Court Opinion

ID: 8632747
Source: CourtListenerOpinion
Date Created: 2022-11-24 19:40:11.300586+00
Date Added: 2024-06-11T16:55:49.710987
License: Public Domain

SAWYER, Circuit Judge
(after stating the facts). The San Francisco Stock and Exchange Board is a voluntary association. The members had a right to associate themselves upon such terms as they saw fit to prescribe, so long as there was nothing immoral, or contrary to public policy, or in ■contravention of the law of the land, in the terms and conditions adopted. No man was under any obligation to become a member unless he saw fit to do so, and when he did, and subscribed to the constitution and bylaws, thereby accepting and assenting to the conditions prescribed, he acquired just such rights with such limitations, and no others, .as the articles of the association provided for. I find nothing in the articles, constitution and by-laws of this association in contravention of the law of the land. The rights acquired by a party entering the as.sociation with the assent of the other members are clearly prescribed in these articles. Under their provisions there is in a member no absolute unlimited right of disposition of his seat or the privileges of membership. Each member holds his seat and exercises the privileges conferred subject to certain prescribed rights of the association, and of the other members in his seat, in case he fails to perform his duty towards the association, or to his fellow-members. And the rights accorded to the association or his fellow-members, by the terms upon which a member is admitted, cannot be abrogated or limited by any subsequent act of his. A member cannot dispose of his right of membership to another, unless the association shall accept that other in his stead, in the mode .and upon the terms prescribed. If he fails to meet his liabilities to his fellow-members, incurred in the course of the proper business transactions of the board, he is suspended, and if his obligations are not met, and he is not restored within the time prescribed, his rights and privileges as a member become the property of the association, and are disposed of for the benefit of his creditors in the board to the exclusion of all others. He cannot himself by any act of disposition of his own, prevent this result. His general creditors can obtain through him no greater rights of property than he himself possesses. His privileges as a member of the stock board could not be seized and sold on execution, and transferred to another in violation of the rights secured by the contract of association, nor could a court of bankruptcy override the rights of the association or its members, secured to them by the terms of the contract under which he acquires any rights at all as a member, by disposing of a greater interest than he himself possesses. The only property of a pecuniary nature in Fenn after his default in the board, would be the residue left after disposing of his seat by the board in accordance with its prescribed usages, or with the assent of the board, and payment of his indebtedness to the members of the board, incurred in the transaction of its business. This is all that, under any circumstances, would be available to the general creditor, or with which the court of bankruptcy has any concern. The rest is the property of the board and its members, not Fenn’s. In this case there was a delinquency of Fenn in his transactions in the board. He was indebted in large sums to the members upon transactions occurring in the board, for which his seat and privileges, as a member, were first liable, under the rules of the association. It is true that he did not insist upon waiting six months under the rules, as he might have done, before his seat became absolutely forfeited. He merely waived this right, and allowed his seat to be disposed of at once, and applied to the purposes provided for in the articles of association. His assignment to defendants only enabled them to close up without delay his connection with the board, and distribute the avails to the proper parties, instead of waiting six months. There is no claim set up that the privileges of Fenn did not sell for all they were worth; and the money realized did not satisfy the just claims of the other members. Nor is there any claim that this proceeding was in fact more dis*1117advantageous to creditors, than if the proceedings had taken a different course. There was nothing left which, under any circumstances, could he available to the general creditors. Fenn transferred nothing to defendants that a court of bankruptcy could take hold of.
[NOTE. The plaintiff took the case to the supreme court on writ of error, where, in an opinion by Mr. Justice Miller, the decision of the lower court was affirmed. 94 U. S. 523. It was held, following the principle laid down in Nichols v. Eaton, 9l TJ. S. 716, that membership in the board was not a matter of absolute sale. Although it is property, yet it is. when purchased, qualified and incumbered by the conditions of article 15 and others, which conditions the creators of it had a right to impose, and a compliance with which is necessary to obtain it.]
There was no residuum. His estate being subordinate to the claims of his associates, under the articles of association, and consisting only of such residuum, there was nothing of it of value. Defendants only received and distributed to the proper parties that part of the proceeds of Fenn’s seat, which belonged to the other members, as they had a right to do under the articles of association.
The error of the plaintiff consists in regarding the seat of Fenn and its proceeds as wholly his property, subject to his absolute disposition, whereas he only had a qualified and limited property in it — an interest subordinate to that of his associates. His estate is what is left after other paramount claims are satisfied out of it, and there appears to be nothing left The prior rights of his co-members accrued by virtue of the very act by which Fenn acquired any rights at all, as a member of the board, and they cannot be divested. The articles of association do not authorize Fenn, or anybody else, to dispose of Fenn’s property contrary to the provisions of the bankrupt act [of 1867 (14 Stat. 517)], as claimed by me plaintiff. They only determine what the extent of his rights of property under the articles of association are, and authorize the board to administer its own affairs, and protect the rights of its own members in matters pertaining to the transactions of the board, in its own way. There must be judgment for the defendants with costs.