Seward v. . City of Rochester

The answer to a single question will determine this appeal. The action was brought to recover specific damages, and an arbitration agreement was pleaded in bar. The trial court and the General Term pronounced that agreement no defense to the action, and while there was much of controversy over the inquiry which of the parties had prevented the arbitration the whole subject became immaterial upon the ruling finally adopted and upon which the judgment stands.

The plaintiff entered into a written agreement with the water commissioners of the defendant corporation. By the terms of that contract he granted to the city the right to lay iron pipes for the conveyance of water across his lands, and when occasion should require to alter, repair, replace, remove or add to such pipes, subject to the payment of any damage done thereby. The city paid to the plaintiff $350 for the right thus granted, and further covenanted to pay to him "a fair and just compensation for any damage" that might accrue "by the breaking, bursting or leakage of said water pipes, or any of them, or from any other cause." It was then agreed, so far as these possible and prospective damages were concerned, that if the parties could not agree upon the amount the damages should "be appraised and fixed by two disinterested persons, one to be selected by each party, and, in case they cannot agree, by an umpire to be selected by them, and the award of two of the three thus selected," it was declared should be "final and conclusive."

It seems to us quite clear that this agreement, properly construed, does not make the award of the arbitrators a condition precedent to the right of recovery. The grant itself was subject to any damage that might accrue, and if it was suffered the city covenanted to pay a just and fair compensation therefor. That covenant stands without limitation upon it. Not such sum as arbitrators might award, but a fair and just compensation for the injury sustained was what the city agreed to pay and the stipulation for an appraisal became a collateral covenant fixing a mode of ascertaining the amount already agreed to be paid.

The arbitration contract was executory, prospective and general. It looked forward to the possibilities of the future, and to subjects of controversy not then in existence, not certain to arise, but contemplated as possible contingencies. It related to and covered not merely such damages as sprang from the express stipulations of the contract, and which could only be recovered because of the covenant, but to damages arising from "any other cause." If, during the process of construction and before the pipes were all connected, the water was negligently or willfully turned into them; or if, after opening trenches for the pipe, the city negligently delayed the work of construction so that for a long and unreasonable period the plaintiff was obstructed in the use of his land, or if, in the process of construction, pipes of insufficient strength were carelessly used, or imperfectly and negligently put together so that injuries resulted; for all these things the plaintiff had a remedy, and a right of action not at all depending upon the provisions of the contract relative to future damages, but equally recoverable had those provisions never at all existed. And so the appraisal was not limited to causes of action which the instrument created, but covered all which might accrue "from any cause," and embraced actions founded upon negligence and not dependent for vitality upon the contract stipulations. And while it may be that injuries from negligence could be redressed under the terms of the agreement which are very broadly expressed, yet the right of recovery existed outside of the agreement and was not created by it. The arbitration, therefore, was not confined to rights created by the contract, but covered all possible injuries flowing from the construction and maintenance of the pipes of every class and kind.

The distinction between executory agreements of arbitration which oust the court of jurisdiction, and, therefore, are rejected as a bar, and those which are sustained as the sole remedy between the parties, is carefully drawn and fully discussed in Delaware Hudson Canal Company v. PennsylvaniaCoal Company (50 N.Y. 250). In one class, it is said, "the parties undertake by an independent covenant or agreement to provide for an adjustment and settlement of all disputes and differences by arbitration, to the exclusion of the courts; and in the other they merely, by the same agreement which creates the liability and gives the right, qualify the right, by providing that before a right of action shall accrue certain facts shall be determined or amounts or value ascertained, and this is made a condition precedent, either in terms or by necessary implication." To that authority and its statement of the distinction nothing for any present purpose needs to be added. The agreement here belongs in the first class. It submits all controversies which may arise in the future out of the grant made to arbitration and totally irrespective of the question whether the rights sought to be vindicated shall prove to be the creation of the contract or have an independent existence under the law as administered by the courts; and it does not, either expressly or by fair implication, qualify the absolute right to a just and fair compensation by making an award a condition precedent to its recovery.

The case, therefore, was rightly decided, and the judgment should be affirmed, with costs.

All concur.

Judgment affirmed.