
    The Union Insurance Co. of Phhiladelphia et al., Resp’ts., v. The Central Trust Co. of New York et al., App’lts.
    
      (Supreme Court, General Term, First Department,
    
    
      Filed December 29, 1890.)
    
    Arbitration—Deposit as security—Revocation.
    A submission to arbitration contained a provision that security satisfactory to the parties who are plaintiffs in this action should be deposited with the Central Trust Co. to secure the payment and satisfaction of any award in favor of said parties against D., in accordance with any judgment that may be entered on such award. After several hearings before the arbitrators, D. revoked the arbitration agreement, and the proceedings thereunder were abandoned. In an action brought by plaintiffs to recover the costs and expenses incurred by them in such proceedings, Held, that there was no misjoinder of parties plaintiff, nor of causes of action; that the provision as to security, although contained in the arbitration agreement, was really an instrument collateral to such agreement, and that the action could be maintained under § 2384 of the Code.
    Appeal from the interlocutory judgment overruling demurrers to the complaint.
    Action to enjoin and restrain any disposition by the defendants of certain securities of the value of $50,000, deposited by the defendant, the Continental Insurance Company, with the defendant, the Central Trust Company, under an agreement for submission to arbitration, made between the two plaintiff insurance companies, the defendant the Continental Insurance Company and one Lorenzo Dimick, by which James E. Carpenter and John R. Reed were appointed arbitrators and directed to appoint a third arbitrator or umpire.
    The following is the opinion at special term:
    Van Brent, P. J. This action was brought to determine the rights and interests of the parties in respect to a certain fund deposited with the defendant, the Central Tmst Company of the city of New York, under and pursuant to a certain arbitration agreement, and to enjoin the disposition of said fund pending the action.
    The complaint alleges that on or about the 14th of October, 1885, the plaintiffs entered into a certain submission to arbitration with the defendant, the Continental Insurance Co. of the city of New York, and one Lorenzo Dimick. This agreement of arbitration after reciting that controversies were existing and pending between the parties of the first and second parts, viz., the plaintiffs, and the parties of the third and fourth parts, viz., the Continental Insurance Co. and said Dimick, arising chiefly out of the transactions and dealings of said Dimick; and that certain civil actions and suits were pending between the said companies and the said Dimick; appointed as arbitrators one Reed, of Philadelphia, and one Carpenter, of New York, with a third arbitrator to be selected, to adjust the differences mentioned in said agreement of arbitration. It was further provided that the arbitrators should select the third arbitrator on the execution and delivery of the agreement of arbitration. The subjects upon which the arbitrators were to act were thereupon stated in the agreement and a provision made that judgment might be rendered upon the award in the supreme court of the state of New York. It was further provided that neither of the parties should have the right to revoke the submission. The compensation of the arbitrators and expenses of witnesses were also provided for. The agreement also contained the following clause: “ It is further agreed that at or before the execution and delivery of this agreement there shall be deposited with the Central Trust Co. of the city of New York security satisfactory to the parties of the first and second parts to the amount of $50,000, to secure the payment, performance and satisfaction of any award in favor of the said parties of the first and second parts or either of them that may be made against said Dimick in said arbitration by said arbitrators or a majority of them, payment and satisfaction of said award up to the said amount of $50,000 to be paid upon demand by the Central Trust Co. of New York in aecordwith any judgment that may be entered upon such award.” The complaint further alleged that the arbitrators named in the agreement selected as the third arbitrator Stephen P. Nash of New York; that Dimick died in February, 1888, leaving a last will and testament devising all his property to his wife, Kate E. Dimick, who was duly appointed the executrix thereof ; that on or about the 13th of October, and before the execution and delivery of said submission, the defendant the Continental Insurance Co., with the approval and procurement of said Dimick, and in conformity to the terms of the submission, deposited with the defendant, The Central Trust Company, 500 shares of the capital stock of the New York & Harlem E. E. Co., to be held by said company in accordance with the terms of said submission. The said Trust Company signed and endorsed upon said agreement the following receipt:
    “New York, October 13,1885.
    “Eeceived 500 shares of the capital stock of the New York & Harlem Railroad Company, to be held in accordance with the terms of the above submission.
    “ Central Trust Co., of New York,
    “ Gr. Sherman, Vice Pres.”
    
    The complaint further alleges that thereafter arid from the 15th until about the 18th of October, the 'plaintiffs and the said Continental Ins. Co. and Dimick proceeded under_ said submission before the arbitrators, and that the plaintiffs have always as parties to said submission duly kept and performed and in all respects complied with all the provisions and covenants of every nature on their part to be kept and performed contained in the said submission; that on the 18th of October Dimick served upon the arbitrators a revocation of said submission to arbitration; that the plaintiffs have incurred costs and ^expenses in preparing for said arbitration and the conducting of the proceedings therein at the time of such revocation in excess of the sum of $50,000; that in December, 1889, the plaintiff duly demanded from the Continental Insurance Company, The Central Trust Co. and the said Kate B. Dimick, executrix, etc., payment of said sum of $50,000 out of the security so deposited as aforesaid, which security then and at all times therein mentioned was of far greater value than $50,000, which payment was refused. ■
    The complaint contains the further allegation that the defendants, The Continental Ins. Co. and Dimick, claimed an interest in said stock and its proceeds adverse to the plaintiffs, and relief was thereupon asked praying that the defendants and each of them might be enjoined until the trial and decision of the action from selling or disposing of this security, and that it might be adjudged and decreed that the said stock may be sold and the rights and interests of the parties therein be settled, and the plaintiffs be paid out of the proceeds the amount of their costs and expenses incurred and damages suffered as aforesaid and for such other relief as might be just.
    To this complaint the defendants, the Continental Insurance Company and the Central Trust Company, separately demurred upon the grounds: First, that there is a misjoinder of parties plaintiff, in that an alleged cause of action in favor of the Union Insurance Company has been joined in the same action with a distinct alleged cause of action in favor of the plaintiff, the Insuranee Company of the State of Pennsylvania. Second, that causes of action have been improperly united, in that the alleged cause of action in favor of the Union Insurance Company has been united in the same complaint and action with a distinct alleged cause of action in favor of the plaintiff, the Insurance Company of the State of Pennsylvania. Third, that the complaint does not state facts sufficient to constitute a cause of action. Fourth, that the complaint does not state facts sufficient to constitute a cause of action against the demurring defendant.
    In the disposition of these demurrers we will consider first the ground of demurrer that there is a misjoinder of parties plaintiff. It seems apparent that this objection is not well taken. The provisions of § 446 of the Code are that all persons having an interest in the subject of the action and in obtaining the judgment demanded may be joined as plaintiffs, except as otherwise expressly prescribed in the act. Section 448 provides as follows: “ Of the parties to the action those who are united in interest must be joined as plaintiffs or defendants except as otherwise expressly prescribed in this act But if the consent of any one who ought to be joined as plaintiff cannot be obtained, he may be made a defendant, the reason therefor being stated in the complaint.”
    It seems to be clear that if there is any right to be enforced in respect to these funds in favor of either of the parties of the first or second parts, both are interested therein, and both are necessary parties to the action, and both may claim affirmative judgment. The subject matter of the action is the $50,000, and this deposit was made for the purpose of securing payment, performance and satisfaction of any award in favor of the parties of the first and second parts, or either of them. Whatever interest they had in this security was joint until by the decision of the arbitrators it appeared that either one or both of them had no interest therein.
    It would appear, therefore, that this deposit having been made as security to these plaintiffs, that if there were any rights to be enforced against this fund for the purpose of meeting their expenses and the expenses of the arbitrators incurred prior to the revocation, this interest was necessarily joint.
    We think, therefore, that it is clear that there was no misjoinder of parties plaintiff.
    The views expressed in regard to the first ground of demurrer seem to dispose of the second ground, because there is no separate cause of action alleged in favor of these two plaintiffs. Their cause of action is joint, because they are jointly interested in the fund, and one of these parties would have no right .to exhaust the fund for the payment of its expenses, leaving the other without any recourse against a security which had been given to it in the same manner. It was absolutely necessary that the rights of these parties should be adjudicated in one action, and that the proportion which each was entitled to recover out of the fund should be settled in the one action, for the reason that the deposit was a joint security, and furthermore because it was under a single agreement.
    This brings us to the next two grounds of demurrer, that the complaint does not state facts sufficient to constitute a cause of action either generally or against the particular demurring defendant In view of the decision which has been made upon the revocation of the arbitration by Dimick, notwithstanding the agreement not to revoke, this question must be determined upon the basis that the agreement to arbitrate was lawfully revoked.
    Considerable discussion has been entered into by the counsel on either side as to what were the rights and liabilities under such circumstances both under the Eevised Statutes and under the Code. We will only refer to the provisions of the Code, which seem to entirely dispose of the question at issue.
    Section 2384 is as follows:
    
      Liability of Party who Revokes.
    
    Sec. 2384. Where a party revokes a submission made either as prescribed in this title or otherwise, any other party to the submission may maintain an action against him, and also against his sureties, if any, upon the submission, or any instrument collateral thereto, in which action the plaintiff may recover all the costs and other expenses and all the damages which he has incurred in preparing for the arbitration and in conducting the proceedings to the time of the revocation. Either of the arbitrators may recover in an action against the revoking party his reasonable costs and expenses.
    Therefore, by this provision any of the other parties to this submission in consequence of the revocation by Dimick had the right to maintain an action against him, and also against his sureties, if any, upon the submission or any instrument collateral thereto to recover their costs and expenses.
    It is alleged upon the part of the Continental Insurance Company that they were not the sureties of Dimick, and, therefore, the action could not be maintained against them; and that the cause of action against both defendants fails because by the special covenant in the submission the Continental Insurance Company, by agreement with Dimick, had paid the fund in question, not to. secure the submission, but to provide for the. payment, performance and satisfaction by Dimick of any award against him, and that the fund should be available to the plaintiffs only in payment of any judgment that might be entered thereon in their favor.
    We think that the provisions of the section referred to expressly gives a right of action under the circumstances presented in this case. It is true that neither the Continential Insurance Company nor the Central Trust Company were sureties for Dimick upon this arbitration. It is also true that by the provisions of the abitration agreement it was provided that this $50,000 should be deposited to secure the payment, performance and satisfaction of any award in favor of the plaintiffs or either of them that might be made against Dimick in the arbitration, and that payment and satisfaction of this award up to the amount of $50,000 should be made upon demand by the Central Trust Company in accordance with any judgment that might be entered upon such award. If the question of the right to maintain this action depended upon the strict words which have been quoted, undoubtedly no claim against this fund would have arisen by a revocation of the submission to arbitration.
    But the liabilities of parties to such an arbitration, or their sureties, or arising under instruments collateral to the agreement to arbitrate in case of a revocation, is determined by the statute; which provides that in case of' a revocation, the other party may recover his expenses, etc., against the revoking party, or his sureties or upon any instrument collateral to the agreement to arbitrate. ¡Now it seems to be plain that the agreement respecting this deposit, although incorporated in the agreement to arbitrate, was really an instrument collateral to such agreement. And it was by reason of the provisions of this collateral agreement that the fund in question sprang into existence.
    The mere fact that it was incorporated in the same instrument as the agreement to arbitrate makes this deposit and the agreement under which it was deposited no less collateral to the agreement to arbitrate. It is an agreement made for the benefit of the plaintiffs and to secure them. The fund is brought into existence in pursuance of that agreement, being furnished by the Continental Insurance Company according to an agreement with Dimick. It is, therefore, the product of an instrument collateral to the agreement to arbitrate.
    Suppose there had been an undertaking upon the part of the Continental Insurance Company, on behalf of Dimick, to deposit this money upon a separate paper and conditioned precisely the same as the agreement now under consideration. Could there be any doubt but that it would be an instrument collateral to the agreement to submit within the language of the Code ? It seems to me clearly not; and that all the confusion in regard to this question has arisen from the fact that the collateral instrument is incorporated in the agreement to submit. But, as we have already seen, that fact in no way changes the relations of the parties. It is an undertaking independent of the agreement to arbitrate to secure the award, and such an instrument comes clearly within the definitions of the Code as collateral to the submission. ¡Now, this $50,000 which is in the hands of the Central Trust Company is the product of this agreement. It was deposited to secure this award, and the rights of the parties are to be determined by the collateral instrument out of which the deposit sprung, interpreted by the liabilities provided for by the section of the Code already cited.
    Although the collateral agreement to secure the performance of the award by Dimick contained no express provision such as would entail the obligation to pay the expenses of the award, the law has stated that where any such obligation is entered into,_ the obligoi', in case of a revocation of the submission, becomes liable to pay the expenses of the party who is not at fault, and the contract between the parties is to be construed in view of the provisions of the statutes governing such instruments.
    It seems to me, therefore, that this action is upon an instrument collateral to the submission and the fund brought into existence thereby, which fund was to be the surety for the perform anee by Dimick of any award which might be rendered against him.
    The demurrer should be overruled with leave to withdraw the demurrer and answer on payment of costs.
    
      John Notman and TFm. Allen Butler, for app’lts; Joseph H. Choate and Tredwell Cleveland, for resp’ts.
   Brady, J.

In this case the elaborate" opinion of the presiding justice delivered upon the decision of this controversy before him covers all the points presented and needs no elaboration.

The serious questions at first blush relate to that part of the agreement providing for the deposit of $50,000 as security for the' performance of any award made against Dimick, and the construction to be given to § 2384 of the Code in connection with it.

It is true that the clause mentioned provides in terms for the award to be made “ in said arbitration,” payable by the Central Trust Company “ in accordance with any judgment that may be entered upon such awards,” which is supposed to limit the right of the plaintiffs under the agreement to awards only. The fallacy of this view consists in disregarding the provisions of the section named, which were a part of the law of the state when the agreement was entered into and which were intended to apply to such agreements, in justice to the parties making them, so that the capricious, or ill-advised or unreliable litigant should not be permitted to indulge in any of these follies or traits and go forth untrammeled by responsibility.

The language employed by the codifiers giving a right of action against the sureties, if any, upon the submission added, to leave no doubt of the intention to cover the whole subject, “ or any instrument collateral thereto,” and these provisions by operation of law are engrafted upon the agreement as effectually as if expressed in hcec verlos.

Thus properly construed, the agreement is an indemnity against any loss by reason of the revocation and with which the fund is burdened. Indeed if strict literal construction should be demanded of the disputed clause, it may well be said that the costs and damages provided for and given to the non-revoking party are an award made by statute in “ said arbitration,” particularly when, as suggested, that law becomes a part of the agreement.

It is not deemed necessary to pursue this subject further.

The judgment appealed from must be affirmed, with costs.

Daniels, J.

Serious doubts arise upon the arbitration agreement whether this action can be maintained for the^ appropriation of the securities, deposited for the only purpose" of satisfying any award which might be made, to the payment of the expenses incurred prior to the revocation of the submission, which prevented an award and terminated the authority of the arbitrators. But the interests of these parties will be promoted by avoiding a definite solution of these doubts at the present time. For if it should be held that the plaintiff had no right of action, a reargument of the appeal would become necessary in this court, which would produce a period of considerable delay. And after that, and tbe decision of the appeal, the case, without doubt, would be taken to the court of last resort by the defeated party. It will advance the final determination of the action to place it in a condition for taking that final step as early as practicable. And that can be done by waiving all these doubts and affirming this judgment at once. It will abridge the time very materially for the pendency of the action, and result in an early as well as final decision.

For these reasons it is considered best to concur in the conclusion of the opinion of Mr. Justice Brady, and affirm the judgment  