Orvis v. Wells, Fargo & Co.

SHIPMAN, Circuit Judge. On July 22, 1881, William T. Whiting-sold to Duncan F. Blount, by an agreement in writing, 500 shares of the capital stock of the Cheyenne Consolidated Mining Company, at one dollar per share, “payable and deliverable, at seller’s option, within thirty days.” The contract was expressly declared to be governed by the laws of the New York Mining Stock Exchange, of which each party was a member. In this transaction, Whiting was the broker of Wells, Fargo & Co., and Blount was the broker of the plaintiff, Charles E. Orvis. Wells, Fargo & Co. guarantied the performance of the contract. Under the rules of the’ exchange, deposits of margin are required to be made in case the market price of the stock moves from the contract price. After July 22d the stock rose in value, and, under repeated calls for margin, Wells,- Fargo & Co. deposited $4,000. When the stock reached $15 per share, Whiting, the defendant’s broker, refused to deposit more margin. On July 20, 1891, the stock reached $20 per share, and Blount notified Whiting- that he would buy the stock in under the rule of the ex 111 change which provided that in case of default of one party the other party may buy or sell the stock at the business room of the exchange, upon notice to the other party of the intended time of sale or purchase. Whiting si ill refusing to add to his margin, Blount bought the stock in for §10,000. The defendant had -‘deposited” in the office of the Cheyenne Consolidated Mining- Company, with instructions to transfer to Blount or his assigns, as a fulfillment of the contract, 300 shares of Cheyenne Gold-Mining stock, and a “call” for 200 shares of Cheyenne Consolida!(id Mining Company stock, due at a later day, and had caused Blount to be notified of such deposit, and refused, through its broker, to pay the sum of about §9,500 which was alleged to be due upon its breach of contract. A rule of the exchange provided that it was the duty of the arbitration committee to take cognizance of, and exercise jurisdiction over, all matters of difference between members of the association, and their decision was binding, subject to an appeal to the governing committee; The dispute between Blount and 'Whiting, under this contract, was brought before the arbitration committee, which decided against Blount, and directed him to pay the §500 specified in the contract, and to take the “call” for 200 shares, and the 300 shares of stock which had been tendered. This award was sustained by the governing committee. After the final decision, Orvis furnished Blount with §500 to pay for the stock which had been “deposited'”; the payment was made; .Blount received the stock, and delivered it to Orvis, who accepted ii. The margins which had been deposited were repaid to Wells, Fargo <& Go. Orvis thereupon brought an action at law against Wells, Fargo & Co. to recover the damages, amounting to §9,497.(57, with interest from July 19, 1881, which he alleged he had sustained through the defendant’s breach of contract for the sale and delivery of the 501) shares of mining company stock. Upon the trial the circuit judge directed a verdict for the defendant, and to reverse the judgment upon the verdict the present writ of error was brought. The theory of the jilaintiff is that out of the transaction two distinct and different contract obligations arose, viz. the obligation of the brokers, who were ostensible principals, and the contract between rhe plaintiff and defendant, who were undisclosed principals, and that the extinguishment, by award or otherwise, of the broker's liability, did not: affect the contract between the plaintiff and defendant. While it is true that a party to a contract may elect to sue the ostensible principal, or the actual and undisclosed principal, when he is disclosed, yet there are not two different contracts, for a breach of which he can obtain satisfaction from each of the respective parties. In this case, Blount, who was Orvis’ agent, submitted the questions in dispute under this contract to arbitration. If, when he first submitted the case, he did not act under Orvis’ authority, the submission, the arbitration, and the award were ratified by his principal, who complied with the provisions of the award, paid the amount due, and accepted the stock, which was declared to constitute a good delivery. It is difficult to see liow- the acts of an agent can he more fully ratified by his principal, and how a valid 112 award can be a more complete bar to a suit upon tbe original cause of action, for tbe award bas been performed by tbe plaintiff, wbo bas received and accepted stock in discharge of tbe apparent principal’s liability under tbe contract, wbicb stock be apparently bas neither returned nor offered to return. Tbe old cause of action for a breach of contract bas disappeared, because, by tbe acceptance of tbe stock and tbe payment of tbe purchase price, be bas waived tbe right to insist that there was a breach. But it is said that tbe award was invalid by reason of tbe misconduct of one of tbe arbitrators. It is true that a court of equity has the power to set aside an award by reason of tbe fraud or fraudulent conduct of tbe arbitrators, and while, at common law, fraud was not a defense to an action at law upon tbe award, yet, in many of tbe states, fraud of tbe arbitrators is a defense to such an action. 2 Greenl. Ev. § 78; Power Co. v. Gray, 6 Metc. (Mass.) 131, 169. In this case, however, the award has been performed, and tbe plaintiff is suing upon tbe original cause of action, without attempting to rescind or disaffirm tbe award, but is retaining its fruits. He retains that wbicb be received in satisfaction of the alleged breach of contract, and seeks a new satisfaction. If á party wishes to disaffirm or rescind a contract because it was vitiated by fraud, be must return, or offer to return, tbe property wbicb be received under tbe contract. Kellogg v. Denslow, 14 Conn. 411. Tbe judgment of tbe circuit court is affirmed, with costs.