Case ID: ad_82/html/0037-01.html
Source: Caselaw Access Project
Author: {"author": "Laughlik, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Theodor G. Lurman, Appellant, v. James H. Jarvie and Others, Respondents.
    
      Suspension from the Ooffee Exchange of New York city—action to recover damages resulting therefrom — exemption from liability of the board, of managers acting in a quasi judicial capacity.
    
    The Coffee Exchange of the city of New York is a corporation composed of coffee merchants, and one of the principal objects thereof is the adjustment of controversies between its members without recourse to the courts.
    One Lurman, who was a member of the exchange, agreed to purchase a quantity of coffee from the firm of W. H.-Crossman & Bro., the members of which were also members of the exchange. Lurman refused to accept the coffee on the ground that it was adulterated and, therefore, could not be lawfully sold as an article of commerce under the laws of the State of New York.
    The graders mentioned in the contract decided against this contention. Lurman refused to abide by this decision and Grossman & Bro. thereupon made complaint to the Coffee Exchange. The complaint was referred to the adjudication committee of the exchange, which refused to hear or determine the controversy as to the adulteration of the coffee, holding that the decision of the graders was conclusive. They accordingly reported to the board of managers of the exchange that it was Lurman’s duty to accept the coffee.
    When the report of the adjudication committee was presented to the board of managers that body also refused, over the objection of Lurman, to consider the merits of the controversy, and after giving Lurman notice and' an opportunity to accept the coffee, suspended him for a period of one year.
    Lurman then instituted a proceeding to compel his reinstatement, which resulted in a determination that he could not be lawfully suspended until his claim that the coffee was adulterated had been investigated and decided against him.
    After procuring his reinstatement Lurman brought an action against the board of managers of the exchange to recover as damages for his unlawful suspension compensation for the inj ury done to his business reputation and reimbursement for counsel fees and other incidental disbursements in securing his reinstatement and for the dues paid by him to the exchange for the year during which he was suspended.
    
      Held, that the complaint was properly dismissed;
    That the case fell fairly within the rule that, in the absence of malice, persons acting in a quasi judicial capacity are not liable for errors of judgment in erroneously determining matters within their jurisdiction affecting the personal or property rights of others.
    Appeal by the plaintiff, Theodor Gr. Lurman, from a judgment of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of New York on the 7th day of March, 1902, upon the dismissal of the complaint by direction of the court after a trial at the blew York Trial Term. ■
    The facts alleged in the complaint and stated in Exhibit A thereto annexed, by counsel for plaintiff in opening the case, so far as material to the questions arising upon- the appeal are as follows: The Coffee Exchange of the city of b¡ ew York, composed of coffee merchants, was incorporated by chapter 393 of the Laws of 1885 ; among the objects of its incorporation were these, “ to adjust controversies between its members; to inculcate and establish just and equitable principles in the trade; to establish and maintain uniformity in the rules, regulations and usages of the trade; to adopt standards of classification of coffees and generally to promote the above mentioned trade in the city of líeW York, and increase its amount and augment the facilities with which it may be conducted.” The plaintiff was a member and the defendants constituted the board of managers. The plaintiff is also a member of the firm of Theodor Gr. Lurman & Co., of Baltimore, Md., dealers in coffee. Membership in the exchange was valuable. Plaintiff and his firm did a large business in coffee both in blew York and Baltimore, and enjoyed a valuable reputation for honest and fair dealing in his trade and business as a merchant.
    The exchange had rules and regulations, and one of its principal objects was the adjustment of controversies between its members expeditiously, inexpensively and by the members without recourse to the courts. The appellant had a contract with the firm of W. H. CrosSman & Bro., the members of which were also members of the exchange, for the purchase of a quantity of coffee of different grades which was in transit. The contract provided that the coffee was to be graded by the firm of Mackey & Small, for the purpose of determining whether or not it came up to the grade called for by the contract ; but in- case the appellant was dissatisfied he could appoint a grader, and in case his grader and said firm could not agree, they could appoint a third person to act as “ grade arbitrator.”
    On the arrival of the vessel the appellant refused to accept the coffee and to appoint a grader, claiming that it was adulterated and, therefore, could not be lawfully graded, held or sold as an article of commerce under the statutes of this State. The alleged adulteration consisted of artificial coloring and polishing for the purpose of giving the beans a uniform color and smooth appearance and of concealing defects. The graders named in the contract held that the coffee complied with its terms. The matter was referred to a committee of three of the exchange called “ adjudicators.” The adjudicators or a majority of them decided against the appellant without hearing his proof or determining the question of adultération, but holding that the terms of the contract required that grade arbitrators be appointed. The board of managers by a tie vote sustained the decision of the adjudicators. The appellant then under protest appointed a grader. His grader and the firm named in the contract disagreed and a grade arbitrator was appointed. The graders refused to hear evidence of adulteration offered by the appellant or to determine that question, but two of them certified that the coffee was “ up to sample ” and was “ good delivery ” under the contract.
    The appellant refused to accept the coffee and the vendors made complaint to the exchange of such refusal and violation of the contract by the appellant. It was referred to the adjudication committee. The appellant appeared before the committee and offered proof of the alleged adulteration and unlawful character of the coffee, but the committee refused to hear the proof or to determine the question, holding that appellant was concluded by the decision of the graders, and reported to the board of managers that it found the complaint sustained, and that under the rules of the exchange it was • the duty.of the appellant to accept the coffee. The appellant made complaint against Messrs. Grossman & Bro. for having availed themselves, as was claimed, of the “ technicalities of the rules of the exchange to force the acceptance of unlawful goods contrary to just and equitable principles of trade; ” and also against the graders for having decided the case without determining the merits and “ undertaken to grade unlawful, i. e., adulterated goods.”
    Notice was given appellant that the report of the adjudication committee on the complaint against him would be considered by the board of managers on October 16, 1894, at three-thirty p. m. ; and that his complaint against Messrs. Grossman & Bro. and the graders would be considered by the adjudication committee at eleven-thirty of the same day. The appellant was in Baltimore and did not receive notice of these appointments of hearings until October 14, 1894. He was unable to attend on the sixteenth, but by letters requested that the board delay action .until after the hearing by the adjudication committee of. said complaint arid pointed out that the ■ merits of the controversy had never been determined and demanded that the board hear and.determine the same. He also forwarded to the board of managers a statement of his case, containing extracts from the statutes accompanied by the proof of his contention, constituting his defense before the board and his complaint before the committee.
    It appears that the fact of adulteration by painting and polishing in the manner, if not in the extent, claimed by the appellant was conceded by Messrs. Grossman & Bro. before the adjudication coim miftee, and no attempt was made to show that it was not condemned by the statutes. The claim was made, however,' that the small quantity of adulteration was not deleterious to- public health.
    The adjudication committee adjourned the hearing on appellant’s complaint to October 18, 1894, at eleven-thirty a. h., but nothing further appears to have been done with it. The board of managers; however, without considering or determining the merits of the controversy, further than having appellant’s claim so forwarded to them as aforesaid, read before them and placed • on file, passed a resolution on October 16, 1894, censuring the appellant and decreeing that unless he settled with Messrs. Grossman & Bro. in full before noon . of October 19, 1894, he should stand suspended from all the privileges of the exchange for the period of one year. The appellant then protested in writing and notified each of the respondents that their action was illegal; that they were depriving him of his rights as a member to have the merits of the question whether or not the coffee was adulterated and condemned by the statute determined by the exchange; that they were attempting by duress of suspension to coerce him into accepting unlawful goods, without hearing or determining the merits of the controversy; that great damage would . result to him in the loss of his privilege as a member and in the injury to his business reputation, and that he would hold them personally responsible for such damages as he should sustain. He further requested that the board reconsider the matter. The board reconvened on October 19, 1894, but evidently without further notice to the appellant, and again passed the resolution by ballot instead of viva voce as before, except that the time was extended to October 22, 1894, when the appellant was suspended without any further consideration of the case. He was excluded from the privileges of the exchange and his name posted as a suspended member. His suspension also appeared in the newspapers. He was required to pay, and did pay, his annual dues of fifty dollars for the period of his suspension.
    The appellant then instituted a proceeding to compel his reinstatement by mandamus. The Special Term denied the application, but the General .Term held, in effect, that the appellant could not be suspended for refusing to take coffee claimed to be adulterated, within the meaning of the statute against it, “without inquiry, investigation and decision as to whether this claim was justified,” and reinstated the appellant. (Matter of Lurman, 90 Hun, 303 ; affd., 149 N. Y. 588.) Reinstatement does not appear to have been effected within the year’s suspension.
    The complaint alleges that the suspension was illegal and without jurisdiction on the part of the respondents to render the determination, but it does not appear that the notice he received was not in accordance with the by-laws of the exchange, and it seems to be conceded that, if the respondents had considered the question of adulteration and decided against the appellant they would have had authority to censure and suspend him.
    The damages alleged for expenses in obtaining reinstatement and injury to business generally is $5,000, but on the opening counsel stated that the injury most complained was that to appellant’s business reputation.
    It is not alleged in the complaint that the defendants entertained or were actuated by malice toward the plaintiff. At the commencement of the trial the defendants moved to dismiss the complaint owing to the omission of an allegation of. malice. The motion was denied and counsel for defendants excepted. Counsel for the plaintiff then opened the case and the stenographer took his opening. The motion for a dismissal of the complaint was then formally renewed upon the grounds: “ First, that no malice is alleged against the defendants, either in the opening of counsel or in the complaint. Second, that the defendants, upon the opening and upon the complaint, appear to have acted in a judicial or quasi judicial capacity and, therefore, are not liable for errors. Third, that the only error charged against them is an error of excluding evidence, and there is no personal liability for such an error. Fourth, there is no cause of action.” Counsel for plaintiff thereupon asked leave to amend the complaint by alleging malice; but the amendment being objected to as changing the whole cause of action, was denied. It was then stated by counsel for plaintiff that the legal questions presented were serious, and he suggested that the court grant defendants’ motion for a dismissal either on the complaint alone or on the complaint and opening, and give his client an exception. The court then inquired of counsel for the plaintiff if he did not state in his opening that he might be able to show malice inferentially, to which he replied : “ I was going to say in relation to the question of malice that I stated in my opening the facts, as I am advised, is the correct statement, and which I have confirmed since the adjournment of the court by reading Exhibit A, which is attached to the complaint. Whether they confirm the inference of malice or not, I do not care at the present time to empress any opinion, and I prefer to say nothing more than that we could show no other facts from which ■ the inference of malice could be drawn except those that cure stated i/n the complai/nt a/nd the exhibit attached to the complcumt. Those were facts which were brought' to the attention of the Board of Managers of the defendants after the report of the adjudication committee and after the first resolution which they passed on the ,16th of October. But, entirely independent of that, I regard the serious question in the case as the judicial question, and it seems to me advisable that before we go into this case it would be just as well, as the question has been raised, that that legal question should be determined.”
    
      Charles Stewart JDamison, for the appellant.
    
      Ed/ward M.. Shepard, for the respondents.
   Laughlik, J.:

We are of the opinion that this action cannot be maintained and 'that the complaint was properly dismissed: Neither bad faith nor malice is alleged, nor are the facts stated of such a nature as to necessarily imply the existence of either. ■ The plaintiff having expressly conceded, in order to present the legal question, that he is unable to show any other facts than those stated in his eomplaiiit, the exhibit annexed and in the opening—the material parts of which are set forth in the statement of facts — malice not having been alleged, should not be inferred if the facts are open to an inference of good faith, and we think they are.

One of the principal objects of the Coffee Exchange was to provide for the speedy and inexpensive determination by arbitration of controversies between its members for the purpose of saving the delay and expense incident to an appeal to judicial tribunals. The plaintiff’s fellow-members of the exchange on this arbitration erred in their view of his rights, as did likewise the respondents as members of the board of managers. Of course the respondents acted with full knowledge of the plaintiff’s claims as to his rights ; but it . is manifest that they believed that it was his duty to accept the decision of the arbitrators and that the proper discipline of the members of the exchange required that he should be suspended for failing to do so. It does not appear that they proceeded in disregard of any by-laws of the exchange. It is conceded that they had power to suspend members for cause, and that if they had heard the plaintiff and then suspended him no action would lie. The appellant’s contention apparently is that the respondents acted without jurisdiction. It appears that the suspension of the plaintiff arose incidentally out of the arbitration proceeding concerning the grading of the coffee and the enforcement of the contract as between the members. It is not denied that these proceedings originated in accordance with the by-laws of the exchange and that the plaintiff had full knowledge and such notices as were required and provided for by the by-laws or rules of the exchange. He actually received two days’ notice of the hearing which resulted in his suspension. The fair inference is, although the fact is not specifically alleged or stated, that the method of enforcing the arbitration is by the suspension or expulsion of the member, and that this action may be taken by the board of managers upon the report of the adjudicators when there is no denial of the fact that the member refuses to •be bound by their determination. Manifestly, the contingency which arose in this case was not foreseen, and apparently no provision had been made for permitting the member to show by formal testimony that the condition of the coffee was such that it could nob be lawfully dealt in under the laws of this State. The court in the mandamus proceeding decided, regardless of any by-law of the corporation, that the plaintiff before being suspended was not only entitled to be heard, but to show in defense of his action the illegal character of the coffee which it was proposed to require him to accept, and that he could not be suspended for refusing to accept adulterated coffee. (Matter of Lurman, 90 Hun, 303 ; affd., 149 N. Y. 588.) At first view, the conduct of the respondents would seem to have been arbitrary, but it-is not improbable that they regarded the action of the appellant in refusing to abide by the decision of the adjudicators, as tending towards insubordination and calling for discipline. They may very well have supposed that the effect of their charter and their by-laws was that’ their members submitted absolutely and finally to the decision of their fellow-memberá of the exchange upon questions concerning their contracts and dealings with one anotherand doubtless that had been the history of the exchange, for we know of no instance where such a question has been previously presented to the courts for review. If the respondents proceeded wholly without jurisdiction it may be that they would be liable for any legal damages sustained by the plaintiff in his property rights as the direct result of their illegal acts, upon the principle that subordinate officers even though acting in a quasi judicial capacity are bound to see that they act within their authority, and good -faith does not protect them in-assuming jurisdiction which they have not. (New York Milk Products Co. v. Damon, 57 App. Div. 261; affd., 172 N. Y. 661; City of New York v. McLean, 170 id. 374; Miller v. City of Amsterdam, 149 id. 288; Mygatt v. Washburn, 15 id. 316 ; Matter of Leggat, 162 id. 437.) But it appears that they had jurisdiction to hear the charges against the appellant and he had notice of the hearing. Having jurisdiction and it being their duty to act they failed, through ignorance of their duties, to fully exercise it and in effect- refused to hear and consider evidence which if heard and considered would upon the law have precluded the action taken by them. And it being the duty of respondents to act, this brings the case fairly within the rule that those acting in a quasi judicial capacity are not liable for errors of judgment in erroneous decisions in determinations affecting the .personal or property rights of others in the absence of malice. (Harman v. Tappenden, 1 East, 555; Barhyte v. Shepherd, 35 N. Y. 238; Jenkins v. Waldron, 11 Johns. 114; Porter v. Haight, 45 Cal. 631; Downer v. Lent, 6 id. 94; Ackerley v. Parkinson, 3 Maule & S. 411; Jones v. Brown, 54 Iowa, 74; Handshaw v. Arthur, 9 App. Div. 175; affd., 161 N. Y. 664.)

As shown in the statement of facts, the plaintiff’s main purpose in bringing the action is to recover damages for injury to his business reputation, and his counsel likens the action to one for slander or libel. These, actions, however, are based upon malice which sometimes has to be affirmatively shown, and in other instances it is presumed from the nature of the wrongful act. The same is true of. actions for malicious prosecution and false arrest and imprisonment. We know of no class of actions where damages to one’s character or reputation are recoverable in the absence of malice, express or-implied. But however the rule may be in other cases, we see no propriety in permitting a recovery for damages to the plaintiff’s business reputation on the facts of this case, there being no malice alleged or facts stated from which it should fairly be implied. (Harman v. Tappenden, 1 East, 555.)

The plaintiff also alleges as an item of damage counsel fees and other incidental disbursements incurred in instituting the mandamus proceeding to procure reinstatement. We do not understand that this claim embraces the costs and disbursements allowed and taxed in the mandamus proceedings which have been awarded against the exchange itself and- were undoubtedly paid. Where the gravamen of an action is malice, as, for example, malicious prosecution or false arrest, or imprisonment, the counsel fees necessarily incurred by the plaintiff in the former action are recoverable. (8 Am. & Eng. Ency. of Law [2d ed.], 675 ; Sheldon v. Carpenter, 4 N. Y. 579 ; Williams v. Garrett, 12 How. Pr. 456.) In an action upon an undertaking for an injunction or attachment where the recovery of such damages is fairly contemplated by the statute and contract, in actions for breach of covenants of warranty and indemnity and in contempt proceedings, counsel fees are also recoverable. (Andrews v. Glenville Woolen Co., 50 N. Y. 285; Rose v. Post, 56 id. 603 ; Tyng v. American Surety Co., 69 App. Div. 137 ; Crounse v. Syracuse, C. & N. Y. R. R. Co., 32 Hun, 497; Dubois v. Hermance, 56 N. Y. 673 ; Jewelers' Agency v. Rothschild, 6 App. Div. 499 ; Sedg. Dam. [8th. ed.] § 237; 8 Am. & Eng. Ency. of Law [2d ed.], 673, 675, 677.) The rule is well settled in this State, however, that disbursements for counsel fees are not ordinarily recoverable as damages for a breach of eohtract, or even of a statutory duty or in common-law action for tort in the absence of' malice. (Bishop v. Hendrick, 82 Hun, 323 ; affd. on opinion below, 146 N. Y. 398; . Clason v. Nassau Ferry Co., 20 Misc. Rep. 315 ; affd., 27 App. Div. 621; Hicks v. Foster, 13 Barb. 663; Lincoln v. Saratoga & Schenectady R. R. Co., 23 Wend. 425 ; Mattlage v. N. Y. El. R. Co., 17 N. Y. Supp. 536.) We think it clear, therefore, that counsel fees and other incidental disbursements in the action, not taxed as costs or disbursements, are not recoverable.

The only other loss alleged to have been sustained by the plaintiff is the payment of his annual dues for the year during which he was suspended, and. this is not specifically alleged as an item of damages. The payment of these dues was not caused by the suspension. They were the ordinary dues levied upon each member presumably pursuant to the by-laws of the exchange. Consequently this item would not be recoverable as damages, at least unless it were shown that damages were suffered on account of the appellant being deprived of the privileges of membership, and such damages were so speculative as to he incapable of ascertainment with sufficient definiteness and certainty to be specially pleaded, proved and recovered. It is hot so alleged in the complaint.'

We, therefore, find no aspect of the case which would justify a recovery. It follows that the judgment should be affirmed, with costs.'

O’Brien, McLaughlin and Hatch, JJ., concurred ; Yan Brunt, P. J., concurred in result.

Judgment affirmed, with Costs.