Solinsky v. New York Stock Exchange

MAYER, District Judge (after stating the facts as above). On the testimony in the case it is clear beyond question that the position which has been taken by Harris, Winthrop & Co. has been so taken in absolute gqod faith as a protective measure against claims which might be asserted prior to the expiration of the statute of limitations, which will be about August, 1920. While no claims have latterly been asserted, yet there is no assurance that some claim may not be made and pursued, and it was said in argument (and it is quite possible) that in a situation of this kind there is always at least a possibility of a last hour claim which might subject Harris, Winthrop & Co. to loss, and therefore they insist, as matter of right, that they should not be placed in any such situation by the payment over at this time to the trustee in bankrupcy of the proceeds of the Wilson membership. The testimony in the case establishes that the uniform practice of the committee on admissions of the New York Stock Exchange has been to entertain claims filed against the proceeds of memberships by members of the Exchange based .upon the liability of the claimants to respond to claims made against them by outsiders for securities received from the member whose membership has been transferred, or based on other matters of a similar kind. Each case, of course, has its own facts,- and there is, therefore, the opportunity for counsel to draw some fine distinctions. But for all substantial purposes and in substantial respects the committee on admissions has pursued the uniform practice of postponing the consideration of the claim against the proceeds so long as the question of the liability of the claimants to the outsider remains open. So far as this record shows, the trustee in bankruptcy has never made any application to the committee on admissions of the New York Stock Exchange to bring the claim of Harris, Winthrop & Co., on for [269] a hearing, nor have there been presented to the committee any facts showing or tending to show that the claims against Harris, Winthrop & Co., either have been extinguished or have been disposed of by a court of competent jurisdiction. On the evidence it is entirely plain that the action in this case of the New York Stock Exchange, acting through its committee on admissions, is in strict accordance with its constitution and the practical construction thereof, as shown by uniform practice. It is vital that an association such as the New York Stock Exchange should exercise-the most scrupulous care in the observance of its constitution and rules, for the members of the Stock Exchange necessarily rely upon the faithful adherence to such constitution and rules for protection in just such a situation as the facts here present. The suggestion that the action of the committee on admissions is arbitrary or without justification is wholly without merit. As stated by counsel for the New York Stock Exchange in his brief: “The presumption is that, whenever the plaintiff is prepared to show the committee that there is no foundation for the claims of which Harris, Winthrop & Co. are apprehensive, or that claimants against them are estopped from the further assertion of their claims, or have elected inconsistent remedies, or that their claims are barred by the statute of limitations, or other similar facts, the committee on admissions will adjudicate adversely upon the claim of Harris, Winthrop & Co. and pay over the proceeds of the Wilson membership to the trustee in bankruptcy.” It is unquestionably the law that, when a member of the New York Stock Exchange has become bankrupt and his membership is transferred, his trustee in bankruptcy is not entitled to the proceeds of the transfer, but only is entitled to have paid to him the surplus remaining after the payment therefrom of his dues to the Exchange and his debts within the Exchange, as allowed by the committee on admissions. Hyde v. Woods, 94 U. S. 523, 24 L. Ed. 264; Belton v. Hatch, 109 N. Y. 596, 17 N. E. 225, 4 Am. St. Rep. 495. It is also well settled that the action of the committee on admissions upon claims filed with it is necessary to the ascertainment of the amount of the surplus to be paid to the representatives of the former member, and is a condition precedent to any claim by such representatives against the Stock Exchange for such surplus. Stonebridge v. Smith, 55 N. Y. Super. Ct. 295; Hutchinson v. Otis, 115 Fed. 937, 53 C. C. A. 419; Id., 190 U. S. 552, 23 Sup. Ct. 778, 47 L. Ed. 1179. Much of what has been set forth supra, could have been omitted, in view of the controlling authority of In re Currie, 185 Fed. 264, affirmed on opinion below in 185 Fed. 265, 107 C. C. A. 369; but, in view of the earnestness with which plaintiff has pressed his contention, it has seemed desirable to consider the subject-matter somewhat fully. I have not failed to consider the various other arguments urged by plaintiff; but, when all is said, it seems to me that the Currie Case, supra, disposes of the suit at bar. I realize that the result will be that the ultimate winding up of the estate in bankruptcy will be postponed for a while, but that temporary inconvenience must give way to the rights of these defendants. [270] The -complaint will be dismissed, with costs; without prejudice, however, to the right of plaintiff to bring such suit, or action as he may be advised for the balance of the proceeds of the Wilson membership that remain in the hands of the New York Stock Exchange after the claim of Harris, Winthrop & Co. has been liquidated and has been passed on by the committee on admissions, and. any amount allowed on such claim paid out of the proceeds of the Wilson membership. The suggestion that a decree'in accordance herewith will indefinitely postpone the disposition of the fund is without merit, for the reason that undoubtedly the whole subject-matter must be disposed of at or prior to the end of August, 1920. Submit decree on five days’ notice.