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decided: April 12, 1973.


Appeal from order of Court of Common Pleas, Trial Division, of Philadelphia, June T., 1967, No. 5642, in case of Leonard M. Reisman v. Ranoel Realty Co.


David H. Marion, with him Allen D. Black, and Harold E. Kohn, for appellant.

Richard B. Sigmond, with him Leonard Spear, and Meranze, Katz, Spear & Bielitsky, for appellee.

Wright, P. J., Watkins, Jacobs, Hoffman, Spaulding, Cercone, and Packel, JJ. Opinion by Spaulding, J.

Author: Spaulding

[ 224 Pa. Super. Page 221]

Appellant Ranoel Realty Company appeals from an order of Judge Ned L. Hirsh of the Court of Common Pleas of Philadelphia confirming an arbitration award in favor of appellee Leonard M. Reisman.

The basis of this action was a contractual agreement entered into between appellant corporation and appellee, then president of the corporation, in June 1966. By the terms and conditions of that agreement, appellee was to construct two apartment buildings for appellant for a sum not to exceed $475,000. After completing the construction work, appellee brought an assumpsit action against appellant corporation. He sought to recover for the unpaid balance of the contract price, for additional work and materials furnished, allegedly at appellant's request, and for cash advances allegedly made to appellant by appellee. A default judgment which had been taken by appellee was stricken off by agreement of the parties, who stipulated that they would instead proceed to arbitration pursuant to the Pennsylvania Arbitration Act of 1927,*fn1 under the Rules of the American Arbitration Association.*fn2 Appellee subsequently filed a demand for arbitration, to which appellant filed an answer and counterclaim. The counterclaim charged appellee with fraud, conversion and breach of fiduciary duty, alleging that he misappropriated construction loans for his personal use.

[ 224 Pa. Super. Page 222]

On May 7, 1969, a hearing was convened before an arbitration panel of three construction industry experts. The arbitrators heard brief testimony from appellee, from the project architect, and from a principal of appellant corporation. There was greatly conflicting testimony as to the allegation that appellee had misappropriated funds and regarding the claim by appellee that he had been authorized by appellant to exceed the $475,000 contract limit in completing the construction project. Shortly after appellee began to testify, and before there was any opportunity for appellant to cross-examine him or to present its own witnesses, the parties agreed to narrow the issues by having counsel state each side's position in oral argument. When this argument was concluded, the parties agreed that each side would submit a brief to the arbitrators, after which there would be a second meeting with the panel in order to determine what witnesses and evidence would be necessary.

Appellee submitted a brief, with appellant filing its brief in response and asserting its counterclaim. On September 10, 1970, the hearing was reconvened with only the arbitrators and counsel present. At that hearing appellee was allowed, over objections by counsel for appellant, to file a rebuttal brief to appellant's counterclaim.*fn3 On September 28, counsel for appellant requested a further hearing in order to cross-examine appellee, to question an unnamed accountant cited by appellee in its rebuttal brief, and to present witnesses in its defense and in support of its counterclaim. This request was refused. The hearing was declared closed as of December 8, 1970, and on March 8, 1971, the arbitrators awarded appellee $50,000 and denied appellant's counterclaim in its entirety.

[ 224 Pa. Super. Page 223]

Appellant seeks to have this award vacated, claiming, inter alia, that the decision of the arbitrators to close the hearings effectively denied it a fair hearing in precluding the presentation of its witnesses and its right to cross-examine appellee's witnesses. Specifically, appellant claims that the conduct of the arbitrators violated the rules of the American Arbitration Association and presents grounds for vacating the award under the Arbitration Act.

It should be noted at the outset that the scope of judicial review of arbitrations commenced pursuant to a statute, as here, is considerably broader than that of common law arbitration. "Common law arbitration may be reviewed only for fraud, misconduct, corruption, or other such irregularity which caused the arbitrator to render an unjust, inequitable and unconscionable award." Keller v. Local 249 I.B. of T.C., W&H, 423 Pa. 353, 223 A.2d 724 (1966). In statutory arbitrations, however, broad judicial review of the award and proceedings is permitted. Keller v. Local 249, id.; Freeman v. Ajax Foundry Products, 398 Pa. 457, 159 A.2d 708 (1960). The Act provides that ". . . the court shall make an order vacating the award upon the application of any party to the arbitration: "(c) 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 any other misbehavior by which the rights of any party have been prejudiced. (d) Where the arbitrators exceeded their powers or so imperfectly executed them that a final and definite award upon the subject ...

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