Court Opinion

ID: 9460367
Source: CourtListenerOpinion
Date Created: 2023-08-04 21:48:09.456696+00
Date Added: 2024-06-11T17:36:35.172177
License: Public Domain

PELL, Circuit Judge
(dissenting).
The majority opinion finds it unnecessary to “reach the issue of whether the preference provisions or policies of the Bankruptcy Act prohibit an exchange rule which purports to affect transactions not arising on the exchange” because “the Chicago Board of Trade rules at issue here were not intended to reach such transactions.” I find nothing in the meager record before us to justify this conclusion. I therefore respectfully dissent.
If we are to decide this case on the basis of the transactions that the rules were “intended” to reach, then it appears to me that we should accord almost controlling significance to the interpretation that the promulgating or*877ganization or institution places on those rules. It is clear that the Board of Trade does interpret the rules in question here to include business transactions between members whether or not those transactions occur as a part of normal Board business.
I have qualified the significance to be given to the Board’s interpretation by characterizing it as “almost controlling.” Under well-settled rules of construction, if only one meaning can be given to the words of a written instrument because of their plain intendment, because of established custom or usage, or because they are words of art, then an interpretation by the Board inconsistent with unambiguous contractual provisions cannot prevail. It appears to me, therefore, that there is implicit in the majority opinion a holding that the wording is not ambiguous and is susceptible only to a meaning inconsistent with the Board of Trade’s interpretation.
I am unable to accept this result for two reasons. In the first place, it appears to me that the rules in question unambiguously do relate to all business transactions between members. Under the rules, these transactions may occur “elsewhere” than on the floor of the Board. Further, they are not confined to commodities, which is the business of the Board of Trade, but may involve the purchase and sale of securities, not the business of the Board, or the borrowing, lending, or payment of money. The claims of the ereditors-members here arose from the sale of certain securities and the loan of $100,000 for the purchase of other securities.
The rationale of this interpretation is obvious. Members of the Board of Trade may, and from this case obviously do, engage in transactions with each other other than those occurring in the ordinary course of business of the Board. The lien on the proceeds of the sale of a member’s seat is a protective device assuring stability and confidence in all business transactions between members.
Secondly, even if it is assumed ar-guendo that there is some ambiguity, then it appears to me that, in the absence of a sufficient record to determine just what the promulgating party “intended,” there should be a remand for a hearing to ferret out those matters not now in the record which customarily enable the trier of fact to ascertain what that intention was. Thus, although I am unable to state precisely what form the evidence might take, it would seem to be significant if the interpretation now advanced by the Board had been historically a matter of custom and usage. Acquaintanceship and understanding on the part of Board members with the interpretation, particularly at the time they purchased their seats, would be of considerable import. If Board members have, in fact, been relying on the Board’s interpretation, our “bolt from the blue” may seriously disrupt their credit arrangements. The property rights at stake are too substantial and the impact of a construction of the rules by this court too great for us to decide the ease on the basis of possibly inaccurate assumptions as to what the rules “intended,” particularly when those assumptions are at odds with the interpretation of the organization issuing the rules.
Further, the Board of Trade, whose members are in the commercial world, may at a hearing indicate that it does not share the concern expressed by the majority opinion about the prospect of engaging “in the general arbitration or claim-determination business.” Again, this should be a matter of evidence, not an assumption, if the pertinent rules are ambiguous.
Before a remand, it would be necessary, of course, to meet the preference-bankruptcy question, which the majority does not address. In my opinion, there is no bankruptcy preference.
Although it may be “dusty law,” as the district court described it, I have no cause for concluding that the reasoning of the Supreme Court in Hyde v. Woods, *87894 U.S. 523, 24 L.Ed. 264 (1876), is other than currently good law:
“There is no reason why the stock board should not make membership subject to the rule in question, unless it be that it is a violation of some statute, or of some principle of public policy. It does not violate the provision of the bankrupt law against preference of creditors, for such a preference is only void when made within four months previous to the commencement of the bankrupt proceedings. Neither the bankrupt law nor any principle of morals is violated by this provision, so far as we can see. A seat in this board is not a matter of absolute purchase. Though we have said it is property, it is encumbered with conditions when purchased, without which it could not be obtained. It is never free from the conditions of article 15, neither when Fenn [the debtor] bought, nor at any time before or since. That rule entered into and became an incident of the property when it was created, and remains a part of it into whose hands soever it may come. As the creators of this right — this property — took nothing from any man’s creditors when they created it, no wrong was done to any creditor by the imposition of this condition.” 94 U.S. at 525. [Emphasis added.]
As the district court also observed: “Subsequent to the Hyde decision, the Bankruptcy Act of 1898 was passed which set out in some greater detail the standards regarding preferred creditors. However, this new bankruptcy law did not [a]ffeet the holding of Hyde v. Woods as evidenced by the fact that it was discussed and reaffirmed in Board of Trade v. Johnson, 264 U.S. 1 [44 S.Ct. 232, 68 L.Ed. 533] (1924).”
For the reasons herein indicated, I would at the very least reverse and remand for a hearing to determine what the intention was as to the scope of the transactions included in the rules in question.