Baltimore & Ohio Railroad v. Canton Co.

McSherry, J., delivered the opinion of the Court. The Baltimore and Ohio Railroad Company needing for its right of way certain property owned by the Canton Company of Baltimore, a contract was entered into between the two companies on the twenty-fourth day of November, eighteen hundred and eighty-four, whereby the Canton Company agreed to grant to the railroad company a right of way, particularly described, and whereby it was provided that “if said j>arties hereto cannot agree as to value of said right of way, then the final decision of price to be paid shall be left to some disinterested third party, acceptable to both parties, who shall determine its value, and his decision shall be final and binding upon both parties hereto.” The sum awarded was to bear interest at the rate of five per cent, per annum from December 1st, 1884. “Possession to be given to the Baltimore and Ohio Railroad Company of the land for the right of way above mentioned, as soon as the said company have furnished the Canton Company the plats showing the location of said right of way, but the adjustment of its value shall be determined at any date upon the request of the Canton Company.” ⁴⁰⁷ Under tliis contract the railroad company took possession of the ‘land wanted for the right of way and proceeded with -the construction of its road. There seems to have heen some difficulty in selecting an arbitrator, and after the lapse of many months a letter-dated December 28th, 1885, and signed by Mr. Spencer, Vice-President of the railroad company, and by Mr. Brooks, President of the Canton Company, was sent to Mr. W. Wo. Spence and Mr. Robt.

C. Hall, notifying, them that they had been agreed upon as arbitrators. Accompanying this letter and referred to in it was a copy of the contract of November 24th, 1884. For the purpose of carrying out this contract insofar as it related to the ascertainment of the value of the right of way, an agreement of submission was executed by the two companies on May 26th, 1886; and by its first paragraph W.W. Spence and Robert C. Hall were duly appointed arbitrators. By the fifth paragraph it was provided that “said arbitrators, in ascertaining the sums of money to he paid as aforesaid, shall take into consideration the damages, if any, and also the benefits, if any, to the remaining property of the Canton Company not appropriated as aforesaid, and be governed in the assessment of said damages and benefits by the charters of said companies, and the law of the land applicable to eminent domain.

Questions of law and fact in the assignment of said damages and benefits are to he determined by the said arbitrators." The arbitrators after hearing testimony made their award on the seventh of June, eighteen hundred and eighty-six, fixing the amount to be paid by the railroad company to the Canton Company at one hundred and forty thousand dollars with interest, at the rate of five per cent, per annum from December the first, 1884, pursuant to the contract of November 24th, 1884. ⁴⁰⁸ On October 28th, 1886, the railroad company filed a bill in the Circuit Court of Baltimore City against the Canton Company, asking an injunction to restrain the enforcement of the award, and seeking to have the award vacated and cancelled, upon the ground that Mr. Spence was at the time of his appointment as an arbitrator, and whilst he acted as such, and when he signed the award, a stockholder of the Canton Company. The Canton Company answered,!and a large volume of testimony was taken. The Circuit Court dismissed the bill, and the railroad company has brought the case here on appeal from that decree. Much of the record is taken up with evidence bearing upon the alleged excessiveness of the award.

But there is no charge or pretension that the arbitrators acted fraudulently in making their estimate; and under the broad terms of the submission any mere mistake of-judgment on their part in assessing the damages cannot be reviewed by this Court. Cromwell, et al. vs. Owings, 6 H. & J., 10 ; Ebert’s Ex’rs vs. Ebert’s Adm’rs, 5 Md., 353 . We are consequently not required to consider this branch of the case at all, and we proceed at once to examine the other questions presented. It is not denied that Mr. Spence was, whilst he acted as an arbitrator, the owner of several hundred shares of the Canton Company's capital stock.

"It is a maxim of every code, in every country, that no man should be judge in his own case. The learned wisdom of enlightened nations and the unlettered ideas of ruder societies, are in full accordance upon this point, and wherever tribunals of justice have existed, all men have agreed that a Judge shall never have the power to decide where he is himself a party. In England it has always been held that, however comprehensive may be the terms by which jurisdiction is conferred upon a Judge, the power to decide his own case ⁴⁰⁹ is always a tacit exception to the authority of his office. It is not left to the discretion of a Judge, or to his sense of decency, to decide whether he shall act or not; all his powers are subject to this absolute limitation; and when his own rights are in question, he has no authority to determine the cause.

The Wash. Ins. Co. vs. Price, 1 Hopk. Ch.

R., (N. Y.,) 1; Peninsular Railway Co. vs. Howard, 20 Mich., 18 . It has accordingly been settled by the House of Lords that a judgment rendered hy a Judge in a case in which he is interested is voidable. Dimes vs. Prop. of the Grand Junc. Canal, 3 H. of L. Cases, 759.

This salutary principle, that no Judge shall decide his own case, is likewise applicable to an arbitrator; and any interest he may have in the subject-matter upon which he is selected to pass judgment will render his award, at least, voidable; unless the parties to the submission, having knowledge of his disqualification, waive the objection or preclude themselves hy their acquiescence or laches from taking advantage of it. So fundamental is this doctrine which disqualifies an arbitrator who is interested, unless specially authorized to act, that it has even been regarded as an implied term or condition in every contract of submission that he shall be disinterested, when the contract itself is silent on the subject. Pool vs. Hennessy, 39 Iowa, 195 . By the original contract, dated November 24th, 1884, it was unequivocally provided that the ascertainment of the amount to be paid to the appellee for the right of way was to he left to a ‘‘disinterested third party.” It is evident, therefore, that there was at that time no idea of submitting the question to a party so directly interested as a stockholder of either company.

Many persons were suggested, but none seem to have been satisfactory to both sides. Finally, Mr. Hall was named, and Mr. Brooks agreed to accept him provided some one ⁴¹⁰ of three other persons whom he mentioned should he associated with Mr. Hall. Mr. Spencer, who had charge of this matter, declined to accede to this proposal. Nothing further was done for some time.

Mr. Brooks being in the office of Mr. Garrett on other business, called Mr. Garrett’s attention to the delay in selecting arbitrators, and stated that he, Mr. Brooks, was willing to accept Mr. Hall provided Mr. Spence should he associated with him; hut that Mr. Spencer had declined to consent to this.' Mr. Garrett then sent for Mr. Spencer, and after a few moments private consultation with him, announced to Mr. Brooks that the railroad company would agree to his proposal. It was then suggested that a joint letter he written by Mr. Spencer and Mr. Brooks to Mr. Spence and Mr. Hall notifying them of their appointment. This letter, as we have already stated, was written and sent. The agreement of May 26th, 1886, was subsequently made “for the purpose of carrying out said agreement” of November 24th, 1884.

Mr. Garrett and Mr. Spencer have both emphatically testified that when they agreed to the appointment of Mr. Spence, and when the agreement of submission was executed, they had no knowledge or information whatever that Mr. Spence was interested in the stock of either company. They have further testified that they never meant to assent to the appointment of an interested arbitrator. On the other hand, Mr. Brooks admits that he knew Mr. Spence was a stockholder of the Canton Company at the time he suggested his appointment. It is thus perfectly manifest that up to this point in the transactions neither Mr. Garrett nor Mr. Spencer knew of Mr. Spence’s interest, and it is not pretended that any other officer of the railroad - company was aware thereof.

It is true Mr. Spence himself says that more than a year before, and when discussing a ⁴¹¹ totally different business transaction, lie mentioned the fact of his being a stockholder of the Canton Company in the presence of Mr. Burns, one of the directors of the railroad company, and the chairman of its finance committee. But this was not notice to the railroad company. The United States Ins. Co. vs. Shriver, et al., 3 Md. Ch.

Dec., 381. On the ground of sound public policy, and because, as observed by Lord Coke, it is against natural justice that a person should act as a judge in his own case, strong, convincing and indisputable evidence ought to. be produced to show that a party who believed he was submitting his cause to a disinterrested arbitrator, subsequently discovered the arbitrator’s direct interest, and then waived the objection. We were not referred during the argument to any adjudged case distinctly deciding whether, when an award is impeached as this one is, the burden of proof rests upon the party who assails it to show that he continued in ignorance of the arbitrator’s disqualification until after the award had been given ; or whether it is on the opposite party to show that he who attacks the award had knowledge of such disqualification before the award was made. When an award, given under a submission, which expressly provides for the appointment of a disinterested arbitrator, is shown to have been made by one who is directly interested in the result, it would seem quite clear, upon principle, that it must be cancelled and set aside, unless the party who seeks to rescue it from condemnation shows that the person impeaching it had knowledge of that disqualification, before the award was signed, and either waived all objection or acquiesced in that departure from the terms of the contract of submission.

This should be the rule as to the burden of proof where the submission distinctly provides for a disinterested arbitrator. Any modification of that ⁴¹² agreement whereby an interested person is substituted, ought to he shown hy the party who claims the award to be valid, though made hy one not competent, under the contract, to sit at all. This is reasonable, because a party has the right to insist on the strict performance of a contract as it is written, unless the adverse party can show, by competent evidence, a waiver of its terms. In Porter vs. Still, 63 Miss., 357 , it was held that the party on whom the burden of proof in any case rests, may be détermined hy considering which would succeed if no evidence were offered by either side, and hy examining what would he the effect of striking out of the record the allegation to be proved.

The onus must he on the party who, under such tests, would fail in the suit. Substantially the same rule is laid down in Stephens’ Digest of the Law of Evidence, page