Court Opinion

ID: 6662839
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:03:32.551831+00
Date Added: 2024-06-11T16:00:13.732612
License: Public Domain

Sedgwick, J.,
dissenting.
1. Three questions are presented by this record and discussed in the briefs: (1) Did the paper writing known as the certificate of membership have an intrinsic market value distinct from and independent of the qualification and right of its owner to a seat upon the stock exchange? This is the fundamental question in the case and is the basis for all reasoning upon the two remaining questions. If the certificate had no distinct value but was of no value except to one who had a right to a seat upon the exchange, and was so involved in that right, to such seat that it could not exist independently of the active participation of the owner of the certificate in the business of *737the exchange, the plaintiff, of course, could not maintain this action if he was lawfully expelled from the exchange, and the judgment of the district court would necessarily he reversed. (2) If it should he found that this certificate has an intrinsic value independent of a seat upon the exchange, so that it constitutes an item of property that may be and habitually is transferred to and from those who have no seat upon the exchange and do not expect to have, and has a definite market value in such exchanges, then the second question is: Do the articles and rules of the association contemplate and authorize the forfeiture of this property upon the expulsion of its owner from a seat upon the exchange? (3) If it should be found that the owner of such certificate has a property interest in it distinct from his right to a seat upon the exchange, and that the articles and rules do not authorize the forfeiture of such property upon the expulsion of a member from his seat on the exchange, the third question would be whether the action of the association amounted to a conversion of this property.
Upon the first question the evidence appears to me to be clear and conclusive that the certificates sold by this association for $3,000 have a distinct value independent of the participation of their owners in the business of the exchange. The evidence is without contradiction that these certificates are and have been continually bought and sold by parties not connected with the exchange, and that they had a well-defined and generally recognized market value. The owner of such a certificate, whether or not he intends to apply for a seat upon the exchange, may deposit such certificate as collateral security for a loan at the banks of Omaha, and the banks generally receive them as such security. The defendant in this case has furnished evidence that it was understood by the directors of this association that this was the case, and that this certificate might be sold upon the markets in Omaha in the same manner that negotiable notes are sold, unless some action was taken by the association to prevent it. The defendant caused a public *738notice to be published in the official paper of the exchange, which had an extensive circulation, that this plaintiff’s certificate (describing it) “is wholly without value and the public are hereby warned against purchasing the same,” which was an unequivocal admission and declaration that the practice of treating these certificates as articles of barter and sale by the public was known to the officers of the association, and that some affirmative action was necessary to destroy its market value. Indeed, it does not appear to be seriously questioned in the evidence, or contended in the briefs, that these certificates were not freely bought and sold by the public generally without regard to the right to a seat upon the exchange. This fact furnished an inducement to purchase these certificates from the defendant, and so enable the defendant to realize more from the sale of these certificates than in all probability it would otherwise have been able to do.
2. As these certificates had an independent value of their own upon the markets in Omaha, in detennining whether the articles and by-laws authorized a forfeiture of this property upon the expulsion of a member from a seat upon the exchange, we must of course be governed by the universal rule that the law does not favor forfeitures, and that the right to declare a forfeiture must be clearly expressed and cannot be derived from inference or analogy. There is no express provision in the articles and rules of the association for forfeiting this property upon the expulsion of a member from a seat upon the exchange. The majority opinion derives this power by inference. It says: “Can any reasonable inference be drawn therefrom (sections 7 and 10 of rule 11) other than that expulsion of a member for bad faith and dishonest conduct means the utter annulment of the certificate and every privilege that pertained thereto before expulsion?” The following is quoted from rule II as compelling such an inference: “An expelled member shall not be readmitted to membership except upon payment of the regular initiation fee and annual assessment.” *739That “initiation fee and annual assessment” includes the original cost of the certificate of $3,000 may he a legitimate inference, but it is no stronger than contrary inferences that may be drawn from other language of the articles and rules. Again, in section 5 of rule 9, which is referred to in the opinion as strengthening the inference that the “initiation fee” mentioned in rule 11 should be construed to mean the original cost of the certificate, the words “initiation fee” are not used, but the “certificate of membership therein” is specified. It seems to be inferred that “initiation fee” means $3,000, the original purchase price-of the certificate, and that, while in other rules the certificate is specifically named as such, in this rule it is to be inferred. In an opinion in the briefs, said to have been the opinion of the trial judge, it is said that the expulsion itself was unlawful. I do not find it necessary to examine that proposition. It is enough to know that this court in its opinion has found that “a certificate of membership in an -exchange is a species of property,” and that property cannot be forfeited by inference or implication, but authority to forfeit must be conferred in express words. The defendant took active and effectual measures to destroy the value of this certificate, which in law is a conversion.
I think the judgment of the district court is right and should be affirmed.
Morrissey, C. J., concurs in this dissent.