Lurman v. Jarvie

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.”