Polish Supreme Court ruling
dated 14 February 1956
Case No. IV CO 29/55
Summary by arbitraz.laszczuk.pl:
Two individuals entered into an arbitration agreement to resolve a dispute involving real estate. The claimant alleged that he had provided the respondent funds to acquire real estate which was to be jointly owned by them in equal shares, but the respondent acquired the property solely for herself. He sought to compel the respondent to convey half of the property to him and to amend the entry in the land and mortgage register accordingly.
In the arbitration, each party appointed one arbitrator, but the arbitrators failed to appoint a third, presiding arbitrator. The parties entered into a settlement before such panel, in which the respondent admitted the claimant’s allegations and agreed to convey half of the ownership of the property to the claimant and to apply to the land and mortgage register to amend the entry for the property accordingly.
The respondent then brought an action before the county court to set aside the settlement under Civil Procedure Code Art. 510, on the grounds that the arbitration panel was incomplete. She alleged that she had applied to the arbitrators to appoint a third, presiding arbitrator, but they refused, and thus they were in dereliction of their duty and the arbitration clause lapsed accordingly. She also alleged that the settlement was invalid because it was not made in the form of a notarial deed as required by the Property Law for conveyance of real estate.
The county court denied the petition, holding that a petition could be filed under Civil Procedure Code Art. 510 only to set aside an arbitration award, not a settlement concluded before an arbitration court. The arbitration clause had not lapsed. The form of the settlement was sufficient because it did not purport to convey title to the real estate but merely established an undertaking to convey title. An allegation that the settlement was invalid could be asserted in any event only in defence to a petition to enforce the settlement.
The respondent sought review by the province court, which presented a certified question to the Polish Supreme Court, as follows: “May Civil Procedure Code Art. 510–512 (petition to set aside an arbitration award) be applied also to a settlement concluded before an arbitration court?”
The Supreme Court issued a ruling holding that Art. 510 applies only to an arbitration award, not a settlement concluded before an arbitration court. The court further stated that the respondent could have sought a declaratory judgment that the settlement was invalid or unenforceable, and the county court should have treated her petition as such. Nonetheless, in the opinion of the Supreme Court, the claim would have to be denied. The allegation that the arbitration clause had lapsed or that the arbitration court was improperly empanelled could be asserted as grounds for setting aside an award. The settlement itself would be utterly void only if made before persons who had not been appointed as arbitrators, and such was not the case. An undertaking to convey title to real estate could be made in a settlement before an arbitration court, which is of the same legal force as a state court judgment.
The Supreme Court concluded that even if the county court had considered the proper grounds for the petition by the respondent, it would have had to deny the petition, and therefore the review by the province court would have to be denied.
Excerpts from the text of the court’s ruling:
1. It follows from the title of Book III and from the first sentence of Civil Procedure Code Art. 510 that the petition provided for in this chapter is applicable only to arbitration awards, and via such petition it is possible only to seek to set aside an award. Such petition cannot be extended by analogy to apply also to a settlement, as the role of the arbitration court in conclusion of a settlement is limited to accepting and documenting the settlement, and thus the settlement does not contain any of the elements constituting the essence of a judicial determination.
2. A party rightly disputing the validity of a settlement is not in any respect bound by the settlement, but should assert such invalidity not by relying on Civil Procedure Code Art. 510, but by other means. An action for a declaration of the invalidity of the settlement will serve this end, or an action based on Civil Procedure Code Art. 573 if the party wishes to restrict itself to depriving the settlement of its enforceability, although in such instance the time limits provided in Art. 573 §1(2) will not apply because they are strictly tied to the res judicata effect of a judgment, which settlements do not have.
3. Absolute invalidity, which would deprive an award or settlement of the character of a judicial act even without the need to challenge the award, would come into play if persons were sitting as arbitrators who had not actually been appointed as such.
4. Under Civil Procedure Code Art. 508 §1, arbitration awards as well as settlements concluded before an arbitration court are equivalent to state court judgments. Thus with respect to an undertaking to make declarations of will, they exert the same effects as state court judgments.