Case ID: abb-pr-ns_3/html/0318-01.html
Source: Caselaw Access Project
Author: {"author": "Van Vorst, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

WHITE against BROWNELL.
    
      New York Common Pleas; Special Term,
    
    
      November, 1867.
    The New York “ Open Board” of Brokers.—Trial of Questions of Membership.—Injunction
    The Open Board of Brokers in the City of New York is not a corporation ; nor is it a joint stock association ; nor is it, as respects questions relating to the continuance or termination of membership in it, a partnership.
    That board is a voluntary association of persons who, for convenience, have associated to provide, at the common expense, a common place for the transaction of their individual business as brokers.
    The agreement which the members of such an association have made, upon the subject of membership, and what shall be the terms on which it shall be acquired, and the grounds and proceedings upon which it shall be terminated, must determine the rights of parties on that subject. A court of justice must recognize and enforce these provisions of the compact. It cannot substitute another contract for the one which the parties have made.
    Provisions of the constitution and by-laws of the Open Board of Brokers in the City of New York, authorizing the expulsion of a member who should faq to perform contracts made at the board, with another member, examined and adjudged not unreasonable.
    One who becomes a member in a voluntary association whose rules provide' for expulsion upon certain grounds, and direct a mode of proceeding before a committee or tribunal of the association to ascertain whether, in a given case, such grounds exist, submits himself to these rules ; and cannot, when they are invoked against himself (nothing unlawful or unconseientious in them being shown) resort to a court of justice to prevent them from being put in force. An injunction, against the tribunal of the association, or against an officer of the association charged with executing the decision of such tribunal, will not lie.
    Motion to dissolve an injunction.
    This action was brought by Cumberland G. White against John L. Brownell, president of the “ Open Board of Brokers,” and others, to procure an injunction restraining them from interfering with his privileges as a member of that board.-
    It appeared that the Open Board of Brokers was organized in the year 1864, by S. L. Joseph, Samuel B. Hard, and seventy-five other persons, their associates. The articles of association signed by them recited that “ the rapidly developing interests of the country, and the increasing number and value of its commercial securities, require new and greater facilities for exchange and negociation; and such business can be successfully transacted only when there is the utmost confidence, and such confidence is begotten only by public, open, fair and upright transactions,-where any party interested may and can know where and how such business is done; and the liberal spirit of the age demands for such transactions a' public mart open to alland declared that for the purpose of supplying these requirements and demands, the subscribers associated themselves together.
    The associates adopted a constitution and by-laws, and made provision therein for a room for the use of the board for the election of a president and other officers, for the formation of an executive committee, a committee of membership, a committee of arbitration, and a board of appeals. It also provided for the election of new members; elections to membership were to be made by ballot, and after the report of the committee on membership, whose duty it was to make diligent inquiry as to the qualifications of the applicant, the new member, upon signing the constitution and paying an initiation fee, was entitled to all the rights and privileges of a member. No person was to be eligible to membership unless he procured a government license as a broker. The constitution also contained clauses for the suspension and expulsion of members, and their readmission. It also provided that every member pledged himself to abide by the constitution, by-laws and rules of the association.
    Under the provisions of the constitution several hundred new members were from time to time admitted to the board, with all the rights and privileges of the original subscribers.
    It was declared to be the duty of the arbitration committee, to take cognizance of and exercise jurisdiction on all claims and all matters of difference between members of the board, and its decision was declared to be binding. It was provided, however, that an appeal from the judgment of the arbitration committee might be taken to the board of appeals, which board should take cognizance of all eases of appeaFfrom the judgment of the arbitration committee.
    It was also provided, in the by-laws, that “ as a means of mutual protection,” it should be the duty of any member to report to the board all cases of defalcation of contracts of other members, and all cases of refusal or inability to pay differences, whereupon the president should declare the member so reported, suspended. From such suspension the reported member might appeal and demand a hearing before the executive committee.
    In the year 1865, the plaintiff, who was a stockbroker, doing business in New York, was elected a member of the board. He paid his fee on initiation, and subscribed the constitution, and became entitled to all the privileges, and was subject to all the obligations of membership under the constitution and by-laws.
    In May, 1867, the by-laws were amended, so as to provide that whenever a member should be in default in any contract, and the fact should become known to the committee on membership, the committee, after due investigation, should report the same without delay, through their chairman, to the president of the board, who should at once declare the member so reported, suspended from all the privileges and immunities of the organization; that from such suspension the reported member might appeal within sixty days from the date of such suspension, and demand a hearing before the executive committee, who should give public notice at the board at least five days before such appeal, for the purpose of enabling -any person interested to present objections, and that they should report the result of their investigation. If it should appear that the complaint was just, the declaration of suspension should be confirmed; otherwise it should be annulled.
    It appeared that the association were the lessees, and were • in the occupation of a building known as number 18 Broad Street, where the business of the association was transacted ; and was the owner of a considerable amount of government bonds and other assets, the accumulation of initiation fees of members and of fines imposed. The sittings of the associates are held in the building on Broad Street, at stated hours of the day, in a large room, which partakes of the character of an exchange or mart where gold, stocks, and other securities are bought and sold by the members dealing with each other; and the right to enter this room, and to take part in the sessions of the board, and to have free access to the same, and to transact business thereat, in the purchase and sale of stocks and other securities, as a broker, and as an associate, forms the principal right and privilege of a member of the board.
    In the month of January, 1867, the plaintiff entered into a contract with Currie, Martin & Co., stockbrokers, and associates with plaintiff as members of the board, by which Currie, Martin & Co., purchased of the plaintiff one thousand shares of the capital stock of the Hudson River Railroad Company, at 128 per cent., “payable and deliverable at sellers option, this year, 1867, with interest at the rate of six per cent, per annum,” either party having the right to call from time to time for deposits to meet the fluctuations of the market. Deposits were made by both parties to the contract, in the United States Trust Company, from time to time, under the contract, to the amount of $55,000 each.
    The Hudson River Railroad Company having adopted a resolution in April, 1867, increasing the capital stock of the company, permitted stockholders to subscribe for such new stock within a certain time, and upon certain conditions. On April 10th, Currie, Martin & Co., notified plaintiff that they elected to subscribe for the additional stock in the company, and that they looked to plaintiff for same. The plaintiff avers that he had no right to subscribe for the new stock; that he was not a stockholder, and that he would not have subscribed for such additional stock were he a stockholder, as he did not consider the stock to be a good and profitable investment.
    On September 5th, 1867, Currie, Martin & Go. called on the plaintiff to deposit $10,000 further margin to secure the contract. The plaintiff refused to furnish it, whereupon they notified plaintiff that they would, under .the rules of the board, purchase at the board 2,000 shares of the stock of the company, whereupon the plaintiff served on the president of the board a protest against the purchase of any shares of stock in the Hudson River Railroad Company, upon his account, under his contract with Currie, Martin & Co. The president of the board did, under the rules, purchase the 2,000 shares of stock on plaintiff’s account, which was paid for by Currie, Martin & Co., notice of which was given to plaintiff by Currie, Martin & Co., on the same day; the notice was at once returned by plaintiff, with a notice to Currie, Martin & Co., that he repudiated the transaction.
    Currie, Martin .& Co., then made a claim on the plaintiff for a large sum of money, as difference in their favor, and demanded payment thereof, which was refused by plaintiff.
    On September 6th, 1867, Currie, Martin & Co., presented their claim and difference to the arbitration committee, and demanded an examination, inquiry, and decision upon the same. This committee appointed a meeting for such purpose for the 9th day of September. The plaintiff was notified to appear on that day before the committee, and interpose whatever defence or objection he might have to the claim and demand of Currie, Martin & Co. On the day the committee met, the claimants appeared before it and presented their claim, and gave evidence of the facts upon which it was based. The plaintiff did not appear before the committee. He declined and refused to be present, or to submit the matter to them; and served upon the chairman of the committee a notice in writing of such refusal.
    The committee made their report, finding, in substance, that Currie, Martin & Co., were entitled, under the contract of February 18, 1867, to one thousand shares of the increased capital stock of the Hudson Biver Bailroad Company, they having given notice to plaintiff that they elected to subscribe for the same; that default having been made by plaintiff in responding to the call for additional deposit, it was at the option of the claimants, under the rules of the board, to elect whether to cancel, to close, or to continue the contract, and that Currie, Martin & Co., did elect to close same. Judgment was rendered in favor of the claimant against plaintiff, in the sum of sixty-nine thousand six hundred and thirty-three dollars and thirty-four cents, with interest.
    Plaintiff did not appeal to the board of appeals from the decision of the arbitration committee. After the expiration of the time to appeal, Currie, Martin & Co., caused the facts and circumstances to be brought to the notice of the committee on membership. A meeting of this committee was held on the 10th of September; the claim and difference was investigated by this committee, and the committee reported to the president of the board that the plaintiff was in default in his contract with Currie, Martin & Co.
    On the 19th September the president of the board declared the plaintiff suspended from all the privileges of the organization.
    The plaintiff took an appeal to the executive committee of the board from such declaration of suspension, in pursuance of the provisions of the constitution. The president of the board took measures to have that committee called together to consider said appeal, and a meeting of the committee was held on the 25th September, in pursuance of the notice required, at which a quorum was not present; and before another meet- ' 'ing was held this action was commenced.
    After the service of the complaint in this suit, a meeting of the executive committee was held to consider the appeal, of which plaintiff had notice. Plaintiff appeared before the committee, refused to prosecute his appeal, and protested against and forbid the committee from taking any proceeding or action in the appeal, and the committee took no further action.
    The plaintiff charged in his complaint that several members of the arbitration committee were prejudiced against him and his claim, and had, before acting, expressed an opinion favorable to Currie, Martin & Go’s view of the matter; that there was unnecessary delay in assembling a meeting of the executive committee; that the delay was occasioned by a disposition on the part of Currie, Martin & Co., and other members of the association, to deny the plaintiff justice; that the association, through its officers, committees, and members sufficient to control its action, has denied the plaintiff justice. He denied the claims made by Currie, Martin & Co., and insisted that his original contract with them was still in force. He claimed that his suspension was unjust, and would inflict irreparable injury on him in his vocation, as broker, by his exclusion from the rooms of the board, and exclusion from his rights and iim munities as a member.
    
      He prayed that the board and its officers, agents, and servants might be enjoined and restrained Rom in any manner interfering with him in the full and free exercise and enjoyment of all his rights and franchises as a member of the organization, or with his enjoyment, in common with other members of the association, of the right to enter the rooms and remain at all the sessions of the board, and to transact business thereat in the buying and selling of gold, stocks, and other securities, as other members do; or from treating him otherwise than as an actual and unsuspended member.
    The defendant, Brownell, the president of the board, in Ms answer to the complaint, expressly and positively denied that either himself, or any other officer or member of the board, so far as he has any knowledge or information, had, at any time, taken any side, or combined, or in any manner .acted with, or at the instigation of the firm of Currie, Martin & Co., against or to the prejudice of the plaintiff, or had in any way or manner desired or sought to deny the plaintiff justice, or to interfere in any way or manner, except so far as the constitution and by-laws of the board required them to interfere in the controversy between plaintiff and Currie, Martin & Co.; and all the statements to the contrary thereof contained in the complaint were denied.
    An order of injunction was obtained by plaintiff on his complaint; and was duly served on the proper parties. The defendant Brownell, the president of the board, now moved for a dissolution of the injunction, on the complaint and answer; both of which were under oath.'
    
      William B. Martin and Freeman J. Fithian, for the motion.
    
      George C. Barrett and William C. Barrett, opposed.
   Van Vorst, J.

The open board of brokers is not a corpora- ’ tion; the obligations and rights of its members are not determined or fixed by any statutory enactment, general or special. It is not a joint stock association. There has been no contribution of capital by its members for the prosecution of business of any kind by the association. There has been no stcfbk issued to its members, nor can the individual members claim any rights of property in it as stockholders.

The association is engaged in no business, and does not devote its funds to the prosecution of any undertaking to produce profit or gain to its members; nor is it a copartnership; in its organization, the essential features which characterize a partnership are wholly wanting. There are no profits earned to be divided among the members, nor are there losses to be borne.

The constitution—the contract between the parties—does not establish copartnership relations between the members; the associates do not hold themselves out to the world as copartners, nor is there anything to show that they regard themselves, the one to the other, in that relation.

The association looks to a continued existence, unaffected by the death, resignation, suspension or removal of its members. If it was a simple copartnership, the death or retirement of an associate would dissolve it.

It is an established principle in the law of partnership, that if it be without any definite period, any partner may withdraw at a moment’s notice, when he pleases, and dissolve the partnership, and the civil law contains the same rule. (3 Kent's Com., 53.)

The death of either party is, ipso facto, from the time of the death a dissolution of the partnership, however numerous the association may be.

But in this organization, although individual members retire, die or are expelled, the body lives.

The status, rights and obligations of this plaintiff are not therefore to be determined by a consideration of this association in the light of its existence either as a corporation, joint stock assocation or copartnership.

The Open Board of Brokers is a voluntary association of persons, who for convenience in the transaction of business with each other, have associated themselves to provide a common place for the transaction of their individual business, agreeing among themselves to pay the expenses incident to the support of a “Mart,” in which each for himself, at stated hours of the day, and for his individual profit may prosecute his own business and enter into separate engagements with his fellow members. The association does not share in the losses of the individual associates, each member takes his own gains, and individually sustains the losses incident to his engagements. The organization of this board grew out of a necessity for new and greater facilites for exchange and negotiation incident to the rapidly developing interest of the country and the increasing number and value of its commercial securities.” As the number of these securities had been largely augmented; so too the body of persons who dealt in them as purchasers and sellers for others had greatly increased, and new organizations were required to be formed and new places of business appointed to meet the wants of a growing and increasing business. The persons who formed this association were brokers. It is stated in the constitution that no person was eligible to membership unless he possessed a government license as a broker. A broker is an agent simply. He transacts business not for himself, but for another. He is a middle man, a negotiator between other persons for a compensation.

A stock broker deals in stocks of moneyed corporations and other securities, for his principal. It is a calling of great responsibilities, in which punctuality, honesty and knowledge are required.

Acting as the stock Broker does for others, it is important that all the engagements he enters into should be promptly and faithfully fulfilled, both by himself and the party for whom he contracts. Hence, the language of the agreement of the original associates is suggestive; “ such business can only be transacted where there is the utmost confidence, and such confidence is begotten only by public, open, fair and upright transactions where every party interested may and can know where and how such business is done ’’—and, hence, a great public Mart ” open to all the associates was desirable.

It follows from the very nature of such an organization, with such objects, intents, and purposes, that there must be rules and regulations for the good order of the association, and such rules should be held to be conclusive as to tho mode of transacting business between the members, and as to the privilege of admission to, and continued enjoyment of, membership.

As this association is not organized in pursuance of any statute, nor are the terms of membership fixed by principles of the common law, it follows that the agreement which the members make among themslves on the subject must establish and determine the rights of the parties on the subject, The constitution of the association, and its laws agreed upon by the members, contain all the stipulations of the parties, and form the law which should govern. The members have established a law for themselves. No person is entitled to membership in the Open Board of Brokers except he is approved by the appropriate committee, voted for by the board, and shall agree to, adopt, and affix his name to the constitution, and, having done this, each member should stand by his contract. Each member is under an obligation to support it himself in all its details, and is under a duty to see to it that it is supported by others. “ As a means of mutual protection, it is declared, by the by-laws, to be the duty of every member to report to the Board all cases of defalcation of contract of other members, and all causes of refusal or inability to pay differences.”

The very existence of this body depends upon the faithful observance of its organic law by all its members.

The court must regard the constitution and laws of this board as the contract by which all the members are bound. The court cannot make any other contract for the parties than they have solemnly made for themselves. It is not the province of courts of law to make contracts for parties. It may explain, interpret, enforce, and, in some instances, where contracts are hard and unconscionable, relieve from them.

But there is no claim in this suit that the terms of this constitution, adopted by the plaintiff, are hard and unconscionable. The plaintiff does not ask to be relieved from his membership, he rather demands that he may be allowed to remain in the association, under the constitution; he does not wish to be suspended, or have his connection determined and ended. In an organization of the character of the Open Board of Brokers, with its several hundred members, the business transacted at its rooms being daily large in amount, and the stocks and securities dealt in being ever fluctuating in value, it was not unreasonable to apprehend that there would be constantly .occurring differences between members, acting as agents for others, in regard to the terms of contracts, and as to the obligations and duties of. contracting parties under agreements often hastily made.

The temptation to avoid a contract in a rapidly rising or falling market, as the pecuniary interest of a party might prompt, rendered it imperative that some tribunal in the body of the association, should be appointed and agreed upon, to take cognizance of and exercise jurisdiction over all cla.ima and matters of difference which might arise between members of the board. This appears the more important, as confidence in each other, and in the engagements which they might make, one with the other, and in the fairness, openness, and uprightness of their transactions, and in the certainty that their engagements would be fulfilled are announced as the causes which led to the organization. To be effective, their decisions should be prompt. As these engagements would be constantly maturing, it was eminently proper that a tribunal should be near to render speedy and exact justice. Confidence is the real life of such engagements; hence, the appointment of a committee of arbitration is a prominent feature in the constitution of this board, and, by the express assent of each member, jurisdiction is awarded to this committee in advance" of all claims and matters of difference which might arise between the members. The associates have agreed, among themselves, that the decisions of this committee shall have conclusive force, and that the members shall be bound by them; and each member is truly bound by such decisions so far as they are made the basis of subsequent action in the board to secure its good government under its constitution.

Let us apply the above principles to the case before us. A claim and matter of difference arose between the plaintiff, a member of the board, and Currie, Martin & Co. also members, growing out of their respective rights and obligations, under a contract for the purchase of 1,000 shares of Hudson River Railroad stock, agreed to be sold and delivered by plaintiff to them. This contract was made at the board, and between its members. It was in respect to a transaction embraced directly within the objects and purposes for which the association was formed. Currie, Martin & Co., claimed the right, under the contract, to subscribe for the increased stock proposed by the railroad company to be issued, and they elected to do so, and looked to plaintiff for the same. This claim to subscribe for the additional stock was not admitted by plaintiff. Currie, Martin & Co. claimed of plaintiff a deposit of additional margin under the contract, which was refused ; they then notified plaintiff that they should, under the rules of the board, purchase 2,000 shares of said stock on plaintiff’s account, against which proposed action plaintiff protested. The stock was bought by the president of the board under the rules, of which plaintiff was notified. He refused to recognize the transaction, or pay for the stock, and Currie, Martin & Co. paid for it, and made a claim and demand on plaintiff for a large sum of money, the difference in their favor. The justice of the claim was denied, and its payment refused by plaintiff.

This was a claim and matter of difference over which the arbitration committee had jurisdiction so soon as the case should be brought before it. It was presented to the committee by the claimants, and an examination and adjudication upon it demanded. A day for hearing was appointed, and plaintiff summoned to appear and answer, and interpose his defence. The plaintiff declined to appear before the committee, claiming that there was nothing to be submitted, and that there was no difference between him and Currie, Martin A Co.

Now, the facts clearly show that there was a real and substantial difference between these parties; claims were presented on the one side to a large amount, growing out of the contract, and denied on the other. H the parties had agreed in regard to their respective rights, then there would have been no claim or difference, but they were very far apart, The question is not whether the claim of Currie, Martin & Co. was right or wrong in itself, just or unjust. There was a difference, which was to be adjusted, and of which the plaintiff, when he became a member, had agreed that the committee should take cognizance. The plaintiff seems to rest in, the belief that because he denied that Currie, Martin & Co. had a claim, that therefore there was none in them favor; he would decide the matter for himself. Row it happens that much of the real business of courts of law arises from the assertion of a claim, by the plaintiff and its entire denial by the defendant, yet the action proceeds to trial and final determination, and it is no uncommon occurrence that the party who denies the claim fails in his defence.

A claim “is a demand of a right or a supposed right, a calling on another for something due, or supposed to be due.” (Webster's Dic.)

And whenever there is a disagreement in opinion in regard to a contract, or a matter in controversy exists between. the parties to it, there is a “difference” such as the committee might properly adjudicate, and of which it was bound to take cognizance.

The committee, in the absence of the plaintiff, heard and determined the matter upon the statements of the claimants, and rendered judgment in their favor. Plaintiff had a right to appear and make his objections, and set up his defence; this he refused to do. After the award was made, he could perform it and retain his rights as a memberthis he declined to do. He might appeal to the board of appeals, and this he refused to do. Having made up his mind that Currie, Martin & Co. had no claim, he concluded that, he need interpose no defence, nor take any steps to reverse the decision, and could treat the award as a nullity. The plaintiff cannot assume this position and still claim the rights of membership. He cannot invoke the aid of this court to protect him in all the rights and advantages of the association, and which he alleges are a great source of benefit to him, and still be allowed to disregard his duties under the constitution and laws of the board.

The plaintiff agreed, when he became a member, that the arbitration committee should take notice of all claims and differences between members, and that he would be bound by their decision. He refused either to acknowledge its conclusive force, in a case in which he was interested, or to appeal from its decision. The constitution must be taken as a whole. The contracting part is an entirety. All its obligations are to be assumed and discharged; all its benefits are to be enjoyed. The enjoyment of the latter depend upon the performance of the former. Were it otherwise, the association would be of no real advantage to its members. It clearly appears that good faith in the observance of the constitutional obligations of the members was intended to furnish a test for the right of continued membership.

There was some discussion on the argument of this motion as to the right of the plaintiff to revoke- his consent to the jurisdiction of the arbitration committee over the claim and difference in question. In an action in a court of law to enforce the award, such question might be raised. For the purposes of this action, under the facts of the case, it can give him no relief. If the plaintiff would revoke the part of his agreement with his associates which imposes duties and obligations upon him, he cannot insist, in a court of equity, that he shall be protected in the enjoyment of rights and privileges created by the same contracts. He that would have equity must do equity.

After the action had before the arbitration committee, no appeal having been taken, proper steps were taken to bring the facts and circumstances involved in this controversy be-, tween plaintiff and Currie, Martin & Co., and the default of plaintiff, before the committee on membership. The matter was investigated, and this committee reported to the .president of the board that plaintiff was in default under the contract. The president of the board, as was his duty, declared the plaintiff suspended.

This suspension operates as a deprival, during its continuance, of all plaintiff’s privileges as a member, including an ex-: elusion from the rooms of the board; but this declaration of suspension is not final. There is reserved to the plaintiff a right of appeal to the executive committee. The jurisdiction of this committee is ample to render and do complete justice. It has full power to hear and investigate the matter, and to report the result to tie board itself; if it shall appear, that the suspension is just, it shall be confirmed; otherwise it' shall be annulled. The plaintiff has taken such appeal to the executive committee. He has placed his case in a way to be investigated, and finally decided by the board itself. Having gone thus far he pauses; he fails to prosecute his appeal; in fact has forbidden the appropriate tribunal to take cognizance of his appeal.

At this step, and with his appeal pending, he asks this court in effect to annul all that has been done by the association in the investigation and disposition of this matter by the officers and committees of the board. He asks this court to restore him to and protect him in the enjoyment of all his privileges and rights as a member, to give him regular standing in the organization, although its records show him to be in default, and the decree of his suspension to be unrevoked.

There are allegations in the complaint which claim that some of the members of • the committee had prejudged the plaintiff’s case ; but in the protest which plaintiff served upon the committee, he does not place his refusal to submit or appear on any such ground. He makes no objection to the competency or fairness of the committee. He expressly assigns for his refusal, that no matters of difference have arisen between him and Currie, Martin & Co., and that they have no claim. If any such objections as he now mentions, existed, he should- have asserted them at the proper time, so that appropriate action could be taken by the association of which he was a member.

The plaintiff also charges the officers, committees, and a portion of its members sufficient to control its action, with a disposition to deny him justice, and deprive him of his rights; but all the allegations on the subject are denied by the answer pf the president.

This court, under its equitable powers, can give the plaintiff no relief under the facts disclosed. Plaintiff has unexhausted remedies for all his complaints and grievances, under the constitution and laws of the board. There is no occasion for the intervention of this court. When he became a member he submitted to its laws, which afford full and complete relief. The equity of the complaint is denied.

Motion to dissolve injunction granted.