Court Opinion

ID: 9545397
Source: CourtListenerOpinion
Date Created: 2023-08-07 17:11:17.876155+00
Date Added: 2024-06-11T15:14:40.796223
License: Public Domain

RUSSON, Justice,
dissenting:
I respectfully dissent from the majority’s conclusion that an oral agreement to arbitrate, though unenforceable under the Utah Arbitration Act, can nonetheless be enforced through some other legal theory such as the doctrine of part performance. Furthermore, I cannot agree with the majority that an insurance company can simply submit a third-party claim against its insured to arbitration.
This court has never before addressed the issue whether oral agreements to arbitrate are enforceable in Utah. At common law, oral arbitration agreements were enforceable. See Robert M. Rodman, Commercial Arbitration § 3.1, at 50 (1984). However, this court has held that “where a conflict arises between the common law and a statute or constitutional law, the common law must yield.” Hansen v. Utah State Retirement Bd., 652 P.2d 1332, 1337 (Utah 1982); see also Utah Code Ann. § 68-3-1 (adopting *803common law of England “so far as it was not repugnant to, or in conflict with, the constitution or laws of ... this state”); 2B Sutherland Statutory Construction, § 50.01, at 89 (5th ed. 1992) (“In cases of conflict between legislation and the common law, legislation will govern because it is the latest expression of the law.”).
In the case at bar, the statute and the common law are clearly in conflict. The Utah Arbitration Act provides that only “[a] written agreement to submit any existing or future controversy to arbitration is valid, enforceable, and irrevocable.” Utah Code Ann. § 78-31a-3 (emphasis added). The majority correctly notes that “[t]he logical extension of this language is that until an agreement to arbitrate is reduced to writing, it is revocable, unenforceable, and invalid.” However, the majority then concludes that while oral arbitration agreements are not enforceable under the Utah Arbitration Act, such agreements may be enforceable through “some other theory.” The majority’s conclusion directly contradicts our established rule mandating that the common law yield to the statute, and it renders the written requirement a complete nullity. Because only written agreements to arbitrate are enforceable under the Utah Arbitration Act, I would hold that oral arbitration agreements are unenforceable in Utah. Nevertheless, even if the common law applied, the alleged oral agreement in this case would be unenforceable because at common law an oral arbitration agreement may be revoked any time before the rendering of the award. See Maynard E. Pirsig, Some Comments on Arbitration Legislation and the Uniform Act, 10 Vand. L.Rev. 685, 685 (1957); 1 Martin Domke, Domke on Commercial Arbitration, § 9:04, at 108 (Gabriel M. Wilner rev. ed.1997).
Other jurisdictions that have addressed the validity of oral arbitration agreements have reached a similar result. See, e.g., Bennett v. Meader, 208 Conn. 352, 545 A.2d 553, 555, 557 (1988) (holding oral arbitration agreements unenforceable because comprehensive statutory scheme regarding arbitration controlled arbitration where common law was inconsistent with statute); Anderson v. Federated Mut. Ins. Co., 481 N.W.2d 48, 49 (Minn.1992) (holding oral arbitration agreement unenforceable, not because common law arbitration was “superseded” by arbitration act, but because oral agreement was revocable at common law before matter was submitted to arbitrator). Commentators have also noted the following effect of the statutory writing requirement: “The requirement that the arbitration clause be in writing in order that it may be considered enforceable is set forth in the United States Arbitration Act, the Uniform Arbitration Act and the statutes of most states. This provision renders invalid mere oral arbitration agreements.” 1 Domke, supra, § 6.01, at 73; see also Rodman, supra, § 4.5, at 92 (“Except where the subject matter is such that a contract with reference thereto must be in writing, a common law arbitration agreement or submission may be oral. However, if there is a requirement to that effect, a statutory submission must be in writing.”); Merton C. Bernstein, Private Dispute Settlement: Cases and Materials on Arbitration, 69 (1968).
Strict enforcement of the writing requirement is also supported by policy considerations. Arbitration is a final proceeding which excludes a court of law from resolving the dispute. By submitting a liability claim to arbitration, participants (1) give up their constitutional right to redress in the courts, (2) waive procedural safeguards, including the .rules of evidence and the rules of civil procedure, and (3) severely limit their right of appeal. Thus, because arbitration strips participants of significant legal rights, an agreement to arbitrate should not be enforceable unless it is in writing. Moreover, as the Bennett court noted, the writing requirement eliminates the problems of proving an oral agreement, the content of which would have to be determined by a court, and this would not be as efficient as establishing the existence and content of a written agreement. Bennett, 545 A.2d at 558; see also Pirsig, supra, at 692 (at common law “[i]t was considered unwise to permit an irrevocable arbitration agreement to be left to the uncertainties of a claimed oral transaction”).
Even if there is no conflict between the Utah Arbitration Act and the common law, *804the majority errs in concluding that an oral arbitration agreement may be enforceable through the doctrine of part performance. The doctrine of part performance is an equitable remedy, based upon the prevention of fraud, which operates to take a parol contract out of the statute of frauds so as to render the contract enforceable. See Martin v. Scholl, 678 P.2d 274 (Utah 1988); Young v. Moore, 663 P.2d 78 (Utah 1983); see also 73 Am.Jur.2d Statute of Frauds §§ 403 & 405 (1974); 37 C.J.S. Statute of Frauds § 248 (1943). Under the doctrine, a party may secure specific performance of a contract, but “only where the circumstances of the case meet the general prerequisites to equitable relief.... The doctrine operates if, but only if, the remedy at law by a recovery of damages or otherwise is inadequate and the contract is one which if in writing would be enforceable in equity.” 73 Am.Jur.2d Statute of Frauds § 401 (1974); see also 37 C.J.S. Statute of Frauds § 249 (1943).
This court has consistently followed the general rule that “[t]he right to an equitable remedy is an exceptional one, and absent statutory mandate, equitable relief should be granted only when a court determines that damages are inadequate and that equitable relief will result in more perfect and complete justice.” Thurston v. Box Elder County, 892 P.2d 1034, 1040 (Utah 1995) (citing South Shores Concession v. State, 600 P.2d 550, 552 (Utah 1979); Delivery Serv. & Transfer Co. v. Heiner Equip. & Supply Co., 635 P.2d 21, 21 (Utah 1981) (equitable remedy “normally only granted when damages may not accurately be ascertained or would not adequately compensate the plaintiff’); Erisman v. Overman, 11 Utah 2d 258, 262, 358 P.2d 85, 88 (1961) (where adequate legal remedy is available, “one may not seek equity”)). This standard applies to the equitable remedy of specific performance. See South Shores Concession, Inc. v. State, 600 P.2d 550, 552 (Utah 1979) (“ ‘The right to specific performance is essentially an exceptional one, and a decree for such relief is given instead of damages only when by this means a court can do more perfect and complete justice. Ordinarily, to entitle one to specific performance of a contract, he must show that a recovery of damages for its breach will not be an adequate remedy. If the breaeh of an agreement can be compensated for in damages specific performance will be denied.’” (quoting Halloran-Judge Trust Co. v. Heath, 70 Utah 124, 141-42, 258 P. 342 (1927) (other citation omitted))).
As an initial matter, an oral agreement to arbitrate is not subject to the Utah Statute of Frauds, codified at Utah Code Ann. §§ 25-5-1 to -9. The majority has offered no rationale as to why the doctrine of part performance should be applied to an oral contract that was not under the statute of frauds to begin with. Moreover, “[i]t is a well-established rule that except where authorized to do so by statute, a court of equity will not decree specific performance of an agreement to decide a controversy by, or submit it to, arbitration.” 71 Am.Jur.2d Specific Performance § 40 (1973); see also 81 C.J.S. Specific Performance § 86 (1977) (“In the absence of a statute providing otherwise, an agreement to submit a matter to arbitration ... ordinarily will not be specifically enforced, even if the contract contains a provision that the agreement to arbitrate disputes, claims, or questions should be specifically enforced.”).1 Cases applying the common law uniformly refused to specifically eñforce an agreement to submit a claim to arbitration. The reasoning for this refusal was aptly stated by one judge in the following manner:
So that we abundantly see, that the very impracticability of compelling the parties to name arbitrators, or upon their default, for the court to appoint them, constitutes, and must forever constitute, a complete bar to any attempt on the part of a court of equity to compel the specific performance of any agreement to refer to arbitration. It is essentially, in its very nature and character, an agreement which must rest in the good faith and honor of the parties, and like an agreement to paint a *805picture, or to carve a statue, or to write a book, or to invent patterns for prints, must be left to the conscience of the parties, or to such remedy in damages for the breach thereof, as the law has provided.
Tobey v. County of Bristol, 23 F. Cas. 1313 (D.Mass.1845), reprinted in Bernstein, supra, at 29-31.
Applying the aforementioned rules, specific performance of an oral agreement to arbitrate clearly is not a proper remedy because equitable principles do not apply in this case. Assuming that an oral arbitration agreement existed, there is nothing to indicate that legal damages are inadequate or that equitable relief will “result in a more perfect and complete justice.” USF & G’s refusal to settle Jenkins’ claim through arbitration has not prejudiced Jenkins in any way, except for the time and cost of preparing for arbitration.2 The time for filing suit has not expired, and Jenkins may still file a lawsuit against Perei-val.3 As Jenkins is in the exact same position she was in before settlement negotiations began, I disagree with the majority’s conclusion that an equitable remedy may be applied in this case. I would therefore affirm the trial court and hold that oral arbitration agreements are unenforceable in Utah.
Finally, I disagree with the majority opinion that the insurance company had the legal authority to submit a claim made by a third party against its insured to arbitration. Jenkins’ liability claim is against Percival, not against USF & G. USF & G is involved only because of its contract of insurance with Percival. Pursuant to the terms and conditions of the insurance contract, USF & G had a duty to pay all sums Percival “legally must pay as damages ... to which this insurance applies,” and it also had a duty “to defend any ‘suit’ asking for such damages.” Furthermore, USF & G had the right to settle any claim or suit, but only because USF & G had the contractual authority to do so.
Settling a liability claim and submitting a liability claim to arbitration are two different concepts. The settling of a liability claim denotes certainty and finality of the claim against the insured. Such is not the case with arbitration. In the ease at bar, Percival is not a party to the arbitration agreement in question, nor does his liability insurance policy give USF & G the authority to submit the claim against him to arbitration. If we were to hold otherwise, Percival, or any other insured, could have great personal exposure inasmuch as it is not uncommon for insurance liability policies to have limits of coverage less than the amount of damages claimed by the third party. If an insurance company could involuntarily submit its insured to arbitration, that insured would be subjected without his consent to the decision of the arbitrator regardless of the amount of award, and all done in derogation of the insured’s constitutional and procedural rights. Moreover, if the amount of the arbitration award was above the policy limits of coverage, an insurance company would still have the obligation to defend its insured in an action to recover the amount in excess of the policy limits; however, the insurance company would be defending a suit in which none of its own money was at risk.
Therefore, I would hold that in order for an insurance company to submit a claim made by a third party against its insured to arbitration, its insured must agree in writing to be bound by the arbitration judgment or the third-party claimant must agree in writing that in the event the amount of the arbitration award exceeds the amount of the insured’s policy limits of coverage, the claimant will accept as full and final settlement the amount of the policy limits and release the insured accordingly.
HOWE, C.J., concurs in Justice RUSSON’s dissenting opinion.

. The Utah Arbitration Act permits a court to specifically enforce an arbitration agreement. See Utah Code Ann. § 78-31a~4. However, as previously established in this dissent and as the majority opinion acknowledges, only written arbitration agreements are valid and enforceable under section 78-3la-3. It therefore follows that only written agreements may be specifically enforced under section 78-3la-4. Because the statute does not authorize specific enforcement of oral arbitration agreements, the general rule is still applicable.

. "[C]ommon law revocability of any submission to arbitration was recognized but with liability for ‘all the costs, expenses, and damages which (the opposing party) may have incurred in preparing for such arbitration.’ ” Pirsig, supra, at 689 (quoting N.Y.Rev.Stat. § 23 (1829)).

. Jenkins was injured on September 24, 1994. The statute of limitations for filing a personal injury action is four years. See Utah Code Ann. § 78-12-25.