Bartlett v. L. Bartlett & Son Co.

93 N.W. 473, 116 Wis. 450, 1903 Wisc. LEXIS 218

Opinion

MARSHALL, J.

If the complaint states a good cause of action, there is at least a probability that appellants are entitled to a decree for the relief prayed for. If that should be the final result of the litigation, yet respondent Chamber of Commerce be allowed in the meantime to do the mischief threatened, it is reasonably certain that the object of the suit will be in a great measure defeated. A judgment in their favor, if the status quo is not preserved pending the litigation, will leave them irreparably injured; while if it is preserved, we are unable to see how any damage of a serious character can accrue to the chamber if it finally prevails, — certainly none that cannot be adequately guarded against by security. In that situation, assuming for the purposes of this point that the complaint states good grounds for relief, appellants are entitled, as a matter of right, upon reasonable terms, to the temporary restraint which was denied them. Valley I. W. Mfg. Co. v. Goodrich, 103 Wis. 436, 78 N. W. 1096; Milwaukee E. R. & L. Co. v. Bradley, 108 Wis. 467, 84 N. W. 870. So this appeal turns upon the sufficiency of the complaint.

There is little need to spend time discussing the general principles regarding when a court of equity will interfere to protect a member of a voluntary association from tbe judgment of its tribunal on a matter submitted to it under its rules. It must be freely conceded that tbe laws of sucb an association, witbin its own sphere of action, so long as they do not violate any public law, written or unwritten, as administered by its tribunal, are supreme. Tbe trial by sucb a tribunal is, to all intents and purposes, an arbitration, its-judgment an award of arbitrators, and tbe enforcement thereof subject to be enjoined by a court of equity for tbe same causes that will admit of any other award being so controlled. It may be so enjoined if it manifestly violates private rights, causing loss to a person, if be has no other adequate remedy. Sucb rights are deemed to be so violated when tbe tribunal exceeds its jurisdiction either when, intending to decide according to law, it misapprehends tbe law, or when it prejudicially goes outside tbe scope of tbe matters submitted, or is guilty of any other error affecting tbe result, other than errors of judgment. A disregard by arbitrators of tbe facts or tbe rules governing tbe matter before them either wilfully or ignorantly, from either good or bad motives, or from whatever cause, is jurisdictional; while mere errors of' judgment, either upon tbe law or the facts, do not vitiate an .award. These principles were discussed at considerable length in Consolidated W. P. Co. v. Nash,, 109 Wis. 490, 85 N. W. 485. As there stated, in effect, whether arbitrators' proceed on a basis so clearly wrong as to not be attributable to errors of judgment, or depart from the scope of the submission, or. are guilty of any misconduct affecting the result, errors of judgment upon the law or the facts not beijjg deemed misconduct, the result is the same: the award is fatally defective for jurisdictional error.

Applying the foregoing to the complaint before us, the question of whether it states a good cause of action comes down to this: Did the board of appeals of the.respondent Chamber of Commerce, in making its award, commit juris ■dictional error affecting sucb award, injurious to appellants ? Manifestly, tbe board was bound by tbe laws of tbe corporation tbe same as appellant. Tbe latter, in submitting to its 'jurisdiction, agreed to be tried by tbe rules of tbe chamber, not by any standard of trade etbics wbicb tbe board might see fit to set trp. If tbe rules were open to construction, it was undoubtedly tbe province of tbe board to construe them. If it erred in judgment in doing so, appellants stipulated in ■advance to'submit thereto. If tbe rules by wbicb appellants’ ■rights were to be tested were not open to construction because not reasonably susceptible of more than one meaning, or if, ■instead of attempting to construe tbe rules and apply tbe same to tbe case in band, tbe board ignored them and adjudged appellants’ rights upon an entirely false standard-— •one not found in tbe rules or tbe law it attempted to follow— then its award does not embody a decision upon tbe matter submitted according to tbe judgment of tbe board, but it is a mere expression of arbitrary will.

Now tbe question submitted to tbe arbitrators was this: Are Bartlett, Frazier & Oo. guilty of having offended against tbe rules of tbe Chamber of Commerce of Milwaukee in that ‘they failed, upon due demand therefor, to comply with an agreement made with Bartlett & Son Company November 29, 1901, to, at tbe option of tbe bolder, at any time before tbe close of business on the exchange floor of such chamber December 7, 1901, sell to said Bartlett & Son Company 50,000 bushels of wheat, contract grade, for time delivery, to tbe damage of sucb company, liquidated, in tbe usual manner in •sucb cases,' at $1,843.45, and fail, upon due demand therefor, 'to pay sucb sum or any part thereof ? There was no pretense that sucb contract was made unless Bartlett, Frazier & Co. were bound by tbe assumption of authority on tbe part- of their clerk, Walter E. Brown, to act in their behalf, either in making the verbal agreement with Bartlett & Son Company <or in subsequently doing the customary clerical work of checking tbe same np to avoid mistakes and delivering tbe usual memorandum evidencing tbe transaction. Much evidence was taken on tbe bearing, but none showing that Bartlett, Erazier & Co. personally knew of tbe transaction in tbe first instance, or of tbe so-called confirmation of it, until a long time thereafter, or that they ever, by any act, ratified it, or authorized their clerk to represent them in such matters on any previous occasion, subsequent to tbe amendment of tbe rules, prohibiting clerks of members of tbe Chamber of Commerce from making trades. Tbe board decided on that state of tbe case that appellants did not make any trade with Bartlett & Son Company which could be recognized under tbe rules of tbe corporation. Tbe question being carried to tbe board of appeals, it held that Bartlett & Son Company was entitled to recover, not because tbe rule prohibiting clerks of members from doing business for their employers does not void a trade made in violation thereof, but because Brown’s treatment of bis void act as that of bis employer, in performing bis legitimate duty of checking up deals, claimed to be binding upon them, and delivering tbe usual memoranda of tbe transactions, made such void act valid, tbe same in all respects as if it were originally that of tbe appellants, and because, “upon all tbe evidence complainant should recover damages.” Since tbe evidence referred to, at no point, shows that Bartlett, Erazier & Co. bad any connection with tbe transaction in controversy except through Brown, or that be was recognized by them as having authority either to make or ratify trades which were within tbe jurisdiction of tbe chamber, after tbe rule referred to was adopted, we must conclude that tbe words, “Upon all tbe evidence complainant ■should recover damages,” are either merely explanatory of what preceded them, or indicate an arbitrary disposition of tbe matter'in band. They probably refer solely to tbe proof showing that Brown, subsequent to tbe adoption of tbe rule, was authorized and accustomed to do tbe usual clerical work of checking up bis employer’s trades and delivering the customary memoranda to the other parties to the transactions, and that he performed that duty in respect to the matter in question, and by so doing made his unauthorized trade valid. We cannot escape the conclusion, whichever view is taken, that the decision was reached, not by applying the rules of the chamber to the case, but by ignoring them; that the board proceeded as if there was no certain test by which to determine the rights of appellants; that it was permitted to say what was just without any guide but the notions of its members, and that appellants were bound thereby. It did not disturb the decision of the arbitrators that a trade made by a clerk in the name of his employer is wholly void because of the rule disabling him from doing such business, yet held that a clerk, in performing his appropriate duties can, in an indirect way, avoid the disability. The view is so unreasonable, that the general prohibition against clerks doing business for their employers can be entirely circumvented by the effect of the performance of their' legitimate duties, that we conclude that the board did not consider the rule in question, but disposed of the matter in hand on its notions of equity as between the persons interested. In that the board plainly exceeded its jurisdiction. It did not merely commit an error of judgment. It was plainly fenced about by the law of the chamber, and the appellants were as well. It was bound to keep within its enclosure, and, operating there, determine whether appellants had kept within theirs. That was what the latter, as member of the chamber, and by joining in the proceedings as well, were bound to submit to. The board exceeded its jurisdiction as clearly as the arbitrators did in Consolidated W. P. Co. v. Nash, 109 Wis. 496, 85 N. W. 485, in adopting an obviously absurd construction of the contract which defined the scope of the submission to them; or in Ryan v. Cudahy, 157 Ill. 108, 41 N. E. 760, where the arbitrators, in a trial under the rules of the Chicago Board of Trade, re fused to accord to a party to tbe controversy the privilege of making proofs, which he was expressly entitled to by such rule.

A trial by a tribunal of a board of trade, provided for by its rules, or that of any other voluntary organization, is like one before a board of arbitrators agreed upon by parties to the controversy submitted to them. Its scope is limited by the rules of the organization. A violation thereof is jurisdictional error which will vitiate the result; and if private rights of a contestant are injuriously affected thereby, a court of equity can afford relief. Such is the effect of the decision in Ryan v. Cudahy, supra. It merely follows elementary principles. We venture to say that the rule is universal that if a board of arbitrators exceeds its jurisdiction to the injury of property rights of any party to the proceedings before it, and there is no other way of reaching the matter, a court of equity will take jurisdiction to afford such relief as it is capable of.

We do not deem it necessary or advisable to support the principles above referred to by citing authorities to any considerable extent. They are deemed to be elementary. The jurisdiction of arbitrators is absolutely and strictly limited by the contract of submission, whether such contract be one formally entered into between the parties or be implied from their being members of a voluntary organization which by its rules requires them to submit their differences to the particular tribunal. The jurisdiction of the arbitrators cannot be-extended beyond the contract of submission by their decision upon any jurisdictional question. When the submission requires the matters to be determined to be tested by a particular rule, whether it be a rule of law or a rule of the corporation or association, the adoption by the arbitrators of a different rule or a disregard of the rule and decision of the matter-according to the notions of the arbitrators of what is just in the premises, is a departure from the submission just the same as tbe inclusion in tbe submission of matters of difference not involved at all in tbe particular controversy to be settled. 3 Cycl. Law & Proe. 674, 675, and cases cited; Morse, Arb. 182. Here tbe question of whether appellants were guilty of having violated tbe rules of tbe chamber depended upon whether clerks of members were disabled by its rules from making trades for their employers. That was decided by the arbitrators in appellants’ favor. The board of apj)eals, without touching that question, as we have seen, but applying to the matter before them an idea not found in the rules of the chamber or the law, or supported by reason — the idea that a person acting as agent for another may avoid disability to make a contract for his principal with one having knowledge of such disability, by ignoring such want of authority and subsequently, without any change in his competency, ratifying his void act — held that appellants ought to pay the damages claimed.

The idea is advanced that the board was warranted in holding appellants liable independent of the rule, because (1) they held out Brown as worthy of confidence, knowing that he was otherwise; (2) authority to him to check and approve accounts necessarily carried with it authority to approve trades, making them binding whether they were previous to the approval or not; (3) they had, previous to the transaction in question, recognized his trades. What we have said really covers all those suggestions. If it be admitted that appellants kept Brown in their employ after they had knowledge that he was not reliable, that did not affect his disability under the rule of the chamber, as to dealing with those who had full knowledge of his disability. As to the second proposition, we say that to hold that authority to check and approve trades is ■consistent with the decision that the rule created absolute disability of the clerk to make the trade was the adoption of a principle wholly inconsistent with the one the submission re quired tire board to try appellants by. As to the last proposition, this seems to be conclusive: There is no evidence showing that appellants, after the disability of the clerk was created by the rule, recognized any contracts made by him that were within the jurisdiction of the chamber. A decision to the contrary without any evidence whatever to support it is jurisdictional error.

Erom what has been said the conclusion must follow that the complaint states a good cause of action. It sets forth, by appropriate allegations, that a controversy between appellants and Bartlett & Bon Company, which was within the jurisdiction of the tribunals of the Chamber of Commerce of the City of Milwaukee to determine, was tried before such tribunals; that the award was against appellants; that the result was reached by the highest authority in the chamber having juris■diction of the subject; that it exceeded its jurisdiction in the matter by ignoring the rule vital to appellants’ rights; that the decision, if allowed to be carried out, will seriously affect their property rights; that it will be carried out unless the court intervenes and prevents the same; and that appellants Rave no other way of protecting themselves from the threatened injury except by an appeal to the equity jurisdiction of the court.

■It must be understood that this decision does not invade in the slightest degree the familiar doctrine that the determinations of the regularly constituted tribunals of a voluntary association, regularly made, on a subject within their jurisdiction, are not open to judicial scrutiny. The court, however, may look into the proceedings of such a tribunal to the extent of seeing whether, to the injury of the complainant, it ■exceeded its jurisdiction, the same as in case of a guasi-judi-cial body.

The result of the foregoing is that we must hold that the «order vacating the temporary injunction is erroneous and must be reversed, and tbe cause be remanded for further proceedings according to law.

By the Court. — So ordered.

Bardeeet, J. F concur in tbe foregoing opinion. WiNsnow and Dodge, JJ., dissent.