Court Opinion

ID: 4490631
Source: CourtListenerOpinion
Date Created: 2020-01-17 22:02:27.952266+00
Date Added: 2024-06-11T07:59:05.222691
License: Public Domain

*200OPINION.
Green:
The Commissioner contends that a partnership can have no interest in a seat on the New York Stock Exchange.
In the case of O'Dell v. Boyden, 150 Fed. 731, the Circuit Court of Appeals, Sixth Circuit, had before it a very similar set of facts. A partner, the legal owner of a seat on the New York Stock Exchange, sold to the partnership a one-fourth interest in the seat and contributed the remainder thereof to the partnership as his proportion of its capital. The partnership was declared a bankrupt and the trustee took possession of and sold the partnership’s beneficial interest in the seat. Judge Lurton, speaking for the court, said:
Tlie New York Stock Exchange is an unincorporated association having a limited membership. No formal certificate of membership is issued, and, aside from repute, Henrotin’s only evidence of membership consists in a letter notifying him of his election and asking him to sign the constitution and by-laws. This letter is the document referred to as the “ certificate ” assigned to O’Dell. Though the membership is personal, it is transferable, subject to the conditions imposed by the articles of the association already referred to. But the transfer is not made except by the acceptance of a candidate for membership who is elected in the room and stead of the retiring member. When a “ transfer ” of membership is made according to the terms which clog such transfers, the transferee becomes a member and the transferror ceases to be one. It follows, therefore, that the mere execution of a paper preparatory to transferring or assigning a membership works no change in *201membership whatever. Thus in 1892, this same membership which was personal to Henrotin, was transferred or assigned to a partnership of which he was a member. That did not deprive Henrotin of his “ seat ” or “ membership.” He continued to be a member and to exercise all of the privileges of a member. In May, 1905, he again joined one of his partners in -transferring or assigning this same membership to the appellant, O’Dell. Nevertheless, he continued to be and act as a member, and O’Dell did not thereby become a member. What was, then, the effect of these transfers or assignments made of this “ seat,” first to Holzman & Co. and then to O’Dell? Though possessing none of the qualities of a negotiable or even a nonnegotiable instrument, this membership has a pecuniary market value and constitutes a property right, which, under the settled principles of the law, is capable of passing by will or inheritance. In re Hellman, 174 N. Y. 254, 66 N. E. 809, 95 Am. St. Rep. 582. Though its sale and transfer are clogged with onerous conditions and the property one of a narrow character, these conditions and characteristics go only to the reduction of the pecuniary market value, and do not deprive it of its character as property. Powell v. Waldron, 89 N. Y. 328, 42 Am. Rep. 301. As a valuable property right, incorporeal in character, it may be reached and subjected as property by a creditor through the flexible remedies of equity. A court of chancery through a decree m personam may compel the co-operation of the member in steps necessary to consummate a sale and transfer under the rules of the association. See Massie v. Watts, 6 Cranch, 148-157, 3 L. Ed. 181, as to the general powers of a court of equity through jurisdiction over the person, Ager v. Murray, 105 U. S. 126-131, 26 L. Ed. 942, where a patent right was subjected, and In re Emrich (D. C.) 101 Eed. 231. Such a seat constitutes a property right which is not only descendible, taxable and assignable, but is one which passes to the trustee of a bankrupt member, and the bankrupt court may compel the bankrupt to sign all transfers or consents essential to bring about its sale under the rules of the exchange. In re Ketchum (D. C.) 1 Fed. 840; In re Werder (C. C.) 15 Fed. 789; Hyde v. Woods, 94 U. S. 523, 24 L. Ed. 264; Sparhawk v. Yerkes, 142 U. S. 1; 12 Sup. Ct. 104, 35 L. Ed. 915; Page v. Edmunds, 187 U. S. 596, 23 Sup. Ct. 200, 47 L. Ed. 318.
The taxpayer partnership was in fact the beneficial owner of the seat on the Exchange. The seat was acquired not by actual purchase but through the contribution of a partner. The valuation thereon had been agreed upon by the partners. The situation is exactly the same as if the partner had contributed, instead of the seat, the sum of $75,000, and such sum so contributed had been expended in the purchase of a seat on the Exchange.