People ex rel. Elliott v. New York Cotton Exchange

15 N.Y. Sup. Ct. 216

• Court: New York Supreme Court
• Decided: July 15, 1876
• Status: Published

Opinion

Beady, J.:

John H. Yalentine, a member of the appellant’s corporation, was expelled, and it was claimed as a result of that proceeding that his right of membership was forfeited, and became the subject of sale by them.

The relator asserted his ownership of that right, and the committee charged with the investigation thereof decided adversely to him.

He then commenced an action against the appellants, and obtained an injunction restraining them from selling the right. For this act he was arraigned and expelled. The committee reported on the subject, among other things, as follows:

“That John H. Elliott claims to be entitled to said seat through a bill of sale thereof, from said John H. Yalentine; that during the progress of the proceedings, which culminated in the advertisement of the seat of said John H. Yalentine for sale, the said John H. Elliott was fully and perfectly cognizant thereof; that prior to the report of your committee, which proposed the resolution directing the sale of said seat, the said John H. Elliott had an opportunity afforded him to prove his claim to said seat, which he. essayed to do, but he failed to so establish to the satisfaction of your committee.

“ That the injunction which John H. Elliott caused to be served upon the Exchange, had for its purpose to prevent a sale of the seat of John H. Yalentine, which sale had been directed by a resolution of your board, based upon proceedings to that end, done and had in strict conformity with the provisions of your by-laws.

We therefore report that, in our opinion, John H. Elliott has been guilty of improper conduct, as alleged in the complaint against him, and that in causing the aforesaid injunction to be served on the Exchange, he has acted in violation of the by-laws and charter of your Exchange, and of the obligations which he assumed when he signed the charter and by-laws, and in contravention of one of the main purposes for which this Exchange was established, ‘ to adjust controversies between its members.’

“We therefore offer the following resolution:

“Resol/oed, That John H. Elliott be, and he hereby is, expelled from membership in the New York Cotton Exchange.”

The charter of the appellants gives them power to make all proper and needful by-laws not contrary to the Constitution and laws of the State of New York or of the United States, and to expel any member in such manner as may be provided by the bylaws. The by-laws, on the subject of expulsion, contain a section which is as follows :

“ Section 1. If complaint of improper conduct is made against a member of the Exchange, it must be in writing, and addressed to the supervisory committee, specifying the particular act complained of, together with all the documentary evidence bearing on the case that the complainant can furnish, together with a list of the witnesses he desires to be examined on said complaint.”

And it is under this by-law only that the power of expulsion is claimed for the cause alleged. The question to be disposed of will be considered on the assumption that the by-law is authorized and in effect.

It will be perceived that it is not stated specifically, in any one or more respects in this action, what would or would not be regarded as improper conduct, and the field is open, therefore, to the consideration of such acts arid to such construction upon them, as the managers present and voting at the meeting and constituting two-thirds may think proper to investigate or adopt.

There is neither in the charter of the appellants, nor in the bylaws, however, any express authority to consider and determine who is the owner of a right of membership, which is in dispute. Whatever may be their power over matters directly connected with the business which prompted their organization, or with the adjustment of controversies between its members or the establishment of just and equitable principles in the cotton trade, or acquired by voluntary submission to them or their committees under the charter and by-laws, there is no express authority conferred upon them to pass upon the title to a seat among them; nor is there any thing in the by-laws to which our attention has been called authorizing it incidentally or by implication.

They could not, therefore, usurp the power absolutely, to pass upon the relator’s claim, and when he resorted to the courts to prevent them from disposing of his property, he was not only not guilty of improper conduct, but asserting a right secured to him by the fundamental law of the land. It may be that a member would be bound by the decision of the appellants in specified cases, which being properly the subject of a reasonable by-law, duly authorized, would be recognized as lawful within the principles governing them. (2 Kent’s Com., 296; Angell & Ames Corp., § 247, and cases cited; People ex rel. Thatcher v. The N. Y. Coml. Assn., 18 Abb. Pr., 271.) The appellant, however, on such subjects, can take nothing by implication. Forfeitures depend upon clear and explicit language, and are even then looked upon with disfavor. Expulsions from a corporation should not be accomplished by hurried and incomplete investigation.

A member of a corporation may so hedge himself in by agreement as to yield the protection which one seeks in the ordinary affairs of life, and enlarge the authority that may be used against him, but when it is said he has done so, it should appear beyond all reasonable doubt.

The presumption should be against the power to expel except for the'causes recognized by the adjudged cases (White v. Brownell, 4 Abbott’s Pr. [N. S.], 192), because it is in the nature of a forfeiture, which the law does not favor. The right to appeal to another tribunal, if to be foreclosed, should be so by explicit contract or agreement, not by mere construction of language employed in a by-law, or by implication from something contained in it; when this power is assumed, and upon either of these elements, and there is any doubt of its existence, it should be rejected in the administration of the law.

This seems to be just doctrine. The power should be unquestionable. When the relator refused to submit to the report against his title, he was not acting in antagonism to the power of the appellant of “ adjusting controversies between its members,” or of “ establishing just and equitable principles in tlie cotton trade,” nor was he rebelling against the judgment pronounced against Valentine, for which express provision was made in the by-laws.

He had no controversy with any member or officer. He said simply, you cannot sell the membership of Valentine because it belongs to me, and I do not admit your authority to dispose of my rights in regard to it. In this he was correct, and the appellant in error. In the case of the People ex rel. Thatcher v. The N. Y. Coml. Assn. (18 Abb. Pr., 271), expulsion was authorized if the member was guilty of willfully violating the charter or by-laws of the association, or guilty of fraudulent breach of contract, or other gross misconduct, and the charge was of obtaining goods by false pretenses. It bears no analogy to the case on hand. Here there is no provision in the by-laws for the trial of the title to a seat, and there is, therefore, in refusing to submit to the report, no violation of the by-laws. There is here no charge either involving moral turpitude or of fraudulent conduct of any kind.

The act complained of is one confessedly correct, unless in violation of some compact by which, the right to do it was, surrendered, which has not been shown as already suggested. The order made at Special Term was for these reasons proper. The representatives of the appellauts having the matter in charge have acted, no doubt, upon convictions conscientiously entertained both as to their power and the injurious conduct of the relator, but the best of mankind may err in judgment.

Order affirmed, with ten dollars costs, and the disbursements of this appeal.

Davis, P. J., and Daotels, J., concurred in the result.

Order affirmed, with ten dollars costs and disbursements.