Puerto Rico Housing Authority v. Superior Court
Puerto Rico Housing Authority v. Superior Court
Opinion of the Court
delivered the opinion of the Court.
We issued a writ of certiorari pursuant to § 28 of Act No. 376 of May 8, 1951 — 32 L.P.R.A. § 3228 — to review the judgment rendered by the Superior Court, San Juan Part, affirming an arbitration award in the cases of Puerto Rico Housing Authority v. Xavier Zequeira, 55-6073 and Zequeira v. Housing Authority, 56-426 (consolidated) involving the impeachment and confirmation, respectively, of the award.
On July 12, 1949 the Authority and Zequeira entered into a contract for the construction of the San José Housing Project, PRHA-17, for the price of $987,976. Pursuant to article 17 of said contract, (a) all the disputes regarding questions arising under §§ 35 to 49 of the General Conditions shall be decided by the Housing Authority, and such decision shall be final and binding on the parties, except as otherwise expressly provided in the contract. (6) All other disputes
In accordance with the evidence presented before the referees who rendered the award object of this proceeding, at the hearing held by them, the following took place: Part of the project consisted in an area to be filled, for which a topographic map was drawn indicating the existing levels, and another for the final fill to be made in the works according to the contract. Realizing that there was something
On April 20, 1950 the contractor wrote to Mr. Hidalgo, the engineer of the Authority, requesting information as to the topography which had been ordered by the Authority and stating that the natural grade which appeared on the plats was not the actual one for the reasons he set forth, and that this changed the conditions of the contract. He requested to negotiate the relevant change order. On May 5, 1950, the engineer, Mr. Hidalgo, told the contractor that a topography which the Authority ordered at his request was completed and that the computations to determine whether there was to be a change in the volume of the fill were being made and that possibly there would be an increase. As soon as the reports were completed, they would prepare a change order to cover the difference.
On December 4, 1950 the Authority sent the contractor Change Order No. 13, informing him that upon reconsidering the fill to be deposited in a specific area, additional fill was needed in the amount of 2,287.74 cubic yards, which the contractor would proceed to deposit in accordance with the original plats. A new plat indicating measurements data was included and an equitable adjustment of the contract price was made in the amount of $1,687.75. Said change order was broken down as follows:
“Additions:
2.287.74 cubic yards of fill at $0.80 $1, 830.19
“Deductions:
284.88 cubic yards of excavation at $0.50 142. 44
Total additions: $1, 830.19
Total deductions: 142. 44
Total increase in the contract price: $1, 687. 75”
On December 18, 1951 the contractor sent a letter to the Executive Director, referring to conversations held with Mr. Hidalgo, the engineer, regarding the liquidation of the projects, setting forth that the condition different from project No. 17 was the levels appearing on the topographic map which indicated points which were not true, and reaffirming that the change order was made for an amount of fill less than the actual one. That since Mr. Hidalgo required him to offer a new map to support his claim, he was negotiating with the firm of Deer & Capacete to make the necessary estimates and to calculate the amount of fill furnished by him.
On October 24, 1953, the contractor sent to the Executive Director a survey made by the Foundation Engineering Co. of Puerto Rico, consisting of a topographic map of the area filled in the San José Project, which determined the amount of fill existing therein, the contractor reasserting that the original topographic map drawn by the Authority was not correct since it marked the wrong lines, and hence the existing
On December 1, 1953 the contractor wrote to the Executive Director and referring to conversations recently held with regard to his claim and to a suggestion made by the Director as to the convenience of having the engineers of the Foundation Engineering Co., who made the survey concerning the fill used in the works, appear at a hearing to be held before the Director in order to discuss the details of the report, he asked for the date and hour of said conference to see whether they could arrive at a final decision of this problem that would be satisfactory to both parties. On January 4, 1954, the Executive Director wrote to the contractor confirming what he had told the latter during a conference held on December 4, that in view of the circumstances of the case and of the terms of the contract there were no grounds to justify his claim.
On January 13, 1954, the contractor wrote to the Executive Director requesting that the controversy regarding the excess of fill be submitted to arbitration pursuant to paragraph 17(6) of the contract, and informed him that he was appointing Gustavo E. Padilla, attorney-at-law, as his referee. On February 3, 1954, the Executive Director answered the former letter informing the contractor that he had appointed Jorge J. Jiménez, engineer, to act as referee on behalf of the Authority with regard to this dispute.
The Authority impeached the award before the Superior ■Court and the contractor, on his part, requested the affirm-
The first question raised by the petitioner in this appeal is that the trial court committed error in deciding that the findings made by the referees with regard to the facts and to the questions of law were final and not reviewable by the courts.
In Ríos v. Puerto Rico Cement Corporation, 66 P.R.R. 446, decided in 1946, we held that as a general rule an arbitration award “may be impeached or set aside if there is any defect or insufficiency in the submission or award rendering it invalid, or when there has been a substantial and prejudicial departure from the rules governing proceedings by and before arbitrators.” Also that “the courts are extremely reluctant to set aside an arbitration award, and they should not permit that the awards be impeached unless
“The company contends that the award is null by virtue of errors of law made by the Arbitration Committee.
“An arbitrator's award is neither a contract nor a judgment, but it partakes of the nature of both. Consequently, the grounds on which an award based on a voluntary submission may be impeached are limited to (1) fraud, (2) misconduct, (3) lack of due process in the conduct of the hearing, (4) violation of public policy, (5) lack of jurisdiction, and (6) want of entirety. Updegraff and McCoy, swpra, pp. 124-27. This means that an award ‘cannot be set aside for mere errors of judgment either as to the law or as to the facts.’ [Citation.]
“As the Board pointed out at the oral argument, the Board or this Court might have arrived at a different conclusion if the issues had been submitted to it or to us. But parties toho enter into an agreement of this nature must understand that they have substituted the arbitrator for the courts for the determination of all questions of fact and substantive law. The company bargained away its right to litigate such questions in the courts. We are powerless to come to its rescue. [Italics ours.]
“The situation would be different if the collective bargaining agreement or the submission to arbitration had provided that the Arbitration Committee must decide according to law. ‘Where the parties so provide, the arbitrators must follow rules of law, and make their award in accordance with the prevailing legal doctrines. If the arbitration agreement is silent with regard thereto, at common law and under most of the arbitration statutes, the arbitrators may declare law as they please, and*343 no award will be vitiated because of their legal errors. . . / [Citations] A leading authority on arbitration is of the view that review by the courts on substantial questions of law would make arbitration more effective. Phillips, supra, 47 Harv. L. Rev. at p. 609 et seq. But in the absence of a provision in the arbitration agreement or of a statutory requirement to that effect, the arbitrator is free to ignore substantive rules of law.”5
See also: Labor Relations Board v. Eastern Sugar, 69 P.R.R. 763, 766 (1949); Labor Relations Board v. Soc. Mario Mercado e Hijos, 74 P.R.R. 376, 380 (1953); Labor Relations Board v. Orange Crush of Puerto Rico, 80 P.R.R. 281, 284 (1958).
In the cases of Ríos and Labor Relations Board v. New York & Porto Rico Steamship, we adopted as the doctrine that would govern among us, those principles related to the effect of an arbitration award and to the sphere of its permissible judicial review which prevail in the different states as well as in the federal jurisdiction, both under the common law and under positive legislation regarding arbitration proceedings, which principles have become on this particular, when not controverted by the lapse of time or because they are so evident, the applicable law of a general and indisputable acceptance. See, among many other subsequent decisions: Amicizia Societa Nav. v. Chilean Nitrate & Iodine S. Corp., 274 F.2d 805, 808-09 (C. A. 2d 1960) ; Application
The conclusion of the trial court regarding the error assigned is correct and it constitutes a declaration of an axiomatic nature, so to speak, of the law covering this particular aspect. Petitioner sustains, however, that such norms do not prevail in Puerto Rico, and that the Court was bound to review the award on its merits and to vacate it on the basis of the errors committed by the arbitrators and of erroneous conclusions of law. In support of the contention it invokes the provisions of paragraph (c) of § 22 of Act No. 376 of 1951.
Paragraph (c) numerates the cases wherein an award may be vacated, such as when the referees are in error in refusing to postpone the hearing after just cause therefor was shown, or in refusing to hear relevant and material evidence on the dispute, or “when they commit any other error impairing the rights of any of the parties.” The trial court, following the principle of “ejusdem generis” concluded that an error of a similar or like nature to those procedural errors mentioned above could be included in the last provision. Actually, when said provision is considered in the light of the section and the statute taken as a whole, of the source thereof and of the original decisions, it cannot be said that the rule of statutory construction is altogether inapplicable or that the conclusion of the trial court was erroneous.
However, considering that if the petitioner is correct, the prevailing rule here with regard to arbitration awards and their review by the courts would be in conflict as much with the classic principle of the Anglo-American doctrine as of the Spanish doctrine of the amicable compounder, and with the decisions of this Court rendered prior to the enactment of Act No. 376, we concluded that it is preferable to
Act No. 376 authorizes and regulates in a sweeping manner the commercial arbitration agreements and it provides the way in which said agreements shall be enforced by the ■courts. It excluded, like other similar statutes, labor arbitration, which would continue to be governed by the labor-management legislation. The provisions of this statute are .substantially patterned on the arbitration legislation of California and on similar laws of other states, on the New York •proceedings, and on the United States Arbitration Act. Sections 22 and 23, the only ones which provide for judicial •intervention to reverse, and modify or correct an award, are .an almost identical copy of §§ 1462 and 1462-a of New York; 1288 and 1289 of California and of §§ 10-11 of the Federal Act (footnote 6 above).
If this would have been the legislative intent, thus constituting a radical departure from the original legislation and from the case law interpreting it, known to the lawmakers, our statute would have included more explicit provisions providing that the award should conform to the applicable law, as it was provided by the Spanish Law of Civil Procedure with regard to the arbitrators, or as it would be the case under a provision to that effect in a submission agreement in the Anglo-American arbitration proceedings, and besides, it would have also contained any other provisions necessary for an adequate review of such errors on the merits.
In such circumstances and for practical reasons of a feasibility, we do not believe that the Legislature intended in these cases that the Superior Court shall review arbitration awards on their merits on account of any error of judgment or of interpretation of the facts or of the law, without providing at the same time the adequate means for a thorough determination to be made by the Court as to whether these errors were committed in the light of the facts involved and of the law such as the trial court would deem applicable, unless as a matter of fact a trial de novo be held in the Superior Court which clearly is not conceivable under Act No. 376. In accordance with the foregoing, we must conclude that Act No. 376 of 1951 did not authorize the judicial review on its merits of an arbitration award otherwise rendered with authority therefor, and the only remedy available against said award is its revocation, modification or correction in the cases provided for in §§ 22 and 23 of said Act. Therefore, the enactment of Act No. 376 did not set aside the decisions of this Court prior thereto, which prevented the judicial review of an award on its merits.
The following four errors assigned by the petitioner to the trial court: (a) in deciding that the referees did not exceed their jurisdiction in rendering the award; (b) in holding that the decision rendered by the referees is not contrary to public policy; (c) in finding as a question of fact that the dispute among the referees turned on the amount
Irrespective of the foregoing, we have carefully examined the award in the light of the dispute submitted to the referees and of the grounds for impeachment invoked before the trial court, of the evidence which they had before them, and of the provisions of § 22 of said Act, and we have found no evidence in the record to warrant the conclusion that the award was rendered in violation of said provisions, or in manifest disregard or ignorance of the law contrary to its interpretation, as stated in the case of Wilko v. Swan, supra; or as set forth by other courts, that the award is from its face so manifestly erroneous in the application of the correct norms which should govern the controversy that it would in fact amount to a perpetration of fraud against one of the parties, who in good faith submitted itself to the good judgment of the referees. Covey v. Arrow Coach Lines, 288 S. W. 2d 192, 196 (1956); Sampson Motors v. Roland, supra at 447; Popcorn Equipment Co. v. Page, 207 P.2d 647, 649 (1949); Fine Foods, Inc. v. Office Employees International Union, 185 N.Y.S. 2d 1021, 1022-23 (1959); Amicizia Societa Nav. v. Chilean Nitrate and Iodine S. Corp., supra at 808-09; Miller, Inc. v. Wilmington Housing Authority, 179 F. Supp. 199, 202 (1959).
The question on which petitioner lays more stress before us is that the referees gave an erroneous interpretation to the contract in granting an additional compensation
At the request of the contractor who found that the drawings of the contract did not correspond to the real situation of the site, the Authority drew new topographic plats and' as a consequence thereof, it issued Change Order No. 13, ordering the contractor to furnish additional fill. The Authority itself changed the contract price pursuant to said change order and increased it on the basis of 80 cents per cubic yard, the price agreed upon. The controversy arose from the discrepancy of views between the parties with regard to the total amount of the increase on the basis of the amount of necessary additional fill, and not as to whether the original contract price could be changed, the contractor contending that in the change order issued by the Authority the latter had considered only the fill needed in a part of the area, and not for the whole area, and that the topographic conditions were different from the ones shown in the original plats, and that this constituted a change of the terms of the contract.
According to the evidence brought before the referees, they concluded, as a question of fact, that when the Authority
In the last error argued by the petitioner it attempts to impeach the submission itself, alleging that the Executive Director lacked the power to submit this controversy to arbitration. This contention was made for the first time when the petitioner requested the Superior Court to reconsider the judgment affirming the award, and it was held that the Authority had voluntarily submitted to the jurisdiction of
The other ground invoked by petitioner challenging the power of the Executive Director to submit the controversy to arbitration is based on the fact already decided in discussing the foregoing errors that the submission to arbitration made by the Executive Director of the dispute involved herein was a violation of the contract, since it entailed a change in the nature of the contract from lump-sum to unit price contract. Actually, the Authority does not argue that the con
Without delving into the field of the specific spheres of action of the Authority and of its Executive Director, since it is unnecessary, the record establishes that the Authority not only submitted to the jurisdiction of the referees by appearing before them through its attorneys, making its contentions and submitting the controversy to the decision of the referees, but that it never invoked, before the issuance of the award, the intervention of the Superior Court impeaching the submission made by the Executive Director, nor requested the Court to stay the arbitration proceedings, as it should have done pursuant to the procedure provided by Act No. 376. When it impeached the first award which was reversed, the Authority did not raise this question either, consenting that the controversy be submitted once more to arbitration. The authority waived its right to make any further similar contention when it submitted to the proceedings, and the contention made for the first time after the award was rendered was too late, unless the situation would have been such as provided in paragraph (c) of § 22. Cf. Brotherton, Inc. v. Kreielsheimer, 83 A.2d 707, 709 (1951); In re General Dry Cleaners, 75 N.Y.S.2d 615, 619 (1947); In re Nadalen Full Fashion Etc., 134 N.Y.S. 2d 612, 614-15 (1954); Sapp v. Borenfeld, supra (1949).
In view of the reasons set forth in this opinion, the writ of certiorari shall be quashed and the judgment appealed from affirming the arbitration award shall remain in full force and effect. The original record shall be remanded for further proceedings not inconsistent with this opinion.
“FINDINGS”
“1 — That the Authority informed the Contractor in a document delivered to him, ‘Schedule of Amounts for Contract Payments’ an itemization by units of work and labor of the contract setting forth the fill to be placed on the parcel and streets in the amount of 70,237 and 16,596 cubic meters respectively. That the accuracy of such amounts up to the last figure was computed by the Authority in order to determine the cost of this fill, as well as of other items of the contract and the cost of the contract itself, which estimate was used by the Authority as the basis for the announcement of the public bid and to determine whether it could award the work. We believe, therefore, that this estimate was made with accuracy by the Authority in order to know the cost of the work to be made. In fact, to our judgment, it constitutes an estimate of the work and of the expenses.
2 — That although the contractor calculated the costs of these items, the true fact is that such items and their amounts were estimated by the Authority and delivered to the contractor. Consequently, it was not the Contractor who prepared the itemization of the work and labor.
3 — That had it not been that the Contractor was able to find out with some accuracy the amount of fill placed by him by means of the numbers on the trucks used in the work, he would have been prevented from determining the additional fill, verifying the errors existing on the Topographic Map furnished by the Authority.
4 — That the Authority admitted that the topography contained several errors in ordering that new topographic surveys be done and in sending to the Contractor Change Order No. 13 dated December 4, 1950, wherein the amount of excavations was not only corrected by increasing the amount of fill to be placed thereon but it was actually reduced. Such modifications increased the cost items computed by the Authority in order to determine the cost of these works and of the contract as a whole.
5 — That although it was a lump-sum contract, the true fact is that during its execution the fill items had to be revised on account of deficiencies or errors in the topographic map pre
6 — That when the Contractor challenged the Change Order for setting forth an increase in the fill less than the amount claimed by the Contractor, the Authority told him to make his own survey of the topography of the parcel. This work was entrusted to the Foundation Engineering Corporation. A copy of said survey was delivered to the Authority for its consideration as requested.
7 — That the contention made by the Authority that the Contractor was bound to furnish the fill up to a specific level, without a previous determination of the volume of fill, is to our judgment, beyond our consideration, since a topographic plat and an itemization of the fill involved herein were furnished by the Authority for these purposes.
8 — That it was impossible for the Contractor to determine the additional fill which would have been necessary to compact the land, and that the person capable of determining this situation by reason of the surveys made to that effect was the Authority itself.
9 — That the amount of fill placed on the area, according to the survey made by the Foundation Engineering Corporation, amounts to 120,603 cubic meters.
10 — That the Contractor, therefore, placed 33,770 cubic meters of fill in excess of the amount computed and stipulated by the Authority. That 3,550 cubic meters should be deducted from this amount, which according to the survey made by the Foundation Engineering Corporation, were placed under the buildings up to the final grade line of the parcel, in addition to 1,759.80 cubic meters which were accredited to Change Order No. 13.”
A controversy arose between the Authority and Zequeira, and they appointed their respective referees who disagreed in their written reports. The third referee considered both reports and on October 6, 1955 he rendered his own with his findings in favor of the contractor. On December 29, 1955 the Authority impeached this award before the Superior Court, San Juan Part, among other reasons, because it was not made within the term fixed by law; because it was not signed by all the referees or by a majority thereof, and because errors were committed which impaired the rights of the Authority when the third referee based his conclusions on evidence submitted in his absence, all this constituting an alleged violation of Act No. 376 of May 8, 1951. On May.2, 1956 the Superior Court set aside said arbitration award for noncompliance with the procedural requisites, and not finding any grounds for incompetence on the part of the referees, it provided that the controversy be submitted to them once more with the opportunity for both parties of being heard and of presenting evidence.
They appear as Appendix A at the end of this opinion.
The reasons adduced by the Authority to impeach the award were the following: (a) that the additional sum of $30,452.41 granted to the contractor on account of the excess fill was a violation of the terms of the contract under which he was bound to furnish the additional fill within -the lump-sum of $987,976; (6) that the referees changed the nature of the contract from a lump-sum one to a unit price contract; (c) that the
In a motion for reconsideration after judgment was rendered, the Authority set up in addition that the arbitration agreement did not include the matter which was submitted to the referees; that the Executive Director did not have the authority to submit said dispute to arbitration, and that the contractor did not request arbitration within the ten days stipulated in the agreement, wherefore the Director did not have any power to go to arbitration either.
“When the referees are in error in refusing to postpone the hearing after just cause therefor was shown, or in refusing to hear relevant and material evidence on the dispute, or when they commit any other error impairing the rights of any of the parties.”
It was made clear in this case that when we stated in the case of Rios v. Puerto Rico Cement Corp., supra, that ordinarily an arbitration award may be impeached or set aside if there is any defect or insufficiency in the submission or award rendering it invalid, or when there has been a substantial and prejudicial departure from the rules governing proceedings by and before arbitrators, there was no intention of deciding that an award may be impeached because of errors of substantive law, but that when the referee has jurisdiction only the errors involving fraud, misconduct or lack of due process could be invoked before the courts against the award; adding to these grounds the violation of public policy and lack of entirety. Although these cases arise from labor-management disputes, in the particular aspect now before us, there are no differences with regard to the rule to be followed in commercial arbitration.
See, for example, the arbitration proceedings of California from the middle of the past century, as they were fundamentally modified by the 1927 legislation based on the State Arbitration Bill supported by the American Association of Arbitration, also followed by other states, California Code of Civil Procedure, § 5 1280 to 1293, 19 West’s Annotated Cal. Codes, pp. 626, 672; the New York Civil Practice Act, § 84 (1920, 1937), Gilbert-Bliss Civil Practice Act of New York Annotated, Vol. 6B, § § 1448-1469; United States Arbitration Act (1947), 9 U.S.C.A. §$ 1-11.
The doctrine in the Spanish law contains norms similar to the Anglo-American doctrine. Under the arbitration proceedings provided by the Law of Civil Procedure of 1881, 5$ 487 and 790-839, which in the absence of any other applicable law governed here — cf. Mas v. Liona, 31 P.R.R. 28 (1922) — until Act No. 376 of 1961 went into effect, if the parties chose to submit the controversy to the judgment of arbitrators, these had to be Laivyers ($ 789 Engl, version) and the judgments of the arbitrators
On the other hand, if the parties interested in the controversy chose to submit it to the judgment of amicable compounders, the latter had to be men of legal age, in the full enjoyment of their civil rights, and know how to read and write (§ 826 Engl, version) and they shall decide the questions submitted to their decision according to their knowledge and belief without being subject to legal forms (§ 832 Engl, version). From such judgments there was no remedy except that of an appeal for annulment of judgment (5 835 Engl, version) in cases where the amicable compounders rendered a judgment outside of the period fixed in the compromise or upon a matter not submitted to their decision, or upon a matter which is not of a civil nature or that is included in the exceptions provided by $ 487 (§ 1689(3) Engl, version). See the judgments rendered by the Supreme Court of Spain on December 6, 1941, holding that the judgments of the amicable compounders who have not exceeded their authority with regard to the matters or issues submitted to their decisions shall stand and become incontestable, whether or not they are correct as to substantive law, etc.; those of November 15, 1934 and March 15, 1933; and the judgment rendered on April 17, 1943, holding that the function of the Supreme Court is not to correct any deficiency or omission found in the award
Paragraph (c) of $ 1462 of New York, % 1288 of California, and ■§ 10 of the Federal Act are identical: “Where the arbitrators were guilty ■of misconduct in refusing to postpone the hearing, upon sufficient cause :shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party 'have been prejudiced.” (California reads misbehaviors.)
“Guilty of misconduct ... or of any other misbehavior.”
Section 4 of the law of December 22, 1953 regulating the arbitration proceedings in the Private Law and which substituted the provisions of the Law of Civil Procedure of 1881 regarding arbitration. — -Medina y Ma-rañón, Leyes Civiles de España, 1958 — provides that there would be only one type of arbitration, whether the arbitrators shall render their judgments according to law, or according to their knowledge and belief only, the parties to the compromise (more like the Anglo-American proceedings) being free to choose any of these solutions. If nothing is said to that effect, it shall be understood that they chose judgment according to the law. Sections 17, 20, 27 and 28, also provide in cases of awards rendered in arbitration proceedings according to law for a right to appeal to the
Section 1485 of the Civil Code does not permit a contractor of a lump-sum contract to request an increase in the price, even if that of the materials or wages has increased, but he may do so when any change increasing the work should be made in the plans, provided the owner has given his authorization. This was the situation here.
Case-law data current through December 31, 2025. Source: CourtListener bulk data.