In re Stringer

• Decision Date: 10 April 1918
• Docket Number: 224.
• Citation: 253 F. 352
• Parties: In re STRINGER.
• Court: U.S. Court of Appeals — Second Circuit

253 F. 352

In re STRINGER.

No. 224.

United States Court of Appeals, Second Circuit.

April 10, 1918

Henry M. Stevenson, of New York City, for petitioners.

A Gordon Murray, of New York City, for trustee.

Before ROGERS and HOUGH, Circuit Judges, and LEARNED HAND, District judge.

ROGERS Circuit Judge.

A voluntary petition in bankruptcy was filed by the bankrupt on January 12, 1915. Matters connected with this bankruptcy have been heretofore adjudicated in several reported cases in the District Court. 230 F. 177; 233 F. 799; 234 F. 454; 244 F 629. When the matter came before this court a year ago, we decided that the claims of Mary E. Lewis, H. Leroy Lewis, and the H. J. Lewis Oyster Company were not entitled to share in the distribution of the firm assets of Stringer & Co. The case is reported in 240 F. 892, 153 C.C.A. 578.

It appears now that the referee has declared an additional dividend of 10 per cent. to the firm creditors of Stringer &amp Co., but that he has been stayed from paying it until it can be determined whether the sale price of a New York Stock Exchange membership is an asset of the firm of Stringer & Co. or the individual property of G. Franklin Stringer. The referee has held that it is an asset of Stringer & Co., and his action has been sustained by the District Judge; and the question which is now presented to this court is whether the District Judge fell into error in holding that the seat on the Stock Exchange is to be held as an asset of Stringer &amp Co. or the individual property of G. Franklin Stringer, as a liquidating partner of Jewell & Stringer. The decision of this court in the former case said nothing whatever as to the disposition of this asset; that question not having been presented to us at that time. The petitioners in the present case are the same parties whose claims were presented in the first case and held not to be claims against the assets of Stringer & Co. The petitioners, having been excluded as to certain of their claims from the firm assets, are now here as exceptants, objecting to the decision of the lower court that the seat on the Stock Exchange is a firm asset, and they seek to have it decided that the asset is an asset of Stringer individually.

Before considering that question, it may be pointed out that a difference of opinion has existed in the courts as to whether a seat or membership in a stock exchange, or merchants' exchange, or board of trade, is property which, if fraudulently conveyed or assigned, may be reached in equity by creditors. That the creditors cannot reach it seems to have been held in Barclay v. Smith, 107 Ill. 349, 47 Am.Rep. 437, Weaver v. Fisher, 110 Ill. 146, Pancoast v. Gowen, 93 Pa. 66, and In re Sutherland, Fed. Cas. No. 13,637. But, whatever may have been thought at one time on this subject, the Supreme Court of the United States has settled the matter that membership in a stock exchange is property which passes to a trustee in bankruptcy as assets of the bankrupt's estate. Page v. Edmunds, 187 U.S. 596, 23 Sup.Ct. 200, 47 L.Ed. 318; Hyde v. Woods, 94 U.S. 523, 24 L.Ed. 264. And see In re Page, 107 F. 89, 46 C.C.A. 160, 59 L.R.A. 94 affirming (D.C.) 102 F. 746. While such property is peculiar, and in its nature a personal privilege, yet such value as it may possess, notwithstanding the restrictions to which it is subject, is held to be susceptible of being realized by creditors. This court in Re Hurlbutt, Hatch Co., 135 F. 504, 68 C.C.A. 216, held that a seat in the New York Stock Exchange passed to a trustee in bankruptcy.

It appears that the records of the Stock Exchange disclose that Edward H. Jewell became a member of the Stock Exchange in December, 1902; that on May 23, 1912, his membership was transferred to G. Franklin Stringer; that the latter was a member of the firm of Stringer & Co., which traded on the Exchange; and that Stringer's membership was transferred on August 26, 1915, for $55,000, which amount the Exchange paid over to Stringer's trustee in bankruptcy on September 13, 1915, after deducting therefrom $1,704.90 being claims against the firm of Stringer & Co. It is not disputed that the seat was originally an asset of the firm of Jewell & Stringer. Then, when that firm was dissolved, the seat was transferred to Stringer in his individual name on the books of the Exchange. The record shows that a rule of the Stock Exchange requires a membership in that organization to be an individual membership, and not a firm membership. The firm has no right to appear on the floor of the Exchange, but the membership as an asset of the firm is liable for any debt contracted by any member, and the Exchange regarded and treated Stringer's membership as an asset of the firm of Stringer & Co., and it is stipulated that at the time Jewell transferred his membership in the Exchange to Stringer the latter 'became the board member of Stringer & Co., and was published as such in Stock Exchange publications. ' For the two years and nine months that Stringer & Co. continued to exist this seat was utilized by it in its business. It appears that the understanding between Stringer and his son, who constituted the only other member of the firm, was that Stringer should furnish the whole of the capital and the son was to put no money into the business. He was to contribute only his services, and was to share to the extent of 25 per cent. in the profits or losses; and an affidavit in the record states that: 'The membership in the Stock Exchange that had become the property of G. Franklin Stringer was thus contributed to Stringer & Co. as a part of its capital which the...