Case ID: abb-pr-ns_7/html/0251-01.html
Source: Caselaw Access Project
Author: {"author": "Loew, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

HEATH against PRESIDENT OF GOLD EXCHANGE.
    
      New York Common Pleas ; Special Term,
    
    
      December, 1869.
    Injunction against Arbitration.— Arbitration Clause in Constitution of Association.— Judicial Tribunals.—Revocation of Submission.
    The constitution of the New York Gold Exchange established an Arbitration Committee, and provided that “ it shall be the duty of said committee to take cognizance of and exercise jurisdiction over all claims and matters of difference between the members of the board, and their decision shall be binding.”—Held, in an action by the plaintiffs, who were or had been members of the board, to enjoin the board and its committee from arbitrating upon a matter of difference between" them and other members, that such a provision could only have the same force as a written agreement to submit an existing controversy to arbitration, and, like such an agreement, was revocable.
    The plaintiffs in this case, having revoked any authority given on their part to the submission of controversies to the Arbitration Committee, an injunction should not be granted to restrain the committee from making an award; for any award that they might make could not be enforced.
    Motion to continue a preliminary injunction.
    This action was brought by William Heath and others, who were partners in business, and members of the New York Gold Exchange, against John F. Under-hill, President of the Exchange, and others, the members of the Arbitration Committee of that association.
    The plaintiffs alleged in their complaint that they were members of the Exchange, and were apprehensive that the defendants would proceed to hear and determine a controversy between themselves and other members of the association, consisting of claims for differences alleged to have arisen out of transactions in the market, in the panic of September, 1869 ; that in such arbitration plaintiffs could not have a fair and definite determination of their rights ; and that in case of an adverse decision the defendants, as plaintiffs apprehended» would declare the plaintiffs no longer to be members of the Exchange.
    After obtaining a temporary injunction, the plaintiffs filed a supplemental complaint, stating that they had tendered their resignation as members of the Exchange, and were therefore no longer subject to its rules, or the action of its Arbitration Committee, and moved that the injunction be continued to forbid the committee from arbitrating upon the matters of difference in question.
    
      Atigustus F. Smith, for the motion.
    I. The courts will not enforce an agreement to arbitrate, for it is against public policy, as tending to exclude the appropriate judicial tribunal (2 Story Eq. J., § 1457 ; 1 Id., § 670 ; Kill v. Hollister, 1 Wils., 129 ; Street v. Rigby, 6 Ves., 815-818, Thompson v. Charnock, 8 T. R., 139 ; Mitchell v. Harris, 4 Brown Ch., 312 ; Agar v. Maclew, 2 Sim. & S., 418 ; Milnes v. Geery, 14 Ves., 400 ; Curtis v. Barnes, 30 Barb., 225 ; Allen v. Watson, 16 Johns., 205 ; Marsh v. Bulteel, 2 Barn. & Ald., 507; Russell’s Arbitrator, 147 ; 2 Rev. Stat., 544, §§ 23, 24, 25).
    II. An award made is enforcible in equity or at law (2 Story Eq. Jur., § 1458).
    III. White v. Brownell (3 & 4 Abb. Pr. N. S.), only holds that, while plaintiff remained a member of the board, it was competent for the board to deprive him of membership; and that decision cannot apply to this case, for here plaintiffs seek only to restrain the Arbitration Committee from proceeding to make an award against them, after they have revoked the submission and resigned membership.
    IV. The plaintiffs seek an injunction under the first clause of section 219 of the Code, upon the ground that the action of the Arbitration Committee ■ in proceeding to make an award against them, would produce injury to them, and it is manifest that this is a case for an injunction, lest Livermore & Co., in whose favor an award will be made, should claim and insist in any suit to be brought by them upon the award that the plaintiffs, although they have tendered their resignation, did not thereby cease to be members of the Grold Board, and were, therefore, still bound by the action of the Arbitration Committee.
    
      John E. Burrill, opposed.
    The case presented by the original complaint cannot be distinguished from that of White v. Brownell (3 Abb. Pr. N. S., 318 ; 4 Id., 162). The supplemental complaint is inconsistent with the original complaint, and the attempt made by it to change the claim and ground of action from a suit in the character of members seeking relief on the ground of membership, to a suit disclaiming to be members, is an abuse of the process of the court, and will not be permitted (Slauson v. Englehart, 34 Barb., 198 ; Wattson v. Thibou, 17 Abb. Pr., 184).
    II. If the original complaint did not contain facts sufficient to constitute a cause of action, or to entitle the plaintiffs to any part of the relief demanded, such defect cannot be obviated by a supplemental complaint (same authorities; Milner v. Milner, 2 Edw. Ch., 114; 1 Hoff. Ch., 396). If the plaintiffs had no cause of action at the time the suit was commenced, they cannot obviate that objection by any thing which occurred since (McCullough v. Colby, 4 Bosw., 603).
    III. The original complaint was based on the fact that the plaintiffs were members of the association, and the plaintiffs now alleging that since the action was commenced they have ceased to be members, the injunction should be dissolved, and the plaintiffs left to such remedy as under the new condition of things they may be entitled to.
    IV. Regarding plaintiffs as members of the association, the case of White v. Brownell is conclusive ; and see authorities referred to in points of counsel in the report of that case.
    V. It is immaterial what may be the ulterior effects of the action of the Exchange in respect to the matters in controversy. Livermore & Co. are not parties to this suit, nor interested in the litigation, except as members of the association, and so far as they are represented by the association, the only question now presented is,—* shall the association proceed to enforce its constitutional jurisdiction ? and, so far as the association is concerned, the execution of its judgment will be limited to a suspension and expulsion of the' plaintiffs, if they refuse to submit to it.
    VI. If plaintiffs can be regarded as having ceased to be members, then this action cannot be sustained, for their only ground was that the exercise of the jurisdiction of the committee might affect them pecuniarily, by depriving them of their seats and other interests in the association ; and if they have surrendered these, no rights of property can be affected. Under such circumstances no injunction should issue, because no emergency exists.
    VII. We submit, however, that the plaintiffs cannot at will throw off the obligation they owe to the association, and sever the ties which bind them to the association. (1.) Regarded as a contract, the plaintiffs became members of the association, and thereby made a contract with the association and all existing and future members. (2.) The plaintiffs by such contract agreed with their fellow-members that all their transactions with such members should be made with reference to and subject to the conditions of the constitution and laws of the Board, which were thus made a part of the transaction itself. (3.) The association acquired the power in certain cases to suspend and expel its members, and it cannot be deprived of its power without consent. (4.) In the language of the supreme court, “ otherwise an unworthy person guilty of the most flagrant violation of duty could by voluntary action on his part in many cases escape a trial and the deserved ignominy of a dismissal (People ex rel. McCune v. Police Board, 26 Barb., 501 ; S. C., 19 N. Y., 188). (5.) See also People ex rel. Banks v. Board of Education, 2 Abb. Pr. N. S. 183 ; Van Orsdall v. Hazard, 3 Hill, 246.
   Loew, J.

As the injunction which was issued in this action has been modified with the consent of the plaintiffs’, so that the officers and members of the Hold Exchange, and the arbitration committee thereof, are now only enjoined and restrained from holding any arbitration in respect to the claims of W. F. Livermore & Co. against the plaintiffs, I shall only consider that point.

By article 7 of the Constitution of the New York Hold Exchange, of which plaintiffs are or were members, it is provided as follows: “The arbitration committee shall consist of a chairman, to be elected annually by ballot, and to serve for one year, and two members to be appointed by the president on the first of every month, to serve for one month. It shall be the duty of said committee to take cognizance of and exercise jurisdiction over all claims and matters of difference bel ween the members of the Board, and their decision shall be binding.”

The precise effect of an arbitration clause like this, in the constitution of an unincorporated association like the Hold Exchange, upon persons who voluntarily become members thereof, and agree to submit to and abide by the constitution and by-laws of the same, has, I believe, never been judicially determined. Before the constitution and laws of such an association can have any binding force whatever upon a member thereof, which will be recognized and enforced bj^ the courts, it must appear that such member personally assented to their provisions (Austin v. Searing, 16 N. Y., 112). Assuming that the plaintiffs in this action assented to the constitution of the Hold Exchange in such a manner as to establish a valid contract between them and the other members of the association, the question arises, what binding force or effect has this seventh article upon them % In my opinion the most that can possibly be claimed for it is that ifc should have the same force an-.l effect as an agreement in writing, made by persons, to submit to the decision of one or more arbitrators any conlroversy existing between them. If I am correct in this conclusion, it will become necessary to ascertain what the law is, in regard to an ordinary agreement to submit a matier in difference to arbitration.

For the reason that the enforcement of such' agreements is deemed against public policy, and as courts of justice-are presumed to be better capable of administering and enforcing the real rights of the parties than mere private arbitrators, such agreements are not enforced either by a court of la.w or a court of equity (2 Story Eq. J., § 1,457 ; 1 Id., § C07 ; Kill v. Hollister, 1 Wils., 129 ; Street v. Rigby, 6 Vesey, 818 ; Agar v. Macklew, 2 Sim. & S., 418 ; Milnes v. Gery, 14 Vesey, 408 ; Thompson v. Charnock, 8 Term, 139 ; Haggart v. Morgan, 5 N. Y. [1 Seld.], 422). But, after an award has been made, it is conclusive on the parties, and m ¡y be enforced if it is unimpeached and unimpeachable (2 Story Eq. J., § 1,458). By the Revised Statutes, a party is permitted to revoke the powers of the arbitrators, at any time before the cause is finally submitted to them for their decision (2 Rev. Stat., 544, § 23 ; Curtis v. Barnes, 30 Barb., 225 ; Allen v. Watson, 16 Johns., 205). This section of ■ the Revised Statutes, it seems, applies to all cases of submission to arbitration (Bloomer v. Sherman ; 2 Edw., 452, and see same case on appeal, 5 Paige, 575). And the court of appeals, in the case of Austin v. Searing (supra), speaking of such voluntary associations like the Grold Exchange, says : “To create a judicial tribunal is one of the functions of sovereign power; and although parties may always make such tribunals for themselves in any specific case, by a submission to arbitration, yet the power is guarded by the most cautious rules. A contract that the parties will submit confers no power on the arbitrator ; and even when there is an actual submission it may be revoked at any time.”

In my opinion, therefore, the plaintiffs had a perfect right to revoke and annul—as they allege by their complaint they did—any power to arbitrate they may have' previously conferred upon either the Gold Exchange or the arbitration committee thereof.

I do not understand that these views in anywise conflict with the case of White v. Brownell, decided in this court (3 Abb. Pr. N. S., 318 ; 4 Id., 162).

It was there decided that the Open Board of Brokers had the right to suspend or expel a member upon a breach of the by-laws by him in respect to the fulfillment of a contract. And, although the question of the effect of the arbitration in that case was the subject of discussion, yet the court both at special and .general term refused to pass on that question.

Now, whether the plaintiffs be regarded as members of the defendant’s organization, as they claim they are in their original complaint, or as having resigned and ceased to be such members, as they allege in their supplemental complaint, they having revoked and annulled any contract of submission to arbitration they may have made, any action which the Gold Exchange or the arbitration committee thereof may take in the premises will-amount to nothing. The defendants cannot enforce any award or judgment that they may make or render, and 1 apprehend that the plaintiffs could not be affected or injured by it in any way.

Having come to this conclusion, it would seem that the plaintiffs are not entitled to a temporary injunction. A court of equity should be extremely cautious in the exercise of the power to issue an injunction, and should award it only in very clear cases (Woodward v. Harris, 2 Barb., 439). It should not be granted in every case in which a party brings himself within the letter of section 219 of the Code, but the nature and extent of the injury which the plaintiff would suti'er, if the injunction were withheld, should be taken in consideration (Bruce v. Delaware & Hudson Canal Co., 19 Barb., 371 ; Gallatin v. Oriental Bank, 16 How. Pr., 253; McCafferty v. Glazier, 10 Id., 475).

The motion to continue the injunction should be denied, and the temporary injunction dissolvód.