This suit arises from a conventional arbitration under an agreement between Arrow Coach Lines, Inc., hereinafter called “Arrow” and Local Division No. 1313, Amalgamated Association of Street, Electric Railway and Motor Coach Employees of America, A.F.L., hereinafter referred to as the “Association.”
The employee whose discharge by Arrow provoked this proceeding is appellant Bryan H. Couey of Abilene, Texas.
The award of the arbitration panel was in favor of appellant.1 Suit in the court below was instituted by Arrow for the purpose of vacating such award. Motions for summary judgment were made by both parties. The motion of Arrow was granted, the motion of appellant denied. Judgment was rendered accordingly.
Since under settled legal principles later stated, we believe that our decision herein must turn upon a proper answer to the question of whether 6r hot the award of the arbitration panel is within the scope of the controversy submitted to it, we will fully treat the procedural aspects of the case and minimize factual matters pertaining to the merits.
On September 13, 1954, Arrow notified appellant, who had been in its employment about 11 years, of his dismissal and gave these reasons:
“Based on your record from June 1st, 1953, to date, you are hereby permanently suspended as an employee of this Company. Our records reflect three (3) instances of excessive speed, one instance of reckless driving, smoking while driving, and various acts of hostility toward this Company.”
On September 16, 1954, the Association, acting for appellant, requested that Arrow set a time and place for a hearing regarding appellant’s discharge. This hearing resulted in a confirmation, by Arrow, of appellant’s dismissal. We quote a portion of Arrow’s letter, dated September 27, 1954, so advising appellant:
“With the understanding that the company reserves its right to object to any arbitration in the matter of any of the published rules of the company, as well as reserving all our rights under our contract and provisions as they relate to the matters presented in this hearing, I have again carefully considered the case of Mr. Couey, including a re-examination of each of the matters contained in his records. We are of the opinion that any of the matters contained in this man’s records furnish sufficient cause for dismissal.”
We quote now the relevant provisions of the contract between Arrow and the Association :
“In accordance with the established Company policy, an Employee will not be disciplined or dismissed from serv*194ice, nor will entries be made against his record without cause.”
Provisions are then made for a hearing before and decision of the General Manager or some other official of Arrow following which it is provided:
“If the Employee so disciplined, discharged or against whose record entries have'been made, is dissatisfied with such" written decision, he shall be entitled to demand arbitration thereof, * * *
Then follows ' directions for selecting the 'arbitrators and for the hearing to be conducted by them from which we quote:
“All parties at interest may appear at such hearing in person or by representatives, and there present all matters pertinent to the controversy in person, by witnesses and in such order as may ■be designated by the arbitrators. * *
“A written decision of the controversy shall be made, and signed by a majority of the arbitrators, with copies thereof to Company' and Association, within twenty (20) days after the hearing is concluded, and such written decision by the arbitrators' shall- 'be final and binding upon all parties, their successors and assigns.” ■
The contract further provides:
“If as a result of the arbitration, the discipline or dismissal of an Employee is found to have been without sufficient cause, the record of the Employee shall be made to conform to the final decision of the Board, and if time has been lost, the' Employee shall be paid for any loss of earnings which he may have suffered by reason thereof,' or so much of such loss as may be finally determined by the Board of Arbitration to be due to him.”
Other provisions which may have a bearing are:
“No arbitration hereunder and no arbitrator or arbitrators shall change or add to any term or provisions of this contract.”
“The Association agrees that it has full notice of the rules and regulations of the Company.”
“Failure on the part of the Company from time to time or at any time to enforce any rule or regulation shall not 'be deemed as a waiver thereof, nor bar the enforcement of such rule or regulation for any subséc[uent violation of the same.”
“It is understood and agreed, that the provisions of this agreement shall be subordinate to any ■ present. or subsequent federal, state, or municipal law or regulation to the extent that any portion hereof is in conflict therewith, * * *.”
Upon the hearing before the arbitrators . it was stipulated:
“This arbitration is held pursuant to the terms and provisions of the contract dated April 1, ■ 1954, between Arrow Coach Lines and Local Division No. 1313, of the Amalgamated Association of Street, Electric Railway and Motor Coach Employees of America, A. F. of L. ' All prerequisites to this arbitration as to whether Bryan H. Couey was dismissed by • Arrow Coach Lines for cause, have been fully complied with and this matter is now properly submitted to this hoard of arbitrators. Mr. Bryan Bradbury of Abilene, Texas, was selected 'by the said Bryan H. Couey and his representatives to serve on, such board and J. V. Hammett of Lampasas, Texas, was selected by Arrow Coach Lines to serve on such board and the Hon.. Frank Tirey was selected from a panel of three arbitrators named by Hon. Ben H. Rice, District Judge of the Western District of Texas, Austin Division, all in accordance with the terms of said contract and it is agreed that the validity of this board and arbitrators and selection of each mem*195ber thereof is valid and binding all parties hereto for all purposes.”
. As indicative of how the parties and the panel understood and construed the nature of the hearing we quote from the record:-
“Mr. Lynch: (for Arrow) Mr. Tirey, I believe we might get the union representatives, who have had much more experience and are more familiar with arbitrations than we are, to state the facts that in these informal hearings of this type that the Rules of Evidence are not followed, and that hearsay or anything else is allowed in the record.
“Mr. Estes: (for the Association), That is correct. In . our arbitration cases they do not follow the strict rules of evidence and a wide latitude is allowed, and then the impartial arbitrator then makes up his own mind relative to the case and the weight that it will bear.
“Mr. Tirey: I am going to hold it up for the time being and you might tálce it' up with the' panel again and then we will work it out.
* * * * * *
“Mr. Hammett: (for Arrow)' Mr., Tirey, wouldn’t it probably expedite our hearing to let that go in subject to your later- ruling on it?
“Mr. Tirey: Well, there isn’t much difference. I don’t- see that it would make any difference anyway because there is not any appeal from our decision, as I understand these rules.
* ⅝ * * * *
“Mr Tirey: Were you present when he had this conversation with this lady that you were talking about ?” A. No, sir. Mrs. Cofer is President of the Company and she reported the conversation to me as her general manager.
“Mr. Tireyr Are there any objections ?.
“Mr. Bradbury: (for appellant) Well, the rules that we are operating under, it is just kind of wide open, Judge. We may have a little hearsay ourselves so I can’t be too technical.
“Mr. Tirey: All right, we will let it go, but I can’t be very scientific in my rulings that way.”
We pause to observe that if all hearsay evidence was -eliminated from this record little else would remain.
The rules of Arrow 'the violation of which is charged to appellant are:
“5. Obedience to the Law. — Operators shall be familiar with, and must obey all laws and traffic regulations, in-eluding ■ those of -the Interstate Commerce Commission, the Railroad Commission of Texas, State Highway Laws of Texas, and the laws of the counties and towns through which they may operate. Such laws and traffic regulations must be obeyed and any violation thereof will be considered a violation of the Company rules.”
“14. Speed on the Open Highway.— Never, under- any condition, .operate a bus above the legal speed 1⅛⅛. Never, under any condition, operate a bus faster than can be operated safely, regardless of the speed limit.”.
“34. 'Hostility to the Company.— Words or acts, of hostility to the Company, its officers, or agents, or service, equipment, or its conditions, or willful disregard of its interests by employees of rules and regulations or criticism of the Company to other than supervisors or officers is positively forbidden, and will be followed by dismissal.”
“52. Use of Tobacco. — Operators are not .permitted. to use tobacco in any form while operating coaches, collecting tickets, accepting or discharging baggage to passengers, or while giving information to passengers. At other times, the use of tobacco is permitted.”
Rule 44 provides:
*196“44. Suspension and Dismissal.— Disobedience of orders, violation of rules, or neglect of duty, will always be considered sufficient cause for disciplining or dismissal. The rules herein contained in the Drivers’ Manual must be followed and failure to do so shall fee termed reason for dismissal;”
With respect to the evidence on the merits the record reflects that appellant admitted smoking on duty and speeding. He denied the reckless driving charge. As to the “hostility” charge appellant admitted that he violated a company rule in talking with fellow employees rather than with an official of Arrow when he' had anything “to report” but the record, on the whole, is subject to a fair and reasonable interpretation that he did not show hostility to Arrow or its officials.
The evidence also shows that Arrow did not interpret. its rules as requiring dismissal of an employee who violated a rule. Proof of this lies in the admitted fact that warnings were issued to employees for acts which, under the rules, authorized dismissal.
Rules of law applicable to contractual arbitrations are plain and well settled. They require that the arbitration be conducted and determined in accordance with the contract. They forbid an attack on the award made except for fraud, misconduct or such gross mistake as would imply bad faith or a failure to exercise an honest judgment. Galveston H. & S. A. Ry. Co. v. Henry, 65 Tex. 685. An award in excess of the authority conferred by the agreement is void. Fortune v. Killebrew, 86 Tex. 172, 23 S.W. 976; Evans v. De Spain, Tex.Civ.App., Austin, 37 S.W.2d 231.
Our duty, under this record, as we conceive it, is to construe the contract between Arrow and the Association and determine whether the award made is within or beyond the scope of the terms of such contract and the reference made by the parties thereunder. Callaway v. Albin, 114 Tex. 5, 261 S.W. 372.
Appellee has a cross point to the effect that since appellant admitted that he smoked on duty and drove in excess of the statutory limit that the award evidences bad faith on the part of the Board since Arrow rules provide that such acts are prohibited and shall constitute cause for dismissal.
As we construe the record the majority of the Board entertained the opinion that under the contract it was their prerogative to find the facts and assess or withhold punishment; that they had the same latitude in enforcing the company rules that Arrow had and that they were invested with a discretion as broad as Arrow had assumed. The hearing was conducted in this atmosphere. For these reasons we do not interpret the award as finding that appellant did not smoke on duty or that he did not speed. He freely admitted these charges. We interpret the award as simply ■finding that these infractions of Arrow’s rules did not justify appellant’s' discharge and that the Board, like Arrow, was not required to discharge or otherwise punish appellant.
Arrow’s position is frank. It contends that one puff on one cigarette by one, of its drivers while on duty is sufficient cause for his dismissal under the contract between it and the Association because its rules so provide.
If this is correct then there was never anything to arbitrate in this case because appellant never denied ’but freely admitted that he had smoked while on duty.
In construing the contract providing for arbitration we have given no consideration to the attempted reservation embodied in Arrow’s letter to the Association dated September 27, 1954, from which we have quoted above. Our reasons for this are that such letter simply evidences an ex parte effort to modify the terms of the previously executed and currently existing contract between the Association and Arrow and there is no evidence that the Association ever consented to such modifi*197cation.2 Furthermore the stipulation between the parties recites that the arbitration is pursuant to the terms of the formal contract and makes no reference to any modification of that agreement.
The contract provides that no employee shall be dismissed “without cause.” “Cause” is not defined in the contract.
The contract provides that dismissed employees “shall be entitled to demand arbitration thereof.” The right to demand arbitration, of course, includes the correlative right to receive arbitration.
The contract makes provision for the employee if as a result of the arbitration he is found to have been dismissed “without sufficient cause.”
The only provisions in the contract which cast any doubt at all upon the extent of authority vested in the arbitrators in this instance are the provisions in which the Association acknowledges notice of Arrow’s rules and that failure to enforce a rule shall not bar or waive future enforcement.
Our conclusion, reached with considerable doubt, is that the arbitration board was vested, by virtue of the contract, with the same authority and discretion as Arrow possessed with regard to appellant’s discharge.
If in every instance an admitted or indisputably proved violation of a company rule operated in a mandatory manner upon the arbitrators in discharge cases the Association would have gained little by their agreement to arbitrate such cases. This record shows that the rule against smoking is habitually violated. The rule against speeding, if technically enforced, would give Arrow unrestricted powers of discharge because everyone who drives a motor vehicle knows that in passing or in driving at the approximate maximum speed as buses must do in order to maintain reasonable schedules the literal letter of the law is breached.
If the agreement to arbitrate, the right of the arbitrators to find that the dismissal was “without just cause” and the agreement that the award should be “final and binding upon all parties” were all subordinate to Company rules and to their inexorable application and control we believe the contract should have so stated. Since it does not we are of the opinion that such intent cannot be fairly inferred from the nature of the agreement and the language used.
As reflecting our thought on this subject we quote from an Article by Guy L. Horton, Attorney and Arbitrator, Still-water, Oklahoma, in Vol. 9, Southwestern Law Journal, p. 332:
“A discharge case may involve only the question of guilt, for the offense may be of a type that, if committed, no reasonable person would contend that discharge was not the proper penalty. Other cases will involve the issue of whether discharge is the proper penalty for an offense proved or admitted. Where this is the question the arbitrator must of necessity weigh the nature of the offense against the severity of the penalty of discharge. In doing this he must give consideration to the rule that it is primarily the function of management to decide upon the proper penalty but that this does not mean that the company’s discretion can never be questioned. The company’s discretion must not be abused, but must at least be reasonably and fairly exercised.
“The correct answer may be found in the company’s actions in the past in regard to similar wrongdoing, but even this principle has its imperfections. In failing to assess the penalty of discharge in all cases involving a particular infraction, the company may either discriminate among employees or subject itself to such a charge. But to hold that management must always assess the same penalty for the same *198offense ignores the fact that there may be either mitigating or aggravating circumstances. The rigid application of the same penalty for the same infraction without regard to all the circumstances of the case is not to the best interests of either management or the employees. The test is that of fairness and consistency, considering the facts of the particular case.
“The question of whether the penalty of discharge is appropriate punishment cannot be .generalized. As stated by one. arbitrator, what constitutes ‘just cause’ must be decided on the basis of the, individual- merits of each case.”
We believe this record justifies the c'on-clusion that -the parties to the arbitration agreement contemplated proceedings of the nature so excellently discussed by Mr. Horton.
The judgment of the trial court is reversed and judgment is here rendered sustaining the award of the arbitrators.
Reversed and rendered.
. One member, Mr. J. V. Hammett, dissented.
. The contract makes specific provision for its modification and there is no evi-denee of compliance with these provisions.