
    GEORGE H. STONEBRIDGE, Jr., as Receiver, &c., Respondent v. JAMES D. SMITH, as President of The New York Stock Exchange, Appellant.
    
      Stock exchange; committee on admission, power of to dispose of proceeds of sale of seat—Injunction against disposition, threats insufficient to maintain.
    
    The committee on admission of the New York Stock Exchange has comjjetent and legal power and authority to pay out of the proceeds of sale of a seat in the Exchange, belonging to a suspended member, the claims described in and authorized to be paid by the articles of the association of said exchange.
    Threats by an officer or member of the Exchange, even if he happen to be a member of said committee, to make an improper distribution (it not appearing that the committee had taken any action, or made any declaration on the subject), are insufficient to sustain an ad interim injunction against the President of the Exchange, his agents and attorney, and tire officers, committees and members of the Exchange, restraining them, pendente lite, from disposing of, or in any manner interfering with (except to preserve the same), the whole or any part of the proceeds of the sale of the seat of suspended member.
    Before Sedgwick, Ch. J., Freedman and Ingraham, JJ.
    
      Decided February 6, 1888.
    Appeal by defendant, from order continuing order of injunction, pendente lite.
    
    The injunction order restrained and enjoined James D. Smith, as President of the New York Stock Exchange, his agents and attorneys and the officers, committees and members of the New York Stock Exchange, and each of them, pending the determination of the action, from disposing of, or in anywise or manner interfering with (excepting to preserve the same), the whole or any part of the proceeds of the sale of the seat or membership of Edward C. Fox, in the New York Stock Exchange.
    
      Carter & Ledyard, attorneys, and Lewis Cass Ledyard, of counsel for appellant, on the questions considered in the opinion, urged:
    I. The precise provisions of the constitution of the New York Stock Exchange, invoked by the defendant in this case, in force at the time of Fox’s suspension are: Article 14, § 3. If any suspended member fails to settle with his creditors within one year from the time of his suspension, his membership shall be disposed of by the committee on admission, and the proceeds paid, pro rata, to his creditors in the Stock Exchange. This was amended before the suspension of Fox so as to read : “ § 3. If any suspended member fails to settle with his creditors, and apply for re-admission within one year from the time of his suspension, his membership shall be disposed of by the committee on admission, and the proceeds paid, pro rata, to his creditors in the Exchange.” These provisions are lawful, reasonable and of binding force on all members of the Exchange, and empowered the committee on admission to pay out of the proceeds of the sale of the seat of the suspended member, the claims authorized to be paid by the articles of association. President, etc., of the Delaware & Hudson Canal Co. v. The Penn. Coal Co., 50 N. Y. 251; Gingerly v. Johnson, 3 Weekly Notes of Cases 541; Thompson v. Adams, 93 Pa. St. R. 55; Evans v. Winter, 1 W. N. C. 181; Weston v. Ives, 97 N. Y. 222.
    II. No action can be maintained before an adjudication by the committee. Gebhard v. New York Club, N. Y. Daily Register, Nov. 15, 1887; Platt v. Jones, 49 Super. Ct. 779.
    III. The plaintiff has a perfect, complete and adequate remedy at law in an action against the Exchange, for money had and received, if the committee pays over any part of the proceeds to persons not entitled. Weston v. Ives, supra.
    
    IV. No declaration of any officer or member of the Exchange, even if he happen to be a member of the committee on admission, can establish any threatened improper disposition of proceeds, or violation of duty by the committee.
    
      Henry Bischoff, Jr., attorney and of counsel for respondent, on the question considered in the opinion, argued:—
    Í. The provisions of the constitution so far as they seek to confer upon the committee on admission power and authority to decide upon the validity of claims upon the proceeds of the sale of the membership of Edward C. Fox, are void as against public policy and the constitutional law of the state. Austin v. Searing, 16 N. Y. 223.
    II. If they are not absolutely void, the authority of the committee on admissions is nevertheless limited to valid and subsisting claims entitled to preference pursuant to the provisions of the constitution and by-laws. It is urged on plaintiff’s behalf that the claims presented to the committee on admission, for payment out of the proceeds of sale in dispute, are not valid and subsisting claims, and are not entitled to payment out of such proceeds of sale; that such claims are fraudulent and fictitious and made only to defraud the plaintiff, and that at the time such fraudulent claims were created, the constitution and by-laws of the Stock Exchange provided that only debts arising upon unsettled contracts should be preferred in payment, and that none of the claims presented are upon unsettled contracts; and that the N. Y. Stock Exchange, its officers and members, are about and threaten to pay such, pretended claims out of the proceeds of sale. The committee has no power to admit- such claims. Wesson v. Ives, 97 N. Y. 222.
    The appellant is threatened with a loss of his property owing to the fraud and collusion of Fox and certain members of the Exchange pretended to be creditors and entitled to payment out of the proceeds of the sale of Fox’s seat, and the impotency of the N. Y. Stock Exchange, its committees, officers and members to resist the payment of such claims. It also appears from the moving papers that the N. Y. Stock Exchange has threatened to pay such pretended claims out of such proceeds of sale, and this allegation is uncontroverted. An in-j unction is therefore both proper and necessary. Christopher v. Mayor, 13 Barb. 567 ; S. C. 5 Abb. 41; Mitchell v. Stewart, 3 Abb. (N. S.) 250; Blatchford v. Ross, 54 Barb. 42; S. C., 37 How. Pr. 110 ; 5 Abb. (N. S.) 434 ; Great Western Railway Co. v. Birmingham, &c., Railway Co., 2 Phillips Ch. 597; Code Civ. Proc. § 604, subd. 1; § 820.
   By the Court.—Sedgwick, Ch. J.

The plaintiff is the receiver of the property of a partnership. One of the partners, Edward C. Fox, had been a member of Stock Exchange. His seat had been bought with partnerskip money. He became insolvent, and was suspended under the rules of the Exchange. Under those rules his seat had been sold, and the plaintiff has the right to the proceeds of the sale that Fox would have had in the circumstances.

There are three articles of the constitution of the Exchange which relate to the disposition of the proceeds of a sale of a seat. The respondent denies that one of these controls this case, inasmuch as it was made after the suspension of Fox. This appeal will be determined irrespective of this subject, and the other articles alone will be considered.

These articles are: “If any suspended member fails to settle with his creditors, within one year from the time of his suspension, his membership shall be disposed of by the committee, and the proceeds paid, pro rata, to his creditors in the Exchange; ” and that passed after-wards : “ If any suspended member fails to settle with his creditors and apply for re-admission within one year from the time of his suspension, his membership shall be disposed of by the committee on admission, and the proceeds paid, pro rata, to his creditors in the Exchange.”

The complaint claims that by conspiracy between Fox and certain members of the Exchange, persons claiming to be creditors have filed with the committee on admission “ claims to said proceeds upon debts or demands against said Fox, which are wholly or partly fictitious, and wholly or partly have no foundation in fact, and do not come within the preferences established pursuant to the constitution and by-laws of the Exchange; and that the N. Y. Stock Exchange, its officers and members, threaten to pay said fraudulent and fictitious claims to the injury of the plaintiff.”

The relief asked is an accounting of the proceeds of sale, a judgment “ directing the payment to this plaintiff, as receiver, of the sum received by said N. Y. Stock Exchange, or said James D. Smith as President, or of such part thereof as the said receiver may be entitled to receive,” and that during the pendency of this action, the defendant as such president, and all the officers and members of said Stock Exchange, having custody or control of the said fund may be enjoined and restrained from in any way or manner disposing of, or parting with any part or portion of said fund.

Under the articles that have been quoted, the committee on admission have competent and legal power and authority to pay, out of the proceeds, the claims described by the articles, but of course no other claims. A threat by any officer or member of the Stock Exchange, even if by chance such individual were a member of the committee, would not tend to show that the committee, as such, threatened to make an improper distribution of any part of the money. It does not appear that the committee have taken any action, or made any declaration on the subject. It is to be presumed that their action will be legal. The supposed admissions of the answer on the subject of what power in this regard the committee have, do not extend to what the committee propose to do, or intend to do, as a •committee.

The complaint does not demand that the committee act upon the subject, but demands that they shall not act. The plaintiff has no right to any part of the fund, until the committee has exhausted its power. And the complaint does not allege that no part of the fund could be paid validly by the committee.

Not applying what has been said to any part of the cause of action, excepting the.demand for an injunction, and applying it to the order of injunction, I am of opinion that the injunction infringes the right of the committee on admission to proceed in a proper way to make a proper disposition of the fund.

Order reversed, with $10 costs, and disbursements to be taxed.

Freedman and Ingraham, JJ., concurred.  