"The respondent relies particularly on Subdivision 3, 'where the arbitrators were guilty of any other misbehavior by which the rights of any party have been prejudiced,' and strongly urges that when the arbitrator endeavored to make his own investigations in the case at bar these acts brought his conduct within the condemnation of such subdivision. Since the words used in said subdivision are 'guilty of misconduct,' it would not seem that they would cover such a case as the one at bar, where there arises no question as to the integrity of the arbitrator. While the respondent's contention might have carried much force when arbitrations were looked at askance, yet since the enactment of the Arbitration Law it would seem that said section, to be consistent therewith, should be held as intending simply to provide the elementary requirements of honesty, full hearing and impartiality (Matter of Wheat Export Co., 185 App. Div. 723, aff'd 227 N. Y. 595). In other words, the clear path would seem to require that the section above quoted, permitting the court to vacate an award, should be strictly construed in favor of the award, leaving it to the legislature to provide such additional reasons as it may desire to point out for vacating an award (Itoh & Co. v. Boyer & Co., 198 App. Div. 881, at 884). Such a construction makes inapplicable as authorities the earlier cases decided prior to the enactment of the Arbitration Law."

Appraisal Clause in Insurance Policy

Not Enforceable as Agreement to Arbitrate Petition of American Insurance Co., Supreme Court of New York, Appellate

Division, 203 N. Y. Supp. 206 Certain property owned by Max Wasserman and insured by the

American Insurance Co. was damaged by fire. A dispute arose thereafter as to the amount of the damage. The policy, which was a standard one, contained the following

clause:

"In case the assured and this company shall fail to agree as to the amount of loss or damage each shall, on the written demand of either, select a competent and disinterested appraiser. The appraisers shall first select a competent and disinterested umpire, and failing for fifteen (15) days to agree upon such umpire then, on request of the assured or this company, such umpire shall be selected by a judge of a court of record in the county and state in which the property insured was located at time of loss. The appraisers shall then appraise the loss and damage, stating separately sound value and loss or damage to each item, and failing to agree shall submit their differences only to the umpire. An award in writing, so itemized, of any two when filed with this company shall determine the amount of sound value and loss or damage. Each appraiser shall be paid by the party selecting him and the expenses of appraisal and umpire shall be paid by the parties equally."

The insurance company, contending that under the clause in question an appraisal of damage should be referred to arbitrators, applied for an order directing that arbitration proceed to settle the controversy. The insurance company contended that the order might be made under Seccion 2 of the Arbitration Law, which reads as follows:

"A provision in a written contract to settle by arbitration a controversy thereafter arising between the parties to the contract, or a submission hereafter entered into of an existing controversy to arbitration pursuant to title eight of chapter seventeen of the Code of Civil Procedure, or article eightythree of the Civil Practice Act, shall be valid, enforceable and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract." Laws 1920, c. 275, § 2, as amended by Laws 1921, c. 14, § 1.

An order granting the application of the insurance company was entered, but this order was reversed upon appeal on the ground that an appraisal of the character provided for in the insurance policy was not an arbitration. The reasons for the court's decision are set forth in the

ment; and the rule persists that an agreement for the appointment of appraisers under the provisions of a policy

ion:

"There can be no doubt that this provision in the policy is a provision in a written contract to settle through an appraisal the amount of loss in controversy between the parties to the contract. If such an appraisal be equivalent to an arbitration in legal effect, then the right of petitioner is complete. A distinction, however, has invariably been observed between the reference of a collateral or incidental matter of appraisement or calculation, the decision of which is not conclusive as to the ultimate rights of the parties, except the mere matter of amount due, and the submission of all the matters that are in controversy between the parties for final determination upon the whole issue. The distinction has been preserved, because the submission of a collateral fact or of a particular question, without making the whole controversy the subject of the determination of arbitrators, is not deemed a coercive means, designed to put an end to the controversy between the contentious parties. The fulcrum of this ruling is that such an incidental reference of an amount due merely substituted the judgment of the appraisers for evidence of value on a collateral matter, and left the rest of the controversy open for adjudication in the legal forum. In such circumstances it has hitherto been considered that a decision on such a subject was not an award, nor was the referring of such a matter to appraisers a submission to arbitration.

"The Arbitration Law (Chapter 275 of the Laws of 1920) does not make agreements to determine certain facts by appraisal arbitrations, if they had not such nature anterior to its enact

been frequently reiterated in this state, and it would be quixotic now to argue that the agreement for an appointment of appraisers to determine merely the amount of damage is a contract for submission to arbitration. Authorities in this state have maintained the rule that the distinction between agreements for an appraisal of damage and arbitration. of the whole dispute should be recognized. . .

"The Arbitration Law itself does not extend the hitherto recognized type of arbitrations, so as to include within its embracement appraisals of incidental matters which are at times provided for in contracts, and since, prior to the adoption of the Arbitration Law, appraisals of the character provided for in insurance policies were never considered as arbitrations, and were had quite informally without the procedure of oaths, witnesses, notices of trial and formal awards, there is no reason indicated for a change thereunder."

BANKING

Bank Liable in Paying Checks to Depositor's Agent

Graham v. Southington Bank & Trust Co., Supreme Court of Errors of Con

necticut, 121 Atl. Rep. 812

Where a person having accounts in two banks draws a check on one bank payable to the other, and delivers the check to an agent for a special purpose, the mere possession of the check does not clothe the agent with apparent authority to convert it

into cash. In such a case the payee bank, in the absence of express or implied authority from the drawer, is not justined in paying the amount of the check to the agent. If it does so it may be liable to the drawer for the amount so paid. The facts in the present case were as follows:

The plaintiff, Charles E. Graham, was the receiver of a manufacturing company, who was continuing the business under order of court. He carried deposit accounts in the Merchants' National Bank of New Haven, and with the defendant, the Southington Bank & Trust Co. Authority to sign checks upon these accounts was conferred by the receiver upon W. D. Chase, whom he had appointed as his managing agent of the business, and the defendant was notified of this fact.

On July 20, 1920, a check was drawn either by the plaintiff, or Chase, on the Merchants' National Bank, payable to the defendant bank. It was intended that the check should be deposited in the plaintiff's account in the defendant bank, and that a transfer of funds from the custody of the Merchants' National Bank to the custody of the defendant bank should be effected thereby. The check was given to Heyman Eyring, who was employed by the plaintiff as auditor and as head of the accounting department, for deposit in the defendant bank.

Eyring, instead of depositing the check, personally indorsed it and presented it to the defendant bank with the representation that the plaintiff had directed him to get the cash for payroll use. The defend ant, without making any effort to ascertain whether this statement was

true, paid to Eyring the amount of the check, and he converted the money to his own use. Thereafter, between August 1, 1921, and February 2, 1922, 56 checks of a similar nature were drawn by the plaintiff for deposit in the defendant bank and given to Eyring to deposit. The latter induced the bank to give him cash for these checks, which he converted to his own use. The sum obtained by Eyring in this manner amounted to $6,395. Subsequently the checks were presented to the drawee bank and paid to the defendant.

Upon discovering the fraud, the plaintiff demanded that the defendant pay him the amount of the checks. The demand was refused, and this action was brought to recover the amount in question. The defendant contended that the plaintiff was not entitled to recover, for the reason that the plaintiff by his conduct had given Eyring apparent authority to cash the checks.

It appeared that Eyring had no direct authority to obtain cash from the bank on the checks in question or any checks except those made payable to his own order. It further appeared that although it was Eyring's duty to indorse all incoming checks for deposit, and to determine whether they should be deposited in the defendant bank or in the Merchants' National Bank, he had no authority to sign checks in behalf of the plaintiff, of which fact the defendant had notice. All cash necessary for payrolls and petty cash was procured from the defendant bank upon checks signed by the plaintiff or Chase and inade payable to Eyring's order. Checks drawn in this way were the

only checks ever cashed by the defendant for Eyring prior to July 20, 1921. Before that time all checks drawn to the defendant bank's order and brought to the defendant were credited to the plaintiff's account.

From these facts the court concluded that Eyring was not clothed with apparent authority by the acts and conduct of the plaintiff to secure money from the defendant bank without a check legally payable to him. The court also held that the mere possession of the checks payable to the defendant's order did not give Eyring apparent authority to secure cash for them.

A judgment in favor of the defendant bank was reversed with directions to enter judgment for the plaintiff.

Stockholder of Insolvent Bank Cannot

Offset Creditor's Claim Against Statutory Liability Farmers' State Bank v. Reed, Supreme Court of Kansas, 217 Pac. Rep. 320

In an action brought by the receiver of the plaintiff, an insolvent bank, to recover from the defendant his statutory liability as a stockholder, the defendant, who was a creditor of the bank, sought to offset his creditor's claim against his liability as a stockholder.

It was held that the money collected from stockholders under their sta. utory liability constitutes a reserve or trust fund for the benefit of all the creditors and that the defendant could not offset his claim against the bank against his statutory liability, for the reason that if he were permitted to do so he would become a preferred creditor. Accordingly,

a judgment for the plaintiff was affirmed.

The decision is in accord with the general rule on this question, as indicated by the following statement quoted from the court's opinion:

"To permit a stockholder to offset a claim which he has against the bank against his statutory liability would have the effect of making him a preferred creditor. In 3 R. C. L. 398, it is said:

"Where the capital of a banking corporation has become impaired, and an assessment against the stockholders is ordered to enable the bank to continue business, the payment of such assessment, and the resumption of business by the bank do not in any manner affect or discharge the stockholders from their general statutory or constitutional liability for the debts of the bank upon its subsequent insolvency. The latter is designed solely for the benefit of creditors, and constitutes a fund available only when the bank is insolvent and unable to meet its obligations in fuil. It amounts for all practical purposes to a reserve or trust fund, to be resorted to only in proceedings in liquidation, when necessary to meet the payment of obligations of the corporation.'

"In 7 C. J. 517, it is said:

"A stockholder who is sued by, or on behalf of creditors to enforce his statutory liability for the debts of the bank, cannot escape or reduce his liability by asserting any claim which he may have against the bank.'"

Certificate of Deposit Protected by
Deposit Guaranty Law
Songer v. Peterson, Bank Commis-
sioner, Supreme Court of Kansas, 220
Pac. Rep. 1060

The plaintiff held a certificate of deposit issued by the Butler County State Bank, which was operated under the bank guaranty system of