Case Name: PEOPLE ex rel. JOHNSON v. NEW YORK PRODUCE EXCHANGE
Court: New York Superior Court
Jurisdiction: New York
Decision Date: 1894-05-24
Citations: 29 N.Y.S. 307
Docket Number: 
Parties: PEOPLE ex rel. JOHNSON v. NEW YORK PRODUCE EXCHANGE.
Judges: 
Reporter: West's New York Supplement
Volume: 29
Pages: 307–313

Head Matter:
(8 Misc. Rep. 552.)
PEOPLE ex rel. JOHNSON v. NEW YORK PRODUCE EXCHANGE.
(Superior Court of New York City, General Term.
May 24, 1894.)
1. Exchanges—Members—Violation op Rui.es.
Where the charter of an exchange states that its purpose is “to inculcate just and equitable principles of trade,” and a by-law provides for the suspension of members accused of any proceeding inconsistent with such principles, but the corporation has taken no steps to inculcate them, a complaint charging a member with a “proceeding inconsistent with just and equitable principles of trade” does not state an offense. Gilder-sleeve, J., dissenting.
2. Same—Violation op By-Law—Public Policy.
A by-law which authorizes the suspension of a member for nonfulfillment of a contract, before the rights of the parties have been settled by an action, is contrary to public policy, in that it hinders the accused member in the exercise of his right to defend in an action on the contract. Gilder-sleeve, J., dissenting.
Appeal from special term.
Application by Edwin L. Johnson for writ of mandamus to compel the New York Produce Exchange to restore him to membership. From an order refusing a peremptory writ, relator appeals.
Reversed.
Argued before SEDGWICK, C. J., and DUGEO and GILDER-SLEEVE, JJ.
Southard & Fairchild, for appellant.
Baldwin & Blackmar (A. E. Blackmar, of counsel), for respondent.

Opinion:
SEDGWICK, C. J.
The relator was a member of a corporation, the defendant. He was, in regular form, charged with a violation of one of the by-laws, and was found guilty and was suspended from membership. He applied below for a peremptory mandamus to the corporation to restore him to membership. The application was denied, and this appeal is taken from the order then made.
The complaint against the relator charged him with, or accused him of, proceedings inconsistent with just and equitable principles of trade, as follows: Nonfulfillment of contract of November 1G, 1892. It thus appears that the offense alleged is the nonfulfillment of a contract, which is, in and of itself, stated by the complaint to be a proceeding inconsistent with just and equitable principles of trade. The position taken by the relator is that neither the charter nor the by-laws made the mere nonfulfillment of a contract an offense. The by-law in question was that any member who shall be accused, etc., of fraudulent breach of contract, or of any pro ceeding inconsistent with just and equitable principles of trade, shall, etc. It is to be observed here that the by-law intends that a member shall be condemned when his breach of his contract shall be fraudulent. There would be no purpose of specifying this, if the intention were to punish generally unjust and inequitable breaches of contract. If there were such an intention, a fraudulent breach of contract would not be specified; for, according to the meaning of "unjust and inequitable,", as given by the respondent's counsel, they would include the case of fraud. I am of opinion that a breach of contract, in and of itself, is not inconsistent with just and equitable principles of trade, in a true sense. A breach of contract is a commission of some act, or the omission, specified or implied in the contract. This commission or omission is not just or unjust, inequitable or equitable, for the law does not look for those qualities in adjudicating upon a contract, but simply at the contract and its terms. If, however, the words are to be taken in a moral sense, then the offense would be doing something in connection with the breach of contract, but which could not be part of it, that was morally unjust and inequitable. In such a case the circumstances must be charged, and not merely the fact of breaking the contract. It is asked whether it is possible to assume, as matter of law, that it is not and cannot be unjust and inequitable to break a contract. It is sufficient, I think, to say that the law has had no occasion, in1 passing upon a case of common-law contract, to pass upon the question of whether a breach was unjust or inequitable. It would be unnecessary to do so. The subject would be irrelevant. It must "be assumed, then, that the law assumes that a breach, pure and simple, of a contract of this kind, is not just and is not equitable; and if the matter turns upon a question of trade morals, or general morals, the question will be determined by facts outside of the mere breach, and they will be a necessary part of the charge. The bylaw in question is founded upon, or has received its validity from, that part of the charter which concerns the same subject, and is as follows: "The purposes of said corporation shall be to inculcate just and equitable principles of trade." The complaint, in substance, then, was that the nonfulfillment of the contract was opposed to, or at variance with, the inculcation mentioned in the charter. According to Webster, "to inculcate" means to impress by frequent admonitions; to teach and enforce by frequent admonitions; to urge on the mind. On the face of the charter, this inculcation, whether to be made by writing or in any other manner, was the duty of the corporation, as such. It was not made the duty of the individual members. The corporation had done nothing towards the performance of this duty. The subject was very difficult to treat. The questions involved were what is a principle of trade? Does it involve matters of morals, as well as of political economy? What is just and equitable? To what extent should the golden rule be enforced, or should the maxim of business is business be enforced? Certainly, the individual judgments of the members were not to be relied upon. Each was not to determine the question alluded to. As long as the corporation had not acted, there was nothing to bind the members, or to guide or enlighten them. I therefore think that, until the corporation had acted in the matter, anything done in trade by a member was not an opposition of the inculcation referred to in the charter. It might be believed that, when the corporation proceeded, a particular act might be of a kind that was opposed to the corporate movement; but, if the act was done before that, there was no violation of the charter. I think that as the case of People v. New York Commercial Ass'n, 18 Abb. Pr. 279, proceeded upon the proposition that it was the duty of the individual members, primarily, to inculcate just and equitable principles of trade, it should not be followed. There was no pretense, upon the face of the complaint, that the corporation had taken corporate action in respect of the subject. Therefore, no offense recognized by the charter was stated, and the committee had no jurisdiction of the offense alleged as such by the complaint. I am also of the opinion that by the charter the common-law right of the other party to the contract in question was preserved, and that involves the preservation of the common-law law right of the relator freely to defend by any defense that might be made in such a court of law; and it is not pretended that, at the time of the relator's trial before the board of managers, he did not have that right. The charter does not in any way refer to this right of defense. That cannot be opposed to the just and equitable principles of trade. But to threaten him, in advance of the action, with expulsion, and oppressively suspending him, for nonfulfillment of his contract, would tend to deter, or be an effort to deter, him from the exercise of a legal right. This cannot be one of the purposes of the corporation, and a by-law made under such a charter is not sanctioned by it, and is against public policy. I therefore think that the board of managers had no power to entertain the complaint. I cannot perceive that Hurst v. Produce Exchange, 100 N. Y. 605, 3 N. E. 42, touches the question. The prevailing opinion was, in substance, that a complaint of conduct against the just and equitable principles of trade gave the complaint committee power to entertain it, and a right to the board of managers to try it. It was not to be assumed that it would be adjudged that the member was guilty for doing something that was not charged in the complaint, or condemned in the by-laws. It was not decided that the nonfulfillment of a contract was intended by the by-law. That question was left for decision when it should arise, after proof was taken by the board; and it was considered that the complaint, by itself, gave jurisdiction. The complaint, on its face, did not show that the offense charged was the nonfulfillment of a contract. The order below should be reversed, with $10 costs, and the motion granted, with $10 costs.