
    Lewis v. Wilson.
    
      (Supreme Court, General Term, First Department.
    
    November 23, 1888.)
    1. Associations—Membership—Expulsion for Breach of Contract—Gaming Contracts.
    The constitution of a voluntary association provided that a member accused of a breach of contract, with another member, should be summoned before the complaint committee, who should investigate the case, and if the committee rendered a decision establishing a money difference between the parties it should, upon notice, stand as a claim against the party, and be paid within 48 hours, or taken on appeal to the arbitration committee. A failure to pay or appeal subjected the party in default to suspension. Plaintiff failed to appeal or pay the amount found due from him by the complaint committee for a breach of contract for the future delivery of stock, and ‘ was suspended. Thereupon he brought action to restrain the enforcement of his suspension. Held that, to render the contracts under which plaintiff was found indebted illegal and void, under statute prohibiting betting and gaming, it must appear affirmatively that they were entered into as gaming contracts, and not as real transactions for the purchase of property, and, when the intent is not made to appear, a contract for the future sale or delivery of stock owned by the seller at the time is a valid agreement, capable of being enforced.
    3. Same—Appeal to Courts—Waiver of Objections.
    The question whether the contracts were speculative or fictitious, which article 19 of the constitution forbade members to enter into, should have been shown to the complaint committee', before whom" plaintiff was summoned, who by the constitution had full power to determine the question. The member must avail himself of all his rights provided for in the constitution before he can appeal to' the courts.
    Appeal from special term, New York county.
    Argued before Van Brunt, P. J., and Brady and Daniels, JJ.
    
      Albert A. Abbott, for appellant. Sullivan & Cromwell, for respondent.
   Daniels, J.

The defendant was sued as the president of the Consolidated Stock & Petroleum Exchange of New York, an association, unincorporated, consisting of more than seven members. Its business was limited to furnishing facilities to its members for the purchase and sale of petroleum, stocks, bonds, and other securities, agricultural and commercial products, ores, metals, and other minerals. The plaintiff became a member of the association at or about the time when it was formed, and he entered into contracts with William M. Banks for the sale to him of stock of the Delaware & Hudson Canal Company, the Union Pacific Railroad-Company, Western Union Telegraph Company, and Delaware, Lackawanna & Western Railroad Company. The form of the agreements made by the plaintiff was the same in each instance, and the following is one of these agreements:

“New York, Dec. 10, 1886.
“For value received, the bearer may deliver me one hundred (100) shares of the stock Delaw. & Hudson Canal Company, at one hundred and three (103) per cent., any time this year. All dividends for which transfer-books close during said time go with the stock. One day’s notice required, except last day.
“Samuel W. Lewis.
“Expires Dec. 31, 1886, 2:15 p. m.
“Indorsed: lOOg. S. W. L. O’C. Dec. 16.”

The plaintiff failed to perform the agreements entered into by him, and a loss was thereby occasioned, which was audited and fixed by a broker at the sum of $937.50. The evidence of the broker was to the effect that the plaintiff empowered him to adjust this loss, and the testimony given by W. M. Banks, as to what took place between himself and the plaintiff when he called upon the latter for payment, tended further to establish the authority of the broker to make the adjustment. This, however, was denied by the plaintiff, but in this state of the evidence no more than an ordinary question of fact was presented, the decision of which by the court in favor of the defendant has become conclusive against the plaintiff. The constitution of the association to which the plaintiff became a party provided for the existence of a complaint committee, consisting of five members, and that committee was empowered to take cognizance of complaints made by one member against another for failing to fulfill contracts entered into between them, or to pay and adjust the amount which, by virtue of the contract, should become due from one of the members to the other. By these provisions it was declared that (section 9) “any member of this association, who shall be accused of * * * a breach of contract, shall upon complaint be summoned before the complaint committee, who shall hear and investigate the ease. In the matter of a breach of contract, if the committee shall render a decision establishing a money difference between the parties, it shall, upon notice to the party or parties against whom thedecision is rendered, stand as a claim against him, and shall be paid within forty-eight hours, or taken on appeal to the arbitration committee. A failure to pay or appeal within the time specified shall subject the party in default to suspension.” The plaintiff did fail to discharge the amount adjusted against him by reason of his default in the performance of the agreements made by him, and a complaint was thereupon made by W. M. Banks, the other party to the agreements, setting forth this default, and notice was thereupon given to the plaintiff that, if the amount remained unpaid for 24 hours, he would be reported for suspension. He failed to make this payment, and he was thereupon summoned to appear before the complaint committee on the 28th of January, 1887, at 3:45 p. m., and a copy of the complaint previously filed was served upon him with this summons. He was also afterwards summoned to appear and attend before the committee, to be examined as a witness in the proceeding. He did appear before the committee, and objected to their proceeding upon the complaint which had been made. Questions were asked him on what ground he refused to answer, and whether he had authorized Mr. O’Connor to settle the claims, and whether he denied the authority of O’Con-nor, or admitted it. These questions he declined to answer, neither admitting nor denying the authority of O’Connor. The committee, after hearing the case, made their decision against the plaintiff for the adjusted differences in the contracts, and notice was given to him of this decision, directing his attention to section 9 of article 6 of the constitution, that the amount must be paid within 48 hours, or an appeal taken to the arbitration committee, on penalty of suspension. The plaintiff failed to take the appeal, or make the payment, and he was suspended from his privileges as a member of the association.

The action was brought by him to restrain the enforcement of his suspension under these proceedings, and in support of it the position has been taken that the association was without authority to proceed against him, or to suspend him, as it did, for the reason that the contracts entered into between himself and W. M. Banks were illegal and void under the provisions of the statute of the state prohibiting betting and gaming; and if they were of that description, then the conclusion would follow that these contracts entered into by the plaintiff were inoperative, and void. But to render agreements of this description illegal and void it must appear affirmatively that they were entered into as gaming contracts, and not as real transactions for the purchase and sale of property. Story v. Salomon, 71 N. Y. 420; Yerkes v. Salomon, 11 Hun, 471; Kingsbury v. Kirwan, 77 N. Y. 612. And the other authorities relied upon in support of the appeal concede the correctness of this principle. Kiley v. Telegraph Co., 39 Hun, 158; Irwin v. Williar, 110 U. S. 499, 4 Sup. Ct. Rep. 160; Gregory v. Wendell, 39 Mich. 337. And when that intent is not made to appear, a contract for the future sale or delivery of stocks, or other property,0not owned by the seller at the time, is a valid agreement, capable of being enforced between the parties making it. Bigelow v. Benedict, 70 N. Y. 202. But if these agreements, or either of them, were speculative or fictitious, which article 19 of the constitution of the associatian forbade the members to enter into, that should have been shown to the committee before whom the plaintiff was summoned to appear and answer the complaint filed against him; for by the constitution of the association the committee was empowered to try that complaint, and, as incidental to that authority, to hear and consider any matter which should be alleged or proved, forming an answer to the complaint, either legally, or by proving the facts complained of to be unfounded. This authority was clearly provided and stipulated for in the constitution of this association; and that it might legally be so provided has the sanction of the authorities, considering the powers in this manner delegated to a committee of an unincorporated association. Dawnkins v. Antrobus, 17 Ch. Div. 615; White v. Brownell, 2 Daly, 329; Olery v. Brown, 51 How. Pr. 92. And so much, at least, was assumed to be the authority of such an association in Loubat v. Leroy, 40 Hun, 546. This legal and equitable principle is obnoxious to nothing that was held in Austin v. Searing, 16 N. Y. 112, which was an action brought to enforce a title to property through the. forfeiture of a subordinate lodge, for alleged misconduct on its part. The proceeding before the committee of this association was invested with no such power. Neither has any such consequence been insisted upon as resulting from what has taken place. No proceeding has been, or can be, under the constitution of the association, taken against the plaintiff to enforce the collection of the money he has failed to pay by seizure or sale of his property. All that it-is claimed maybe done, is the forfeiture of his privileges as a member of the association, while he shall fail or refuse to comply with the decision which has been made against him. And the fact that the forfeiture might possibly hereafter be followed by expulsion will not change the nature of the proceeding. So far as it has been extended, that has been done under the clear authority of the constitution of the association. It has resulted in no more than the suspension of the plaintiff from the privileges of the association, and, if he was not subject to'the imposition of this disability, he should not only have appeared, but have shown the fact to be so before the committee, and in that manner protected himself against the exercise of even this power of suspension'; and if he had made that fact to appear, and the committee had improperly decided against his evidence, the constitution supplied him with means of redress by way of an appeal to the arbitration committee, which was empowered to re-examine and rehear the case. And when authority of this description is provided for the security and protection of the rights of a member, he is required to avail himself of it before he can appeal to the courts to restrain the action of the committee or the association. Loubat v. Leroy, supra; Lafond v. Deems, 81 N. Y. 507, where it was said that courts should not, as a general rule, interfere with the contentions and quarrels of voluntary associations, so long as the government is fairly and honestly administered, and those who have grievances should be required in the first instance to resort to the remedies for redress provided by their rules and regulations. Id., 514. It has been urged, under the authority of Heath v. President, etc., 7 Abb. Pr. (N. S.) 251, that the plaintiff had the power to disaffirm the authority of the committee, and to refuse to be bound by the proceedings; and that was held to be the right of the party in that case,on the principle that a person agreeing to submit a dispute to arbitration might revoke the authority of the arbitrators. But this was not such a case. It was not an arbitration, nor within this principle applicable to those proceedings; but it was a hearing over which .the committee had jurisdiction as long as the plaintiff remained a member of the association, and he .could only disaffirm or disregard that authority by terminating his membership in the association itself. Beyond that the objection which is now in this manner urged in behalf of the plaintiff was not taken by himself when he appeared before the committee. Neither was it by the letter of his counsel written to the secretary of the committee in answer to the proceedings taken against him. And still further than that, the court in its disposition of the action, has assumed that the contracts were valid obligations, which the plaintiff entered into for the sale of these shares, and there is no such preponderance of evidence against that conclusion as would justify its disaffirmance on appeal. The case was rightly disposed of at the trial, and it should be affirmed, with costs.

Van Brunt, P. J., and Brady, J., concur.  