Vitaphone Corp. v. Electrical Research Products, Inc.

166 A. 255, 19 Del. Ch. 247, 1933 Del. Ch. LEXIS 49
CourtCourt of Chancery of Delaware
DecidedApril 21, 1933
StatusPublished
Cited by2 cases

This text of 166 A. 255 (Vitaphone Corp. v. Electrical Research Products, Inc.) is published on Counsel Stack Legal Research, covering Court of Chancery of Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Vitaphone Corp. v. Electrical Research Products, Inc., 166 A. 255, 19 Del. Ch. 247, 1933 Del. Ch. LEXIS 49 (Del. Ct. App. 1933).

Opinion

Pennewill, Chief Justice:

The question this court is required to decide is one of law, viz., whether the arbitration covenant and/or statute relied on by the respondent constitute a bar 'to the action instituted in this court by the complainant. There are no questions of fact now involved and it is, therefore, unnecessary to make further reference to the bill of complaint, or state at greater length than I have, the allegations of the plea.

The respondent contends that the arbitration covenant involved in this case, entered into in another State, should be recognized by this court, and be controlling, on the ground of comity, even in the absence of any arbitration statute in the State of its creation.

I will, therefore, first consider the effect of said covenant without regard to the statute.

It may be conceded that there is reason in respondent’s contention, but because of two Delaware cases—Randel v. President, etc., of Chesapeake & Del. Canal, 1 Har. 233, and Fooks v. Lawson, 1 Marv. 115, 40 A. 661, 663, I feel unable to sustain it.

In the Randel Case the Court said:

“Courts will not suffer themselves to be ousted of their jurisdiction by the private agreement of the parties. * * * Even in the case of a clear submission of existing disputes either party has a right to revoke the submission. It is true he is answerable on his agreement to submit; but after the revocation this would be no defence in an action to recover the disputed matter. His only liability is on his agreement to abide by the reference; if he violates that agreement it is not a defence to an action for the thing disputed.”

[263]*263The same law was declared in Fooks v. Lawson, supra, in which the'court used this language:

“The law permits either of the parties to a submission to arbitration to revoke, without the consent of the other, the agreement of such submission, before the award authorized thereby has been made.”

Courts outside this State have gone so far as to hold that an agreement to submit to arbitration is in general revocable by either party at any time before an award has been made. 1 A. & E. Enc. of Law 664.

In Section 55 of “Restatement of Contracts,” an excellent work recently published by the American Law Institute, it is said:

“Nor is any bargain to arbitrate a bar to an action on the claim to which the bargain relates.”

I am now discussing the effect of an arbitration agreement without regard to any statute on the subject. The language of the court, therefore, in the case of Meacham v. Jamestown, F. & C. R. Co., 211 N. Y. 346, 105 N. E. 653, 654, Ann. Cas. 1915C, 851, is in point. The contract provided not only that the decision of the engineer as arbitrator should be final and conclusive between the parties, but further that each party “waives all right of action, suit or suits or other remedy in law or otherwise under this contract or arising out of the same to enforce any claim except as the same shall have been determined by said arbitrator.”

The court in that case said:

“Tested by the principles of the cases cited, we conclude that the language employed in the contract in question is susceptible of but one construction, namely, an attempt on the part of the parties to the same to enter into an independent covenant or agreement to provide for an adjustment of all questions of difference arising between [264]*264the parties by arbitration to the exclusion of jurisdiction by the courts. Notwithstanding the decisions of the courts of Pennsylvania that the contract as to arbitration was valid and enforceable in that state, judicial comity does not require us to hold that such provision of a contract which is contrary to a declared policy of our courts * * * shall be enforced as between nonresidents of our jurisdiction in cases where the contract is executed and to be performed without this state, and denied enforcement when made and performed within our state.”

In a concurring opinion Judge Cardozo said:

“There may conceivably be exceptional circumstances where resort to the courts of another state is so obviously convenient and reasonable as to justify our own courts in yielding to the agreement of the parties and declining jurisdiction. * * * If any exceptions to the general rule are to be admitted, we ought not to extend them to a contract where the exclusive jurisdiction has been bestowed, not on the regular courts of another sovereignty, but on private arbitrators. * * * It is true that some judges have expressed the belief that parties ought to be free to contract about such matters as they please. In this state the law has long been settled to the contrary. * * * The jurisdiction of our courts is established by law, and is not .to be diminished, any more than it is to be increased, by the convention of the parties.”

The respondent cites two Delaware cases in support of its position, viz., Crumlish v. Wil. & Western R. Co., 5 Del. Ch. 270, and Stewart v. Grier, 7 Houst. 378, 32 A. 328, 329. Upon examination it is found that in both of those cases an award had been made and the court held that the parties to the arbitration were bound by the award, which in the absence of fraud was final. The question was not the right to revoke the agreement, but the right to repudiate the decision. This fact differentiates the last mentioned cases from the one before the court in which no award has been made. It should be borne in mind in considering this question that there is a difference between the power of a party to revoke an agreement to arbitrate, and his power to repudiate an award made in pursuance of the agreement. This difference is recognized [265]*265by the authorities. In the case before the court the arbitration still rests in agreement. There has been no award —no decision. No award is set up in the plea.

The failure to distinguish between the effect of an arbitration that rests in agreement, and one in which an award has been made shows that some of the decisions relied on by the respondent are not here in point. In the one case the controversy is undecided, in the other it is in a sense res adjudieata.

I do not say that the policy of this State is opposed to the settlement of controversies by arbitration. Such a policy would be unfortunate in these times when settlements without litigation should be encouraged in every way. The tendency of the law is now in that direction perhaps more than ever before. In Steioart v. Grier, supra, it was said:

“The tendency of modem jurisprudence is to give force, conclusiveness, and effect to all awards where there is no corruption or misconduct on the part of the arbitrators.”

But I do say that courts here and elsewhere are opposed to being ousted of jurisdiction by the agreement of parties to an arbitration, no award having been made. Such was the policy of the State where the arbitration statute in question was entered into, before the arbitration statute was enacted, and if the statute has established a different policy in that State, I do not feel that this court is- bound by comity to recognize it.

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Bluebook (online)
166 A. 255, 19 Del. Ch. 247, 1933 Del. Ch. LEXIS 49, Counsel Stack Legal Research, https://law.counselstack.com/opinion/vitaphone-corp-v-electrical-research-products-inc-delch-1933.