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In Re American Arbitration Ass'n

APRIL 16, 1969.

IN THE MATTER OF THE AMERICAN ARBITRATION ASSOCIATION ARBITRATION BETWEEN THOMAS KARASKIEWICZ, PLAINTIFF-APPELLEE, AND ALLSTATE INSURANCE COMPANY, DEFENDANT-APPELLANT.


Appeal from the Circuit Court of Cook County; the Hon. EDWARD F. HEALY, Judge, presiding. Reversed and remanded with directions.

MR. PRESIDING JUSTICE DRUCKER DELIVERED THE OPINION OF THE COURT.

Defendant appeals from a judgment of the Circuit Court denying its motion to strike the complaint and dismiss the suit, vacating the award of the arbitrator and returning the cause to the American Arbitration Association for a full hearing. On appeal defendant contends (1) that the complaint should have been stricken for failure to include either a copy of the insurance contract on which the claim was founded or the relevant provisions thereof and (2) that the suit should have been dismissed for failure to state a cause of action. The complaint alleged that plaintiff had an insurance contract with defendant, that pursuant to the arbitration clause plaintiff sought arbitration of its uninsured motorist claims, that pursuant to the rules of the American Arbitration Association an arbitrator was designated and a hearing held and that plaintiff was apprised in writing that the hearing had been closed as of February 27, 1967. The complaint further alleged that subsequent to the closing of the hearing, on March 8, defendant sought leave to file a memorandum containing its statement of the facts and of the law involved in the case, that this violated Accident Claims Tribunal Rules No. 26 *fn1 and No. 27 *fn2 of the American Arbitration Association, and that without advising plaintiff that the hearing had been reopened the Arbitrator "took Defendant's Memorandum of Law, as irrefutable and confessed" and relied on it to the prejudice of the plaintiff. Defendant moved to strike the complaint and to dismiss the action but the court denied both motions and, at the same time, vacated the award. Leave to file an answer was denied.

Defendant first contends that his motion to strike the complaint for failure to attach a copy of the contract or the relevant provisions thereof should have been granted. Ill Rev Stats, c 110, § 36 (1967) provides in pertinent part that:

If a claim or defense is founded upon a written instrument, a copy thereof, or of so much of the same as is relevant, must be attached to the pleading as an exhibit or recited therein. . . .

Although it was conceded at oral argument that a copy of the insurance contract should have been attached to the complaint we were asked to decide the issue of whether an action could be brought under section 12(a)(3) of the Uniform Arbitration Act (Ill Rev Stats, c 10, § 112(a)(3) (1967)) which provides that an award must be vacated if "[t]he arbitrators exceeded their powers. . . ." The allegations of the complaint, which are admitted by a motion to dismiss, were:

(1) that after proofs were closed defendant asked leave to file a memorandum of law with the Arbitration Commission;

(2) that although a copy of the memorandum was sent to plaintiff no leave to file was granted;

(3) that contrary to section 27 of the Accident Claims Tribunal Rules the hearings were not reopened for the purpose of filing the memorandum; and

(4) that the Arbitrator "took the memorandum as irrefutable and confessed" and that he relied on it to the prejudice of the plaintiff.

The parties do not complain of any action of the Arbitrator during the hearing but only raise the issue of whether the term "power" includes the procedures to be followed by the Arbitrator after the closing of proofs. In Fagnani v. Integrity Finance Corp., 53 Del. 193, 204-05, 167 A.2d 67, the court decided that the provision in the Standard Form of Arbitration Procedure setting a time limit for the arbitrator's decision was mandatory. The court stated at page 73:

The parties have written this contract adopting the Standard Form of Arbitration Procedure as a part of the agreement. This court should not vary the terms of the contract nor should it write a new one for the parties. While it is true that settlement of a controversy by arbitration is favored by the courts, nevertheless, the authority of the arbitrators is derived from the mutual assent of the parties to the terms of the submission. The parties are bound only to the extent, and in the manner, and under the circumstances pointed out in their agreement, and they have a right to stand upon the precise terms of their contract. Machine Printers Beneficial Ass'n of United States v. Merrill Textile Paint Works, 12 NJ Super 26, 78 A.2d 834; United Electrical Radio & Machine Workers of America, Local 411, C.I.O. v. National Pneumatic Co., 134 NJL 349, 48 A.2d 295.

We believe the same principle is applicable in the instant case. The rules provided in effect that the closing of the hearings is a cutoff date for the submission of evidence or briefs. If briefs are to be filed thereafter the hearing must first be reopened and a new date set for closing the hearing. This was a grant of a "power" under the contract which required that if briefs were to be filed after the hearings were closed, the hearings would have to be reopened for that purpose. Although defendant requested leave to file the memorandum, no order was ever entered thereon and no hearing date set. Therefore, a consideration of the memorandum by the arbitrator as alleged in the complaint would exceed the "power" granted him by the contract.

We hold that the court's finding that the complaint stated a cause of action is proper. Plaintiff's allegations in the complaint that he did not file an objection or reply to the application for leave to file the memorandum do not constitute a waiver of the rules providing for a reopening of the hearing. There was no obligation on him to object since the application might have been denied or if allowed, he had a right to rely on the observance of the rules, viz., that the hearing would be reopened. There was no obligation on plaintiff to reply until leave to file was actually granted.

With reference to the trial court's refusal to permit defendant to file an answer after its motion to dismiss was denied we find that after a denial of a motion to dismiss the defendant has a right to answer. Lake View Trust & Savings Bank v. City of Chicago, 314 Ill. App. 386, 41 N.E.2d 208 (abst).

The judgment is reversed and the cause is remanded to the Circuit Court with directions to strike the complaint for failure to attach a copy of the contract, to grant plaintiff leave to file an amended complaint and to ...


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