

The Supreme Court of Iowa said:

"Where such an agreement has been entered into, and also that judgment shall be entered by the court in which the action is pending, the only fair inference is that the parties intended that the action be continued for the filing of the award and the entry of judgment thereon. True, there was no order or reference, nor was there any entry of dismissal. For all that appeared of record in the case, it was pending up to the entry of the judgment on the award, and both parties so treated it until the final hearing. ”

Holding to the effect that where an agreement is entered by the parties to a pending suit directing that judgment may be entered pursuant to arbitration and award, neither the submission nor the award operates as a discontinuance of the suit. (Callanan v. Port Huron Ry. Co., 61 Mich. 15, 27 N. W. 718; Wilson v. Williams, 66 Barb. 209.)

In the case of Hearne v. Brown, 67 Me. 156, it was held that submission to arbitration would not be treated as a discontinuance of a pending suit where by necesssary implication the case is to be retained on the docket until the arbitration is perfected by the award.

The courts generally have held that where a stipulation contains a provision by way of agreement that judgment may be entered on the award, it will be inferred that the parties to the agreement intended thereby to prevent a discontinuance. (Hearne v. Brown, supra; Wilkinson v. Prichard, supra; Monroe Bank v. Widner, 11 Paige, 529, 43 Am. Dec. 768; Wilson v. Williams, supra; Rogers v. Nall, 6 Humph. 29; McCarthy v. Swan, 145 Mass. 471, 14 N. E. 635.)

A mere unexecuted agreement to submit to arbitration, made during the pendency of a suit, has been held as in no wise operating against the further progress of the pending litigation. (Wright v. Evans, 53 Ala. 108.) In a jurisdiction having a statute relating to arbitration, and in an instance where the partiés entered into an agreement to arbitrate, which agreement did not conform to the statute, it was held that the agreement to arbitrate did not operate as a discontinuance, nor did it divest the court of jurisdiction. (Cox v. Giddings, 9 Tex. 44.)

To the same effect will be 'found the cases of Nettleton v. Gridley, 21 Conn. 531, 56 Am. Dec. 378, and Dinsmore v. Hanson, 48 N. H. 413. The reasoning in the case of Dinsmore v. Hanson, supra, is especially applicable to the question here presented under the circumstances of the case.

Commentators in viewing the question here dwelt upon have declared that the majority rule, that is, the rule supported by the majority of the decisions, is to the effect that a ground for the discontinuance of a pending suit is furnished by an agreement whereby the subject-matter of the action is submitted to arbitration. The rule in English courts, whatever it-may have been under the very early practice, was reframed at a later date, and we find it expressed by a text-writer on the subject as follows:

"It was formerly holden that a reference to arbitration was an implied stay of proceedings. But, in the begining of Queen Anne’s time, a rule was made that no reference whatsoever, of any cause depending in the King’s Bench, should stay the proceedings, unless it was expressed in the rule of reference, to be agreed, and all proceedings in this court should be stayed; and it has been frequently decided that the agreement to refer all matters in difference to arbitration is not sufficient to oust the courts of law or equity of their jurisdiction. When a reference is pending, and it has been agreed that it shall operate as a stay of proceedings, it may be made the subject of an application to the court for staying the proceedings until an award be made.” (Tidd on Practice of the Courts of King’s Bench and Common Pleas, 821.)

As will be seen by reference to the authorities we have cited, a strong line of decisions, and indeed, as we view it, the better reason, supports the rule that where it is expressly declared in or may be inferred from the agreement to refer that the parties did not intend, by referring their differences to arbitration, to effect a discontinuance or dismissal of the pending suit, such reference will not be construed by the court to effect a discontinuance or ouster of jurisdiction. Whatever diversity of opinion there may be as to the proper rule applicable to cases where the agreement to refer makes no mention as to the entry of judgment, the great trend of opinion will be found to support the rule that where the agreement to refer contains a provision to the effect that judgment shall be entered in the pending suit pursuant to the arbitration, neither the submission nor the award operates as a discontinuance. (2 R. C. L. 360.)

2. The one central question here involved, and the most important, inasmuch as it entails a reversal of the order and judgment of the lower court, is the right and duty of that court to entertain a motion to relieve one of the parties of the effect of a stipulation duly entered into. The stipulation was one which provided for the entry of judgment following submission to arbitration. The suit being one at law, the court held that nothing less than an independent proceeding in equity could relieve the appellant of the effect of his stipulation. In this we must conclude the court erred.

In the case of Adams v. Hartzell, 18 N. D. 221, 119 N. W. 635, it appears that a stipulation was entered by the parties establishing an agreed statement of facts. The case being submitted upon this speculation, subsequently one of the parties gave notice of motion for an order permitting him to present further testimony in his objection. His motion was supported by affidavit. The court overruled objection and granted the motion. There the court held that while the action of the lower court was erroneous in relieving one party of the force and effect of the stipulation while the other remained bound, it declared, nevertheless, that under some circumstances such stipulation might be effected in the exercise of a wise discretion and additional evidence be received.

In the case of Gerdtzen v. Cockrell, 52 Minn. 501, 55 N. W. 58, it appears that the parties had stipulated the terms of a compromise and settlement of their mutual claims as involved in the action and authorized judgment to be entered in pursuance of such stipulation. The court held that it was within the power of the trial court to set aside such agreement and upon a proper showing place the parties in statu quo upon motion. Replying to the contention tliat the agreement and stipulation constituted a contract and therefore could not be. set aside summarily upon motion, but could only be determined by a proceeding in equity, the court said:

"The mere form of the instrument sought to be set aside is not, however, controlling. It was a step or proceeding in the cause, and determined the form and amount of the judgment and the final disposition of the case. The effect of the order in question here, as finally made, was to put the parties in statu quo, with leave to serve the amended answer. It left the parties free to proceed to a trial upon the merits of the controversy between them, but the proceedings was not a trial of the merits upon motion. It was in principle no different from the vacating.or setting aside of any order or stipulation in the action on the ground of mistake or other equitable ground.”

In the case of Butler v. Chamberlain, 66 Neb. 174, 92 N. W. 154, the Supreme Court of Nebraska had this same question before it. In that instance it involved the right of the trial court to relieve a party of a stipulation of fact claimed to have been made improvidently. The court, after a most lucid reasoning, said:

"Therefore it seems to us that the sole question is whether there was an abuse of discretion on the part of the trial court. We think there was. If plaintiff’s affidavit be true — and it stands uncontradicted — the stipulation stands in the way of a recovery by her of a substantial sum, justly due her, in her representative capacity. In the light of that affidavit, the stipulation was improvidently made, and should be set aside, since it does not appear that to do so would work any injustice to the defendant. ”

In the case of Keens v. Robertson, 46 Neb. 837, 65 N. W. 897, we find the Supreme Court of Nebraska again passing upon this question under conditions where the parties to a suit pending entered into a stipulation, and placed the same of record, that the decision in the case should be the same as that which might be rendered in another case then pending for trial in the same court. On motion of one of the parties, supported by affidavit, to vacate the agreement, the stipulation was set aside by the trial court. The court in determining the question referred approvingly to the cases of McClure v. Heirs of Sheek, 68 Tex. 426, 4 S. W. 552; Porter v. Holt, 73 Tex. 447, 11 S. W. 494, and Ward v. Clay, 82 Cal. 502, 23 Pac. 50.

In the case of Barry v. Mutual Life Ins. Co. of N. Y., 53 N. W. 536, the court of appeals had before it the question of the right, of the trial court in an action at law to relieve parties of the effect of a stipulation, made during the course of a trial, as to the entry of an order vital to the issue. The qourt said:

"It is not an unusual thing to relieve parties from stipulations made in the progress of the action; and courts have always regarded this as within their power, and the exercise of it is frequently necessary to promote justice and prevent wrong.”

In support of this conclusion, the court quoted the remark of Mr. Chief Justice Marshall (The Hiram, 1 Wheat. 440, 4 L. Ed. 131) as follows:

"If a judgment be confessed under a clear mistake, a court of law will set that judgment aside, if application be made * * * while the judgment is in its power.”

Continuing, the court said:

"Whether the causes assigned were sufficient to justify the court in the exercise of the power was exclusively for that court to determine; there certainly was not an entire absence of a foundation for the application. It is true, as urged by the appellants, that the stipulation was in the nature of a compact or agreement of the parties, and valid perse; but, like other compacts and agreements made in the progress of an action and affecting proceedings in it, it was liable to be dealt with summarily by the court, so long as the parties could be restored to the same condition in which they would have been if no agreement had been made. ”

In the case of McClure et al. v. Heirs of Sheek, 68 Tex. 426, 4 S. W. 552, the Supreme Court of Texas held to the effect that agreements of counsel in regard to the trial of a cause are not absolute and are not to be treated as contracts to be enforced under all circumstances. They may be set aside by the courts in the exercise of a sound discretion when their enforcement would result in serious injury to one of the parties and the other would not be prejudiced by such setting aside. In the case of Porter v. Holt, 73 Tex. 447, 11 S. W. 494, the same court, having before it a case involving a stipulation entered into by attorney yielding up by mistake a substantial defense to the action, held:

"The setting aside of such agreements is ordinarily in the discretion of the courts, and their action will not, as a general rule, be revised. But where the agreement involves something more than a mere matter of practice, and affects the substance of the cause of action or the character of the defense, and it appears that it has been entered into by counsel without a knowledge of the facts, and that its withdrawal will not operate to the prejudice of either party, the motion to set aside ceases to be a matter of mere discretion, and should be granted by the court. ”

To the same effect was the ruling in the case of Hancock v. Winans, 20 Tex. 320. In the case of Meldrum v. Kenefick, 15 S. D. 370, 89 N. W. 522, the court held to the effect that relieving parties from a stipulation is within the discretion of the court, and would not be reviewed unless such discretion were abused.

In the case of Vail v. Stone et al., 13 Iowa, 284, the Supreme Court of Iowa had before it a case involving a stipulation filed by attorney wherein the defendant in a suit for foreclosure of mortgage consented to the rendition of a decree for the amount due on the note and mortgage including interest and costs to be ascertained by the clerk of the district court. Subsequent to the filing of the agreement the defendant filed an answer setting up the payment to the plaintiff of the sum of $400, and that the contract sued on was usurious. The answer was stricken from the files upon the motion of the plaintiff and decree entered upon the judgment. While affirming the action of the lower court in this respect, the supreme court said:

" It is not questioned but that the parties may have such agreement withdrawn or stricken from the files, if it is made apparent to the court that it was obtained in an improper manner.”

How applicable this assertion of law may be to the matter here at bar can be learned only from a consideration of the evidence in support of fraud and misconduct of the arbitrators as asserted in the motion.

In the case of Northern Pacific Co. v. Barlow, 20 N. D. 197, Ann. Cas. 1912c, 768, the Supreme Court of North Dakota, in dealing with the question of a stipulation of fact entered by the parties during the course of a suit instituted for the purpose of quieting title to certain lands, held to the effect that it was proper for the trial court, in the exercise of sound judicial discretion and upon good cause shown and in furtherance of justice, to relieve the parties from the stipulation entered into in the course of a judicial proceeding where the application was seasonably made.

We find all of these cases holding in effect that such agreements are not to be regarded as contracts; and may be dealt with by the court upon a proper showing made within seasonable time; and where the showing is sufficient, the court, in the exercise of sound discretion, may relieve the parties of the effect.

The case of Ward v. Clay, 82 Cal. 502, 23 Pac. 50, referred to by the Supreme Court of Nebraska in the Keens-Robertson case; supra,' is especially illuminative of the subject. In that case Mr. Justice Vanclief, speaking for the Supreme Court of California, quoted approvingly from the decision of that court in the case of Richardson v. Musser, 54 Cal. 198, saying:

"There can be no doubt of the power of the trial court to relieve a party from the effects of a stipulation which admits as a fact that which is not true, if the application is made in proper time. ”

Continuing on the subj ect-, the court said: " The principal purpose of vesting the court with this discretionary power is to enable it 'to mold and direct its proceedings so as to dispose of cases upon their substantial merits, ’ when it can be done without injustice to either party, whether the obstruction to such a disposition of cases be a mistake of fact or a mistake as to the law, although it may be that the court should require a stronger showing to justify relief from the effect of a mistake in law than in case of a mistake as to matter of fact.”

The case of Ward v. Clay, supra, is again referred to approvingly by the Supreme Court of California in the case of Robinson v. Exempt Fire Co. of San Francisco, 103 Cal. 1, 36 Pac. 955, 24 L. R. A. 715, 42 Am. St. Rep. 93.

Mr. Black, in his work on Judgments, secs. 297, 303, 321, and 322, sanctions the proposition that it is within the power of the court to vacate a judgment unjustly, improperly, or fraudulently entered; that this power is a common-law power, inherent in the court and possessed by it .as a part of its necessary machinery, and can be exercised by it without statutory authority. See, also, Freeman on Judgments, sec. 99.

In the case of Mutual Life Ins. Co. v. O’Donnell, 146 N. Y. 275, 40 N. E. 787, 48 Am. St. Rep. 796, the Court of Appeals of New York, having before it the question of an order of the lower court bearing upon a stipulation entered during the course of a proceeding in foreclosure, held that the party entering such stipulation may obtain relief from the judgment upon a motion in the court wherein it was entered.

The case of Mutual Life Ins. Co. v. O’Donnell, supra, was cited approvingly by the Appellate Division of the Supreme Court of New York in the case of Potter et al. v. Rossiter et al., 109 App. Div. 737, 96 N. Y. Supp. 177.

In Ruling Case Law we find an assertion to the effect that the violation of a stipulation is regarded as a breach of contract for which a separate action will lie, but the court always has power to grant relief in a summary manner upon motion. This statement of the rule is amply supported by authority.

3. The motion 'against the entry of judgment filed by appellant in the lower court was supported to some extent by affidavits. It is made manifest that the court neither considered these nor entertained other evidence offered by the appellant. This being true, we do not now assume to determine as to the propriety of relieving appellant of the effect of the stipulation. Had the court received and considered the evidence in support of the motion, and after such consideration refused to set aside the stipulation, another and a different question would be presented here. There can, we think, be no doubt as to the right and power, in fact the duty of a trial court to entertain, and in the exercise of sound discretion to determine, a motion to vacate such a stipulation as that involved in the case at bar. On occasion when a trial court does entertain such a motion and after investigation renders its order or decision on the matter, a court of review, recognizing that the matter is one involving the discretionary powers of the lower court, would rarely disturb such an order or decision except when abuse of discretion is manifest. Without attempting to look into the evidence offered on the motion here, we deem it proper to observe that in matters of this character a granting of such motion where the court in furtherance of justice saw fit so to do would at most only place the parties in statu quo, so that the entire matter might be presented to the tribunal of their first choosing. We do not assume to determine that relief might not have been sought by the appellant through an independent action in equity, but that the motion could be entertained and determined, being one arising out of an action in course of progress, all phases of which, and especially the entry of judgment, were before the trial court, there can be no doubt. The stipulation, its validity, force, and effect were matters properly questionable by the court in which it was of record. If through the avenue of fraud this instrument became a nullity, it had no place in the suit pending, and a judgment entered pursuant thereto would have no more sanctity than the stipulation itself. To say that a trial court could not in furtherance of justice protect itself from entering such a judgment would be to shear the court of a most valuable and effective power.

The order appealed from is reversed, with instructions to the trial court to set aside the judgment and entertain the motion of the plaintiff.

Let the order issue accordingly.