Case Name: The City Trust, Safe Deposit & Surety Co. of Philadelphia, Plaintiff, v. Frederic Waldhauer, Defendant
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1905-04
Citations: 47 Misc. 7
Docket Number: 
Parties: The City Trust, Safe Deposit & Surety Co. of Philadelphia, Plaintiff, v. Frederic Waldhauer, Defendant.
Judges: 
Reporter: New York Miscellaneous Reports
Volume: 47
Pages: 7–15

Head Matter:
The City Trust, Safe Deposit & Surety Co. of Philadelphia, Plaintiff, v. Frederic Waldhauer, Defendant.
(Supreme Court, New York Trial Term,
April, 1905.)
labor — Where association of employers not unlawful — Member gave bond to obey all orders, etc. — Order violated and surety paid — Action by surety against member.
An organization of master employers whose sole object and intent is to secure stability in the building trades by obtaining an agreement for the settlement of differences by peaceful arbitration, instead of by so-called sympathetic strikes, is not unlawful.
Defendant as a representative of an association of roofers and sheet metal workers, upon voluntarily becoming a member of the Building Trades Employers’ Association, whose general objects were lawful, gave a surety company bond for $500 issued in his own behalf and in favor of the association to obey and execute all decisions, orders, prohibitions and regulations of its board of governors given and made under the authority of its constitution and by-laws. The board of governors in an endeavor to get the situation brought about by the strike of 1903, in the building trades in the city of New York, in such shape that building would go on with some degree of certainty, made arrangements by which men entering the employment of its members should agree to sign an agreement which provided that they would arbitrate all their differences and would not go out on sympathetic strikes and unanimously adopted and sent to each member the following: “Resolved, that no member of the Building Trades Employers’ Association shall employ any roofers, sheet metal workers, roof tilers or slaters, and members having such men at work shall immediately lay them off until further notice ”, and defendant received a copy. Upon proof that defendant, after laying off men for three weeks, took them back to work without the consent of the association and without asking whether they had signed the arbitration agreement, the board of governors found that he had violated its order and in due course notified defendant and his surety that the bond had been ordered forfeited and demanded payment of the $500, and upon defendant’s default the surety paid the amount. Held, that in an action by the surety company against defendant, upon the bond and upon the indemnity agreement contained in the application therefor to keep harmless the surety from and against all suits, loss, damage, etc., which it might at any time sustain in consequence of having given said bond, etc., plaintiff was entitled to judgment for the $500 with interest, together with a reasonable counsel fee.
Action by surety against principal on a bond, after payment. The opinion states the case.
Frederic J. Swift, for plaintiff.
H. C. Bachrach, for defendant.

Opinion:
Clarke, J.
Plaintiff is a surety company. On June 26, 1903, the defendant applied to plaintiff for a bond in the sum of $500' in his own behalf and in favor of the Building Trades Employers' Association. Defendant's application contained an indemnity agreement whereby he agreed to faithfully, fully and strictly comply with all the terms and conditions of said bond and " to keep harmless the company from and against all suits loss, damages, etc., which the company shall or may at any time sustain in con- ^ sequence of having given the said bond and to pay to the company all damages for which the company shall become responsible upon said bond before the company shall be compelled to pay the same, and to pay all costs and expenses, including counsel fees, which the company may incur in investigating any claim made under said bond or in defending any suit commenced upon said bond." Upon such application and indemnity agreement the plaintiff, as surety, with defendant, as principal, did, on the 26th of June, 1903, issue its bond on behalf of defendant and in favor of the Building Trades Employers' Association and Charles L. Eidlitz, as president thereof, and the individual members thereof in the sum of $500. Said bond contains the following : " Whereas as the aforesaid principal has been admitted as a representative member of the Building Trades Employers' Association, one of the said obligees, upon his agreement and stipulation herein and hereby evidenced, that he will obey and execute all decisions, orders, prohibitions and regulations of the board of governors of said Building Trades Employers' Association, given in pursuance and made under the authority of the' constitution and by-laws of said association, immediately upon service upon him of a copy of the same duly certified by the secretary of said association, and also upon the execution and delivery of this undertaking to said association, to pay to said obligees the sum of $500 for liquidated damages to said obligees, by reason of any noncompliance of said principal with said agreement and stipulation. Row, therefore, the condition of this obligation is such that if the said principal shall duly and faithfully obey and execute any and all such decisions, orders, prohibitions and regulations of said board of governors of the said 'Building Trades Employers' Association, given in pursuance and under the authority of the constitution and bylaws of said association, then this undertaking shall be void; otherwise to remain in full force and effect. This undertaking is issued upon the express condition that upon due proof to the said surety that the said principal, after service upon him of a copy of any decision, order, prohibition or regulation, and has been declared to be in default thereof by said board of governors, and has, upon demand, failed to pay to said obligees the amount of this undertaking, then within thirty days after receiving notice of said service and default the said surety agrees to pay the full amount of this undertaking to said obligees as liquidated damages, which sum is herewith stipulated as liquidated damages and not as a penalty by the said principal, the said obligees and the said surety; and the surety and the said principal herewith waive all defenses they may have against the payment of said sum. And upon the further condition that if any liability shall accrue on the part of the said surety by reason of this undertaking after settlement of the same the said surety shall be subrogated to all rights and remedies which the said obligees would have against the principal in this undertaking, or any other person." The Building Trades Employers' Association was an unincorporated association, composed of employers of labor in the building trades. As expressed in its constitution: " The objects of this association shall be to foster the interests of those engaged in the erection and construction of buildings and other structures, to reform abuses relating to the business of persons so engaged, to secure freedom from unjust and unlawful exactions, to obtain and diffuse accurate and reliable information as to all matters affecting such persons, to procure uniformity, harmony and certainty in the relations existing between employers, employees, mechanics and laborers, and in all lawful ways to promote and protect the business interests of the members of this association, but there is no intention nor shall there be any action on the part of this association to control or in any way deal with prices or restrict competition." The defendant belonged to this association as a representative member. That is, he belonged to the association of " roofers and sheet metal workers," which said association was represented by three representatives upon the board of governors of the Building Trades Employers' Association. Said board consisted of sixty such representatives, three from each of twenty different employers' associations. The powers of the board of governors, as defined in the constitution, are as follows: " The board of governors shall, at the request of any constituent association, have power to decide all controversies, difficulties and differences arising between the members of its association and their employees, to determine and regulate the conduct of the members of this association relative to such controversies, difficulties and differences, to decide all disputes and disagreements arising between employers' associations represented on the board of governors and employees' organizations; also all controversies, difficulties and differences arising between different employers' associations represented on the board, and to determine, regulate and control the conduct of such employers' associations relative to such disputes, difficulties and differences and generally to de termine, regulate and control the conduct of the members of this association and the employers' associations represented on the board in all matters pertaining to their relation with their employees, or in any and all matters affecting the building industry or the business interests in such building interest of the members of this association and for such purposes to make general rules and regulations. The decisions, orders, prohibitions and regulations of the board of governors shall be final and obligatory upon each and every member of this association and shall be complied with, obeyed and observed in good faith by every member. The board may suspend or expel members of this association for cause by the same quorum and vote as is required to order a cessation or resumption of work." The constitution contains this provision : " When the question of ordering a cessation or resumption of work by any or all of the members of the association is before the board representatives from not less than seventy-five per cent, of the associations represented on the board shall constitute a quorum, and to order a cessation or resumption of work at least four-fifths of the vote must be in favor of such an order." Also this: " In order to insure the compliance with and obedience to the decisions, orders, prohibitions and regulations of the board of governor's all repre-. sented and individual members shall give bonds to this association." In the summer of 1903 there was a widespread strike in the building trades in the city of Hew York. The Building Trades Employers' Association attempted to get the situation in such shape that building would go on with some degree of certainty. In carrying out that object the board of governors made arrangements by which men entering the employment of the members of the association should agree to sign an arbitration agreement, which provided that they would arbitrate all their differences and would not go out on sympathetic strikes. A great many of the roofers, sheet metal workers, roof tilers and slaters had signed this arbitration agreement. In order to further this policy, and at the request of the Association of Sheet Metal Employers, a circular letter was issued on July 29, 1903: " To the members You are hereby informed that the following resolution was unanimously adopted at a meeting of the hoard of governors, held to-day, and you will please govern yourselves accordingly: Resolved, that no member of the Building Trades Employers' Association shall employ any roofers, sheet metal workers, roof tilers or slaters, and members having such men at work shall immediately lay them off until further notice." The president of the association testified that the resolution meant, and that the members understood, that said resolution did not apply to roofers, sheet metal workers, roof tilers and slaters who had signed the arbitration agreement. The defendant received a copy of said order. He testified that when he received it he was engaged in the construction of the Morris High School, in the city of New York; Public Schools 123 and 130, Brooklyn; fifteen houses in Third, street; forty-rtwo houses for tire Eastern Parkway Company, Brooklyn, and a great many other jobs — all under written contracts containing time limits and penalties; that when he received this notice he laid off the men; that he kept them off about three weeks; that then the contractors for these schoolhouses sent him three days' notices, threatened him with penalties and also to bréale the contract and get some one else to finish up the jobs; and that then he took the men back to work without the consent of the association and without asking whether they had signed the arbitration agreement. It appears that this was reported to the board of governors, and on the 21st of August, 1903, written notice of the charge was sent to defendant and he was notified to appear and make answer on the twenty-fourth. On the twenty-fourth defendant failed to appear, and, evidence having been taken, it was found that he had violated the order and it was determined that he be expelled and his bond forfeited and the plaintiff notified. The plaintiff was notified in writing on August twenty-sixth that the bond had been ordered forfeited by the board of governors. On September twelfth the board sent the proof of the regularity of its proceedings to the plaintiff, including a copy of a letter of September second to defendant notifying him of the action of the board and demanding payment of the sum of $500. Under date of September sixteenth the plaintiff notified the defendant in writing that the board of governors had sent the papers to it and stated that unless he should immediately pay it would be compelled to bring suit. Defendant not having paid, the plaintiff sent on October fifteenth its check for $500 to the association. It is conceded that $100 is a reasonable counsel fee and that the interest is $42, and this suit is brought by the plaintiff upon the indemnity agreement in the application and. upon the bond to recover $642. Defendant moves to dismiss the complaint on the ground that the prohibition in the resolution was not within the fair import of the constitution of the association; that they were not such orders or directions as the defendant was bound to obey and were in restraint of defendant's right to contract and in restraint of trade and against public policy. Eurther, that although the sum of $500 is set forth in the bond as the stipulated damages, it is in fact a penalty, no actual damages having been shown. The defendant of his own free will joined the association, subscribed to its constitution and bylaws, thereby promising to obey and be governed by their provisions and gave a bond with surety so to do. The general purposes of the association were lawful and commendable. The object was mutual benefit. ' If successful the benefit would extend to the community at large, whose interests were grievously affected by the general interference with building operations — the strike having nothing to do with wages or hours of labor. It has been many times held in this State that workingmen have the right to organize' for the purpose of securing higher wages, shorter hours of labor or improving their relations with their employers; that they have a right to strike; that is, to cease working in a body by prearrangement until a grievance is redressed, provided the object is not to gratify malice or inflict injury upon others, but to secure better terms of employment for themselves. A peaceable and orderly strike, not to harm others, but to improve their own condition, is not in violation of law. National Protective Assn. v. Cumming, 170 N. Y. 315. The converse of that proposition must be equally true. If tne workman may decline to work the master may decline to employ. If the workman may strike the master may lock 'out. Whatever one man may do alone he may do in combination with others, provided they have no unlawful object in view. Therefore, if it be lawful for workmen to organize and to conduct a peaceable strike to improve their condition it seems a natural corollary that masters may organize and conduct a peaceable lockout for the same purpose. It is conceded in this case that there was no malice either towards the defendant or towards the employees in the lockout order. The sole object and intent was to secure peace and stability in this great industry by obtaining an agreement for the settlement of differences by peaceful arbitration instead of by wasteful, irrational, so-called sympathetic strikes, which, as has been demonstrated by recent cases in the criminal courts of this State, might be used for far different purposes than the betterment of the strikers as a whole. I find, therefore, nothing unlawful in the combination of the employers in the association, nor in the order issued by its governing board, which defendant violated. In Curran v. Galen, 152 N. Y. 38, the language of the Court of Queen's Bench in Regina v. Rowlands, 17 Ad. & El. (N. S.) 671, is quoted with approval: " The rights of workmen are conceded; but the exercise of free will and freedom of action, within the limits of the law, is also secured equally to the masters. The intention of the law is, at present, to allow either of them to follow the dictates of their-own will, with respect to their own actions, and their own property, and either, I believe, has a right to study to promote his own advantage, or to combine with others to promote their mutual advantage." In Sinsheimer v. United Garment Workers of America, 77 Hun, 215, it was said: Manufacturers have the right to lock out all operatives connected with a labor organization because of demands made by it upon one of the manufacturers. Therefore, the order was not unlawful. Master Stevedores' Assn. v. Walsh, 2 Daly, 1, was an action to recover a penalty by a corporation of which defendant was d member for the violation of a by-law or " pledge " to the effect that there should be no variation from the prices adopted by the association. The court said: " In the present case the by-law was limited in its operation to the members composing 'the corporatipn, and is sought to he enforced against one who had voluntarily subscribed to it. As individuals, the master stevedores might collectively enter into an agreement not to work under certain rates, and when formed into a corporation, they could, as a corporate body, make a by-law of that nature, being one, in the language' of the statute, 'to promote the business and interests of the association.' If the by-law is one which it is in the power of the corporation to make, it has the power also to attach to it a penalty for the purpose of enforcing it. All who become members of the corporate body are bound by it, and where the penalty is incurred an action may be brought in the name of the corporation to recover it." .In the case at bar defendant not only subscribed to the constitution, but gave a bond. He must be held to his contract, As to the claim that the order disobeyed was not one contemplated by the constitution or within the power of the board of governors to pass, the constitution expressly provides for a special quorum " when the question of ordering a cessation or resumption of work by any or all of the members of the association is before the board." So far as restraint of trade is concerned a lockout is no greater restraint than a strike, and yet the strike, per se, is not unlawful on that account. Plaintiff may have judgment for $642.
Judgment for plaintiff