HARTFORD FIRE ,IN(O.,CO. P.
the mortgage, nor can the receiver oBhe company do so for them.' In Reed's Appeal, 122 Pa. St. 565, 16 AU. Rep. 100, it was declared by court that a contractor.who had k;nowledge that under atiust mortgage of 8 corporation the issue of bonds was in excess of the cllpital stock paid in, and who was a participant in the fraud of such issue, could' not attack the validity of the mortgage as in violation of the statute. No more, in my judgmeilt,is' it competent for the corporation itself, which has received and enjoys the fruits of its mortgage bonds, toassail their vaJidity in' the hands of a bona fide purchaser for value, on such gr9und. We have already seen that the consideration which passed from Sam" uel R. Bullock & ,Co. to the Corry Water-Works Company wR$'largely in excess of the whole issue;ofmortgage bonds, and this, too, 'without taking into consideration a contractor's profit. Therefore, there is really no ground for the assertion that the indebtedness so created fictitious; and,certainly, under the facts of this case, neither the corporationnoT its ,stockholders ':uan be heard so to allegj'l to of the innocent 'bondholder. " If the construction contract,8s a: whole; offended against the constitutional and stlitutory prOVisions here 'invoked, the corrective 1I0WfT the, complain: of transactioq, Appeal of Colu,mbia .B.ank, ThIs' prinCIple, which fndeed is decisive of the entire case,wa.s recognizedaaso:l.l:lld, aU9 w8f:1.enforce,din Bank v'. Matthe:ws ,' ,98'.U. S. 621, where a sought to e'njoin a sale or'the mortgaged premiE\esun<iera pqwer, the lDortgage; 'Qp'the groundtha.t it ,was taken in yi9lation of;the whel'c.Q; fore,ign ,corpo.ra.tion,. 1,1.'. qOl)veyance iq,dl:fe9lviothe lflws o(th,e state in. Which .theJand was.sitqateQ..,Jt; . held., that the ,corporatiQrl took granto:r and4i!l' subf:1equent. grantee, and that it waslortbe lIJOI:l.13 to question the; validity of. the<ieed:ofcoDveyan.cetQ thecorpQfflt!Qll, Let a decree drawp disIllissipg the ,bill ofG9mplll,il:l.t, ..
Izqs. Co. et al.
'V. 130NNER MEROAN'.l'Jl,Jl:.Co.
(Oircuit court, D.
1. ARBITRATION AND A WAR])-Jl[IsCONDUCT oFARBlTRATOItB.
An award mad6byan arbitJ:ator, or an umpire oatween two arbitrators, as to the amount of loss upon a stock of by fire, without any eXlI,IJ1inationof the goods themselves, bu.t merely frol;n bills, invoice books,and iiivelirories,is in,valid. ' . . .. . " . ., .. . " .' . .. '...
S ..'tton,regulaws ttie:<iondn:etotnrbitl'ators, .Bud..provides·fOr.vlRl41;ing the for
An award made by an not upon his own judgIllent or by r,aso!1 of any heluia,made, but solely atthe'directwu of 0lle,ot the-'parties, . is Ulvalld. " , . ,.'" .:;" . ,'" ,1', .. 'e;tbitraby
motion upon grounds specified therein, do not apply to a submission and award which is not made a record of the court.
" SAHE-JUBISDIOTION IN EQUITY.
But, even if the Montana statute does apply to such a case, it cannot deprive the federal courts of any jurisdiction which they may have under the judiciary act of 1879 to entertain a bill in equity to set aside the award, since the statute was passed after the judiciary act.
SAME-AoTION ON AWARD.
In an action at law upon an award, no defense can be made upon the merits of the award, but only upon matters affecting the jurisdiction of the arbitrators; and, as a legal defense would not be an adequate remedy where misconduct in making the award is charged, a court of equity would have jurisdiction of a bill to set it aside.
Where a number of insurances companies, affected by a loss, join in submitting to arbitration the question of the amount of damage, and a single award is made, a single bill brought by all the companies as parties plaintiff to set aside the award is not multifarious.
Where it appears from the bill that the amount of insurance given by each of the plaintiffs exceeded $2,000, and there is nothing to show that the loss was to be apportioned pro rata to the amount of each PQlicy, the court cannot presume that such was the case, and has jurisdiction as to each plaintiff, even though the total insuranoe exceeds the loss fixed by the award, since the insured might select certain of the policies, and sue upon them for their full value.
In Equity. On demurrer to bill, and motion for injunction. Haggin &: Van Ne88, (Geo. a. Gorham, Jr., of counsel,) for complainants. Forbi8, &: Fu,.bis, (M. Kirkpatrick, of counsel,) for defendant.
KNOWLES, J. The plaintiffs, being 17 insurance companies, have presented to this court their bill of complaint in equity, and, among other prayers, ask for an injunction enjoining defendant from commencing or. prosecuting any actions at law against plaintiffs by reason of an award hereinafter described, or in any manner taking any steps to enforce any claim under, or by virtue of, or based upon said award, pending this action, and t.hat, upon a final hearing, said award be vacated and annulled, and the preliminary injunction be made perpetual. It appears from plaintiffs' bill that plaintiffs severally, with other insurance companies, immred certain property of defendant against loss by fire, or damage on account thereof. That there was a loss of and damage to said property on account of a fire which occurred in the vicinity of the place where the same was situated. That, as to the amount and extent of this loss. there·was a dispute between plaintiffs and defendant. With a view of Bettling this dispute, plaintif:ls and defendant entered into an agreement to submit the Bame to arbitration. That in this agreement it was provided plaintiffs should select one person to act as arbitrator, the defendant a second person to act as such, and that these two should select a third who should act as umpire, and decide between the other two in matters' of difference only, and that the said three persons, or any two of them, should a true return and award make under oath of tllf;lsoundyalue, and loss and damage, or loss or,damage of or to said property. That in pursuance of said agreement the plaintiffs appointed one Joseph P. Treanor. 'l'he defendent, one G. E. Rockwood, and these two elected as umpire one Theodore Schurmeier. It is further set forth..
HARTFORD FIRE INS. CO. V. BONNER MERCANTILE CO.
in the bill that the said Rockwood and Schurmeier signed an award of the value of the loss and damage to said property, of $60,624.73. That in making-said award, and in acting as an arbitrator, the said Rockwood and the said Schurmeier were guilty of such misconduct as would avoid and render null and void said award, in this: (1) That they estimated the loss and damage to said property largely in excess of the actual loss and damage to the same. (2) That the said Rockwood did not act upon his own judgment or by reason of any investigation or examination made by him, but under the direction and in the interest of defendant, and that he agreed to the award and final making of the same under the direction and at the instigation and in the interest of defendant. (3) That said Schurmeier did not act with either of the other arbitrators in estimating the loss or damage to the property injured, and that he did not act with the other arbitrators, but by himself, in making his estimates, and that he did not in fact examine the property damaged, but waited until the other two had completed their examination, and, having obtained their separate estimates of damage and loss, separated himself from said other two arbitrators, and each of them, and by himself, and without the advice, counsel, or assistance of such other arbitrators or either of them, proceeded to determine arbitrarily, and without examination of said damaged property, the loss and damage to the same; that in arriving at the value of said loss and damage he procured from defendant its bills; invoice books, and inventories, and in the absence of his co-arbitrators, and the representatives of plaintiffs and defendant, and other insurers, arbitrarily and unjustly fixed and determined the amount ofloss and damage to said property. (4) That the said Rockwood and Schurmeier did not fully examine into the matter of said loss and damage, and did not take into consideration the age, location, or condition of said damaged property at the time of said fire, and did not make proper or any deductions for depreciation, or of property saved, and did not find the damage to be the sum awarded by them. The allegations amount to about this: Rockwood acted under the direction of defendant, and not as an arbitrator, nor upon his own judgment, and upon his own investigation; Schurmeier did not make up his own estimate from an examination of the pwperty injured; and did not act with the other arbitrators, but by himself, in making his estimates. And, lastly, that the award was not what the said Rockwood and Schurmeier found was the damage or loss to said property on account of said fire. The defendant demurred to the bill of complaint on grounds, in substance, as follows: (1) That the bill did not contain any matter of equity whereon this court can ground any decree, or give to plaintiffs any relief against defendant; (2) that there appears in said bill that there is a misjoinder of plaintiffs; (3) that it appears from the bill that the plaintiffs have a complete and adequate remedy at law, and that this court has no jurisdiction of the cause; (4) that the bill contains not any matter of equity wherein to sustain such writ of injunction as is sought and prayed for in and by said bill. The demurrer admits all the allegations of the bill well pleaded to be true, and hence all the above
facts U'lust be taken as true in considering the dem'urrer and motion 'be-
fore it. ' -An award made by arbitrators 'may be set aside and declared
ntillaridvoidlvhen it clearly appears that the arbitrators who signed the award were guilty of misconduct, partiality, or fraud. Sullivan v. Prink, 3 Iowa, 66; 1 Amer. & Eng. Enc. Law, tit. "Arbitration," p. 707,and cases'cited. Does the bill show such a misconduct on the part of the arbitrators or either of as would justify a court in setting aside as alleged under the direction of the their award? If defendilnt, and signed the award under its direction, and did not act upo.n, own judgment, or by reason of any investigation he had made, then hE1'cannot be said to have acted as an arbitnltorin the case at all, but of defendant. It has been decided that, when an arbitrator makes up his award on account ofany private conversation witli olleofthe parties to the cause to be arbitrated, it should avoid his awaid. 'Moshierv.Shear, 102 Ill. 169. Much more should it avoid his he acts,' not upon his own volition and investigation, but under the 'direction of one of the parties. The facts alleged show such misconduct on the part of Rockwood as should render void any award he made. IfSehtirmeier did not examine the damaged goods, but procured the separate estimates of each of the other arbitrators, and then obtained the bills,' inVoice books, and inventories of d,efendant, and made up his estimate of damage and loss from these, he was guilty of misconduct whichshoilldavoid his award. It is evident from what appears in the billtha.t it'was intended the arbitrators should make a personal examination of th'e damaged property. At all events, they should take some evidence Upon this subject such as would qualify them to form some just estima.te of the damage sustained. In this case it was not conternplated that they were to act without evidence. How could Schurmeier tell which was right in his estimate of damage without some evidence bearirigupon the issue presented. He does not seem to have consulted either of the:otherarbitrators. ,Bills, invoice books, and inventories would not seem to be proper evidencea.lone upon which to base an mate 'of the damages or loss to the property on account of the fire. When 1m arbitrator acts without sufficient evidence, or without a full hetiring, or any hearing, of a case submitted to him, his award is void for misconduct. Halstead v. Seaman, 82 N. Y. 27; Fudickar v. In8urance , 00., 62 N. Y. 405; Alexander v. Cunningham, 111 Ill., 511; Day v. HammOnd,57 N. Y. 479; Ing·raham v. Whitmore, 75 Ill. 24; Van Cortlandt v. -Undirh1l,l, 17 405. There allegations in the bill show that Schurmeier acted without consulting the other arbitrators, but alone. If he was what iEi called a "third arbitrator," this was misconduct. Haven v. It>innisimmet Co., 11 Allen, 377. If he was an umpire, as distinguished from a third arbitrator, it was proper for him to act alone, and make up his decision alone. Underhill v. Van Cortlandt. 2 Johns. Ch. 339; Ingraham v. Whitmore, 75 Ill. 24. The allegations in the bill are: "That the' amount of loss and damage to said propetty. [that is, the erty of defendant,] by reason of said fire, slwuld be estimated, appraised. and determined in detail by G. E. Rockwood and Joseph P. Treanor, together with
HARTFORD FIRE Il'l'S. GO.
BOl'l'NER MERCANTILE CO.
a third persot:!, to be mutually selected and appointed by said Rockwood and Treanor, who should act as umpire to decide between thpm, the said Rockwood and Treanor. in matters of difference only, and that the said three persons, or any two of them, should a true return and award make under oath."
Perhaps an examination of the agreement of submission would make this matter more clear. I am inclined to hold that, under the allegations of the bill, Schurmeier should be considered as an umpire. and not as a third arbitrator. If he was to decide between them in matters of difference, neither of the others could take any part in his deliberations. He was to decide between them, not with them; and he would certainly be required to arrive at his conclusions alone. There is only one thing that seems contrary to the view that he was an umpire and not a third arbitrator, and that is that one or both of the other arbitrators was or were to sign the award with him. An umpire, properly sucb, signs his award alone. Has this court, sitting as a court of chancery, jurisdiction to determine the issue presented in the bill?-that is, the jurisdiction, as such court, to set aside the award of the arbitrators for the above misconlluct? The plaintiffs are not citizens of Montana. The defendant is a citizen thereof. This sufficiently appears in the bill. This is sufficient to give the court jurisdiction if it has jurisdiction of the subject-matter of the action. If the plaintiffs have a plain and adequate remedy at law, this court, as a court of chancery, has no jurisdiction of this case. Thompson v. Railroad Cos;, 6 Wall. 134. The jurisdiction of a court of equity to set aside and cancel awards was settled at an early day. 2 Pom. Eq. Jur. § 919. And formerly such relief could be obtained only in a court of equity. Emmet v. Hoyt, 17 Wend. 410; Underhill v. Van Oortlandt, 2 Johns. Ch. 360; BurcheU v. Marsh, 17 How. 344; Doke v. James, 4 N. Y.568. The statutes of Montana (Code Civil Proc. §§ 459-468) provide for SUbmitting causes to arbitration, and regulates in some particulars the conduct of the arbitrators, and provides for vacating on motions, awards upon grounds stated in the statute. If this action was in a state court, it might be urged that under the statute there was a plain and adequate remedy at law, and that there was no need of resorting to a court of chancery. It may be true, however, that the setting aside of an award on motion is confined to those cases in which the submission is a rule of court, and a judgment may be entered upon the award. This was the case under the statute of Wm. III., (see Emmet v. Hoyt, 17 Wend. 8upra,) and there is much in the statute of Montana to indicate that the setting aside of awards should be confined to cases where the submission is made a record of the court. See, also, BurrO'ughs v. David, 7 Iowa, 155. In this case the submission was not made a record of the court, and it is doubtful if it is of that class of awards which it is contemplated by the statute should be made a record of court. It is then an arbitration according to common-law rules, and not governed by the statute. But, if it was, this statute could not take away the equity jurisdiction of this court, having been passed since the grant of jurisdiction to the courts oithe United States made by the judiciary act of187.9.Mc-
Coniltay v. Wright, 121 U. S. 201, 7 Sup. Ct. Rep. 940. Generally, it may be said, state statutes cannot affect the equity jurisdiction of the United States courts. It is true, as is claimed by the defendant, that the plaintiffs could have set up, in an answer or counter-claim, in an action in-the state courts, set up in their bill of complaint herein. But this would not be a" legal defense," as I undcrstand that term. It would be an equitable defense to an action at law, which is permitted underthe Civil Code. In the case of Day v. Hammond, 57 N. Y. 479, it is held that under the statute the application to set aside an award is an appeal to the equitable powers of the court. Several cases have been cited to the effect that, where arbitrators fail to give notice of the time and place of hearing before them, the award made by them'is absolutely void, and that these facts may be set up in defense to an action at law upon the award. Elmendorfv. Harris, 23 Wend. 628; Curtis v. Sacramento, 64 Cal. 102-106; Emery v. Owings, 48 Amer. Dec. 580; and others cited by defendant. In these cases the want of this notice is treated as something akin to a want of service on a defendant in an action at law. It is considered that the arbitrators have no jurisdiction in such a case to, hear and determine the cause submitted to them, and that as a want of jurisdiction is good as a defense to a judgment at law, so is this plea of a want of notice a good defense to an action upon an award. The courts, however, make a distinction between an award which is absolutely void, and one which is only voidable. Where the arbitrators are guilty of misconduct which does not affect what may be called their" jurisdiction," and which does not appear upon the face of the award, then, prior to the statutes abovenamed, the award could be set aside only in a court in equity upon a proper bilL Truesdale v. Straw, 58 N. H. 207; 2 Story, Jur. §1452. In Hamiltonv. Ottmmings, 1 Johns. Ch. 517, Chancellor KENT held that "a bill in 'Chancery will be entertained when the instrument sought to be set aside is liable to abuse from its negotiable nature, or because the defense not arising on its face may be difficult or nncertain at law, or from some other circumstance peculiar to the case, and rendering a resort here "-that is, to a court of equity-"highly proper." In this case the allegations of misconduct do not go to the jurisdiction to hear the dispute, and it does not appear that the misconduct appears on the face of the award. It is also alleged that defendant threatens to commence an action on the award. And I am satisfied that this misconduct could not be set up in defense to an action at law in any United States district or circuit court. _In the case of Insurance Co. v. Stanchfield, 1 Dill. 425, theUnited States circuit court of the eighth circuit say that the misrepresentations and fraud complained of were a good defense to an action at law on the policy, and available as sueh to the company; "and, again, the company has a full, plain, and perfect defense to the policy at law, and no reason is shown" hy a resort to equity is either necessary, dient, or proper." In that case the allegations in the bill were that the policies of insurance sought to be canceled were obtained from the surance;company by frau<,lulent representations. Such a defense would
have been a good defense to any action at law upon those policies. Fraud in procuring an instrument can always be set up as a legal defense to any action on the same. Smith v. Mc!ve:r, 9 Wheat. 532. In this case I have shown that the misconduct complained of could not be set up as a legal defense to an action at law on the award, and hence that the plaintiffs had no plain and perfect defense at law to the award; and hence that case cannot be a guide in this action. I cannot see from the allegations in plaintiffs' bill, which are admitted, what equities the defendant has which should require of the plaintiffs a performance thereof before they should be awarded the relief they ask. There may appear equities of defendant which should be allowed before this suit is terminated, but I can see none now. The plaintiffs in their reply brief cite many authoritie:l to the effect that, if the award was obtained by the fraud of defendant, it has no equities in this case. If fraud is claimed on the part of the defendant, I do not think the facts stituting the fraud are set forth with sufficient clearness to entitle them to any relief on this ground. The facts constituting fraud should always be fully set forth. Goodwin v. Goodv)'in, 59 Cal. MO. The award in the case was the result of a joint submission made by all the plaintiffs in company with other insurance companies !l,nd defendant. The award is one instrument. Each of the plaintiffs is interested in the award, and is interested in the question of its cancellation. Hence, I think the bill cannot be said to be multitiuious. The plaintiffs have a common interest in the suit. Story, Eq. PI. §§ 537, 537a. It does not appear from the bill whether each one of the plaintiffs would be liable to defendant for the full amount it insured the property of defendant on this award; that is, it does not appear but the defendant might sue and ,recover uf each one of the plaintiffs on this award, the full amount of the sum such plaintiff insured defendant's property. It appears frol11 the bill that the insurance given on the property of defendant by each plaintiff exceeds $2,000. It is true that it shows that the amount of all the insurance policies on this property exceeds the amount of thelos8 ;specified in the award. The defendant cannot recover certainly more than the amount of the award; but, unless there is some provision in the policies that defendant can recover, where the insurance exceeds the amount of the loss, only a pro rata sum of each insurer, it might select certain of the plaintiffs, and sue each for the full amount of insurance it gave. Cromie v. Insurance Co., 15 B. Mon. 432. If it should turn out, however, that the conditions of the policies given by each plaintiff provided that, where there was a loss less than the full amount of the 'insurance, then each plaintiff would be liable only for a pro rata sum proportioned to the loss and damage, and the full amount of insurance, then it may appear that some of the plaintiffs are not interested to the amount of $2,000 in having the award canceled; and then the question would arise as to the jurisdiction of this court to try this cause as to such plaintiff. The point presented in some of its aspects would be similar to that decided in the case of Hawley v. U. S., S. 549,),gBup. Ct. Rep. 846, and Seaver v. Bigelows) 5 Wall. 208. I d\>
vol. 44. ;
not think ihe&>l1rt 'Mn go 'beyond the plEladings and find even from statements of Cotmsel, or, -presume that the iOsu1anoo policies given defendllntbj pJitintiffs'had a proi-ala clausetherein. -This court) then, up ·to this time,it would appear; has jurisdiction to try this caUSe as to all thepillintiffs. It was hot necessary to make arbitrators parties to tbisaetioh. Arbitrators constitute a tribunalseleeted by tbecontendi,ng parties which in its nature is'judicial. Most of tbe cases treat an Award in the nature of a judgment, and I cannotsee why there is any more reason for making the arbitratoI'sparties to this suit than tbere would be in making a court a party to an action to set aside its judgment.' The demurrer of defendant is overruled,and the motion of the 'phlintiffs for an injunotion pending this action will be granted until the 'further order of this court. Before issuing the injunction, the plaintiffs :must execute to' defendant, with two or more sufficient sureties, a good and sufficient bond, to be approved by this court, or a judge thereof, to secure the defendant against any loss or damage on account of the issuing of said injunction, in the sum of 375,000.
FIRST NAT. BANK: OF WILMINGTON
(Oirowlt Court, D. Dewware. October. 1890.)
NATIONAL BANKS-TAXATION, OF STOCK.,
Under Rev. St. U. S. § 5219, providing that shares of national bank stock may be taxed as part of the personalty of the owner, and that each state may tax them in its own manner, except that the taxation shall not be at a greater rate than is imposed on other moneyed oapital owned by citizens of the state, a state may tax national bank shares held by Ita corporate or individual citizens as an investment, subject to the restriotlon that the tax shall not exceed the burdello upon similar property in the state. . .
In Equity. Levi O. Bird, Andrew E. Sanborn, and John Beggs, for complainant. Benjamin Nields, for defendant.
McKENNAN, J. This suit is brought to relieve the complainant from the levy and collection of a tax imposed by the state of Delaware upon <lertain of its shares as anational bank, incorporated under the laws of the United States, and held by corporate or individual citizens of the state. This question is to be resolved by the true meaning and construction of the act of congress defining and limiting the power of the states in taxing national bank shares. The only portion of the act of congress to which is necessary to refer at length is section 5219 of the Revised which is as follows: "Nothing herein shall prevent all the sbares in any association from being included in the valuation of. the personal property of the owner or holder of such shares, in assessing taxes imposed by authority of thestatewithin which the. association is locatt'd; but the legislalure of each state .may determine and .direct the manner and place of taXing all the shares of national banking as-