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HG4556.U6L4" """""'*'"■""">' 
 
 The law of commercial exchanges, 
 
 3 1924 013 889 732 
 
The original of tliis book is in 
 tlie Cornell University Library. 
 
 There are no known copyright restrictions in 
 the United States on the use of the text. 
 
 http://www.archive.org/details/cu31924013889732 
 
THE LAW 
 
 OF 
 
 COMMERCIAL EXCHANGES 
 
 BY 
 
 CHESTER ARTHUR LEGG, A. B.. LL. B. 
 
 MEMBER OF THE CHICAGO BAR. 
 
 <t C A ■' / ' 
 
 NEW YORK 
 
 BAKER. VOORHIS & CO. 
 
 1913 
 
(B 
 
 CoPYRtGHT 1912 
 
 HY 
 CHESTER ARTHUR LEGjG 
 
 , ; ^- ?■ 
 
 *• / , ■'• < ll' 
 
TO 
 
 JULIA. A. CHARLES 
 
 Whose noble character and loving kindness 
 
 will ever remain a precious memory 
 
 and a constant inspiration. 
 
 This book is 
 
 DEDICATED 
 
 By 
 
 The author, her grandson. 
 
PREFACE 
 
 The purpose of this book, as its title imports, 
 is to. state accurately and yet succinctly the legal 
 principles underlying the relations of our Com- 
 mercial Exchanges with their members, with non- 
 members, and with the State. While the writer is 
 profoundly conscious of its limitations both in 
 scope and treatment, yet it is only fair to state 
 that through a great portion of the journey under- 
 taken in its preparation he has sailed over an 
 almost uncharted sea. It is rare indeed in 
 these days when law books covering practically 
 the entire range of our commercial and social 
 affairs are issued almost hourly from the press to 
 find one field the soil of which has been as yet 
 unturned by the legal ploughman. And, yet, this 
 was substantially the fact discovered by the writer 
 to his surprise and often to his annoyance when 
 several years ago he became connected in a legal 
 capacity with one of our leading Exchanges. 
 
 A careful investigation located but two legal 
 treatises in English which even touched the sub- 
 ject. One,^ if not long out of print, was found 
 
 ' Bisbee and Simonds, Board of Trade (1884). 
 
 [v] 
 
vi Pebface. 
 
 absolutely unserviceable in view of the number 
 and variety of decisions rendered since its publica- 
 tion. The other/ while devoting a limited portion 
 of space to the Exchange, has deliberately sub- 
 ordinated it to the main purpose of the book, 
 which treats in an admirable way of the legal 
 problems arising in .the purchase and sale of 
 securities upon our Stock Exchanges. It was such 
 lack of a law book treating comprehensively the 
 subject of the Exchange as a distinct institution of 
 modern commerce and industry which prompted 
 the preparation and publication of this treatise. 
 
 The book is designed primarily as one for the 
 use of lawyers. And, yet, its use and service to 
 that large body of laymen who compose the mem- 
 bers and governing bodies of our Commercial 
 Exchanges have been kept constantly in mind by 
 the writer. Accordingly, the aim has been 
 throughout, without sacrificing its usefulness as a 
 legal treatise, to avoid any extended discussions 
 of a purely technical nature which would inevit- 
 ably have prevented its serious study by those 
 unacquainted with legal formulae and terms. If, 
 but to a small extent, the reading of this volume 
 by judges and lawyers will tend not only to estab- 
 lish that desirable unformity of decision among 
 the courts of the various States upon the varied 
 problems of the Exchanges, but further shall help 
 to create a common ground where the views of the 
 
 °Dos Passes, Stock Brokers and Exchanges (2d ed.), 2 
 vols. (1905). 
 
Preface. vii 
 
 courts and the needs of the Exchanges and their 
 members may meet in harmony and with profit to 
 both, the time and labor expended in its prepara- 
 tion and publication will not have been spent in 
 vain. 
 
 In properly acknowledging the services ren- 
 dered by others in the preparation of this volume, 
 the writer finds one of his greatest difficulties. 
 While the plan of the work from its inception and 
 the actual writing thereof have devolved entirely 
 upon the writer, yet, in consequence of his exact- 
 ing professional duties, a large part of the read- 
 ing of the proof, the verification of citations of 
 cases and preparation of the index has fallen upon 
 those who now are or have been associated with 
 him in his office. In all cases, this arduous labor 
 has been cheerfully and efficiently performed. 
 Among those whom he wishes especially to thank 
 are his young professional friends, John H. Large 
 and Stephen Love. The latter was particularly 
 helpful in his suggestions during the preliminary 
 stages in the planning of the book and in prepar- 
 ing the index. 
 
 Two other gentlemen, while in no direct way 
 concerned in the preparation of the book, have yet 
 rendered invaluable assistance. One is Mr. John 
 C. F. Merrill, an honored ex-President and now 
 Secretary of the Chicago Board of Trade. As an 
 indefatigable and uncompromising champion of 
 the Exchanges through many years, he is known 
 to all. But, as one who has been permitted for 
 
viii Pebpace. 
 
 several years to enjoy Ms loyal friendship and 
 generous assistance upon many occasions, the 
 writer wishes at this time to express his sincere 
 appreciation. The other is Mr. Henry S. Rob- 
 bins, an eminent member of the Chicago Bar, and 
 one except for whose remarkably successful work 
 in the courts throughout the country in protecting 
 the Market Quotations of the Exchanges from 
 ruthless exploitation, that chapter of this book 
 would have been bare of authorities indeed, and 
 the Exchanges themselves the sufferers to an 
 extent which future generations of their members 
 can alone adequately realize. 
 
 CHESTER ARTHUR LEGG. 
 Chicago, Illinois, November 16, 1912. 
 
TABLE OF CONTENTS 
 
 CHAPTER I. 
 
 OKIGIN AND HISTORICAL DEVELOPMENT OF 
 THE COMMERCIAL EXCHANGES. 
 
 PAGE. 
 
 Section 1. Commercial Exchanges Product of Late 
 
 Mediaeval Ages 1 
 
 2. The Exchanges in England 9 
 
 3. Commercial Exchanges in the United States. 12 
 
 CHAPTEE II. 
 LEGAL STATUS OE EXCHANGES. 
 
 Section 4. Definition and General Nature 16 
 
 5. Organization 18 
 
 6. Member's Power to Bind Exchange 21 
 
 7. Ownership of Exchange Property 22 
 
 8. Power of Exchange to Sue and be Sued. ... 24 
 
 9. Dissolution and Its Incidents 29 
 
 CHAPTER III. 
 
 MEMBERSHIP IN EXCHANGES AND ITS INCI- 
 DENTS. 
 
 Section 10. General Nature of Exchange Memberships. 33 
 
 11. The Privilege of Transacting Business on 
 
 the Floor of the Exchange 38 
 
 12. Termination of Membership 39 
 
 [ix] 
 
X Table of Contents. 
 
 PAGE. 
 
 Section 13. Definitioa of " License" 40 
 
 14. Is Membership a " Property Right ? " 45 
 
 15. Disposition of Membership under Various 
 
 Circumstances 54 
 
 (a) In bankruptcy proceedings 54 
 
 (b) Proceedings by attachment or execu- 
 
 tion 60 
 
 (c) Is a membership subject to taxation ? 63 
 
 (d) Membership subject to resulting 
 
 trust 65 
 
 CHAPTER IV. 
 
 ADMINISTEATIVE POWEE OP EXCHANGES OVEE 
 MEMBEES. 
 
 A. Rules or By-laws m General. 
 
 Section 16. Necessity for Rules or By-laws 71 
 
 17. Source of Power to Establish Rules or By- 
 
 laws 72 
 
 18. Limitations upon Power to Establish Rules 
 
 or By-laws 77 
 
 (a) Must be within express or implied 
 
 power delegated in charter or con- 
 stitution 79 
 
 (b) Must not be contrary to law or public 
 
 policy 83 
 
 (c) Other limita/tions suggested by the 
 
 courts 86 
 
 (d) Is " reasonableness " a proper test ? . . 89 
 
 B. Consideration of Specific Rules. 
 
 Section 19. Rules or By-laws Regulating Admission. . . 93 
 
 20. Rules or By-laws Regulating Reinstatement. 97 
 
 21. Rules or By-laws Regulating Enjoyment of 
 
 Membership 98 
 
Table of Contents. xi 
 
 PAGE. 
 
 (a) Power to enact rules or by-laws pro- 
 
 viding for expulsion or sus- 
 pension of members 98 
 
 (1) How this power is obtained. . 98 
 
 (2) What causes can be made 
 
 ground of expulsion or sus- 
 pension 108 
 
 (3) By whom must the power to 
 
 expel or suspend members 
 
 be exercised 112 
 
 (4) In what manner must the 
 
 power to expel or suspend 
 members be exercised 114 
 
 (b) Power to enact rules or by-laws for 
 
 fining members 116 
 
 Section 22. Eules or By-laws Allowing Preferences to 
 
 Exchange Creditors 118 
 
 (ja) Source of power to establish such 
 
 preference 118 
 
 (b) Does such rule or by-law infringe the 
 
 Federal Bankruptcy Act? 122 
 
 (c) Must claims preferred arise from 
 
 transactions on the Exchange?... 124 
 
 (d) Is preference limited to fund arising 
 
 from sale of membership ? 128 
 
 23. Rules or By-laws Regulating Conduct of 
 
 Members 132 
 
 (a) The enforcement of decorum among 
 
 members 132 
 
 (b) Vilification of fellow members 136 
 
 (c) DisTionorable or uncommercial con- 
 
 duct 137 
 
 24. Eules or By-laws Compelling the Fulfill- 
 
 ment of Business Obligations 
 Among Members 138 
 
xii Table of Contents. 
 
 PAGE. 
 
 (a) Obligations aHsing from transactions 
 
 off the Exchange 142 
 
 (b) Where failure to comply is due to 
 
 financial inability 144 
 
 (c) Where obligation is legally unenforce- 
 
 able 146 
 
 Section 25. Rules or By-laws Relative to Arbitration of 
 Business Disputes Among Mem- 
 bers 151 
 
 (a) Agreements to arbitrate in general. . 152 
 
 (b) Can members be coinpelled to arbi- 
 
 trate or retire from the Exchange? 157 
 
 26. Rules or By-laws Restricting Commercial 
 
 Activities of Members 173 
 
 (a) Agreements in restraint of trade or 
 
 commerce in general 175 
 
 (b) Rules or by-laws establishing uniform 
 
 rates of commission 180 
 
 (c) Rules or by-laws forbidding members 
 
 to trade with or for expelled or 
 suspended members 185 
 
 (d) Rules or by-laws forbidding members 
 
 to deal with or for " bucket shops." 187 
 
 (e) Rules or by-laws restricting the solici- 
 
 tation of business 189 
 
 (f) Rules or by-laws limiting hours of 
 
 trading 190 
 
 (g) Other rules or by-laws of this general 
 
 character 192 
 
 27. The Enactment of Rules or By-laws 193 
 
 (a) What body must enact rules or by- 
 
 laws 193 
 
 (b) Amendment of rules or by-laws 197 
 
 (c) Regulations versus rules or by-law. . . 201 
 
Table of Contents. xiii 
 
 CHAPTEE V. 
 
 REVIEW OF DECISIONS OF EXCHANGES AND 
 OTHER ASSOCIATIONS BY THE COURTS. 
 
 PAGE. 
 
 Section 28. Source of Power of Exchange to Adjudicate. 206 
 
 29. When Courts Have Jurisdiction to Review. 209 
 
 30. Member Must Exhaust His Remedies Within 
 
 the Association 213 
 
 31. Objection to the Procedure Followed 221 
 
 (a) Preliminary investigation 224 
 
 (b) Prejudice of prosecutor 225 
 
 (c) The form of the charges 225 
 
 (d) Notice of hearing 226 
 
 (e) Right to present his defense 226 
 
 (f) Waiver of defects in procedure 229 
 
 32. Objection for Lack of Jurisdiction 230 
 
 33. Objection on the Merits 238 
 
 34. Remedies Available to Members 242 
 
 (a) Remedy by injunction 243 
 
 (b) Remedy by writ of mandamus 245 
 
 CHAPTEE yi. 
 
 LIABILITY OF EXCHANGES, ITS OFFICERS AND 
 COMMITTEES TO MEMBERS, NON-MEMBERS 
 AND THE STATE. 
 
 Section 35. Liability to Members 24Y 
 
 (a) Liability for wrongful discipline of 
 
 member 248 
 
 (b) Are officers ever liable individually? 251 
 
 (c) Measure of damage to such member. . 252 
 36. Liability to Non-members 253 
 
 (a) Non-member cannot object to invalid 
 
 act of Exchange 253 
 
 (b) Liability for contracts or torts of 
 
 agents and servants 256 
 
xiv Table op Contents. 
 
 PAGE. 
 
 (c) When are non-members bound by the 
 rules, by-laws and business customs 
 
 of the Exchange? 259 
 
 Section 37. Eesponsibility of Exchanges to the State. . 276 
 
 (a) When will the State interfere 276 
 
 (b) Will illegal rules or by-laws subject 
 
 Exchanges to criminal law?. ... 281 
 
 CHAPTEE VII. 
 
 MAEKET QUOTATIONS OF AN EXCHANGE. 
 
 Section 38. Market Quotations Source of Great Litiga- 
 tion 284 
 
 39. Control of Market Quotations by Exchanges. 286 
 
 40. Various Problems Considered by the Courts. 288 
 
 (a) Are market quotations property?... 289 
 
 (b) Are market quotations impressed with 
 
 a public use ? 291 
 
 (c) Illegal nature of transactions on Ex- 
 
 changes no bar to protection of 
 quotations 295 
 
 (d) Time within which control of market 
 
 quotations exists 296 
 
 CHAPTER VIII. 
 
 OLEAEING HOUSES OF MODEEN OOMMEECIAL 
 EXCHANGES. 
 
 Section 41. Clearing Houses Eequired by Business upon 
 
 Exchanges 304 
 
 42. Description of Clearing Systems upon 
 
 Various Exchanges 307 
 
 43. Legal Problems Arising in Clearing Trades. 314 
 
 (a) Is system for clearing trades illegal? 314 
 
 (b) When are non-members bound by 
 
 system of clearing trades ? 327 
 
TABLE OF CASES CITED 
 
 (Keferences are to pages.) 
 
 A PAGE. 
 
 Abernethy v. Hutchinson, 1 Hall & T. 28 300 
 
 Ackermann v. Ackermann, 60 S. W. (Texas) 366 26 
 
 Albers v. Merchants Exchange, 39 Mo. App. 583 133, 
 
 197, 223, 225, 227, 235 
 Albers v. Merchants Exchange, 138 Mo. 140, 39 S. W. 
 
 473 228, 250, 251, 252 
 
 Albers Commission Co. v. Spencer, 205 Mo. 105 164 
 
 Allen V. Dykers, 3 Hill (N. Y.) 593 274 
 
 Allien v. Wotherspoon, 18 Jones & S. 417, 50 N. Y. Super. 
 
 Ct. 417 66 
 
 Altmann v. Benz, 27 IST. J. Eq. 331 30 
 
 American Ins. Co. v. Coster, 3 Paige (N. Y.) 323 23 
 
 American Live Stock Commission Co. v. Chicago Live 
 
 Stock Exchange, 143 111. 210, 32 N. E. 274, 18 L. R. A. 
 
 190, 36 Am. St. Eep. 385 79, 94, 96, 181, 254, 277 
 
 Anderson v. United States, 171 U. S. 604, 43 L. Ed. 300. . 193 
 
 Anonymous, F. Moore 242 176 
 
 Austen v. Brigham, 67 N. Y. Supp. 891 65 
 
 Ayer v. Mead, 13 111. App. 625 266 
 
 B 
 
 Babcock v. Merchants Exchange, 159 Mo. 381, 60 S. "W. 
 
 732 256 
 
 Baird v. Wells, L. E. 44 Oh. Div. 661 209 
 
 Baker v. Drake, 66 N. Y. 518, 23 Am. Eep. 80 274 
 
 [xv] 
 
xvi Table op Cases Cited. 
 
 PAOE. 
 
 Baltimore v. Jolinston, 96 Md. 737, 54 Atl. 646, 61 L. 
 
 R. A. 568 64 
 
 Bank v. Brandt, 51 Ind. 56 23 
 
 Bank of Montreal v. Waite, 105 111. App. 3Y3. . . . :v. .73, 79 
 Barber v. Palmer, 70 Hun (N. Y.) 498, 24 N. T. Supp. 
 
 451, 53 N. T. St. Eep. 753 23 
 
 Barclay v. Smith, 107 111. 349, 47 Am. Eep. 437, 16 
 
 Cent. Law J. 437 .- 34, 49, 52, 62, 65 
 
 Bartlette v. Crittenden, 4 McLean 300, Fed. Cas. No. 
 
 1,082 300 
 
 Baum V. New York Cotton Exchange, 4 N. Y. Supp. 207, 
 
 21 Abb. N. C. 253 98, 207 
 
 Baxter v. Board of Trade, 83 111. 146 243 
 
 Bayliffe v. Butterworth, 1 Exch. 425, 11 Jur. 1019, 17 
 
 L. J. Exch. 78 266 
 
 Belton V. Hatch, 109 N. Y. 593, 17 N. E. 225, 4 Am. St. 
 
 Eep. 495 17, 18, 23, 73, 118, 206, 207 
 
 Bernheim v. Keppler 69 N. Y. Supp. 803, 34 Misc. 321. 
 
 55, 119, 128, 207, 239 
 
 Berry v. Kelly, 4 Eob. (N. Y.) 106 23 
 
 Bibb V. Allen (N. Y. Cotton Exchange), 149 U. S. 481, 
 
 37 L. Ed. 819, 13 S. Ct. 950 269, 328, 333 
 
 Bishop V. Chamber of Commerce, 5 Ohio S. & C. PL Dec. 
 
 356, 5 Ohio N. P. 365 230 
 
 Black and White Society v. Van Dyke, 2 Whart. 309 239 
 
 Blakemore v. Heyman, 6 Fed. 581 265 
 
 Blumenthal v. Cincinnati Chamber of Commerce, 7 
 
 Week. Law Bui. 327, 8 Ohio Dec. (Eeprint) 410. .114, 
 
 223, 226, 227, 233, 239, 240, 248 
 Board of Trade v. Cella Commission Co., 145 Fed. 28, 76 
 
 C. C. A. 28 297, 299 
 
 Board of Trade v. Christie Grain and Stock Co., 116 
 
 Fed. 944 288, 293 
 
 Board of Trade v. Christie Grain and Stock Co., 198 TJ. 
 
 S. 236, 25 S. Ct. 637, 49 L. Ed. 1031 287, 296, 316, 317 
 
Table of Cases Cited. xvii 
 
 PAGE. 
 
 Board of Trade v. Consolidated Stock Exchange of 
 
 Buffalo, 121 Fed. 433 287, 302 
 
 Board of Trade v. Donovan Commission Co., 121 Fed. 
 
 1012 295 
 
 Board of Trade v. Ellis, 122 Fed. 319 295 
 
 Board of Trade v. Hadden-KruU Co., 109 Fed. Y05. .297, 299 
 Board of Trade v. Nelson, 162 111. 431, 44 N. E. 743, 53 
 
 Am. St. Eep. 312 20, 139, 206, 207, 225 
 
 Board of Trade v. O'Dell Commission Co., 115 Fed. 574.. 295 
 Board of Trade v. Thomson Commission Co., 103 Fed. 
 
 902 287, 297, 299 
 
 Board of Trade v. Weare, 105 111. App. 289. . .79, 80, 139, 146 
 
 Bostedo V. Board of Trade, 227 111. 90, 81 N. E. 42 188 
 
 Boucicault v. Fox, 5 Blatchf. 87, Fed. Cas. No. 1,691. ... 300 
 
 Boyle V. Henning, 121 Fed. 376 333 
 
 Bradley v. Western Union Telegraph Co., 8 Ohio Dec. 
 
 (Eeprint) 707 287 
 
 Brandenburger v. Jefferson Club, 88 Mo. App. 148. .215, 217 
 Brown V. Dale (England), 9 Ch. Div. 78, 27 Weekly Eep. 
 
 149 30 
 
 Brown V. Stoerkel, 74 Mich. 269, 41 N. W. 921, 3 L. E. 
 
 A. 430 30 
 
 Bryant v. Western Union Telegraph Co., 17 Fed. 825 292 
 Budd V. Multnomah Ey. Co., 15 Ore. 413, 15 Pac. 659, 3 
 
 Am. St. Eep. 169 86, 99 
 
 Burke v. Eoper, 79 Ala. 138 29, 30, 31, 209 
 
 Burt V. Grand Lodge, 66 Mich. 85, 33 N. W. 13 248 
 
 Burt V. Lathrop, 62 Mich. 106, 17 N. W. 716 21 
 
 Butterfield v. Beardsley, 28 Mich. 412 30, 31 
 
 Byram v. Sovereign Camp of Woodmen, 108 Iowa 430, 79 
 
 N. W. 144, 75 Am. St. Eep. 265 230 
 
 C 
 
 Cahill V. Kalamazoo Mutual Ins. Co., 2 Doug. 124 
 
 (Mich), 43 Am. Dec. 457 196 
 
 Caird v. Sime, L. E. 12 App. Cas. 326 300 ~ 
 
xviii Table of Cases Cited. 
 
 PAGE. 
 
 Caldicott V. Griffiths, 8 Exoh. 898, 23 L. J. Exch. 54, 1 
 
 C. L. E. 715, 22 Eng. L. J. Eq. 527 23, 28 
 
 Caldwell v. People, 67 111. App. 367 187 
 
 Cannon v. Toronto Exchange, 27 Grant Ch. 23 226 
 
 Cannon i;. Toronto Exchange, 5 Ont. App. 268 226, 248 
 
 Carroll v. Mullanphy Bank, 8 Mo. App. 249 194, 196 
 
 Cartwright v. Dickinson, 88 Tenn. 476, 17 Am. St. Eep. 
 
 &W, 12 S. W. 1030, 7 L. E. A. 706 99 
 
 Caswell V. Putnam, 120 N. T. 153, 24 N. E. 287 267 
 
 Central Stock and Grain Exchange v. Board of Trade, 
 
 196 111. 396, 63 K E. 740 287, 294 
 
 Chicago Open Board of Trade v. French, 61 HI. App. 349. 256 
 Chicago W. & V. Coal Co. v. People, 214 111. 421, 73 
 
 N. E. 770 282, 283 
 
 Christie Commission Co. v. Board of Trade, 94 lU. App. 
 
 229 287, 294 
 
 Cleage v. Laidley, 149 Fed. 346 321 
 
 Cleveland Telegraph Co. v. Stone, 105 Fed. 794 287, 299 
 
 Clews V. Jamieson, 182 U. S. 461, 45 L. Ed. 1183, 21 S. 
 
 Ct. 845 267, 275, 316, 328, 333, 334 
 
 Clute V. Loveland, 68 Cal. 254, 9 Pac. 133 22, 66 
 
 Cochran v. Adams, 180 Pa. St. 289, 36 Atl. 864. . .55, 119, 125 
 
 Cohen V. Budd, 103 N. T. Supp. 45, 52 Misc. 217 79, 
 
 119, 129, 130 
 
 Comingore, In re, 96 Fed. 552 51 
 
 Commercial Bank v. State, 6 Sm. & M. (Miss.) 599 280 
 
 Commercial Telegram Co. v. Smith, 47 Hun (N. T.) 
 
 494, 15 N. T. St. Eep. 19 288, 293, 299 
 
 Commonwealth v. German Society, 15 Pa. St. 251. . .227, 237 
 Commonwealth v. Guardians of the Poor, 6 Serg. & E. 
 
 469 110, 222 
 
 Commonwealth v. Mayor of Lancaster, 5 Watts 152 200 
 
 Commonwealth v. Penn. Beneficial Association, 2 Serg. 
 
 & E. 141 115 
 
 Commonwealth v. Pike Benevolent Society, 8 Watts & 
 
 S. 247 222, 239 
 
Table of Cases Cited. xix 
 
 PAGE. 
 
 Commonwealth, v. St. Patrick Benevolent Society, 2 
 Binney 441, 4 Am. Dec. 453 80, 90, 109, 110, 136, 232 
 
 Commonwealth v. Union League, 135 Pa. St. 301, 20 Am. 
 St. Eep. 870, 19 Atl. 1030, 8 L. E. A. 195. .. .103, 110, 
 
 134, 210, 236 
 
 Corbin v. Adams, Y6 Va. 58 156 
 
 Crowe V. Aiken, 2 Bias. 208, Fed. Gas. No, 3,441 300 
 
 D 
 
 Davidson v. Knox, 67 Cal. 143, 7 Pac. 413 28 
 
 Dawkins v. Antrobus, L. K. 17 Ch. Div. 615, 44 L. T. N. 
 
 S. 557 106, 210, 236 
 
 Day V. Holmes, 103 Mass. 306 275 
 
 Dickenson v. Chamber of Commerce, 29 Wis. 45, 9 Am. 
 
 Eep. 544 80, 139, 143, 147 
 
 Dickinson v. Board of Trade, 114 111. App. 295. .79, 181, 
 
 190, 209 
 
 Dinsmore v. Hanson, 48 N. H. 413 157 
 
 District Lodge v. Cohn, 20 HI. App. 335 106 
 
 Dodge Co. V. Construction Information Co., 183 Mass. 
 
 62, 66 ]Sr. E. 204, 60 L. E. A. 810, 97 Am. St. Eep. 412. 287 
 Douglas V. Carpenter, 17 App. Div. (N. T.) 329, 45 N. Y. 
 
 Supp. 219 267 
 
 Duke V. Fuller, 9 N. H. 536, 32 Am. Dec. 392 30 
 
 Dutton V. Poole, 2 Lev. 210 176 
 
 Dyers Case, T. B. 2 Hew V. p. 5, pi. 26 176 
 
 E 
 
 Eliot V. Merchants Exchange, 14 Mo. App. 234 62 
 
 Elliot V. Eoyal Assurance Co., L. E. 2 Ex. 237, 36 L. J. 
 
 Exch. 129, 16 L. T. Eep. N. S. 399, 15 Week. Eep. 907. 154 
 
 Elsas V. Alford, 1 N. Y. Cit. Ct. 123 87 
 
 Employing Printers Club v. Doctor Blosser Co., 122 Ga. 
 
 509, 50 S. E. 353, 69 L. E. A. 90, 106 Am. St. Eep. 137. 279 
 Ertz V. Produce Exchange Co., 82 Minn. 173, 84 N. W. 
 
 743, 51 L. E. A. 825, 83 Am. St. Eep. .419 181 
 
XX Table of Cases Cited. 
 
 PAGE. 
 
 Eury V. Merrill, 42 HI. App. 193 30 
 
 Evans v. Chamber of Commerce, 86 Minn. 448, 91 N. W. 
 
 8 73, 79, 159, 160, 164, 206, 207, 233 
 
 Evans v. Philadelphia Club, 50 Pa. St. 107. .39, 43, 102, 
 
 110, 232 
 Exchange Telegraph Co. v. Gregory (Eng.), 1 Q. B. 147, 
 
 60 J. P. 52, 65 L. J. Q. B. 262, 74 L. T. Eep. N. S. 
 
 83 287, 288 
 
 F 
 
 Farmer v. Board of Trade, 78 Mo. App. 557 39, 74, 87, 
 
 164, 168, 207, 223, 227, 233 
 Parnsworth v. Hemmer, 1 Allen (Mass.) 49, 79 Am. Dec. 
 
 756 275 
 
 Fassett v. Parish in Boylston, 19 Pick. (Mass.) 361. .22, 23 
 Fawcett v. Charles, 13 Wend. (N. T.) 473. . .25, 109, 110, 237 
 
 Fears v. State, 102 Ga. 274, 29 S. E. 463 51 
 
 Fischer v. Eaab, 57 How. Pr. 87 29, 31 
 
 Fish V. Fiske, 154 Mass. 302, 28 N. E. 278 58 
 
 Fisher v. Keane, L. E. 11 Ch. Div. 353 222, 227 
 
 Fitzpatrick v. Eutter, 160 111. 282, 43 N. E. 392 27 
 
 Ford V. Chicago Milk Shippers Association, 155 111. 166, 
 
 39 K E. 651, 27 L. E. A. 298 277, 282, 283 
 
 Fowler v. Pickering, 119 Mass. 33 265 
 
 Frorer v. People, 141 111. 171, 31 N. E. 395, 16 L. E. A. 
 
 492 51 
 
 Q 
 
 Gale V. Townsend, 45 Minn. 357, 47 E". "W. 1064 26 
 
 Gaylord; In re. 111 Fed. 717 55, 119 
 
 Gill V. State, 10 Ohio C. 0. K S. 345 188 
 
 Gladish v. Kansas City Live Stock Exchange, 113 Mo. 
 
 App. 726 186 
 
 Glendenning, In re, 74 N. Y. Supp. 190, 68 N. T. App. 
 
 Div. 125 (affirmed 171 N. Y. 684, 64 N. E. 1121) 64 
 
Table of Cases Cited. xxi 
 
 ^ PAGE. 
 
 Goddard v. Merchants Exchange, 9 Mo. App. 290 79, 
 
 85, 86, 20Y 
 
 Gorman v. Eussell, 14 Cal. 531 30 
 
 Grand Lodge v. People, 60 111. App. 550 (affirmed 166 111. . 
 
 Yl, 46 N. E. Y68) 209 
 
 Grant, Ex parte, 13 Ch. Div. (1880) 66Y 129 
 
 Gray v. Portland Bank, 3 Mass. 364, 3 Am. Dec. 156 86 
 
 Greaves v. Legg, 11 Exch. 642, 24 P. TJ. 210 265 
 
 Greeley v. Doran Wtight Co., 148 Mass. 116, 18 N. E. 
 
 8Y8 253 
 
 Green v. Board of Trade, 1Y4 111. 585, 51 N. E. 599, 49 
 
 L. E. A. 365 20Y, 224, 225, 228, 255 
 
 Green v. African Methodist Society, 1 Serg. & E. 254. . . . 114 
 Greer v. Payne, 4 Kans. App. 153, 46 Pac. 190. . .Y9, 181, 234 
 
 Greer v. StoUer, YY Fed. 1 233 
 
 Gregg V. Mass. Medical Society, 111 Mass. 185, 15 Am. 
 
 Eep. 24 .216, 243 
 
 Gregory, In re, 1Y4 Fed. 629 Y9, 118, 119, 129 
 
 Grocers' Bank v. Murphy, 60 How. Pr. 426, 10 Daly 168. 62 
 
 Gruner v. Stucken, 39 La. Ann. 10Y8, 3 So. 388 269 
 
 Guilfoil V. Arthur, 158 HI. 600, 41 N. E. 1009 2Y 
 
 Gundlach v. Germania Association, 49 How. Pr. 190 .... 88 
 
 H 
 
 Hebenicht v. Lissak, Y8 Cal. 351, 20 Pac. 8Y4, 5 L. E. A. 
 
 Y13, 12 Am. St. Eep. 63 62 
 
 Haebler v. New York Produce Exchange, 149 N. Y. 414, 
 
 44 N". E. 8Y Y3, 139, 143, 144, 164, 1Y3, 206, 226, 
 
 229, 235, 241 
 Haebler v. New York Produce Exchange, 15 Misc. 42, 36 
 
 IST. Y. Supp. 42Y ' 235 
 
 Haggart v. Morgan, 5 N. Y. 422, 55 Am. Dec. 350 156 
 
 Haight V. Dickerman, 18 N. Y. Supp. 559, 63 Hun 632, 
 
 45 N. Y. St. Eep. 128 119 
 
 Hallett V. Aggergaard, — S. D. — , 114 N. W. 696, 14 
 
 L. E. A. N. S. 1251 266, 316, 328, 333, 336 
 
xxii Table of Cases' Cited. 
 
 ' PAGE. 
 
 Hamilton v. Young, 7 L. R. Ir. 289 269, 271 
 
 Hanscom v. Hendricks, 5 N. Y. Supp. 109, 52 Hun 80, 
 
 22 N. Y. St. Eep. 585 (affirmed 123 N. Y. 664, 26 N. E. 
 
 750) 66 
 
 Hansen v. Boyd, 161 U. S. 397, 40 L. Ed. 746, 16 S. Ct. 
 
 571 264 
 
 Harris v. Miss. Valley, etc., E. E. Co., 51 Miss. 602 280 
 
 Harris v. Turnbridge, 8 Abb. N. 0. (N. Y.)291 265 
 
 Haven & Clement v. James, 172 Fed. 250 321 
 
 Hayes, In re, 75 N. Y. Supp. 312 119, 124, 227 
 
 Heatb v. New York Gold Exchange, 7 Abb. Pr. 251, 38 
 
 How. Pr. 168 79, 83, 166 
 
 Heim v. New York Exchange, 118 W. Y. Supp. 591 192 
 
 Hellman, In re, 174 N. Y. 254, 95 Am. St. Eep. 582, 66 
 
 K E. 809 64 
 
 Hibernia Fire Engine Co. v. Commonwealth, 93 Pa. St. 
 
 264 80 
 
 Hitch V. Hawley, 132 N. Y. 212, 30 W. E. 401 32 
 
 Hitchcock V. Coker, 6 Ad. & E. 438, 1 Nev. & P. 796, 2 
 
 Har. & W. 464 178 
 
 Hockreiter's Appeal, 93 Pa. St. 479 199 
 
 Hoeffner v. Grand Lodge, 41 Mo. App. 359 222 
 
 Hoffman v. Livingston, 46 N. Y. Super. Ct. 552 253 
 
 Holly Springs Bank v. Pinson, 58 Miss. 421, 38 Am. Eep. 
 
 330 194 
 
 Hopkins v. United States, 171 U. S. 578, 43 L. Ed. 290. . 193 
 
 Horner v. Graves, 7 Bing. 735, 5 Moore & P. 768 177 
 
 Horton v. Baptist Church in Chester, 34 Vt. 309 21 
 
 Howard v. Savannah, T. U. P. Charlt. (Ga.) 173 87 
 
 Hubbard v. Miller, 27 Mich. 15, 15 Am. Eep. 153 179 
 
 Hubbell V. Drexel, 11 Fed. 115 267 
 
 Hudson V. Spaulding, 6 N. Y. Supp. 877, 53 Hun 638, 25 
 
 K Y. St. Eep. 256 28 
 
 Hunt V. New York Cotton Exchange, 205 U. S. 322, 51 
 
 L. Ed. 821, 27 Sup. Ct. 529 287 
 
 Hurlbutt, In re, 135 Fed. 504, 68 C. C. A. 216 58 
 
Table of Cases Cited. xxiii 
 
 PAGE. 
 
 Hurst V. New York Produce Exchange, 100 N. Y. 605, 3 
 N. E. 42 139, 164, 215, 216 
 
 Huston V. Eeutlinger, 91 Ky. 333, 34 Am. St. Eep. 225, 
 15 S. W. 867, 13 Ky. Law Rep. 925 232, 244, 245, 277 
 
 Hutchinson v. Lawrence, 67 How. Pr. 38. . .223, 226, 227, 228 
 
 Hyde v. "Woods, 94 U. S. 523, 24 L. Ed. 264 58, 79, 
 
 83, 118, 120, 130 
 
 I 
 
 Innes v. Wylie, 1 Oar. & K. 257 106 
 
 Ipswich Tailor's Case, 11 Coke 53a 176 
 
 Irwin V. Williar, 110 TJ. S. 499, 28 L. Ed. 225, 4 S. Ot. 
 160 265, 269, 273, 274, 315, 316, 328, 331 
 
 J 
 
 Jackson v. South Omaha Live Stock Exchange, 49 Neb. 
 687, 68 N. W. 1051 207, 225, 229 
 
 K 
 
 Karcher v. Supreme Lodge, 137 Mass. 368 215 
 
 Kehlenbeck v. Logeman, 10 Daly 447 (N. Y.) 87 
 
 Eetchum, 1 Fed. 840, Fed. Cas. No. 10,237 58 
 
 Kiernan v. Manhattan Quotation Telegraph Co., 50 How. 
 
 Pr. 194 287 
 
 King V. Hutton, 2 Q. B. Div. (1900) 504 129 
 
 Kuehnemundt v. Smith, 2 N. Y. Supp. 625, 17 N. Y. St. 
 
 Eep. 757 223, 227, 229 
 
 L 
 
 Labouchere v. Earl of Wharncliffe, L. E. 13 Ch. Div. 346. 222 
 Lafond v. Deems, 81 N. Y. 507, 8 Abb. N. 0. 344 29, 30, 215 
 Lafond V. Deems, 1 Abb. N. C. 318, 52 How. Pr. (N. Y.) 
 
 41 .- 30 
 
 Lahifi V. St. Joseph's Total Abstinence, etc.. Society, 76 
 
 Conn. 648, 57 Atl. 692, 65 L. E. A. 92, 100 Am. St. 
 
 Eep. 1012 248, 252 
 
xxiv Table of Cases Cited. 
 
 PAGE. 
 
 Lambert v. Addison, 46 L. T. N. S. 25. .- 236 
 
 Lary v. Goodnow, 48 N. H. lYO 15Y 
 
 Lawrence v. Maxwell, 53 N. Y. 19 2Y4, 275 
 
 Leech v. Harris, 2 Brewst. (Pa.) 571 18, 22, 106, 109, 
 
 110; 116, 140, 143, 207, 235, 237, 239, 244, 266, 278 
 
 Leech v. Leech, 3 Week. Not. Cas. 542 119 
 
 Leggett V. Waller, 80 N. T. Supp. 13, 39 Misc. 408 62 
 
 Lehman v. Feld, 37 Pad. 852 324, 333, 336 
 
 Levy V. Magnolia Lodge, 110 Oal. 297, 42 Pac. 887.. .215, 
 
 222, 230 
 Lewis V. Wilson, 121 N. T. 284, 24 K". E. 474. . . .140, 149, 
 
 223, 227, 229, 233, 239 
 
 Livingston v. Kalli, 5 El. & Bl. 132 156 
 
 Londheim v. White, 67 How. Pr. 467 62 
 
 Long Island E. E. Co., In re, 19 Wend. 37, 32 Am. Dec. 
 
 429 99 
 
 Loubat V. Leroy, 40 Hun 546, 17 Abb. N. 0. 512, 1 N. T. 
 
 St. Eep. 178 219, 220, 222 
 
 Low V. Eees Printing Co., 41 Neb. 127, 59 N. W. 362, 24 
 
 L. E. A. 702, 43 Am. St. Eep. 670 51 
 
 Lowenberg v. Greenebaum, 99 Cal. 162, 33 Pac. 794, 21 
 
 L. E. A. 399, 37 Am. St. Eep. 42 34, 49, 62 
 
 Lurman v. Jarvie, 82'N. T. App. Div. 37, 81 N. T. Supp. 
 
 468 250, 251 
 
 Lurman, In re, 90 Hun 303, 35 N. Y. Supp. 956 227 
 
 Lyttleton v. Blackburne, 45 L. J. Ch. N. S. 219, 33 L. T. 
 
 N. S. 641 209 
 
 M 
 
 McCabe v. Emmons, 51 N. Y. Super. Ct. 219 94 
 
 McCabe v. Father Matthew, etc.. Society, 24 Hun 149 197 
 
 McCarthy Bros. v. Chamber of Commerce, 105 Minn. 
 
 497, 117 N. W. 923, 21 L. E. A. (N. S.) 589. . . .80, 94, 
 
 100, 119 
 McDearmott Commission Co. v. Board of Trade, 146 
 
 Fed. 961, 77 C. 0. A. 479 297, 299, 300, 301 
 
Table op Cases Cited, xxv 
 
 PAGE. 
 
 McFadden v. Murphy, 149 Mass. 341, 21 N. E. 868. . .29, 30 
 
 MeHenry v. Board of Trade, 131 Dl. App. 275 25 
 
 McKane v. Adams, 123 N. T. 609, 25 N. E. 1057, 20 Am. 
 
 St. Eep.'785 93 
 
 Macklin v. Eichardson, 2 Ambl. 694, 7 English Euling 
 
 Cases 66 300 
 
 Mallan v. May, 11 Mees. & W. 653, 7 Jur. 536 179 
 
 Manning v. Shoemaker, 7 Pa. Super. Ct. 375 21 
 
 Marine Grain & Stock Exchange v. Western Union Tele- 
 graph Co., 22 Fed. 23 288, 292 
 
 Markham v. Jaudon, 41 N. T. 235 274 
 
 Martin v. Building Association, 2 Coldw. (Tenn.) 418. . . 194 
 
 Marye v. Strouse, 5 Fed. 483, 6 Sawy. 204 265, 269, 271 
 
 Mayer v. Joumeymans Stone Cutters Association, 47 N. 
 
 J. Eq. 519, 20 Atl. 492 93 
 
 Mayhew v. Herrick, 7 C. B. 229, 13 Jur. 1078, 18 L. J. 
 
 C. P. 179, 62 E. 0. L. 229 23 
 
 Medical Society v. Weatherly, 75 Ala. 248. .115, 209, 210, 211 
 
 Meridian Nat. Bank v. Brandt, 51 Ind. 56 23 
 
 'Metropolitan Grain & Stock Exchange v. Board of Trade, 
 
 15 Fed. 847, 11 Biss. 531, 4 Ky. Law Eep. 840 292 
 
 Miller v. Junction Canal Co., 53 Barb. (N. T.) 590 156 
 
 Moffatt V. Board of Trade, 111 S. W. 894 (Mo. App.). 
 
 79, 87, 165, 199, 207, 239 
 Mogul Steamboat Co. v. McGregor, L. E. 23 Q. B. D. 598. 281 
 Mokelumne & Campo, etc. v. Knox, 67 Cal. 20, 7 Pac. 413. 28 
 
 Morris v. Grant, 34 Hun (N. T.) 377 254 
 
 Morton Gravel Eoad Co. v. Wysong, 5 Ind. 4 193 
 
 Mottu V. Primrose, 23 Md. 482 220 
 
 Moxey v. Philadelphia Stock Exchange, 14 Phila. 185 
 
 (affirmed in 9 Week. Not. Cas. 441) . .119, 215, 217, 218, 227 
 
 Moxey's Appeal, 9 Week. Not. Cas. 441 119, 207, 
 
 215, 217, 218, 227 
 
 Moyse v. Exchange, 128 N. Y. Supp. 112 215, 216 
 
 Munn V. Hlinois, 94 U. S. 113, 24 L. Ed. 77 292 
 
 Murdock v. Phillips' Academy, 29 Mass. 263 228 
 
xxvi Table of Cases Cited. 
 
 N PAGE. 
 
 Nashua Savings Bank v. Abbott, 181 Mass. 531, 63 N. E. 
 
 1058, 92 Am. St. Eep. 430 66 
 
 National Exchange Bank v. National Bank of- North 
 
 America, 132 Mass. 147 305 
 
 National League of Commission Merchants v. Homung, 
 
 129 N. T. Supp. 437 167 
 
 National Telegraph News Co. v. Western Union Tele- 
 graph Co., 119 Fed. 294, 56 C. 0. A. 1&8, 60 L. E. A. 
 
 865 48, 287, 289, 290, 297, 299 
 
 Neimann, In re, 124 Fed. 738 58 
 
 Nelson v. Board of Trade, 58 111. App. 399 39, 235 
 
 Nelson v. Board of Trade, 162 111. 431, 44 N. E. 743, 53 
 
 Am. St. Eep. 312 239 
 
 Nettleton v. Gridley, 21 Conn. 531, 56 Am. Dec. 378 157 
 
 Neukirch v. Keppler, 56 App. Div. (N. T.) 230, 67 N. T. 
 
 Supp. 710 228, 229 
 
 Neukirch v. Keppler, 174 N. T. 509, 66 N. E. 1112 241 
 
 New Jersey State Dental Society v. Dentacura Co., 57 
 
 N. J. Eq. 593, 41 Atl. 672 (affirmed 58 N. J. Eq. 582, 
 
 43 Atl. 1098) 300 
 
 Newman v. Lee, 87 App. Div. (N. Y.) 116, 84 N. T. 
 
 Supp. 106 267 
 
 New Tork and Chicago Grain & Stock Exchange v. 
 
 Board of Trade, 127 111. 153, 19 N. E. 855, 2 L. E. A. 
 
 411, 11 Am. St. Eep. 107 287, 288, 291 
 
 Nixon and Chatfield v. Nash, 12 Ohio St. 647, 80 Am. 
 
 Dec. 390 23 
 
 Monotuck Silk Co. v. Fair, 112 Mass. 354 265 
 
 O 
 
 O'Connell v. Lamb, 63 111. App. 652 26 
 
 O'Dell V. Boyden, 150 Fed. 731 58, 66 
 
 Olds V. Chicago Open Board of Trade, 18 HI. App. 465. 
 
 250, 253 
 Olery v. Brown, 51 How. Pr. 92 215 
 
Table of Cases Cited. xxvii 
 
 PAGE. 
 
 Oregon & W. Bank v. American Mortgage Co., 35 Fed. 
 
 22 156 
 
 Ostrom V. Greene, 161 N. T. 353, 55 N. E. 919 21 
 
 Ostrom V. Greene, 45 N. T. Supp. 852, 20 Misc. 1Y7 210 
 
 Otto V. Journeymen Union, Y5 Cal. 308, 17 Pac. 217, 7 
 
 Am. St. Kep. 156 106, 222, 227, 232, 244, 278, 279 
 
 P 
 
 Pacaud v. Waite, 218 HI. 138, 75 N. E. 779, 2 L. E. A. 
 
 (N. S.) 672 164, 168 
 
 Page V. Edmunds, 187 F. S. 596, 47 L. Ed. 318, 23 S. Ct. 
 
 200 58 
 
 Palmer v. Be Witt, 47 N. T. 532, 7 Am. Eep. 480 300 
 
 Pancoast v. Gowen, 93 Pa. St. 66 34, 62 
 
 Pardridge v. Cutler, 68 111. App. 569 266 
 
 Parsons v. Martin, 11 Gray (Mass.) Ill 273, 274 
 
 Paulison v. Halsey, 38 N. J. L. 488 157 
 
 Penfield v. Skinner, 11 Vt. 296 21 
 
 People V. Albany Hospital, 11 Abb. Pr. N. S. 4 220 
 
 People V. Medical Association, 118- N. Y. 10, 23 N. E. 129. 219 
 People V. Medical Society, 24 Barb. (N. T.) 570. .80, 91, 
 
 109, 232 
 People V. Milk Exchange, 145 N. T. 267, 39 N. E. 1062, 
 
 27 L. E. A. 437, 45 Am. St. Eep. 609 277, 278, 282 
 
 People V. Sheldon, 139 N. T. 251, 34 N. E. 785, 23 L. E. 
 
 A. 221, 36 Am. St. Eep. 690 282, 283 
 
 People V. Wade, 59 N. T. Supp. 846, 13 N. T. Cr. E. 425. 187 
 
 People V. Wirschingi 88 N. E. 169 187 
 
 People V. Women's Catholic Order, 162 111. 78, 44 N. E. 
 
 401 215 
 
 People ex rel. Bartlett v. Medical Society, 32 N. T. 187. . 89 
 
 People ex rel. Bosqui v. Crockett, 9 Cal. 112 86 
 
 People ex rel. Burton v. St. George's Society, 28 Mich. 
 
 261 222 
 
 People ex rel. Deverell v. Musical Union, 118 N. T. 101, 
 
 23 N. E. 129 220 
 
 People ex rel. Dodson v. Board of Trade, 224 111. 370 115 
 
xxviii Table of Cases Cited, 
 
 PAGE, 
 People ex rel. Elliott v. Cotton Exehange, 8 Hun (N. 
 
 Y.) 216 ..99, 168,214, 235 
 
 People ex rel. Johnson v. Produce Exchange, 149 N. T. 
 
 401, 44 ]Sr. E. 84 Y9, 80, 139, 146, 159, 164, 169, 
 
 173, 211, 223, 226, 235, 238, 239, 240, 241 
 People ex rel. Lemmon v. Feitner, 167 N. Y. 1, 60 N. E. 
 
 265, 82 Am. St. Eep. 698 17, 65 
 
 People ex rel. Mcllhaney v. Live Stock Exchange, 170 HI. 
 
 556, 48 N. E. 1062, 39 L. E. A. 373, 62 Am. St. Eep. 
 
 404 32, 78, 79, 80, 82, 189, 277, 283 
 
 People ex rel. Page v. Board of Trade, 45 HI. 112. .39, 40, 
 
 43 , 79, 80, 92, 106, 109, 139, 140, 145, 206, 214 
 People ex rel. Pinckney v. New York Board of Fire 
 
 Underwriters, 7 Hun (IST. Y.) 248 104, 105 
 
 People ex rel. Pulford v. Fire Department, 31 Mich. 458. 
 
 86, 87, 91, 99, 115, 237 
 
 People ex rel Eice v. Board of Trade, 80 111. 134 18, 20 
 
 People ex rel. Eoehler v. Mechanic's Aid Society, 22 Mich. 
 
 86 222 
 
 People ex rel. Stewart v. Young Men's Society, 41 Mich. 
 
 67, 1 N. W. 931 86 
 
 People ex rel. Thacher v. New York Commercial Asso., 18 
 
 Abb. Pr. 271 79, 80, 106, 109, 112, 119, 139, 143, 
 
 148, 207, 227 
 
 Perkins v. Electric Light Co., 21 Blatchf. 308 156 
 
 Perry v. Barnett, 15 Q. B. D. 388, 54 L. J. Q. B. 466, 52 
 
 L. T. Eep. 585 265 
 
 Pitcher v. Board of Trade, 121 111. 412' 13 N. E. 187. 
 
 112, 139, 229, 239 
 
 Place V. Sweetzer, 16 Ohio 142 23 
 
 Piatt V. Jones, 96 K Y. 24 58 
 
 Poultney v. Bachmann, 31 Hun (N. Y.) 49, 10 Abb. N. 
 
 C. 252, 62 How. Pr. 466 88 
 
 Powell V. Abbott, 9 "Week. Not. Cas. 231 (Pa.) 78, 79, 
 
 168, 214 
 Powell V. Waldron, 89 N. Y. 328, 42 Am. Eep. 301. . .62, 66 
 Primrose, In re, 23 Md. 482 220 
 
Table of Cases Cited. xxix 
 
 Q PAGE. 
 
 Quentell v. New York Cotton Exchange, 106 N. T. Supp. 
 228 207, 219 
 
 R 
 
 Renville, In re, 46 N. Y. App. Div. 37, 61 N. Y. Supp. 
 
 S49 288, 293 
 
 Eex V. Westwood, 4 B. & 0. 781 194 
 
 Eichardson v. Society, 58 N. H. 187 93, 200 
 
 Rigby V. Connol, L. R. 14 Ch. D. 482, 49 L. J. Ch. 328,, 
 
 42 L. T. 139, 28 Week. Rep. 650 209, 210, 211 
 
 Ringo V. Wing, 49 Ark. 457, 5 S. W. 787 23 
 
 Ritterband v. Raggett, 4 Abb. N. 0. 67, 42 N. Y. Super. 
 
 Ot. 556 62 
 
 Roberts v. Myers, Brunner Col. Cas. 698, Fed. Cas. No. 
 
 11,906 , 300 
 
 Robinson v. MoUett, L. R. 7 H. L. 802, 44 L. J. C. P. 
 
 362, 33 L. T. R. U. S. 544 269, 273 
 
 Robinson v. Templar Lodge, 117 Cal. 370, 49 Pae. 170, 
 
 59 Am. St. Rep. 193 248 
 
 Roome v. Swan, 2 N. Y. Supp. 614, 15 Civ. Proc. Rep. 
 
 344, 18 H. Y. St. Rep. 286 62 
 
 Rorke v. San Francisco Stock Exchange Board, 99 Cal. 
 
 196, 33 Pac. 881 140, 266 
 
 Russell V. New York Produce Exchange, 27 Misc. 381, 58 
 
 N. Y. Supp. 842 254, 277 
 
 Ryan v. Cudahy, 157 111. 108, 41 N. E. 760, 49 L. R. A. 
 
 353, 48 Am. St. Rep. 305 209, 244, 245 
 
 Ryan v. Lamson, 44 111. App. 204 215 
 
 S 
 
 SafFery, Ex parte, L. R. 4 Ch. Div. (1876) 555 129 
 
 St. James Club, 13 Eng. L. P. E. 592 23 
 
 St. Mary's Benevolent Asso. v. Lynch,- 64 N. H. 213, 9 
 Atl. 98 29 
 
XXX Table op Cases Cited. 
 
 PAGE. 
 
 Sale V. First Baptist Church, 62 Iowa 26, 49 Am. Eep. 
 
 136, 209, 210 
 Salem Bank v. Gloucester Bank, 17 Mass. 1, 9 Am. Dec. 
 
 Ill 193 
 
 Samuels v. Oliver, 130 111. 73 266 
 
 San Francisco v. Anderson, 103 Cal. 70, 36 Pac. 1034. . . 64 
 
 Savannah Cotton Exchange v. State, 54 Ga. 668 167, 237 
 
 Schiller Commandery v, Jaennichen, 116 Mich. 129, 74 
 
 N. "W. 458 30 
 
 Schwartz v. "Weckler, 29 Abh. Pr. N. S. 332 28 
 
 Seneca Co. Bank v. Lamb, 26 Barb. (N. Y.) 595 83 
 
 Sewell V. Ives, 61 How. Pr. (N. T.) 44 250, 253 
 
 Sextoil V. Commercial Exchange, 10 Pa. Co. Ct. 607. . . . 140 
 Seymour v. Bridge, 14 Q. B. D. 460, 54 L. J. Q. B. 347. . 265 
 
 Shannon v. Cheney, 156 Cal. 567, 105 Pac. 588 66, 119 
 
 Sheppard v. Barrett, 17 Phila. Eep. 145 119, 128 
 
 Sinclair v. Tallmadge, 35 Barb. (N. T.) 602 156 
 
 Singerly's Admin, v. Johnson, 3 Week. Not. Cas. 541. 
 
 55, 119, 239 
 Skinner v. Dayton, 19 Johns. (N. T.) 513, 10 Am. Dec. 
 
 286 21 
 
 Slater v. Supreme Lodge, 76 Mo. App. 387 220 
 
 Smith V. Nelson, 18 Vt. 516 200 
 
 Smith V. Eeynolds, 66 L. T. 808 265 
 
 Soby V. People, 134 111. 66, 25 N. E. 109 187 
 
 Society v. Van Dyke, 2 Whart. 309 237 
 
 Society for Visitation v. Commonwealth, 52 Pa. St. 125. 
 
 110, 222 
 
 Sparkhaw v. Terkes, 142 ¥. S. 1, 35 L. Ed. 915 58 
 
 Springs v., James, 121 N. T. Supp. 1054, 137 App. Div. 
 
 110 321, 324 
 
 Spring Valley Water Works v. Schottler, 62 Cal. 69 51 
 
 Sproul V. Morris, 31 Pitts. L. J. (N. S.) 310 65 
 
 Staats V. Bristow, 73 N. Y. 264 23 
 
 State V. Chamber of Commerce, 4 Ohio N. P. 244. . .227, 
 
 230, 23^ 
 
Table of Cases Cited. xxxi 
 
 PAOE. 
 
 state V. Chamber of Commerce, 6 Ohio S. & C. PI. Dec. 
 
 363 227, 230, 239 
 
 State V. Corcoran, 73 Vt. 404, 50 Atl. 1110 188 
 
 State V. Duluth Board of Trade, 107 Minn. 506, 121 N. 
 
 W. 395, 23 L. E. A. (N. S.) 1260 181, 183, 283 
 
 State V. Kentner, 178 Mo. 487, 77 S. W. 522 187 
 
 State V. Logan, 84 Mo. App. 584 187 
 
 State V. McMillan, 69 Vt. 105, 37 Atl. 278 188 
 
 State V. Slavonska, 28 Ohio St. 665 249 
 
 State V. Union Merchants Exchange, 2 Mo. App. 96. 
 
 79, 164, 232 
 
 State V. Williams, 75 N. C. 134 84 
 
 State V. Wilson, 73 Kans. 343 ." 79, 181 
 
 State V. Wood, 13 Mo. App. 139 280 
 
 State ex rel. Corey v. Curtis, 9 Nev. 325 194 
 
 State ex rel. Crane v. Chamber of Commerce, 77 Minn. 
 
 308 79, 119 
 
 State ex rel. Cuppel v. Milwaukee Chamber of Commerce, 
 
 47 Wis. 670, 3 N. W. 760. . . .79, 80, 113, 190, 211, 223, 227 
 State ex rel. G^-aham v. Chamber of Commerce, 20 Wis. 
 
 68 39, 76, 109, 113, 167, 232, 235 
 
 State ex rel. Kennedy v. Union Merchants Exchange, 2 
 
 Mo. App. 96 167, 168 
 
 State ex rel. Star Publishing Co. v. Associated Press Co., 
 
 159 Mo. 410, 60 S. W. 91, 51 L. E. A. 151, 81 Am. St. 
 
 Eep. 368 51 
 
 State ex rel. Waring v. Georgia Medical Society, 38 Ga. 
 
 608, 95 Am. Dec. 408 133, 209, 210, 211, 235, 237 
 
 State Savings Asso. v. Printing Co., 25 Mo. App. 642 194 
 
 Staton V. Norfolk & C. E. E. Co., Ill N. C. 278, 16 S. E. 
 
 181, 17 L. E. A. 838 51 
 
 Stemmermann v. Lilienthal, 54 S. C. 440, 32 S. E. 535. . . 30 
 Sterrett v. Phila. Local Telegraph Co., 18 Phila. 316. .. . 293 
 
 Stevens v. State, 2 Ark. 291, 35 Am. Dec. 72 51 
 
 Stewart v. Cauty, 8 M. P. W. 160 265 
 
 Stone V. Marye, 14 Nev. 362 265 
 
xxxii Table of Cases Cited. 
 
 PAGE. 
 
 Sturges V. Board of Trade, 86 HI. 441 .216, 243 
 
 Sullivan v. Campbell, 2 Hall (N. Y.) 271 22 
 
 Sullivan v. Postal Telegraph Co., 123 Fed. 411, 61 C. C. 
 
 A. 1 288 
 
 Supreme Lodge of United Workmen v. Zuhlke, 129 HI. 
 
 298, 21 N. E. Y89 248 
 
 Supreme Order v. Stein, 120 Ind. 270 248 
 
 Sutherland, In re, 6 Biss. 526, Fed. Cas. No. 13,637. .34, 57 
 Sutton V. Tatham, 10 Ad. & E. 27, 37 E. C. L. 39 266 
 
 T 
 
 Taylor v. Bailey, 169 IlL 181, 48 N. E. 200 266 
 
 Taylor v. Ketchum, 5 Eob. (S. Y.) 507, 35 How. Pr. 
 
 (K Y.) 289 .- 274 
 
 Temple v. Toronto Stock Exchange, 8 Ont. 705. .227, 239, 249 
 
 Tenny v. New England Protective Asso., 37 Vt. 64 29 
 
 Thomas v. Ellmaker, 1 Pars. Cas. (Pa.) 98 29 
 
 Thomas v. Musical Union, 121 N. Y. 45 215 
 
 Thompson v. Adams, 93 Pa. St. 55. . . .66, 73, 83, 119, 165, 207 
 
 Tompkins v. Halleck, 133 Mass. 32, 43 Am. Eep. 480 300 
 
 Torrey v. Baker, 1 Allen 120 200 
 
 Turner v. Eobinson, 10 Ir. Ct. Eep. 121, 510 300 
 
 U 
 
 Union Bank of Maryland v. Eidgely, 1 Harr. & G. (Md.) 
 324 193 
 
 United States v. Metropolitan Club, 11 App. D. 0. 180. 
 
 210, 236 
 
 V 
 
 Vandike's Appeal, 57 Pa. St. 9 23 
 
 Van Dusen v. Jungeblut, 75 Minn. 305, 74 Am. St. Eep. 
 
 463, 77 N. W. 970 269, 275, 316, 328, 333, 336 
 
 Vaughn v. Herndon, 91 Tenn. 64 159, 164 
 
 Von Schmidt v. Huntington, 1 Cal. 55 30 
 
Table of Cases Cited. xxxiii 
 
 W , PAGE. 
 
 Walls V. Bailey, 49 IST. Y. 464, 10 Am. Eep. 407 266 
 
 Ward V. Vosburgh, 31 Fed. 16 269 
 
 Warder, In re, 10 Fed. Y89 58 
 
 Warren v. Louisville Tobacco Exchange, (Ky. 1900) 55 
 
 S. W. 912 79, 257 
 
 Warren v. St. Louis Merchants Exchange, 52 Mo. App. 
 
 157, 55 S. W. 912 80, 257 
 
 Washington Benevolent Society v. Bacher, 20 Ta. St. 
 
 425 222 
 
 Wangle v. Seaboard Banlc, 54 N. Y. Super. Ct. 283 253 
 
 Weare Commission Co. v. People, 209 111. 528, 70 N. E. 
 
 1076 187 
 
 Weaver v. Fisher, 110 111. 146 52, 65 
 
 Weiss V. Musical Union, 189 Pa. St. 446, 42 Atl. 118.110, 235 
 
 Westcott V. Mining Co., 23 Mich. 145 99 
 
 Western Union Telegraph Co. v. State, 164 Ind. 492, 76 
 
 N. E. 100, 3 L. E. A. (N. S.) 153 287, 294 
 
 Weston V. Ives, 97 N. Y. 222 73, 119, 206 
 
 White V. Brovynell, 3 Abb. Pr. N. S. 318. .17, 19, 29, 73, 
 
 81, 93, 159, 164, 215, 217, 230, 233, 239 
 White V. Brownell, 4 Abb. Pr. IST. S. (N. Y.) 162, 2 Daly 
 
 329 18, 19, 22, 23, 73, 79, 93, 106, 110, 
 
 159, 164, 206, 207, 215, 217, 230, 233, 239, 260 
 
 Whitlock V. Seaboard National Bank, 29 Misc. 84 267 
 
 Willcocks, Ex parte, 7 Cowen 402, 17 Am. Dec. 525 196 
 
 Wiley V. Baumgardner, 97 Ind. 66, 49 Am. Eep. 427 179 
 
 Wilson V. Commercial Telegram Co., 3 N. Y. Supp. 633, 
 
 18 N. Y. St. Eep. 78 288, 293 
 
 Wrede v. Clark, 117 N. Y. Supp. 5 58 
 
 Wynehamer v. People, 13 N. Y. 378 51 
 
 Y 
 
 Young V. Eames, 78 App. Div. (N. Y.) 229. ..226, 229, 
 
 241, 242 
 Young V. Eames, 79 N. Y. Supp. 1068. ..226, 229, 241, 242 
 
xxxiv Table of Cases Cited. 
 
 Z PAGE. 
 
 Zell V. Baltimore Stock Exchange, 102 Md. 489, 62 Atl. 
 
 808, 4 L. E. A. (N. S.) 435 66, 73, 79, 119, 207 
 
 Zindorf Construction Co. v. Western Am. Co., 27 Wash. 
 
 31, 67 Pac. 374 154 
 
CHAPTER I. 
 
 OEIGIN AISTD HISTOEIOAL DEVELOPMENT OF 
 THE OOMMEECIAL EXCHANGES. 
 
 Section 1. Commercial Exchanges Product of Late 
 Mediaeval Ages. 
 
 2. The Exchanges in England. 
 
 3. Commercial Exchanges in the United States. 
 
 Section 1. Commercial Exchanges Product of 
 Late Mediaeval Ages. 
 
 The Commercial Exchange, like many other in- 
 stitutions, legal, industrial or social, which in these 
 modern days have become so important a part of 
 the life about us, has its roots planted in the al- 
 most hidden recesses of the historical past. While 
 the date of its origin is impossible of accurate 
 determination, yet we can discover the economic 
 conditions and influences which undoubtedly con- 
 tributed thereto. A commercial Exchange, as will 
 be pointed out again and again in this treatise, is 
 neither more nor less than a great market place. 
 It is an institution devoted to commerce and trade. 
 Accordingly, it is but reasonable to conclude that 
 the origin of the Exchanges dates from that period 
 between the twelfth and fifteenth centuries when 
 the people of the young and vigorous nations 
 which arose upon the ruins of the Roman Empire, 
 becoming imbued with a broader outlook upon life, 
 
 [1] 
 
2 The Law of Commeecial Exchanges. 
 
 began again to live in cities and to devote their 
 energies to manufacturing and commerce.^ 
 • This industrial movement began to be felt even 
 in the eleventh century and was in full swing dur- 
 ing the twelfth. The reasons for it were largely, 
 if not entirely, economic. The early period of the 
 Middle Ages was essentially a cityless period. 
 The large and flourishing cities which everywhere 
 dotted the continent of Europe at the height 
 of the Eoman Empire in the centuries suc- 
 ceeding its fall had passed into complete decay 
 and oblivion. During the latter period, the only 
 two classes of people were the landlords or baron- 
 age who owned the land and the peasants who 
 tilled it. Aside from agriculture and that con- 
 ducted under the wasteful and repressive condi- 
 tions incidental to the feudal system, the only 
 other industry consisted in supplying the meagre 
 wants of a primitive society in the way of building 
 rude huts for the peasants and castles for the 
 nobles. These industries were necessarily local- 
 ized and were operated by unskilled peasant labor. 
 But in the latter portion of the Middle Ages, and 
 particularly from the twelfth century, a change 
 took place of vast and potent influence for future 
 civilization. The people began to desire more than 
 the bare necessities of life and reached out for 
 
 * See Adams, Civilization During Middle Ages, chapter 
 XII, title " The Growth of Commerce and Its Results ; " 
 also, Cunningham, Growth of English Industry and Com- 
 merce (Early and Middle Ages). 
 
Obigin, Etc., of Commeeoial Exchanges. 3 
 
 greater luxury in the matter of buildings, clothing, 
 food and household utensils and furnishings. 
 These demands could not be met by the casual 
 labor of unskilled peasants, but required the 
 trained hand of professional craftsmen. The 
 more alert and ambitious of the agricultural popu- 
 lation left the land where living was bare and 
 precarious and began to congregate frequently 
 about some castle or monastery and to ply the 
 various trades. In the course of time some of 
 these isolated mediaeval communes grew to vil- 
 lages and others more favorably situated soon be- 
 came towns of considerable size. This impulse 
 was first felt in Italy, but soon passed across the 
 Alps to Grermany, the Netherlands, and later to 
 France and England. 
 
 The movement once started was carried along 
 by its own momentum and the presence of au- 
 spicious conditions both economic and political. 
 As their industries grew, wealth was amassed and 
 the " burghers " became more self-reliant and 
 more independent. In time they grew to such 
 strength and importance that they were able to 
 throw off the yoke of their feudal masters and 
 often became in law and in fact independent re- 
 publics. With their greater liberties, their in- 
 dustries grew apace. In time the output grew far 
 beyond the demands of the local community 
 around them, and it became necessary to exchange 
 their products with other cities and countries. It 
 thus transpires that at the dawn of the modern era 
 
4 The Law op Commeecial Exchanges. 
 
 we find the vigorous and flourishing city republics 
 in Italy — Venice, Genoa, Pisa, Milan and Flor- 
 ence ^ — carrying on many industrial arts, such as 
 the weaving of silk and wool and the forging of 
 armor and weapons and exchanging these prod- 
 ucts in the markets of the Orient for carpets, 
 sugar, fruits and spices, and in the ports of the 
 North Sea for fish, lumber and amber. 
 
 The same high state of development of city life 
 and industry can be seen in the North. Beginning 
 with the towns of South Germany, such as Ulm, 
 Ratisbon, Augsburg and Nuremberg, the position 
 of importance soon shifted to the cities of the north 
 of Germany — Bremen, Hamburg, Ijiibeck, Rostock, 
 Danzig, and many others. In fact, a group of 
 these northern cities formed an alliance known as 
 the Hanseatic League, and in the later part of the 
 fourteenth century grew powerful enough to de- 
 pose and set up kings, not alone in their own but 
 foreign countries as well. The movement to the 
 west of Germany was no less marked than else- 
 where. During the fourteenth century the Flem- 
 ish city of Bruges became the real meeting place 
 between the cities of north and south Germany, 
 and thither came merchants from all parts of 
 Europe to exchange their respective wares. In 
 the fifteenth and the following century the place 
 of Bruges was largely taken over by Antwerp, 
 
 ' See vol. T, Cambridge Modem History, chapter XV, 
 title " Economic Change " from fifteenth to seventeenth 
 centuries. 
 
Okigin, Etc., of Commercial Exchanges. 5 
 
 which in its day became the primary market place 
 of the then known world. 
 
 While the development during this period of 
 city life and the resultant growth and prog- 
 ress of industry and commerce supplied the 
 fundamental conditions out of which we should 
 expect the commercial Exchange to grow, yet 
 there are several particular institutions peculiar 
 to the late mediaeval and early modern periods 
 which by their general similarity to the mod- 
 ern Exchange would suggest at least some de- 
 gree of relationship.^ These are the Trade Guilds 
 and the Mediaeval Fairs. While the idea of 
 association or co-operative effort is an impor- 
 tant factor in the industrial life of our present 
 century, it was a far greater factor in the life of 
 the thirteenth and fourteenth centuries. This was 
 particularly true of the merchant guilds in all the 
 various industrial centers. At this time the chief 
 function of the various governments seemed to be 
 that of carrying on war with their neighbors. 
 Whatever protection and security were afforded 
 to commerce both at home and between foreign 
 countries depended almost exclusively upon the 
 efforts of the merchants themselves. An individ- 
 
 ' See New Encyclopedia Britanniea, eleventh edition; 
 Chambers' Encyclopedia; Johnson's New Universal Cyclo- 
 pedia, title " Exchanges." See also Day's History of Com- 
 merce (Longmans, Green and Company, 1907), pp. 155, 156, 
 335. 
 
6 The Law of Commercial Exchanges. 
 
 ual mercliant was helpless. In union, however, he 
 found a reasonable amount of protection. 
 
 Accordingly, at , a comparatively early date in 
 the history of modern commerce, we find that the 
 members of the various trades began to associate 
 together in organizations known as guilds with 
 extensive rules or regulations for the conduct of 
 the common erdployment. Among the first thus to 
 organize were the merchants. In the course of 
 time these organizations spread, and in order to 
 ward off common dangers it was found advisible 
 and necessary to form a confederation of these 
 various guilds in the different cities. The unions 
 of the Italian cities from time to time and the 
 Hanseatic League among the northern cities are 
 splendid types of these mediaeval attempts towards 
 industrial and commercial associations. It is with 
 respect, however, to the internal organization of 
 the merchant guilds in the more prominent cities 
 — their close membership and their comprehen- 
 sive rules and regulations for the conduct of busi- 
 ness by all members and the settlement of dis- 
 putes — that their similarity with the modern Ex- 
 change is suggested. 
 
 Another institution of the thirteenth and four- 
 teenth centuries which may very reasonably have 
 been the forerunner of the modern Exchanges 
 was the great Pairs. All are acquainted in a 
 general way with the fairs which are held, even 
 to-day, at stated intervals in the various States 
 and counties of this country. These institutions, 
 
Origin, Etc., of Commeeci^Uj Exchanges. 7 
 
 however, discharged a far more important func- 
 tion than their modern prototype. They supplied 
 almost the sole opportunity whereby merchants 
 during the late mediaeval period could display and 
 dispose of their wares. Within the various coun- 
 tries, the places and dates for holding of these 
 Fairs became definitely fixed and were zealously 
 guarded. In time, moreover, they became great 
 international institutions, extending all the way 
 from England, through the Netherlands and Ger- 
 many as far as Nijni Novgorod in Russia, and 
 the merchants of all countries carrying their 
 wares with them traveled the entire circuit. As 
 is generally known, these Fairs became so im- 
 portant a part of the life of the times that the 
 sovereigns of the different countries extended to 
 them unusual guaranties of protection, that they 
 had their own courts and administered their own 
 law, and that the universal nature of the princi- 
 ples of the Law Merchant is due almost entirely 
 to the cosmopoHtan and international character 
 of these Fairs. It is in the aspect of these Fairs, 
 however, as great national and international 
 market places that we are alone concerned, and in 
 this resides their similarity to the modern com- 
 mercial Exchanges. 
 
 The first organization which clearly takes on 
 the form of the commercial Exchange as we now 
 know it was the Antwerp Bourse,* established 
 about the middle of the sixteenth century. Ant- 
 
 * History of Commerce, Olive Day, pp. 155, 156. 
 
8 ThJ; Law of Commebcial Exchanges. 
 
 werp was then at the zenith of its power and 
 glory as a trading center. The trade of the 
 Italian cities due to the blockade of the usual 
 routes to the Orient and the discovery of a water 
 passage to India and unknown continents to the 
 West had suffered a tremendous decline. The 
 Netherlands, on the other hand, became the nat- 
 ural trading point for the newly discovered coun- 
 tries. Moreover, the merchants of Antwerp 
 about this time, with far-sighted enterprise, re- 
 moved all of those restrictions upon the associa- 
 tions of foreigners in their commercial affairs 
 which had grown up among the merchant guilds 
 of the other cities. Originally, the business of 
 those who composed the Bourse was largely deal- 
 ing in produce and wares of all kinds and in sup- 
 plying money by loans to sovereigns and princes. 
 A contemporary thus writes of the Bourse : ' ' One 
 heard there a confused murmur of all languages, 
 one sees there a motley mixture of all possible 
 costumes; in short, the Antwerp Bourse seemed 
 to be a little world in which all parts of the great 
 were united." It became, moreover, the great 
 money market of the world. At the same time 
 we note the growth of a practice of buying and 
 selling of certificates in advance of the arrival of 
 the actual commodities which suggests the de- 
 livery of warehouse receipts and stock certificates 
 of later days. 
 
Oeigin, Etc., op Commebcial Exchanges. 9 
 
 Section 2. The Exchanges in England. 
 
 The introduction of the Exchange in England 
 dates from about the year 1566. For some years 
 prior to that time there resided in Antwerp a 
 sagacious and prosperous London merchant and, 
 as well, one of the most prominent financiers of 
 his time, who had been sent there as the English 
 Commercial Agent. His name was Sir Thomas 
 Gresham." His duties in financing loans for his 
 sovereign undoubtedly brought him into close 
 touch with the operations upon the Bourse. At 
 all events, upon his return to England, he offered 
 to build an Exchange in London provided the city 
 suppHed the land. In the year 1566 or 1567, ac- 
 cordingly, an institution known originally as 
 Gresham's Bourse was established in Cornhill, 
 London. The building has been described as " a 
 quadrangle with an arcade ; above was a corridor 
 (called a pawn) with stalls for the sale of wares; 
 outside were shops." It is reported that on 
 January 23, ^§11, the Bourse was opened with 
 great pomp and ceremony by Queen Elizabeth, 
 who proclamed it * * The Royal Exchange. ' ' The 
 original structure was destroyed in the great fire 
 of 1666, but was rebuilt in 1669. It was again 
 destroyed by fire in 1838. In 1844, however, the 
 present structure was completed at a cost of 
 £180,000. While originally the business opera- 
 tions on the Exchange like its model at Antwerp 
 
 ° See Dictionary of National Biography, vol. XXIII, title 
 "Sir Thomas Gresham." 
 
10 The Law of Commekcial Exchanges. 
 
 were confined to trading in various wares and 
 the financing of loans, at the present time it is 
 used chiefly as a meeting place where matters of 
 great commercial or financial interest to the realm 
 are proposed and considered. Although it is 
 open daily, yet its principal meetings are between 
 the hours of 2 p. m. and 5 p. m. on Tuesday and 
 Friday of each week. 
 
 From time to time the dealers in particular 
 commodities or property have removed from the 
 Eoyal Exchange and have set up Exchanges of 
 their own. One of the earliest secessions of this 
 kind resulted in the formation of the London 
 Stock Exchange. About the close of the seven- 
 teenth century the formation of joint stock com- 
 panies with capital stock and the introduction in 
 England in 1692 by William III of the system of 
 raising funds by loans supplied a new form of 
 investment for people of limited means. Both of 
 these forms of investment, however, soon gave 
 rise to great speculation and those members of 
 the Eoyal Exchange who dealt in them became 
 known as " stock brokers." The violence of 
 speculation at this period and the evils attendant 
 upon it gave rise to various statutes during 
 the reign of William III, which required all 
 brokers to be licensed by the city of London, lim- 
 ited their number to 100, and further required 
 that the names and residences of such brokers 
 were to be posted on the Eoyal Exchange. 
 
 In consequence of the criticism to which they 
 
Oeigin, Etc., of Commbecial Exchanges. 11 
 
 were subjected the stock brokers withdrew from 
 the Eoyal Exchange in 1698 and for a century oc- 
 cupied temporary quarters in the open air about a 
 network of alleys at Cornhill, London, and also 
 in Jonathan and Garraway's coffee houses. At 
 a little later period the directors of the Bank of 
 England set apart a room of the rotunda of the 
 bank for the brokers dealing in the public fund. 
 At first the public were admitted indiscriminately 
 to these meetings upon the payment of a nominal 
 sum. While the earliest minutes of the Stock 
 Exchange do not begin until December, 1798, yet 
 these records do refer to the existence of a Stock 
 Exchange as early as 1773. Moreover, a news- 
 paper on the fifteenth of July, 1773, contained the 
 announcement that on the previous day the 
 brokers had resolved to change the name from 
 New Jonathan's to that of the Stock Exchange. 
 
 In the year 1801 an unprecedented increase in 
 the business of the various brokers and the incon- 
 venience due to the indiscriminate admission of 
 the public caused the brokers to look about for a 
 larger and a permanent home. Accordingly, a 
 fund of £20,000 was raised and with it the Stock 
 Exchange opened its building in March, 1802, in 
 Capel Court, with a membership of about 500. In 
 1^53, however, this building was found inade- 
 quate to the needs of the Exchange and was re- 
 placed by the present structure, to which additions 
 have been made from time to time. 
 
 Space forbids any discussion in detail of the 
 
12 The Law of Commebcial Exchanges. 
 
 foundation of other Exchanges both in London 
 and in the more prominent cities of Great Britain. 
 One feature in the growth of these various Ex- 
 changes, however, should be noted. Both in Eng- 
 land and in the United States a line of cleavage 
 took place between a Stock Exchange dealing in 
 securities and what came to be known as Produce 
 Exchanges dealing in various agricultural and 
 other commodities. This distinction has never 
 been carried out to the same extent in the cities 
 upon the continent of Europe. At all events, we 
 find that Stock Exchanges patterned after the 
 London Stock Exchange have been established in 
 Manchester, Liverpool, Edinburgh, Glasgow, and 
 Various other cities of Great Britain. Moreover, 
 in London we find the Corn Exchange in Mark 
 Lane, the Coal Exchange on lower Thames street, 
 the Hop and Malt Exchange in Southwark and 
 the Hide and Skin Exchange in Bermondsey. 
 Likewise in the larger cities, such as Liverpool, 
 Manchester, Glasgow and others, there exist large 
 and flourishing Exchang'es dealing in agricultural 
 products and various other commodities. 
 
 Section 3. Commercial Exchanges in the United 
 States. 
 The earliest trace of an Exchange in this coun- 
 try dates from about the beginning of the nine- 
 teenth century. While there is in existence a 
 document which indicates that as early at 1792 
 about twenty brokers in New York city formed 
 
Obigin, Etc., op Commercial Exchanges. 13 
 
 an alliance among themselves for mutual pro- 
 tection in handling the public stock of that day, 
 principally the Eevolutionary inconvertible notes, 
 yet nothing of a permanent organization was at- 
 tempted for a quarter of a century thereafter. 
 The first institution, however, approaching the 
 Stock Exchange of the present time was the 
 Philadelphia Board of Stock Brokers, which ex- 
 isted as a formal organization with a regular con- 
 stitution as early as the beginning of the nine- 
 teenth century. 
 
 About the year 1812, in carrying on the war 
 with England, the Federal government had to 
 issue sixteen millions of treasury notes and to 
 borrow about one hundred and nine millions of 
 dollars. Moreover, there were in existence at 
 this time over 200 banks with a combined capital 
 of about $82,000,000. The severe fluctuations in 
 these securities presented unusual opportunities 
 for speculation. Upon this phenominal increase 
 of business, the New York stock brokers met one 
 day in 1817 and resolved to send a delegate over 
 to Philadelphia for the sole purpose of investi- 
 gating the Association in that city. In a short 
 time after his return a preliminary draft of a con- 
 stitution and by-laws, modeled upon that the 
 Board of Stock-brokers of Philadelphia, was 
 adopted, and the New York Stock Exchange be- 
 came an established fact. This preliminary con- 
 stitution and by-laws were revised three years 
 afterwards and it is usual to date the real history 
 
14 The Law of Commercial Exchanges. 
 
 of the Exchange from February 21, 1820. Its 
 subsequent history and phenomenal growth are 
 matters of history known to all. 
 
 Following the model of the New York Stock Ex- 
 change, and due largely to the tremendous in- 
 crease in security issues of corporations, both 
 public and private, during the last half century. 
 Stock Exchanges have been established in many 
 of the larger American cities. Thus we note the 
 Philadelphia Stock Exchange, the Company of 
 Associated Stock-brokers of San Francisco (an 
 incorporated association), the Chicago Stock Ex- 
 change, established in 1882, and many more. In 
 fact Stock Exchanges have been established in 
 Boston, St. Louis, Baltimore, Pittsburg, Cleve- 
 land, Cincinnati, Denver, Detroit, Kansas City, 
 New Orleans, Providence, Los Angeles, Indianap- 
 olis, Richmond, Washington, Montreal and 
 Toronto. 
 
 Turning from the American Stock Exchanges 
 to those known as Produce Exchanges, it is ex- 
 ceedingly difficult to determine the date of origin 
 of the first of these associations. Among the 
 first, however, of these to be established was the 
 Board of Trade of the City of Chicago. As early 
 as 1845 the grain business of Chicago had assumed 
 such proportion, due to the opening up of the vast 
 agricultural area to west of it and its advan- 
 tageous shipping facilities to the east over the 
 Great Lakes, that the establishment of a Grain 
 Exchange was generally agitated. It remained 
 
Obigin, Etc., of Commeecial Exchanges. 15 
 
 for the year 1848, however, to witness the birth of 
 this institution. For eleven years it existed as an 
 unincorporated body, but in the year 1859 it was 
 incorporated by special charter under the laws of 
 the State of Illinois, and still exists as a corporate 
 body under this charter. The New York Produce 
 Exchange, having existed as an unincorporated 
 association since 1850, was incorporated in 1862. 
 The Merchants' Exchange of St. Louis was estab- 
 lished in the year 1854, the New York Cotton 
 Exchange in 1870, and these were followed by 
 the Minneapolis Chamber of Commerce in 1881 
 and the New York Coffee Exchange in 1882. 
 As with the Stock Exchanges, so here we find 
 that Produce Exchanges have been established 
 in a great number of the larger and more 
 prosperous American cities. Among the more 
 prominent of these Exchanges are those at Du- 
 luth, Kansas City, Mo., Omaha, Milwaukee, New 
 Orleans, Winnipeg, Toledo, Detroit, Buffalo, 
 Baltimore and others. While the speculative 
 features found upon the more important of these 
 Exchanges, and particularly on the Board of 
 Trade of the City of Chicago, are not common to 
 all, yet in their fundamental status as markets 
 for agricultural produce all are alike. 
 
CHAPTER II. 
 
 LEGAL STATUS OF EXCHANGES. 
 
 Section 4. Definition and General Nature. 
 
 5. Organization. 
 
 6. Member's Power to Bind Exchanges. 
 
 7. Ownership of Exchange Property. 
 
 8. Power of Exchange to Sue and Be Sued. 
 
 9. Dissolution and Its Incidents. 
 
 Section 4. Definition and General Nature. 
 
 Various definitions of a commercial Exchange 
 are found in the cases and text-writers. The one 
 most commonly employed is that it is "An asso- 
 ciation of persons engaged in business of the same 
 general nature who for convenience have com- 
 bined to provide at the common expense and un- 
 der uniform' rules a common place for the trans- 
 action of their individual business." ^ In essence 
 it is but a market place provided and maintained 
 by a certain class of merchants in such com- 
 modities as grain, stocks, cotton, etc., where 
 buyers and sellers or their representatives may 
 meet and transact business under uniform rules 
 and regulations which have been found essential 
 for the safe and convenient trade in these com- 
 modities. One fundamental characteristic of 
 these institutions should be clearly kept in mind. 
 
 ^ 17 Oyc. 849, title " Exchanges," and cases cited in notes, 
 
 [16] 
 
Legal Status of Exchanges. 17 
 
 Unlike many other associations, similar at least 
 in form of organization, the Exchanges them- 
 selves transact no business and are in no wise 
 concerned with the business affairs of those per- 
 sons who compose their membership.^ It comes 
 into existence by the voluntary desires of those 
 who consider that such an organization is essen- 
 tial for the transaction of the particular business 
 in which they are engaged, and when it fails to 
 furnish such service it can be as easily dissolved. 
 It is found upon investigation that the commer- 
 cial exchanges in this country at least are in some 
 cases unincorporated and sometimes incorpo- 
 rated. Generally speaking, the Stock Exchanges 
 are unincorporated, whereas the Produce Ex- 
 changes are incorporated. There is, however, no 
 particular significance in this fact and probably 
 is due more largely than to any other influence to 
 the example set by the New York Stock Exchange 
 in the one field and the Chicago Board of Trade 
 in the other. If there was any particular advan- 
 tage of one form over the other, it would be diffi- 
 cult to understand why the New York Stock Ex- 
 change has remained unincorporated throughout 
 its existence while in the same city, the New York 
 Produce Exchange and likewise the New York 
 Cotton Exchange are corporate bodies. The same 
 
 'White V. Brownell, 3 Abb. Pr. N. S. 318; Belton v. Hatch, 
 109 N. T. 593, 17 H. E. 225, 4 Am. St. Eep. 495; People 
 ex rel. Lemmon v. Feitner, 167 N. Y. 1, 60 N. E. 265, 82 Am. 
 St. Bep. 698. 
 
 Com. Exc. — 2 
 
18 The Law of Commekcial Exchanges. 
 
 observation could be made in the case of the Chi- 
 cago Board of Trade and the Chicago Stock Ex- 
 change also located in the same city. Whether in- 
 corporated or unincorporated, however, the Ex- 
 changes present an " anomaly " in the law.^ It 
 is difficult to classify them. The authorities are 
 agreed that when unincorporated such Exchange 
 is no more or less than a " voluntary associa- 
 tion, ' ' ^ and even when incorporated its legal 
 nature is not changed if its charter grants to the 
 association full control over the admission and 
 disciplining of its members.'* In some respects 
 these exchanges or associations when unincorpo- 
 rated partake of the legal nature of a partnership 
 and when incorporated of a corporation, but, on 
 the other hand, are in many other particulars 
 radically different from both such organizations. 
 It may be well, therefore, to compare in greater 
 detail some of the more important characteristics 
 of the Exchanges both when unincorporated and 
 incorporated, with the partnership on the one 
 hand and the private corporation for profit on the 
 other. 
 
 Section 5. Organization. 
 
 The unincorporated Exchange comes into exist- 
 ence simply by virtue of an agreement between 
 
 'Dos Passes, Stock-brokers and Stock Exchanges (2d ed.), 
 vol. I, p. 22. . 
 
 * White V. Brownell, 4 Ahb. Pr. N. S. 162, 2 Daly (N. Y.) 
 329; Belton v. Hatch, 109 N. T. 593, 11 N. E. 225, 4 Am. 
 St. Eep. 495 ; Leech v. Harris, 2 Brewst. (Pa.) 5Yl. 
 
 " People ex rel. Eice v. Board of Trade, 80 111. 134. 
 
Legal Status of Exchanges. 19 
 
 those who compose it and when that agreement is 
 lawfully ended it ceases to exist. It is a volun- 
 tary organization not necessarily because it is a 
 matter of choice whether one will enter into mem- 
 bership or not, because this may be equally true 
 of membership in a corporation, but rather be- 
 cause its legal existence, so far as it has any legal 
 existence, rests upon the will of its members and 
 does not require the co-operation of any public 
 authority." As any two persons may contract to 
 carry on together any lawful project so may fifty 
 or five hundred. The legal right to associate to- 
 gether is bounded by no stricter limitations than 
 the right to contract. In the sense that both are 
 formed by the mutual consent of those who com- 
 pose it, the unincorporated Exchange or Associa- 
 tion and the ordinary partnership are alike. But, 
 the purposes f or.which each is formed prevent any 
 further comparison between them in this con- 
 nection. The pg,rtnership is organized to con- 
 duct some business venture, and those who join it 
 do so with a view of sharing any profits which 
 may be earned. The Exchange, however, con- 
 ducts no business and earns no profits. The rea- 
 son for its organization must be accounted for, 
 not by the expectation of the members to secure 
 profits, for the obvious reason that there are none, 
 but solely because of the peculiar rights and privi- 
 leges which come to those who are permitted to 
 enjoy its membership. 
 
 ° White V. Brownell, supra. 
 
20 The Law op Commeecial Exchanges. 
 
 Most of the older and more prominent Produce 
 Exchanges as we have seen are incorporated un- 
 der private charters.' There is nothing peculiar 
 in this fact, inasmuch as they were formed prior 
 to the enactment of general incorporation acts and 
 like many of our railroads and other early corpo- 
 rations still cling to such charters. At the 
 present time, however, a large number of the 
 States, have enacted general statutes for the in- 
 corporation of associations not organized for 
 profit and several Exchanges have been incorpo- 
 rated under such general statutes.* "When thus 
 organized ^t is difficult to see how such an Ex- 
 change would differ in any degree from one organ- 
 ized and existing under a special charter. 
 
 However incorporated, the authorities are clear 
 that such Exchange in no wise loses its funda- 
 mental characteristics as a voluntp,ry association.' 
 Its real nature is not changed nor are its purposes 
 transformed by the fact of its incorporation. 
 While it may have some advantages under one 
 form and not under the other, yet its essential 
 nature is unchanged. In fact, one prominent Ex- 
 
 ' Board of Trade of the City of Chicago incorporated by 
 special act of 1859; New York Produce Exchange prior to 
 1877 incorporated by special act of 1862, ch. 359, 1867, ch. 30 ; 
 see Dos Passoa (2d ed.), vol. I, p. 11. 
 
 ° Pittsburgh Stock Exchange ; Company of Associated 
 Stock-brokers (San Francisco). 
 
 "People ex rel. Eice v. Board of Trade, 80 111. 134; Board of 
 Trade v. Nelson, 162 HI. 431, 44 N. E. 743, 53 Am. St. 
 Eep. 312. 
 
LegxVl Status of Exchanges. 21 
 
 change, the Board of Trade of the City of Chicago, 
 existed for many years as an unincorporated hody 
 before its organization as a corpo]:ation. 
 
 Section 6. Member's Power to Bind Exchange. 
 
 Upon a familiar legal principle a partner can 
 bind the partnership by any act within the scope 
 of the partnership business." This, however, is 
 not true of the stockholder of a private corpora- 
 tion " for the reason that the law sees no prin- 
 ciple of agency between the corporation and its 
 stockholders. Accordingly, in the case of the 
 incorporated Exchange at least, it is difficult to 
 conceive how a member simply by virtue of his 
 membership could bind the association. More- 
 over, the law is clearly settled that the same prin- 
 ciple is true of the unincorporated exchange or 
 association.'^ The only persons authorized to 
 bind the association are the majority of its mem- 
 bers,'^ or its officers," or those especially dele- 
 gated to act for such association, and even in such 
 cases, the authorities seem to require that their 
 acts must be in strict conformity with the power 
 
 " See 30 Cyc. 47Y, title " Partnership." 
 
 " See 10 Cyc. 373, title " Corporation." 
 
 " Burt V. Lathrop, 52 Mich. 106, 17 N. W. 716 ; Ostrom v. 
 Greene, 161 N. Y. 353, 55 JST. E. 919; Skinner v. Dayton, 19 
 Johns. (N. T.) 513, 10 Am. Dec. 286. 
 
 " Manning v. Shoemaker, 7 Pa. Super. Ct. 375 ; Horton v. 
 Baptist Church in Chester, 34 Vt. 309; Penfield v. Skinner, 
 11 Vt. 296. 
 
 " See 4 Cyc. 309, note 50, title "Associations." 
 
22 The Law of Commercial Exchanges. 
 
 so delegated or the association will not be bound." 
 The liability of such association for the tortious 
 acts of its agents will be treated in a later chapter 
 of this treatise. 
 
 Section 7. Ownership of Exchange Property. 
 
 When the Exchange is incorporated, the corpo- 
 ration itself like any other corporate body owns 
 all property devoted to the business purposes of 
 the association. In fact, the charter of such ex- 
 change or association usually provides the precise 
 limit beyond which it cannot acquire or own such 
 property.^^ Where the association is unincorpo- 
 rated, however, a different and more difficult 
 situation is met. There can be no doubt that the 
 law allows property to be held not only by indi- 
 viduals separately, but by two or more individuals 
 as co-owners. This is the exact situation as to 
 the property owned by a partnership. All the 
 partners collectively own the property of such 
 partnership. The same principle is undoubtedly 
 true of the property of the unincorporated ex- 
 change or association. All members collectively 
 own such property of the exchange or associa- 
 tion." 
 
 '= Sullivan V. Campbell, 2 Hall (N. T.) 2Y1. 
 
 '* See section 1, Charter, Board of Trade of the City of 
 Chicago. . 
 
 '"White V. Brownell, 4 Abb. Pr. N. S. (N. T.) 162, 2 Daly 
 329; Clute v. Loveland, 68 Cal. 254, 9 Pac. Eep. 133; Fas- 
 sett V. Parish in Boylston, 19 Pick. (Mass.) 361; Leech v. 
 Harris, 2 Brewst. (Pa.) 5Y1. 
 
Legal Status of Exchanges. 23 
 
 In several very fundamental respects, however, 
 the rights of the individual partner in the prop- 
 erty of the partnership differ widely from the 
 rights of a member in the property of the exchange 
 . or association. In the first place, the rights of all 
 members of the latter are equal, which may not 
 be true in a partnership, and furthermore are sub- 
 ject to all conditions laid down in the constitution 
 or by-laws of such Exchange.^' Moreover, the 
 rights of such member are not divisible or pro- 
 prietary, and except in the case where such ex- 
 change or association is dissolved, the member is 
 not entitled to a share of such property.^* A 
 partner upon retiring from the partnership can 
 demand an accounting and distribution of such 
 property,^" and his share in all property of the 
 partnership is so far divisible that it can be seized 
 upon legal process "^ and can be sold and assigned 
 by its owner ^^ — all of which is not true of such 
 
 "Belton V. Hatcli, supra. 
 
 "Wlhite V. Brownell, supra; St. James Club, 13 Eng. 
 L. P. E. 592; Eassett v. Parish in Boylston, supra; Caldi- 
 cott V. Griffith, 8 Ex. BO'S, 1 0. L. Eep. Y15, 23 L. J. Exch. 54. 
 
 " See 30 Cyc. YlO, title " Partnership." 
 
 "•Staals V. Bristow, Y3 N. T. 264; Berry v. Kelly, 4 Rob. 
 (N. Y.) 106; Nixon v. Nash, 12 Ohio St. 64Y, 80 Am. Dec. 
 390; Place v. Sweetzer, 16 Ohio 142; Mayhew v. Herrick, 
 7 0. B. 229, 13 Jur. 10Y8, 18 L. J. 0. P. 1Y9, 62 E. 0. L. 229. 
 
 ""Eingo V. Wing, 49 Ark. 45Y, 5 S. W. Y8Y; Meridian Nat. 
 Bank v. Brandt, 51 Ind. 56; Barber v. Palmer, YO Hun 
 (N. Y.) 498, 24 N. Y. Supp. 451, 53 N. Y. St. Rep. Y53; Am. 
 Ine. Co. V. Coster, 3 Paige (N. Y.) 323; VaJidikes' Appeal, 
 5Y Pa. St. 9. 
 
24 The Law of Commercial Exchanges. 
 
 interest of a member in the property of an ex- 
 change or association. 
 
 While the above principles are no less true 
 when applied to real property as well as personal 
 property of such unincorporated exchange or as- 
 sociation, yet in practice such principles would be 
 so unworkable that various methods have been 
 devised to obviate the difficulty. It is obvious 
 that since all property is in a legal sense owned 
 by the members collectively, all would have to join 
 in transferring it to another. This has been 
 avoided by creating a board of trustees to hold 
 such property in trust for the association and in 
 some cases by the organization of a separate cor- 
 poration for this purpose.^^ This course has not 
 been necessary in some few jurisdictions where 
 by statutory changes in the common-law principle 
 such associations are now permitted to acquire 
 and transfer real property in the name of the 
 association.^* 
 
 Section 8. Power of Exchange to Sue and Be 
 Sued. 
 
 The question of the power of the Exchanges to 
 sue and be sued presents many features similar 
 in principle to that discussed in the preceding 
 paragraph. Treating first of the incorporated 
 Exchange, there can be no doubt that like all cor- 
 
 ^ See Dos Passos, Stock-brokers and State Exchanges (2d 
 ed.), pp. 35 et seq. 
 " 4 Cyc. 306, title "Associations,"" pp. 35 et seq. 
 
Legal Status of Exchakges. 25 
 
 porate bodies such Exchange may sue and in turn 
 be sued in its corporate name.^^ This power 
 arises from the fact that in the eyes of the law 
 such corporation is a distinct entity absolutely 
 apart from the natural persons who compose it. 
 The power is but another incident of that legal 
 status whereby such incorporated exchange or 
 association may own and convey property as a 
 corporate body. Moreover, such power is not 
 left to inference from analogy to the ordinary 
 private corporation for profit, but commonly is 
 expressly provided for in the charters of such in- 
 corporated Exchanges. 
 
 Where such Exchange is unincorporated, a 
 somewhat different situation is presented. At 
 common law and apart from statutory changes, it 
 is firmly established both by the authorities and 
 text- writers that such exchange or association like 
 any partnership must sue or be sued in the name 
 of all the members who compose it.^° This arises 
 from the fact that the exchange or association as 
 such has no legal existence. 
 • Here again, however, statutes have been en- 
 acted in many States in this country to meet the 
 practical diflficulty thus presented whenever it is 
 necessary for such an association with a large and 
 often scattered membership to sue or be sued at 
 
 " See Charters of various Exchanges ; Fawcett v. Charles, 
 13 Wend. (N. Y.) 473 ; McHenry v. Board of Trade, 131 111. 
 App. 275. 
 
 '^ See 4 Cyc. 312, title "Associations," notes 66 and 67. 
 
26 The Law of Commercial Exchanges. 
 
 law in the courts. It will not be necessary to 
 tabulate the particular statutory changes made 
 by the various States in the common-law rule." 
 In general, these statutes provide that where such 
 an association consists of a certain number of 
 members, in New York for illustration, the re- 
 quirement is seven members,^^ suit can be brought 
 either by or against the president or other officers 
 of such association. In some States, however, 
 statutes have gone farther and allowed suits to be- 
 brought by or against the association as" such.^^ 
 In Illinois, however, the common-law rule still pre- 
 vails.^" However much these various statutes 
 may differ in minor particulars, the practical 
 effect of all has been to place the unincorporated 
 associations in an equally favorable position so 
 far as the right to sue or be sued is concerned as 
 the incorporated association, and to this extent 
 has largely contributed not only to an increased 
 organization of such bodies, but to check the 
 movement towards their establishment in the cor- 
 porate form. 
 
 The above principle is only true when such un- 
 incorporated associations sue or are sued in a 
 court of law. The rule has long been otherwise 
 
 " See Dos Passes (2d ed.), vol. I, pp. 40-56; also 4 Cyc. 313. 
 
 "^ Section 1919 of New York Code Civil Procedure. 
 
 '^ Colorado Code, sec. 14 ; Minn. General Statutes 18Y8, eh. 
 66, sec. 42; Gale v. Townsend, 45 Minn. 35 Y, 4Y N. "W. 1064; 
 Ackermann v. Ackermann, 60 S. W. (Texas) 366. 
 
 =° O'Connell v. Lamb, 63 111. App. 652. 
 
Legal Status of Exchanges. 27 
 
 in a court of equity." Here the authorities lay 
 down various exceptions to the general rule that 
 such suits must be brought by or against all the 
 members of such association individually. Un- 
 der these exceptions, one or more members 
 thereof is adequate either as plaintiff or defend- 
 ant, first, where the question is one of common or 
 general interest, and one or more of the members 
 may conveniently sue or defend for the benefit of 
 the entire body; second, where the particular 
 member or members can be fairly seen to repre- 
 sent the right and interest of the aggregate mem- 
 bership; and, third, where due to the large and 
 scattered number of the membership, it is prac- 
 tically impossible for such association either to 
 sue or be sued except in the name of one or at 
 least a few of its members.^^ 
 
 In those jurisdictions where a suit at law is 
 permitted against an unincorporated association 
 in the name of the president or some other officer, 
 such judgment obtained must be satisfied out of 
 the joint property owned by the association. If 
 such property is not sufficient to satisfy the judg- 
 ment, then the judgment creditor may reach the 
 assets of the individual members and the judg- 
 ment obtained against the president or other offi- 
 cers is prima facie evidence in the plaintiff's favor 
 
 " See 4 Cyc. 312, note 68, title "Associations." 
 
 "Story's Equity Pleading, 9Y; Fitzpatriek v. Rutter, 160 
 
 111. 282, 43. N. E. 392; Guilfoil v. Arthur, 158 HI. 600, 
 
 41 N. E. 1009. 
 
28 The Law op Commercial Exchanges. 
 
 in the second case.^^ The individual member, 
 however, when sued is not absolutely concluded by 
 such judgment against the president or other offi- 
 cer, but may resist in the second suit against him 
 by showing that the judgment is in excess of the 
 legal liability of such individual members for the 
 debts of the association.^* It has been held, more- 
 over, that even where statutes permit such as- 
 sociation to be sued in the name of its officers, the 
 creditor is not inhibited from bringing his action 
 against such individual member or members in 
 the first instance.^^ 
 
 In several cases, following strictly the analogy 
 of the unincorporated association and the part- 
 nership, the courts have held that such association 
 could neither sue a member nor be sued by a mem- 
 Ijgj. 38 There is some authority, however, clearly 
 opposed to these cases." Statutes in various ju- 
 risdictions have changed this situation so that 
 
 " See Dos Passes, Stock-brokers and Stock Exchanges (2d 
 ed.), vol. I, pp. 52-53, and cases cited in foot-notes. 
 
 °*Dos Passos, etc. (2d ed.), p. 53, and cases in foot-note 
 thereto. 
 
 "' Schwartz v. "Weckler, 29 Abb. Pr. N. 0. 332 ; Hudson v. 
 Spaulding, 6 N. T. Supp. 87Y, 53 Hun 638, 25 N. Y. St. Eep. 
 256; Mokelumne & Campo, etc. v. Knox (Cal.), 67 Oal. 20, 7 
 Pac. 415 ; Davidson v. Knox, 67 Cal. 143, 7 Pac. 413. 
 
 " See 4 Cyc. 314, title "Associations," and cases cited in 
 note 77. 
 
 " Caldicott V. Griffith, 8 Exch. 898, 23 L. J. Exch. 54, 22 
 Eng. L. J. Eq. 527, 1 0. L. E. 716. 
 
Legal Status of Exchanges. 29 
 
 such association can freely sue a member or be 
 sued in turn by such member.'^ 
 
 Section 9. Dissolution and Its Incidents. 
 
 While the authorities are somewhat numerous 
 dealing with the dissolution of unincorporated 
 associations generally, these questions apparently 
 have seldom arisen directly in the case of the 
 incorporated exchange. However, there can be 
 no doubt that here as throughout the subject, the 
 courts would follow the legal principles laid down 
 for the dissolution of the ordinary unincorpo- 
 rated association. In the first place, the law is 
 clear that unlike an ordinary partnership, the re- 
 tirement of a member of an association either 
 voluntarily or involuntarily does not ipso facto 
 dissolve such association.^' 
 
 The cases lay down various grounds for the dis- 
 solution of such associations. In the first place, 
 where the constitution provides a method of 
 dissolution, the courts will hold such associa- 
 tion to the method therein prescribed." In one 
 case ^^ where the constitution provided that such 
 
 " See 4 Oyc. 315, title "Associations," note Y8 thereto. 
 
 '° Burke v. Eoper, Y9 Ala. 138; Thomas v. Ellmaker, 1 Pars. 
 Cas. (Pa.) 98; Fischer v. Kaab, 57 How. Pr. 8Y, 94; Tenny v. 
 New England Protective Ass'n, 37 Vt. 64; White v. Brown- 
 ell, 3 Abb. Pr. N. S. (N. Y.) 318. 
 
 " Fischer v. Raab, supra; Lafond v. Deems, 81 N. Y. 507, 
 8 Abb. N. 0. 344; St. Mary's Benevolent Ass'n v. Lynch, 64 
 N. H. 213, 9 Atl. 98. 
 
 " McFadden v. Murphy, 149 Mass. 341, 21 N. E. 868. 
 
30 The Law of Commeecial Exchanges. 
 
 association could not be dissolved so long as 
 fifteen members favored continuing, tKe court held 
 that a majority of the members could not by vote 
 dissolve such association against the desire of 
 said protesting fifteen members. Moreover, a ma- 
 jority of the members can not dissolve such asso- 
 ciation against the wishes of the minority.*^ It 
 has been held, however, that such association may 
 be dissolved by the unanimous consent of all mem- 
 bers *^ and under some circumstances by long con- 
 tinued non-user. 
 
 The above cases illustrate the methods of dis- 
 solution by the voluntary act of the association 
 or its members. There are, however, several 
 situations where a Court of Equity will, at the 
 request of the members, decree the dissolution of 
 such association. Such a situation arises where, 
 through internal dissension, it has become im- 
 possible, to maintain the objects for which such 
 association was formed.** This will not be de- 
 
 " Altmann v. Benz, 27 N. J. Eq. 331 ; Schiller Coirnnandery 
 V. Jaennichen, 116 Mich. 129, Y4 N. "W. 458; McFadden v. 
 Murphy, 149 Mass. 341, 21 N. E. 868. 
 
 ■"Burke V. Koper, Y9 Ala. 138; Von Schmidt v. Huntington, 
 1 Cal. 55; Brown v. Stoerkel, 74 Mich. 269, 41 N. W. 921, 
 3 L. E. A. 430; Butterfield v. Beardsley, 28 Mich. 412; 
 Duke V. Fuller, 9 N. H. 536, 32 Am. Dec. 392; Stemmer- 
 mann v. Lilienthal, 54 S. C. 440, 32 S. E. 535; Brown v. 
 Dale (England), 9 Ch. Div. 78, 27 Wkly. Rep. 149. 
 
 " Lafond v. Deems, 1 Abb. N. 0. 318, 52 How. Pr. (N. T.) 
 41; but see same case 81 N. T. 507, 8 Abb. IST. C. 344; 
 Eury V. Merrill, 42 111. App. 193; Gorman v. Eussell, 14 
 Cal. 531. 
 
Legal Status of Exchanges. 31 
 
 creed, however, for slight cause, but solely in cases 
 where it is shown clearly to the court that the con- 
 tinuance of the association in view of such in- 
 ternal dissension is neither practicable nor desir- 
 able.*= 
 
 Passing from the causes and methods of dis- 
 solving such associations to the effect of the same 
 upon the members, the courts are clear that the 
 liabilities of such associations to creditors must 
 first be met and any surplus of assets shall be 
 divided proportionately among all members at 
 the time of dissoltuion/® Confining the applica- 
 tion of such principles to the unincorporated ex- 
 changes it would follow that every holder of a 
 membership or " seat " in good standing would 
 share equally in such surplus assets. 
 
 Where the exchange or association is incor- 
 porated, no different legal principles are applied 
 upon its dissolution than when it is unincor- 
 porated.^' The authorities seem' to make no dis- 
 tinction in stating the causes for which such dis- 
 solution will be decreed or allowed between an 
 exchange or association in one form or the other.*' 
 Moreover, the cases indicate that the same method 
 
 "Fischer v. Raab, supra; Burke v. Eoper, supra; Butter- 
 field V. Beardsley, supra. 
 
 " See 4 Cyc. 316, title "Associations ; " Dos Passes, Stock- 
 brokers and Stock Exchanges (2d ed.), vol. I, p. 56. 
 
 " See 17 Cyc. 853, title " Exchanges." 
 
 " See lY Cyc. 853, title " Exchanges," and cases in foot- 
 notes thereto. 
 
32 The Law of Commebcial Exchanges. 
 
 of distributing the assets of sucli' exchange or 
 association will be made when it is a corporate 
 body as when unincorporated.*'' These cases, 
 moreover, seem sound upon principle inasmuch as 
 the two types, while somewhat different in form 
 of organization, are yet fundamentally and sub- 
 stantially identical. 
 
 "People V. Chicago Live Stock Exchange, lYO 111. 556, 
 48 N. E. 1062, 62 Am. St. Eep. 404, 39 L. E. A. 373; Hitch v. 
 Hawley, 132 N. Y. 212. 30 N. E. 401. 
 
CHAPTEE m. 
 
 MEMBEESHIP IN EXCHANGES AND ITS 
 INCIDENTS. 
 
 Section 10. General Nature of Exchange Memberships. 
 
 11. The Privilege of Transacting Business on the 
 
 Floor of the Exchange. 
 
 12. Termination of Membership. 
 
 13. Definition of " License." 
 
 14. Is Membership a " Property Eight ? " 
 
 15. Disposition of Membership under Various Cir- 
 
 cumstances. 
 
 (a) In bankruptcy proceedings. 
 
 (b) Proceedings by attachment or execution. 
 
 (c) Is a membership subject to taxation? 
 
 (d) Membership subject to resulting trust. 
 
 Section 10. General Nature of Exchange Member- 
 ships. 
 
 No problem in this entire subject has vexed the 
 courts more than to determine accurately the ex- 
 act legal nature of a membership or " seat," as 
 it is popularly known, in our commercial Ex- 
 changes. The problem, moreover, is of the highest 
 practical importance, inasmuch as a correct de- 
 termination of the legal status of a membership 
 affects not only the rights of the owner as against 
 the Exchange, but also the rights of creditors out- 
 side of such Exchange to realize on it as a valu- 
 able asset of the owner in the event of the latter 's 
 Com. Exc— 3 [33] 
 
34 The Law of Commebcial Exchanges. 
 
 insolvency or failure to satisfy a judgment ob- 
 tained against him and even the right of the State 
 itself to subject the same to taxation. The ques- 
 tion presented to the courts in the several score 
 or more of cases which have come before them 
 was, whether such membership was property in 
 the legal acceptance of that term or simply a 
 license. In several of the cases '■ the courts have 
 designated it to be a " privilege," but they ob- 
 viously had in mind no more or less than is con- 
 veyed by the term " license," since to hold other- 
 wise would indicate that a " privilege " in this 
 connection was a distinct legal entity distinguish- 
 able both from a property right and a license, 
 which is not a fact. One has certain privileges 
 by virtue of a contract or by possessing some 
 property or a license, but the privilege itself is 
 not, in a legal sense, a distinct status or entity. 
 
 Satisfactory progress in the solution of this 
 problem can only be made by first defining our 
 terms. Accordingly, at the outset, let us inquire 
 what is a membership in an Exchange and what 
 is the legal signification of the terms " property " 
 on the one hand and " license " on the other. 
 Upon careful analysis, we find that the funda- 
 mental idea associated with such membership is 
 
 ' See Paneoast v. Gowen, 93 Pa. St. 66, 71 ; Lowenberg v. 
 Greenebaum, 99 Cal. 162, 165, 33 Pac. Y94, 21 L. E. A. 399, 
 37 Am. St. Bep. 42 ; In re Sutherland, 6 Bissel 526, 529, Fed. 
 Oas. No. 13,637; Barclay v. Smith, 107 111. 349, 353, 47 Am. 
 Rep. 437, 16 Cent. Law J. 437. 
 
Membbeship in Exchanges — Incidents. 35 
 
 the perspnal, individual right which the holder ob- 
 tains to come on the premises of the Exchange and 
 exercise his calling as a broker. In effect, all that 
 such niembership is, and in reality all that an ap- 
 plicant for admission conceives that he is getting, 
 is that right or privilege of transacting business 
 with fellow members in his own behalf or in behalf 
 of his customers. It cannot be denied that there 
 are some incidental advantages which accrue to 
 members, such as the right of receiving his pro 
 rata share of the physical property of the Ex- 
 change in case of its dissolution. This, however, 
 is but a minor incident of the relation arising from 
 membership in such Exchange. Iii fact, this latter 
 right exists by virtue of membership in any asso- 
 ciation which owns property. On the other hand, 
 the peculiar rights and privileges resulting from 
 membership in an Exchange would be present 
 even if such Exchange did not own one dollar's 
 worth of property. 
 
 The further fact should be noted, that the privi- 
 lege or right of exercising such business calling 
 on the Exchange floor accrues to the member not 
 by natural right, but by virtue of a contract be- 
 tween the Exchange and the member. Where the 
 Exchange is incoporated, such contract is made 
 with the corporation itself; where it is unincor- 
 porated, in legal theory such member contracts 
 either with the existing membership collectively 
 or with each existing member individually. The 
 existence of such contract is the basis of recipro- 
 
36 The Law op Commeecial Exchanges. 
 
 cal rights. On the one side, the member agrees, in 
 consideration of the permission to enter into mem- 
 bership, to abide by all the rules or by-laws of the 
 Exchange, including the payment of all dues or 
 fees which are vahdly assessed against him, and 
 on the other side, the Exchange agrees to permit 
 such member all the privileges of the Exchange 
 so long as he obeys its rules, by-laws and regula- 
 tions. Of course, inasmuch as the entire right of 
 membership rests upon the contract above sug- 
 gested, the member may, by the rules, by-laws and 
 regulations, which are a part of such contract of 
 membership, obtain as many additional rights and 
 privileges as are provided therein. When the 
 courts, however, are considering the exact legal 
 nature of such membership, they mean to convey 
 by the term a thing which carries with it generally 
 three rights or privileges: (1) The personal right 
 of the owner to come upon the premises of such 
 Exchange and transact business; (2) The right of 
 transferring, or having transferred on the books 
 of the Exchange, such membership, under certain 
 conditions, to some non-member, and (3) The 
 right of the legal representative, in ease of the 
 owner's death or insolvency, to receive the pro- 
 coed's from the sale of such membership remaining 
 after payment of all the creditors on the Exchange. 
 It cannot be denied that some Exchanges might 
 be found where, bj^ the rules or by-laws, the mem- 
 bership did not carry with it these three rights 
 or privileges, or others where a member gained 
 
Membebship IK Exchanges — Incidents. 37 
 
 some additional rights. But yet these admittedly 
 are the fundamental and important advantages 
 thereby gained. When the courts in the actual 
 cases before them have endeavored to place such 
 membership either in the class of rights recog- 
 nized as " property " or in the class of those 
 legally known as* " license," they have started 
 with these three elements as facts. This mental 
 process is not peculiar to this investigation alone, 
 but is everywhere pursued by the courts in de- 
 termining kindred cases. For instance, suppose 
 a statute provided that a tax should be levied on 
 " negotiable instruments," and a person subjected 
 to the tax objected on the ground that the par- 
 ticular obligation which he owned and upon which 
 he was taxed was not in fact a " negotiable in- 
 strument." Can any one doubt that the pro- 
 cedure of the court would be, first, to find out just 
 what the instrument before it was, and what rights 
 it would convey if enforced, and, second, having 
 determined these preliminary points, to deter- 
 mine whether an instrument with such attendant 
 characteristics came within the legal tests uni- 
 versally recognized as descriptive of the term 
 ' ' negotiable instruments ? ' ' Likewise, in the in- 
 vestigation before us, the courts have in all cases 
 which have come before them first accepted as 
 facts the attributes of a membership in an Ex- 
 change as above set forth and have then proceeded 
 to determine whether the thing possessing such 
 characteristics might be brought within the classi- 
 
38 The Law of Commekcial Exchanges. 
 
 fication of legal rights known as " property " or 
 within the classification of rights known as 
 " license." 
 
 Section 11. The Privilege of Transacting Busi- 
 ness on the Floor of the Exchange. 
 
 Some further consideration should be given to 
 the above-designated three elements which ordi- 
 narily make up the thing which we term a member- 
 ship in an Exchange. In the first place, the first 
 and foremost benefit accruing to a holder of such 
 membership — the privilege of coming on the Ex- 
 change floor and transacting business — is fun- 
 damentally different from a similar relationship 
 which persons may have in other associations or 
 organizations. A person becomes a member of a 
 private corporation for profit in order to partake 
 of any profits earned by such corporation. An 
 Exchange, on the other hand, even if incorporated, 
 transacts no business and earns no business profits 
 as such, to which any member becomes entitled by 
 virtue of such membership. Moreover, it is un- 
 like the relation which one partner bears to his 
 firm, for substantially the same reasons. And 
 finally, it is totally different from a membership 
 in a social, fraternal or philanthropic association 
 for the reason that while in the latter such mem- 
 bership is sought for the intangible benefits of a 
 purely personal character, which come to those 
 in the association, the membership on the Ex- 
 change is a means of making a livelihood, and 
 
Membekship in Exchanges — Incidents. 39 
 
 practically the only way, under modern business 
 conditions, whereby one can pursue to advantage 
 that particular calling. A membership in our 
 commercial Exchanges is to the broker what a 
 license is to the laAvyer, the physician, and the 
 liquor dealer, and the union card — in some com- 
 munities — to the laborer; namely, a necessary 
 possession and pre-requisite to the efficient and 
 satisfactory transaction of a particular business. 
 
 Section 12. Termination of Membership. 
 
 One further feature of such membership in our 
 Exchanges must be noted. Whatever its real legal 
 nature is, the courts are everywhere agreed that 
 it is at least such a legal right as the law will pro- 
 tect. The courts are a unit in holding that the 
 owner cannot be arbitrarily deprived of it by the 
 Exchange.^ This obviously must be true, because 
 otherwise the question, whether a rule or by-law 
 of such Exchange is valid or invalid, would never 
 get before the courts. A member objecting to 
 expulsion for violating a rule which he claimed 
 was invalid would be met at the very threshold 
 with the statement of the court that the decree of 
 the Exchange was absolutely final. But in reality, 
 
 ' See Evans v. Philadelpliia Club, 50 Pa. St. 107; State ex 
 rel. Graham v. Chamber of Commerce, 20 Wis. 68; Nelson 
 V. Board of Trade, 58 111. App. 399; Farmer v. Board of 
 Trade, Y8 Mo. App. 557 ; and particularly People ex rel. Page 
 V. Board of Trade, 45 111. 112, at page 114. Also see chapter 
 V herein and cases there cited. 
 
40 The Law of Commeecial, Exchanges. 
 
 even in jurisdictions wliere sucli membership has 
 been decided to be merely a license or " privi- 
 lege," the courts are in accord with the above 
 proposition.' Why the courts have taken this 
 position it will be more easy to ascertain as we 
 progress,* but the fact cannot be doubted that, 
 whatever its legal nature, the holder of such mem- 
 bership will be protected by the courts in the en- 
 joyment of the rights and privileges which go with 
 it from any unreasonable or arbitrary attack by 
 the Exchange. 
 
 Section 13. Definition of " License." 
 
 Our inquiry then is to determine whether a thing 
 possessing the characteristics above noted is prop- 
 erty or a license. Here again we must first under- 
 stand clearly what is meant by the terms ' ' prop- 
 erty " or " license " before one can decide in 
 which classification it properly belongs or, more 
 accurately, whether it belongs in either one of 
 them. For convenience, let us start with the 
 latter term. This term ' ' license ' ' is used in many 
 situations in life. Thus we have liquor licenses, 
 theatre licenses, a license to hunt on another's 
 land, a license to come on the property of the 
 licensor, either by the express permission of the 
 latter or by necessary implication, to perform 
 some service. In fact, there are about as many 
 different places in which the term may be used as 
 
 ' People ex rel. Page v. Board of Trade, 45 111. 112, 114. 
 ' See section 21, chapter IV. 
 
Membership in Exchanges — iNcioEiirTs. 41 
 
 there are occasions for the use of it. In the law 
 of real property, a license may carry with it cer- 
 tain rights which would not accompany a license 
 granted by the State, but the term has a funda- 
 mental legal status wherever or however used. It 
 is in this fundamental sense that the term will be 
 used in this discussion. 
 
 The courts are everywhere agreed that the term 
 " license " embraces two ideas or elements, first, 
 a right or authority granted by some competent 
 authority to another to do an act or series of acts 
 which without such license would be illegal,^ and 
 second, the permission or authority granted con- 
 fers no permanent estate or interest in the thing 
 upon which such license operates, but is revocable 
 at any time or for any reason by the grantor." 
 These elements, it is submitted, make up all the 
 rights incident to a license. In various cases we 
 find the courts speaking of licenses being irrevo- 
 cable under certain conditions, as when they are 
 " executed " or " the licensee has expended 
 money upon the basis of such license."'' On 
 principle, however, those cases can only be sup- 
 ported on the theory that the grantor intended to 
 transfer more than a simple license, and in fact 
 created an easement which, when followed by ex- 
 pensive and substantial improvements by the 
 
 "See 25 Oyc 597, and other definitions there referred to. 
 See also vol. 5, p. 4133, " Words and Phrases." 
 ° See authorities in 25 Cya 645, note 44. 
 ' See cases in 25 Cyc. 646, note 46. 
 
42 The Law of Commeecial Exchanges. 
 
 grantee upon the faith of the agreement, will be 
 regarded in equity as sufficient part performance 
 to take the case out of the" Statute of Frauds.^ 
 Everywhere in Hfe, and not in -the field of law 
 alone, in using a particular word or term, we must 
 accept some standard or authority which decides 
 what that word or term means. In ordinary 
 affairs such a standard is supplied by the diction- 
 aries. In law, this standard is supplied by the de- 
 cisions of "the courts. Accordingly, while one may 
 have the abstract, constitutional right to use the 
 term " license " as denoting something entirely 
 different from that recognized by the weight of 
 authority, yet it is submitted that, as a practical 
 question, we cannot speak of a license in any other 
 sense than that clearly recognized by the courts. 
 If this be a sound principle, then a license in law 
 embraces the two elements above set forth and 
 none other. 
 
 A familiar example of a license is the theatre 
 ticket.® The question has long been settled, that 
 the holder of such ticket obtains no vested interest 
 in the seat designated upon such ticket, and more- 
 over, that the proprietor of the theatre has the 
 right to revoke the ticket, refuse the holder ad- 
 mission, and even eject him, at least until the 
 holder has taken his seat.® It does not fol- 
 low, however, that the holder of such ticket is 
 without redress. The courts allow him his legal 
 
 ' See cases in 25 Oyc. 64Y, note 4Y. 
 ° See discussion in 38 Oyc. 264-266. 
 
Membership in Exchanges — Incidents. 43 
 
 remedy against the theatre proprietor for the re- 
 fusal to honor the ticket upon its presentation,^ 
 but the law is clearly settled, that no power exists, 
 either in a court of law or equity, to compel the 
 proprietor to admit such ticket holder when the 
 theatre owner has seen fit to revoke the ticket. 
 
 Whatever else it may be, it would seem that a 
 membership in our commercial Enchanges has 
 little, if anything, in common with the " thing " 
 legally denoted by the term " license." In two 
 fundamental aspects the two are radically dif- 
 ferent. First, we have seen that one of the basic 
 characteristics of a license in law is, that it is rev- 
 ocable at any time and for any reason by the one 
 who has granted it. On the other hand, we have 
 seen that no jurisdiction has ever held that a mem- 
 bership in one of our Exchanges is revocable at 
 will by such Exchange; on the contrary, all hold 
 that such right, in order to exist, must either be 
 expressed in, or reasonably implied from, the rules 
 or by-laws of the Exchange, and even then can- 
 not be exercised at any time or for any reason 
 which satisfies, the Exchange alone." In this 
 fundamental respect, therefore, a membership in 
 an Exchange would seem to be in direct antithesis 
 to the attributes of the ordinary license. 
 
 Such membership would seem further at var- 
 iance with the legal conception of a license with 
 respect to the power which the holder has, subject, 
 
 '° See Evans v. Pliiladelphia Club, supra; People ex rel. 
 Page V. Board of Trade, supra. 
 
44 The Law op Commeecial Exchanges. 
 
 of course, to the rules or by-laws of the Exchange, 
 of transferring it to another. While som^ doubt 
 may arise as to whether the right to transfer some- 
 thing only when the Exchange consents thereto is 
 in reality a right to transfer at all, yet the fact 
 remains, that a member who enters such Exchange 
 through the transfer to him of an unimpaired 
 membership derives the rights and privileges of 
 membership directly through his transferror. 
 This is demonstrated by the fact that in some of 
 the Exchanges the rules provide two methods 
 whereby one may gain a membership or seat 
 therein : first, by presenting an unimpaired certifi- 
 cate which has been transferred to him by a mem- 
 ber in good standing, or second, by the payment of 
 an initiation fee which is usually largely in excess 
 of the prevailing prices for such membership. In 
 the rules of the Board of Trade of the city of 
 Chicago, it is provided that a person may become 
 a member either by the presentation of such un- 
 impaired certificate of membership transferred to 
 him by a member in good standing or by the pay- 
 ment of an initiation fee of $10,000, with the ad- 
 ditional qiialification in either case, of course, that 
 such candidate must receive the approval of the 
 Board of Directors. It is obvious, therefore, that 
 when a person does secure a membership by rea- 
 son of the transfer to him of the membership of 
 another, no new membership is created, but the 
 candidate simply " steps into the shoes " of the 
 outgoing member. 
 
Membeeship in Exchanges — iKrciDEiirTs. 45 
 
 Such a state of affairs is never true in the 
 case of a license. When A secures a license to 
 Ijunt or fish on the premises of B, the former 
 gets no such right as is . capable of transfer 
 to another." One may transfer interests or 
 estates to another, but never privileges or licenses. 
 Of course, if B in the above hypothetical case was 
 only disposed to give this permission to one per- 
 son, and C, for a satisfactory consideration, in- 
 duced A to request B to allow him (C) to hunt or 
 fish in the place of A, would succeed to the 
 rights or privileges of A, but he would not derive 
 them through A but directly from B, the licensor. 
 Accordingly, in these two fundamental aspects, it 
 would seem that a membership is radically dif- 
 ferent from the right which passes under the legal 
 description of " license." 
 
 Section 14. Is Membership a " Property Right? " 
 If it is not proper to classify such membership 
 as a Ucense, can it be properly considered prop- 
 erty? Here again let us inquire what we mean 
 ordinarily by the term ' ' property. ' ' Considered 
 from the purely theoretical view point of juris- 
 prudence, there are a half dozen or more different 
 senses in which this term has been used." An 
 examination of the adjudicated cases, however, 
 reveals two principal senses in which the term is 
 
 " See 25 Cyc. 644. 
 
 " Salmond on Jurisprudence, sec. 163 ; Austin" on Juris- 
 prudence, 817, 
 
46 The Law of Commebcial Exchanges. 
 
 used, first, in the broader and more subjective 
 sense as designating the peculiar rights accruing 
 to the owner of definite things or objects, and 
 second, in the narrower sense of denoting the sub- 
 ject or thing itself which is owned or in relation to 
 which the above right exists.^^ It is obviously far 
 beyond the design or scope of such a treatise as 
 this to discuss in detail which is the proper signifi- 
 cation of this term, and moreover, such a deter- 
 mination is in no way necessary or helpful to solve 
 the practical problem before us. For our purpose 
 it will be sufficient to use the term in the latter 
 sense alone. It should be stated, moreover, that 
 the latter is the sense in which the term is most 
 commonly understood. When a layman speaks of 
 his property, he has reference to a certain piece 
 of land or a definite chattel, and not to that right 
 or bond which attaches such land or chattel to 
 him in the eyes of the law. 
 
 It does not follow, however, that the law, in de- 
 fining the term " property " as denoting a par- 
 ticular • object or thing, necessarily limits it to 
 objects which are tangible and which can be seen 
 and touched. This idea was firmly fixed in the 
 minds of lawyers during the formative period of 
 the law, but in the course of time and with the de- 
 velopment of legal intelligence, the law has gone 
 far beyond the original conception, and sees in 
 many things which may not be visible or tangible 
 
 ^ See discussion in 32 C^c. 648 ; also 6 " Words and 
 Phrases" 5699. 
 
Mbmbeeship in Exchanges — Incidents. 47 
 
 as perfect a property as though they were dis- 
 cernible by the ordinary human senses. The fol- 
 lowing passage from a learned legal writer, al- 
 though dealing ~with a problem in no way similar 
 to our own, brings out most clearly that mediaeval 
 state of mind which could not conceive of any- 
 thing as existing unless it was perceptible by the 
 ordinary human senses. He says : 
 
 " The true explanation of the foregoing rules 
 will, I believe, be found in no consideration of 
 public policy, no wide social needs, but in what I 
 shall venture to describe as a mental incapacity or 
 inability to conceive that mere rights can be trans- 
 ferred or pass from person to person. Things 
 may be transferred ; that is obvious ; the transfer 
 is visible to the eye; but how rights? You have 
 not your rights in your hand or your pocket, nor 
 can you put them into the hand of another, nor 
 hand tbem unto him and bid him walk about within 
 their metes and bounds." ^* 
 
 The law is not at the present time, nor has it 
 been for several centuries, in the state described 
 by the learned writer. It is now no longer fatal 
 to the classification of a thing as property that it 
 is invisible or intangible. In fact, in our modern 
 life, a large part of the things which constitute 
 the wealth of a country and to possess which men 
 exert a great amount of energy and are willing to 
 expend large sums of money, are things which can- 
 
 " The Mystery of Seisin, F. W. Maitland, 2 Law Quarterly 
 Keview 481, 489. 
 
48 The Law of Commebcjal Exchanges. 
 
 not be seen or touched or physically transferred. 
 A franchise to operate a railroad, an easement 
 over the land of another, the good will of a pros- 
 perous business, a patent right, are familiar ex- 
 amples, among innumerable others, of property 
 within that use of this term which designates the 
 thing or object which may be owned as " prop- 
 erty," although the exact substance composing 
 them is invisible and intangible. This modern 
 conception of the term is stated by a learned 
 American judge as follows : 
 
 " Property, even as distinguished from prop- 
 erty in intellectual production, is not, in its 
 modern sense, confined to that which may be 
 touched by the hand, or seen by the eye. What is 
 called tangible property has come to be, in most 
 great enterprises, but the embodiment, physically, 
 of the underlying life — a life that, in its con- 
 tribution to success, is immesurably more effective 
 than the mere physical embodiment. Such, for 
 example, are properties built upon franchises, on 
 grants of government, on good will, on trade 
 names and the like. ' ' ^^ 
 
 Thus, the fact of its intangibility, that it cannot 
 be seen or touched by the ordinary human senses, 
 no more conclusively negatives the fact that such 
 membership is property than do the same char- 
 acteristics denote that the good will of a business 
 
 "Judge Grosseup in National Telegraph. News Co. v. 
 Western Union, 119 Ted. 2»4, 299, 60 L. E. A. 865, 56 C. C. 
 A. 198. 
 
Membekship in Exchanges — Incidents. 49 
 
 or a patent right is not property. A further ob- 
 jection, however, is made in several of the cases " 
 to the classification of such membership as prop- 
 erty, on the ground that the owner has not an 
 absolute or unlimited right to transfer it. It is 
 admittedly true that the rules or by-laws of all our 
 Exchanges expressly provide that such transfer 
 can only be made by a member in good standing, 
 and that the transferee must be acceptable to the 
 Exchange, and the further fact is true, that 
 neither in law nor equity does there reside any 
 remedy to compel the Exchange to accept as a 
 member such transferee, however unreasonable or 
 arbitrary its action may be." But as a practical 
 matter, we know that such right of transfer does 
 in fact exist, first, because the rules or by-laws of 
 all Exchanges expressly authorize it, and, second, 
 because it is done many times each day, and is the 
 usual route over which persons pass into the Ex- 
 changes. 
 
 On the other hand, even assuming the most ex- 
 treme situation, where the rules or by-laws did not 
 permit any transfer at all of memberships, it can- 
 not be concluded that this fact settles for once and 
 all that such membership is not property. In 
 many situations in life the power of alienation is 
 
 " See Barclay v. Smith, lOY 111. 349, 47 Am. Eep. 437, 16 
 Cent. Law J. 437; Lowenberg v. Greenebaum, 99 Cal. 162, 
 33 Pac. 794, 21 L. E. A. 399, 37 Am. St. Eep. 42. 
 
 " See sec. 19, post. 
 Com. Exc. — 4. 
 
50 The Lajv of Commercial Exchanges. 
 
 either forbidden or restricted or impossible, and 
 yet no one doubts that the thing the transfer of 
 which is thus forbidden or impossible is property. 
 For illustration let us suppose that A grants a 
 life estate in a certain piece of property to B, and 
 the deed expressly forbids the tenant, B, to alien- 
 ate the estate or allows it only in case the new 
 tenant is acceptable to A. Would any one con- 
 tend that, because of such limitation on the power 
 of alienation, the estate of B in the land was not 
 property? And again, we all realize that good 
 will in a business is, as such, incapable of being 
 transferred apart from the business to which it is 
 attached. And yet it may reasonably constitute a 
 large part of the assets of a particular business, 
 and often is more valuable to the purchaser than 
 the actual land and chattels which he has pur- 
 chased. 
 
 Thus far we have been concerned with a defini- 
 tion of the term ' ' property ' ' solely from a nega- 
 tive point of view. The question may well be 
 asked at this point, what is the definition and 
 what are the elements which in law definitely give 
 to an object the quality which we designate " prop-- 
 erty." Unfortunately, no definition of the term 
 can be set forth which is possible of accurate ap- 
 plication to all eases. The courts and legal 
 writers, however, are generally agreed that prop- 
 erty includes anything which legally may be ac- 
 quired, enjoyed, and disposed of by a human 
 
Membbeship in Exchanges — Incidents. 51 
 
 being.^* These attributes, however, will not em- 
 brace every species of objects which the courts 
 have, on one occasion or another, declared to be 
 property, and undoubtedly it was never imagined 
 that they should do so. It is not the business of 
 courts to establish legal axioms, but rather to de- 
 cide concrete cases in litigation before them. A 
 court is rarely, if ever, called upon to declare 
 whether a particular object always has been, is, 
 and always will be, considered property, but solely 
 whether, in the light of the particular facts before 
 it and in view of the specific right with reference 
 to it which a litigant requests the court to uphold, 
 the object is one which can be properly and rea- 
 sonably declared to be property. The problem has 
 been no different when the question has come be- 
 fore the courts to determine the exact legal nature 
 of a membership in the Exchanges. The courts 
 have never in fact, whatever they have said, de- 
 cided that it was to be considered at all times prop- 
 erty or always a license, but have proceeded in all 
 
 " See Low v. Rees Printing Co., 41 Neb. 127, 59 N. W. 
 362, 24 L. E. A. 702, 43 Am. St. Eep. 670; Fears v. State, 
 102 Ga. 274, 29 S. E. 463; In re Comingore, 96 Fed. 552; 
 Stevens v. State, 2 Ark. 291, 35 Am. Dec. 72 ; Wynehamer v. 
 People, 13 N. T. 378; Frorer v. People, 141 111. 171, 31 N. E.' 
 395, 16 L. E. A. 492; State ex rel. Star Publishing Co. v. 
 Associated Press Co., 159 Mo. 410, 60 S. W. 91, "51 L. E. A. 
 151, 81 Am. St. Eep. 368 ; Staton v. Norfolk & C. E. Co., Ill 
 N. C. 278, 16 S. E. 181, 17 L. E. A. 838; Spring Valley 
 Waterworks v. Sebottler, 62 Cal. 69. 
 
52 The Law of Commekcial Exchanges. 
 
 cases to adjudicate upon the concrete facts before 
 them and to determine whether, in the particular 
 situation before them, it could properly be con- 
 sidered one thing or the other. 
 
 This fact is clearly brought out in two cases in 
 Illinois. In the earlier case ^° the proceeding, was 
 one in equity to compel the holder to deliver his 
 membership in the Chicago Board of Trade to an 
 officer and turn over the proceeds to the creditors. 
 The court held that such membership was not 
 property for the purposes of such a proceeding, 
 and denied the request of complainant. In a later 
 case,^° however, the same court had before it the 
 question whether, when A furnished the money to 
 his agent, B, to purchase a membership in the 
 Chicago Board of Trade, A had the right in equity 
 to compel B, upon termination of the employment, 
 to transfer the membership back to him (A). The 
 court held that in fact the legal relation between 
 A and B, so far as the membership was concerned, 
 was one of trustee and cestui que trust, and that 
 although such membership might not be property 
 in every sense, it was sufficiently so to justify the 
 interposition of equity to give to the plaintiff the 
 desired relief. On page 152 of the opinion the 
 court said: 
 
 " It is a misapprehension to suppose, as counsel 
 
 ""Barclay v. Smith, lOY lU. 349, 47 Am. Eep. 437, 16 Cent. 
 Law J. 437. 
 " Weaver v. Eisher, 110 111. 146. 
 
Membership in Exchanges — Incidents. 53 
 
 for plaintiff in error seem to, that we lield in Bar- 
 clay V. Smith, 107 111. 349, that there are no prop- 
 erty rights of any kind in a certificate of member- 
 ship in the Board of Trade of the City of Chicago. 
 We simply there held that such a certificate is not 
 property which is liable to be subjected to the 
 payment of the debts of the holder by legal pro- 
 ceedings. "We do not intimate that from the 
 nature of a certificate of membership in the Board 
 of Trade, it could not, by statute, be subjected to 
 the payment of debts, but only that, under the law 
 as it now is, it cannot be. . . . There is ... a 
 large class of legal rights in which there is a prop- 
 erty interest, that, by reason of their personal and 
 peculiar character, manifestly could not be made 
 the subject of transfer by judicial sale, such, for 
 instance, as an interest in real estate conditioned 
 to become void on alienation or transfer to an- 
 other; contracts for personal services requiring 
 the individual care and skill of the one party in 
 and about some matter affecting the person or 
 personal tastes of the other party. But in all 
 these cases it is too obvious to require the cita- 
 tion of authorities, a court of equity would inter- 
 fere to protect against deprivation of enjoyment; 
 and it is impossible to conceive any reason why a 
 court of equity will not, upon like principle, inter- 
 fere here to protect the complainant's interest in 
 this certificate of membership in the Board of 
 Trade." 
 
54 The Law op Commebciai, Exchanges. 
 
 Section 15. Disposition of Membership under 
 Various Circumstances. 
 
 The particular situations wherein the courts 
 have been called on to decide the exact legal nature 
 of a membership in an Exchange can be reduced to 
 four classes, first, in bankruptcy, second, in pro- 
 ceedings supplemental to execution, third, under 
 taxing statutes, and fourth, in cases of resulting 
 trusts. 
 
 (a) In bankruptcy proceedings. — In the first 
 situation, to-wit, bankruptcy proceedings, the 
 principal question centers around the rights of the 
 trustee in bankruptcy to the membership standing 
 in the name of the bankrupt. Before discussing 
 the main question involved in this situation, 
 namely the right of such trustee in bankruptcy to 
 demand an assignment of the membership to him- 
 self or his transferee as against the bankrupt and 
 his purchaser, it will be well to dispose of two 
 groups of cases which are often cited as authori- 
 ties for the main proposition but which, upon care- 
 ful analysis, we find not in point. These are cases, 
 first, where the trustee sets up a claim to the pro- 
 ceeds from the sale of the membership when there 
 are no Exchange creditors, and second, where the 
 only question involved is as to the right of the 
 trustee to all the proceeds of the sale of such mem- 
 bership despite the claim of Exchange creditors 
 to a portion of such proceeds. 
 
 It is obvious that in neither one nor the other 
 of these situations is the question of the exact 
 
Membebship in Exchanges — Incidents. 55 
 
 legal nature of such membership prior to its con- 
 version into money directly involved. In both 
 groups of cases we find a definite amount of money 
 which has resulted from the sale of the member- 
 ship of such insolvent member. No one can ques- 
 tion that the money at least is property, which in 
 all fairness and justice should be distributed 
 among the creditors of such bankrupt member, 
 whatever view the court may hold as to the exact 
 legal nature of such membership prior to the time 
 of its conversation into money. Whatever the 
 legal nature of such membership was, whether it 
 was a property right or a license, it was a valuable 
 asset of the owner, as shown by the sale of it, and 
 accordingly the courts, in allowing the trustee to 
 assert dominion over this fund, are no more de- 
 ciding what the legal nature of the thing sold was 
 prior to the sale than in the case of any' other 
 assets of such bankrupt which have been con- 
 verted into money. The authorities, moreover, 
 clearly sustain the legal title of such trustee in 
 bankruptcy to this fund arising from the sale 
 of the membership of such insolvent member, 
 where the bankrupt member has no unpaid cred- 
 itors on the Exchange.^'^ 
 
 The second group of cases merely brings into 
 question the right of the Ex;change, by a rule or 
 
 ^In re Gaylord, 111 Fed. Y17; Cochran v. Adams, 180 Pa. 
 St. 289, 36 Atl. 854; Bernheim v. Keppler, 69 N. T. Supp. 
 803, 34 Misc. 321; Singerly's Admin, v. Johnson, 3 Week. 
 Not. Gas. 541. 
 
56 The Law of Commeecial Exchanges. 
 
 by-law, to give the Exchange creditors a prior lien 
 on the proceeds arising from the sale of the seat 
 of such insolvent member, and here again the au- 
 tho«ities are a unit upon the proposition, that a 
 rule or by-law of this description is in no way in 
 violation of the bankruptcy statutes.^^ The courts, 
 while recognizing the legal title of such trustee 
 in bankruptcy to the funds resulting from the 
 sale of such membership, yet hold that the claims 
 of creditors on the Exchange must first be met, 
 and then any surplus remaining shall be turned 
 over to such trustee in bankruptcy. In a later 
 chapter of this treatise, we shall see the exact legal 
 principle upon which the courts have proceeded in 
 sustaining the validity of these rules or by-laws.^^ 
 It is sufficient for our purposes here to point out 
 that in these cases, as well as in those within the 
 first group above mentioned, the exact legal nature 
 of such membership under the bankruptcy statute 
 is not directly involved, whatever the courts may 
 have said about it in their opinions. 
 
 This brings us to those cases where the question 
 is directly involved as to the exact legal nature of 
 such membership under the bankruptcy statute, 
 and where the courts were forced to face and de- 
 cide this question in order to determine the rights 
 of the litigants. The exact situation can best be 
 illustrated by assuming the following hypothetical 
 case : Suppose that A is a member of a certain Ex- 
 change, and that upon the bankruptcy of A, X is 
 
 " See sec. 22, subsec. (b), post. 
 
Membeeship in Exchanges — Incidents. 57 
 
 appointed his trustee in bankruptcy. X then 
 applies for an order of the court compelling either 
 the Exchange oflScers or A to assign this member- 
 ship to him (X) as trustee in bankruptcy or to the 
 latter 's transferee, subject, of course, to the ac- 
 ceptance of the latter by the Exchange. Either A 
 or the Exchange objects to the granting of such an 
 order on the ground that such membership is not 
 such property within the purview of the Bank- 
 ruptcy Act as became vested in the trustee upon 
 the bankruptcy of A. Section 70 of the Bank- 
 ruptcy Act of 1898 provides that the trustee shall 
 be vested by operation of law with the title of the 
 bankrupt to all ' ' property which prior to the filing 
 of the petition he could by any means have trans- 
 ferred or which might have been levied upon and 
 sold under judicial process against him." ^^ If a 
 membership in our Exchanges is a thing which 
 prior to the bankruptcy the member owning it 
 might have transferred, "then it is property within 
 the above section of the Bankruptcy Act, and the 
 title to it vests in the trustee upon the bankruptcy 
 of such member. 
 
 Prior to the year 1902 this question had come 
 before the courts upon quite a few occasions. A 
 leading case ^* held squarely that a membership in 
 an Exchange, by reason of the fact that it was not 
 transferable absolutely by the owner, but only in 
 case the Exchange would accept the transferee, 
 
 " 30 Stat. L. 566. 
 
 "In re Sutherland, 6 Bissel 526, Fed. Cas. No. 13,63Y. 
 
58 The Law of Commebcial Exchakges. 
 
 was not within the terms of the above section of 
 the act. The great weight of authority, however, 
 in other lower Federal courts was squarely in ac- 
 cord with the proposition that such membership 
 in an Exchange was property within the meaning 
 of the above section.^' 
 
 All doubt on the matter, however, was dissolved 
 by the decision of the Supreme Court of the United 
 States in the case of Page v. Edmunds.^' In this 
 case Page was a member of the Philadelphia Stock 
 Exchange, and became a voluntary bankrupt on 
 November 16, 1899. The bankrupt did not in- 
 clude as an asset in his schedule his membership, 
 in the Exchange, but the trustee caused the same 
 to be appraised, and on his petition the referee 
 ordered that the seat should be sold at pubhc 
 auction. The bankrupt petitioned for a review of 
 the referee 's order on the ground that his member- 
 ship in the above Exchange was not property 
 within the Bankruptcy Act, inasmuch as there was 
 no right of absolute transfer in the owner. The 
 court sustained the action of the lower court in 
 
 '^In re Ketchum, 1 Fed. 840, Fed. Cas. No. 10,337; In re 
 Warder, 10 Fed. 275, 15 Fed. 789; In re Neimann, 124 Fed. 
 738 ; In re Hurlbutt, 135 Fed. 504, 68 C. C. A. 216 ; O'Dell v. 
 Boyden, 150 Fed. 731 ; also dicta in Hyde v. Woods, 94 TJ. S. 
 523, 24 L. Ed. 264; Sparhawk v. Terkes, 142 F. S. 1, 35 L. 
 Ed. 915. New York is also in accord with this line of au- 
 thorities: Wrede v. Clark, 117 N. T. Supp. 5; also dictum 
 in Piatt V. Jones, 96 N. T. 24. See case of Fish v. Fiske, 
 154 Mass. 302, 28 N. E. 278. 
 
 " 187 F. S. 596, 47 L. Ed. 318, 23 S. Ct. Eep. 200. 
 
Membership in Exchanges — Incidents. 59 
 
 allowing the order requested by the trustee to 
 compel the transfer of the membership. Justice 
 McKenna, in delivering the opinion of the court, 
 answered the question, " Was the seat in the Stock 
 Exchange property? "in the following manner, at 
 page 605 of the opinion : — 
 
 " The Bankrupt Act of 1898 has made its own 
 rule. For the same reason it is not necessary to 
 review the cases cited from other jurisdictions. 
 Whatever is in them favorable to appellant's con- 
 tention was based upon the inability that the re- 
 spective courts found in the law to transfer a title 
 which could not be insisted upon and enjoyed 
 against the consent of the association. But that 
 consequence, in our judgment, affects the value of 
 a seat in a stock board, but not its existence as 
 property. The contingencies which may defeat or 
 affect its title, or its enjoyment, will be reflected 
 in its price, and if, notwtihstanding them, a seat 
 has a vendible value of from $5,000 to $8,000, it 
 would seem that the law should have some process 
 to reach it for the benefit of creditors. And the 
 ,Bankrupt Act supplies the process. The trustee 
 of a bankrupt's estate is the bankrupt's assignee, 
 and we only repeat the statute when we say the 
 trustee is vested with whatever the bankrupt can 
 convey. ' ' 
 
 Accordingly, there can be no doubt that, within 
 the terms of the Bankruptcy Act now upon the 
 Federal statute books, a membership in an Ex- 
 
60 The Law of Commebcial Exchanges. 
 
 change is such, property as becomes vested in the 
 trustee in the event of the owner's insolvency. 
 
 (b) Proceedings by attachment or execution. — 
 The second situation where the courts have been 
 called upon to decide directly the exact legal 
 nature of a membership in the Exchange is in pro- 
 ceedings where a creditor of a member has sought 
 by attachment or by some common law or statu- 
 tory process of execution to divest such member 
 of his right of membership in the Exchange, and 
 to compel its transfer to him, the creditor. The 
 exact problem may become clearer if we assume 
 the following hypothetical case: Suppose A, a 
 member of a certain Exchange, is indebted to B, 
 a non-member, in the sum of $5,000, and B gets a 
 judgment against the former in a court of law for 
 this amount. The only valuable asset which A has 
 is his membership in the Exchange, which has a 
 saleable value at least equal to the amount of the 
 judgment. The creditor, B, seeks by some process, 
 legal or equitable, to reach this asset of A. B then 
 sues out a writ of execution against the member- 
 ship and the sheriff at a judicial sale sells the 
 membership to X, and B then seeks an order 
 either against the Exchange or the judgment 
 debtor compelling the transfer of the membership 
 to the purchaser at such judicial sale. 
 
 It will serve no purpose to consider under what 
 particular process the courts have declared that 
 this can or cannot be done. In some jurisdictions, 
 the methods in vogue at common law are still in 
 
Membeeship in Exchanges — Incidents. 61 
 
 use, whereas in a great many more the procedure 
 rests upon local statutes which have changed or 
 supplemented the ordinary methods available to 
 a judgment creditor. Accordingly, our inquiry 
 properly is not what methods a State might pro- 
 vide, or by which peculiar method the creditor 
 must proceed, but solely whether, by any process 
 whatever, legal or equitable, such creditor may 
 reach the membership owned by the debtor in 
 satisfaction of his judgment debt. 
 
 Upon general legal principles any personal 
 property of a judgment debtor, unless it is ex- 
 pressly exempted by law, may be taken in execu- 
 tion, if it is such property as the debtor might him- 
 self have transferred.^^ Expressed in slightly dif- 
 ferent phraseology, but conveying the same idea, 
 the courts and legal writers agree that any prop- 
 erty which the debtor can make the subject of 
 voluntary transfer of title can, by execution, be 
 made the subject of involuntary transfer.^' It 
 would seem, therefore, that the test here is sub- 
 stantially similar to that laid down in the section 
 of the Bankruptcy Act above considered. And 
 within this test, the weight of authority is in sup- 
 port of the proposition, that membership in an 
 Exchange is property and therefore subject to an 
 appropriate proceeding in execution, in spite of 
 the fact that the right of the debtor to transfer it 
 
 "See lY Cyc. 940. 
 
 ^ See Freeman on Executions (3d ed.), sec. 110, and also 
 17 Cyc. 940. 
 
62 The Law op Commeecial Exchanges. 
 
 was not absolute but qualified by the necessary 
 approval of the Exchange.^^ In some jurisdic- 
 tions, however, a different rule is recognized and 
 applied.^" 
 
 Thus in the jurisdictions in the United States 
 where the question has arisen. New York, Missouri 
 and California sustain the right of the judgment 
 creditor to reach by some appropriate process of 
 execution such membership in an Exchange, 
 whereas Pennsylvania and Illinois deny such 
 right. When carefully examined, however, even 
 the latter jurisdictions proceed not on the theory 
 that such membership is in no sense property, but 
 that it is not within the meaning of that term in 
 the execution statute. Thus California, in the 
 case of Lowenberg v. G-reenebaum,^^ does not over- 
 rule the earlier case of Habenicht v. Lissak,^^ but 
 
 "" Powell V. Waldron, 89 N. T. 328, 42 Am. Rep. 301 ; Lond- 
 heiin v. White, 6Y How. Pr. 467; Baak v. Murphy, 60 How. 
 Pr. 426, 10 Daly 168 ; Eitterband v. Baggett, 4 Abb. N. C. 67, 
 42 N. T. Super. Ct. 556; Leggett v. "Waller, 80 N. T. Supp. 13, 
 39 Misc. 408; Roome v. Swan, 2 N. T. Supp. 614, 15 Civ. 
 Proo. Eep. 344, 18 IST. T. St. Eep. 286 ; Eliot v. Merchant's Ex- 
 change, 14 Mo. App. 234; California has held that a seat 
 could be reached by proceedings supplementary to execution 
 (Habenicht v. Lissak, 78 Cal. 351, 20 Pac. 874, 5 L. E. A. 
 713, 12 Am. St. Eep. 63), but not by ordinary writ of execu- 
 tion (Lowenberg v. Greenebaum, 99 Cal. 162, 33 Pac. 794, 21 
 L. E. A. 399, 37 Am. St. Eep. 42). 
 
 '° Pancoast v. Gowen, 93 Pa. St. 66; Barclay v. Smith, 107 
 HI. 349, 47 Am. Eep. 437, 16 Cent. Law J. 437. 
 
 " See cases in note 29. 
 
 "' See cases in note 29. 
 
Mbmbeeship in Exchan"ges — Incidbwts. 63 
 
 merely decides that such membership cannot be 
 reached by the particular execution proceeding 
 employed in the case before the court. Apart 
 from jurisdictions and judged simply by the num- 
 ber of decisions, the majority are in accord with 
 the proposition, that such membership is reach- 
 able by a judgment creditor in some proceeding or 
 other. 
 
 (c) Is a membership subject to taxation^ — The 
 question whether a membership in an Exchange 
 may be the subject of taxation has been before the 
 courts of this country upon various occasions. In 
 reality, the questions before the courts in every 
 case has simply involved the proper construction 
 of a local taxation statute. In no one of these 
 cases has the contention been put forth that the 
 State could not, if it saw fit, have taxed such mem- 
 bership by express terms in the statute. The 
 question has been, not what the State could do but 
 rather what it has done in the particular statute 
 before the court. Inasmuch as the various taxa- 
 tion statutes in the different jurisdictions differ in 
 phraseology in a greater or less degree, it is 
 hardly possible to cite a case as authority for the 
 proposition that such membership is or is not tax- 
 able in a jurisdiction where the local taxation 
 statute is different in its phraseology from that in 
 the State where the case thus cited has arisen. In 
 no jurisdiction does the taxation statute include by 
 express provisions a membership in an Exchange. 
 The statutes simply provide for the taxation of 
 
64 The Law op Commeecial Exchanges. 
 
 " all property " or "all personal property," 
 enumerating in some cases the particular things 
 which shall be considered as coming within the 
 word ' ' property, ' ' and upon the levy of a taxupon 
 such membership the owner seeks to prevent its 
 collection on the ground that such membership is 
 not " property " within the scope of this term in 
 such statute. One would naturally expect to find 
 a clear division of the authorities upon a question 
 which is so largely one of statutory construction. 
 New York and Maryland, in the construction of 
 identically the same terms, " all property," ar- 
 rived at different conclusions, the former holding 
 that a membership was within this term and the 
 latter that it was not.^^ California also denied 
 that it was taxable within the local statute.^* New 
 York also has held that it is property within the 
 inheritance tax law of that State,'' but on the 
 other hand has held that it could not be taxed 
 within a statute providing that " nonresidents of 
 the State doing business within the State . . . 
 shall be taxed on the capital invested in such 
 business, as personal property, at the place where 
 
 '' Matter of Hellman, 174 N. T. 254, 95 Am. St. Rep. 582, 
 66 N. E. 809 ; Baltimore v. Johnston, 96 Md. 737, 54 Atl. 646, 
 61 L. E. A. 568. 
 
 " San Francisco v. Anderson, 103 Cal. 70, 36 Pac. 1034. 
 
 " Matter of Hellman (see note 33) ; In re Glendinning, 74 
 N. T. Supp. 190, 68 App. Div. 125, affirmed 171 N. Y. 684, 
 64 N. E. 1121. 
 
Membeeship in Exchanges — Incidents. 65 
 
 such business is carried on, to the same extent as 
 if they were residents of the State. ' ' '° 
 
 (d) Membership subject to resulting trust. — 
 The fourth situation wherein the courts have been 
 called upon to decide the exact legal nature of a 
 membership in an Exchange arises when A, for 
 some business purpose or other reason, furnishes 
 the money to B to take out a membership in a cer- 
 tain Exchange. Nothing appears upon the Ex- 
 change records to show that B is not the complete 
 owner of such membership. A becomes dissatis- 
 fied with his agent B and brings a bill in equity to 
 compel B to transfer this membership to him (A) 
 on the ground that B is simply holding such mem- 
 bership as trustee for him. 
 
 Where there are no claims against B among 
 fellow members of the Exchange, the court, recog- 
 nizing the rights of A as the beneficiary, has held 
 that such membership was sufficiently property to 
 constitute a trust res in the hands of B, and has 
 compelled the latter to transfer such membership 
 back to A." In the Weaver case the court squarely 
 qualified the language at least of the same court 
 in an earlier case,^' which went to great lengths to 
 
 " People ex rel. Lemmon v. Feitner, 167 N. Y. 1, 60 N. E. 
 265, 82 Am. St. Eep. 698; but see Austen v. Brigham, 6Y 
 N. T. Supp. 891. 
 
 " Weaver v. Fisher, 110 111. 146 ; Sproul v. Morris, 31 Pitts. 
 L. J. N. S. 310. 
 
 " Barclay v. Smith, lOY 111. 349, 4Y Am. Eep. 437, 16 Cent. 
 Law J. 437. 
 
 Com. Exc. — 5. 
 
66 The Law of Commekcial Exchanges. 
 
 demonstrate that a membersliip in the same Ex- 
 change was in no sense property. On the other 
 hand, the courts are decisive upon the proposition 
 that A in the above hypothetical case will not be 
 given such a decree when to do so would defeat 
 the rights of bona fide creditors of A on the Ex- 
 change.^* 
 
 In several cases the courts have gone to the ex- 
 treme limit in holding a membership in an Ex- 
 change to be property by recognizing the right of 
 the member to pledge or assign it to secure a debt 
 due to the pledgee.*" The position taken by the 
 courts in these cases seems all the more remark- 
 able inasmuch as it has been taken apart from 
 statute. It is difficult to determine upon just 
 what legal, principle these courts have proceeded 
 in these decisions, unless it be that such member- 
 ship having been decided to be property it is 
 accordingly the proper subject of a pledge. 
 Whether this position is legally sustainable or 
 
 '"Zell V. Baltimore Stock Exchange, 102 Md. 489, 62 Atl. 
 808, 4 L. R A. (K S.) 435; Thompson v. Adams, 93 Pa. St. 
 55. See also the case of Allien v. Wotherspoon, 18 Jones & 
 S. 417, 50 N. Y. Super. Ct. 41Y. 
 
 " Nashua Savings Bank v. Abbott, 181 Mass. 531, 63 N. E. 
 1058, 92 Am. St. Eep. 430; Powell v. Waldron, 89 N. T. 
 328, 42 Am. Eep. 301; Clute v. Loveland, 68 Cal. 254, 9 
 Pac. 133. See also the cases of Allien v. Wotherspoon, 
 supra; O'Dell v. Boyden, 150 Fed. Y31; Hanscom v. Hen- 
 dricks, 5 N. T. Supp. 109, 52 Hun 80, 22 N. T. St. Eep. 585, 
 affirmed 123 N. T. 664, 26 N. E. 750; Shannon v. Cheney, 
 156 Cal. 567, 105 Pac. 588. 
 
Membership in Exchanges — Incidents. 67 
 
 not, and in passing it may be well to note that a 
 thing may be classed as property which neverthe- 
 less cannot be pledged, yet these cases are at least 
 squarely opposed to any classification of such 
 membership, from any point of view, as a mere 
 license. 
 
 In examining the large number of cases wherein 
 the legal nature of a membership in a commercial 
 Exchange has been passed upon by the courts, we 
 find that the decision in each case has been based 
 solely upon the particular facts before the court 
 and with a view to the specific remedy sought, 
 however extensive generalizations, of vague and 
 oftentimes mischievous nature, the court may 
 have indulged in its opinion. Of one conclusion, 
 however, we can be certain; namely, that in no 
 jurisdiction have the courts decided squarely that 
 such membership is a license or " mere privi- 
 lege." The case in Illinois which is largely re- 
 sponsible for this misconception did not in fact so 
 decide, and later cases in the same State have said 
 clearly that that case stands for no such broad 
 proposition. 
 
 Under the authorities no broad and at the same 
 time accurate generalization as to the legal nature 
 of a membership in a commercial Exchange is 
 possible. For instance, we have seen that one 
 jurisdiction has held a membership to be property 
 within an execution statute and not within a taxa- 
 tion statute. Accordingly, our conclusion must 
 be, that the question whether such membership is 
 
68 The Law of Commercial Exchanges. 
 
 property or something else is purely academic and 
 useless for practical purposes, and that the only 
 question which has concerned the courts in the 
 past and will continue to do so in the future is, 
 whether it can be taxed, whether it passes to the 
 trustee in bankruptcy or the purchaser at an 
 execution sale, or whether it can be made the sub- 
 ject of a trust. And in all these situations the 
 courts will decide the question in accordance with 
 local statutes or decisions, if there be such, and in 
 their absence, by the aid of decisions in other ju- 
 risdictions on similar facts, or in accordance with 
 fundamental legal principles. 
 
CHAPTEB IV. 
 
 ADMINISTKATIVE POWEE OF EXCHANGES OVEE 
 MEMBEES. 
 
 A. EuLES OR By-laws in General. 
 
 Section 16. Necessity for Eules or By-lawe. 
 
 17. Source of Power to Establish Eules or By-laws. 
 
 18. Limitations upon Power to Establish Eules or 
 
 By-laws. 
 
 (a) Must be within express or implied power 
 
 delegated in charter or constitution. 
 
 (b) Must not be contrary to law or public 
 
 policy. 
 
 (c) Other limitations suggested by the courts. 
 ■(d) Is "reasonableness" a proper test? 
 
 B. Consideration of Specific Eules. 
 
 19. Eules or By-laws Eegulating Admission. 
 
 20. Eules or By-laws Eegulating Eeinstatement. 
 
 21. Eules or By-laws Eegulating Enjoyment of 
 
 Membership. 
 (a) Power to enact rules or by-laws provid- 
 ing for expulsion or suspension 
 of members. 
 
 (1) How this power is obtained. 
 
 (2) What causes can be made ground 
 
 of expulsion or suspension. 
 
 (3) By whom must the power to expel 
 
 or suspend members be exercised. 
 
 (4) In what manner must the power to 
 
 expel or suspend members be 
 
 exercised. 
 
 [69] 
 
70 The Law op Commehcial Exchanges. 
 
 (b) Power to enact rules or by-laws for fining 
 o£ members. 
 23. Rules or By-laws Allowing Preferences to Ex- 
 change Creditors. 
 
 (a) Source of power to establish such prefer- 
 
 ence. 
 
 (b) Does such rule or by-law infringe the 
 
 Federal Bankruptcy Act? 
 
 (c) Must claims preferred arise from trans- 
 
 actions on the Exchange? 
 
 (d) Is preference limited to fund arising from 
 
 sale of membership? 
 
 23. Rules or By-laws Regulating Conduct of Mem- 
 
 bears. 
 
 (a) The enforcement of decorum among 
 
 ■members. 
 
 (b) Vilification of fellow-members. 
 
 (c) Dishonorable or iincommercial conduct. 
 
 24. Rules or By-laws Compelling the- Fulfillment of 
 
 Business Obligatioijs Among Members. 
 
 (a) Obligations arising from transactions off 
 
 the Exchange. 
 
 (b) Where failure to comply is due to finan- 
 
 cial inability. 
 
 (c) Wliere obligation is legally unenforceable. 
 
 25. Rules or By-laws Relative to Arbitration of 
 
 Business Disputes Among Members. 
 
 (a) Agreements to arbitrate in general. 
 
 (b) Can members be comx>elled to arbitrate or 
 
 retire from the Exchange? 
 
 26. Rules or By-laws Restricting Commercial 
 
 Activities of Members. 
 
 (a) Agreements in restraint of trade or com- 
 merce in general. 
 
 (b)' Rules or by-laws establishing uniform 
 rates of commission. 
 
Administrative Powebs Ovek Members. 71 
 
 (c) Rules or by-laws forbidding members to 
 
 trade ■with or for expelled or suspended 
 members. 
 
 (d) Rules or by-laws forbidding members to 
 
 deal with or for " bucket-shops." 
 
 (e) Rules or by-laws restricting the solicita- 
 
 tion of business. 
 
 (f) Rules or by-laws limiting hours of trad- 
 
 ing. 
 
 (g) Other rules or by-laws of this general 
 
 character. 
 27. The Enactment of Rules or By-laws. 
 
 (a) What body must enact rules or by-laws.- 
 
 (b) Amendment of rules or by-laws. 
 
 (c) Regulations versus rules or by-laws. 
 
 A. Rules or By-laws in General. 
 
 Section 16. Necessity for Rules or By-laws. 
 
 The primary object in the formation of our com- 
 mercial Exchanges was to establish and maintain 
 a uniform standard of business conduct govern- 
 ing the transactions between the members thereof. 
 It is obvious that there can be no such uniformity 
 in the methods of business unless each member in 
 such organizations is under obligation to observe 
 specific rules and regulations setting forth pre- 
 cisely what such business methods are and pro- 
 viding penalties for the infraction thereof. A 
 single individual may well be a law unto himself 
 so far as the conduct of his private business is 
 concerned. But where a great body of men have 
 joined together in an association for the further- 
 ance of a common object, it is as essential that 
 
72 The Law op Commbeoiax, Exchanges. 
 
 sucli an association sliall have rules wMcli it is 
 incumbent upon all members to observe and fol- 
 low as it is that a government shall have laws for 
 the guidance of all citizens who desire to obey 
 them and for the punishment of those who evade 
 them. Accordingly, we find that all the commer- 
 cial Exchanges, whether incorporated or unincor- 
 porated, have established comprehensive rules 
 and regulations, not only for the management of 
 their affairs as associations but also for the ad- 
 ministrative control by such associations over 
 their members in the conduct of their business 
 thereon. 
 
 Section 17. Source of Power to Establish Rules or 
 By-laws. 
 
 The question arises at the outset. Whence comes 
 the power of such Exchanges to enact such rules 
 and by-laws? It should be noted that this is 
 clearly distinguishable from the question as to 
 whether a particular rule or by-law is valid or 
 invalid. Our problem now is to discover the 
 fundamental source of such power of the Ex- 
 changes to enact such rules and by-laws in gen- 
 eral. In this connection we have already seen 
 that the power of the unincorporated Exchange, 
 not alone to pass rules, but to act in any degree 
 as such association, springs altogether from the 
 mutual contract of the members thereof, as repre- 
 sented in the constitution, whereas in the incorpo- 
 rated Exchange such powers are derivable from 
 a specific grant from the State, known as its char- 
 
Administeative Powers Ovee Membees. 73 
 
 ter. The bearing of this distinction upon the 
 scope of the authority to enact particular rules 
 and by-laws will be observed in subsequent por- 
 tions of this chapter. It is necessary, however, 
 at this point to keep clearly in mind the funda- 
 mental principle that the power of self govern- 
 ment of such associations as our commercial Ex- 
 changes rests on, and in turn is measured by, the 
 organic legal act creating such association, in the 
 unincorporated Exchange the constitution, and in 
 the incorporated Exchange the charter from the 
 State.^ 
 
 The distinction above noted, that the constitu- 
 tion of an unincorporated Exchange is a contract 
 between the members thereof and that the charter 
 of the incorporated Exchange represents a 
 specific grant, is clearly settled by a legion of 
 authorities. In the leading case of White v. 
 Brownell,^ an early New York case, the court 
 said: 
 
 "As this association is not organized in pur- 
 suance of any statute, nor are the terms of mem- 
 bership fixed by the principles of the common 
 
 * Incorporated : Evans v. Clianiber of Commerce, 86 Minn. 
 448, 91 ]Sr. W. 8, 9; Haebler v. New York Produce Exchange, 
 149 N. T. 414, 44 N. E. BY, 91 ; Banli of Montreal v. "Waite, 
 105 111. App. 3Y3. Unincorporated: White v. Brownell, 4 
 Abb. Pr. N. S. 193, 2 Daly 329; Belton v. Hatch, 109 N. Y. 
 593, 17 N. E. 225, 226, 4 Am. St. Eep. 495; Zell v. Balti- 
 more Stock Exchange, 102 Md. 489, 62 Atl. 808, 809, 4 L. E. 
 A. (N. S.) 435; Thompson v. Adams, 93 Pa. St. 55; Weston 
 V. Ives, 97 N. Y. 222, 228. 
 
 " 3 Abb. Pr. N. S. 318. 
 
74 The Law of Commercial Exchanges. 
 
 law, it follows that the agreement which the mem- 
 bers make among themselves on the subject must 
 establish and determine the rights of the parties 
 on the subject. The constitution of the associa- 
 tion and its laws agreed upon by the members 
 contain all the stipulations of the parties and form 
 the law which should govern." 
 
 In the case of Farmer v. Board of Trade,^ the 
 court expressed the same general thought in the 
 following language : 
 
 ' ' The constitution is contractual in form, being 
 signed by the members, and is, in effect, a contract 
 between them to act and conduct themselves 
 under its provisions." 
 
 Where, however, the Exchange is incorporated, 
 either by special charter or under a general in- 
 corporation act of the State, the power to enact 
 such rules or by-laws arises not by contract among 
 the members but by virtue of a legislative grant, 
 and in accordance with the legal principle applica- 
 ble to all corporate bodies, it can do no acts, in- 
 cluding the act of -passing rules for ^elf -govern- 
 ment, except such as are expressly or impliedly 
 authorized by its charter. 
 
 An examination of the authorities reveals three 
 situations where this power of the Exchanges to 
 enact rules and by-laws for their self-government 
 has come before the courts; first, where the con- 
 stitution or charter is absolutely silent as to the 
 existence of such power ; second, where the consti- 
 
 ' 78 Mo. App. 557. 
 
Administeativb Powees Ovek Membees. 75 
 
 tution or charter expressly authorizes the passage 
 of a particular rule or by-law, and third, where 
 the authority granted is to " enact all rules and 
 by-laws which it shall deem necessary." 
 
 The first situation is of more academic than 
 practical interest, for the reason that without 
 exception the leading commercial Exchanges, 
 whether incorporated or unincorporated, have in 
 their charters or constitutions an express pro- 
 vision of some kind or other, authorizing the en- 
 actment of rules and by-laws. However, even in 
 case such grant of power were absent, yet on prin- 
 ciple it can be reasonably implied. Corporate 
 bodies generally possess the power by implication 
 to enact rules and by-laws.* If this be true, it is 
 difficult to see upon what legal principle such right 
 by implication can be denied to the incorporated 
 Exchange, where the possession of some such 
 power is far more essential to the proper admin- 
 istration of the organization than in the case of 
 the private corporation for profit. Upon a similar 
 line of reasoning it would seem that likewise the 
 unincorporated Exchange possesses by implica- 
 tion such power to enact rules or by-laws for its 
 self-government. In both cases the very- exist- 
 ence of the institution requires the establishment 
 of comprehensive and definite rules or by-laws. 
 Accordingly, while there is a total lack of author- 
 ity upon the point, yet we can reasonably assume, 
 in the case of both the incorporated and the un- 
 
 * See 10 Cyc. 353, note 64. 
 
76 The Law of Commebciax, Exchanges. 
 
 incorporated Exchange, that the power to enact 
 rules and by-laws exists by implication. 
 
 A practical illustration of the second situation 
 above noted arises where the constitution or 
 charter of an Exchange expressly authorizes the 
 expulsion or suspension of members by a majority 
 vote of all members. It is a fundamental canon 
 of construction, that where there is a grant of 
 power to do a particular act or to perform such an 
 act in a particular way, such grant by implication 
 will operate to exclude the power to do other acts 
 or do the act specified in any way other than that 
 provided for. The effect of such a grant is to 
 limit the exercise of power as substantially as 
 where .the limitation is expressly stated.^ Accord- 
 ingly, such express provision would by implica- 
 tion necessarily exclude the power of the Ex- 
 change, by rule or by-law, to confer upon any 
 other body, such as a board of directors, the right 
 to perform such act of expulsion or suspension." 
 This principle is likewise applied where the con- 
 stitution or charter of the Exchange authorizes 
 the enactment of a particular rule covering a 
 definite subject-matter.'^ 
 
 The third situation, however, namely, where the 
 broad power is delegated in the constitution or 
 
 " See 10 Cyc. 353, note 66. 
 
 ° State ex rel. Graham v. Chamber of Commerce, 20 Wis. 
 68; also see other cases in section 21 post, sub-section (a), 
 paragraph (3). 
 
 ' Angell and Ames on Corporations, sec. 325 ; 10 Cyc. 353, 
 note 66. 
 
Administeative Powbes Ovee Membbes. 77 
 
 charter of the association to pass " all rules or by- 
 laws which the association shall deem necessary," 
 presents the most common method of conferring 
 such power. It is in this situation where arise 
 the complicated questions in connection with the 
 validity or invalidity of specific rules or by-laws 
 enacted by the Exchanges. These questions arise 
 for the reason that, while from a literal construc- 
 tion of such broad provision it would seem to fol- 
 low that the Exchanges might enact any rule or 
 by-law which they alone deemed necessary, yet, 
 upon careful examination of the authorities, we 
 find that, while the limitations upon the exercise 
 of the power in such a case are not so definitely 
 fixed as we may desire, yet they do in fact exist, 
 and it is the determination of when and where to 
 place such limitations that presents the great 
 diflficulty of this subject. 
 
 Section 18. Limitations upon Power to Establish 
 Rules and By-laws. 
 At this point the inquiry naturally arises. Are 
 there no limitations upon this power to enact 
 rules or by-laws other than the will and pleasure 
 of the association! The answer of the courts is, 
 that the law does impose certain limitations upon 
 the exercise of this power. These limitations, 
 while easy of statement, yet are oftentimes ex- 
 ceedingly difficult of application to the facts of a 
 particular case. This difficulty, however, is not 
 peculiar to tliis field of law alone. It has been 
 
78 The Law of Commercial Exchanges. 
 
 wisely said that law is a subject which everybody 
 believes he understands until called upon to apply 
 the correct principle to the facts of an actual and 
 concrete case. 
 
 Reverting again to the three situations above 
 considered, the second presents no very formida- 
 ble problem from the standpoint of determining 
 the limitation upon such power. The very form 
 in which such power is granted, as we have seen, 
 prevents its enlargement or contraction by any 
 process of construction. In a word, the very 
 terms of the authority set the limits where the 
 power begins and ends. 
 
 The first and third situations, however, present 
 far greater difficulty in determining the exact 
 limits within which such Exchanges may legally 
 bind their members by the enactment of rules or 
 by-laws. On its face, a power to ' ' make all laws 
 which it shall deem necessary " would seem al- 
 most without limitation. A careful analysis of 
 the numerous authorities, however, reveals the 
 fact that even in these situations two funda- 
 mental limitations have been established by the 
 courts upon the exercise of this power of the Ex- 
 changes and other like associations to enact rules 
 or by-laws. These are, first, all such rules or by- 
 laws must lie within the authority, either ex- 
 pressed or reasonably implied from the provisions 
 of the constitution or charter,* and second, they 
 
 ' People 'v. Chicago Live Stock Exchange, 170 Til. 556, 48 
 N. E. 1062, 39 L. E. A. 373, 62 Am. St. Eep. 404; Powell v. 
 Abbott, 9 "Week. Not. Cas. 231 (Pa.) ; Evans v. Chamber of 
 
Administrative Powers Over Members. 79 
 
 must not be contrary to any fixed rule or principle 
 of law.' 
 
 (a) The constitution or charter of no Exchange 
 attempts to state in detail just what rules or by- 
 laws can or cannot be passed. But the power to 
 do a certain thing or enact a particular rule or 
 by-law may well exist and yet not be authorized in 
 .express terms. Surrounding every express grant 
 of power there is a more or less indefinite expanse 
 of implied power, throughout which region the 
 grantee may act as lawfully as if the power to do 
 
 Commerce, 86 Minn. 448, 91 N. "W. 8; Bank of Montreal v. 
 Waite, 105 111. App. 3Y3; People v. Board of Trade, 45 111. 
 112; Board of Trade v. Weare, 105 111. App. 289; State ex rel. 
 Ouppel V. Milwaukee Chamber of Commerce, 4Y Wis. 670, 3 
 N. W. Y60; Warren v. Louisville Tobacco Exchange (Ky. 
 1900), 55 S. W. 912; People ex rel. Thacher v. N. Y. Com- 
 mercial Asso., 18 Abb. Pr. 271; Johnson v. Produce Exch., 
 149 ISr. T. 401, 44 N. E. 84. 
 
 "Evans v. Chamber of Commerce, 86 Minn. 448, 91 N. W. 
 8; State v. Union Merchants' Exchange, 2 Mo. App. 96; 
 Mofiatt V. Board of Trade, 111 S. W. 894 (Mo. App.) ; Live 
 Stock Commission Co. v. Exchange, 143 111. 210, 32 N. E. 
 274, 36 Am. St. Eep. 385, 18 L. R. A. 190; People v. Chicago 
 Live Stock Exchange, 170 111. 556, 48 N. E. 1062, 39 L. E. A. 
 373, 62 Am. St. Eep. 404; Dickinson v. Board of Trade, 114 
 111. App. 295; State ex rel. Crane v. Chamber of Commerce, 
 77 Minn. 308; Zell v. Baltimore Stock Exchange, 102 Md. 
 489, 62 Atl. 808, 4 L. R. A. N. S. 435 ; State v. Wilson, 73 
 Kans. 343; Greer v. Payne, 4 Kans. App. 153, 46 Pac. 190; 
 Hyde v. Woods, 94 IT. S. 523, 24 L. Ed. 264; In re Gregory, 
 174 Fed. 629 ; White v. Brownell, 4 Abb. Pr. N. S. 162, 2 Daly 
 (N. y.) 329; Heath v. New York Gold Exchange, 7 Abb. Pr. 
 ISr. S. 251, 38 How. Pr. 168; Cohen v. Budd, 103 N. Y. 
 Supp. 45, 52 Misc. 217; Goddard v. Merchants Exchange, 9 
 Mo. App. 290. 
 
80 The Law of Commeecial Exchanges. 
 
 tlie specific thing were granted. No fixed rule of 
 practical value has been or can be framed for de- 
 termining whether a rule or by-law of an associa- 
 tion lies within the scope of such implied power. 
 The- only approach to it which the courts have 
 laid down is that, considering each specific case 
 upon its own facts, such a rule or by-law will be 
 sustained if the object sought can be seen to be 
 within the purposes for which the association was 
 organized and the particular rule is in some 
 direct way connected with the attainment of those 
 objects and purposes.^" A rule or by-law which 
 does not meet these requirements is invalid." In 
 all cases, however, the question is a matter for the 
 court to determine and not the jury.^^ 
 
 The proposition that all rules and by-laws of 
 the Exchanges must conform to, and be included 
 within, the express or implied authority of the 
 
 "People ex rel. Thacher v. N. Y. Commercial Asso., 18 
 Abb. Pr. 2Y1 ; Johnson v. Produce Exchange, 149 N. T. 401, 
 44 ]Sr. E. 84 ; People ex rel. Page v. Board of Trade, 45 HI. 112 ; 
 Board of Trade v. Weare, 105 HI. App. 289; McCarthy Bros. 
 Co. V. Chamber of Commerce, 105 Minn. 497, 117 N. W. 923, 
 21 L. E. A. (N. S.) 589; Warren v. Louisville Tobacco Ex- 
 change (Ky. 19D0), 55 S. W. 912; Dickinson v. Chamber of 
 Commerce, 29 "Wis. 45, 9 Am. Eep. 544; State ex rel. Cuppel 
 V. Milwaukee Chamber of Commerce, 47 Wis. 670, 3 N. W. 
 760. 
 
 " People V. Chicago Live Stock Exchange, 170 111. 556, 48 
 N. E. 1062, 39 L. E. A. 373, 62 Am. St. Eep. 404; People v. 
 Medical Society, 24 Barb. 570 ; Commonwealth v. St. Patrick 
 Benevolent Society, 2 Binney 441, 4 Am. Dec. 453 ; Hibernia 
 Engine Co. v. Commonwealth, 93 Pa. St. 264. 
 
 " See 10 Cyc. 358, note 99. 
 
Administbative Poweks Over Members. 81 
 
 constitution, if it be unincorporatedj follows logi- 
 cally from the fact that such constitution consti- 
 tutes a contract between the members, and the 
 terms of such contract set the limits beyond which 
 the Exchange cannot legally act. As was stated 
 in a leading case," 
 
 " The court must regard the constitution and 
 laws of this board as the contract by which the 
 members are bound. The court cannot make any 
 other contract for the parties than thev have 
 solemnly made for themselves." 
 
 This is not an unfamiliar legal principle, but is 
 found in many other fields of the law. If A, B, C 
 and D form a copartnership to conduct a grain 
 business, with an appropriate set of partnership 
 articles, any one of the partners can bind the 
 partnership within the express or implied powers 
 contained in said partnership articles." Whether 
 a particular act is within such express or implied 
 powers, however, is a matter to be decided by the 
 facts of each specific case. A contract entered 
 into by D to build a railroad obviously would not 
 bind the partnership, whereas a contract for the 
 purchase of ordinary office supplies clearly would. 
 The cases in between such extremes alone give rise 
 to difficulty. This is the identical principle ap- 
 plied in the case of the unincorporated Exchange. 
 The writer does not mean to imply that such Ex- 
 change is a partnership or governed in all respects 
 
 " White V. Brownell, 3 Abb. Pr. N. S. 318, 3Y, 2 Daly 329. 
 " See discussion in 30 Cyc. 4Y7. 
 Com. Exc. — 6, 
 
82 The Law of Commekcial, Exchanges. 
 
 by the same principles of law. They are similar, 
 however, in this respect at least, that the copart- 
 nership articles in the one and the constitution in 
 the other represent a contract within the express 
 or implied terms of which the parties thereto alone 
 can be bound. As this applies to all acts of the 
 Exchange, it clearly covers the act of the associa- 
 tion in the making of rules and by-laws. 
 
 Where the Exchange is incorporated, its charter 
 sets the limits beyond which such Exchange can- 
 not act as an association. In the case of private 
 corporations for profit, any act of the corporation 
 beyond the expressed or reasonably implied pow- 
 ers contained in its charter is void on the ground 
 legally known as ultra vires. A similar prin- 
 ciple is applied to the acts of incorporated Ex- 
 changes. In a leading case in Illinois,^^ the court 
 applied this limitation to an incorporated Ex- 
 change, and in the course of the opinion said : 
 
 " Where the corporation is created, there goes 
 with it the power to enact by-laws for its govern- 
 ment and guidance as well as for the guidance and 
 government of its members. This power is neces- 
 sary to enable a corporation to accomplish the 
 purpose of its creation. But by-laws must be 
 . . . for corporate purposes and always within 
 charter limits. The by-law in this case . . . 
 is not for corporate purposes, nor is it within the 
 purposes declared in the certificate of incorpora- 
 
 " People V. Chicago Live Stock Exchange, lYO HI. 556, 48 
 N. E. 1062, 39 L. E. A. 373, 62 Am. St. Eep. 404. 
 
Administrative Powers Over Members. 83 
 
 tion. It is, therefore, unlawful, as the corpora- 
 tion had no right to exercise this power of enact- 
 ing it under its charter. ' ' 
 
 (b) Even though a rule or by-law, however, 
 falls within the express or implied power of such 
 Exchanges, as set forth in the constitution or 
 charter, it must still meet the additional test that 
 it shall not be contrary to the ' ' law of the land. ' ' 
 While .this limitation is usually expressed in such 
 constitution or charter, even in its absence no rule 
 or by-law in contravention of law can be upheld.^® 
 In the case of the unincorporated Exchange this 
 applies as well to provisions of the constitution as 
 to rules or by-laws subsequently enacted." Like- 
 wise, in the case of the incorporated Exchange, 
 this principle applies, first, because no legislature, 
 by express proviso, could authorize the doing of 
 an illegal act, and second, because, unless the 
 charter expressly authorizes the Exchange to pass 
 the specific rule, it cannot be assumed that the 
 legislature intended to grant to its creation, an 
 artificial person, a power which a natural person 
 could not exercise.^* 
 
 A test whereby to determine whether a par- 
 ticular rule or by-law is " contrary to law," and 
 
 " See eases in note 9, supra. 
 
 " Heath v. New York Gold Exchange, 38 How. Pr. 168, 1 
 Abb. Pr. (ISr. S.) 251. In Hyde v. Woods, 94 U. S. 523, 24 
 L. Ed. 264, and Thompson v. Adams, 93 Pa. St. 65, court 
 considered legality of a section of the constitution and thus 
 inferred that it would in certain cases hold that invalid. 
 
 "-Bank v. Lamb, 26 Barb. 595. 
 
84 The Law of Commbecial Exchanges. 
 
 therefore invalid, can be no more definitely set 
 out in terms applicable to all states of fact than 
 the test as to whether such rule is within the 
 express or implied powers of the constitution or 
 charter of such Exchange. This, however, is not 
 alone true of this branch of the law. In the field 
 of contracts, for illustration, the courts have never 
 attempted to fix a hard and fast rule by which one 
 could determine whether any and all contracts 
 were in restraint of trade and commerce, and yet 
 the broad legal principle is none the less true that 
 any such contract is invalid whenever the court, 
 upon examination of the facts of the particular 
 case, shall determine that it is in unreasonable re- 
 straint of trade or commerce. 
 
 The legality of rules and by-laws of our Ex- 
 changes, whether incorporated or unincorporated, 
 is weighed by the same considerations which en- 
 ter into the determination of the legality or 
 illegality of contracts generally^ Here again the 
 extreme cases are easy of solution, but the cases 
 between such extremes present the difficulties. As 
 an illustration, a rule or by-law which authorizes 
 the commission of an assault and battery upon a 
 member as an incident of the ceremony of expul- 
 sion is invalid, on the fundamental legal principle 
 that no two persons, whether in an organization 
 or out of it, can legally agree to the commission 
 of a crime.^" Such a case presents the situation 
 where the test of illegality is comparatively easy 
 
 " State V. "Williams, Y5 N. 0. 134, 
 
Administkative Powers Ovek Membees. 85 
 
 to apply. At the other extreme is the case con- 
 taining the facts set out in Goddard v. Merchants 
 Exchange.^" A rule of the Kansas City Board of 
 Trade provided that the buyer should assume the 
 payment of all charges from the time when the 
 contract to deliver was made, thereby reversing 
 the legal principle ordinarily applied, which cast 
 such burden upon the seller until the delivery. 
 The court sustained the validity of this rule in 
 spite of its repugnance to a principle of the com- 
 mon law on the ground that there was nothing im- 
 moral or detrimental to sound public policy in 
 such a change. 
 
 The legality or illegality of the great mass of 
 rules or by-laws of our Exchanges which lie be- 
 tween these extremes is, however, not so easy 
 of determination. In the decision of such cases 
 it is most desirable at least that there exist 
 some comprehensive and well-defined test of 
 legality. A careful examination of numerous 
 cases where the courts have had under considera- 
 tion the question of the validity of such rules or 
 by-laws results in some such test as this : when a 
 particular rule or by-law can be seen to be essen- 
 tial to the maximum attainment of all lawful ob- 
 jects of such Exchanges, and at the same time the 
 injury to the public by its operation is but inci- 
 dental, such rule or by-law will be upheld. On 
 the other hand, when the object sought to be at- 
 tained is plainly .unlawful or, even though it be 
 
 *■ 9 Mo. App. 290. 
 
86 The Law op Commeecial Exchanges. 
 
 lawful, where the harm to the public through its 
 operation far outweighs the benefit to the Ex- 
 change and its members, the courts will declare it 
 invalid. Each rule or by-law must be examined 
 in the light of its particular facts and the estab- 
 lished legal principles applicable thereto. While 
 a more definite test would be more satisfactory, 
 none other has yet been suggested by the au- 
 thorities. 
 
 (c) It is not contended that the courts have ex- 
 pressly applied one or the other of these tests in 
 every case where they have declared a particular 
 rule or by-law of the Exchanges valid or invalid. 
 In every case, however, these have been the funda- 
 mental principles upon which the courts have un- 
 consciously proceeded. In fact, the great mass of 
 cases set forth no tangible principles whatever. 
 From time to time the courts have laid down the 
 following tests of validity of rules or by-laws: 
 first, they must not be contrary to the constitu- 
 tion or charter ; ^^ second, they must not be con- 
 trary to general law or constitutional or common- 
 law rights ; ^^ third, they must operate equally ; ^^ 
 fourth, they must not disturb vested rights ; ^* 
 
 "" See cases in note 8. 
 
 '^ See 10 Cyc. 356, notes 85, 86 and 87. 
 
 '° Goddard v. Merchants Exchange, 9 Mo. App. 290 ; People 
 ex rel. Stewart v. Young Mens' Society, 41 Mich. 67, 1 N. W. 
 931; Budd v. Multnomah Ey. Co., 15 Ore. 413, 15 Pac. 659, 
 3 Am. St. Eep. 169. 
 
 '^ People ex rel. Pulford v. Fire Department, 31 Mich. 458 ; 
 People V. Crockett, 9 Cal. 112; Gray v. Portland Bank, 3 
 Mass. 364, 3 Am. Dec. 156. 
 
Administeative Powees Ovee Membbes. 87 
 
 fif th, they must not operate retrospectively ; ^" 
 sixth, they must not be unreasonable ; ^° seventh, 
 they must not be in restraint of trade,^'' and many 
 more. In fact, if one took the reason expressed 
 in each opinion as a test of validity, there would be 
 almost as many different tests for deciding the 
 validity of rules or by-laws as there were rules or 
 by-laws considered. Moreover, there are dicta in 
 many cases which state that the courts possess a 
 broader power to control the rules or by-laws of 
 the incorporated association than the unincorpo- 
 rated, particularly with reference to the test of 
 " reasonableness."^' 
 
 In reality all these various tests can be easily 
 brought within the two broad considerations above 
 suggested : first, that all rules or by-laws shall be 
 within the express or implied powers delegated in 
 the constitution or charter, and second, they shall 
 not be illegal. Thus, the alleged test that such 
 rule or by-law shall not operate unequally or 
 retrospectively clearly falls within the first broad 
 test set out above, it being beyond the express or 
 implied powers granted to such association to 
 enact such a rule or by-law. Thus also the alleged 
 test that it must not restrain trade or infringe a 
 
 ""People ex rel. Pulford v. Fire Department, 31 Mich. 458; 
 Howard v. Savannah, T. TJ. P. Charlt. (Ga.) 1Y3. 
 
 "^ See 10 Cyc. 357, notes 94 and 95. 
 
 " See 10 Oyc. 359. 
 
 "= Moffatt V. Board of Trade, 111 S. W. 894, 900 (Mo. App.) ; 
 Farmer v. Board of Trade, 78 Mo. App. 557, 566; Elsas v. 
 Alford, 1 N. T. Oit. Court 123; Kehlenbeck v. Logeman, 
 10 Daly 447. 
 
88 The Law of Commekcial Exchanges. 
 
 constitutional or common-law right can be clearly 
 classed within the second broad test above set 
 forth. 
 
 Two of these alleged tests alone warrant further 
 attention at this point. The proposition that no 
 rule or by-law shall disturb rights which have be- 
 come vested, has been laid down repeatedly in the 
 cases and treatises dealing with the subject.^^ 
 The question has never been before the courts 
 where the ordinary rules of Exchanges were in- 
 volved, and it is difficult to conceive how the ques- 
 tion could arise in connection with the ordinary 
 business affairs of such associations. But it has 
 arisen in several cases of purely insurance or 
 benefit associations, and may arise wherever the 
 Exchange maintains such an adjunct to its ordi- 
 nary business pursuits. It has been held that a 
 mutual benefit association may, by an amendment 
 to its rules or by-laws, reduce the sick benefit of a 
 member even while he is sick,^° but that a death 
 benefit cannot be reduced after a member's death, 
 because, immediately upon the death of the in- 
 sured, the right of his personal representative and 
 heirs became vested.^^ This seems sound, both on 
 principle and authority. The sole means whereby 
 an association obtains the right to compel the ob- 
 servance of its rules or by-laws is the assent of 
 the members, either express or implied. In such 
 
 ^ See 10 Cyc. 357 and cases there cited. 
 "Poultney v. Bachmann, 31 Hun 49, 10 Abb. N. C. 253, 
 62 How. Pr. 466. 
 " Gundlach v. Germania Association, 49 How. Pr. 190. 
 
Administeative Powebs Over Members. 89 
 
 a case as we are now discussing, the third person 
 never has given his consent to be bound by such 
 rules or by-laws, and the power of the decedent 
 to assent thereto terminated upon his death. 
 While, as before indicated, this principle has 
 arisen only in cases of mutual benefit associa- 
 tions, yet it is equally applicable, should the ques- 
 tion arise, to the rules and by-laws of any associa- 
 tion, including an Exchange.'^ 
 
 (d) The remaining alleged test suggested by 
 the courts upon many occasions is, that no rule or 
 by-law of such exchange or association will be 
 valid if ' ' unreasonable ' ' A superficial examina- 
 tion of the opinions in many of these cases would 
 leave the impression that this test of " reasonable- 
 ness " was an independent principle in no way 
 connected wi'th any other test previously discov- 
 ered. Upon careful analysis, however, this is 
 found not to be true. The term " unreasonable " 
 is here, as in many other aspects of the law, an 
 abstraction. It presumes the existence of some 
 standard which is reasonable. When a court de- 
 clares a rule or by-law of such Exchange to be in- 
 valid because it is " unreasonable," we are no 
 nearer a clear conception of the court's meaning 
 than if it held the rule to be unreasonable because 
 invalid. In the legal field of negligence, for illus- 
 tration, the law declares that an individual's con- 
 duct is unreasonable which does not measure up 
 to the degree of care which would be exercised 
 
 '' People ex rel. Bartlett v. Medical Society, 32 N. Y. 187. 
 
90 The Law of Commeecial Exchanges. 
 
 under like circumstances by the ordinary run of 
 men.^^ 'Likewise, in passing upon the validity of 
 rules or by-laws of the Exchanges and other asso- 
 ciations^ the courts in fact, although their lan- 
 guage upon first impression would often seem to 
 indicate to the contrary, do not declare that a par- 
 ticular rule or by-law is unreasonable per se, but 
 rather that to hold it valid would require an un- 
 reasonable construction of the powers, both ex- 
 press and implied, inherent in such association by 
 virtue of its organic law. 
 
 This conclusion is further borne out by the fact 
 that whenever a court has declared a rule or by- 
 law of an Exchange invalid on the ground that it 
 was unreasonable, it has made an investigation 
 into the very same facts, i. e., the purposes and 
 objects of the association and the relation thereto 
 of the particular rule, which it would have had to 
 investigate in order to decide whether the rule or 
 by-law was within the implied powers of the asso- 
 ciation. Thus, in the case of an incorporated so- 
 ciety formed for the relief of members in sickness 
 and distress, and to assist countrymen to emi- 
 grate to the United States, the court held invalid, 
 because " unreasonable," a ■rule declaring that 
 vilifying any of the members was a crime against 
 the society.^* The rule in fact was invalid because 
 in no way connected with the objects of the so- 
 
 " See 29 Cyc. 42Y. 
 
 '^ Commonwealtli v. St. Patrick Benevolent Society, 2 Bin- 
 ney 441, 4 Am. Dec. 453. 
 
Administeative Powers Ovee Membees. 91 
 
 ciety. The court explained its decision in the 
 following manner : 
 
 " Every man who becomes a member looks to 
 the charter; in that he puts his faith and not in 
 the uncertain will of the majority of the members. 
 The offense of vilifying a member, or a private 
 quarrel, is totally unconnected with the affairs of 
 the society, and therefore its punishment cannot 
 be necessary for the good government of the 
 corporation. ' ' 
 
 Moreover, in several cases where the court de- 
 clared an " ex post facto ' ' rule or by-law invalid 
 on the ground that it was unreasonable, the real 
 principle applied was that it was not within the 
 express or implied powers of such association.^' 
 In People v. Medical Society,^" the defendant was 
 chartered for the promotion of medical science 
 but subsequently passed a rule establishing a fixed 
 schedule of charges which every member must 
 exact upon penalty of expulsion. The court held 
 the rule to be " unreasonable " and therefore in- 
 valid, but the true principle upon which it pro- 
 ceeded is observed in the following passage : 
 
 " Can it be said with any plausibility that the 
 establishment of a tariff of prices for medical 
 services was a legitimate object of the creation of 
 the corporation or that it was necessary or in any 
 way contributed to the accomplishment of the 
 
 " People ex rel. Pulford v. Fire Department, 31 Mich. 458. 
 " 24 Barb. 571. 
 
92 The Law of Commekcial Exchanges. 
 
 purposes or objects for which the law authorized 
 the corporation? " 
 
 In the case of People ex rel. Page v. Board of 
 Trade,^' the court, in holding a rule of the defend- 
 ant association valid which declared that any 
 member who failed to comply with a business con- 
 tract should be suspended until he did fulfill such 
 contract, said: 
 
 " It (the charter) gives the power of expulsion 
 and under that power the Exchange has adopted 
 this by-law, providing that if a member fails to 
 comply with a business contract made with an- 
 other member, he shall be expelled. ... It 
 certainly cannot be said that this rule was not 
 germane to the purposes for which the corpora- 
 tion was created. In our judgment, though it 
 might sometimes operate harshly, it is well 
 adapted to secure the objects we have named, and 
 preserve the high character and credit of the 
 Board. "^« 
 
 B. CONSIDEEATION OF SPECIFIC EuLES. 
 
 Thus far we have been reviewing the various 
 considerations which determine the validity or in- 
 validity of rules or by-laws in general. The in- 
 quiry has simply been, How do the Exchanges and 
 similar associations get such power to enact rules 
 for their self-government, and what are the gen- 
 
 " 45 111. 112. 
 
 " For other similar cases see notes 10 and 11. 
 
Administrative Powees Ovee Membees. 93 
 
 eral limitations upon the exercise of that power? 
 It remains to discover hovs^ the courts have applied 
 these general tests of validity to specific rules or 
 by-lavFs which are common to all Exchanges. 
 
 Section 19. Rules or By-laws Regulating Admis- 
 sion. 
 
 A logical and natural point at which to begin is 
 with those rules which regulate admission to mem- 
 bership in such Exchanges and lay down stand- 
 ards of eligibility. In the case of the unincor- 
 porated associations, all authorities are agreed 
 that they have absolute power to make any rules 
 prescribing the standards of eligibility they see 
 fit to make and unlimited power to apply them.^^ 
 As stated in the leading case of White v. Brow- 
 nell:*" 
 
 " This association is not organized in pur- 
 suance to any statute nor are the terms of mem- 
 bership fixed by principles of common law. It 
 follows that the agreement which the parties 
 make among themselves on the subject must estab- 
 lish and determine the rights of the parties on the 
 subject." 
 
 Inasmuch as the constitution and subsequent 
 
 '° White V. Brownell, 2 Daly 329, 4 Abb. Pr. N. S. 192, af- 
 firmed in 3 Abb. Pr. N. S. 318; Richardson v. Society, 58 N. 
 H. 187; Mayer v. Journeyman Stonecutters' Association, 47 
 N. J. Eq. 519, 20 Atl. 492; McKane v. Adams, 123 N. T. 
 609, 25 N. E. 1057, 20 Am. St. Rep. 785. 
 
 " 3 Abb. Pr. N, S. 318, 
 
94 The Law of Commercial Exchanges. 
 
 rules of such association constitute a contract be- 
 tween the parties, it is submitted that no stranger 
 to such contract can complain with any effect as 
 to any of its provisions. 
 
 Where such Exchange exists under a charter, it 
 is essential that the latter instrument contain a 
 clear and express provision granting the power to 
 control the admission of members. The presence 
 of this provision is one of the salient points of 
 difference between the private corporation for 
 profit and the incorporated Exchange. In the 
 former there exists no power to refuse member- 
 ship to any person who presents a certificate of 
 stock duly transferred to him, and such transferee 
 has an equitable remedy to compel such corpora- 
 tion to register his name upon the books of the 
 corporation.^^ In the case of the incorporated 
 Exchange, however, no such legal principle ap- 
 plies, primarily by reason of a provision in the 
 charter of all commercial Exchanges granting to 
 the corporation complete control over the admis- 
 sion of members. The control of membership by 
 such Exchange or association, where this power is 
 expressly granted in the charter, is no less abso- 
 lute than in the Exchange which is unincor- 
 porated.*^ 
 
 " See discussion in 10 Oyc. 605. 
 
 " Live Stock Commission Co. v. Live Stock Exch., 143 Lll. 
 210, 32 N. E. 274, 36 Am. St. Eep. 385, 18 L. R. A. 190; Mc- 
 Carthy Bros. Co. V. Chamber of Commerce, 105 Minn. 497, 
 117 N. W. 923, 21 L. E. A. (N. S.) 589 ; McCabe v. Emmons, 
 51 N. Y. Super. Ct. 219. 
 
Administeative Poweks Ovee Membees. 95 
 
 The rules of all commercial Exchanges, gen- 
 erally, provide two methods of obtaining mem- 
 bership therein, first, by the payment of an 
 initiation fee and receiving the required vote of 
 approval of the Exchange or its governing corh- 
 mittee, and second, by presenting an unimpaired 
 membership, which has been transferred to the 
 applicant by some member who desires to retire, 
 and likewise receiving the required vote of ap- 
 proval of such Exchange or its governing com- 
 mittee. No doubt has ever arisen as to the power 
 of the Exchanges over admissions in the first 
 situation. The very nature of such institutions, 
 whether incorporated or unincorporated, clearly 
 indicates the total lack of power in any court of 
 law or equity to force a certain body of men to 
 associate in business with another with whom they 
 decline to consort. The rules of admission may 
 be most unreasonable and their application to the 
 case of the candidate may be purely arbitrary, but 
 he has no relief. While this may well be a good 
 ground of complaint upon the part of a member, 
 it obviously cannot be urged by a total stranger.^^ 
 
 In the second situation above noted, the pro- 
 cedure is slightly different, although there is in 
 fact no less control in one case than the other. 
 Let us assume that the Exchange requires the 
 member in such a case to show two requisites for 
 admission, first, the valid transfer to him of an 
 unimpaired membership of a retiring member, and 
 
 " See cases in notes 39 and 42. 
 
96 The Law of Commebcial Exchanges. 
 
 » second, the approval of the governing board or 
 committee upon his application for admission. 
 The applicant shows a compliance with the first 
 requisite, but comes into court and complains that 
 for no reason whatever the Exchange has refused 
 to give the necessary approval, and accordingly 
 requests the court to mandamus the Exchange to 
 compel his admission. Now, even though we con- 
 sider the applicant as the owner of a property 
 right, in the form of the membership transferred 
 to him, which view, as we have seen, is favored by 
 some courts, yet the Exchange is the creator of 
 such right and as such can place any conditions 
 it sees fit upon the transfer of that membership 
 and the admission of the transferee. And within 
 the scope of its powers as authorized in the con- 
 stitution or charter, the Exchange by rule or by- 
 law has seen fit to require not alone the presenta- 
 tion of such a certificate of membership by the ap- 
 plicant but also the approval of the Exchange 
 itself or its governing committee, as concurrent 
 requisites for admission. And in the absence of 
 such approval as provided in the rules of such 
 Exchange, the law is clear that no power exists in 
 law or equity to compel the members to associate 
 in business with the applicant. This was well set 
 out by the Illinois Supreme Court in a leading 
 
 "Live Stock Commission Co. ■;;. Live Stock Exchange, 143 
 m. 210, 229, 32 N. E. 274, 36 Am. St. Eep. 385, 18 L. E. A. 
 190, 
 
Administeative Powees Ovee Membees. 97 
 
 " Before an applicant can become a member, 
 Ms application must, among other things, be in- 
 dorsed by two members, and must receive the 
 approval of at least seven members of the board 
 of directors, voting by ballot. Members and 
 directors of such corporations, in acting upon ap- 
 plications for membership, are necessarily en- 
 titled to a freedom which is not subject to judicial 
 compulsion. No two members can be compelled 
 to indorse an application, nor can any seven mem- 
 bers of the board of directors be compelled to vote 
 in its favor, but both are entitled to act upon their 
 own judgment and according to their own choice. 
 In other words,,a court of chancery will not under- 
 take to force upon a corporation of this character, 
 a member, against the will of those whose duty 
 it is to pass upon applications for membership." 
 
 Section 20. Rules or By-laws Regulating Re- 
 instatement. 
 
 The question of reinstatement is closely asso- 
 ciated with that of admissions, the only difference 
 in fact being that here a former member is the ap- 
 plicant, whereas in the former cases such applicant 
 was seeking admission for the first time. The same 
 legal principles are applicable in the one case as 
 in the other. Where a former member, who has 
 retired voluntarily or has been justly expelled 
 from the Exchange, desires re-admission, he 
 comes to all intents and purposes as one whose ap- 
 CoM. Exc. — 7. 
 
98 The Law of Commebcial Exchanges. 
 
 plication is presented for the first time/^ There 
 is one situation under this subject of reinstate- 
 ment, however, which the courts have never clearly 
 analyzed, and yet should be carefully distin- 
 guished-. This is the situation where the former 
 member demands re-admission by a writ of man- 
 damus on the sole ground that his expulsion was 
 illegal, the decree expelling him was therefore 
 voidj and hence he never in fact ceased to be a 
 member. The decisions where an expelled mem- 
 ber has gained re-admission by such writ of man- 
 damus do not clearly indicate that this was the 
 principle upon which the courts proceeded. And 
 yet upon no other legal principle, than this can 
 these decisions be supported. Unless this be true, 
 the authorities where such petitions for mandamus 
 have been granted can be supported only on the 
 theory that there resides in the courts a power to 
 compel an Exchange or other association to admit 
 to membership a person whom it was unwilling 
 voluntarily to admit. This principle, as we have 
 seen, is untenable. 
 
 Section 21. Rules or By-laws Regulating Enjoy- 
 ment of Membership. 
 
 (a) Power to enact rules or by-laws providing 
 for expulsion or suspension of members — (1) 
 How this power is obtained. — Eules or by-laws 
 authorizing the expulsion or suspension of mem- 
 
 " Baum V. New York Ck)tton Exchange, 4 K T. Supp. 207, 
 21 Abb. N. C. 253. 
 
Administeative Powers Ovee Membees. 99 
 
 bers under certain stipulated conditions are found 
 in all Exchanges. Such power of disfranchise- 
 ment is never permitted in a private corporation 
 for profit unless the charter expressly so pro- 
 vides.*' The inquiry, therefore, becomes perti- 
 nent, why such power is found in the Exchanges, 
 whether they be incorporated or unincorporated. 
 The answer is found in the very nature of such 
 institutions. The private corporation for profit is 
 organized primarily for gain, in accordance with 
 the usual standards of commercial dealings appli- 
 cable thereto. The members thereof do not con- 
 template dealing with one another, but only with 
 the public. The presence of this power is in no 
 way essential to the attainment of the objects of 
 the corporation. In the case of comnlercial Ex- 
 changes, however, the situation is radically dif- 
 ferent. These organizations have been established 
 not for profit but simply to promote and maintain 
 a definite standard of commercial conduct, which' 
 object, except by the enforcement of such rules, 
 could not be realized. The relation between mem- 
 bers primarily is one of trust and confidence in one 
 
 "Westeott V. Mining Co., 23 Mich. 145; People ex rel. 
 Pulford V. Fire Department, 31 Mich. 457; Matter of Long 
 Island R. R. Co., 19 Wend. 37, 32 Am. Dec. 429 ; People ex 
 rel. Elliott V. New York Cotton Exchange, 8 Hnn 216 ; Budd 
 V. Multnomah Ey. Co., 15 Ore. 413, 3 Am. St. Eep. 169, 
 15 Pae. 659; Cartwright v. Dickinson, 88 Tenn. 476, 17 Am. 
 St. Rep. 910, 12 S. W. 1030, 7 L. R. A. 706, 1 Thompson on 
 Corporations, sec. 853. 
 
100 The Law of Commeecial Exchanges. 
 
 another. In a leading case,^' the court called at- 
 tention to this fact in the following language: 
 
 " The business transacted by such organiza- 
 tions and the methods pursued are unusual and 
 special. The members do not deal at arm's length 
 to the same extent as under ordinary circum- 
 stances. An unusual degree of confidence is re- 
 posed by each member in his fellow members, not 
 because human nature is more trustful and confid- 
 ing in the Chamber of Commerce than elsewhere 
 in the marts of trade, but because the business is 
 transacted under unusual self-imposed restric- 
 tions and with extraordinary provisions for en- 
 forcing verbal agreements and understandings 
 which possibly may not be enforceable in the 
 courts." 
 
 Accordingly, it is obvious that, aside from the 
 question whether the Exchange in fact has such 
 power of expulsion or suspension in a particular 
 .case, the presence of such authority is both natural 
 and necessary. 
 
 Our first problem is to discover in what ways 
 the Exchanges may obtain this power of making 
 rules or by-laws providing for the expulsion or 
 suspension of their members. The most natural 
 way, of course, and, it might be added, the ordi- 
 nary way, is by express grant in the charter or 
 constitution to ' ' expel such persons as it shall see 
 
 " McCarthy Bros. Co. v. Chamber of Commerce, 105 Minn. 
 49Y, 117 N. W. 923, 21 L. E. 'A. (N. S.) 589. 
 
Administbative Poweks Oveb Membees. 101 
 
 fit." *' The only question arises when such power 
 is not expressly delegated in the constitution or 
 charter of an association. In such a case, can the 
 authority to make and enforce rules relative to the 
 expulsion or suspension of members be reasonably 
 implied? 
 
 As we have seen above, it is well settled, both 
 upon principle and authority, that such power of 
 expulsion is never implied in the case of a cor- 
 poration for profit. The simple legal principle at 
 the basis of these decisions is that the possession 
 of such power by a private corporation for profit 
 is in no way essential to the attainment of the 
 objects for which they were organized. Accord- 
 ingly, such power will not be allowed by implica- 
 tion. In the case of the Exchanges, however, 
 where the possession of the power is absolutely 
 essential to the permanency of the institution it- 
 self and the attainment of the objects for which it 
 was established, such reasoning does not apply. 
 Accordingly, on principle, the power to expel their 
 members for certain offenses should be implied in 
 the case of the Exchanges, whether incorporated 
 or unincorporated. 
 
 This position is sustainable not only on prin- 
 ciple but also by the weight of authority. Let us 
 
 " Section 4 of the charter of the New York Cotton Ex- 
 change provides that the " said corporation shall have povrer 
 to admit new memhers and expel any memher, in such man- 
 ner as may he provided hy the hy-laws." Section 4 of the 
 charter of the N. Y. Produce Exchange is identical with the 
 ahove. 
 
102 The Law of Commeecial Exchanges. 
 
 begin first with the cases dealing with the incor- 
 porated associations and then proceed to those 
 which are unincorporated. The case of Evfns v. 
 Philadelphia Club/' decided in 1865, is generally 
 cited as the leading case against the above proposi- 
 tion. The facts were as follows: The defendant 
 was an incorporated pleasure club owning prop- 
 erty valued at about $3,000. The plaintiff having 
 been expelled from the club for a personal assault 
 upon a fellow member, in accordance with a by- 
 law which allowed the club to expel any memebr 
 guilty of conduct which was disorderly or injur- 
 ious to the interests of the- club, brought a writ of 
 mandamus to obtain reinstatement. The charter 
 of the club in none of its provisions gave to the 
 corporation in express terms the right of expul- 
 sion. The lower court granted the writ. On ap- 
 peal, the decision of the lower court was affirmed 
 by a divided court, but without opinion, and ac- 
 cordingly the opinion of the lower court alone has 
 come down to us. The decision, upon analysis, 
 stands for the proposition that in any corpora- 
 tion owning property, no power of expulsion can 
 be exercised unless expressly conferred by the 
 charter. 
 
 If this decision be sound, it must follow that 
 such power of expulsion from a corporation, 
 whether organized for profit qv not, will never be 
 implied, because, as a practical matter, a corpora- 
 tion which did not own some property could hardly 
 
 " 50 Pa. St. 107. 
 
Administeative Powers Oveb Members. 103 
 
 ever be found. In the light of subsequent cases, 
 however, which are in decided conflict with it, the 
 authority of this case is greatly impaired. In the 
 first place, at that time the incorporated associa- 
 tion which we are now considering was rare, and 
 the distinction herein suggested had never been 
 made by the courts or even suggested to them. 
 The court in the Evans case was acquainted with 
 but two types of corporation : first, municipal cor- 
 porations, second, private corporations for profit. 
 All the authorities cited by the court in that case 
 are those of attempted expulsion from either one 
 or the other of these classes of corporations. 
 Furthermore, the language of the decisions was 
 taken almost verbatim from a section of an old 
 treatise on the law of corporations, where the 
 writers were treating, by their own statement, 
 only cases relative to private corporations for 
 profit.^" 
 
 The later authorities dealing with facts in actual 
 cases similar to those in Evans v. Club, supra, 
 would seem to leave that case suspended, as it 
 were, in space. In the case of Commonwealth v. 
 Union League of Philadelphia,"^ the facts were 
 almost identical with the earlier case, with the 
 exception that here the power to make and enforce 
 rules relative to expulsion was granted in the 
 charter. While all that the Supreme Court of 
 Pennsylvania said in delation to the Evans case is 
 
 " Angell and Ames on Corporations, section 410. 
 •"ISS Pa. St. 301, 20 Am. St. Eep. 8Y0, 19 Atl. 1030, 8 
 L. E. A, 196. 
 
104 The Law op Commebcial Exchanges. 
 
 pure dicta, yet it clearly shows the judicial state 
 of mind in that jurisdiction. On page 323 the 
 court said: 
 
 " The Union League, although not a pro- 
 prietary corporation, cannot in any strict sense 
 be considered a joint-stock or moneyed corpora- 
 tion ; its objects and purposes, as well as its man- 
 agement, are of a purely patriotic and social, and 
 not of a financial or monetary, character. Al- 
 though authorized to hold property, real and per- 
 sonal, to a certain limited extent, for the promo- 
 tion of the objects of the league, it is plainly dis- 
 tinguishable from such corporations as are organ- 
 ized for business and for purposes of gain, and 
 this is fully illustrated in the present conduct of 
 its affairs. In the by-laws it is provided that ' no 
 member shall receive any profit, salary, or emolu- 
 ment from the funds of the league.' Members 
 are admitted, not upon payment of the estimated 
 value of a share or interest in the property of the 
 league, but of a merely nominal sum as an ad- 
 mittance fee, and are charged with the payment 
 of an annual tax of $25 for the support of the 
 league, whilst their franchise and property rights 
 are not inheritable, but continue for life, or dur- 
 ing membership alone." 
 
 Because of this, the court declared that the prin- 
 ciple set forth in the Evans case did not apply to 
 this corporation. 
 
 The case of People ex rel. Pinckney v. N. Y. 
 
Administeative Poweks Over Membebs. 105 
 
 Board of Fire Underwriters,''^ a New York case, 
 is not only squarely in line with the facts of the 
 Evans case but is decisively opposed to the de- 
 cision in that case. The defendant was an incor- 
 porated Board of Fire Underwriters, the charter 
 of which did not grant in express terms the power 
 of expulsion. The corporation subsequently made 
 a by-law or rule establishing certain rates of com- 
 mission for writing insurance, and in addition pro- 
 vided for the expulsion of any member who 
 charged less than the prescribed rates. The cor- 
 poration also owned personal property to the 
 value of $50,000. The plaintiff was found guilty 
 of violating this rule or by-law, and forthwith ex- 
 pelled. He then brought a writ of mandamus for 
 reinstatement on the ground that the rule or by- 
 laws was invalid because not authorized in the 
 charter. The court sustained the validity of the 
 rule or by-law and denied the writ of plaintiff. 
 On page 251 the court said : 
 
 " It was in no sense whatever a trading cor- 
 poration ; and no part of the assessments paid or 
 collected was afterwards to be returned to the 
 organizations or agencies from which they should 
 be received. For those reasons it was not a cor- 
 poration from which its members could not be 
 expelled because they were entitled to proprietary 
 interests ^n the capital or earnings. It was 
 merely an organization formed for promoting the 
 proper transaction and management of the busi- 
 
 "'Y Hun 248. 
 
106 The Law of Commekcial Exchanges. 
 
 ness of insurance, by its members, in uniform 
 manner. And its usefulness and success de- 
 pended, in a very great measure, upon their faith- 
 ful observance of its rules and regulations. . . . 
 And, for that reason, the corporation necessarily 
 possessed the power of expulsion over members 
 violating their obligations in that respect. It 
 could not exist without it. If they could violate 
 the rules and by-laws lawfully made by it, and 
 still insist upon their membership, the object for 
 which the corporation was formed would at once 
 be defeated." ^^ 
 
 Where the Exchange is unincorporated, while 
 there would seem to be less rather than more rea- 
 son to doubt the possession of the inherent power 
 to make rules or by-laws providing for expulsion 
 or suspension of members, yet there seems to be 
 no authority squarely in point. Dicta in several 
 English cases,^* and the opinion of a learned legal 
 writer ^^ can be cited in opposition to the presence 
 of such authority, whereas dicta in several Ameri- 
 can eases ^'' seem to hold a contrary view. In this 
 
 '^ Also see dicta to same ejffect in People ex rel. Thacher v. 
 New York Commercial Asso., 18 Abb. Pr. 271, 283, and 
 People ex rel. Page v. Board of Trade, 45 111. 112. 
 
 "^See opinion of Jessel, M. E., in Dawkins v. Antrobus, L. 
 E. 17 Cb. Div. 615, 620, L. T. N. S. 557, and Innes v. Wylie, 
 1 Car. & K. 257. 
 
 °' Niblack on Mutual Benefit Societies, sections 55-57. 
 
 °°Wbite V. Brownell, 2 Daly 329, 4 Abb. Pr. N. S. 162; 
 Leech v. Harris, 2 Brewst. 571; Otto v. Union, 75 Cal. 308, 
 17 Pac. 217, 7 Am. St. Eep. 156; but see District Lodge v. 
 Cohen, 20 111. App. 335. 
 
Administrative Powers Over Members. 107 
 
 unsatisfactory state of the authorities, we are war- 
 ranted in venturing a conclusion upon principle 
 alone. Certainly the power of expelling or sus- 
 pending members for proper causes is no less es- 
 sential to the attainment of the objects of the 
 unincorporated than the incorporated Exchange, 
 in which latter case, it has been seen, the pre- 
 ponderance of authority clearly recognizes the ex- 
 istence of such inherent power. We have also 
 seen that even though the constitution was silent, 
 as to the power of such unincorporated Exchange 
 to make rules or by-laws in general, yet, by virtue 
 of its status as such association, the power can be 
 reasonably implied to make all such rules or by- 
 laws as are within the scope of the objects of the 
 association and are not illegal. If this be sound, 
 and if the power to expel or suspend be necessary 
 in the case of the incorporated association, as we 
 have seen the authorities are agreed, it must fol- 
 low that the power to make and enforce rules and 
 by-laws relative to the expulsion or suspension of 
 members arises equally in the case of an unincor- 
 porated Exchange which has the "same objects and 
 only differs from the former in the fact that one 
 exists by reason of a charter and the other by 
 virtue of a constitution. 
 
 The consideration of the legal authorities thus 
 far Avill, it is submitted, warrant the following con- 
 clusions : The power to expel or suspend members 
 is never implied in the case of a corporation or 
 private association for profit, but must be granted 
 
108 The Law of CoMMEBcaAL Exchanges. 
 
 in express terms. This power, however, will be 
 implied, by the better reasoned authorities, in the 
 case of incorporated or unincorporated Ex- 
 changes, on the ground that it is an essential ele- 
 ment of their existence, and the only means 
 whereby it can attain the objects for which they 
 were formed. Where such power is expressly 
 delegated in the charter or constitution, which is 
 the normal situation at least in the case of all com- 
 mercial Exchanges, no question of the existence of 
 the power obviously can arise. It has, and can 
 exercise, the power to expel its members for 
 proper cause by reason of express grant from the 
 State or the mutual agreement of all parties as 
 represented in the constitution. 
 
 (2) What causes can be made ground for ex- 
 pulsion or suspension of members. — Accordingly, 
 the Exchange, whether incorporated or not, has 
 the authority and power to pass rules or by-laws 
 for the expulsion or suspension of its members, 
 first, where the right is expressly delegated, and 
 second, even in the absence of express delegation 
 it will be implied. Therefore, as a practical 
 matter, it is of no significance in the case of 
 the incorporated or unincorporated Exchanges 
 whether such express delegation of power to expel 
 or suspend its members be present or absent in 
 the charter or constitution. This conclusion is 
 ventured with reference solely to the right of ex- 
 pulsion or suspension. Whether the absence of 
 such express delegation of power to control the 
 
Administrative Powees Ovee Membees. 109 
 
 membership in any other way changes the essential 
 status of such association, is a different matter. 
 Upon this proposition, at least, the authorities 
 are in perfect accord, that the power of such Ex- 
 changes to make rules or by-laws relative to ex- 
 pulsion or suspension or to perform the act of 
 expulsion or suspension is no broader where such 
 power is expressly delegated than where it is im- 
 plied. Although but one case °^ expressly declares 
 this to be true, yet it is settled by an overwhelm- 
 ing weight of authority, that there are three 
 causes only for which members may be legally 
 expelled, and the courts in declaring this have 
 made absolutely no distinction between cases 
 where there was an express grant and those where 
 th«re was not. These three are : first, offenses of 
 an infamous nature indictable at common law. 
 Some of the cases under this proposition hold 
 that the member must have been found guilty in 
 a court of law before his expulsion ; ^' second, 
 offenses against the corporator's duty to the co;"- 
 poration, and third, offenses compounded of the 
 two.'« 
 
 " State ex rel. Graham v. Chamber of Commerce, 20 Wis: 
 68. 
 
 "^ Comjmonwealth v. St. Patrick Benev. Society, 2 Birmey 
 441, 4 Am. Dec. 453; Leech v. Harris, 2 Brewst. (Pa.) 5Yl; 
 Fawcett v. Charles, 13 Wend. 4Y3. 
 
 °° Cases where there was a grant : State ex rel. Graham v. 
 Chamber of Commerce, 20 Wis. 68 ; People ex rel. Thacher v. 
 New York Commercial Association, 18 Abb. Pr. 2Yl ; People 
 V. Medical Society, 24 Barb. 570; People ex rel. Page v. 
 
110 The Law of Commebcial Exchanges. 
 
 This three-fold classification has its origin in 
 this country in the case of Evans v. Philadelphia 
 Club,"" decided in 1865, but can be traced back in 
 England for many years prior to the latter date. 
 The above rules were first applied in the case of 
 municipal corporations, and accordingly the court 
 in Evans v. Club was only able to cite in support 
 of its conclusion cases of municipal corporations 
 and a treatise where the authors, as is clearly 
 shown by the context, did not have in mind the 
 distinction between a corporation for profit and 
 one not organized for profit which has been sug- 
 gested herein, but rather that between a corpora-, 
 tion which owned property and one which did not. 
 While, as we have seen, the decision in the Evans 
 case has been thoroughly discredited by later de- 
 cisions in this country, yet the three-fold test laid 
 down by that court has been accepted in all subse- 
 quent decisions and may now be considered 
 settled. 
 
 Accordingly, the Exchanges, whether incor- 
 porated or not, may expel or suspend members 
 
 Board of Trade, 45 HI. 112 ; Commonwealth v. Union League, 
 135 Pa. St. 301, 20 Am. St. Eep. 870, 19 Atl. 1030, 8 L. E. A. 
 195 ; Society for Visitation v. Commonwealth, 52 Pa. St. 125 ; 
 White V. Brownell, 4 Abb. Pr. N. S. 193, 2 Daly 329. Cases 
 where was no grant: Commonwealth v. St. Patrick Benev. 
 Society, 2 Binney 441, 4 Am. Dec. 453; Leech v. Harris, 2 
 Brewst. 5Tl; Fawcett v. Charles, 13 Wend. 473; Evans v. 
 Philadelphia Club, 50 Pa. St. 107; Weiss v. Musical Union, 
 189 Pa. St. 446 ; Commonwealth v. Guardians of the Poor, 6 
 Serg. & E. 469. 
 "'' 50 Pa. St. 107. 
 
Administrative Powees Oveb Membebs. Ill 
 
 for acts whicli properly come within any one of 
 the three classes above mentioned, and if they 
 possess the power to perform the act of expulsion 
 or suspension, it necessarily follows that they may 
 pass rules or by-laws providing for expulsion or 
 suspension under such. circumstances. It does not 
 follow, however, that a rule or by-law which is 
 within this three-fold test is without the two broad 
 tests which are applicable to all rules or by-laws 
 in general. We have seen in a previous portion 
 of this chapter °^ that rules' and by-laws enacted by 
 such Exchanges and similar associations must 
 come within two tests : first, they must be within 
 the express or implied power of the association; 
 second, they must not infringe upon any fixed 
 principle of law. It necessarily follows that rules 
 relative to expulsion or suspension likewise must 
 meet these two tests. The three classes of offenses 
 above set forth, for which members may be ex- 
 pelled, are limitations upon that specific power of 
 expulsion or suspension, and in no way influence 
 the considerations which enter into the validity or 
 invalidity of all rules in general. There seems to 
 be scant authority upon this proposition, but what 
 there is clearly sustains it. Furthermore, all 
 cases holding that an Exchange cannot expel mem- 
 bers for violation of certain by-laws which are 
 invalid even though the acts of such member come 
 within this three-fold classification, can be sus- 
 
 " See section 18, supra. 
 
112 The Law of Commercial Exchanges. 
 
 tained only on this ground."^ In People ex rel. 
 Thacher v. Commercial Association"^ tlie court 
 pronounced a dictum to the effect that the breach 
 of a void by-law is not an act contrary to one's 
 duty as a corporator because * ' the answer to such 
 a position is plain, positive and unequivocal. 
 The by-law was unauthorized, and was not sanc- 
 tioned by any rule, of law or principle applicable 
 to the institution which enacted it." 
 
 (3) By whom must the power to expel or sus- 
 pend be exercised. — The rules or by-laws of 
 most commercial Exchanges and similar associa- 
 tions provide for a delegation of the power to 
 expel or suspend members to a select committee 
 known under various names, such as the board of 
 directors, governing committee, board of man- 
 agers, etc. The objection has been raised in many 
 cases to the validity of such delegation of power 
 in the absence of express power so to do in the 
 charter or constitution. It is submitted that an 
 analysis of all the authorities will show that this 
 question is largely one of the construction of the 
 particular charter or constitution before the court 
 in each case. In the case of Pitcher v. Board of 
 Trade,"* the court said, on page 419 of the opin- 
 ion: 
 
 " Expulsion by action of the directors is one 
 mode or manner of expulsion ; expulsion by a ma- 
 
 °" See section 32, post. 
 " 18 Abb. Pr. 3Y1. 
 "121 HI. 412. 
 
Administrative Poweks Ovee Members. 113 
 
 jority vote of ail the corporators is another mode 
 or manner of expulsion, A rule prescribing the 
 former mode is as much authorized and justified 
 by the language of the charter (which provided 
 that the corporation shall have the right to 
 ' expel such persons as they may see fit in manner 
 to be prescribed by the rules ') as a rule prescrib- 
 ing the latter mode. ' ' 
 
 In the case of State ex rel. Graham v. Board of 
 Trade,°° the charter provided that the " corpora- 
 tion shall have the power to expel any member as 
 they may see fit." Under this provision it was 
 held that the power to expel members could not 
 be delegated to the Board of Directors of the Ex- 
 change, the court saying, at page 77 of the opin- 
 ion: 
 
 " We are of the opinion that disfranchisement 
 of a member is not a part of the general manage- 
 ment of the business of the corporation entrusted 
 to its board of directors, but is a power confided 
 to the body of corporators." 
 
 Later the Milwaukee Chamber of Commerce 
 secured an amendment to its charter, so that dele- 
 gation of power to expel or suspend members was 
 expressly provided for in certain cases, and in the 
 case of State ex rel. Cuppel v. Chamber of Com- 
 merce,°° where the same objection was made to the 
 delegation as in the former case, the court dis- 
 allowed the claim on the express ground that the 
 
 . "^ 20 Wis. 68. 
 ™47 Wis. 670, 3 N. W. 760. 
 Com. Bxc. — 8, 
 
114 The Law op Commeecial Exchanges. 
 
 former difficulty had been avoided by sucli amend- 
 ment. In other cases, where such delegation has 
 been permitted, the objection raised in the Wis- 
 consin cases has never been made, and the court, 
 without deciding upon what particular legal prin- 
 ciples it proceeded, has either allowed or dis- 
 allowed such delegation.^' 
 
 (4) In what manner must the power to expel 
 or suspend members he exercised. — The ques- 
 tion has arisen in several cases, whether such as- 
 sociation may expel a member under certain con- 
 ditions without going through the ceremony of a 
 trial. There would seem no doubt upon the propo- 
 sition that, in the absence of a rule or by-law 
 clearly authorizing such unusual procedure, the 
 association cannot expel a member without afford- 
 ing him a full and impartial hearing upon the 
 merits of his case and an opportunity to present 
 his defense."^ Where, however, there is in exist- 
 ence a rule or by-law which clearly provides for 
 such a proceeding, a different question is pre- 
 sented. Such a situation usually arises where a 
 member, having failed to pay his dues, has been 
 expelled under a rule or by-law which provides, 
 ' ' And in case of the failure of any member to pay 
 his annual assessment during the whole of any 
 fiscal year of the association, such failure shall of 
 itself operate as a forfeiture and cancellation of 
 
 " See Blumenthal v. Cincinnati Chamber of Commerce 7 
 Week. Law Bui. 327, 8 Ohio Dec. (Eeprint) 410, and Green 
 V. African Methodist Society, 1 Serg. & E. 254. 
 
 " See section 31, post, sub-section (e). 
 
Administrative Powees Oveb Members. 115 
 
 the membership of such member and of all rights 
 and privileges thereunder." 
 
 The vahdity of the forfeiture of a membership 
 under the provisions of such a rule has been 
 squarely sustained in one case in Illinois,"' but 
 denied in other cases." The latter cases, however, 
 upon careful analysis can be explained on the 
 theory that the particular rules involved did not 
 clearly provide for such forfeiture, and the courts 
 in such cases were disposed to dissolve all doubt 
 in favor of the niember. There can be no doubt, 
 however, that the member may, by a clear, un- 
 equivocal contract agree to expulsion by this 
 method just as well as by any other. There is 
 certainly nothing intrinsically illegal about it. 
 The only question is, whether he did in fact agree 
 to such a contract with the association. This, 
 however, is a pure question of fact in each case, 
 and in no way touches the question of the power 
 of the association to pursue such a method, if it 
 be authorized in express terms. This principle 
 was well expressed by the court in the case of 
 Medical Society v. Weatherly,''^ in the following 
 language : 
 
 " It is competent for any member of such an 
 association to bind itself by agreement to forfeit 
 
 ™ People ex rel. Dodson v. Board of Trade, 224 HI. 3Y0. 
 
 "Medical Society v. Weatherly, 75 Ala. 248; Common- 
 wealth V. Penn. Beneficial Association, 2 Serg. & R. 140; 
 People ex rel. Pulford v. Fire Department, 31 Micli. 4S8. 
 
 " 75 Ala. 248. 
 
116 The Law of Commeecial Exchanges. 
 
 his membersliip upon a specified condition, and 
 that such forfeiture may be made to take effect at 
 a time fixed, without special or personal notice to 
 the party in default. ' ' 
 
 Another situation is well worth our attention at 
 this point. Let us suppose that the charter or 
 constitution of such Exchange grants the power 
 of expulsion or suspension in general terms, and 
 in accordance with this grant of power, the Ex- 
 change has passed various rules or by-laws pro- 
 viding for the expulsion or suspension of members 
 in particular cases. The question has arisen in 
 several instances, whether such exchange or asso- 
 ciation may expel or suspend its members for 
 offenses which cannot be classed within the specific 
 rules enacted, but which nevertheless are within 
 one of the three general classes of offenses above 
 enumerated " for which expulsion or suspension 
 may be inflicted. If, as we have seen,^^ an Ex- 
 change may expel or suspend members who com- 
 mit offenses within any one of these three classes 
 even without any specific rules whatever, it cer- 
 tainly does not follow that, by providing for such 
 penalty by rules in certain cases, the Exchange 
 thereby forfeits its rights to expel members for 
 offenses falling within the above three-fold classi- 
 fication, although not covered by these rules.'* 
 
 (b) Power to enact rules and by-laws for fining 
 
 " See section 18, supra. 
 " See section 18, supra. 
 " Leech, v. Harris, 2 Brewst. 5Yl. 
 
Administrative Powers Ovee Members. 117 
 
 members. — Imposing a fine upon a member is, 
 generally speaking, the method employed for the 
 punishment of less serious offenses against the 
 rules of such associations. No difficulty arises, as 
 a practical matter, at this point, for the reason 
 that the charters or constitutions of modern com- 
 mercial Exchanges almost without exception pro- 
 vide for such power in express terms, and usually 
 prescribe the maximum fine and the manner 
 whereby it can be collected, if the member refused 
 to pay iV^ Moreover, there would seem to be 
 hardly any greater difficulty in recognizing such 
 power 'even where it is not expressly delegated in 
 the charter or constitution. It is one of the most 
 effective means of discipline which can be exer- 
 cised. The courts have upheld the power of pri- 
 vate corporations for profit to enforce their by- 
 laws by reasonable fines.'"' If allowable in such a 
 case, it cannot logically be denied to the Ex- 
 changes and similar associations. If such asso- 
 ciation has the broad power of discipline, by the 
 express terms of its charter or constitution, can 
 the power be denied to it to choose the particular 
 method of carrying out such discipline, provided 
 such method is neither unreasonable nor illegal? 
 
 " Thus section 11 of the charter of the Chicago Board of 
 Trade provides that " said corporation may inflict fines upon 
 any of its memhers, and collect the same, for breach of its 
 Rules, Regulations, or By-laws ; but no fine shall exceed five 
 dollars." 
 
 ™ See 10 Cyc. 362, note 23, 
 
118 The Law op Commeecial Exchanges. 
 
 The right to fine members is well within these 
 qualifications, and that it can be exercised by such 
 Exchange even without an express delegation of 
 power in its charter or constitution is settled both 
 on principle and authority. 
 
 Section 22. Rules or By-laws Allowing Prefer- 
 ences to Exchange Creditors. 
 
 Upon all modern Exchanges, both incorporated 
 and unincorporated, there is one rule which ap- 
 pears to be peculiar to these institutions. This 
 is the rule which provides, in substantially the 
 same general terms, that in case of the insolvency 
 or death of a member the proceeds from the sale 
 of the seat of such member shall be applied first 
 to the claims of creditors who are fellow mem- 
 bers on such Exchange. 
 
 (a) Source of power to establish such prefer- 
 ence. — The question has been before the courts 
 on many occasions to determine whether such a 
 rule is valid, the claim being, first, that such rule 
 is beyond the authority of such Exchange to 
 make, and, second, that it is further invalid as 
 within the prohibitions of the Federal Bankruptcy 
 Act. Whatever objection there may be upon prin- 
 ciple to the validity of this rule, it is submitted 
 that the long line of authorities sustaining it in 
 spite of these contentions, make the question one 
 of academic rather than practical interest.'^'' It 
 
 "Hyde v. Woods, 94 U. S. 523, 24 L. Ed. 264; Belton v. 
 Hatch, 109 N. T. 593, 17 N. E. 225, 4 Am. St. Eep. 495 ; In re 
 
Administrative Powees Ovee Membees. 119 
 
 would seem, however, that such rule can be sup- 
 ported on principle apart from authorities. 
 Avoiding the disputed question as to whether such 
 membership in an Exchange is a property right or 
 merely a privilege, in either case the right to such 
 membership arises fundamentally from a grant by 
 the association. Whether such association be in- 
 corporated or unincorporated, a member obtains 
 the rights and privileges which go with such mem- 
 bership solely by virtue of the act of such Ex- 
 change in conferring upon him certain rights and 
 privileges. Accordingly, the Exchange itself, as 
 the grantor of these rights and privileges, may 
 place upon them any restrictions which it may see 
 fit so long as the same are reasonably necessary 
 and are not positively illegal. Considering the na- 
 ture of the business transacted on such Exchange, 
 its unusual risks and the impossibility of sur- 
 rounding these transactions with the same safe- 
 Gregory, 1Y4 Fed. 629; Singerly's Admin, v. Johnson, 3 
 Week. Not. Cas. 541 ; Leech v. Leech, 3 Week. Not. Gas. 542 ; 
 Moxey's Appeal, 9 Week. Not. Cas. 441; Zell v. Baltimore 
 Stock Exchange, 102 Md. 489, 62 Atl. 808, 4 L. E. A. (N. S.) 
 435 ; Thompson v. Adams, 93 Pa. St. 55. See also In re Gay- 
 lord, 111 Fed. 117; Sheppard v. Barrett, IT Phila. Eep. 145; 
 Cochran v. Adams, 180 Pa. St. 289, 36 Atl. 854; Shannon v. 
 Cheney, 156 Cal. 56Y, 105 Pac. 588 ; Bemheim v. Keppler, 69 
 N. T. Supp. 803, 34 Misc. 321; In re Hayes, 75 N. T. Supp. 
 312 ; Haight v. Dickerman, 18 N. T. Supp. 559, 63 Hun 632, 
 45 N. Y. St. Eep. 128; Weston v. Ives, 97 N. T. 222; Cohen 
 V. Budd, 103 N. Y. Supp. 45, 52 Misc. 217; McCarthy Bros. 
 Co. V. Chamber of Commerce, 105 Minn. 497, 117 N. W. 923, 
 21 L. E. A. (N. S.) 589; State ex rel. Crane v. Chamber of 
 Commerce, 77 Minn. 308. 
 
120 The Law of Commercial, Exchanges. 
 
 guards which are provided for by men in other 
 lines of business, it would seem well within the 
 power of the Exchange to give each member this 
 security at least, that he can in any case, even 
 without express stipulation in the contract, exer- 
 cise a lien upon the seat of the member with whom 
 he is trading in case of the latter 's inability to 
 meet his obligations. 
 
 The case of Hyde v. Woods " is chiefly responsi- 
 ble for the practically unanimous line of decisions 
 upholding the validity of such a rule or by-law. 
 In the course of its opinion, the Supreme Court 
 of the United States, speaking through Justice 
 Miller, said: " Though we have said it (the mem- 
 bership) is property, it is incumbered with con- 
 ditions when purchased, without which it could 
 not be obtained. It never was free from the con- 
 ditions of article 15, neither when Fenn bought, 
 nor at any time before or since. That rule entered 
 into and became an incident of the property when 
 it was created, and remains a part of it into whose 
 hands soever it may come. As the creators of 
 this right — this property — took nothing from 
 any man's creditors when they created it, no 
 wrong was done to any creditor by the imposition 
 of this condition. ' ' And again in the case of Bel- 
 ton V. Hatch, 109 N. Y. 593, at p. 597, the court 
 said, " When Des Marets joined the Exchange, it 
 may be perfectly true that he acquired property, 
 but it was property given by the act of those who, 
 
 " 94 TJ. S. 523, 24 L. Ed. 264. 
 
Administkative Powers Ovee Members. 121 
 
 in giving it, accompanied the gift with, conditions 
 which were incident to, and a part of, the prop- 
 erty ; and it was in no sense property created by 
 the individual's act. I consider that there is no 
 obvious distinction between property of the in- 
 dividual's own creation, to which he attaches con- 
 ditions, or in the disposal of which he exerts a 
 direction, whereby the claims of others are 
 affected, and property which comes to him sub- 
 ject to conditions which may deprive him of its 
 use or enjoyment. And so here, if the constitu- 
 tion, which forms the basis of this association ap- 
 propriates to his creditors in the association, or 
 to any of its corporate objects, the peculiar prop- 
 erty of the member, who, by force of the constitu- 
 tion's provisions, has lost his membership, that 
 was an incident entering into his title to it. When 
 membership and the rights belonging to that status' 
 were conferred upon him the gift was accom- 
 panied by a condition that the rights, of whatever 
 nature, should revert to the association upon the 
 happening of certain events, and he cannot be 
 heard to complain; nor can third persons, claim- 
 ing to derive under him. He should be held to his 
 contract, which was reasonable, and, when entered 
 into, prejudiced no rights of others, nor conflicted 
 with any statutory or common-law right. A per- 
 son acquired by his admission to membership only 
 such rights as the constitution and by-laws of the 
 association give him; and upon ceasing to be a 
 member, by the competent judgment of the gov- 
 
122 The Law of Commehcial Exchanges. 
 
 erning committee, he ceases to have any further 
 concern or interest in the association, except it is 
 given by its laws. ' ' 
 
 (b) Does such rule or by-law infringe the Fed- 
 eral Bankruptcy Act? — The further claim has 
 been put forth against the validity of this rule, 
 that its operation constitutes a preference within 
 the Federal Bankruptcy Act. If this be true, un- 
 doubtedly it is invalid regardless of any merit it 
 may have under the test above noted. Apart from 
 the authorities, which clearly deny this contention 
 also," the rule can be supported on principle 
 alone. Section 60a of the Federal Bankruptcy 
 Act, as amended in 1903, provides as follows : " A 
 person shall be deemed to have given .a prefer- 
 ence if, being insolvent, he has, within four months 
 before the filing of the petition, or after the fiUng 
 'of the petition and before adjudication, . . . 
 made a transfer of any of his property, and the 
 effect of the enforcement of such . . . transfer 
 will be to enable any one of his creditors to obtain 
 a greater percentage of his debt than any other 
 of such creditors of the same class." It is thus 
 seen that the Act provides that three facts must 
 concur before there is a preference: First, the 
 insolvent member must make a transfer of prop- 
 erty which he owns; second, sueh transfer must 
 be made within four months of the insolvency; 
 and, third, such disposition of his property must 
 result in an injury to other creditors. In the ope- 
 
 " See cases in note Y7. 
 
Administrative Poweks Ovee Membeks. 123 
 
 ration of the rule under consideration, however, 
 such preference to Exchange creditors results 
 solely from the condition which the Exchange 
 placed upon this membership when it granted it, 
 which may have occurred many years prior to 
 bankruptcy, and this same condition would ope- 
 rate regardless of the fact that the owner of such 
 membership or seat desired or did not desire to 
 create a preference. In other words, the advant- 
 age to Exchange creditors exists irrespectively of 
 any act on the part of the insolvent. He certainly 
 makes no " transfer of his property," as provided 
 for in the above section. It was the recognition 
 of this principle that was voiced by the court in 
 Hyde v. Woods, supra, at page 526 of the opinion, 
 "It is said that it is against the policy of the 
 Bankrupt Law, against public policy, to permit a 
 man to make in this or any other manner a stand- 
 ing or perpetual appropriation of his property to 
 the prejudice of his general creditors ; and it is to 
 this point that the numerous authorities of counsel 
 are cited. They all, however, relate to cases 
 where a man has done this with property which 
 was his own — property on which he himself im- 
 posed the direction, or the incumbrances which 
 impeded creditors. It is quite different where a 
 man takes property by purchase, or otherwise, 
 which is subject to that direction or disposition 
 when he receives it. It is no act of his which 
 imposes the burden. It was imposed ,by those 
 
124 The Law op Commercial Exchanges. 
 
 who had a right to do it, and to make an accom- 
 paniment of any title which they gave to it. ' ' 
 
 (c) Must claims 'preferred arise from trans- 
 actions on the Exchange? — An examination of 
 the authorities reveals a few novel situations in 
 which the above rule as to preferences was either 
 applied or rejected. Among the most prominent 
 of these situations is one where the creditors on 
 the Exchange became such not by reason of trans- 
 actions which arose on the Exchange but in deal- 
 ings with the insolvent outside of the Exchange. 
 The question, therefore, arises whether such Ex- 
 change creditors have a lien on the proceeds from 
 the sale of the debtor's membership in such a case 
 as well as when the debt arose upon the Exchange 
 floor. 
 
 This point was raised in the case of In re 
 Hayes.*" In this case article 13 of the rules of the 
 New York Stock Exchange provided that the seat 
 of a member who became insolvent or was expelled 
 should be sold and that the proceeds of the sale 
 should be used to make payment of ' ' all claims of 
 members of the Exchange against said member- 
 ship." The question was presented to the court 
 whether the word ' ' claims ' ' in the above rule in- 
 cluded claims other than those which arose out of 
 transactions on the New York Stock Exchange. 
 The court found, as a matter of fact, that the com- 
 mittee on insolvency of the Exchange had merely 
 paid claims which arose on that Exchange, and 
 
 ="75 N". T. Supp. 312. 
 
Administrative Powees Over Members. 125 
 
 hence their discussion of the above situation is 
 pure dictum. The court, however, discussed our 
 situation and stated clearly its belief that any- 
 such general terms as ' ' all claims " or " all con- 
 tracts, debts, or obligations of every description, ' ' 
 merely included debts or claims which arose from 
 transactions on the Exchange. The situation was 
 also referred to in a general way in the case of 
 Cochran v. Adams.'^ In that case the court had 
 before it, for construction, various rules, among 
 which was one providing that " when a member 
 dies his membership shall, within one year there- 
 after, be sold or transferred; if, however, he be 
 indebted to any member of the Stock Exchange 
 . . . said membership shall be sold . . . and 
 the proceeds thereof . . . shall be paid to the 
 owner's creditors who are members ''of the Ex- 
 change." On page 295 of the opinion the court 
 said : ' ' From a careful consideration of the con- 
 stitution of the Stock Exchange, especially the 
 provisions above referred to, it is quite apparent 
 that the purpose was to provide for settlement of 
 claims pertaining to the business of said Ex- 
 change, or other business similar thereto, or, as 
 expressed in section 4, ' for transactions arising 
 in or relating to the business of banker or Stock 
 Exchange broker.' Assuming that we are correct 
 in thus construing the constitution, it necessarily 
 follows that it is not every kind of indebtedness 
 between members that is allowed the preference 
 
 " 180 Pa. St. 289, 36 Atl. 854. 
 
126 The Law of Commercial Exchanges. 
 
 provided for, but only such kinds of indebtedness 
 as are specified in, the constitution." 
 
 The dicta of the above cases would seem to be 
 entirely sound on principle. It is obvious that 
 the operation of this rule is at best a special legal 
 dispensation allowed to members of the Ex- 
 changes for- the reason that the- business is con- 
 ducted under such conditions as to render neces- 
 sary the giving of security to fellow members in 
 this way. It can well be argued that when mem- 
 bers deal together on the Exchange they have in 
 view the security which arises from the fact that 
 beyond the personal credit of every member is the 
 security furnished by his membership in the as- 
 sociation. When, however, these conditions do 
 not exist, it would seem that the reason for the 
 rule fails. When two members of the Exchange 
 cease transacting business in the commodities 
 traded in on the Exchange and incur mutual obli- 
 gations in transactions in no way connected with 
 the Exchange, the security afforded by the mem- 
 bership of one or the other on such Exchange does 
 not affect in the slightest degree the making or 
 carrying out of such transactions. 
 
 A variation of the above situation can be imag- 
 ined, which is both interesting and practical. 
 Suppose that A and B are members of both Ex- 
 change X and Exchange Y. B becomes indebted 
 to A in transactions on the Y Exchange, and then 
 becomes insolvent. Can A assert a lien against 
 the membership of B on the X Exchange to satisfy 
 
Administeative Powees Over Members. 127 
 
 debts created on Exchange Yl There is no direct 
 authority to guide us as to a correct determina- 
 tion of this question and yet it is difficult to see 
 how the case is any different from any other debt 
 created outside of the Exchange. In both cases 
 the reason for the Application of the rule fails, 
 inasmuch as A and B were not dealing with one 
 another on Exchange Y upon the basis of the 
 security of their memberships in Exchange X, but 
 with reference to the membership of both in the 
 Exchange upon which the debt arose. 
 
 In all these cases, however, the courts were 
 merely construing what was meant by the term 
 ' ' all debts " or " all claims. ' ' In passing, it may 
 be of interest to imagine a rule which left no 
 doubt upon what debts were included, but in ex- 
 press terms provided that' the members should 
 have this preference whether the debt arose on 
 the Exchange or outside of it. "Would such a rule 
 be valid? It is difficult to see how it can be sus- 
 tained on principle and there is no direct author- 
 ity upon the point. The reasoning of the courts 
 in the above cases, it would appear, covers the 
 case where it is attempted to accomplish this end 
 by an express rule as well as when it was at- 
 tempted by a construction of the rule in its usual 
 form. Moreover, such a rule would have this ad- 
 ditional practical objection, namely, if the Ex- 
 changes can give such a preference to their mem- 
 bers not only for debts incurred on the Exchange, 
 but outside of it as well, it is difficult to see where 
 
128 The Law of Commekcial Exchanges. 
 
 the line should be drawn. It seems, therefore, 
 that such a rule as that suggested would not be 
 sustained by the courts, not only because it is 
 capable of infinite harm to outside creditors, but 
 also because it is in no way necessary for the 
 proper purpose of the Exchknge.*^ 
 
 It is hkewise fundamental that the rule under 
 consideration cannot be invoked when the debt 
 arose prior to the time when the insolvent mem- 
 ber became a member of such Exchange.^' 
 
 (d) 7s preference limited to fund arising from 
 sale of, membership? — On several of the Ex- 
 changes a rule manifestly inspired by the de- 
 cisions in line with Hyde v. Woods, supra, has 
 been established providing that the Exchange 
 creditors of the insolvent member are entitled not 
 only to a preference upon the proceeds from the 
 sale of the latter 's membership, but also to any 
 profits resulting from the closing out of " open 
 trades " standing in the name of such member 
 when he became insolvent. For illustration, let 
 us suppose that A is a member of an Exchange 
 where such a rule is in effect. He becomes insol- 
 vent, and his trades are closed out in the manner 
 provided by the rules, and as a result he has sev- 
 eral thousand dollars owing to him from other 
 members of the Exchange The question arises, 
 whether the creditors on the Exchange may have 
 a preference in the division of this fund in oppo- 
 
 '' But see case of Sheppard v. Barrett, 17 Phila. Eep. 145. 
 '' Bernheim v. Keppler, 69 N. Y. Supp. 803, 34 Misc. 321. 
 
Administbative Powees Ovee Membees. 129 
 
 sition to the claims of outside creditors of the in- 
 solvent. This, of course, depends on the validity 
 of the rule providing for such preference. The 
 number of authorities where this question has 
 come before the courts is not large, but what there 
 is seems to favor the validity of the rule, although 
 there are several well-reasoned cases denying its 
 validity.** 
 
 The rule or by-law which allows this preference 
 to Exchange creditors in the case of proceeds 
 from the sale of the seat of such insolvent mem- 
 ber, as we have seen, can be justified by the fact 
 that the Exchange, being the creator of such 
 membership or seat, can place any conditions it 
 sees fit upon the enjoyment of the same. Every 
 membership or seat, accordingly, is encumbered 
 with the condition which the Exchange places 
 upon it at the time of its inception, and this con- 
 dition binds any person to whom such membership 
 is transferred. Moreover, as was seen, the rule is 
 reasonable inasmuch as the nature of the business 
 transacted between one member, and another ren- 
 ders necessary and desirable the security afforded 
 by such a rule. Where the Exchange attempts, 
 however, as in the rule under consideration, to 
 extend this principle to a greater length and 
 allows a preference to Exchange creditors upon 
 
 "In re Gregory, 1Y4 Fed. 629; Ex parte Grant, 13 Ch. Div. 
 (1880) 667; and see also King v. Hutton, 2 Q. B. Div. (1900) 
 504. Contra: Cohen v. Budd, 103 N. Y. Supp. 45, 52 Misc. 
 217, and see also Ex parte Saffery, L. K. 4 Oh. Div. (1876) 
 555. 
 
 Com. Exc. — 9. 
 
130 The Law op Commeecial Exchanges. 
 
 profits which arise from the closing out of con- 
 tracts which the member had made on the Ex- 
 change floor prior to his insolvency, it can hardly 
 be contended that. either explanation above sug- 
 gested can be offered to uphold it. While in a 
 sense, of course, the member who became insol- 
 vent was enabled to make such advantageous con- 
 tracts simply by virtue of his membership on the 
 Exchange, nevertheless it cannot be said that the 
 Exchange is directly the grantor or creator of this 
 particular asset which the outside creditors are 
 desirous of reaching, and therefore it is not an 
 asset upon which the Exchange can impress such 
 conditions upon its disposition as it sees fit. 
 
 Moreover, the rule, as a practical matter, would 
 seem to be objectionable for the same reason that 
 was suggested above in the case of debts arising 
 between members on transactions outside of the 
 Exchange, namely, that if allowed, it is hard to see 
 where the exact limits are to be placed. These ob- 
 jections are stated by the court in Cohen v. Budd,^' 
 at page 45 of the opinion, in the following language : 
 " The doctrine has been well established in this 
 country, since the case of Hyde v. Woods, 94 U. S. 
 523, that a rule providing that the proceeds of a 
 defaulting member's seat are subject, first, to the 
 payment of his debts to his fellows, is valid and 
 not in violation of the bankrupt law. . . . The 
 defendant claims that the principle of the case 
 cited would sanction a., rule providing that claims 
 
 " 103 N. Y. Supp. 45, 52 Misc. 217. 
 
Administbative Powees Ovee Membees. 131 
 
 due from members to a defaulting member may be 
 collected by the Exchange and applied to debts 
 due other members, upon the theory that the 
 rights of general creditors must be deemed sub- 
 ordinate to the restrictions imposed upon a mem- 
 ber as a condition of acquiring membership. I 
 do not think the contention is sound. Such a rule 
 would practically take the estate of an Exchange 
 member out of the bankruptcy law. Even if such 
 a rule were enforceable, its application could in 
 no event be extended to transactions arising upon 
 other Exchanges. Concededly, a portion of the 
 fund in dispute resulted from transactions upon 
 other Exchanges, and to that extent, at least, the 
 rule is clearly opposed to public policy. Stock 
 Exchanges have the power to enact such rules and 
 regulations concerning the government of their 
 affairs as may be necessary to carry out their 
 purposes, but such rules and regulations must not 
 be contrary to the law of the land." However 
 objectionable the rule may be on principle, yet, as 
 before stated, its validity has been sustained by 
 courts of great influence and weight, and it would 
 not be surprising to find in a short time that the 
 law is clearly settled in its favor. 
 
 Thus far we have been considering the powers 
 of the Exchanges and other associations to con- 
 trol, by rule or by-laws, the enjoyment of their 
 memberships. We have considered the various 
 decisions which the courts have made in questions 
 involving the validity of rules laying down the 
 
132 The Law of Commekciax, Exchanges. 
 
 qualifications for admission, rules governing the 
 case where such member, after admission, be- 
 comes insolvent, and especially the validity or in- 
 validity of rules providing for the discipline of 
 members by expulsion or suspension. We there 
 noted the broad reasons for sustaining this power 
 to expel or suspend members and the limitations 
 upon the same. These rules or by-laws, however, 
 are rather in furtherance of the police powers of 
 the Exchanges. They show not what rules or 
 by-laws the Exchanges may enact for their in- 
 ternal government, but rather the means whereby 
 the obedience of members to rules or by-laws 
 which are assumed to be vaHd can be enforced. 
 It remains, therefore, to determine what specific 
 rules or by-laws the Exchanges may enact for 
 their self-government and a violation of which 
 they can make the basis of discipline. Accord- 
 ingly, a consideration of the decisions involving 
 such problems will engage us during the remain- 
 ing portion of this chapter. 
 
 Section 23. Rules or By-laws Regulating Conduct 
 of Members. 
 
 (a) The enforcement of decorum among mem- 
 bers. — An examination of the rules or by-laws of 
 the Exchanges will reveal without exception some 
 which regulate the personal conduct of the mem- 
 bers upon the business floor or other premises of 
 such Exchange. Rules forbidding members to 
 smoke during certain hours, assault, or vilify an- 
 
Administrative Powers Ovee Members. 133 
 
 other member, or engage in any boisterous or un- 
 gentlemanly conduct — in short, rules exacting 
 reasonable decorum while upon the premises — 
 are found in substantially the same language on 
 all the Exchanges. It is almost needless to 
 state that such rules or by-laws, exacting proper 
 decorum of members, are absolutely essential to 
 the orderly and satisfactory transaction of busi- 
 ness between the members. Under no other con- 
 ditions than those of perfect safety both to mind 
 and body could the members conduct their affairs 
 and achieve the purposes for which such associa- 
 tions were organized. .The single fact that there 
 is almost a total lack of any authority where the 
 power of such Exchanges or other similar associa- 
 tions to make such rules or by-laws has been con- 
 tested is the strongest proof of the validity of 
 such rules. 
 
 The case of Albers v. Merchants ' Exchange '° is 
 one of the very few cases involving such a rule, 
 and yet even this case is not squarely in point. 
 The plaintiff had been disciplined under a rule of 
 the defendant Exchange which forbade members 
 to smoke on the Exchange floor during certain 
 hours. The court, while deciding the case upon 
 other issues, yet clearly declared itself in favor 
 of the validity of the rule involved. In the case 
 of State ex rel. Waring v. Georgia Medical So- 
 ciety," the defendant, an incorporated association, 
 
 '' 39 Mo. App. 583. 
 
 " 38 Ga. 608, 95 Am. Dee. 408. 
 
134 The Law of Commercial Exchanges. 
 
 organized to advance the science of medicine, 
 passed a rule or by-law providing that ' ' any mem- 
 ber who shall be guilty of ungentlemanly conduct 
 during the session of the society, or who shall con- 
 duct himself out of the society in such a manner as 
 would render him' ineligible to membership, shall 
 be expelled from the society. ' ' Although the court 
 in fact decided that the particular conduct of the 
 plaintiff was not within the rule, yet it stated 
 clearly its opinion, by way of dictum, that such a 
 rule was within the power of the association to 
 enact. At page 441 the court said: " We think 
 this by-law a proper one in view of the objects of 
 the society, and we hold that the charter conferred 
 upon the corporation the power to ordain and 
 establish it, and that they have the power to expel 
 a member when a proper case arises under it." 
 
 In the case of Commonwealth v. Union League 
 of Philadelphia,^^ the validity of rules providing 
 for the decorum of members of associations was 
 probably most clearly discussed. In that case 
 the rule of the defendant association provided that 
 a ' ' majority of the board shall have power to sus- 
 pend members for a wilful infraction of the rules 
 of the house ... or for acts or conduct which 
 they may deem disorderly or injurious to the in- 
 terests, or hostile to the objects, of the league." 
 A member, having been expelled for calhng a 
 fellow-member a " blackguard " brought man- 
 
 »= 135 Pa. St. 301, 19 Atl. 1030, 8 L. E. A. 196, 20 Am. St. 
 Eep. 870. 
 
Administrative Poweks Ovee Membees. 135 
 
 damus to compel the club to reinstate him. The 
 court, in deciding for the defendant, had to meet 
 squarely the following two propositions: First, 
 is it within the power of such an association as 
 the defendant to make a rule compelling the ob- 
 servance of certain standards of decorum, and 
 second, was the particular act of the defendant 
 within the rule established by the defendant club? 
 At this point we are interested in but the first con- 
 sideration, and in disposing of this the court said, 
 at page 325 of the opinion, " Nor, in view of the 
 very general and comprehensive powers thus con- 
 ferred, and of the objects and purposes, conduct 
 and management of the league, can we say that 
 the by-laws, ordained pursuant to the charter, are 
 unreasonable, arbitrary or oppressive, or that 
 they violate any principle of natural justice. We 
 see nothing unreasonable in a by-law of a club, 
 consisting of gentlemen who are associated for 
 patriotic and social purposes, requiring the ob- 
 servance of a proper decorum and gentlemanly 
 intercourse, between the members, whilst within 
 the walls of the club house ; the lack of such regu- 
 lations would certainly tend to promote such dis- 
 order and dissension as would be fatal to the at- 
 tainment of the objects of the association. Nor is 
 the by-law in question illegal, or in conflict mth 
 the charter in this, that it does not designa,te and 
 define the various and specific acts which will be 
 deemed disorderly. To have anticipated in a 
 by-law the various disorderly acts which might or 
 
136 The Law of Commeecial Exchanges. 
 
 could occur, would have required the exercise of 
 a very fertile imagination ; neither the statute nor 
 the common law contains any such ridiculous 
 detail." 
 
 (b) Vilification of fellow members. — The ques- 
 tion has arisen whether a rule or by-law providing 
 for the expulsion or suspension of any member 
 who vilifies another member is valid. In the case 
 of Commonwealth v. St. Patrick's Benevolent So- 
 ciety,*^ the court decided squarely against the 
 validity of such a rule or by-law. In that case 
 the defendant association had been incorporated 
 for the purpose of " raising a fund to be appHed 
 to the relief of its members in case of ^ckness or 
 misfortune, and the assistance of distressed Irish- 
 men emigrating to the United States." The re- 
 lator had been expelled from said association on 
 the ground that he had violated a by-law provid- 
 ing for the expulsion of any member vilifying an- 
 other member, and brought a writ of mandamus to 
 secure his reinstatement, alleging that the above 
 by-law was invalid. The court granted the writ 
 and declared the by-law to be invalid. It said, on 
 page 456, " Is this by-law necessary for the good 
 government and support of the affairs of the cor- 
 poration? . . . The offense of vilifying a mem- 
 ber, or a private quarrel, is totally unconnected 
 with the affairs of the society, and therefore its 
 punishment cannot be necessary for the good gov- 
 ernment of the corporation." It is difficult to see 
 
 "2 Binn. 441, 4 Am. Dec. 453. 
 
Administkative Powees Ovee Membees. 137 
 
 how a different principle could be applied in the 
 case of an Exchange than in the case of the above 
 association. The Exchanges, as we have seen, 
 are organized for commercial objects and possess 
 the power to make and enforce only such rules or 
 by-laws as will directly tend to promote the ob- 
 jects for which they were organized. 
 
 Of course, if an association could be imagined 
 wherein the very object of its formation was to 
 promote amity and good feeling and repress the 
 prevailing tendency of the people to condemn and 
 vilify their neighbors without cause, such a rule 
 or by-law might be in place. But these objects 
 are not those sought by the Exchanges and upon 
 this fundamental principle it would seem to fol- 
 low that unless such vilification by one member 
 of another was of such character as to constitute 
 a breach of decorum or was criminal and the 
 offender subsequently was convicted in a court of 
 law for the offense, the Exchanges would neither 
 have the power to make such a rule or by-law nor 
 the right to discipline one for its infraction The 
 best results would be attained by compelling any 
 member injured thereby to seek his redress in a 
 court of law. 
 
 (c) Dishonorable or uncommercial conduct. — 
 One rule • or by-law commonly present in all com- 
 mercial Exchanges, and in most philanthropic, 
 social or mutual benefit associations, is that which 
 provides in general terms that any member guilty 
 of any conduct or any act which involves the good 
 
138 The Law op CoMMEBciAii Exchanges. 
 
 name of the association shall be subject to certain 
 discipline, as therein provided. No court has yet 
 had presented to it the question, as to the power 
 of such an Exchange or other similar association 
 to make such a rule or by-law and it is most diffi- 
 cult to conceive how such a proposition can ever 
 be raised. The usual method in which the ques- 
 tion arises is where a member, suspended or ex- 
 pelled for an act which such Exchange or its gov- 
 erning committee has decided to be within the rule 
 or by-law, objects not to the rule or by-law itself 
 but to the judgment of the Exchange or its gov- 
 erning committee, that the particular conduct lies 
 within such rule or by-law. Accordingly, a dis- 
 cussion of the rule or by-law will be deferred until 
 the validity of such adjudications by the Ex- 
 changes or the governing committees is consid- 
 ered at length. It may be well to state, however, 
 that should the power of such Exchanges by rule 
 or by-law to make such conduct a ground of sus- 
 pension or expulsion ever be questioned the 
 proposition will be decided by the courts in accord 
 with the broad tests applicable to all rules or 
 by-laws of such institutions. 
 
 Section 24. Rules or By-laws Compelling the Ful- 
 fillment of Business Obligations 
 Among Members. 
 
 Among the rules or by-laws of most of the com- 
 mercial Exchanges is found one which can be re- 
 duced substantially to these terms, to-wit, " any 
 
Administbative Powees Ovek Mbmbebs. 139 
 
 metober who shall fail to comply with the terms of 
 any contract or business obligation " shall be sus- 
 pended or expelled. The phraseology differs in 
 the rules of the various Exchanges, but the idea is 
 the same in all. The attempt is to compel the 
 members to observe a high standard of com- 
 mercial honor and to fulfill honorably and com- 
 pletely all transactions into which they have en- 
 tered. 
 
 The question can be best presented by taking a 
 concrete illustration. Suppose A, a member of 
 the X Projjuce Exchange, buys of B, another mem- 
 ber, 10,000 bushels of wheat for delivery in the 
 following May. When the time for delivery 
 comes B refuses to perform his contract, and upon 
 complaint of A is expelled or suspended by the 
 X Produ&e Exchange. B then seeks, by a writ of 
 mandamus, a restoration of his membership, on' 
 the ground that the rule or by-law for violation 
 of which he was disciplined is invalid. What 
 answer will the court make to such application for 
 the mandamus? By the overwhelming weight of 
 authority, the validity of the rule is sustained.'" 
 
 °° Dickenson v. Chamber of Commerce, 2& Wis. 45 ; People 
 ex rel. Page v. Board of Trade, 45 III. 112 ; Pitcher v. Board 
 of Trade, 121 III. 412, 13 N. E. 187; Board of Trade v. Nelson, 
 162 111. 431, 44 N. E. 743, 53 Am. St. Eep. 312; Board of 
 Trade v. Weare, 105 111. App. 289 ; People ex rel. Thacher v. 
 New York Commercial Association, 18 Abb. Pr. 271; People 
 ex rel. Johnson v. Produce Exchange, 149 N. T. 401, 44 N. E. 
 84; Haebler v. New York Produce Exchange, 149 N. Y. 414, 
 44 N. E. 87; Hurst v. New York Produce Exchange, 100 N. Y. 
 
140 The Law of Commekcial Exchanges. 
 
 It is no less clear upon principle. The Exchanges 
 are organized, among other objects, to maintain 
 high standards of business honor and to incul- 
 cate principles of justice and equity in trade. It 
 is evident that unless the Exchanges have power 
 to make and enforce the rule in the situation above 
 outlined, they must necessarily fail in a great 
 many cases to maintain such standards. Abso- 
 lute integrity is more necessary here than in al- 
 most any other modern business. The business 
 done is one of great volume, involves large 
 amounts of money, and must be settled,promptly 
 and without " quibbling." 
 
 As was stated by the Illinois Supreme Court in 
 a leading case,"^ at page 115 of the opinion, ' ' One 
 of the objects for which the board of trade was 
 created undoubtedly was to promote a high stand- 
 ard of commercial honor and commercial credit 
 in the city of Chicago, by securing among the 
 members of the board a prompt discharge of their 
 pecuniary obligations, contracted in their dealings 
 with each other, without a resort to the expensive 
 and dilatory procedure of a court of law. . . . 
 It. (the charter) expressly gives the power of ex- 
 pulsion, and under that power the corporation has 
 adopted this by-law providing that, if a member 
 
 605, 3 N. E. 42; Sexton v. Commercial Exchange, 10 Pa. Co. 
 Ct. 607. See also Lewis v. Wilson, 121 N. T. 284, 24 IST. E. 
 474; Eorke v. San Francisco Stock and Exchange Board, 99 
 Cal. 196, 33 Pac. 881 ; Leech v. Harris, 2 Brewst. 571. 
 " People ex rel. Page v. Board of Trade, 45 111. 112. 
 
Administeative Powers Ovee Membees. 141 
 
 fails to comply with a business contract made with 
 another member, he shall be expelled. This is 
 somewhat different from the adjustment of dis- 
 putes, which are properly referable to the com- 
 mittees of reference and arbitration. It applies 
 to cases of noncompliance with contracts about 
 which there is no dispute necessary to be referred 
 to one of these committees, as there was none in 
 the present case. It certainly cannot be said that 
 the rule was not germane to the purposes for 
 which the corporation was created. In our judg- 
 ment, though i.t might sometimes operate harshly, 
 it is well adapted to secure the object which we 
 have above named, and preserve the high char- 
 acter and credit of the board. That a corpora- 
 tion purely commercial in its character would 
 soon cease to be respected or respectable if it 
 tolerated among its members a violation of an un- 
 disputed contract is a proposition too plain for 
 argument. Perhaps the rule would have been 
 better if it had allowed more discretion to the 
 board of directors, to be exercised in cases of mis- 
 fortune and not of fault; but this does not touch 
 the question of power, and is a matter wholly for 
 the decision of the corporation itself. That the 
 rule, even in its present form, is either unreason- 
 able or unjust we cannot hold. Even if there had 
 been no express grant, in the charter, of a power 
 of expulsion, we should be inclined to hold, that a 
 prompt performance, by the members, of their 
 contracts with each other, was so important to the 
 
142 The Law of Commeecial Exchakges. 
 
 well-being of such a corporation as this, that a 
 member, failing in this regard, was guilty of a 
 breach of his duty as a corporator, and if the cor- 
 poration thought proper to pass a by-law making 
 such breach of duty a ground of disfranchisement, 
 the act would have to be sustained, as an exercise 
 of its inherent power, under the rules of the com- 
 mon law." 
 
 While the power of the Exchanges to make a 
 rule or by-law compelling every member to fulfill 
 his business obligation upon penalty of expulsion 
 or suspension cannot now, in view, of the author- 
 ities, be open to doubt, yet considerable difficulty 
 has been experienced by the courts in its applica- 
 tion to various situations which have come before 
 them. For convenience, we may group these 
 situations as follows, first, where the obliga- 
 tion between the members arose from transactions 
 outside the Exchange; second, where the default 
 of the member was due to financial inability to 
 fulfill the contract, no element of moral turpitude 
 being present, and third, where the contract which 
 the member repudiated is one which, if contested 
 in a court of law, would be legally unenforceable. 
 
 (a) Obligations arising from transactions off 
 the Exchange. — The exact problem in each situa- 
 tion can be more clearly represented by taking a 
 concrete illustration as near to the actual facts as 
 possible. Accordingly, let us imagine in the first 
 situation that A and B are both members of the 
 X Produce Exchange, whereon are bought and 
 
Administrative Powees Ovee Membees. 143 
 
 sold the ordinary agricultural products, such as 
 wheat, corn, cotton, etc. A and B meet in a place 
 away from the Exchange and B contracts to sell 
 to A a piece of real estate or to deliver a shipment 
 of oil, stone or cement. B defaults on such con- 
 tract, and upon complaint of A he is expelled from 
 the Exchange. He seeks, by writ of mandamus, 
 to gain a restoration of his membership upon the 
 ground that the rule or by-law does not cover such 
 a case, but only one where the obligation arose on 
 the Exchange floor. What answer will the court 
 make to the contention of B ? It is apparent that 
 this is, after all, a pure question of construction 
 as to what the words " any contract " or " any 
 business obligation " include. While the author- 
 ities are rather scarce upon the subject, yet of 
 those which exist a majority uphold the right of 
 the Exchange to expel the member for breach of 
 such a contract under the above by-law.^^ 
 
 In fact, the leading case, and the one most often 
 cited, in opposition to the validity of such appli- 
 cation or the rule or by-law is, upon analysis, 
 clearly distinguishable upon its own particular 
 facts from those cases which uphold it. In that 
 case, Leech v. Harris,^^ the rule read, " if any 
 member shall refuse to comply with his stock con- 
 
 '"' People ex rel. Thaeher v. New York Commercial Associa- 
 tion, 18 Abb. Pr. 2Y1; Haebler v. New York Produce Ex- 
 change, 149 N. Y. 414, 44 N. E. 8Y ; Dickenson v. Chamber of 
 Commerce, 29 "Wis. 45, 9 Am. Eep. 544, 
 
 "2 Brewst, 571, 
 
144 The Law of Commeecial Exchanges. 
 
 tracts " he shall be expelled. The contract for 
 the repudiation of which the member was expelled 
 was one to convey land, and was not made on the 
 Exchange floor. The sum and substance of the 
 court's decision was that the Exchange itself had 
 limited, in express terms, the class of contracts 
 for breach of which the member would subject 
 himself to the penalty, and that a contract to con- 
 vey land was not in any light a ' ' stock contract. ' ' 
 Where the rule reads that the breach of, or de- 
 fault upon, " any contract " or " business obhga- 
 tion," is a. ground of expulsion, there is nothing in 
 the above opinion which clearly indicates that the 
 court would be in opposition to the majority on 
 this proposition. In the case of Haebler v. New 
 York Produce Exchange,"* the court said at page 
 425: " The opinion in that case (Thacher v. 
 N. Y. Commercial Association, 18 Abb. Pr. 271) 
 seems to cover the questions before us, is well 
 reasoned, and we think properly holds that this 
 by-law was intended to regulate the conduct of its 
 members in commercial transactions as well when 
 contracts are made outside as when made on the 
 floor of the Exchange." 
 
 (b) Where failure to comply is due to financial 
 inability. — The second situation can be more 
 clearly understood if we imagine that B, in the 
 above case, admits the making of the contract and 
 bis failure to fulfill it, but claims that his failure 
 was due to financial inability and not in any way 
 
 " 149 N. T. 414, 44 N". E. 87. 
 
Administrative Powees Ovee Membees. 145 
 
 to a desire to avoid his honest obhgations. The 
 question then reduces itself to this, Is moral de- 
 linquency necessary to constitute an offense under 
 such a rule? It is obvious that in its practical 
 results the welfare of the Exchange is equally 
 endangered whether the member is unable or sim- 
 ply unwilling to fulfill his obligations. While, of 
 course, the conduct of such member in the latter 
 case is morally more reprehensible than in the 
 former, yet the danger to the Exchange or the 
 other members by allowing such a person to con- 
 tinue in his enjoyment of membership is equally 
 present. One is just as inconsistent with " just 
 and equitable principals of trade " as the other. 
 The case of People ex rel. Page v. Board of 
 Trade ®^ is squarely in accord with this proposi- 
 tion. In this case, one Page, a member of the 
 Board of Trade, sold to Stevers & Brown, also 
 members, a quantity of corn for delivery during 
 the month of May, 1867. The price of corn having 
 advanced. Page offered to Stevers & Brown $500 
 to rescind the contract. This offer was accepted, 
 and Page paid $100 in money and gave his demand 
 promissory note for $400. The payees subse- 
 quently demanded payment of this note, and upon 
 his failure to pay it, Stevers & Brown made a com- 
 plaint to the board of directors. Page appeared, 
 admitted the indebtedness, but said he was unable 
 to pay, and thereupon the board of directors sus- 
 pended him from the privileges of the Exchange. 
 
 '=45 111. 112. 
 
 Com. Exc. — 10. 
 
146 The Law op Commeecial Exchanges. 
 
 At page 116 of the opinion tlie court said : ' ' Per- 
 haps the rule would have been better if it had 
 allowed more discretion to the board of directors, 
 to be exercised in cases of misfortune and not of 
 fault; but this does not touch the question of 
 power, and is a matter wholly for the decision of 
 the corporation itself. That the rule, even in its 
 present form, is either unreasonable or unjust, we 
 cannot hold. ' ' In the case of Haebler v. New York 
 Produce Exchange,"" the court refused to hold that 
 this rule covered merely the case where the action 
 of the defaulter could be considered " fraud- 
 ulent," and stated at page 429, " That the purpose 
 of the amendment was to confer upon the board of 
 managers authority to discipline members guilty 
 of unjust and inequitable conduct or -proceedings 
 in trade including breach of contract, although 
 not actually fraudulent, we have no doubt. ' ' " 
 
 (c) Where obligation is legally unenforceable. 
 — The third situation is illustrated in the case 
 where B admits that he contracted with A on the 
 Exchange to do a certain thing, and that he has 
 refused to perform it, but sets up the defense that 
 the Exchange has no jurisdiction to discipline him 
 for such default, because the original contract be- 
 tween him and A was legally unenforceable. This 
 situation can be further divided into two classes : 
 
 " 149 N. Y. 414, 44 N. E. 87. 
 
 " See also People ex rel. Johnson v. Produce Exchange, 149 
 N. T. 401, 44 N. E. 84, and Board of Trade v. Weare, 105 
 111. App. 289. 
 
Administrative Powers Over Members. 147 
 
 (1) Wliere the contract was unenforceable because 
 illegal and contrary to sound public policy; (2) 
 wliere the contract, while not involving any ele- 
 ment of moral turpitude, yet would be unenforce- 
 able in a court of law for some other reason. The 
 latter division is well illustrated in the case of 
 Dickenson v. Chamber of Commerce."^ In this 
 case Dickenson refused to fulfill his contract with 
 a fellow member on the ground that it was an oral 
 contract within the Statute of Frauds and hence 
 unenforceable, and accordingly claimed that the 
 Exchange had no jurisdiction to expel him for vio- 
 lation of such a contract. The court refused to 
 sustain the contention of the plaintiff, and at page 
 50 of the opinion said : ' ' And, if it was one of the 
 objects of the association to ' inculcate just and 
 equitable principles in trade,' it is apparent that 
 end would be best attained by raising the standard 
 of morality among its members, in requiring them 
 to perform all their business engagements, 
 whether legally binding on them or not." This 
 decision seems absolutely correct on principle. It 
 is obvious that the very nature aiid methods of 
 business carried on upon such an Exchange render 
 the observance of the provisions of the Statute of 
 Frauds not only inconvenient but impossible. 
 Accordingly, the Exchanges have the right, within 
 their implied powers, to make a rule controlling 
 this specific situation, unless it could be further 
 shown that such rule was positively illegal 
 
 °» 29 Wis. 45. 
 
148 The Law of Commeeciaxi Exchanges. 
 
 It is obvious that there is nothing involving 
 moral turpitude or positively illegal where two 
 persons agree together not to be bound by the 
 provisions of such a law as the Statute of Frauds. 
 This is well settled by the authorities."" The 
 statute was passed merely as a measure to 
 save the courts the time and trouble of adjudicat- 
 ing many cases where it was almost impossible to 
 obtain accurate proof except by some such re- 
 quirement. It would, therefore, seem well within 
 the power of such Exchanges to enforce, between 
 members at least, these contracts, however ob- 
 jectionable on procedural grounds they might be 
 in a court of law. This principle is not confined 
 to the case where the defense is rested upon the 
 Statute of Frauds alone, but applies generally to all 
 similar cases which, if brought in a court of law, 
 could not be enforced. The general principle gov- 
 erning all situations, however, in this class is well 
 stated in the case of People ex rel. Thacher v. New 
 York Produce Exchange,^"" where the court said, 
 at page 279, "One of the principal objects of the 
 corporation appears to have been, in part, to es- 
 tablish a high moral standard in conducting busi- 
 ness transactions, and to exercise somewhat of a 
 control over those who belonged to it, in their 
 trade with each other, and with strangers. It 
 reached a little beyond the precise legal rights of 
 its members in their business conduct, subjecting 
 
 °° See 20 Oyc. 308. 
 "" 18 Abb. Pr. 271. 
 
Administrative Powees Ovee Membees. 149 
 
 them to a supervisory care so far as fair dealing 
 was concerned, to which they would not be ordi- 
 narily amenable in any tribunal known to the 
 land." 
 
 On the other hand, where the contract repudi- 
 ated is not simply unenforceable upon the ground 
 above considered, but rather because it is abso- 
 lutely illegal and therefore void from its incep- 
 tion, the question becomes far more difficult of 
 solution. Suppose, for illustration, that A and 
 B, members of the X Produce Exchange, make a 
 contract on the Exchange floor whereby A was to 
 give B a certain amount of money for manipulat- 
 ing or " cornering " the market. B obtains the 
 consideration but subsequently refuses to carry 
 out his agreement, and A then seeks to secure the 
 expulsion of B from the Exchange. A case some- 
 what involving this principle is Lewis v. Wilson.^"^ 
 Here Lewis denied the right of the Consolidated 
 Stock and Petroleum Exchange to expel him for 
 repudiation of his contract with a fellow member 
 on the ground that the contract which he refused 
 to fulfill was a gambling agreement, and its viola- 
 tion, therefore, did not render him amenable to 
 the above rule of the Exchange. The court here 
 called attention to the fact that the only way in 
 which such a contract would be deemed illegal 
 was by ascertaining the undisclosed intent of the 
 parties, and inasmuch as the contract on its face 
 was valid, refused to sanction the contention of 
 the complainant. The court, however, by way of 
 
 "' 121 N. T. 284, 24 N. E. 4Y4. 
 
150 The Law of Commeecial Exchanges. 
 
 dictum, discussed the above proposition in the fol- 
 lowing language, at page 287 of the opinion, 
 " Whether the contract to which the complainant 
 before the committee related, was valid or void, 
 is, we think, wholly irrelevant to the present in- 
 quiry. The plaintiff cannot insist upon remain- 
 ing a member of the association, while at the saine 
 time repudiating the conditions of membership. 
 The Exchange cannot enforce the contract, 
 whether valid or void, and the decision of the com- 
 plainant committee will not preclude the plaintiff 
 from defending against it in a court of law. But 
 the members of the association may, if they so 
 agree, say that no one shall remain a member, and 
 enjoy the privileges of the association, if he re- 
 fuse to comply with the rules. It may be true that 
 the committee, if the facts had been presented and 
 proved as they were claimed by the plaintiff, 
 would nevertheless have regarded the gambling 
 element as no excuse to the plaintiff for not per- 
 forming. But whether the committee should de- 
 cide rightly or wrongly does not change the atti- 
 tude of the plaintiff as a member of the associa- 
 tion, or qualify his obligation to submit to the 
 decision of the agreed tribunal, under pain of sus- 
 pension. All that he could require was that the 
 investigation should be conducted bona fide, upon 
 notice to him and an opportunity to be heard, and 
 that the decision made should be within the scope 
 of the jurisdiction conferred on the committee." 
 It should be carefully noted, however, that this 
 
Administeative Powees Ovee Membees. 151 
 
 case was doubtful on its facts and accordingly 
 cannot be cited to support the power to expel a 
 member for repudiation of such a contract as sug- 
 gested in the opening of this paragraph which is 
 obviously and positively illegal. 
 
 Section 25. Rules or By-laws Relative to Arbitra- 
 tion of Business Disputes Among 
 Members. 
 
 In the rules and by laws of all modern Exchanges 
 will be found some provision for the arbitration 
 of business disputes which naturally arise thereon. 
 Such rules and by-laws extend all the way from a 
 simple provision for the appointment of an arbi- 
 trator chosen by the disputants on the one extreme 
 to the other, where formal committees of arbi- 
 tration and appeal are provided, with comprehen- 
 sive regulations for their procedure and the ren- 
 dition of their decisions. In all Exchanges, how- 
 ever, the end is the same, namely, to provide a 
 way whereby business disputes may be settled 
 equitably and expeditiously between parties who 
 desire to avoid the inconvenience and expense of 
 litigation in the courts of law. "We are here con- 
 sidering generally the power of the Exchanges by 
 rules or by-laws to regulate the conduct of their 
 members while transacting business upon such 
 Exchanges. It is obvious that the only question 
 which can cause any doubt is, whether such Ex- 
 changes have the power, by rule or by-law, to pro- 
 vide, in substance although not necessarily in ex- 
 
152 The Law of Commercial Exchanges. 
 
 press terms, that any member must either arbi- 
 trate in the way provided in the rules or by-laws 
 of the association or suffer the penalty of suspen- 
 sion or expulsion. This, it will be seen, is the only 
 question which the courts would ever be called 
 upon to adjudicate, inasmuch as no one could 
 reasonably doubt that the Exchanges might, by 
 rule or by law, provide a method of arbitration 
 simply for the convenience of the members, but 
 which they need not avail themselves of unless 
 they see fit to do so. Thus, the only practical and 
 difficult question which arises in this connection 
 is, whether the Exchanges have the power to com- 
 pel their members to arbitrate their differences as 
 a condition to retaining membership in the asso- 
 ciation. 
 
 (a) Agreements to arbitrate in general. — The 
 correct determination of this question can proba- 
 bly best be arrived at by considering the general 
 legal effect of contracts for arbitration between 
 persons who have no connection with such Ex- 
 changes. The following hypothetical case will 
 serve for the purposes of illustration. Suppose 
 A and B, at the time they enter into an agreement 
 to transact certain business, also agree that in case 
 any dispute shall arise in the carrying out of this 
 agreement such dispute shall be submitted to arbi- 
 tration and further that both parties will consider 
 the decision of such arbitrators as conclusive and 
 final and a bar to any action on the original con- 
 tract in the courts of law. A dispute does subse- 
 
Administrative Powess Ovee Membeks. 153 
 
 quently arise whereby A claims that B is indebted 
 to him in approximately the sum. of $1,000, and 
 begins a suit for the recovery of the amount in a 
 court of law. B then pleads, by way of abatement, 
 the agreement between them to arbitrate this dis- 
 pute, and asks the court to bar the suit of A. 
 
 While it is beyond the design of this treatise to 
 enter into any extended discussion of the law con- 
 trolling such agreements to arbitrate, yet it will 
 suffice to point out that the authorities are over- 
 whelmingly in line with the proposition, that such 
 an agreement as outlined in the problematical case 
 above is contrary to public policy and in no way 
 constitutes a bar to the suit of A upon the original 
 cohtract.^"^ The reasons adduced by the courts 
 for this firm stand against such contracts for arbi- 
 tration are stated in various ways, but those most 
 often put forth are, first, that the courts are 
 jealous of any attempt to encroach upon the ex- 
 clusiveness of their jurisdiction, and second, that 
 the courts do not consider it sound public policy 
 to allow any citizen to renounce the right he pos- 
 sesses of coming into the courts of law and having 
 his rights protected. However this may be, the 
 question has been settled so long and by such an 
 overwhelming weight of authority that it can no 
 longer be considered debatable. 
 
 Nevertheless, there seems to be a strong ten- 
 dency in modern times to relax the rigor of the 
 
 "° See discussion and long list of cases in 9 Cyc. 512. 
 
154 The Law of Commekcial Exchanges, 
 
 common-law rule in some States by statute ^°^ and 
 in others by engrafting upon such common-law 
 rule various exceptions, which while commendable 
 from a practical and business standpoint yet seem 
 upon theory to be somewhat fantastic. Thus, it 
 seems now conclusively established in England 
 and, following such English decisions, in many 
 States in this country, that while two persons can- 
 not legally agree to submit to arbitration all ques- 
 tions which may arise in the course of their deal- 
 ings, and particularly the question of the existence 
 of any legal liability upon the one party or the 
 other, nevertheless they may agree that, in case 
 any such dispute shall arise they shall, as a con- 
 dition precedent to any suit at law upon such obli- 
 gation, have a committee of arbitrators ascertain 
 the amount to be recovered, and that until such 
 determination hj the committee of arbitrators all 
 remedy upon the original obligation shall be 
 barred."* This exception was very tersely stated 
 by Justice Bramwell in the case of Elliot v. Royal 
 Assurance Co.,"' at page 245, " If two persons, 
 Avhether in the same or in a different deed from 
 that which creates the liability, agree to refer the 
 matter upon which the liability arises to arbitra- 
 tion, that agreement does not take away the right 
 
 "' See Zindorf Construction Co. v. Western American Co., 
 2Y Wash. 31, 67 Pac. 374. 
 
 "' See 9 Cye. 513. 
 
 "" L. R. 2 Ex. 237, 36 L. J. Exch. 129, 16 L. T. Eep. N. S. 
 399, 15 Week. Eep. 907. 
 
Administrative Powers Over Members. 155 
 
 of action. But if the original agreement is not 
 simply to pay a sum of money, but that a sum of 
 money shall be paid if something else happens, 
 and that something else is that a third person 
 shall settle the amount, then no cause of action 
 arises until the third person has so assessed the 
 sum. For to say the contrary would be to give 
 the party a different measure of compensation 
 from that for which he had bargained. This is 
 plain common sense, and is what I understand the 
 House of Lords decided in Scott v. Avery." 
 
 Apart, however, from the exception as above 
 stated, the general and ordinary agreement to 
 arbitrate all disputes which shall arise in the 
 course of carrying out a contract is nugatory and 
 cannot be pleaded as a bar to a suit upon the 
 original obligation. The authorities are clear 
 that up until the time when the dispute is actually 
 submitted to arbitration "° and, in some jurisdic- 
 tions, until the award is actually made by the arbi- 
 trators,"" either party may revoke his agreement 
 to arbitrate. Whether such revocation will in 
 turn give to the other party a legal right of action 
 for the breach of the agreement to arbitrate is not 
 so clearly settled by the authorities as one might 
 wish, and upon principle it is very difficult to un- 
 derstand why such action should be allowed. If 
 the courts declare that such agreements for arbi- 
 tration do not constitute a bar to a suit upon the 
 original obligation because such arbitration agree- 
 
 ™ See discussion in 3 Cyc. 610. 
 
156 The Law of Commeecial Exchanges. 
 
 ments are illegal and contrary to public policy, it 
 is difficult to see how they can turn around and 
 allow the opposite party to collect damages for the 
 breach of them. And yet there are a number of 
 authorities sustaining this proposition."^ 
 
 Let us now vary the above situation by suppos- 
 ing that a dispute having actually arisen, A and B 
 have formally submitted the question for determ- 
 ination to certain arbitrators mutually agreeable 
 to them, and that the said arbitrators have made 
 an award that A is indebted to B in a certain 
 amount. Can A, under such a state of facts, re- 
 fuse to abide by the award and still sue B upon 
 the original obligation in a court of law? It is 
 obvious that where A and B, with a definite sub- 
 ject-matter in mind, and in accordance with a con- 
 sideration which is mutually acceptable to them, 
 refer such question to an outside party or parties 
 to determine the rights of the parties involved, 
 the question is decidedly different from that where 
 the parties, long prior to any actual dispute, agree 
 to abide by the decision of certain arbitrators. In 
 the former case A and B, as it were, have given a 
 definite power of attorney to such outside arbi- 
 trators to decide upon the merits of the dispute 
 which is submitted to them, and accordingly it 
 
 "" Livingston v. Ealli, 5 El. & Bl. 132 ; Haggart v. Morgan, 
 5 N. T. 422, 55 Am. Dec. 350; Miller v. Junction Canal Co., 
 53 Barb. 590; Sinclair v. Tallmadge, 35 Barb. 602; Corbin v. 
 Adams, Y6 Va. 58 ; Oregon & W. Bank v. American Mortgage 
 Co., 35 Fed. 22 ; Perkins v. Electric Light Co., 21 Blatchf . 308. 
 
Administeative Poweks Over Membees. , 157 
 
 may well be, on principle, that such a submission 
 operates as a discontinuance of any suit upon the 
 original obligation. Moreover, it seems to be 
 well settled, by a clear weight of authority, that 
 such submission to arbitration does constitute an 
 effective bar to the suit upon the original obliga- 
 tion.^"^ Some courts, however, hold that nothing 
 less than an actual award will accomplish the dis- 
 continuance of such suit."' When such award, 
 however, has once been made, the principle is 
 firmly established that any rights which one party 
 may have arise not by virtue of such original ob- 
 ligation but solely in accordance with such final 
 award."" Whether, after the making of such sub- 
 mission but prior to such award, either party may 
 revoke such submission, seems difficult to deter- 
 mine, but probably the majority of the decisions 
 would sustain such right of revocation, leaving the 
 party injured to his action on the agreement to 
 submit to arbitration."^ 
 
 (b) Can members be compelled to arbitrate or 
 retire from the exchange? — Passing from the gen- 
 eral legal principles governing the subject of 
 " arbitration " to the application of the same to 
 the Exchanges, it may be well to re-state the exact 
 
 ™ See cases in 3 Cyc. 605. 
 
 """Nettleton v. Gridley, 21 Conn. 531, 56 Am. Dec. 3Y8; 
 Lary v. Goodnow, 48 N. H. 170 ; Dinsmore v. Hanson, 48 N. 
 H. 413 ; Paulison v. Halsey, 38 N. J. L. 488. 
 
 ™ See discussion in 3 Cyc. at 728 and following pages. 
 
 "" See 3 Cyc. 610. 
 
158 The Law of Commercial Exchanges. 
 
 problem we are considering. This is, whether a 
 rule or by-law is valid which in effect, if not in 
 express terms, provides that any member who 
 refuses, upon request of the other party, to arbi- 
 trate before the duly constituted committee or in 
 some other mutually satisfactory method, his busi- 
 ness disputes with fellow members shall be liable 
 to suspension or expulsion. It is not contended 
 that very many such rules or by-laws can be found 
 which expressly provide that a member either 
 must arbitrate or suffer expulsion from the Ex- 
 change. In effect, the same results are reached, 
 however, as shown by the large number of cases 
 before the courts where the Exchanges, upon the 
 failure or refusal of a member to arbitrate, have 
 proceeded to discipline him for violation of an- 
 other rule or by-law, namely, that which compels 
 every member to fulfill his business obligations or 
 retire from the Exchange. In substance, there- 
 fore, the question comes to this. Can such Ex- 
 changes, either by their rules or by their acts com- 
 pel their members to make the choice of arbitrat- 
 ing or suffering expulsion? 
 
 Like all other rules or by-laws, it is submitted 
 that the validity of the above rule should be de- 
 termined by the application of the two general 
 tests heretofore set forth, namely, is it within the 
 express or implied powers delegated to such Ex- 
 changes in the constitution or charter, and, second, 
 is it contrary to any fixed principle of law or 
 public policy? Of course, where the power is ex- 
 
Administrative Powees Over Members. 159 
 
 pressly delegated in the charter or constitution 
 to compel their members to arbitrate and in ac- 
 cordance with this the Exchange, by rule or by- 
 law, gives to the members the choice above out- 
 lined, no question can arise as to the first test at 
 least. Moreover, where the charter or constitu- 
 tion is silent upon the matter, it may very well be 
 that this power can be reasonably construed to lie 
 within the implied powers of a commercial Ex- 
 change organized primarily to facilitate the trans- 
 action of business and maintain high commercial 
 standards. A requirement that members shall 
 settle their business disputes in that way rather 
 than through the expensive and unsatisfactory 
 process of the courts in consideration of their con- 
 tinuance of membership can be easily seen to be 
 not only desirable but even necessary for the 
 effective transaction of the business upon such 
 Exchanges.^" 
 
 Such a rule or by-law, however, as we have seen, 
 will not be upheld simply because it is desirable 
 or even necessary for the maintenance of the asso- 
 ciation. It must meet the further test of its 
 legality. The invalidity of the ordinary agree- 
 ment of arbitration, as above noted, is due to the 
 jealousy with which the courts view any arrange- 
 ments between private parties looking towards the 
 
 ""Wtite V. Brownell, 3 Abb. Pr. N. S. 318, 2 Daly 329; 
 Evans v. Obamber of Oommerce, 86 Minn. 448, 91 N. W. 8; 
 People ex rel. Johnson v. Produce Exchange, 149 N. T. 401, 
 44 N. E. 84 ; Vaughn v. Herdon, 91 Tenn. 64. 
 
160 The Law of Commercial Exchanges. 
 
 ouster of the regularly established courts of their 
 jurisdiction. In the eyes of the courts, it is their 
 prerogative to adjudicate disputes between sub- 
 jects and any attempt to supplant them in this 
 respect will be deemed contrary to sound public 
 policy. This doctrine was tersely expressed by 
 the court in the case of Evans v. Chamber of Com- 
 merce,"^ as follows : 
 
 "It is undoubtedly true that parties cannot 
 control the course of justice or effectually oust 
 the courts of the jurisdiction which has been con- 
 ferred on them, by mutual agreement so to do. 
 That an agreement to submit disputes to arbitra- 
 tion will be held invalid, in law and in equity, 
 when the effect is to deprive the courts of juris- 
 diction to determine such disputes, is conceded. 
 The principle on which this doctrine rests is that 
 every citizen is entitled to resort to all the courts 
 of the country and to invoke the protection which 
 all the laws of all these courts may afford him. 
 He cannot bind himself in advance to forfeit his 
 right to this protection, at all times and on all 
 occasions, whenever the case may be presented. 
 The law, and not the contract, prescribes a remedy 
 for all disputes, and parties have no more right to 
 enter into stipulations against a resort to the 
 courts for the remedy in a given case than they 
 have to provide a remedy prohibited by law." 
 
 Whether, we consider such position of the courts 
 as enlightened or reactionary, there can be no 
 
 ™ 86 Minn. 448, 91 N. W. 8. 
 
Administrative Powees Ovee Members. 161 
 
 doubt that they are correct on the facts and that 
 the ordinary agreement of arbitration does, if up- 
 held, oust the jurisdiction of the regularly estab- 
 lished courts. Let us suppose that A and B enter 
 into a certain transaction and agree that any dis- 
 pute which shall arise in carrying it out shall be 
 submitted to arbitration. Subsequently a dispute 
 does arise and A begins suit against B in a court 
 of law. B pleads the agreement to arbitrate, If 
 the court sustains this plea, it thereby bars A 
 from suing upon his original claim anywhere 
 within that jurisdiction at least. It could have no 
 other effect. Its practical effect is that of a re- 
 lease of all parties upon the original claim or 
 a permanent injunction running against A to sue 
 upon it. Unless the claim of A was barred, then 
 the result would be that A could sue upon his 
 original claim and B could turn around and 
 sue A for the breach of his contract to arbitrate 
 Thus a multiplicity of actions would occur. Ac- 
 cordingly, by the orthodox view at least, the courts 
 simply refuse to give any enforcement to such 
 agreement of arbitration and in our hypothetical 
 case would sustain A's demurrer to such plea 
 of B. 
 
 In a case, however, where such discontinuance 
 of the original cause of action did not result and 
 the courts were not ousted of their jurisdiction, it 
 would be reasonable to suppose that the courts 
 would not refuse to enforce such an agreement. 
 Com. Exc. — 11. 
 
162 The Law of Commebcial Exchanges. 
 
 Our inquiry then is to determine whether the rule 
 or by-law under consideration does in fact operate 
 to oust the jurisdiction of the court. The rule or 
 by-law which we can assume is a contract between 
 all members and the association, provides that a 
 member must upon request arbitrate all business 
 differences arising with other members within the 
 association or suffer expulsion from the associa- 
 tion. Let us assume that A and B, both members 
 of a certain association where such a rule or by- 
 law is in effect, have a business dispute and to 
 test the rule or by-law by the most extreme case, 
 let us further assume that B is indebted to A, the 
 only dispute being upon the amount of the debt. 
 The debtor, B, is perfectly willing to arbitrate, 
 but, the creditor, A, declines and accordingly is 
 expelled. In this way, we avoid the possibihty 
 that the expulsion of A may be sustained for any 
 other reason than his refusal to arbitrate. If B 
 were expelled, the direct issue might be avoided 
 by basing the expulsion of the debtor on his failure 
 to fulfill his business obligations. 
 
 Subsequently, A the creditor, begins in a court 
 of law a suit against B for the amount of his claim. 
 The debtor, B, pleads the agreement of A under 
 the rule or by-law to arbitrate. A, then replies 
 that his .agreement was not to arbitrate at all 
 events, but, was in the alternative, namely, either 
 to arbitrate, or, suffer expulsion from the Ex- 
 change and that having been expelled from the 
 association for refusing to arbitrate, his agree- 
 
Administrative Powees Ovee Members. 163 
 
 ment has been completely fulfilled, leaving the 
 original obligation intact. 
 
 The point might be raised in this connection 
 that vi^hile as a theoretical proposition the rules or 
 by-laws of the Exchanges giving to a member the 
 choice of either arbitrating his business disputes 
 or suffering expulsion might not oust the jurisdic- 
 tion of the courts, for the reasons set forth, never- 
 theless, as a practical proposition, it does so oust 
 their jurisdiction because in almost every in- 
 stance, the amount in dispute compared to the 
 value of a membership is very small and no mem- 
 ber will choose to exercise his right to sue for such 
 an amount in a court of law at the risk of losing 
 his membership, in the Exchange, worth, in many 
 instances, thousands of dollars. The only answer 
 which can be made to this line of reasoning is, to 
 hold with the respectable number of modern au- 
 thorities that far from being opposed to public 
 policy, agreements for arbitration are in fact in 
 line with the most enlightened public policy, and 
 accordingly, that the courts will not permit any 
 technical legal principle, laid down at a stage of 
 industrial conditions far different from those now 
 existing to interfere with them. This tendency of 
 the courts to uphold such agreements for arbitra- 
 tion, at least among members of an Exchange 
 organized, inter alia, to facilitate the transactions 
 of business amicably, has been stated by the 
 courts in several recent cases. Thus in the 
 
164 The Law op Commeecial Exchanges. 
 
 case of State v. Union Merchant's Exchange"* 
 the court said, at page 99, " The law is not op- 
 posed to arbitration. On the contrary, it is said 
 to be the policy of the law to encourage these do- 
 mestic tribunals, although they may, if they 
 choose, disregard the rules of law in their de- 
 cisions. Indeed, it is probably the very fact that 
 they are not bound by legal rules, that has led the 
 courts to say that arbitration is looked upon with 
 favor." It would thus appear, that whether we 
 hold to the orthodox principles of the early com- 
 mon law or with the trend of the modern authori- 
 ties, these rules or by-laws can and should be sus- 
 tained. 
 
 Thus upon principle the validity of the rule or 
 by-law under consideration can be clearly sus- 
 tained. An examination of the cases where the 
 question has arisen, however, reveals a square con- 
 flict of authority. The majority, as well as the 
 better reasoned, of the decisions following the 
 leading case of Evans v. Chamber of Commerce 
 of Minneapolis "° uphold the rule."* In that case 
 
 "' 2 Mo. App. 96. 
 
 "" 86 Minn. 448, 91 IST. W. 8. 
 
 ""Farmer v. Board of Trade, Y8 Mo. App. 557; Albers 
 Commission Co. v. Spencer, 205 Mo. 105; Pacaud v. Waite, 
 218 ni. 138, 75 N. E. 779, 2 L. E. A. (N. S.) 672; Hurst v. 
 New York Produce Exchange, 100 N. T. 605, 3 N. E. 42; 
 People ex rel. Johnson v. Produce Exchange, 149 N. T. 401, 
 44 N. E. 84; Haebler v. New York Produce Exchange, 149 
 N. Y. 414, 44 N. E. 87; White v. Brownell, 3 Abb. Pr. N. S. 
 318, affirmed in 4 Abb. Pr. N. S. 193, 2 Daly 329; Vaughn v. 
 
Administrative Powers Oveb Members. 165 
 
 the plaintiff had been expelled for failure to arbi- 
 trate a dispute with a fellow member. He then 
 sought by legal action to secure his reinstatement 
 in the Exchange on the ground that the rule was 
 invalid, inasmuch, as the charter only authorized 
 arbitration when " voluntarily " submitted. The 
 court, however, sustained the validity of the rule. 
 While admitting the general doctrine that the 
 ordinary contracts of arbitration were invalid on 
 grounds of public policy, the court answered in 
 the negative the question which it considered de- 
 cisive of the case: " Are the rules in question, 
 providing for the expulsion of members of the de- 
 fendant association, and on which the action com- 
 plained of was based, contrary to the constitution 
 or statutes of the State or are they opposed to 
 public policy? " It said, at page 456 of the opin- 
 ion : ' ' Because such by-laws and rules give to the 
 board of directors power to discipline only when a 
 member refuses to arbitrate, as he has agreed to 
 do in consideration of the rights and privileges of 
 membership, and no attempt is made to deprive 
 him of an opportunity to litigate his differences 
 in the ordinary way, they are not unreasonably 
 coercive, violative of constitutional rights, or con- 
 trary to public policy. . . . There has been no 
 attempt in these rules or their observance, through 
 proceedings resulting in plaintiff's expulsion, to 
 enforce the liability of a member upon a contract 
 
 Herndon, 91 Tenn. 64. See also TiLompson v. Adams, 93 Pa. 
 St. 55; Moffatt v. Board of Trade, 111 S. W. 894 (Mo. App.). 
 
166 The Law of Commercial Exchanges. 
 
 or upon any other form of obligation!. His day in 
 court is still reserved to Mm." And further in 
 page 455: " The error which prevails in a few 
 cases, in which an opposite doctrine has been an- 
 nounced, lies in the fact that the broad distinction 
 was not observed which exists between an attempt 
 to enforce in the courts an absolute agreement to 
 waive, disregard, or ignore the ordinary methods 
 of settling disputes, and an effort to compel com- 
 pliance with an agreement made between individ- 
 uals, as a condition to becoming and remaining 
 members of a voluntary association for business 
 purposes, that they will settle their business dif- 
 ferences in a prescribed way." 
 
 There are, however, some respectable authori- 
 ties contrary to the reasoning and the authorities 
 above set forth. One of the early but still the 
 leading case in opposition is Heath v. New 
 York Gold Exchange."'' In this case the plain- 
 tiff was seeking to enjoin the arbitration com- 
 mittee of the defendant Exchange from proceed- 
 ing to arbitrate the claim which another member 
 held against the plaintiff. The Exchange was un- 
 incorporated, and the constitution contained the 
 following provisions: " It shall be the duty of 
 said committee to take cognizance of and exercise 
 jurisdiction over all claims and matters of dif- 
 ference between the members of the board, and 
 their decision shall be final." The distinction 
 made in Evans v. Chamber of Commerce, supra, 
 
 "' 38 How. Pr. 168, 1 Abb. Pt. (N. S.) 251. 
 
Administrative Powees Ovee Membbes. 167 
 
 between the ordinary contracts for arbitration 
 and the situation by virtue of the rules of the 
 Exchange, the court either refused, or was un- 
 able, to perceive and accordingly the question 
 was decided squarely in accordance with the 
 common-law principles relative to agreements for 
 arbitration. This cas6, while often cited as being 
 in opposition to the broad principle above set 
 forth is yet, upon close analysis, not so much" so as 
 a superficial examination would indicate. The 
 case in no way holds that a rule which gives to a 
 member of the Exchange the choice of either arbi- 
 trating or surrendering his membership is in- 
 valid. It simply stands for the broad proposition, 
 that so far as the agreement to arbitrate was con- 
 cerned the plaintiff had the legal right to revoke 
 such contract prior to the making of an award. 
 It is submitted that even in those jurisdictions fol- 
 lowing Evans v. Chamber of Commerce, supra, 
 such a legal principle is sound and so this case, 
 although often cited as the leading authority 
 against the principles above set forth, is in fact 
 not squarely in opposition. There are, however, 
 several other cases which squarely hold that a rule 
 of such Exchange which compels its members 
 either to arbitrate or surrender their membership 
 is invalid."^ One of these cases is State ex rel. 
 
 ™ State ex rel. Kennedy v. Union Merchants' Exchange, 2 
 Mo. App. 96; National League of Commission Merchants v. 
 Hornung, 129 N. Y. Supp. 437. See also State ex rel. 
 Graham v. Chamber of Commerce, 20 Wis. 68; Savannah 
 
168 The Law of Commeeciax, Exchanges. 
 
 Kennedy v. Union Merchants Exchange of St. 
 Louis."° Later cases in Missouri, however, would 
 seem to leave some doubt as to the law of that 
 jurisdiction.^^" 
 
 The case of Pacaud v. Waite "^ presents an 
 interesting angle of this subject. Here both the 
 plaintiff and the defendant were members of the 
 Chicago Board of Trade, the charter of which au- 
 thorized the creation of committees of arbitra- 
 tion and appeal, but, expressly hmited the juris- 
 diction of such committees to the hearing of 
 matters " voluntarily " submitted. Another pro- 
 vision, however, of the charter authorized the 
 Board of Trade to " establish such rules, regula- 
 tions, and by-laws ... as they may think 
 proper; " still another section provided that 
 " said corporation shall have the right to admit 
 or expel such persons as they may see fit in the 
 manner to be prescribed by the rules, regulations, 
 and by-laws thereof." In accordance with these 
 provisions the said Board of Trade had passed a 
 rule as follows: (Eule 20, section 6.) 
 
 ' ' Upon the fulfillment or settlement of any con- 
 tract or upon the closing of any contract under 
 the provisions of section 5 of this rule, deposits 
 upon which have been made, and when the full ad- 
 Cotton Exchange v. State, 54 Ga. 668; Powell v. Abbott, 9 
 Week. Not. Cas. 231; People ex rel. Elliott o. Cotton Ex- 
 cbange, 8 Hun 216. 
 
 "° 2 Mo. App. 96. 
 
 ™ See Farmer v. Board of Trade, Y8 Mo. App. 557. 
 
 '" 218 111. 138, 75 N. E. 779, 2 L. E. A. (N. S.) 672. 
 
Administrative Powbes Ovek Members. 169 
 
 justment of all differences relating to the same 
 shall have been effected, the deposits shall there- 
 upon be payable to the party depositing the same, 
 and the joint endorsement of both parties upon the 
 certificate shall be a sufficient authority to the 
 party holding the deposit to pay the same to the 
 holder of the certificate; or in case of a failure 
 between the contracting parties to settle their re- 
 spective claims upon the deposit within three busi- 
 ness days after the maturity of all contracts upon 
 which the deposit is applicable, the matter in dis- 
 pute ghall, upon the application of either party to 
 such contracts, be submitted to a select committee 
 of three disinterested persons, members of the 
 association, to be appointed by the president, 
 which committee shall, without unnecessary delay, 
 summon the parties before them, and hear such 
 evidence, under oath, as either may wish to sub- 
 mit touching their claims to the deposit, and shall 
 by a majority vote decide, and report to the presi- 
 dent of the board, in writing, in what manner and 
 to whom the deposit is payable, either wholly or 
 in part ; whereupon the president shall endorse on 
 either the original or duplicate certificate an order 
 for the 'payment of such deposits in accordance 
 with the decision of said committee, and such 
 order shall bie a sufficient warrant to the party 
 holding the deposit to pay the same in accordance 
 with such order." 
 
 Both "Waite, the plaintiff, and Pacaud, the de- 
 fendant, were members of the Exchange. Waite 
 
170 The Law of Commebcial Exchanges. 
 
 had sold a quantity of corn to Pacaud for delivery 
 in July, 1902, and had deposited the sum of $2,350 
 with the Bank of Montreal at Chicago to margin 
 these contracts. When the time for delivery came, 
 the price was greatly enhanced, and Waite refused 
 to deliver on the ground that the market had been 
 manipulated and the closing prices were " ficti- 
 tious. ' ' The defendant, Pacaud, was about to take 
 steps to secure an indorsement to him of said 
 margin deposit Iby the president of the Board, as 
 provided in section 6 of rule 20, above cited, when 
 Waite brought a bill in equity to enjoin both Pa- 
 caud and the President of the Board from pro- 
 ceeding to take any action looking to the indorse- 
 ment of this margin certificate to any one other 
 than the plaintiff himself. The position taken by 
 Waite was, that the charter only authorized the 
 Exchange to arbitrate disputes between members 
 when " voluntarily " submitted for arbitration, 
 and that if section 6 of rule 20 were sustained by 
 the court, the said provision of the charter would 
 be absolutely ignored, inasmuch as the member 
 would be forced to arbitrate his business disputes 
 with another member whether he desired to do so 
 or not. The Illinois Supreme Court dismissed the 
 bill. In passing upon the case, it sustained the 
 right of the Exchange to pass this rule on the 
 ground that it was passed in accordance with that 
 section of the charter which authorized the Ex- 
 change to " establish such rules, regulations, and 
 by-laws for the management of the business as 
 
Administrative Powees Ovee Membees. 171 
 
 they may think proper," and not by virtue of the 
 other section of the charter which involved the 
 question of arbitration. 
 
 This position taken by the court would seem 
 exceedingly difficult to sustain, either on principle 
 or authority. In the first place, what distinction 
 can be m'ade between the terms ' ' voluntary ' ' and 
 " involuntary " as applied to agreements to arbi- 
 trate except that by " voluntary " we mean a 
 thing done willingly and by * ' involuntary ' ' some- 
 thing which is done unwillingly. It is submitted, 
 that the court, in construing those sections of the 
 charter which merely authorized voluntary arbi- 
 tration did not pay any too much attention to the 
 distinction, from a standpoint of diction, be- 
 tween these two terms. If the compelling ' of 
 Waite to give up his claim to the margin deposit 
 in the bank was not forcing him to arbitrate, it is 
 submitted that a new concept will have to be 
 evolved for this term. In the second place, it 
 should be carefully noted that this case does not 
 present a situation where the claim of Pacaud was 
 apparent and not disputed by Waite but one 
 wherein Waite absolutely denied that there was 
 any obligation whatever to pay Pacaud, on the 
 ground that there was an illegal corner of the 
 market. There is an entirely different situation 
 involved when a member says to another member, 
 " I owe you $1,000 but I do not intend to pay 
 you," and where one says, " I will- not pay you 
 the $1,000 you claim from me because I do not owe 
 
172 The Law of Commeecial Exchanges. 
 
 it to you. " It is an act of bad faith and dishon- 
 esty for a man to refuse to pay his honest obliga- 
 tions, but it is in no way reprehensible to refuse to 
 pay obligations which one honestly claims he does 
 not owe. This was substantially the position 
 taken by Waite in this case, and yet the Supreme 
 Court, by a somewhat clouded reasoning, denied 
 its validity. The question, according to the Su- 
 preme Court, comes down to this : If this rule is 
 in furtherance of the provisions of the charter 
 relative to arbitration it is invalid, because not 
 voluntary, but if passed under some other pro- 
 vision of the charter it can be sustained, and the 
 Exchange shall be the final judge as to the par- 
 ticular provision of the charter under which it has 
 passed this rule. Such reasoning would seem far 
 from satisfactory, unless one can agree that the 
 decrees of an Exchange, whether in construing 
 their rules or applying them to the particular con- 
 duct of each member, are final and conclusive, and 
 not reviewable by the courts. 
 
 There is one situation in connection with this 
 subject upon which, happily, there seems to be no 
 doubt whatever. This is the case where A and B, 
 members of the Exchange, having formally sub- 
 mitted their dispute to arbitration, as provided in 
 the rules, the arbitration committee renders its 
 decision against A, ordering him to pay B a cer- 
 tain sum of money. The latter is dissatisfied with 
 this award, and refuses to comply with the same, 
 and in accordance with the rule of the Exchange 
 
Administeative Powers Oveb Members. 173 
 
 providing for the espialsion of any member who 
 shall fail or refuse to fulfill his business debts and 
 obligations, is expelled. It is obvious, that in this 
 case no such question can arise as discussed above, 
 for the reason, first, that everywhere it is admitted 
 that when the arbitrators have once made their 
 award neither party can revoke the agreement to 
 arbitrate, and, second, the obligation became fixed 
 for the first time according to the agreement of 
 the parties upon the making of the award and 
 therefore the debt becomes just like any other 
 obhgation between members of the Exchange 
 about which there is no dispute whatever. The 
 authorities in this situation clearly sustain the 
 right of the Exchange to expell or suspend a mem- 
 ber for failure or refusal to abide by an award of 
 such committee."^ 
 
 Section 26. Rules or By-laws Restricting Oom- 
 mercial Activities of Members. 
 An examination of the rules or by-laws of any 
 of the modern conmiercial Exchanges will reveal 
 many which in one way or another restrict or 
 limit the commercial activities of the members. 
 One will provide, for instance, that the members 
 shall not trade except within certain hours and in 
 a certain place, another that in every transaction 
 a certain rate of commission shall be charged, and 
 
 ^' Haebler v. New York Produce Exchange, 149 N. Y. 414, 
 44 N. E. 87; Pfeople ex rel. Johnson v. New York Produce 
 Exchange, .149 N. Y. 401, 44 N. E. 84. 
 
174 The Law of Commeecial Exchanges. 
 
 still anotlier that a member shall not trade with 
 certain classes of persons. Although upon first 
 glance these limitations may strike an outsider as 
 a most unusual and oppressive state of affairs, 
 when judged by the conditions which prevail gen- 
 erally in the commercial world, yet upon more 
 careful consideration it will appear that some re- 
 strictions are absolutely essential to the attain- 
 ment of those objects for which such Exchanges 
 were created. If every member had the full right 
 to transact his business in the way which he alone 
 deemed best or most agreeable, obviously no such, 
 institutions as our Exchanges would or could 
 exist. 
 
 These rules or by-laws like all others must 
 meet the two broad tests hereinbefore discussed, 
 namely, do they lie within the express or implied 
 powers granted in the charter or constitution of 
 such association, and, second, do they contravene 
 any fixed principle of law or public policy. The 
 first of these tests in the case of rules or by-laws 
 limiting the commercial activities of members, has 
 never given the courts any serious trouble. It has 
 never been doubted that the very nature of the 
 Exchanges and the objects sought to be gained by 
 their organization and maintenance render neces- 
 sary some restrictions imposed upon the conduct 
 of members with one another and with the public. 
 In fact, it can be reasonably assumed that the 
 fundamental reason for their organization was to 
 reform conditions which arose simply because of 
 
Administrative Powers Over Membees. 175 
 
 unrestrained competitive conditions. The main 
 difficulty which the courts have found when con- 
 sidering the validity of such' rules or by-laws has 
 been under the second test, that of legality. The 
 question has always been, is it lawful for the Ex- 
 change to compel the charging by all members of 
 n uniform rate of commission, or to limit a mem- 
 Lor in respect to the hours during which he shall 
 trade or in respect to the persons with whom he 
 f.hall trade? Before considering, however, the 
 validity or invalidity of specific rules or by-laws 
 with respect to this second test it might be well 
 to consider, in a broad way, apart from particular 
 statutes, the legal principles which underlie all 
 agreements or methods seeking to limit or repress 
 business activities among those who, except for 
 such agreements, would naturally and freely com- 
 pete one with another. 
 
 (a) Agreements in restraint of trade or com- 
 merce in general. — It is, of course, far' beyond 
 the scope of this treatise to attempt any discus- 
 sion in detail of the legal principles applicable to 
 all contracts or agreements, the tendency of which 
 is to restrict the play of competition in.trade or 
 commerce. A statement of the broad generaliza- 
 tions indulged in by the courts from time to time 
 may, however, throw light upon the considerations 
 which determine the validity of the particular 
 rules before us and serve as a legal background 
 for our subsequent investigations. Nothing is 
 more clearly settled than that, at an early period 
 
176 The Law of Commeecial Exchanges. 
 
 in the life of our common law, all contracts which 
 tended in any degree to the restraint of commerce 
 or trade were void.^^^ Various explanations have 
 been advanced for this position taken by the 
 courts. One is, that at that time trade in the 
 mechanical arts being in its infancy, it was deemed 
 a matter of the greatest public importance to en- 
 courage its growth, and that these contracts in- 
 stead of affording such encouragement actually 
 tended to limit such trade and industry. The 
 rather ingenious explanation has also been ad- 
 vanced that in the early times every member of 
 society was bound to pursue one trade or calling 
 throughout life, it not being possible at that stage 
 of industry for the individual to change at any 
 time he saw fit from one trade to another. Ac- 
 cordingly, when any person retired by agreement 
 from the trade which he was by law or nature 
 bound to pursue, he would be perforce compelled 
 to remain in idleness, which condition the courts 
 conceived absolutely detrimental to the welfare of 
 society.^^* 
 
 However firmly fixed the principle was in early 
 common law that all agreements or contracts 
 which tended in any degree to the restraint of 
 trade or commerce were illegal, it could not hold 
 ground in the face of the advance of modern in- 
 
 "^ Dyer's Case, T. B. 2 Hew. V, p. 5, pi. 26; Ipswich 
 Tailor's Case, 11 Coke 53a; Anonymous, F. Moore 242; But- 
 ton V. Poole, 2 Lev. 210. 
 
 '" See Pollock on Contracts, p. 313 ; also 9 Oyc. 525. 
 
Administeative Powers Over Members. 177 
 
 dustrial and commercial conditions. It was soon 
 found that some agreements, even though they 
 constituted a restraint of trade or commerce, must 
 be allowed if the development of industry and 
 commerce was to progress along safe and satis- 
 factory lines. Accordingly, a consideration of the 
 authorities, especially those of modern times, 
 would lead us to substitute in place of the rigor- 
 ous common-law rule above set forth some such 
 principle as this : That contracts which impose an 
 unreasonable restraint upon the exercise of a busi- 
 ness, trade, or profession are void, but contracts 
 which reasonably restrain it are valid.^^^ 
 
 This principle, of course, is of slight practical 
 value unless we are able to determine what agree- 
 ments in restraint of trade are reasonable and 
 what are unreasonable. This is, as one would 
 judge, a most difficult thing to do, and no court 
 has yet been able to supply a test capable of ac- 
 curate application to all states of fact. As stated 
 by Chief Justice Tindal, in the case of Horner v. 
 Graves,'^' " No precise boundary can be laid 
 down within which the restraint would be reason- 
 able, and beyond which excessive." 
 
 ^ See 2 Addison on Contracts (Abbott's ed.) 1150 ; Bishop 
 on Contracts, sections 515, 516; Metcalf on Contracts, 232; 
 2 Parsons on Contracts, 748 ; Wharton on Contracts, sections 
 430, 431; 2 Pomeroy's Eq. Jur., section 934; 1 Story's Eq. 
 Jur., section 292; all cases cited in note in 92 Am. Dec, 
 751 and in 9 Cyc. 523 and 529. 
 
 ""I Bmg. 735, 5 Moore & P. 768, 
 Com. Exc. — 12. 
 
178 The Law op Commeeciax, Exchanges. 
 
 It should not be conceived, however, that this 
 difficulty is present in this branch of the law alone. 
 In many fields of hfe we find the courts laying 
 down the principle, that the conduct of every man 
 must be " reasonable," and that by the term 
 " reasonable " they mean such conduct as a man 
 of ordinary prudence would adopt. The doctrine 
 of reasonable care in the legal field of negligence 
 is no less difficult to define than that of " reason- 
 able restraint ' ' in the case before us, and yet no 
 court for this reason has suggested a discarding 
 of this legal principle. The courts have, however, 
 in various cases attempted, with varying degrees 
 of success, to lay down a more precise test to de- 
 termine whether a particular contract or agree- 
 ment is reasonable. In Horner v. Graves, supra, 
 the proposition was very tersely put by Chief 
 Justice Tindal: " We do not see how a better 
 test can be applied to the question, whether rea- 
 sonable or not, than by considering whether the 
 restraint is such only as to afford a fair protec- 
 tion to the interests of the party in favor of whom 
 it is given, and not so large as to interfere with 
 the interests of the public. Whatever restraint 
 is larger than the necessary protection of the 
 party can be of no benefit to either ; it can only be 
 oppressive, and if oppressive, it is, in the eye of 
 the law, unreasonable." And again in Hitchcock 
 V. Coker,^" ' ' Where the restraint of a party from 
 carrying on a trade is larger and wider than the 
 
 "' 6 Ad. & E. 438. 1 Nev. & P. 796, 2 Har, & "W. 464. 
 
Administrative Powbes Ovee Membees. 179 
 
 protection of the party with whom the contract is • 
 made can possibly require, such restraint must be 
 considered as unreasonable in law, and the con- 
 tract which would enforce it must be therefore 
 void. ' ' And it was thus also stated by an,eminent 
 American jurist, in the case of Hubbard v. Mil- 
 ler,"^ as follows : ''If, considered with reference 
 to the situation, business and objects of the 
 parties, and in the light of all the surrounding 
 circumstances with reference to which the con- 
 tract was made, the restraint contracted for ap- 
 pears to have been for a just and honest purpose, 
 for the protection of the legitimate interests of 
 the party in whose favor it is imposed, reasonable 
 as between them, and not specially injurious to 
 the public, the restraint will be held valid. ' ' 
 
 Accordingly, any agreement must be considered 
 upon its own facts and in the light of the par- 
 ticular surrounding circumstances and conditions. 
 While a determination as to whether a particular 
 agreement is reasonable or unreasonable is one of 
 law for the court,^^' nevertheless a court can 
 arrive at its conclusion only by viewing all the 
 surrounding circumstances and facts of the par- 
 ticular case^ A careful consideration of the multi- 
 
 ■'' 27 Mich. 15, 15 Am. Rep. 153, Christiancy, 0. J. 
 
 ™ 1 Wharton on Contracts, section 433 ; Bishop on Con- 
 tracts, section 517; Benjamin on Sales, section 527; 2 Pome- 
 roy's Eq. Jur., section 934; Mallan v. May, 11 Mees. & W. 
 653, 7 Jur. 536; Wiley v. Baumgardner, 97 Ind. 66, 49 Am. 
 Kep. 427. 
 
180 The Law of Commebcial Exchanges. 
 
 tude of authorities upon this problem will enable 
 one to arrive at no more definite test for determin- 
 ing whether a particular agreement is reasonable 
 or unreasonable than this ; that if, in the light of 
 all the conditions and circumstances surrounding 
 the particular agreement, the court can see that 
 the protection of the legitimate interests of those 
 concerned in such agreement outweighs the injuryv 
 thereby caused to the public, it will be sustained. 
 On the other hand, if the necessary result of such 
 agreement will be to cause grave injury to the 
 public at large, such agreement will be condemned 
 regardless of the benefits secured to those enter- 
 ing into the agreement.^^" 
 
 (b) Rules or by-laws establishing uniform rates 
 of commission. — It now remains to apply these 
 general legal principles to the specific rules or by- 
 laws of the Exchanges which are designed to re- 
 strict the commercial activities of the members. 
 The first in importance, as well as the one found 
 in practically all modern commercial Exchanges, 
 is that which prescribes the minimum rates of 
 commission which all members must charge for 
 the transaction of business thereon for non-mem- 
 bers or fellow members, under penalty of expul- 
 sion or suspension. These rules or by-laws of the 
 various Exchanges have been before the courts 
 upon many occasions where their validity has been 
 
 "°See Wald's Pollock on Contracts (3d ed.), pp. 467-471; 
 discussion and cases in 9 Cyc. 529; cases in note in 92 Am. 
 Dec. 752. 
 
Administrative Powees Ovee Membees. 181 
 
 attacked, on the ground that they were in restraint 
 of trade and conducive to monopoly and hence 
 illegal, but by the clear weight of authority, al- 
 though several jurisdictions take the contrary 
 view, their validity has been sustained.^^^ 
 
 The question arises at the outset, how an asso- 
 ciation of commission merchants dealing in grain, 
 stocks, etc., can legally establish a uniform rate of 
 charges. The only satisfactory answer to this 
 question is found in the nature of the business 
 transacted upon such Exchanges. The prime 
 object for the creation of such associations is to 
 maintain a high standard of business conduct, and 
 to promote just and equitable principles of trade. 
 It is obvious that such standards can best be main- 
 tained by eliminating the element of competition 
 so far as the charge for services is concerned and 
 emphasizing the quality of the service. The 
 charge for the service exacted by a member of 
 such an Exchange for transacting business is the 
 least consideration in determining the amount of 
 business which each member shall do. What such 
 customer wants is efficiency, skill, financial se- 
 curity, and above all, absolute integrity. The per- 
 
 "' State V. Duluth Board of Trade, lOY Minn. 506, 121 N. 
 W. 395, 23 L. E. A. (N. S.) 1260; Dickinson v. Board of 
 Trade, 114 111. App. 295 ; Greer v. Payne, 4 Kans. App. 153, 
 46 Pac. 190. Contra: State v. "Wilson, Y3 Kans. 343. And 
 see Ertz v. Produce Exchange Co., 82 Minn. 173, 84 N. W. 
 Y43, 51 L. E. A. 825, 83 Am. St. Eep. 419, and Live Stock 
 Commission Co. v. Live Stock Exchange, 143 111. 210, 32 
 N. E. 2Y4, 36 Am. St. Eep. 385, 18 L. E. A. 190. 
 
182 The Law of Commeecial Exchanges. 
 
 sonal confidence reposed and financial responsi- 
 bility exacted distinguish the business from almost 
 all other strictly commercial branches. It would 
 be impossible or at least more difficult to main- 
 tain these objects for which such Exchanges were 
 established, if they were demoralized by that con- 
 stant pressure of ruthless and financially irre- 
 sponsible competition which is the constant bane 
 of so many other lines of trade. In eliminating 
 entirely the question of the price of services and 
 thus placing the emphasis upon the quality of the 
 service as the most prominent factor for the at- 
 traction of business, these rules or by-laws di- 
 rectly promote the fundamental objects and pur- 
 poses of such associations. 
 
 The validity of these rules or by-laws, however, 
 does not rest alone upon the benefits which accrue 
 to the Exchanges and their members. In ad- 
 dition, they are in no way injurious to the public 
 at large. In no appreciable degree is either the 
 production or price of the commodities dealt in on 
 such Exchanges affected by such uniform rates of 
 commission for services. The commission charged 
 for buying or selling such commodities constitutes 
 but the most unimportant factor in the price 
 charged to the consumer or accruing to the pro- 
 ducer. Moreover, so long as the charge itself is 
 just and reasonable, and this has been assumed in 
 all the cases before the courts, it is a distinct ad- 
 vantage to the producer to know in advance just 
 what such charge will be and that it is certain, 
 
Administeative Powers Ovee Membees. 183 
 
 definite and. uniform. A combination of producers 
 of these commodities which operated to limit the 
 output or to fix the prices at which the same should 
 be sold is illegal for the reason that it results 
 directly and designedly in the restraint of trade 
 in such commodities. On the other hand, a certain 
 standard of commission rates for the handling of 
 these products limits, if at all, in the most minor 
 degree the price of such commodities either to the 
 producer or consumer. And while this distinction 
 is but one of degree and not of principle, yet in- 
 asmuch as the entire question of what is a reason- 
 able and what an'unreasonable restraint is one of 
 degree, at least according to modern law, it would 
 seem to be of decisive force in this connection. 
 In the ease of State v. Duluth Board of Trade,"^ 
 the court said at page 413 of the opinion : 
 
 "The Board of Trade neither buys nor sells 
 grain. The members act as the agents of the pro- 
 ducers and purchasers of the grain, and the 
 regulation of their commissions for such services 
 can have no appreciable effect upon either the pro- 
 duction or the price of the grain. It is a fixed 
 charge, which must be paid and the price which 
 the producer obtains for the grain may be affected 
 indirectly thereby. But the question is whether 
 the production or price is directly or to any ap- 
 preciable extent controlled or regulated by the 
 rule which makes the charge uniform, definite and 
 known, instead of uncertain and unknown. So 
 
 "'' lOY Minn. 506, 121 N. W. 395, 23 L. E. A. (K". S.) 1260. 
 
184 The Law of Commebcial Exchanges. 
 
 long as the rate of commission is reasonable, as it 
 is conceded to be in this instance, it must be for 
 the benefit of the producer to know in advance 
 what it will cost in commission to have his grain 
 sold. ... In fact, public policy requires that 
 such charges shall be definite, certain, and uni- 
 form, and this seems equally true as to commis- 
 sions for sales, when made under the pecufiar con- 
 ditions under which the grain business is con- 
 ducted. A board of trade which requires its mem- 
 bers to treat all its customers exactly alike in the 
 matter of charges for services no more destroys 
 competition than does a railroad when it charges 
 all shippers the same rate for conveying freight. 
 
 " It is common knowledge that competition be- 
 tween commission men for the business of the 
 producers is in fact strong, and success in getting 
 the business depends, not upon offering to trans- 
 act it for less than the uniform rate of commis- 
 sion, but upon the skill and facilities possessed for 
 obtaining the highest price for the grain from the 
 elevator and mill men who are generally the pur- 
 chasers. There is no fixed price at which sales 
 must be made. If A can secure a cent a bushel 
 more for B's grain than can C or any other com- 
 mission man, he will get the benefit of his superior 
 skill and energy. Competition of this character 
 exists on all Boards of Trade and Chambers of 
 Commerce, and it is inconceivable that a rule 
 which requires all the commission men who are 
 members of the board or chamber to charge the 
 
Administrative Powers Over Members. 185 
 
 same rate of commission for the same service can 
 materially affect or control either the production 
 of grain or the price at which it sells. Of course, 
 in a remote and indirect way, every charge and 
 item of expense which attaches to the marketing 
 of grain or other products affects to some extent 
 the prices received by the producers and paid by 
 the ultimate purchaser. But contracts and agree- 
 ments for certain and uniform charges, which are 
 for the benefit of all and operate only indirectly 
 on production and prices, are not within the pro- 
 hibition of the statute." 
 
 Accordingly, since these rules or by-laws estab- 
 lishing such minimum or uniform rates of com- 
 mission charges are vitally essential to the welfare 
 of the Exchanges and the members thereof who 
 are bound by them, and do not on the other hand 
 operate to the serious detriment of the public at 
 large, they are sustainable upon principle as well 
 as by the weight of authority above cited. 
 
 (c) Rules or by-laws forbidding members to 
 trade with or for expelled or suspended members. 
 — In the rules or by-laws of the Exchanges will 
 be found many provisions restricting the business 
 dealings of the members with certain designated 
 persons or classes of persons. For instance, one 
 such rule or by-law will provide that no member 
 shall be permitted to deal with a member under 
 senten"Ce of suspension or expulsion so long as the 
 latter remains under such sentence. The validity 
 of such rule was passed on in the case of Gladish 
 
186 The Law of Commercial Exchanges. 
 
 V. Kansas City Live Stock Exchange/^^ "where the 
 court, in dismissing a bill to enjoin the enforce- 
 ment by the association of this rule said, at page 
 732 of the opinion, " There is nothing in defend- 
 ant's organization .to do either (constitute a trust 
 or limit competition). It does not seek to limit 
 trade, nor to limit competition by refusing to buy 
 or sell to others for the reason that they are not 
 members of its association. But they can boycott 
 a member, or, rather, they can refuse to deal with 
 him, not because he is not a member of the Ex- 
 change but because he has been found guilty and 
 expelled from the association for his wrongdoing. 
 . . . The purposes of the Exchange are to be 
 commended. It provides for the expulsion of a 
 member who has been found guilty of a violation 
 of commercial honesty, and forbids its members 
 from having further dealings with him. In other 
 words, boycotts him for his conduct, and not be- 
 cause he is not a member of the association. If 
 the association, after having expelled plaintiff for 
 converting his customer's money to his own use, 
 and. thus betraying his trust, should permit its 
 members to continue dealings with him, it would 
 be, in effect, holding him out to the business world 
 as a man who could be trusted. If the association 
 lives up to its declared purposes, ' to promote and 
 protect all interests concerned in the purchase and 
 sale of live stock ... to promote and protect 
 
 *" 113 Mo. App. 726. 
 
Administeativb Powers Ovee Members. 187 
 
 uniformity in customs and usage in the transaction 
 of business ... to inspire confidence in the 
 methods and integrity of its members . . . and, 
 generally, to promote the welfare of the Kansas 
 City market,' it will inspire confidence every- 
 where and the tendency would be to increase and 
 not to limit competition and trade on said market. 
 There is nothing in the rules and regulations of 
 the association that brings it within the inhibition 
 of the statute, or opposed to the common law. ' ' 
 
 (d) Rules or hy-laws forbidding members, to 
 deal with or for " bucket shops." — A similar 
 situation is presented in the case of a rule or 
 by-law of such Exchanges which provides for the 
 expulsion of any member dealing, directly or in- 
 directly, with a bucket shop. It cannot be doubted 
 that the Exchange in its endeavor to maintain a 
 high standard of commercial integrity would have 
 the right to suspend or expel any member who was 
 himself guilty of bucket shopping, or of failure to 
 execute the orders given him by an outsider in 
 the manner prescribed by the rules and generally 
 recognized as legitimate in the ordinary affairs of 
 business. Moreover, when it is realized that such 
 bucket shop transactions are designated as crim- 
 inal by the statutes of many States,^'* there can be 
 
 ""See Soby v.. People, 134 HI. 66, 25 N. E. 109; "Weare 
 Commission Co. v. People, 209 111. 528, 70 N. E. 10Y6 ; People 
 V. Wirsching, 88 N. E. 169; Caldwell v. People, 67 111. App. 
 367; State v. Kentner, 178 Mo. 487, 77 S. W. 522; State v. 
 Logan, 84 Mo. App. 584; People v. Wade, 59 N. T. Supp. 846; 
 
188 The Law of Commeecial, Exchanges. 
 
 no difference of opinion upon the point, that any 
 member guilty of such practices falls below that 
 standard of business integrity which the Ex- 
 changes desire to inculcate. If this reasoning be 
 sound when the member is guilty of such question- 
 able or criminal business conduct, can there be any 
 more doubt that such Exchanges have equally the 
 power to enact and enforce a rule which prohibits 
 any member from dealing, directly or indirectly, 
 with an outsider who practices such a nefarious 
 business? As is well known, those engaged in 
 bucket shopping find it most convenient and often 
 essential to the conduct of their business to employ 
 the facilities offered on the legitimate Exchanges. 
 Accordingly, any member of the Exchange who 
 offers to such businesses any assistance as above 
 indicated is, in effect, but aiding and abetting such 
 a criminal business and, moreover, is preventing 
 their natural decay. In fact, the validity of such 
 rules has been so generally acknowledged that 
 the question has been rarely adjudicated in the 
 courts, although it is fair to assume that in many 
 cases the Exchanges have seen fit to en- 
 force such rules or by-laws. In the ease of 
 Bostedo V. Board of Trade of the City of Chi- 
 cago,^^° where the validity of this rule was attacked 
 by the plaintiff, the court, in sustaining its valid- 
 Gill V. State, 10 Ohio C. C. N. S. 345; State v. McMillan, 69 
 Vt. 105, 37 Atl. 278; State v. Corcoran, 73 Vt. 404, 50 Atl. 
 1110. 
 "" 227 m. 90, 81 N. E. 42. 
 
Administbative Powers Ovee Membebs. 189 
 
 ity, said, at page 92 of the opinion, " "We think, 
 therefore, in view of what has been said in the 
 foregoing cases, and especially in view of the hold- 
 ing in the Sturges case, that the Circuit Court did 
 not err in refusing to enjoin the board of directors 
 of appellee from proceeding to try appellant upon 
 the charges preferred against him by Hill. ' ' 
 
 (e) Rules or by-laws restricting the solicitation 
 of business. — Another rule or by-law frequently 
 found in commercial Exchanges is one which pro- 
 vides that no member of the Exchange shall em- 
 ploy any other person as a solicitor except one 
 who is a member of the Exchange, or shall employ 
 not more than a given number of solicitors, or 
 shall pay his solicitors a fixed salary, not depend- 
 ent upon the amount of business they secure. In 
 the case of People v. Chicago Live Stock Ex- 
 change,'^* the court refused to sustain the validity 
 of such a rule, and at page 570 said : " The by-law 
 in this case is a restriction on freedom of trade 
 and business. It trammels competition and pro- 
 hibits an individual from contracting and engag- 
 ing in business, and from using such agencies and 
 means that he may desire, not hostile to general 
 law. It is not required for corporate purposes, 
 nor is it included within the purposes declared in 
 the certificate of incorporation. It is therefore 
 unlawful, as this corporation had no right to exer- 
 cise this power of enacting it under its franchise. " 
 
 "° lYO 111. 556, 48 ]Sr. E. 1062, 39 L. E. A. 373, 62 Am. St. 
 Eep. 404. 
 
190 The Law of Commercial Exchanges. 
 
 While this court may have decided the case before 
 it correctly upon its facts, yet it is submitted that 
 the language employed in the opinion is far too 
 sweeping to trust as a sound principle for the de- 
 termination of similar cases. Under the broad 
 terms of the opinion no rules of the Exchanges 
 limiting the commercial activities of their mem- 
 bers in any degree could be sustained, and yet, as 
 we have seen, the lower court in this same State 
 has sustained the validity of a rule of the Chicago 
 Board of Trade which prescribes certain uniform 
 rates of commission.^^^ 
 
 (f) Rules or by-laws limiting hours of trading. 
 — Another rule in force upon most of the com- 
 mercial Exchanges is one which regulates the 
 trading hours and provides for the punishment of 
 any member who trades upon such Exchange floor 
 or elsewhere after the prescribed closing time. In 
 the case of State ex rel. Cuppel v. Milwaukee 
 Chamber of Commerce,^^' the plaintiff having been 
 expelled for violation of such a rule brought a 
 writ of mandamus to compel the defendant Ex- 
 change to restore him to membership. The court 
 declined to grant the writ, and expressly held that 
 this rule was valid. It said, on page 767 of the 
 opinion : 
 
 " The objection that the chamber has no power 
 to make a rule or by-law which prohibits its mem- 
 bers from meeting when and where they please, 
 
 '" Dickinson v. Board of Trade, 114 HI. App. 295. 
 ™ 47 Wis. 670, 3]Sr. W. 760. 
 
Administrative Powees Ovek Members. 191 
 
 and then and there making contracts for the 
 future delivery of grain or provisions, is based 
 upon the alleged positions that such a rule or by- 
 law is not for the good government of the chamber, 
 and therefore ultra vires; and further, that the 
 same is unnecessary and unreasonable, and ope- 
 rates as an unlawful restraint of trade We can- 
 not concur in these positions. Eegarding the rule 
 under consideration merely as a police regulation, 
 enacted for the purpose of affording the members 
 of the chamber of comm^ce free and convement 
 ingress and egress to and from the daily meetings 
 of the chamber, and to prevent the confusion and 
 disturbance in the public places near its Ex- 
 change room which might result from the un- 
 limited right of the members to trade in those 
 places, we could not hold that the rule in that be- 
 half may not be proper for the good government 
 of the chamber, or that it imposes an unlawful re- 
 straint upon trade, or is unreasonable or unneces- 
 sary. But it is probable that the rule was enacted 
 for other than mere police purposes. It may be 
 that experience has shown that the unrestricted 
 right of the members to form a market at the time 
 and in the places specified in the rule, for the pur- 
 pose of making the class of contracts therein men- 
 tioned, tended to promote irregular transactions 
 by persons not members of the chamber and not 
 amenable to its rules. In the preamble the 
 chamber declares its objects to be ' to promote 
 just and equitable principles in trade, to correct. 
 
192 The Law of Commebcial Exchanges. 
 
 abuses, to estabKsh and maintain uniformity in 
 the commercial usages of the city, to acquire, pre- 
 serve and disseminate valuable business informa- 
 tion, and to support such regulations and meas- 
 ures as may advance the mercantile and manu- 
 facturing interests of the city of Milwaukee.' 
 These are laudable objects and we cannot say that 
 none of them are promoted by the rule under con- 
 sideration. ' ' 
 
 (g) Other rules or by-laws of this general char- 
 acter. — The space limjts of this treatise prevent 
 any extended discussion of many other rules or 
 by-laws of our commercial Exchanges aimed at 
 the restriction or limitation of the commercial 
 activities of their members. Frequently, for in- 
 stance, we find a rule forbidding a member to 
 affiliate with any other Exchange in the same 
 city,^^° while another may provide that any mem- 
 ber who attempts to corner the market shall be 
 subject to discipline. In all of such cases it is 
 submitted, that the broad general test above out- 
 lined will furnish the only helpful means of ad- 
 judging the validity of such rules. Whenever the 
 courts can see that the rules or by-laws are rea- 
 sonably essential for the purposes of the associa- 
 tion and the protection of its legitimate interests 
 and are not injurious to the public at large, these 
 rules will be and have been sustained. On the 
 
 "^For instance of such a rule see Heim v. New York 
 Exchange, 118 N. T. Supp. 591. 
 
Administbativb Powees Over Membebs. 193 
 
 other, when these conditions cannot be found they 
 will be, and have been condemned.^*" 
 
 Section 27. The Enactment of Rules or By-laws. 
 
 (a) What body must enact rules or by-laws. — 
 Thus far we have been considering the general 
 power of the Exchanges and other similar associa- 
 tions to enact rules or by-laws for their self-gov- 
 ernment and the various considerations which 
 limit the exercise of such power. There naturally 
 arises at this point the question, by whom this 
 power may be exercised — the membership at 
 large or a select but subsidiary body of such as- 
 sociation, called by various names, such as Board 
 of Directors, Governing Committee, etc. This 
 problem usually can be solved by consulting the 
 constitution or charter of such association. 
 Where these instruments expressly delegate such 
 power to said special committees, the answer is 
 plain that no body other than such committee may 
 exercise it, and this excludes even the membership 
 at large. "Where, however, these instruments are 
 silent as to the delegation of the power to a par- 
 ticular body, it resides by implication in the mem- 
 bership at large and in the most numerous branch 
 of such membership. This conclusion is settled 
 by principle and authority."^ And unless a dif- 
 
 '"See Hbpkins v. U. S., 171 TJ. S. 5Y8, 43 L. Ed. 290; 
 Anderson v. IT. S., 171 TT. S. 604, 43 L. Ed. 300. 
 
 '"Morton Gravel Eoad Co. v. Wysong, 5 Ind. 4; Bank v. 
 Eidgely, 1 Harr. & G. (Md.) 324; Bank v. Gloucester Bank, 
 17 Mass. 1, 9 Am. Dec. Ill; Holly Springs Bank v. Pinson, 
 Com. Exc— 13. 
 
194 The Law of Commekcial. Exchanges. 
 
 * 
 
 ferent requirement is expressly provided in the 
 constitution or charter, a majority vote of the 
 members of such association will be required to 
 enact a valid rule or by-law."^ 
 
 In the great majority of instances, however, the 
 correct determination of this question cannot be 
 made by a cursory examination of such constitu- 
 tion or charter. Let us test the problem by the 
 following hypothetical state of facts which, by the 
 way, represent the real situation in most of the 
 Exchanges. Suppose that the constitution or 
 charter merely provides in general terms that 
 " the association shall have power to pass such 
 rules or by-laws as it shall deem necessary, etc." 
 Let us assume further, first, that at some time sub- 
 sequent to the organization of the association un- 
 der such charter or constitution the membership 
 at large enacts a rule delegating the power to 
 enact all rules or by-laws to the board of directors, 
 and that in accordance with such delegation of 
 power, the latter body does enact a rule or by-law 
 governing the conduct of its members, and second, 
 the case where, although no such delegation of 
 power has been made by the membership, never- 
 theless such select committee assumes to itself 
 the power to enact rules or by-laws. Is such exer- 
 
 58 Miss. 421, 38 Am. Eep. 330; State Savings Association v. 
 Printing Co., 25 Mo. App. 642; Carroll v. Mullanphy Banlc, 
 8 Mo. App. 249 ; State ex rel. Corey v. Curtis, 9 Nev. 325 ; 
 Martin v. Building Association, 2 Coldw. (Tenn.) 418; Rex 
 V. West-wood, 4 B. & 0. Y81. 
 "'See 10 Oyc. 355. 
 
Administrative Powers Over Members. 195 
 
 cise of legislative power upon the part of the 
 select committee binding upon the members? 
 
 The latter situation has yet to be passed upon 
 by the courts, and any discussion accordingly 
 must rest upon principle alone. The argument to 
 support this position is that, inasmuch as the 
 board of directors can bind the association by any 
 action it may take within the scope of the powers 
 of such association as expressed in the constitu- 
 tion or reasonably implied therefrom, accordingly, 
 when it performs the act of making rules or by- 
 laws within the scope of such constitution or 
 charter, it is also acting as such association. This 
 position is unsound, it is submitted, in failing to 
 take into account the, exact legal function of such 
 board of directors. Unless some additional pow- 
 ers are expressly given to it by the members 
 aggregate, the only function which such a body 
 should perform is to represent and direct the cor- 
 poration or association as such in accordance with 
 rules or by-laws enacted by the membership at 
 large. It is peculiarly an administrative and not 
 a legislative body, created to perform those duties 
 alone which the large body of members either 
 cannot perform at all or can perform less effici- 
 ently than a smaller body. 
 
 In the first situation outlined above, where the 
 select committee exercises such power to enact 
 rules only after an express delegation to it of the 
 authority by the membership at large, there is 
 some authority sustaining the exercise of the 
 
196 The Law of Commebcial Exchanges. . 
 
 power thus delegated,"* but it is by no means 
 overwhelming or unanimous.^** Moreover, none 
 of these cases has to do directly with associations 
 exactly similar to the Exchanges, but rather with 
 private corporations for profit. Where the as- 
 sociation is unincorporated, the argument might 
 be pressed that the constitution is in effect of no 
 higher authority than any other rule enacted by 
 the members composing the association, and inas- 
 much as there would be no question were the 
 power expressly delegated to such select com- 
 mittee in the constitution, there can be none when 
 it is thus delegated by a rule enacted by the mem- 
 bership at large. When the organic law creating 
 such association is founded upon a charter granted 
 by the State, which grants the power to enact rules 
 to the " corporation " or " association," it be- 
 comes far more difficult to uphold such delegation 
 of full legislative power than where the associa- 
 tion is unincorporated. In actual practice, how- 
 ever, we observe incorporated Exchanges with 
 provisions in their charters substantially identical 
 with the general terms herein set forth exercising 
 this power to enact rules or by-laws in exactly 
 opposite ways, some through select committees ^*^ 
 and others through the membership at large.^** 
 
 ^"Ex parte Willcocks, 7 Cowen 402, 17 Am. Dec. 525; 
 Cahill V. Kalamazoo Mutual Ins. C!o., 2 Doug. 124, (Mich.) 
 43 Am. Dec. 45Y. 
 
 '" Carroll v. Mullanpliy Savings Bank, 8 Mo. App. 249. 
 
 '*° See section 55 of the by-laws of the N. T. Produce Ex- 
 change. 
 
 "'See article X of the by-laws of the Chicago Board of 
 Trade. 
 
Administrative Powers Over Members. 197 
 
 (b) Amendment of rules or by-laws. — The dis- 
 cussion thus far has had more in mind the situa- 
 tion where, immediately after organization of 
 such an Exchange, either by constitution or in con- 
 formity with the charter, the association pro- 
 ceeded forthwith to enact a code of rules or by- 
 laws related to the objects sought to be attained. 
 It is but natural, however, in the course of time 
 that such Exchanges should find it necessary to 
 change such rules or by-laws and add others. It 
 follows from the consideration given to the ques- 
 tion of the power to enact rules that as members 
 are bound by the rules to which they assent by 
 becoming members, they are equally bound by all 
 lawful amendments and additions thereto subse- 
 quently adopted in accordance with existing rules, 
 even though they vote against such changes. This 
 has been held both in the case of the unincorpo- 
 rated "^ and the incorporated "' exchanges and 
 associations. 
 
 The amendment of such rules and by-laws may 
 take one of two forms, first, the change of a par- 
 ticular rule which has been regularly enacted in 
 the past, either by adding to or subtracting from 
 its provisions, or second, the addition of some en- 
 tirely new provision to the rules to by-laws, 
 broadening the powers before exercised by such 
 association. The former method is of no par- 
 ticular importance to the topic at hand, inasmuch 
 
 '" Albers V. Merchants Exchange, 39 Mo. App. 583. 
 ^^ McCabe v. Father Matthew Society, 24 Hun 149. 
 
198 The Law op Commercial, Exchanges. 
 
 as it is controlled by legal principles not peculiar 
 to the law of Exchanges. The second method is 
 the one most commonly observed and one which 
 renders this subject of interest at this point. It 
 is obvious that in testing the validity of a particu- 
 lar amendment, the same legal principles are ap- 
 plied as in the case of rules and by-laws discussed 
 in the preceding portion of this chapter. It is a 
 matter of no significance that the one rule or by- 
 law was adopted immediately succeeding the 
 organization of the exchange or association and 
 another a year or a number of years subsequently 
 thereto. In each case, the sole question to de- 
 termine is, whether the association had the power 
 to enact the particular rule or by-law in question. 
 Of course, a particular situation might arise when 
 it could be seen that in passing the first code of 
 rules or by-laws, the association had exhausted its 
 entire power both express and implied. But such 
 is at best a remote possibility. The act of adding 
 a new rule or by-law, upon analysis, is seen to be 
 simply an effort to make potent a power which 
 such association always had, but which for con- 
 venience it had theretofore allowed to remain 
 latent. Accordingly, in determining the validity 
 of such an amended rule or by-law, the same tests 
 are applied as in the case of any other rule, 
 namely, is it within the express or implied powers 
 of such exchange or association as laid down in 
 the constitution, and second, is it contrary to any 
 rule of law. Inasmuch as these propositions have 
 
Administrative Powees Ovee Members. 199 
 
 been fully discussed above, no further considera- 
 tion will be attempted here. 
 
 The question of the procedure whereby such 
 amendment is adopted is, however, of sufficient im- 
 portance to warrant some consideration at this 
 point. Assuming that the constitution, or charter, 
 or a previous rule or by-law of such exchange or 
 association prescribes a specific method of pro- 
 cedure for the amendment of its rules, does the 
 failure to comply with such procedure vitiate the 
 amendment ? It is hardly necessary to discuss the 
 case where the method pursued is contrary to 
 that laid down in the charter or constitution. 
 These represent the organic law whereby such as- 
 sociation exists. Accordingly, in the case of the 
 incorporated Exchange, the method for amend- 
 ment being set out in express terms in the charter, 
 it will be presumed that the legislature was 
 equally as insistent upon the manner in which the 
 rules or by-laws were adopted as on the subject- 
 matter of such rules and by-laws themselves, and 
 accordingly one is as limited as the other.^^" And 
 in the same way, the constitution of the unincor- 
 porated Exchange represents its organic law, and 
 if the method be prescribed therein, it cannot be 
 ignored with impunity.^^" Although the courts 
 have upon several occasions carelessly seemed to 
 state that the constitution was in fact entitled to 
 
 "° 10 Cye. 354. 
 
 ^iHockreiter's Appeal, 93 Pa. St. 479; Moffat v. Board of 
 Trade, 111 S. W. (Mo. App.) 894. 
 
200 The Law of Commercial Exchanges. 
 
 no greater respect than any other rule or by-law, 
 this seems to be erroneous both upon principle and 
 authority. 
 
 A question far more difficult is where the re- 
 quired formalities of amendment are contained 
 not in the charter or constitution of the Exchange 
 but simply in another rule or by-law previously 
 enacted. Let us assume as an illustration that 
 an existing rule or by-law requires a two-thirds 
 vote of all members to enact an amendment, but 
 disregarding this provision, the amendment is put 
 into operation by a simple majority vote. The 
 validity of such an amendment has been denied in 
 one case ^'^ but on the other hand it has been sus- 
 tained in several cases.^°^ Upon principle, it 
 would seem that the decisions holding such amend- 
 ments, although irregularly adopted, to be valid, 
 are erroneous^ unless it be conceded that rules 
 and by-laws are never binding upon a majority of 
 the members whenever they see fit to disregard 
 them. A person joining such an association con- 
 tracts to be bound by such rules as are in existence 
 when he enters and such as are subsequently made 
 in accordance with these already in existence. 
 Accordingly, it would seem that he would not be 
 bound by any such rule or by-law not enacted in 
 accordance with the terms of his original contract 
 unless he assented thereto, and in the absence of 
 
 '" Torrey v. Baker, 1 Allen 120. 
 
 '" Eiohardson v. Society, 58 N. H. 187; Oommonwealtli v. 
 Mayor of Lancaster, 5 Watts 152 ; Smith v. Nelson, 18 Vt. 516. 
 
Administeative Powers Over Members. 201 
 
 such assent, if his case be one permitting of legal 
 redress, the courts will grant him relief, 
 
 (c) Regulations versus rules or by-laws. — The 
 question has arisen several times as to the exact 
 status and effect of a regulation established by the 
 board of directors or other select committee when 
 the power to exact rules or by-laws is conceded to 
 be in the entire membership alone. In this con- 
 nection we mean, by a regulation a fiat issuing 
 from such board of directors or governing com- 
 mittee prescribing a certain rule of conduct to be 
 observed by all members of the association. A 
 distinction should be made at the outset between 
 those regulations of such board of directors, etc., 
 controlling the public at large or those not mem- 
 bers in their intercourse with, or business trans- 
 actions upon, such exchange or association, and 
 the totally different class of regulations promul- 
 gated by such board of directors or governing 
 committee which seek to regulate the conduct of 
 members inter se or the relation between members 
 and the association. The former covers a purely 
 administrative matter, over which such board of 
 directors or governing committee, as the supreme 
 administrative body, has entire control, and ac- 
 cordingly a regulation put forth by them of this 
 character would be well within the scope of the 
 implied powers inherent in such body.^°^ 
 
 Where such regulations seek to control the con- 
 duct of the members inter se, or, in their relations 
 
 '"' See 10 Cyc. 357, note 37. 
 
202 The Law of Commeecial Exchanges. 
 
 witli the association, a different situation is pre- 
 sented. As we have seen, in the absence of some 
 provision in the charter or constitution, the power 
 to enact rules or by-laws for the self-government 
 of the association, whether incorporated or unin- 
 corporated, resides in the association at large and 
 in the most numerous portion thereof, but that in 
 several cases the courts have held that the mem- 
 bership might delegate this power to a select body, 
 which then might act in this matter for the entire 
 association. Accordingly, when such board of 
 directors has the power to enact rules or by-laws 
 by any of the methods above suggested, there can 
 be no doubt that any action concurred in by a ma- 
 jority thereof and not objectionable upon any of 
 the grounds applicable to all acts of such associa- 
 tions, is binding upon all members thereof, 
 whether it be promulgated in the form of a rule 
 or regulation. In the absence of any such dele- 
 gated authority, and where the power to enact 
 rules or by-laws resides in the association at 
 large, either by the express terms of the charter 
 or constitution or implied from the absence of 
 such express delegation, it cannot be contended 
 upon principle or authority that the board of 
 directors or any select committee of such associa- 
 tion has any power to provide any new rules or 
 by-laws for the self-government of such associa- 
 tion, whether their acts be termed rules or merely 
 regulations. 
 
 In this connection, however, there are two situa- 
 tions which should be clearly distinguished from 
 
Administrative Powees Over Members. 203 
 
 that where the board of directors or other select 
 committee has proceeded to enact an entirely new 
 rule or by-law by promulgating it in the form of a 
 regulation. These are, first, where one of the 
 existing rules expressly authorizes the governing 
 committee or board of directors to promulgate 
 regulations to carry such rules into effect, and, 
 second, where such committee, in accordance with 
 its power to interpret all the rules or by-laws, 
 merely declares in the form of a regulation that 
 a certain act or conduct of a member will be con- 
 sidered, in the future, as within the terms of such 
 rule. Although an exhaustive search has failed 
 to reveal any cases where either of these situations 
 has ever been passed upon by the courts, yet, on 
 principle, both regulations would seem to be valid 
 and binding upon all members of this association. 
 In the first situation, the regulations which the 
 committee makes are in fact an integral portion 
 of the rule or by-law by virtue of the express dele- 
 gation of such power from the members at large. 
 If, as we have seen, the constitutent body of such 
 Exchange or other association may lawfully dele- 
 gate the complete power to enact rules or by-laws 
 to such select committee, there can hardly be any 
 question that the power can be delegated to such 
 committee in the case of a specific rule to choose 
 the particular method best suited to its enforce- 
 ment. 
 
 The second situation is best illustrated where a 
 rule or by-law provides in general terms that 
 ' ' any member who shall be guilty of dishonorable 
 
204 The Law op Commeecial Exchanges. 
 
 conduct or of a grave offense involving the credit 
 or respect of the association " shall be subject to 
 discipline, but does not define what acts constitute 
 such a " grave offense " or such " dishonorable 
 conduct. ' ' It cannot be denied that primarily the 
 construction of the rules or by-laws of such asso- 
 ciation and the determination whether a particular 
 act is within or without the rule are questions for 
 such governing committee alone to determine. 
 Accordingly, there would seem to be nothing un- 
 usual or unwarranted for such committee to de- 
 clare in advance, and in the form of a regulation, 
 that in the future certain conduct of any mem- 
 ber will be deemed within the general terms of 
 such a rule, and, if this be sound, any member 
 guilty of the conduct which such committee de- 
 clared by regulation to be within the rule would be 
 as liable to discipline as if the rule had forbidden 
 such conduct in express terms. It should, how- 
 ever, be borne in mind that such governing com- 
 mittee cannot make an interpretation of this char- 
 acter which is not reasonably within the terms of 
 such rule, but is arbitrary and unjustifiable. They 
 could not declare that a man with " blue eyes " 
 was guilty of dishonorable conduct and subject to 
 discipline under the above rule. But within the 
 limits which the courts can see are calculated to 
 attain the objects for which such rule or by-law, 
 assuming it to be valid, was created, it would seem 
 that the construction of such governing committee 
 in this matter is supreme and binding upon the 
 members although formulated as a regulation. 
 
CHAPTER V. 
 
 EEVIEW OF DECISIONS OF EXCHANGES AND 
 OTHEE ASSOCIATIONS BY THE COUETS. 
 
 Section 28. Source of Power of Exchange to Adjudicate. 
 
 29. When Courts Have Jurisdiction to Eeview. 
 
 30. Member Must Exhaust His Eemedies Within 
 
 the Association. 
 
 31. Objection to the Procedure Followed. 
 
 (a) Preliminary investigation. 
 
 (b) Prejudice of prosecutor. 
 
 (c) The form of the charges. 
 
 (d) Notice of hearing. 
 
 (e) Eight to present his defense. 
 
 (f ) Waiver of defects in procedure. 
 
 32. Objection for Lack of Jurisdiction. 
 
 33. Objection on the Merits. 
 
 34. Eemedies Available to Members. 
 
 (a) Eemedy by injunction. 
 
 (b) Eemedy by writ of mandamus. 
 
 One of the most difficult'problems in this entire 
 subject is to determine from the cases to what 
 extent the courts will sit in review upon the de- 
 cisions of the Exchanges and other similar asso- 
 ciations. At the outset it may be well to state 
 that it is not every decision of such an association 
 with which we are concerned at this point. For 
 instance, we are not considering here such de- 
 cisions as are made in the exercise of their legis- 
 lative or administrative functions. These mat- 
 ters were fully treated under the power of such 
 
 [205] 
 
206 The Law of Commebcial Exchanges. 
 
 associations to make and enforce their rules or 
 by-laws. Our investigation here is rather into the 
 legal principles surrounding the exercise of their 
 judicial or quasi-JMdicial functions. In substance, 
 our inquiry is to determine under what circum- 
 stances the courts will, at the instance of an ex- 
 pelled or suspended member, interfere with the 
 enforcement or maintenance of such decisions of 
 these associations. 
 
 Section 28. Source of Power of Exchanges to 
 Adjudicate. 
 
 As a preliminary matter, the inquiry arises, how 
 such association gets the power to exercise this 
 judicial or g-wasi-judieial function. For instance, 
 suppose a member should put up the claim that 
 such an association has the undoubted power to 
 enact valid rules or by-laws, but no power to sit 
 as a court and decide that its rules or by-laws have 
 or have not been violated. An answer to this 
 contention is found in Jthe constitution or charter 
 of such association and the rules or by-laws en- 
 acted in conformity thereto, which together form 
 a part of every member's contract with the asso- 
 ciation.^ These provide in substantially all in- 
 
 ' White V. Brownell, 2 Daly 329, 4 Abb. Pr. N. S. 193; 
 Haebler v. New York Produce Excbange, 149 N. Y. 414, 44 
 N. E. 8Y; Belton v. Hatch, 109 N. Y. 593, lY N. E. 225, 4 
 Am. St. Eep. 495 ; Weston v. Ives, 9Y N. Y. 222 ; Board of 
 Trade v. Nelson, 162- HI. 431, 44 N. E. 743, 53 Am. St. Eep. 
 312; People ex rel. Page v. Board of Trade, 45 HI. 112; 
 Evans v. Chamber of Commerce, 86 Minn. 448, 91 N. W. 8; 
 
Review of Decisions by the Courts. 207 
 
 stances that the association, through its duly con- 
 stituted committee, shall have the right to expel or 
 suspend members, and every member on his en- 
 trance into membership agrees with the associa- 
 tion to the exercise of such power by the associa- 
 tion under certain conditions. It is perfectly well 
 settled that a member cannot complain if he is 
 expelled or suspended from the association so long 
 as the association in expelling or suspending him 
 complies with certain well-defined rules.^ That 
 the presence of this power in the association to 
 adjudicate upon the violation of its rules or by- 
 laws is derivable solely from the agreement be- 
 tween the members and such association is clearly 
 settled by the authorities.* 
 
 A large share of the perplexity of this subject 
 arises from the failure of the courts themselves to 
 
 Goddard v. Merchante Exoliange, 9 Mo. App. 290; Moxey's 
 Appeal, 9 Week. Not. Oas. 441; Zell v. Baltimore Stock Ex- 
 change, 102 Md. 489, 4 L. E. A. (N. S.) 435, 62 Atl. 808; 
 Thompson v. Adams, 93 Pa. St. 55 ; Jackaon v. South Omaha 
 Live Stock Exchange, 49 Nebr. 687, 68 N. W. 1051. 
 
 "Evans V. Chamher of Commerce, 86 Minn. 448, 456, 91 
 N. W. 8; Quentell v. N. T. Cotton Exchange, 106 N. T. 
 Supp. 228 ; White v. Brownell, 2 Daly 32"9, 4 Abb. Pr. (N. S.) 
 162; Belton v. Hatch, 109 N. T. 593, lY N. E. 225, 4 Am. St. 
 Eep. 495; People ox rel. Thacher v. New York Commercial 
 Aisso., 18 Abb. Pr. 271 ; Baum v. New York Cotton Exeh., 4 
 N. Y. Supp. 207, 21 Abb. N. C. 253 ; Bernheim v. Keppler, 69 
 N. Y. Supp. 803, 34 Misc. 321; Leech v. Harris, 2 Brewst. 
 571; Moffatt v. Board of Trade, 111 S. W. 894, 900; Farmer 
 V. Board of Trade, 78 Mo. App. 557; Board of Trade v. Nel- 
 son, 162 HI. 431, 44 N. E. 743, 53 Am. St. Eep. 312; Green v. 
 Board of Jrade, 174 HI 585, 591, 51 N. E. 599, 49 L. E. A. 365. 
 
208 The Law op Commebcial Exchanges. 
 
 define clearly in their opinions the exact grounds 
 for their refusal to review the decisions of such 
 associations. For instance, there is a clear dis- 
 tinction in fact between that situation where, be- 
 cause of the subject-matter, the courts have no 
 power whatever to adjudicate upon the case of a 
 controversy arising out of the relations between 
 an association and its members, and the totally 
 different situation where the courts, although pos- 
 sessing adequate jurisdiction over the subject- 
 matter of the controversy yet decline to go behind 
 the decisions of the tribunals of such associations. 
 Unless there is some legal right of which the mem- 
 ber is deprived by the action of the association, the 
 expelled member will be met at the very thresh- 
 old by the statement of the court that it could 
 give him no relief because it lacks jurisdiction over 
 the case. In the latter of the above situations, 
 however, the court, while its jurisdiction in the 
 abstract to interfere may be clear, yet for other 
 reasons declines to set the machinery of the courts 
 in motion to adjudicate anew the matters in dis- 
 pute. The practical effect of this failure to dif- 
 ferentiate between the two situations has led not 
 only to a great deal of " loose talk " among law- 
 yers as well as laymen to the effect that the de- 
 cisions of voluntary associations are in all cases 
 absolutely final, but has also caused the courts to 
 fall into the error of citing, to support the second 
 proposition, cases which upon analysis are citable 
 only for the former. 
 
Eeview of Decisions by the Coubts. 209 
 
 Section 29. When Courts Have Jurisdiction to 
 Review. 
 
 The authorities are agreed that the justification 
 for the interference of the courts with the enforce- 
 ment of the decisions of the tribunals of such as- 
 sociations is based upon the protection of the 
 property rights of members. Unless. some prop- 
 erty rights of the expelled or suspended member 
 are involved, the courts would summarily dismiss 
 the complaint of such member without venturing 
 into a determination whether the association was 
 right or wrong in its decision. This proposition 
 holds good whether the association is incorpo- 
 rated or unincorporated.* Moreover, whether 
 such member is deprived of property rights is 
 solely a question of whether the association holds 
 and owns property of appreciable value. The 
 thing which leads the courts to interfere is not 
 that the membership itself is a valuable business 
 asset, or even that it is of considerable monetary 
 value, but rather the individual interest of all 
 members of the association in the tangible prop- 
 
 'Eigby V. C«nnol, L. E. 14 Ch. D. 482, 49 L. J. Ch. 328, 42 
 L. T. 139, 28 Week. Eep. 650; Sale v. First Baptist Church, 
 62 la. 26, 49 Am. Eep. 136; Burke v. Eoper, Y9 Ala. 138; 
 Medical Society v. Weatherly, 15 Ala. 248; Grand Lodge v. 
 People, 60 HI App. 550, affirmed 166 111. 71, 46 N. E. Y68; 
 Lyttleton v. Blackbume, 45 L. J. Ch. N. S. 219, 33 L. T. 
 N. S. 641; Baird v. Wells, L. E. 44 Ch. Div. 661; State ex rel. 
 Waring v. Georgia Medical Society, 38 Ga. 608, 95 Am. Dec. 
 408; Eyan v. Cudahy, 157 111. 108, 41 N. E. 760, 49 L. E. A. 
 353, 48 Am. St. Eep. 305 ; Dickinson v. Board of Trade, 114 
 ni. App. 295. 
 
 Com. Exc. — 14. 
 
210 The Law op Commeecial Exchanges. 
 
 erty owned by tlie latter." If the basis of the 
 courts ' jurisdiction was the value of the member- 
 ship alone, apart from any interest in the assets 
 of the association represented thereby, then it 
 would be difficult to understand the decisions es- 
 tablishing similar jurisdiction of the courts over 
 the acts of purely social clubs, wherein a member- 
 ship is only valuable, from a monetary standpoint 
 at least, by virtue of the property owned by the' 
 club." 
 
 The above view is well expressed by a learned 
 English judge in the following language : 
 
 ' ' I have no doubt whatever that the foundation 
 of the jurisdiction is the right of property vested 
 in the member of the society, and of which he is 
 unjustly deprived by such unlawful expulsion. 
 There is no such jurisdiction that I am aware of 
 reposed, in this country at least, in any of the 
 queen's courts to decide upon the rights of per- 
 sons to associate together when the association 
 possesses no property. Persons, and many per- 
 sons, do associate together without any property 
 in common at all. A dozen people may agree to 
 meet and play whist at each other's houses for a 
 certain period, and if eleven of them refuse to 
 
 "Eigby V. Oonnol, supra; Sale v. Church, supra; Medical 
 Society v. Weatherly, supra; State ex rel. Waring u. Georgia 
 Medical Society, supra. 
 
 ' Ostrom V. Greene, 45 N. T. Supp. 852, 20 Misc. 1T7; Com- 
 monwealth V. Union League, 135 Pa. St. 301, 8 L. E. A. 195, 
 20 Am. St. Eep. 8Y0, 19 Atl. 1030; United States v. Metro- 
 politan Club, 11 App. D. C. 180; Dawkins v. Antrobus, L. E. 
 17 Oh. Div. 615, 44 L. T. N. S. 557. 
 
Eeview of Decisions by the Coitets. 211 
 
 associate with the twelfth any longer, I am not 
 aware that there is any jurisdiction in any court 
 of justice in this country to interfere. Or a dozen 
 or a hundred scientific men may agree with each 
 other in the same way to meet alternately at each 
 other's houses, or at any place where there is a 
 possibility of their meeting each other ; but if the 
 association has no property, and takes no sub- 
 scriptions from its members, I cannot imagine that 
 any court of justice could interfere with such an 
 association, if some of the members declined to 
 associate with some of the others."'' 
 
 Where the association is incorporated, the cases 
 in several States at least sustain the jurisdiction 
 of the courts to review the decisions of the tri- 
 bunals of such associations on the ground of the 
 supervisory or visitorial power of the courts over 
 corporations.* This position was taken in the ease 
 of Medical Society v. Weatherly,® where the court 
 said, at page, 252 of the opinion : 
 
 " This right of supervision over bodies cor- 
 porate is one of great antiquity in our law, and is 
 regarded as derived from the visitorial power, 
 
 ' Sir Greorge Jessel, M. E., in Eibgy v. Connol, L. E. 14 
 Oh. Div. 482, 49 L. J. Ch. 328, 32 L. T. 139, 28 Week. Eep. 
 650. 
 
 'Medical Society v. Weatherly, Y5 Ala. 248; State ex rel. 
 Cuppel V. Milwaukee Chamber of Commerce, 4Y Wis. 6Y0, 3 
 N. W. 760 ; People ex rel. Johnson v. New York Produce Ex- 
 change, 149 N. T. 401, 44 N. E. 84; State ex rel. Waring v. 
 Georgia Medical Society, 38 Ga. 608, 95 Am. Dec. 408. 
 
 ° Y5 Ala. 248. 
 
212 The Law op Commeeciax, Exchanges. 
 
 always impliedly reserved by the sovereign or 
 State in granting corporate charters, and which is 
 exercised through the courts of common-law juris- 
 diction. ' ' 
 
 Whether the principle of visitorial power as a 
 ground for the review of the decisions of such in- 
 corporated associations is sound or not, is a mat- 
 ter of small practical importance. It would be 
 almost impossible to find an incorporated associa- 
 tion, such as our Exchanges, which did not own 
 some property, and accordingly even if the juris- 
 diction of the court were denied under such visi- 
 torial power, it still would attach under the broad 
 principle above set forth, namely, that the asso- 
 ciation did in fact own property. And in reality, 
 in the very cases where such ground of review was 
 set forth, the associations in fact did own prop- 
 erty, and accordingly the courts might have taken 
 jurisdiction for that reason alone, apart from the 
 existence of such visitorial power. The only case 
 where it would be necessary for the courts to rest 
 their jurisdiction upon such visitorial power would 
 be where the association, although incorporated, 
 owned no property. This, however, would be im- 
 possible to find among the Exchanges at least; 
 therefore the question, whether under the visi- 
 torial power the courts can exercise review over 
 the decisions of such associations is more academic 
 than practical. 
 
 One proposition should be carefully noted at 
 this point. "We have seen that the decisions are 
 
Eeview of Decisions by the Couets. 213 
 
 unanimous in holding that a membership in a com- 
 mercial Exchange cannot be terminated arbitrar- 
 ily at any time or for any reason' agreeable to the 
 association alone.^" If the rule were otherwise, it 
 is obvious that there would be no cases wherein 
 the courts had sat in review upon the decisions of 
 the Exchanges, or their duly constituted com- 
 mittee's, and hence no cases to cite upholding the 
 validity of particular rules or by-laws and deny- 
 ing that of others The court in every instance, 
 when called upon to intervene at the instance of 
 an expelled member, would be forced to say that 
 such member, upon entering the association, had 
 trusted his rights and interests to the association, 
 and if the latter saw fit to confiscate such member- 
 ship, the incident was closed forever. That such 
 is not the law is due solely to the fact that the 
 member, when expelled, loses a valuable property 
 right in the assets of the association. While 
 ownership of a genuine property right is not 
 necessarily inconsistent with the right of the 
 grantor thereof or even of a third party to ter- 
 minate the same under certain agreed conditions, 
 yet, such right is unusual and will not be implied. 
 The right to exercise such power of termination 
 must be shown in unequivocal terms. Accordingly, 
 the principle that a membership in one of our 
 Exchanges cannot be terminated arbitrarily would 
 seem to follow simply because, in the absence of 
 an express agreement to the contrary, the courts 
 
 " See section 12, swpra. 
 
214 The Law of Commercial Exchanges. 
 
 will not imply from the contract between tlie mem- 
 ber and the association a power in the latter to 
 forfeit arbitrarily such a valuable property right." 
 
 This principle is most clearly brought out in an 
 early case in Illinois," wherein was involved the 
 right of the Chicago Board of Trade to expel mem- 
 bers under section six of its charter, which pro- 
 vided that said ' ' corporation shall have the right 
 to admit or expel such persons as they may see fit, 
 in manner to be prescribed by the rules or by- 
 laws thereof. ' ' At page 114 of the opinion, proba- 
 bly in answer to the contention of the counsel of 
 the appellee that such power under the charter 
 was unlimited, the court said : 
 
 ' ' Here is a specific grant of power, in terms so 
 general that they seem to leave the causes of dis- 
 franchisement at the discretion of the corpora- 
 tion, subject only to the one limitation, that the 
 proceeding shall follow the ' rules, regulations or 
 by-laws.' Notwithstanding the generality of this 
 language, however, it is doubtless true, as insisted 
 by the counsel for appellant, that the discretion 
 here granted is not purely arbitrary, but can be 
 exercised only for some just and reasonable 
 cause. It would hardly be contended, for ex- 
 ample, that a by-law would be valid which should 
 seek to disfranchise members unless they would 
 attend a particular church, or send their children 
 
 "People ex rel. Elliott v. New York Cotton Exchange, 8 
 Hun (N. T.) 216 ; Powell v. Abbott, 9 "Week. Not. Cas. (Pa.) 
 231. 
 
 " People ex rel. Page v. Board of Trade, 45 HI. 112. 
 
Review of Decisions by the Couets. 215 
 
 to a particular school. These would be subjects 
 so utterly aloof frora the objects for which the 
 corpo-ration was created, that we cannot suppose 
 the legislature intended to clothe it with the right 
 of controlling the action of its members in these 
 matters. ' ' 
 
 Section 30. Member Must Exhaust His Remedies 
 Within the Association. 
 
 Even in situations where, because of the prop- 
 erty rights involved, the courts have jurisdiction 
 to review the decisions of associations or their 
 duly constituted tribunals, the expelled or sus- 
 pended member must exhaust his remedies within 
 the association before seeking the intervention of 
 the courts. This is a principle which is universally 
 followed," subject to a few minor exceptions. 
 
 Three situations can be conceived of where the 
 above principle would come into play : first, where 
 the member seeks to enjoin the association or one 
 of its committees from commencing or proceeding 
 with his trial on the charges filed against him; 
 
 ''White V. Brownell, 2 Daly 329, 3 Abb. Pr. N. S. 318, 4 
 Abb. Pr. N. S. 193; Moyse v. Exchange, 128 N. T. Supp. 112; 
 Brandenburger v. Jefferson Club, 88 Mo. App. 148; Moxey v. 
 Phila. Stock Exchange, 14 Phila. 185, affirmed in 9 Week. 
 Not. Oas. 441 ; Hurst v. New York Produce Exchange, 100 N. 
 Y. 605, 3 N. E. 42; Ryan v. Lamson, 44 111. App. 204; 
 Thomas v. Musical Union, 121 N. Y. 45 ; Olery v. Brown, 51 
 How. Pr. 92; People v. Women's Catholic Order, 162 HI. 78, 
 44 N. E. 401 ; Karoher v. Supreme Lodge, 137 Mass. 368 ; Levy 
 V. Magnolia Lodge, 110 Cal. 297, 42 Pac. 887; Lafond v. 
 Deems, 81 N. Y. 507, 45 Abb. N. C. 344. 
 
216 The Law of Commbecial Exchanges. 
 
 second, where the charges have been sustained be- 
 fore one committee and the member then imme- 
 diately applies to the courts for reinstatement, 
 without prosecuting the appeal to a higher body 
 within the association which right of appeal is 
 given him by the rules or by-laws ; third, where 
 the only thing left undone by such expelled mem- 
 ber is a personal application for reinstatement to 
 the same body which visited upon him its decree. 
 
 In the first of the above situations, the authori- 
 ties are clear upon the proposition, that the courts 
 will not assume in advance that the member will 
 not obtain a fair hearing before the duly con- 
 stituted tribunal of the association, and accord- 
 ingly will not interfere with the holding of such 
 trial.^" This position seems sound upon principle, 
 even apart from authority, because if the member 
 is illegally expelled or suspended, he still has his 
 remedy in the courts. And again, since no one 
 can anticipate what such decision of the Exchange 
 or committee will be, the court would many times 
 interfere in a case where the decision of the asso- 
 ciation itself would have been favorable to the 
 complainant. 
 
 Likewise in the second situation, the authorities 
 are agreed that such member must, under ordi- 
 nary conditions, exhaust his remedy within the 
 
 " IToyse v. Exchange, 128 N. T. Supp. 112 ; Hurst v. New 
 York Produce Exchange, 100 ~S. Y. 605, 3 N. E. 42; Sturges 
 V. Board of Trade, 86 111. 441 ; Gregg v. Mass. Medical Society, 
 111 Mass. 185, 15 Am. Eep. 24. 
 
Review of Decisions by the Courts. 217 
 
 association by prosecuting his appeal from the 
 committee which expelled him to the higher com- 
 mittee or tribunal provided for in the rules or 
 by-laws before seeking the aid of the courts to 
 restore him to membership.^' In the case of White 
 V. Brownell,^" the facts revealed a rule of the asso- 
 ciation which required such appeal from one com- 
 mittee to another within the association, which 
 step the complaining member had not taken. At 
 page 364 of the opinion the court said : 
 
 " The by-law having provided a mode for re- 
 viewing and correcting any error or injustice on 
 the part of the committee on membership in re- 
 porting to the president that the plaintiff was in 
 default, he was bound to avail himself of the 
 remedy provided by the constitution and by-laws 
 of the body of which he had become a member, 
 before he can ask a court of equity to investigate 
 a proceeding not necessarily final in the body it- 
 self, but which was there subject to review, and 
 might be annulled by the action of a committee 
 expressly clothed with authority to investigate 
 it. He must, in consonance with the rule upon 
 which Lord Eldon acted in the case above cited 
 (Garden v. Drury, 1 Ves. & B. 154), resort to the 
 remedy which is provided by the constitution and 
 
 "White V. Brownell, 2 Daly 329, 3 Abb. Pr. N. S. 318, 4 
 Abb. Pr. N. S. 193 ; Moxey v. Stock Exchange, 14 Phila. 185, 
 affirmed in 9 Week. Not. Oas. 441; Branderburger v. Jeffer- 
 son Club, 88 Mo. App. 148. 
 
 " 2 Daly 329, 3 Abb. Pr. N. S. 318, 4 Abb. Pr. N. S. 193. 
 
218 The Law of Commebciai, Exchanges. 
 
 by-laws of the association itself, before he asks a 
 court of equity to interfere, unless by evasion, in- 
 tentional delays, or other unjust procedure, he is 
 practically deprived of tlj.« benefit of that remedy, 
 which' in this case is substantially denied by the 
 answer. ' ' 
 
 The third situation is one which, in the absence 
 of adequate authority, presents some difificulty to 
 determine accurately. The case of Moxey v. Phila- 
 delphia Stock Exchange " is frequently cited for 
 the proposition that the expelled or suspended 
 member must apply to the Exchange for reinstate- 
 ment before seeking a remedy in the courts. It is 
 evident upon analysis that this case is distinguish- 
 able upon its own facts. The rule of the Exchange 
 in that case pro"\dded in substance that any mem- 
 ber suspended for insolvency might be subse- 
 quently reinstated by applying to the proper com- 
 mittee and showing that he had received a regular 
 discharge in the bankruptcy court. Instead of 
 making such application and showing his dis- 
 charge, he commenced mandamus proceedings to 
 procure his reinstatement. The court held that 
 his action was premature in that he had not fol- 
 lowed the procedure provided in the rules and by- 
 laws. 
 
 In this case, however, the association itself had 
 taken no action and had made no decision which 
 indicated its attitude toward the member who 
 sought his relief in the courts. Where, however, 
 
 " 14 Phila. 185, affirmed in 9 Week. Not. Cas. 441. 
 
Review of Decisions by the Couets. 219 
 
 sucli association had definitely passed upon the 
 merits of the member's case and had found that he 
 was in fact guilty of ' ' dishonorable conduct, ' ' for 
 illustration, it would seem unnecessary to require 
 that such member, as a condition precedent to 
 obtaining his remedy in the courts, must apply for 
 reinstatement to the same association, or, tribunal 
 thereof which had just expelled him. In such a 
 case as Moxey v. Exchange, supra, there is a very 
 great probability that the Exchange would re- 
 instate the member upon his compliance vdth the 
 rules or by-laws, whereas in the latter situation 
 there is almost a conclusive presumption that the 
 association would not reverse its decision. Ac- 
 cordingly, in requiring the expelled member to 
 make such application for reinstatement, the 
 courts would practically be requiring him to do a 
 useless thing.^* 
 
 This leads us to note in passing the sole excep- 
 tion to the general principle that such expelled or 
 suspended member must first exhaust his remedies 
 within the association before applying to the 
 courts for relief. When the court can see from 
 the facts of the particular case before it that such 
 a course would be useless, the member will be 
 allowed to obtain his relief in the courts in spite 
 of his failure to exhaust his remedies within the 
 association.^" This applies equally to all three of 
 
 " Loubat V. Le Eoy, 40 Hun 546, 17 Abb. N. 0. 512, 1 N. T. 
 St. Eep. 178; People v. Medical Asso., 118 N. T. 10, 23 N. E. 
 129. 
 
 " Quentell v. New York Cotton Exchange, 106 N. Y. Supp. 
 
220 The Law of Commeecial Exchanges. 
 
 the situations above indicated, as well when relief 
 is sought to enjoin the trial of a member upon the 
 charges preferred against him as when, after a 
 preliminary decision, relief is asked without first 
 resorting to the appeal within the association pro- 
 vided for by the by-laws. No general principle 
 can be adduced which will enable one in advance 
 to determine how objectionable the proceedings 
 must be in order to absolve the member from ex- 
 hausting his remedy within the association. Like 
 many other questions, this is a question for the 
 court to determine from the facts of each par- 
 ticular case. That such an exception to the gen- 
 eral principle, however, does exist, is well settled 
 by the authorities. 
 
 When will courts go behind the decisions of the 
 tribunals of the Exchanges and similar associa- 
 tions. — Thus far we have considered the essential 
 elements which must appear before the courts will 
 ever take jurisdiction to review the decisions of a 
 tribunal of such association. We have found that 
 such jurisdiction will not be exercised unless, first, 
 the association owns property, and second, the 
 member had exhausted his remedies within the 
 association. Our inquiry now is to discover under 
 what circumstances, assuming the above essentials 
 are present, the courts will go behind the decisions 
 
 228; LoTibat v. Le Eoy, 40 Hun 546, lY Abb. N. 0. 512, 1 IST. 
 Y. St. Eep. 1Y8; Slater v. Supreme Lodge, Y6 Mo. App. 387; 
 Mottu V. Primrose, 23 Md. 482; People ex rel. Deverell v. 
 Musical Union, 1 18 N. T. 101, 23 N. E. 129 ; People v. Albany 
 Hospital, 11 Abl Vr. N. S. 4. 
 
Eeview of Decisions by the Courts. 221 
 
 of such associations or their duly constituted tri- 
 bunals. 
 
 An examination of numerous authorities reveals 
 three grounds which members when expelled or 
 suspended have from time to time set forth to 
 obtain a review of the decisions of such associa- 
 tions or their duly authorized tribunals. These 
 are: First, objections to the procedure followed 
 by such tribunal in arriving at its decision ; second, 
 lack of jurisdiction in such tribunal to decide the 
 case, and third, a decision erroneous on the merits. 
 It is apparent that the first two contentions raise 
 questions of law only, whereas the third raises a 
 question of fact, with one exception. Accordingly, 
 let us consider these possible contentions of such 
 member separately, by examining the decisions of 
 the courts upon each one. 
 
 Section 31. .Objection to the Procedure Followed. 
 
 It is necessary to consider in this connection the 
 two situations, first, where the association has en- 
 acted in its rules or by-laws a prescribed course of 
 procedure dealing with the matter of the expulsion 
 or suspension of its members, and second, where 
 there are no rules or by-laws designating the pro- 
 cedure to be followed. The first situation can be 
 dismissed with the statement, which is abundantly 
 supported by the authorities, that the rules or by- 
 laws relative to such procedure form a part of the 
 contract, like all other rules or by-laws, between 
 the member and the association, and particularly 
 
222 The Law of Commekcial Exchanges. 
 
 in a case involving the disfrancMsement of the 
 member, must be strictly followed by such associa- 
 tion in proceedings looking to the expulsion or 
 suspension of its member/" This necessity of 
 strict compliance with the prescribed rules or by- 
 laws does not imply that the failure to observe the 
 letter of each and every one of such rules or by- 
 laws will be fatal." The authorities do require, 
 however, that such departure from the prescribed 
 procedure shall not deny to the member any sub- 
 stantial right therein allowed.^^ As a practical 
 suggestion, it is safer to err, if necessary, upon 
 the side of caution, and accordingly the associa- 
 tion in such cases should endeavor to follow the 
 letter and not simply the spirit of their rules or 
 by-laws. 
 
 The second situation above noted requires more 
 extended consideration. The general proposition 
 which is sustained by the great weight of au- 
 thority is that, in the absence of a prescribed rule 
 or by-law of procedure, technical compliance with 
 
 '"Fisher v. Keane, L. E. 11 Ch. Div. 353; Labouchere v. 
 Earl of Wharncliffe, 13 Id. 346 ; Commonwealtli v. Guardians 
 of the Poor, 6 Serg. & R. 469 ; Commonwealth v. Pike Benevo- 
 lent Society, 8 "Watts & S. 247; Washington Benevolent 
 Society i;. Bacher, 20 Pa. St. 425; Society for Visitation v. 
 Commonwealth, 52 Pa. St. 125; Otto v. Journeyman Union, 
 Y5 Cal. 309, 17 Pac. 217, 7 Am. St. Eep. 156; Loubat v. Le 
 Eoy, 40 Hun 546, 17 Abb. N. C. 512, 1 N. Y. St. Eep. 178. 
 
 ^People ex rel. Burton v. St. George's Society, 28 Mich. 
 261; Levy v. Magnolia Lodge, 110 Cal. 297, 42 Pac. 887; 
 Hoeffner v. Grand Lodge, 41 Mo. App. 359. 
 
 '"'People ex rel. Eoehler v. Mechanics Aid Society, 22 
 Mich. 86. 
 
Review of Decisions by the Couets. 223 
 
 proceedings necessary in a court of law will not 
 be required,^' but such proceedings will be upheld 
 provided they give to such member notice of the 
 time and place of the meeting where the trial is to 
 oecur,^* a full opportunity to be heard in his own 
 defense,^^ and a fair and impartial hearing of the 
 charges made against him.^° These, of course, are 
 broad, general limitations upon the decisions of 
 the tribunals of the associations from the point of 
 view of the procedure adopted, and it is natural 
 to find that upon various occasions the courts have 
 been called upon to decide whether the procedure 
 adopted by such association in a particular case 
 has violated the general tests above set forth. 
 Accordingly, it may result in making the above 
 tests more definite and practical if we consider the 
 decisions of the various courts in a few of these 
 specific cases. 
 
 " Albers v. Merchants Exchange, 39 Mo. App. 583 ; Hutch- 
 inson V. Lawrence, 6Y How. Pr. 38; People ex rel. Johnson v. 
 New York Produce Exchange, 149 N. T. 401, 44 N. E. 84; 
 Lewis V. Wilson, 121 N. Y. 284, 24 N. E. 4Y4; Kuehnemundt 
 V. Smith, 2 N. Y. Supp. 625, lY N. Y. St. Rep. Y57. 
 
 '"Farmer v. Board of Trade, 78 Mo. App. 557, Albers v. 
 Merchants Exchange, 39 Mo. App. 583; Lewis v. Wilson, 
 supra; Kuehnemundt v. Smith, supra; Hutchinson v. Law- 
 rence, supra; State ex rel. Cuppel v. Milwaukee Chamber of 
 Commerce, 47 Wis. 670, S.IST. W. 760; Blumenthal v. Cincin- 
 nati Chamber of Commerce, 8 Ohio Dec. 410, 7 Week. Law 
 Bui. 327, 8 Ohio Dec. (Eeprint) 410 (notice to one partner is 
 notice to all partners). 
 
 °° See cases in note 24. 
 
 " See cases in note 24. 
 
224 The Law of Commekcial Exchanges. 
 
 (a) Preliminary investigation. — In a case de- 
 cided by the Supreme Court of Illinois," an ex- 
 pelled member made tlie objection that his expul- 
 sion was invalid because the full board of directors 
 had referred the complaint against him to a 
 subordinate committee to determine whether such 
 charges should be filed and such committee had 
 conducted its investigation without calling him be- 
 fore them. This reference to a committee and the 
 ex parte hearing which it conducted he contended 
 rendered his subsequent expulsion by the entire 
 tribunal invalid. The court, in denying this con- 
 tention of the member said, at page 591 of the 
 opinion : 
 
 " The appellant insists that such appointment 
 of the committee, and its hearing testimony and 
 investigating without notice to him, are unrea- 
 sonable, unjust, and a violation of his rights. 
 The object and purpose of this rule were evidently 
 to avoid the annoyance and harassment to mem- 
 bers which would arise from hearing every charge 
 that might be made against a member based on 
 mere rumor, or by operators on the wrong side 
 of the market who might be dealing through the 
 member as their agent or commission man. A 
 mere inquiry to determine whether mere com- 
 plaints or rumors shall be investigated and tried 
 before the board of directors on charges preferred 
 against a member is in no sense a trial. Neither 
 
 " Green v. Board of Trade, 174 HI. 585, 51 N. E. 599, 47 
 L. E. A. 365. 
 
Eeview of Decisions by the Coukts. 225 
 
 is it an unreasonable by-law, in contravention of 
 public policy. It is not requisite that notice be 
 given of such inquiry. When charges are pre- 
 ferred against a member to be tried before the 
 board .of directors, the by-laws then require that 
 he shall have notice before being placed on trial. 
 No right given him under the by-laws of the cor- 
 poration, to which he has assented, is infringed." 
 
 (b) Prejudice of prosecutor. — The authorities 
 are also clear upon the 4)roposition that such de- 
 cree of expulsion or suspension is in no way in- 
 valid because a member of the board of directors 
 whose duty it was subsequently to try such mem- 
 ber filed the charges against him.^' It has also 
 been held that even a non-member may file such 
 charges.^* Moreover, the fact that a member of 
 the tribunal which tried the member had sustained 
 a financial loss due to the conduct of the member 
 complained of does not invalidate its decree, at 
 least in the absence of an express challenge of such 
 member of the committee by the member about to 
 be tried.'" 
 
 (c) The form of the charges. — There is no 
 necessity that the charges be drawn up within the 
 technical requirements of criminal or civil plead- 
 ing.'^ The onlywrequirement is that they be suffi- 
 
 '^ Green v. Board of Trade, 1Y4 HI. 585, 51 N. E. 599, 47 
 L. R. A. 365. 
 
 "Albers v. Merchants Exchange, '39 Mo. App. 583. 
 
 '" Jackson v. South Omaha Exchange, 49 Neb. 687, 68 N. 
 W. 1051. 
 
 "Board of Trade v. Nelson, 162 HI. 431, 44 N. E. 743, 53 
 Com. Exc. — 15. 
 
226 The Law op Commeecial Exchanges. 
 
 ciently clear and explicit to inform such member 
 of the exact offense with which he is charged/^ 
 The general charges of * ' conduct inconsistent with 
 just and equitable principles of trade " ^^ or " un- 
 mercantile conduct ' ' ^* have been held sufficient. 
 
 (d) Notice of hearing. — The authorities are a 
 unit upon the proposition that the member accused 
 must be given due notice of the time and place 
 where his trial upon the charges preferred will be 
 held, and -that any failure so to give him notice 
 will render the decree of suspension or expulsion 
 invalid.^^ Such notice, moreover, is necessary 
 even though the rules or by-laws do not so pro- 
 vide.^' 
 
 (e) Right to present his defense. — Nothing is 
 more clearly settled by the authorities than the 
 
 Am. St. Eep. 312; People ex rel. Johnson v. New York Pro- 
 duce Exchange, 149 N. Y. 401, 44 N. E. 84; Haebler v. New- 
 York Produce Exchange, 149 N. Y. 414, 44 N. E. 87; Blumen- 
 thal V. Cincinati Chamber of Commeroe, 8 Ohio Dec. (Re- 
 print) 410, 9 Week. Law Bui. Y6; Young v. Eames, 19 N. Y. 
 Supp. 1068. 
 
 " Haebler v. New York Produce Exchange, 149 N. Y. 414, 
 44 N. E. 87; People ex rel. Johnson v. New York Produce 
 Exchange, 149 N. Y. 401, 44 N. E. 84; Hutchinson v. Law- 
 rence, 67 How. Pr. 38; Cannon v. Toronto Exchange, 5 Ont. 
 App. 268. 
 
 °° People ex rel. Johnson v. New York Produce Exchange, 
 supra. 
 
 "* Blumenthal v. Chamber of Conunerce, supra. 
 
 "' See cases cited in note 24. 
 
 °° Haebler v. Produce Exchange, supra; People ex rel. 
 Johnson v. New York Produce Exchange, supra; Hutchinson 
 V. Lawrence, supra; Cannon v. Toronto Exchange, 27 Grant 
 Ch. 23. 
 
Review of Decisions by the Coubts. 227 
 
 principle that a decree expelling or suspending a 
 member without giving him an opportunity to be 
 heard in his defense will not be sustained if con- 
 tested in the courts." It is equally settled, how- 
 ever, that such a hearing does not necessitate a 
 trial by jury,^* nor a trial conducted in accordance 
 with the technical proceedings in a court of law. 
 For instance, such decree is not invalid because a 
 large portion of the evidence was hearsay,^" nor 
 because the member has been tried once before 
 for the same offense.*" Such a hearing, however, 
 must include the right of the member to present 
 his own testimony, examine his own witnesses, and 
 cross-examine the witnesses against him.*^ Un- 
 
 " Albers v. Merchants Exchange, 39 Mo. App. 583 ; Lewis v. 
 Wilson, 121 N. T. 284, 34 N. E. 474; Hutchinson v. Law- 
 rence, 6Y How. Pr. 38; State ex rel. Ouppel v. Milwaukee 
 Chamber of Commerce, 47 Wis. 670, 3 N. W. 760; Temple v. 
 Toronto Stock Exchange, 8 Ont. 705; Farmer v. Board of 
 Trade, 78 Mo. App. 557; Kuehnemundt v. Smith, 2 N. Y. 
 Supp. 625, 17 ]Sr. T. St. Rep. 757; Blumenthal v. Cincinnati 
 Chamber of Commerce, 8 Ohio Dec. (Eeprint) 410, 7 Week. 
 Law Bui. 327; Matter of Lurman, 90 Hun 303, 35 N. Y. 
 Supp. 956 ; Moxey's Appeal, 9 Week. Not. Cas. 441 ; Fisher v. 
 Keane, L. R. 11 Ch. Div. 353; Commonwealth v. German 
 Society, 15 Pa. St. 251. 
 
 °° People ex rel. Thacher v. New York Commercial Asso., 
 18 Abb. Pr. 271. 
 
 " Blumenthal v. Chamber of Commerce, supva. 
 
 " State ex rel. Cuppel v. Milwaukee Chamber of Commerce, 
 supra; Otto v. Journeyman Union, 75 Cal. 308, 17 Pac. 217, 
 7 Am. St. Rep. 156. And see State v. Chamber of Commerce, 
 4 Ohio N. P. 244. 
 
 " Hutchinson v. Lawrence, supra. 
 
228 The Law of Commercial Exchanges. 
 
 less the rules or by-l^ws otherwise provide,*^ such 
 member is entitled to be represented by counsel,*^ 
 and this right is likewise accorded to the tribunal 
 of the association.^* The fact that such counsel is 
 also a member of the association is of no conse- 
 quence.*^ 
 
 In substance, all that the law requires is that 
 such procedure be adopted by the association or 
 its duly constituted committee or tribunal as ■will 
 accord to the member against whom charges are 
 preferred a full and impartial hearing upon the 
 merits of the case, and an opportunity to present 
 his own defense to the same degree substantially 
 as accorded to those who are conducting the 
 prosecution of such charges. The technical pro- 
 cedure followed in the courts of law is not only 
 unnecessary but, as stated by the courts, is un- 
 desirable, considering the objects of the associa- 
 tion and the aim sought by the trial of its mem- 
 bers. In a leading case *° the Supreme Court of 
 New York expressed the principles above sug- 
 gested in the following language : 
 
 " The principle to be deduced from all these 
 cases is, that in every proceeding before a club, 
 
 " Green v. Board of Trade, 174 HI. 585, 51 N. E. 599, 49 
 L. E. A. 365. 
 
 "Murdock v. Phillips' Academy, 29 Mass. 263. See also 
 Y8 App. Div. (N. Y.) 229; Neukircli v. Keppler, 56 App. Div. 
 (N. T.) 230. 
 
 " Albers v. Merchants Exchange, 138 Mo. 140, 39 S. W. 473. 
 
 " Albers v. Merchants Exchange, supra. 
 
 " Hutchinson v. Lawrence, 67 How. Pr. 38. 
 
Review of Decisions by the Couets. 229 
 
 society or association having for its object the 
 expulsion of a member, the member is entitled to 
 be fully and fairly informed of the charge and to 
 be fully and fairly heard." 
 
 (f ) Waiver of defects in procedure. — To what 
 extent any procedural defects will be cured by the 
 failure of the member to object to them in due 
 course before the tribunal of the association is not 
 quite clear from the authorities. It is certain 
 that slight irregularities will be waived by such 
 failure to object. For instance, it has been so held 
 when proper objection was not made to the dis- 
 qualification of particular members of such tri- 
 bunal,*' the insufficiency of the complaint,*^ re- 
 fusal of the right to copy or take notes of the 
 testimony,*" and in one case the denial of the right 
 to be confronted with the witnesses against him.^° 
 It is safe to assume that there are few situations 
 where, by appearing at the hearing, answering to 
 the merits of the charges against him, and failing 
 to protest against any defect in the procedure fol- 
 lowed, the accused member does not waive any 
 objections which otherwise he might have urged 
 against the regularity of the procedure.^^ The 
 
 "Pitcher v. Board of Trade, 121 El. 412, 13 N. E. 187; 
 Jackson v. Soutli Omaha Exchange, 49 Neb. 687, 68 N. W. 
 1051. 
 
 " Haebler v. New York Produce Exchange, 149 N. Y. 414, 
 44 N. E. 87. 
 
 " Kuehnemundt v. Smith, 2 N. Y. Supp. 625, 17 N. Y. St. 
 Eep. 757. 
 
 ^ Kuehnemundt v. Smith, supra. 
 
 " See Lewis v. Wilson, 121 N. Y. 284, 24 N. E. 474; Young 
 
230 The Law of Commebcial Exchanges. 
 
 authorities are clear, moreover, that after due 
 notice to such member and his failure to appear 
 and defend against the charges, such tribunal can 
 proceed to the trial/^ The only doubt arises 
 where the defect was not one of procedure merely, 
 but a total lack of jurisdiction in the tribunal oyer 
 the subject-matter. There are no cases involving 
 Exchanges which consider this proposition, but 
 with just and equitable principles of trade ' ' shall 
 several dealing with fraternal benefit societies ex- 
 pressly deny that such a defect is waived by the 
 failure of the member to object.^^ On principle, 
 these cases would seem to be of general applica- 
 tion to all voluntary associations, including Ex- 
 changes. 
 
 Section 32. Objection for Lack of Jurisdiction. 
 
 This broad objection can in turn be divided into 
 three distinct situations where the lack of juris- 
 diction of such tribunal has been particularly 
 urged by such expelled member as a ground for 
 setting aside the adjudication of the tribunal. 
 These are: First, where the association has en- 
 acted a specific rule or by-law covering the offense 
 
 V. Eames, 79 N. Y. Supp. 1068; Neukircli v. Keppler, 56 
 N. T. App. Div. 225; Bishop v. Chamber of Commerce, 5 
 Ohio S. & C. PI. Dec. 356, 5 Ohio N. P. 365 ; State v. Cham- 
 ber of Commerce, 6 Ohio S. & C. PI. Dec. 363, 4 Ohio N. P. 
 244. 
 
 '"' White V. Brownell, supra; Levy v. Magnolia Lodge, 110 
 Cal. 29Y, 42 Pae. 887. 
 
 " Byram v. Sovereign Camp of Woodmen, 108 Iowa 430, 79 
 N. W. 144, 75 Am. St. Rep. 265. 
 
Review of Decisions by the Couets. 231 
 
 charged but such rule is contended by the mem- 
 ber to be invalid, second, where the rule or by-law 
 is phrased in general terms and the member 
 objects not to the validity of the rule, but to the 
 characterization of his act in such a way as to 
 bring it within the general terms of such rule, and 
 third, where the member was expelled not for 
 violation of any particular rule, but simply for an 
 offense which the tribunal deemed within the gen- 
 eral grounds for expulsion or suspenson of mem- 
 bers apart from any specific rules or by-laws. 
 
 (a) We have seen that the power of such asso- 
 ciations to enact rules and by-laws is bounded by 
 two definite limitations, first, that such rules or 
 by-laws must be within the express or implied 
 powers of such association, and second, that they 
 must not be illegal. Accordingly, for the court to 
 hold that while the rule or by-law was invalid yet 
 the decision of the association or its tribunal in 
 expelling a member for infraction of it was never- 
 theless conclusive, would not only run counter to 
 the legal principle universally applied where a 
 person is charged with the infraction of a statute 
 which is found to be unconstitutional but in ad- 
 dition would confer on the act of the association 
 in deciding when its' rules or by-laws have been 
 violated a greater virtue than is accorded to the 
 act of the association in enacting the rule or by- 
 law originally. It is not the single act of such 
 association in passing the rule or by-law which is 
 thus inhibited but all other acts as well, including 
 
232 The Law of Commercial Exchanges. 
 
 the act of enforcing the rule. Therefore the au- 
 thorities are well settled that the infraction by a 
 member of a rule or by-law which the association 
 had no legal authority to enact does not render 
 such member liable to discipline for a violation 
 thereof, and if expelled for such offense, the 
 courts will restore him to membership.^^ It has 
 been so held where a member was expelled for 
 refusal to arbitrate a claim as required by the 
 rules,"^ for failure to charge the uniform rates 
 prescribed in the rules of a medical association,^" 
 and for hiring nlore solicitors than allowed by the 
 rules of an insurance association." In the case of 
 Huston V. Reutlinger,^^ the above principle was 
 thus expressed by the court, at page 227 of the 
 opinion : 
 
 " If the by-laws enacted violate the public 
 policy of the State, or if they are a departure 
 from the object sought to be accomplished by the 
 contracting parties, and are unjust and unreason- 
 able, the chancellor will not hesitate when called 
 
 "State V. Union Mes-chants Exchange, 2 Mo. App. 96; 
 Huston V. Eeutlinger, 91 Ky. 333, 34 Am. St. Hep. 225; 
 5 S. W.. 86Y, 12 Ky. Law Eep. 925; Otto v. Journeyman 
 IJnion, 75 Oal. 315, lY Pac. 217, 7 Am. St. Eep. 156; People v. 
 Medical Society, 24 Barb. 570; State ex rel. Graham v. 
 Chamber of Commerce, 20 Wis. 68; Commonwealth v. St. 
 Patrick Benevolent Society, 2 Binn. 441, 4 Am. Dec. 453; 
 Evans v. Philadelphia Club, 50 Pa. St. 107. 
 
 '^ State V. Union Merchants Exchange, supra, 
 
 ™ People V. Medical Society, supra. 
 
 " Huston V. Eeutlinger, supra. 
 
 ® Supra. 
 
Eevibw op Decisions by the Cotjets. 233 
 
 on to protect the parties in the enjoyment of their 
 rights as members of the association." 
 
 The question has arisen in several cases ■whether 
 the member is under any circumstances estopped 
 to contest the validity of a.rule, even admitting it 
 to be invalid, when an attempt is made by the 
 association to expel him for violation of it. 
 Where the rule or by-law is not positively illegal 
 but invalid only under the first test above set 
 forth, namely, that it is not within the express or 
 implied powers of the association, it may well be 
 that if it were on the books of the association at 
 the time when the member entered the association 
 and even if enacted, subsequently yet he had voted 
 for it, then such member mil be thereby estopped 
 to contest the validity of the rule and his expul- 
 sion for breach of it.°' Where, however, the rule 
 or by-law is positively illegal, the question of 
 estoppel is more difficult to decide, but, even here 
 there would seem to be some basis for the conten- 
 tion that so long as the association itself is not 
 seeking the enforcement of the rule or by-law but 
 is simply ' ' standing pat, ' ' as the saying is, upon 
 the contract between the member and itself, the 
 court would give the member no relief against his 
 
 " Blumenthal v. Oincinnati Chamber of Commerce, Y Week. 
 Law Bui. 327, 8 Ohio Dec. (Eeprint) 410; White v. Brownell, 
 2 Daly 329, 3 Abb. Pr. N. S. 318, 4 Abb. Pr. N. S. 193. Also 
 see Evans v. Chamber of Commerce, 86 Minn. 448, 91 N. W. 
 8; Farmer v. Board of Trade, T8 Mo. App. 55Y; Lewis v. 
 Wilson, 121 N. T. 284, 24 N. E. 474; Greer v. Stoller, 77 
 Fed. 1. 
 
234 The Law op Commekcial Exchanges. 
 
 expulsion.*" Unfortunately, however, the authori- 
 ties are meager upon this proposition. 
 
 (b) The second situation where such expelled 
 or suspended member objects to the decision of 
 the tribunal of the association is seen where the 
 rule or by-law provides generally that " dishonor- 
 able or uncommercial conduct " or " fraudulent 
 breach of contract " or " practices inconsistent 
 with just and equitable principles of trade ' ' shall 
 render the guilty member liable to expulsion, and 
 the member objects not to the validity of the rule 
 itself but to the characterization of his act as 
 " dishonorable " or " uncommercial," etc. The 
 question then becomes, whether such character- 
 ization of the act by the tribunal is final and con- 
 clusive against the member, and whether the 
 courts will ever substitute their opinion of such 
 conduct for that of the association or its tribunal. 
 While the authorities dealing with this general 
 proposition are quite numerous, yet in the great 
 proportion of them the court simply upholds the 
 decision of the tribunal without discussing the 
 particular principle upon which it proceeds in so 
 doing, and accordingly it is difficult to determine 
 accurately whether it meant to decide that such 
 characterization of the tribunal was final .regard- 
 less of the facts or merely that the particular 
 facts of the case before it justified the character- 
 ization which such tribunal put upon the act of 
 the member. 
 
 °° Greer v. Payne, 4 Kans. App. 153, 46 Pac. 190. 
 
Review of Decisions by the Cotjkts. . 235 
 
 There are, however, some authorities which will 
 enable us to come to some definite conclusions 
 upon this proposition. For instance, there can be 
 no doubt that a decision that a member was guilty 
 of " dishonorable conduct " because he had red 
 hair or blue eyes would never be accepted as final 
 by the courts. Turning to the actual .cases, we see 
 that the courts have restored to membership com- 
 plainants who had been expelled, as guilty of 
 ' ' dishonorable conduct, ' ' etc., for refusing to pay 
 a fine which they claimed illegal,^^ for resorting 
 to the courts to obtain legal rights against a fel- 
 low member,'^ and for refusing to submit a dis- 
 pute to arbitration after having commenced a suit 
 at law to enforce the same claim. "^ In fact, we 
 find quite a number of cases where a member was 
 restored to membership solely on the ground that 
 the association's characterization of his act so as 
 to bring it within a given rule was erroneous."* 
 On no other theory can these cases be supported 
 than that the characterization by such tribunal of 
 
 "^ Albers v. Merchants Exchange, 39 Mo. App. 583. 
 
 " People ex rel. Elliott v. Cotton Exchange, 8 Htin 216. 
 
 "^ State ex rel. Graham' v. Milwaukee Chamher of Com- 
 merce, 20 Wis. 68. 
 
 " Nelson v. Board of Trade, 58 HI. App. 399 ; People ex rel. 
 Johnson v. Produce Exchange, 8 Misc. 552, 29 'N. T. Supp. 
 307, and In re Haebler, 15 Misc. 42, 36 N. T. Supp. 427 (al- 
 though both these cases were reversed in 149 N. Y. 401 and 
 in 149 N. T. 414, yet the upper court there affirms above 
 principle) ; State ex rel. Waring v. Society, 38 Ga. 608, 95 
 Am. Dec. 408; Leech v. Hiarids, 2 Brewst. 571; Weiss v. 
 Musical Union, 189 Pa. St. 446, 42 Atl. 118. 
 
236 The Law of Commercial Exchanges. 
 
 sucli acts by a member is no more final than its de- 
 cision upon the validity of its rules or by-laws, 
 because in all these eases the facts were in no way 
 in dispute. Where the facts are thus not in con- 
 troversy, and we find the cases reversing the de- 
 cisions of the tribunals, the only conclusion which 
 can be reached is that the characterization by such 
 tribunal is not final and conclusive. But where 
 the court can see that such characterization was 
 reasonable and was not arbitrarily or fancifully 
 arrived at, then it will be sustained.^^ 
 
 (c) The third situation under the general de- 
 fense of such expelled member on the ground of 
 lack of jurisdiction arises where the association 
 has no rule or by-law covering the particular 
 offense charged but nevertheless has expelled such 
 member for a cause which is deemed a violation 
 of his duty toward the corporation. As we have 
 seen, such associations may suspend or expel 
 members, apart from particular by-laws, for any 
 one or all of three causes : first, for committing a 
 crime indictable at common law or under the stat- 
 utes, second, for violating his duty as a corpora- 
 tor, and third, for doing something which is a com- 
 bination of these two."" Obviously no question 
 arises as to the first or third, because whether 
 
 °° See cases in note 64, supra; also Commonwealtli v. Union 
 League, 135 Pa. St. 301, 8 L. K. A. 195, 19 Atl. 1030, 20 Am. 
 St. Eep. 870; Dawkins v. Antrobus, L. R. 17 Ch. Div. 615; 
 Lambert v. Addison, 46 L. T. IST. S. 25; United States v. 
 Metropolitan Club, 11 App. D. C. 180. 
 
 "See section 21, supra, subsection (a), paragraph (2). 
 
Eeview of Decisions by the Courts. 237 
 
 one's act may be placed in either of these classes 
 is always easy of decision. The inquiry then re- 
 duces itself to this, suppose that such association 
 should decide that a member had violated his duty 
 towards the association and had therefore ex- 
 pelled him, could he come into court and obtain 
 reinstatement on the ground that his conduct was 
 not in fact in violation of such duty towards the 
 association? The authorities are agreed that the 
 decisions of such tribunals are no more conclusive 
 upon the courts in such cases than any other de- 
 cisions which they make as to their jurisdiction."^ 
 This would appear also to be sound on principle, 
 for if the decisions of such tribunals were final as 
 to what acts were detrimental to the association 
 and thus a breach of a member 's duty, then simply 
 by declaring the particular act to be such, an asso- 
 ciation might terminate such membership arbi- 
 trarily and at any time it saw fit, whether a court 
 would agree with it or not. Furthermore, to hold 
 such a decision conclusive, the courts would be 
 placed in the position of upholding such a decision 
 of the association or its tribunal in characterizing 
 an act of such member which act, if forbidden by 
 an express rule or by-law, the court, as we have 
 seen, might under some circumstances declare to 
 be an insufficient ground for expulsion. 
 
 "Leech v. Harris, 2 Brewst. 571; Fawcett v. Charles, 13 
 Wend. 473 ; Savannah Cotton Exchange v. State, 54 Ga. 668 ; 
 State ex rel. Waring v. Society, 38 Ga. 608; Commonwealth 
 V. German Society, 15 Pa! St. 251 ; People ex rel. Pulford v. 
 Fire Department, 31 Mich. 458; Society v. Van Dyke, 2 
 Whart. 309, 
 
238 The Law of Commeecial Exchanges. 
 
 Section 33. Objection on the Merits. 
 
 The question remains to be considered, whether 
 the courts will ever review the decisions of such 
 tribunals on the merits. In other words, our in- 
 quiry is, will the courts ever disturb such decisions 
 because in their judgment the evidence is insuffi- 
 cient to justify the tribunal of the association in 
 coming to its conclusion? It should be carefully 
 borne in mind, that we are assuming that every 
 element heretofore considered has been satisfied, 
 and that the only contention which such member 
 can raise in court with any hope of success is that 
 of the lack of evidence. In some of the cases,** 
 the question under consideration has been treated 
 as if the lack of evidence went to the jurisdiction 
 of such tribunal, but upon careful analysis we 
 must conclude that such view is erroneous. If 
 such tribunal should decide the case without any 
 evidence to sustain it, and for this reason the 
 court should disallow such decision by ordering 
 the reinstatement of the member who was ex- 
 pelled, then the court, in legal theory, would dis- 
 allow such decision not on the ground that the 
 tribunal was without jurisdiction to make it but 
 rather that it had improperly exercised such juris- 
 diction. While the effect may be the same, the 
 issues presented in the two cases are entirely 
 different. 
 
 As a general proposition, the authorities are 
 well settled that the courts will not disallow such 
 
 °° People ex rel. Johnson •». New York Produce Exchange, 
 149 N. T. 401, 44 N. E. 84. 
 
Review of Decisions by the Couets. 239 
 
 decisions simply because they think the evidence 
 was weaker than did the association or its tri- 
 bunal. If A, a member of such an association, 
 has been expelled for failure to fulfill a contract 
 with B, a fellow member, the courts will not 
 review the question whether there was such a 
 contract and such a breach of it. With possibly 
 one exception, hereafter noted, the courts will ac- 
 cept at its face value the decision of the tribunal 
 as to what the facts in the case were/' This 
 proposition has been set forth in many decisions. 
 Thus in Nelson v. Board of Trade,'" the court said, 
 at page 440 of the opinion : 
 
 " Whether the evidence before the board of 
 directors was sufficient to authorize its finding 
 cannot be examined into by the courts. The re- 
 lator stands convicted by the sentence of a tri- 
 bunal of his own choice. With the question 
 whether the judgment was correct upon the facts 
 
 °° Leech v. Harris, 2 Brewst. 571 ; Nelson v. Board of Trade, 
 162 111. 431 ; People ex rel. Johnson v. Produce Exchange, 149 
 N. Y. 401, 44 N. E. 84; Blumenthal v. Cincinnati Chamber 
 of Commerce, 1 Week. Law Bui. 327; Black and White 
 Society v. Van Dyke, 2 Whart. 309 ; Temple v. Toronto Stock 
 Exchange, 8 Ont. 705 ; Moffat v. Board of Trade, 111 S. W. 
 894; Pitcher v. Board of Trade, 121 111. 412, 13 N. E. 187; 
 Lewis V. Wilson, 121 N. Y. 284, 24 N. E. 474; White v. 
 Brownell, 2 Daly 329, 3 Abb. Pr. N. S. 318, 4 Abb. Pr. N. S. 
 193 ; State v. Chamber of Commerce, 4 Ohio N. P. 244 ; Bern- 
 heim v. Keppler, 69 N. Y. Supp. 803, 34 Misc. 321 ; Singerly's 
 Admin, v. Johnson, 3 Week. Not. Cas. 541 ; Commonwealth v. 
 Pike Benevolent Society, 8 Watts & Serg. 247. 
 
 " 162 HI. 431, 44 N. E. 743, 53 Am. St. Eep. 312. 
 
240 The Law of Commeecial Exchanges. 
 
 the courts have nothing to do. Having given him 
 notice and made due inquiry, where there is no 
 question of the jurisdiction or legality of the pro- 
 ceedings, the courts will not sit as courts of ap- 
 peal and re-examine the facts. To do that would 
 be to usurp an authority in cases of this kind for 
 which there is no justification in the law." 
 
 And in People ex rel. Johnson v. Produce Ex- 
 change " we find this statement : 
 
 " The question for the court is not whether, 
 passing upon the evidence as res nova, it would 
 have reached the same conclusion as that of the 
 board of managers, or whether the conclusion was 
 reasonable or unreasonable, but simply and 
 wholly whether the case was so bare of evidence 
 to sustain the decision that no honest mind could 
 have reached the conclusion that the relator's con- 
 duct was ' inconsistent with just and equitable 
 principles of trade.' " 
 
 In the case of Blumethal v. Cincinnati Chamber 
 of Commerce,''^ the court said : 
 
 " The question is not whether I, or any of the 
 learned counsel, or the jury if they had been try- 
 ing that case on the same evidence presented to 
 this board, would have suspended Mr. B or not. 
 That is not the question. By this constitution, 
 Mr. B agreed with his fellow members and with 
 the Chamber of Commerce not that he might be 
 suspended or expelled if I, or you, or this jury 
 
 " 149 ISr. Y. 401, 44 N. E. 84. 
 
 "7 Week. Law. Bui. 327, 8 Ohio Dec. (Eeprint) 410, 
 
Eeview of Decisions by the Couets. 241 
 
 should say that he was guilty of unmercantile con- 
 duct ; but he agreed that he might be suspended if 
 the Board of Officers should so decide. So if the 
 Board of Officers, in good faith, seeking honestly 
 to reach the truth, with sufficient cause to exer- 
 cise judgment upon, came to a conclusion, al- 
 though it be in our judgment a wrong one, we 
 cannot interfere." 
 
 One exception alone is suggested to this doc- 
 trine by the courts. This exception is, that such 
 a decision of the tribunal will not be conclusive 
 even on the facts if the courts, by an examination, 
 can see that there was a total lack of evidence to 
 sustain the finding of such tribunal.''^ It is incum- 
 bent, however, upon the member to show by clear 
 and unequivocal evidence that such decision of the 
 tribunal is objectionable upon this ground. The 
 principle seems to be identical with the case where 
 a litigant seeks to obtain a setting aside of the 
 verdict of a jury on the ground that it was con- 
 trary to the evidence. The fact that a decision 
 was made establishes a presumption that it is 
 correct. Such presumption, however, is not con- 
 clusive, but can be rebutted by a clear showing 
 that such tribunal could not reasonably have come 
 to this conclusion on the evidence submitted.''* 
 
 "People ex rel. Johnson v. Produce Exchange, 149 N. Y. 
 401, 44 N. E. 84; Young v. Eames, Y9 N. Y. Supp. 1068; In re 
 Haebler, 149 N. Y. 414, 44 N. E. 87 ; ISTeukiroh v. Keppler, 
 174 ]Sr. Y. 509, 66 N. E. 1112. 
 
 " See cases in note 73. 
 Com, Exc— 16, 
 
242 The Law of Commeecial Exchanges. 
 
 The principle is clearly stated by the court in 
 Young V. Eames/'' at page 1074 of the opinion : 
 
 " It being shown that the body purporting to 
 act had jurisdiction of the subject-matter and of 
 the person, and that they proceeded regularly 
 under the rules provided for their guidance, and 
 that they rendered a decision, the presumption 
 that it was founded on sufficient evidence arises; 
 and while this presumption is not conclusive, it 
 rests upon the one who assails the decision to 
 show in what respect it is either irregular or 
 void." 
 
 Section 34. Remedies Available to Members. 
 
 Thus far we have been considering the con- 
 ditions under which a member may obtain some 
 relief in the courts from a decision of such asso- 
 ciation or its duly constituted committee. Our 
 question now is, assuming that the member pre- 
 sents a proper case, what is the particular remedy 
 which he must pursue in order to prevent such 
 threatened expulsion or suspension or to recover 
 his membership after he has been thus expelled 
 or suspended. Such remedies may be roughly 
 divided into two classes, first, those which are pre- 
 ventive, and second, those which are restorative. 
 Accordingly let us examine the authorities where- 
 in are considered the questions of the availability 
 of one or the other of these remedies to such ex- 
 pelled or suspended member. 
 
 "79]Sr. T. Supp. 1068. 
 
Review of Decisions by the Courts. 243 
 
 (a) Remedy by injunction. — An examination 
 of the authorities reveals that the remedy of in- 
 junction has been sought by the members of asso- 
 ciations first, to prevent the association from com- 
 mencing or proceeding with the trial of such 
 member upon the charges preferred against him, 
 and second, to prevent the association from deny- 
 ing him the rights and privileges of membership 
 after the decree of expulsion. It is a fundamental 
 legal principle that an injunction will never be 
 allowed where there is open to the applicant an 
 adequate remedy at law. Accordingly, the au- 
 thorities are clear upon the proposition, that an 
 injunction will not be granted to such member in 
 the second situation because, as we shall see later, 
 he can avail himself of the remedy of mandamus, 
 if unlawfully expelled.^" 
 
 Where the association, however, is unincorpo- 
 rated, the writ of mandamus will not lie,'^ and 
 therefore the courts make an exception to the gen- 
 eral doctrine, even in the second situation, and 
 allow an injunction to such member." While 
 there are a few cases which allow such writ of 
 mandamus even aga,inst an unincorporated asso- 
 ciation, yet they can only be sustained upon some 
 local statutory change in the common-law reniedy 
 of mandamus. 
 
 "Baxter v. Board of Trade, 83 HI. 146; Sturges v. Board 
 of Trade, 86 111. 441; Gregg v. Mass. Medical Society, 111 
 Mass. 185, 15 Am. Eep. 24. 
 
 " See 25 Cyc. 385-6. 
 
 " See 25 Cyc. 386, note 47. 
 
244 The Law of Commercial Exchanges. 
 
 Where the member is seeking by injunction to 
 prevent the association from commencing or pro- 
 ceeding with the trial of such member, the author- 
 ities, subject to one exception, are a unit upon the 
 proposition that it does not lie.'" This seems 
 sound on principle as well, because if the associa- 
 tion be incorporated the member not only has an 
 unexhausted remedy within the association, but, 
 in addition, has his ordinary writ of mandamus, 
 whereas if the association be unincorporated, the 
 member still has failed to exhaust his remedy 
 within the association.*" 
 
 There are, however, some cases in the books 
 where an injunction was allowed to such member 
 even in this situation.*^ These are the cases where 
 the complainant, unless aided by such an injunc- 
 tion, will be expelled for some cause which under 
 no circumstances can justify his expulsion, or in 
 a manner absolutely contrary to the method pro- 
 vided in the rules or by-laws. This is the same 
 situation in which, as we have seen, the courts do 
 not require the member first to exhaust his 
 remedy within the association.'^ The power of 
 the court of equity to interfere in such cases by 
 
 ™ See cases in note 13. 
 
 °° See discussion of this principle in section 30, supra. 
 
 "'■ Huston V. Eeutlinger, 91 Ky. 333, 34 Am. St. Rep. 225, 
 15 S. W. 867; Leech v. Harris, 2 Brewst. 571; Otto v. 
 Journeyman Union, 75 Cal. 315, 17 Pac. 217, 7 Am. St. Eep. 
 156; Eyan v. Cudahy, 157 HI. 108, 48 Am. St. Eep. 305, 49 
 L. E. A. 353, 41 N. E. 760. 
 
 '^ See oases in note 19. 
 
Review op Decisions by the Couets. 245 
 
 injunction has been exercised where the rule or 
 by-law for violation of which the member was 
 about to be expelled was clearly invalid/^ and also 
 where the tribunal had denied to the member his 
 right to an impartial hearing and the opportunity 
 to present his full defense.** 
 
 (b) Remedy by writ of mandamus. — The re- 
 storative remedy which is open to such member 
 when unlawfully expelled or suspended is a writ 
 of mandamus. Ob^aously, it is not a remedy to 
 prevent the association from commencing the 
 trial of such member or from continuing it after 
 it has been commenced, but is proper in those 
 cases only where the member, having been ex- 
 pelled or suspended by the decree of such tri- 
 bunal or the association, seeks to be restored to 
 membership or to be allowed to exercise some 
 other right of which he has been unlawfully de- 
 prived. The remedy of mandamus, by the great 
 weight of authority, does not lie against an un- 
 incorporated association.*^ Mandamus is a civil 
 action or proceeding, an extraordinary remedy or 
 prerogative, in the sense that it can be maintained 
 only in the absence of all other adequate remedies, 
 whereby the sovereign through the courts com- 
 mands an inferior tribunal, corporation or public 
 officer to perform some act which the law specifi- 
 cally enjoins as a duty resulting from the office, 
 
 ^ Huston V. Eeutlinger, supra. 
 °'Eyan v. Oudahy, supra. 
 '" See 26 Oyc. 385-6. 
 
246 The Law of Commeecial Exchanges. 
 
 trust or station.*" It has long been settled that 
 the writ hes not only against corporations which 
 are public or gwasi-public in their nature but also 
 against purely private corporations." And no 
 distinction is made in this connection between 
 the ordinary private corporation for profit and 
 the incorporated associations, such as the Ex- 
 changes and others organized for social, philan- 
 thropic or commercial objects.*' Accordingly, the 
 law is well settled that a writ of mandamus is the 
 proper remedy for the member to resort to when 
 unlawfully expelled or suspended from such an 
 incorporated association to compel his restora- 
 tion to membership therein.*' 
 
 *■ See 26 Cyc. 139. 
 " See 26 Cyc. 338. 
 " See 26 Cyc. 343. 
 °° See long list of cases in 26 Cyc. 343, note 30. 
 
CHAPTER VI. 
 
 LIABILITY OF EXCHANGE, ITS OEFICEES AND 
 COMMITTEES TO MEMBEES, NON-MEMBEES 
 AND THE STATE. 
 
 Section 35. Liability to Members. 
 
 (a) Liability for wrongful discipline of mem- 
 
 ber. 
 
 (b) Are officers ever liable individually? 
 
 (c) Measure of damage to such member. 
 
 36. Liability to Non-members. 
 
 (a) Non-member cannot object to invalid act 
 
 of Exchange. 
 
 (b) Liability for contracts or torts of agents 
 
 and servants. 
 (e) When are non-members bound by the 
 rules, by-laws and business customs of 
 the Exchange? 
 
 37. Eesponsibility of Exchanges to the State. 
 
 (a) When will the State interfere ? 
 
 (b) Will legal. rules or by-laws subject Ex- 
 
 changes to criminal law? 
 
 Section 35. Liability to Members. 
 
 We have seen that, unlike the ordinary partner- 
 ship, the member of an unincorporated associa- 
 tion may, under certain circumstances, sue the as- 
 sociation.^ We have also observed the manner in 
 which such suit must be brought.^ Thus, there 
 can be no doubt that for proper cause the member 
 may sue the exchange or association when it is 
 
 * See section 7, Chapter II. 
 " See section 7, Chapter 11. 
 
 [247] 
 
248 The Law of Commbkcial Exchanges. 
 
 unincorporated and obviously when it is incorpo- 
 rated. Our inquiry at this point is to determine 
 for what causes such member has his redress 
 against the exchange or association. The first 
 and most obvious situation involving such legal 
 right of the member against the association arises 
 where he is denied some property right to which 
 he has become legally entitled. Such a situation 
 does not often arise in the case of the Exchanges, 
 but is of frequent occurrence with benefit and 
 other similar associations. Nevertheless, the 
 principle is of general application. Whenever 
 such a state of affairs arises where there is owing 
 to the member from the association a sum of 
 money or some other property interest, the former 
 has his remedy against the latter as in the case of 
 any creditor against a debtor.^ 
 
 (a) Liability for wrongful discipline of mem- 
 ber. — The situation which has arisen most fre- 
 quently in the case of the Exchanges is one where 
 a person who has been wrongfully expelled * or in- 
 definitely suspended," or has been denied the privi- 
 
 ' Supreme Order v. Stein, 120 Ind. 270; Supreme Lodge of 
 United Workmen v. Zuhlke, 129 111. 298, 21 N. E. 789 ; Eobin- 
 son V. Templar Lodge, 117 Gal. 370, 49 Pac. 170, 59 Am. St. 
 Eep. 193. 
 
 ■■ Cannon v. Toronto Corn Exch., 5 Ont. App. 268 ; Burt v. 
 Grand Lodge, 66 Micli. 85, 33 N. "W. 13 ; Lahifi v. St. Joseph's 
 Total Abstinence and Benevolent Society, 76 Conn. 648, 57 
 Atl. 692, 100 Am. St. Eep. 1012. 
 
 "Blumenthal v. Cincinnati Chamber of Commerce, 8 Ohio 
 Dee. (Eeprint) 410, 7 Cine. Law Bull. 327. 
 
Liability of Exchange, Its Officers, Etc. 249 
 
 leges of membership without actual expulsion or 
 suspension," subsequently brings an action against 
 the Exchange for damages caused to him thereby. 
 We have already considered the preventive and 
 restorative remedies open to a former member 
 who has been illegally or irregularly expelled or 
 suspended.'^ The present situation arises when 
 such person does not desire to retain or be re- 
 stored to membership but seeks compensation for 
 the damage done to him. It has been held, more- 
 over, that the bringing of such action for damages 
 forecloses on the right of such member to bring 
 mandamus.' 
 
 The question then arises under what circum- 
 stances can such expelled or suspended member 
 maintain such action for compensation. We have 
 seen that when such exchange or association ex- 
 pels or suspends one of its members by action of 
 its duly constituted committee, it acts in a judicial 
 or quasi-judicial capacity, and that such tribunal 
 of the exchange or association is one of the mem- 
 ber's own choice.^ It is a fundamental principle 
 of our law that no judge while acting in a judicial 
 capacity is liable in a suit at law for any decision 
 which is simply an error of judgment.^" The 
 same is true of the judicial acts of ministerial 
 officers, of directors, trustees and mana^ng 
 
 ' Temple v. Toronto Stock Exchange, 8 Ont. (Can.) Y05, 
 
 ' See section 34, supra. 
 
 ' State V. Slavonska, 28 Ohio St. 665. 
 
 ° See section 33, supra. 
 
 " See 23 Cyc. 567, title " Judges." 
 
250 The Law of Commercial Exchanges. 
 
 boards generally." Moreover, it has been held 
 applicable to the governing board of an Ex- 
 change.^^ Only for such an act or decree as can 
 be denominated malicious will such action lie." 
 What constitutes an error of judgment and what 
 is malicious are impossible of determination, ex- 
 cept in the light of the particular facts of each 
 specific case. It has been held that a failure to 
 pursue strictly the methods of procedure pre- 
 scribed in the rules or by-laws is not such as will 
 render the exchange or association,^* nor the offi- 
 cers thereof individually,^'' liable to an action by 
 a member. Probably the only safe test is that the 
 action will lie only upon a clear showing that the 
 decree expelling or suspending such member was 
 wilfully done and inspired without probable cause. 
 Upon such a showing the courts can see that such 
 exchange or association and the officers were not 
 actuated by any motive calculated for the good of 
 the body as a whole and accordingly will give to 
 such member the desired and just redress." 
 
 " See cases cited in Albers v. Mercliaiits Exchange, 138 Mo. 
 140, 39 S. W. 473. 
 
 " Lurman v. Jarvie, 82 N. Y. App. Div. 3Y, 81 N. T. Supp. 
 468; Albers v. Merchants Exchange, supra. 
 
 " Lurman v. Jarvie, supra; Albers v. Merchants Exchange, 
 supra. 
 
 " Lurman v. Jarvie, supra. 
 
 ^ Albers v. Merchants Exchange, supra. 
 
 "Lurman v. Jarvie, supra; Albers v. Merchants Exchange, 
 supra. See Sewell v. Ives, 61 How. Pr. (N. T.) 44; Olds v. 
 Chicago Open Board of Trade, 18 111. App. 465. 
 
Liability of Exchange, Its Officers, Etc. 251 
 
 (b) Are officers ever liable individually^ — In 
 several cases, the expelled or suspended member 
 has pursued his remedy not against the exchange 
 or association, but directly against the officers 
 and directors thereof." In none of the cases, 
 however, has it been clearly explained why the 
 action was brought in this form rather than di- 
 rectly against the exchange or association. An 
 explanation cannot be found in the form of or- 
 ganization of such Exchange because the officers 
 were thus sued in one case,^* where the Exchange 
 was a corporate body, and likewise in other cases 
 where the Exchange was unincorporated." More- 
 over, the same underlying principle of Uability to 
 such member was applied in one case as the other. 
 Accordingly, without venturing into the broad 
 field of determining under what circumstances the 
 injured member may sue the central body on the 
 one hand or must confine his remedy to the offi- 
 cers individually on the other, it will suffice to 
 state that such expelled or suspended member 
 may bring his action directly against the Ex- 
 change or against the officers individually only 
 upon a clear showing that the injury to such 
 member was done with a malicious intent and in- 
 spired by unjustifiable motives. When such show- 
 ing is made, the authorities would seem to allow 
 
 " Albers v. Merchants Exchange, supra. 
 "Albers v. Merchants Exchange, supra. 
 "Lurman v. Jarvie, supra. 
 
252 The Law op Commercial Exchanges. 
 
 to the aggrieved member a choice either to sue the 
 Exchange directly or the officers individually. 
 
 (c) Measure of damages to such member. — 
 The question as to what measure of damages shall 
 be accorded to such expelled or suspended mem- 
 ber has arisen in several cases. Obviously, un- 
 less such member can show that his expulsion or 
 suspension was inspired by malice of the officers 
 or committee of such exchange or association, he 
 is entitled to no damages whatever, not even to 
 nominal damages.^" Assuming, however, that 
 such member has in fact laid a valid ground for 
 redress, he cannot demand compensation for the 
 profits of a speculative nature which he might 
 have made, or at least claims he might have made, 
 had he not been denied the privilege of member- 
 ship and the opportunity of trading upon s.uch 
 Exchange.^^ Nor can he recover for his " in- 
 jured feelings " or even for counsel fees and 
 other expenses which he has been forced to ex- 
 pend to resist his expulsion or suspension in the 
 courts.^^ When such member has been wrong- 
 fully expelled or suspended, the act constitutes in 
 effect a conversion of his membership and the 
 correct measure of damages is " the value of the 
 right of which that certificate was the evidence of 
 title, with interest from the time of conversion to 
 
 °°Albers V. Merchants Exchange, supra. 
 ^ Albers v. Merchants Exchange, supra. 
 ""Albers v. Merchants Exchange, supra. See, however, 
 Lahifi V. St. Joseph's, etc.. Society, supra. 
 
Liability of Exchange, Its Officers, Etc. 253 
 
 the time of trial. ' ' ^^ And it has been held that 
 the fact that the proceeds from the sale of the 
 membership of ■ one unlawfully expelled or sus- 
 pended were distributed among his creditors upon 
 the Exchange, does not operate as a defense to 
 his action against the Exchange or in mitigation 
 of damages.^* 
 
 Section 36. Liability to Non-members. 
 
 We have seen that members are bound by the 
 rules and by-laws af the Exchange for the funda- 
 mental reason that they have agreed to be bound 
 by all such rules or by-laws as are within the ex- 
 press or implied powers of such Exchange to 
 make.^^ For the exactly opposite reason that non- 
 members under ordinary circumstances have not 
 agreed to be bound thereby, the latter are entirely 
 beyond the scope of such rules, by-laws and regu- 
 lations of the Exchange.^' 
 
 (a) Non-member cannot object to invalid act 
 of Exchange. — Inasmuch as a non-member is not 
 bound by the rules, by-laws or regulations of the 
 Exchange, so correspondingly a non-member can- 
 not interfere with the operation of even an in- 
 valid rule or by-law so long as it is acceptable to 
 
 " Olds V. Chicago Open Board of Trade, supra. 
 
 " Sewell V. Ives, supra. 
 
 '^ See sections lY and 21, supra; also see 17 Oyc. 852, note 
 14, and cases there cited. 
 
 *■ Greely v. Doran Wright Co., 148 Mass. 116, 18 N. E. 878 ; 
 Wangle v. Seaboard Bank, 54 N. T. Super. Ct. 283 ; Hoffman 
 V. Livingston, 46 N. Y. Super. Ct. 552. 
 
254 The Law of Commekcial Exchanges. 
 
 the members.^^ Whether an agreement is unrea- 
 sonable and unduly burdensome may give rise to 
 some means of relief to a party to such agreement 
 but never to one who is in no direct way concerned 
 therein. The Supreme Court of Illinois in a lead- 
 ing case ^^ and in considering a rule or by-law 
 which was admittedly invalid stated the principle 
 applicable to a complaint by a non-member as 
 follows : 
 
 "A voluntary association, whether incorporated 
 or not, has, within certain well-defined limits, 
 power to make and enforce by-laws for the gov- 
 ernment of its members. Such by-laws are ordi- 
 narily -matters between the association and its 
 members alone, and with which strangers have no 
 concern. If the association, or a majority of its 
 members, pass by-laws which are unreasonable, 
 or contrary to law or public policy, and attempt 
 "to enforce them as against a dissenting or un- 
 willing minority, such minority may undoubtedly, 
 in proper eases, appeal, to the courts for relief 
 against their enforcement -But mere strangers 
 have ordinarily no right to interfere. As to 
 them, such by-laws are matters of no concern. 
 They do not apply to and are not binding upon 
 them. ' ' 
 
 " Eussel V. New York Produce Exchange, 27 Misc. 381, 58 
 N. Y. Supp. 842. See also Morris v. Grant, 34 Hun (N. Y.) 
 37Y. 
 
 ^ American Live Stock Com. Co. v. Chicago Live Stock 
 Exchange, 143 111. 210, 32 N. E. 2Y4, 36 Am. St. Kep. 385, 
 18 L. E. A. 190. 
 
Liability of Exchange, Its Officers, Etc. 255 
 
 It has been held, moreover, that a non-member 
 has no right to rehef against the exercise by the 
 Exchange of its disciphning power over a mem- 
 ber, even though such discipline of the member 
 may cause financial loss to the non-member." In 
 the case of Green v. Board of Trade, supra, the 
 court, in denying this as a ground of relief, said, 
 at page 593 of its opinion : 
 
 " It is insisted the Board of Trade, by holding 
 out to the public that a broker is a member, en- 
 courages and invites the public to buy produce on 
 its Exchange through that member, and when the 
 public have acted on such invitation, by the expul- 
 sion of, such member, the board would prevent the 
 carrying out of contracts which customers of the 
 expelled member have made in good faith, and 
 such customers would be remediless. . . . The 
 existence of such contracts affords no ground for 
 interference to prevent a trial under the rules of 
 the Board of Trade. If it could be held that it 
 did, then a member could always have outstand- 
 ing contracts, and effectually prevent being tried 
 for a violation of the rules of the Board of Trade. 
 Aside from this, customers of a member of the 
 Board of Trade dealing with him as such member 
 must be conclusively presumed to have dealt with 
 him with reference to the rules of the board, which 
 provide that their broker could be suspended or 
 expelled for misconduct. ' ' 
 
 " Green v. Board of Trade, 174 Dl. 585, 51 N. E. 599, 49 
 L. E. A. 365. 
 
256 The Law of Commeecial Exchanges. 
 
 And an Exchange, like any other owner o£ prop- 
 erty, may forbid non-members and strangers from 
 trespassing upon the premises of the association/" 
 Unless this were true, the courts would in effect 
 declare such Exchange to be a public market which 
 they have not as yet done. 
 
 (b) Liability for contracts or torts of agents 
 and servants. — The legal principles controlling 
 the liability of the exchange or association for the 
 contracts or torts of its agents are so largely un- 
 settled and in the process of creation that it would 
 seem almost unwise to venture any definite con- 
 clusions upon the matter at this point. Within 
 these limitations, however, it may be well to indi- 
 cate at least the broad general principles which 
 it is submitted should control. While the cases 
 dealing with Exchanges are exceedingly scarce, 
 yet those dealing with such liability of clubs and 
 societies of various kinds are sufficiently numer- 
 ous to warrant the conclusion that the general 
 principle therein enunciated would be followed in 
 similar situations dealing with the Exchanges. 
 
 Where such Exchange is incorporated, it is diffi- 
 cult to see how any different principles of liability 
 are applicable than to corporate bodies generally. 
 A railroad corporation, for illustration, is liable 
 for all acts of its agents or servants, both in the 
 law of contract and tort, when such acts are within 
 the expressed or reasonably implied scope of such 
 
 °° Chicago Open Board of Trade v. French, 61 HI. App. 349; 
 Babcock v. Merchants Exchange, 159 Mo. 381, 60 S. W. 733. 
 
Liability of Exchange, Its Officebs, Etc. 257 
 
 agents' or servants' authority or line of duty. As 
 the purchasing agent of such corporation by his 
 purchases of necessary supplies, or the engineer 
 while running his locomotive by killing a pedes- 
 trian or traveler, can make the corporation, his 
 principal, hable, there seems no reason to doubt 
 the application of the same principle to the agent 
 or servant of the incorporated exchange or asso- 
 ciation in purchasing supplies or running an ele- 
 vator and thereby causing loss or doing injury to 
 non-member. Whether such liability does exist 
 in a particular case is decided like any other upon 
 the law of agency. In one case,^^ an incorporated 
 Exchange was held not liable for the failure of a 
 marker to record on the quotation board the sales 
 as they were made because of a lack of evidence 
 of negligence, but the court clearly indicated in its 
 opinion that upon a clear showing of negligence 
 such Exchange would have been liable to one in- 
 jured thereby. Moreover, there seems no reason 
 to doubt that for such acts of its agent or servant, 
 like any other corporate body, the Exchange itself 
 is liable and not those who compose it. 
 
 The responsibility of the unincorporated ex- 
 change or association for the contracts or torts of 
 its agents or servants .presents a problem far 
 more difficult of definite statement than in the 
 case of the incorporated exchange or association. 
 This arises largely from the unsettled status of 
 
 "Warren v. St. Louis Merchants Exchange, 52 Mo. App. 
 157. 
 
 Com. Bxc. — 17. 
 
258 The Law of Commercial Exchanges. 
 
 the institution. As we have seen the courts very 
 generally apply to such uTiiucprporated associa- 
 tions the legal principles derived from the law of 
 partnership.^'' It is obvious that under the law of 
 partnership every member would be individually 
 liable even for the acts of members within the 
 scope of the association objects, whether such 
 member was authorized to bind the association or 
 not. The courts, however, have never seen fit to 
 extend this principle of partnership to the case of 
 such unincorporated exchange or association, at 
 least with respect to their liability for the con- 
 tracts or torts of its agents or servants, even when 
 the latter happen to be members of the exchange 
 or association. Accordingly, it seems well settled 
 by the cases and text-writers that all such liabil- 
 ity is controlled by the law of agency and not of 
 partnership.^'' 
 
 This would seem the logical way to work out the 
 liability of such exchange or association for the 
 acts of its agents or servants. In the very nature 
 of things, all the members thereof cannot take 
 part in carrying out every act necessary to accom- 
 plish the objects of such exchange or association. 
 The power to act must of necessity be delegated 
 to others. Accordingly, officers and agents are 
 appointed to administer the work of the institu- 
 
 "See Pars, on Part. (4th ed.), sec. 431; also Dos Passos, 
 Stock-brokers and Stock Exchanges (2d ed.), vol. I, pp 38 
 ei seq. 
 
 "^ 1 Lindley on Part, and Company Law (4th ed.) 57. 
 
Liability of Exchange, Its Officers, Etc. 259 
 
 tion, and the acts of such officers and agents 
 within the scope of the authority delegated to 
 them are in law and in fact the acts of the asso- 
 ciation and of those who compose it. Just as 
 property may be the subject of joint ownership, 
 so may one or more persons represent not one, 
 but several joint principles. And, inasmuch as 
 the law sees no magic in numbers, such agent may 
 represent two hundred joint principals as effec- 
 tively as two or ten. Therefore, where such agent 
 within the scope of his delegated authority con- 
 tracts as such agent in behalf of the exchange or 
 association, or within the scope of his duty does 
 any injury or damage to a non-member, it would 
 seem not only just but logical to conclude that the 
 principal which employs him and holds him out as 
 its representative is bound by his acts as effectively 
 as any other principal would be thus bound. And, 
 in determining the scope of such agent's author- 
 ity or the line of his duty, the constitution and 
 rules of such exchange or association and the ob- 
 jects of such organization seem to mark the limits 
 within which such agent can bind the exchange or 
 association by his acts. 
 
 (c) When are non-memhers hound by the rules, 
 by-laws and business customs of the Exchange? 
 — As we have seen, the individual members in 
 their relations with fellow members and with the 
 Exchange are bound by the rules and by-laws 
 thereof for the fundamental reason that they 
 agreed to be bound thereby as a condition of en- 
 
260 The Law of Commebcial Exchanges. 
 
 trance into membersMp,^* and tlie fact that a par- 
 ticular member did not know of the existence of 
 some rule or by-law in no event operates as a 
 defense when charged with a violation thereof.^^ 
 An examination of numerous cases, however, re- 
 veals many where the courts have held that non- 
 members as well as members were bound by the 
 rules, by-laws and customs prevailing upon the 
 various Exchanges. The cases cannot be ex- 
 plained upon any such theory of unqualified con- 
 sent as in the case of a member for the reason 
 that none has been required of such non-member 
 nor given by him. Accordingly, if these cases be 
 sound, they must be sustained upon other grounds 
 than the express assent of such non-member. 
 
 At the outset, it may be well to note that a far 
 greater proportion of the cases consider the bind- 
 ing effect of business customs or usages prevail- 
 ing in a certain market upon a non-member than 
 the similar effect of the rules or by-laws of an 
 Exchange. And yet it is submitted that no dif- 
 ferent legal principle should be applied in one case 
 than the other. The rules or by-laws regulating 
 the transaction of business upon an Exchange are 
 but the customs and usages of that particular 
 market codified in express terms. Whenever a 
 business custom or usage of a particular market 
 is of suflSicient notoriety to bind persons who trade 
 
 " Section 28, supra, and cases there cited. 
 ^ White V. Brownell, 2 Daly (N. T.) 329, 4 Abb. Pr. N. S. 
 162. 
 
Liability of Exchange, Its Ofpicees, Etc. 261 
 
 thereon, it is difficult to conceive why a different 
 test should be applied when the custom or usage 
 is set forth in the form of a rule or by-law of such 
 Exchange. While it may be possible for such 
 non-member to learn more easily of a rule or by- 
 law than of a custom or usage, yet in fact non- 
 members are no more and no less acquainted with 
 one than with the other. Thus, we may reason- 
 ably conclude that whenever such non-member 
 would be bound by a custom or usage, he would be 
 equally bound by a rule or by-law establishing a 
 business custom or usage and cases under one can 
 be cited with perfect fairness under the other. 
 
 Confining our investigation for the moment 
 simply to rules or by-laws of such Exchanges, it 
 is perfectly obvious that a large part of them can 
 in no event effect any but members. A non- 
 member, for illustration, could in no case be 
 amenable to the purely disciplinary rules or by- 
 laws of such Exchanges. The vitality of such 
 rules or by-laws as to members springs solely 
 from the authority of such Exchange to punish 
 the member violating such rule or by-law by sus- 
 pending or expelling him from membership. 
 Where the offender, however, is a non-member, 
 such power is entirely lacking. This principle is 
 so obvious that it would be useless to consider it 
 further at this point. Moreover, the same prin- 
 ciple is true of all those rules or by-laws regulat- 
 ing the internal administration or government of 
 such Exchanges. In reaUty, the only rules or by- 
 
262 The Law of Commercial, Exchanges. 
 
 laws which can ever affect in any way a non- 
 member are those which regulate the transaction 
 of business upon such Exchanges. Such rule or 
 by-law may provide for the charging of a par- 
 ticular rate of interest for money advanced to a 
 customer, or the payment of certain rates of com- 
 mission ; the method of substituting and offsetting 
 trades; the power of such member to close out 
 trades standing in the name of customers; the 
 time of payment; the mode of delivery; the re- 
 sponsibility of members to fellow members and 
 customers in case of insolvency, as well as many 
 more. 
 
 A person who employs a member of an Ex- 
 change to execute a transaction thereon for him, 
 unnecessarily authorizes the latter to enter into 
 contracts in his behalf with other members. 
 Ordinarily, when parties contract with one an- 
 other, all the terms of that agreement are set down 
 in writing and it is a fundamental legal propo- 
 sition that thereafter no party thereto can by 
 parol evidence vary the terms of that agreement, 
 or seek to show that his intention was any differ- 
 ent than is imported by the plain terms thereof .'° 
 While this proposition is still well settled, yet, in 
 the course of time and with the growth and 
 progress of commercial dealings generally, various 
 exceptions have been ingrafted upon the legal 
 doctrine. Among the most prominent of such ex- 
 ceptions is that which holds that the " usage " or 
 
 " See 17 Cyc. 667, title " Evidence," and cases there cited. 
 
Liability of Exchange, Its Opficees, Etc. 263 
 
 ' ' customs ' ' current in any particular trade, occu- 
 pation or market, when general and well estab- 
 lished, and not unreasonable or unlawful, or in 
 contravention of the express terms of a contract, 
 constitute a part of every contract made with ref- 
 erence to such trade, occupation or market and are 
 presumed to enter into the intention of all parties 
 to such contracts.'^ 
 
 In no field of trade or business is this principle 
 more settled, and, in fact, more necessary as a 
 practical proposition than in transactions upon 
 our Exchanges. The methods of transacting 
 business thereon render absolutely essential the 
 introduction of the usages and customs prevailing 
 thereon and the rules or by-laws thereof govern- 
 ing such transactions, for otherwise, such trans- 
 actions could not possibly give rise to a full and 
 intelligible business agreement. The volume of 
 trading in securities and agricultural commodities 
 upon our modern Exchanges has grown to such 
 proportions and time is so largely of the essence 
 in the execution of such transactions that no op- 
 portunity is afforded for the making of formal 
 and comprehensive agreements as in other lines 
 of trade. An offer to buy or sell is made and 
 accepted by the utterance of hardly more than a 
 few words or the sign of the hand, although the 
 transaction may involve thousands of dollars in 
 value. At best, the only writing which takes 
 
 " See 9 Cyc. 582, title " Contracts ; " also Dos Passos, Stock- 
 brokers and Stock Exchanges (2d ed.), vol. I, p. 410. 
 
264 The Law of Commeecial Exchanges. 
 
 place is the simplest memorandum upon a card 
 giving the particular commodity bought or sold, 
 the price and quantity and the name of the oppo- 
 site party; and even these may be in a cipher 
 peculiar to the particular trade and unintelligible 
 to one not acquainted with it. The agreement be- 
 tween the member and his customer, the non- 
 member, is no less informal than between mem- 
 bers. The order is sent often over a telegraph 
 wire to a broker upon an Exchange a thousand 
 miles away and the purchase or sale reported in 
 the course of a few seconds over the same instru- 
 mentality. Nothing is said in any case about 
 carrying charges, commissions, settlements be- 
 tween brokers, the authority of the broker to close 
 out the transaction without notice to the customer 
 and many more particulars of vital interest, it 
 would seem, to all such customers. All such par- 
 ticulars do appear, however, in the rules or by- 
 laws of the particular Exchange or the usages and 
 customs then and there prevailing. Our inquiry 
 then is to determine under what circumstances, if 
 any, such non-member, by authorizing the member 
 of such Exchange to transact business thereon for 
 his account,' adopts as a part of his contract the 
 rules, by-laws and customs of such Exchange. 
 
 In the first place, it is perfectly well settled that 
 such non-member is bound by the rules, by-laws or 
 customs of such Exchange when he has knowledge 
 of them.^' No doubt exists upon this proposition; 
 
 ''Hausen v. Boyd, 161 U. S. 39Y, 40 L. Ed. 746, 16 S. Ot. 
 
Liability of Exchange, Its Ofpicebs, Etc. 265 
 
 and it has been held that if clear evidence of such 
 knowledge is present, it makes no difference that 
 the rule, by-law or custom is unreasonable,^" or 
 even contrary to a statute.*" Under what circum- 
 stances, in the absence of a showing of express 
 assent thereto, such non-member will be presumed 
 to have known such rule, by-law or custom, is a 
 pure question of the law of evidence to be decided 
 by the jury as in all cases by the facts of the par- 
 ticular case. Prior transactions upon that par- 
 ticular Exchange have been held in several cases 
 to establish a presumption of such knowledge by 
 such a non-member ; *^ and such notice given to an 
 agent .has been held to bind the principal, although 
 the former neglected to communicate it to the 
 latter.*^ 
 
 A question of far greater difficulty to determine 
 from the authorities is whether such non-member 
 is bound by the rules, by-laws or customs of such 
 
 5Y1; Irwin v. Williar, 110 IJ. S. 499, 28 L. Ed. 225, 4 S. Ct. 
 160. See also 12 Cyc. 1046, title " Customers and Wages ; " 
 also 19 Cyc. 199, title " Factors and Brokers." 
 
 "'Marye v. Strouse, 5 Fed. 483; Smith v. Eeynolds, 66 
 L. T. 808. 
 
 " Seymour v. Bridge, 14 Q. B. D. 460, 54 L. J. Q. B. 34Y. 
 See also Perry v. Barnett, 15 Q. B. D. 388, 54 L. J. Q. B. 466, 
 52 L. T. Eep. 585. 
 
 "Nonotuck Silk Co. v. Fair, 112 Mass. 354; also Fowler 
 V. Pickering, 119 Mass. 33; Stewart v. Cauty, 8 M. P. W. 
 160; but see Stone v. Mayre, 14 Nev. 362; Harris v. Turn- 
 bridge, 8 Abb. N. 0. (N. Y.) 291; Blakemore v. Heyman, 6 
 Fed. 581. 
 
 " Greaves v. Legg, 11 Exch. 642, 24 P. U. 210. 
 
266 The Law of Commebcial Exchanges. 
 
 market or Exchange, regardless of his knowledge 
 of their existence or application. Although the 
 authorities are by no means uniform upon the 
 proposition, yet, subject to the exceptions herein- 
 after referred to, it would appear that by the clear 
 weight of the decisions, especially those of recent 
 years, any person who employs a member of an 
 Exchange to transact thereon business for his ac- 
 count is presumed to authorize such member to 
 execute such transaction in accordance with the 
 rules, by-laws and customs of such Exchange ; not 
 because such non-member had knowledge thereof 
 and even in spite of his ignorance, but rather be- 
 cause, as his agent, the member executing the busi- 
 ness had implied authority to bind his principal 
 thereby.''^ But, in order to bind such principal, 
 it must appear that the transaction actually took 
 place upon the Exchange.** Moreover, it has been 
 held that a person employing such member is not 
 only presumed to authorize the latter to execute 
 
 " See 19 Cyc. 199, title " Factors and Brokers," and cases 
 cited in note 33 ; also see cases cited in note 75 Am. Dec, 
 325; Dos Passes, Stock-brokers and Stock Exchanges (2d 
 ed.) 424; Taylor v.. Bailey, 169 HI. 181, 48 N. E. 200 
 Samuels v. Oliver, 130 111. 73; Pardridge v. Cutler, 68 111 
 App. 569; Walls v. Bailey, 49 N. T. 464, 10 Am. Bep. 407 
 Sutton V. Tatham, 10 Ad. & E. 27, 37 E. C. L. 39 ; Bayliffe v, 
 Butterworth, 1 Exch. 425, 11 Jur. 1019, 17 L. J. Exch. 78 
 Hallett V. Aggergaard, (S. Dak.) 114 N. W. 696, 14 L. E. A 
 N. S. 1251. 
 
 "Ayer v. Mead, 13 111. App. 625; Eocke v. San Francisco 
 Stock Exchange, 99 Cal. 196, 33 Pac. 881; Leech v. Harris, 
 2 Brewst. (Pa.) 571. 
 
Liability of Exchange, Its OFriCEES, Etc. 267 
 
 his business in accordance with such rules, by-laws 
 and customs, but equally is presumed to authorize 
 the adoption of no method which is not in accord- 
 ance therewith.*^ 
 
 It is far beyond the scope of this treatise to 
 enter into any detailed discussion of the cases 
 where the general doctrine above stated has been 
 applied. Such a discussion could only be ade- 
 quately treated in a work treating of the law of 
 brokers or factors dealing in stocks or agricul- 
 tural commodities; and yet a reference to a few 
 of the more prominent cases' decided in recent 
 years may be instructive at this point. One such 
 case *° was within recent years decided by the Su- 
 preme Court of the United States. The question 
 at issue was whether a non-member dealing in 
 stocks upon the Chicago Stock Exchange was 
 bound by the rules of the latter institution which 
 permitted the substitution of trades from one 
 broker to another in the course of settlement 
 whereby it transpired that the customer had ob- 
 tained an entirely different party upon the other 
 side of his contract than the one with whom he 
 originally contracted. The party obtained in the 
 settlement objected to the suit against him by the 
 
 " Newman v. Lee, 87 App. Div. 116, 84 N. Y. Supp. 106 ; 
 Caswell V. Putnam, 120 N. Y. 153, 24 N. E. 287; Douglas v. 
 Carpenter, 17 App. Div. (N. Y.) 329, 45 N. Y. Supp. 219; 
 Whitlock V. Seaboard National Bank, 29 Misc. 84; Hubbell 
 V. Drexel, 11 Fed. 115. 
 
 "Clews V. Jamieson, 182 U. S. 461, 45 L. Ed. 1183, 21 
 S. Ct. 845. 
 
268 The Law op CoMMEBCiAii Exchanges. 
 
 complainant on the ground that there was no 
 privity of contract between them. In denying 
 this contention, the court said, at page 481 of its 
 opinion : 
 
 " We are then brought to the question decided 
 by the Circuit Court, which held that there was 
 no privity of contract between the complainants 
 and Jamieson & Company. Aside from the gen- 
 eral rule that a party sending an order to a broker 
 doing business in an established market or trade, 
 for a transaction in that trade, thereby confers 
 upon the broker authority to deal according to 
 any well-settled usage in such trade or markets, 
 it plainly appears in this case from the pleadings 
 that the sales and purchases of stock were in fact 
 made subject to the rules of the exchange, the 
 complainants alleging in their bill that such was 
 the fact, while the defendants Jamieson & Com- 
 pany in their answer make a like claim. 
 
 "All the transactions regarding the sales and 
 purchases of the various shares of stock men- 
 tioned in this case must, therefore, be regarded 
 as having taken place Avith direct reference and 
 subject to those rules." 
 
 And again at page 488 : 
 
 " The rules of the Chicago Exchange clearly 
 contemplate and provide for a substitution of 
 names between the selling and the delivery days, 
 and each party is kept secured by the margin 
 originally put up, which is added to and taken 
 from as the stock fluctuates in price from day to 
 
Liability op Exchange, Its Officers, Etc. 269 
 
 day. Hence it may be that the parties buying or 
 selling may by virtue of this rule be liable to dif- 
 ferent principals represented in one original con- 
 tract between the brokers. Whatever the rules 
 or practice of the Exchange may be, it is of course 
 plain that no principal can be held to the per- 
 formance of a contract which he never made, au- 
 thorized or ratified. The stipulation made be- 
 tween the parties relating to this matter, while 
 not entirely plain, might affect the right to main- 
 tain this action but for the fact that all other 
 claims were settled, leaving only the controversy 
 regarding the 700 shares to be disposed of be- 
 tween these parties. Upon the facts before us 
 we think there was sufficient privity of contract 
 between them to sustain this suit. ' ' " 
 
 While the doctrine that such non-member is 
 bound by the rules, by-laws or well-established 
 customs of an Exchange or market when dealing 
 thereon can be considered well settled at the 
 present time by the weight of the authorities, it 
 cannot be denied that there is a respectable num- 
 ber of cases holding that such non-member is not 
 bound in the absence of knowledge thereof." On 
 
 "See also Bibb v. Allen (N. T. Cotton Exchange), 149 
 U. S. 481, 37 L. Ed. 819; Ward v. Vosburgh, 31 Fed. 16; 
 Gruner v. Stucken, 39 La. Ann. 1078, 3 So. 388 ; Van Dnsen 
 V. Jungeblut, 75 Minn. 305, 74 Am. St. Eep. 463, 77 N. W. 
 970. 
 
 "" Irwin V. "Williar, 110 IJ. S. 499, 28 L. Ed. 225 ; Marye v. 
 Strouse, 5 Fed. 483, 6 Sawy. 204; Robinson v. MoUett, L. R. 
 7 H. L. 802, 44 L. J. C. P. 362, 33 L. T. R. U. S. 544; 
 Hamilton v. Young, 7 L, R. Ir. 289. 
 
270 The Law of Commebcial Exchanges. 
 
 principle, however, it would seem that the propo- 
 sition generally adopted is far more reasonable 
 and sound. A person employing such member 
 naturally wants to obtain the desired results. 
 The member on the other hand can only accom- 
 plish such results by acting in accordance with 
 the rules, by-laws or customs prevailing on such 
 Exchange or market. The very nature of the 
 business and the methods of carrying it on render 
 impossible the obtaining of the assent thereto of 
 each non-member who gives an order to buy or 
 sell The non-member on the other hand can al- 
 ways obtain comprehensive information of such 
 rules, by-laws or customs by reasonable inquiry. 
 It is certainly not burdensome to require of any 
 person who engages in extensive financial opera- 
 tions upon such Exchanges that he learn before- 
 hand just what his obligations are "to be. Ordi- 
 nary business prudence would dictate such a 
 course in other lines of commercial dealings and 
 it is submitted that it should be no less imperative 
 when transacting business upon our Exchanges. 
 
 It cannot be doubted, however, that to this legal 
 doctrine established by the great weight of mod- 
 ern authorities and resting upon sound business 
 principles, there are several well-settled excep- 
 tions. Such non-member, for instance, is not 
 bound when the rule, by-law or custom of such 
 Exchange or market is unreasonable." Here 
 
 " See 12 Oyc. 104Y, title " Customs and Usages," and cases 
 cited in notes thereto. 
 
Liability of Exchange, Its Opficebs, Etc. 271 
 
 again the determination of what is reasonable or 
 unreasonable is a matter of fact and can only be 
 decided in the light of the actual cases wherein the 
 question has been passed upon by the courts."^" A 
 custom of brokers to charge the full cost of a tele- 
 gram to each customer, although a dozen cus- 
 tomers ' orders might be included in the one tele- 
 gram, was held not to bind such non-member in 
 the absence of the latter 's knowledge of it for this 
 reason." Likewise, a custom of the Exchange 
 permitting brokers to take over in their own 
 names stocks which they are carrying for a cus- 
 tomer without notice to him whenever the broker 
 has reason to believe that the market is inade- 
 quate or a forced sale would lower the selling 
 price, has been held objectionable upon this 
 ground. °^ 
 
 Another exception which has often been ex- 
 pressed by courts and text-writers, is that such 
 rules, by-laws or customs will not bind a non- 
 member when they are contrary to " fixed rules 
 of law." The inability of lawyers and courts to 
 determine accurately the meaning of this term 
 has given rise to considerable difficulty, not alone 
 in the situation under consideration, but in many 
 others as well. It is submitted that the only 
 validity which these rules, by-laws or customs 
 possess springs from the fact that they are by im- 
 
 " 12 Cyc. 1047, and cases cited there. 
 
 " Marye v. Strouse, supra. 
 
 '' Hamilton v. Young, T L. E. Ir. 289. 
 
272 The Law op Commeecial Exchanges. 
 
 plication a portion of all contracts made upon such 
 Exchange. Accordingly, their binding effect rests 
 upon the same basis, at least so far as the test of 
 their legality is concerned, as an express con- 
 tract. Wherever an express agreement contrary 
 to a " fixed rule of laws " is invalid, so likewise 
 would an implied contract be invalid, and on the 
 other hand, wherever parties may legally avoid a 
 " fixed rule of law " by an express stipulation, so 
 one implied should be given the same effect. 
 
 As one learned author has accurately said,^^ the 
 only way to obtain an approach to harmony among 
 the decisions is to keep closely in mind the dis- 
 tinction between contracts which are absolutely 
 void and those which, although they contravene 
 some established principle of law, yet will under 
 some conditions be upheld. In testing the valid- 
 ity of rules and by-laws on the ground of illegal- 
 ity, we saw that this distinction was clearly 
 adhered to by the courts.^* An agreement to com- 
 mit murder, or one contrary to a statute expressly 
 declaring such an agreement to be absolutely void, 
 or one which is contrary to some sound principle 
 of morality or public policy would be void even if 
 expres'sed and therefore no less so when implied. 
 On the other hand, an agreement which merely 
 avoided some legal direction, such as contained in 
 the Statute of Frauds, or some legal requirement 
 
 "' Dos Passes, Stock-brokers and Stock Exchanges (2d ed.), 
 vol. I, pp. 422 ei seq. 
 
 " See section 18, supra, subsection (b). 
 
Liability of Exchange, Its Officers, Etc. 273 
 
 "whicli the courts had in the past declared should 
 be followed in commercial dealings, in no way in- 
 volves a fundamental question of right and wrong 
 and accordingly as it may be avoided by an ex- 
 press agreement, there seems no real difficulty 
 why an implied agreement would not have the 
 same effect. It is submitted that if every rule, 
 by-law or custom were invalid because it estab- 
 lished something different from that of a " fixed 
 rule of law, ' ' no such rule, by-law or custom would 
 ever be valid, because if it were not different it 
 would be a part of the law ; °^ and further, unless 
 a change in some such " fixed rule of law " was 
 designed, such rule, by-law or custom would not 
 have been instituted. It is not the fact that such 
 change has been made, but rather the extent and 
 character of such change which determines its 
 validity.^" 
 
 Another exception to the general doctrine above 
 set forth is that while a rule, by-law or custom of 
 the Exchange or market which merely regulates 
 the mode of performing a contract will bind a non- 
 member when dealing thereon, yet a rule, by-law 
 or custom which changes the intrinsic character 
 of such contracts or varies the express terms 
 thereof will not have such effect unless the non- 
 member has knowledge thereof when he employs 
 such member or broker." Many cases can be 
 
 "' See 12 Cyc. 1054, title " Customs and Usages." 
 ™ See 12 Cyc. 1054, title " Customs and Usages." 
 °' Irwin V. Miller, supra; Eobinson v. MoUett, supra; Plar- 
 CoM. Exc— 18. 
 
274 The Law of Commercial Exchanges. 
 
 cited for this proposition. It is exceedingly un- 
 fortunate, however, to find the courts of one juris- 
 diction holding that a State of facts does not 
 change the intrinsic character of the original con- 
 tract, while in another jurisdiction deahng with a 
 similar state of facts, an exactly opposite de- 
 cision has been held, although the courts in both 
 claim to recognize the same principle of law. 
 
 A clear recognition of this exception was 
 adopted by the Supreme Court of the United 
 States in the case of Irwin v. Williar.^' In this 
 case a custom of the Baltimore Exchange, of which 
 the brokers were members and where the trans- 
 actions took place, was shown whereby all brokers 
 were among themselves principals, and thus per- 
 sonally liable on contracts entered into in behalf 
 of their customers, and likewise another custom 
 permitting such broker in case of the default of 
 his principal to supply the commodity bought or 
 sold and charge it to the latter. The court held 
 such customs ineffective to bind the principal ex- 
 cept upon a showing of his knowledge thereof, be- 
 cause, through a method of submitting trades 
 known as " ringing up," the broker who fulfilled 
 the original contract on his own account was 
 placed in a position opposed to that of his prin- 
 
 sons V. Martin, 11 Gray (Mass.) Ill; Baker v. Drake, 66 N. 
 Y. 518, 23 Am. Rep. 80 ; Lawrence v. Maxwell, 53 N. T. 19 ; 
 Markham v. Jaudon, 41 N. Y. 235; Taylor v. Ketokum, 5 Eob. 
 (N. Y.) 507, 35 How. Pr. (N. Y.) 289; Allen v. Dykers, 3 
 Hill (N. Y.) 593. 
 ■""110 U. S. 499, 28 L. Ed. 225. 
 
Liability of Exchange, Its Officeks, Etc. 275 
 
 cipal. Without discussing this case at length, it 
 would seem that its effect has been considerably- 
 weakened if not overruled by the same court in 
 later decisions ^^ and by various courts in other 
 jurisdictions. 
 
 It has been held, moreover, that a customer giv- 
 ing a broker an order to buy stocks dehverable in 
 sixty days is not bound by a custom which per- 
 mits the broker to buy it at the end of thirty days 
 and deliver it at the end of such sixty days at the 
 increased price and interest besides the usual 
 commissions.™ Moreover, a custom permitting a 
 broker without the knowledge of buyer and seller 
 to act for both and collect double coinmissions has 
 been held bad on this ground.^^ And to the same 
 effect is a decision "^ holding that a rule, by-law or 
 custom of the Exchange permitting a broker to 
 hypothecate securities received by him as margins 
 is not binding upon a non-member without his 
 knowledge or assent. It will not be necessary to 
 illustrate this exception to the general doctrine 
 under consideration to greater length. Like all 
 legal principles so largely in the making, its exact 
 limits are as yet shadowy. Whether in the face 
 of commercial necessities, it shall retain its vigor 
 
 ■" Clews -v. Jamieson, supra; see also Van Dusen v. Junge- 
 blut, supra. 
 
 " Day V. Holmes, 10.3 Mass. 306. 
 
 "" Famsworth v. Hemmer, 1 Allen (Mass.) 49, 79 Am. Dec, 
 756. 
 
 °" Lawrence v. Maxwell, 53 N. T. 19. 
 
276 The Law of Commeecial Exchanges. 
 
 or be reduced to practical impotency only time 
 and future cases can decide. 
 
 Section 37. Responsibility of Exchanges to the 
 State. 
 
 It is but natural to expect that the commercial 
 Exchanges in addition to the legal duties which 
 they owe to members and non-members are under 
 an additional obligation to the State. A single 
 individual must obey the law of the State where 
 he resides or seeks to conduct his affairs. It 
 would be strange if any different principle were' 
 applicable to a collection of individuals associated 
 in an institution such as an Exchange. The same 
 is true when such Exchange happens to be incor- 
 porated. A private corporation for profit must 
 at all times conduct its business within the scope 
 of its charter powers and the laws of the State 
 which created it or of the State where it operates. 
 Likewise, both on principle and the authorities, 
 the same restrictions are present in the case of the 
 incorporated Exchanges. The proposition that 
 such Exchanges, whether incorporated or unin- 
 corporated, are subject to the control of the State 
 is so obvious and fundamental as to render un- 
 necessary any further discussion as to its exist- 
 ence. The only important inquiry is, under what 
 circumstances will the State interfere with such 
 organizations and just what form does such inter- 
 ference take. 
 
 (a) When will the State interfere? — As we 
 
Liability of Exchange, Its Opficees, Etc. 277 
 
 have seen, a member of an exchange or associa- 
 tion is not bound by an illegal rule or by-law 
 thereof, and in case he is disciplined for an in- 
 fraction of such rule or by-law the courts will give 
 him redress.*^ On the other hand, we have seen 
 that a non-member cannot enjoin the Exchange 
 from enforcing a rule or by-law even though be- 
 tween members it is illegal and unenforceable.®* 
 Accordingly, the inquiry arises. Where is the 
 power lodged to inhibit unlawful rules, by-laws or 
 practices of such an Exchange, assuming that the 
 members thereof assent to its enforcement? 
 
 An examination of the authorities reveals that 
 in such a situation, where the facts warrant inter- 
 ference, the State through its duly organized 
 cojirts will provide the necessary relief. When 
 such Exchange happens to be a corporate body, 
 it is clearly settled that quo warranto "^ or other 
 similar proceedings by the attorney-general or 
 other proper officer may be brought and a judg- 
 ment obtained either annulling the charter and 
 
 "" Section 32, supra. See also Huston v. Beutlinger, 91 
 Ky. 333, 15 S. W. 867, 34 Am. St. Eep. 225. 
 
 "American Live Stock Commission Co. v. Chicago Live 
 Stock Exchange, 143 111. 210, 32 N. E. 274, 36 Am. St. Eep. 
 385, 18 L. K. A. 190 ; Eussell v. New York Produce Exchange, 
 58 N. Y. Supp. 842, 27 Misc. 381. 
 
 "'People ex rel. MoHhany v. Lii^e Stock Exchange, 170 111. 
 556, 48 N. E. 1062, 62 Am. St. Eep. 404, 39 L. E. A. 373; 
 People V. Milk Exchange, 145 N. Y. 267, 39 N. E. 1062, 27 
 L. E. 437, 45 Am. St. Eep. 609 ; Ford v. Chicago Milk Ship- 
 pers Association, 155 111. 166, 39 N. E. 651, 27 L. E. A. 298. 
 
278 The Law of Commercial Exchanges. 
 
 dissolving the corporation or ousting it from its 
 illegal course."" The basis for such action is the 
 power of the States by virtue of its visitorial or 
 superintending control over corporations within 
 its jurisdiction,*' and there seems no reason to 
 doubt on principle, as there can be none upon au- 
 thority, that this power is any less true of an in- 
 corporated Exchange than of a corporate body 
 generally. Where the Exchange is unincor- 
 porated, there seems no reason to apply any dif- 
 ferent principle than when it is incorporated. 
 Otherwise, one would have to conclude that the 
 immunity of the former body in the enforcement 
 of illegal rules, by-laws and practices was more 
 secure than in the latter. This proposition, how- 
 ever, is neither sound on principle nor sustained 
 by the authorities.*^' Whatever will justify in- 
 terference in the one case would equally justify it 
 in the other. While the form of proceeding may 
 be somewhat different, inasmuch as that in the 
 nature of quo warranto is limited to questions 
 dealing with public officers and corporations hold- 
 ing a franchise, yet the same practical result on 
 
 "■ See N. Y. Code Civ. Proc, sec. 1798; People v. Milk Ex- 
 change, supra; also see 2Y Cyc. 908, title " Monopolies " and 
 cases cited in note 58 thereto ; see also cases in notes, 8 Am. 
 St. Eep. 179. 
 
 " Dos Passes, Stock-brokers and Stock Exchanges (2d ed.), 
 vol. I, p. 68 ; see also 32 Cyc. 1425, title " Quo Warranto." 
 
 "* Otto V. Journeymen T^iilors Protective Union, 75 Cal.- 
 308, 17 Pao. 217, 7 Am. St. Eep. 156; Leech v. Harris, 2 
 Brewst. (Pa.) 571. ' 
 
Liability of Exchange, Its Officees, Etc. 279 
 
 principle can be obtained through a court of 
 equity."^ Under modern statutes, both Federal 
 and among the States, dealing with monopolies in 
 restraint of trade or commerce, the remedy by 
 proceeding in equity is generally allowed, at least 
 when instituted by the particular government 
 through its legal officers.'"' 
 
 Thus far we have assumed the rule or by-law of 
 such Exchange to be illegal and upon this fact 
 have predicated the conclusion that the State 
 through its courts may grant relief. It does not 
 follow, however, that such drastic methods will 
 be exercised in every case where a rule or by-law 
 is contrary to law. In such matters the courts will 
 proceed with extreme caution ''^ and will only 
 grant such a decree upon a direct suit by the State 
 itself '^ and upon a clear showing that the conduct 
 of such corporation constitutes a willful and re- 
 peated misuser of its powers " and furthermore 
 that such misuser imposes an unlawful and harm- 
 ful burden upon the public.^* An act of the cor- 
 poration, even though illegal, which merely affects 
 
 " See in this connection Employing Printers' Club v. Doc- 
 tor Blosser Co., 122 Ga. 509, 50 S. E. 353, 106 Am. St. Eep. 
 137, 69 L. R. A. 90; see also Otto v. Journeymen Tailors, etc.. 
 Association, supra. 
 
 '" See comprehensive note in 64 L. R. A. 689. 
 
 " See cases cited in note 8 Am. St. Eep. 181. 
 
 " See 10 Cyc. 1278, title " Corporations." 
 
 " See 10 Cyc. 1283, title " Corporations " and cases there 
 cited. 
 
 " 10 Cyc. 1279, title " Corporations " and cases there cited. 
 
280 The Law of Commercial Exchanges. 
 
 the members thereof and is concerned solely with 
 the internal government of such corporation does 
 not present a case where dissolution will be ad- 
 judged.'^ The general doctrine was well ex- 
 pressed by the court in the case of The People v. 
 Live Stock Exchange, supra, at page 570 of the 
 opinion as follows: 
 
 "It is not every misconduct on the part of a 
 corporation, or act not consonant with the pur- 
 pose of its creation, that will destroy its life. An 
 act to thus result must be one which tends to pro- 
 duce injury to the public by affecting the welfare 
 of the people. Where this results there is an 
 abuse of corporate franchise. (People v. North 
 River Sugar Eefining Co., 121 N. Y. 582.) At- 
 tempts to place restrictions on trade and com- 
 merce and to fetter individual liberty of action by 
 preventing competition are hostile to public wel- 
 fare and affect the interests of the people. Such 
 attempts by a corporation are an abuse of its cor- 
 porate franchise. Public policy requires that cor- 
 porations, in the exercise of powers, must be con- 
 fined strictly within their charter limits, and not 
 be permitted to exercise powers beyond those ex- 
 pressly conferred. The State provides for the 
 creation of corporations. The corporation is its 
 creature, and must always conform to its policy. 
 This duty on the part of corporations to do no 
 
 " Harris v. Miss. Val., etc., E. E. Co., 51 Miss. 602 ; Com- 
 mercial Bank V. State, 6 Sm. & M. (Miss.) 599; State v. 
 Wood, 13 Mo. App. 139. 
 
Liability op Exchange, Its Ofpicebs, Etc. 281 
 
 acts hostile to the policy of the State grows out of 
 the fact that the legislature is presumed to have 
 had in view the public interest when a charter was 
 granted to the corporation, and no departure from 
 its charter purposes will be allowed which would 
 be hurtful to the public. Where such act is done 
 by a corporation the State may proceed to claim 
 a forfeiture of its charter by an information in 
 the nature of quo warranto." 
 
 (b) Will illegal rules or hy-laws subject Ex- 
 changes to criminal laivf — The power of the 
 State to dissolve and thereby prevent such Ex- 
 changes from continuing their illegal acts does not 
 exhaust its jurisdiction over such organizations. 
 The authorities seem well settled that in proper 
 cases, the criminal law of the State can be invoked. 
 The question has arisen principally when the 
 charge has been made that the rules or by-laws of 
 such Exchanges were in restraint of trade or com- 
 merce. It is of course far beyond the scope of 
 this treatise to attempt any general discussion of 
 the legal principles applicable to this subject. It 
 will suffice to state that at common law contracts 
 in restraint of trade were not held to be illegal in 
 the fullest sense of that term. The correct doc- 
 trine at common law was that such agreements 
 being opposed to sound public policy, neither the 
 courts of law or equity would enforce them." Ac- 
 cordingly, whatever criminal responsibility is in- 
 
 " Mo^l Steamboat Company v. McGregor, L. E. 23, Q. B. 
 D. 598. 
 
282 The Law of Commeecial Exchanges. 
 
 curred by those who make and carry out such 
 agreements, whether it be a private compact be- 
 tween two or more or appear as a rule or by-law 
 of an exchange or association which all members 
 thereof are bound to obey springs solely from 
 modern statutes both of the Federal government 
 and among the several States/^ And in accord- 
 ance with these statutes, criminal prosecutions 
 have been successfully maintained against ex- 
 changes or associations organized by dealers in 
 such commodities as coal,^^ milk,™ etc., where the 
 objects of such exchange or association and the 
 effect and plain intent of the illegal rules and by- 
 laws were to control the prices of these products. 
 Moreover, it has been held in one case that the 
 members of such an Exchange are liable to indict- 
 ment and conviction for conspiracy " to do an act 
 injurious to trade or commerce. ' ' *° 
 
 In this connection, however, several fundamen- 
 tal differences should be pointed out between the 
 organizations which were defendants in the cases 
 cited above and the legitimate Exchanges which 
 exist so largely in commercial centers. We have 
 seen that in no cases do the latter conduct any 
 business and that their sole purpose is to maintain 
 
 " See note, 64 L. E. A. 689. 
 
 ™ Chicago W. & V. Coal Co. v. People, 214 HI. 421, 73 N. 
 E. Y70. 
 
 ™ People V. Milk Exchange, 145 N. T. 267, 39 N. E. 1062, 
 27 L. E. A. 437, 45 Am. St. Eep. 609; see also Ford v. Milk 
 Shippers Ass'n, 155 111. 166, 39 N. E. 651, 27 L. E. A. 298. 
 
 '"People V. Sheldon, 139 N. T. 251, 34 K E. 785, 23 L. E. 
 A. 221, 36 Am. St. Eep. 690. 
 
Liability of Exchange, Its Officbes, Etc. 283 
 
 a place where the members thereof may meet and 
 transact business with one another. In all the 
 cases above cited, however, at least one and some- 
 times both of the following factors have appeared 
 clearly in the evidence ; first, the exchange or as- 
 sociation was formed for the sole purpose of act- 
 ing as the common selling agent for the products 
 of the constituent members and thereby eliminat- 
 ing the competition between them,^^ or, the agree- 
 ment between the members, whether in the form of 
 a rule or by-law or simply a private compact 
 among the members, was to maintain a certain 
 fixed price, or in some other direct way prevent the 
 free play of competition.'- Neither of these factors 
 are ever present upon the regular and legitimate 
 Exchanges. The only approach to such a situa- 
 tion upon the latter is found in those rules which 
 estabhsh uniform charges for the transaction of 
 business upon such Exchanges, and, as we have 
 seen, these rules or by-laws have been uniformly 
 upheld.*^ But, wherever it can be seen that the 
 rules or by-laws so Hmit the commercial activities 
 of the members as to be harmful to the public at 
 large, there seems no reason to doubt both upon 
 principle and authority ** that the legal principles 
 above set forth would be applied to the Exchanges. 
 
 °' Chicago W. & V. Coal Co. v. People, supra; see also 
 Ford V. Chicago Milk Exchange, supra. 
 
 °^ People V. Sheldon, supra. 
 
 " State ■;;. Duluth Board of Trade, lOY Minn. 506, 121 N. W. 
 395, 23 L. E. A. (N. S.) 1260. 
 
 " People ex rel. Mcllhany v. Chicago Live Stock Exchange, 
 supra. 
 
CHAPTER VII. 
 
 MARKET QUOTATIONS OF AN EXCHANGE. 
 
 Section 38. Market Quotations Source of Great Litigation. 
 
 39. Control of Market Quotations by Exchanges. 
 
 40. Various Problems Considered by the Courts. 
 
 (a) Are market quotations property? 
 
 (b) Are market quotations impressed with a 
 
 public use? 
 
 (c) Illegal nature of transactions on Ex- 
 
 changes no bar to protection of quota- 
 tions. 
 
 (d) Time within which control of market 
 
 quotations exists. 
 
 Section 38. Market Quotations Source of Great 
 Litigation. 
 
 No question within the entire range of this sub- 
 ject has been before the courts more often than 
 that dealing with the control by the Exchanges of 
 their market quotations. And it may well be 
 added that probably no other question at the pres- 
 ent time has been so squarely settled in favor of 
 the Exchanges. Even a superficial examination 
 of this treatise will reveal upon many if not upon 
 most of the important legal questions which have 
 arisen in connection with the Exchanges a more 
 or less divided state of the authorities. Upon the 
 subject of market quotations, however, the highest 
 courts of most jurisdictions both in this country 
 
 [284] 
 
Market Quotations of an Exchange. 285 
 
 and in England have within the last decade un- 
 equivocally upheld the power of the Exchanges to 
 control the same as they see fit. 
 
 The question of the control of market quotations 
 has been a prolific source of litigation within the 
 last decade, first, because these market quotations 
 have become an important factor in modern com- 
 mercial life and, secondly, by reason of this latter 
 fact their control has been a financial object to the 
 Exchanges. . The market quotations are simply the 
 continuous prices at which from moment to mo- 
 ment the commodities dealt in upon the particular 
 Exchange are sold for future delivery by one 
 member to another, during the hours of trading. 
 Within these hours one or more members are con- 
 stantly offering to buy at a certain price a par- 
 ticular commodity, and another member or num- 
 ber of members offering to sell the same com- 
 modity for the same time of delivery. When the 
 sale is made — that is, when the bid of one mem- 
 ber is accepted by another — a market quotation 
 is made which is then collected by a skilled corps 
 of officials and within the course of a few minutes, 
 and often seconds, is transmitted over the tele- 
 graph and telephone to the corners of the com- 
 mercial world. 
 
 The prices thus made upon such Exchanges, and 
 this applies of course more particularly to the 
 market quotations upon the leading Exchanges, 
 enter into the very warp and woof of the entire 
 industrial fabric. While these market quot-ations 
 
286 The Law op Commeecial Exchanges. 
 
 • 
 of course are of primary importance to those deal- 
 ing in such commodities as stocks, grain, cotton, 
 etc., whether they, be producers, middle-men or 
 manufacturers, yet it is a great mistake to con- 
 ceive that they have no importance outside of this 
 field. They constitute a portion of the real funda- 
 mental indices of modern business and in a greater 
 or less degree control the movements and opera- 
 tions throughout the entire field of modern busi- 
 ness. 
 
 Section 39. Control of Market Quotations by Ex- 
 changes. 
 
 The vast commercial importance which has at- 
 tached to these market quotations of the leading 
 Exchanges has naturally given rise to a great 
 amount of contention and litigation relative to the 
 control of their dissemination by the Exchanges. 
 It may be well to state that certain of the Ex- 
 changes, the most prominent example being the 
 New York Stock Exchange, sell their quotations 
 outright to some agency, usually a telegraph com- 
 pany, without any attempt to control their dis- 
 semination. Other Exchanges, including the Chi- 
 cago Board of Trade and the leading Cotton Ex- 
 changes, merely allow such agency to distribute 
 their quotations under certain stipulated condi- 
 tions, which bind not only the telegraph company 
 but all who receive them from the latter. Ob- 
 viously, it is only when the second method is em- 
 ployed that the problems now under consideration 
 arise. 
 
Maeket Quotations of an Exchange. 287 
 
 Several comparatively early cases ^ squarely de- 
 nied the right of an Exchange to control as it 
 pleased its market quotations. At the present 
 time, however, with the possible exception of Illi- 
 nois, and even here later cases seem to weaken the 
 above case materially,^ it can be stated as the 
 settled doctrine of the courts that the market quo- 
 tations are the property " of the Exchange where 
 created, and continue to be uiitil voluntarily pub- 
 hshed to the public,* and that, far from being im- 
 
 ' New York and Chicago Grain and Stock Exchange v. 
 Board of Trade, 127 111. 153, 19 N. E. 855, 2 L. E. A. 411, 11 
 Am. St. Rep. 107; see also Western Union Telegraph Co. v. 
 State, 164 Ind. 492, 76 N. E. 100, 3 L. R. A. (N. S.) 153. 
 
 ''Christie Commission Co. v. Board of Trade, 94 111. App. 
 229; Central Stock and Grain Exchange v. Board of Trade, 
 198 111. 396, 63 N. E. 740. 
 
 " Exchange Telegraph Co. v. Gregory, (Eng.) 1 Q. B. 147, 
 60 J. P. 52, 65 L. J. Q. B. 262, 74 L. T. Rep. N. S. 83 ; Board 
 of Trade v. Christie Grain and Stock Co., 198 U. S. 236, 49 
 L. Ed. 1031, 25 Sup. Ct. Rep. 637 ; |Hunt v. New York Cotton 
 Exchange, 205 F. S. 322, 51 L. Ed. 821, 27 Sup. Ct. Rep. 529 ; 
 Cleveland Telegraph Co. v. Stone, 105 Fed. 794; National 
 Telegraph News Co. v. Western Union Telegraph Co., 119 
 Fed. 294, 56 C. C. A. 198, 60 L. R. A. 865; Board of Trade v. 
 Consolidated Stock Exchange of Buffalo, 121 Fed. 433 ; Brad- 
 ley V. Western Union Telegraph Co., 8 Ohio Dec. (Reprint) 
 707; Kiernan v. Manhattan Quotation Telegraph Co., 50 How. 
 Pr. 194; see also Dodge Company v. Construction Informa- 
 tion Co., 183 Mass. 62, 66 N. E. 204, 60 L. R. A. 810, 97 Am. 
 St. Rep. 412. 
 
 * Cleveland Telegraph Co. v. Stone, supra; Board of Trade 
 V. Thomson Commission Co., 103 Fed. 902. 
 
288 The Law of Commebcial Exchanges. 
 
 pressed witk a public use,^ the Exchange may dis- 
 tribute its quotations in the manner and methods 
 agreeable to it alone," either withholding them en- 
 tirely from the public/ or, in case it desires to 
 allow their dissemination, it may give them to one 
 and not to another,* and may impose upon the 
 licensee to whom it furnishes its quotations such 
 conditions as to their use as it may see fit." In 
 conclusion, therefore, the law is now well estab- 
 lished giving to the Exchanges complete and abso- 
 lute control over their market quotations. While 
 there may still arise some doubt as to the applica- 
 tion of these principles to concrete states of fact, 
 yet, there is no longer any doubt as to the legal 
 principle to be applied. 
 
 Section 40. Various Problems Considered by the 
 Courts. 
 These doctrines have not been settled except 
 after many years of litigation during which the 
 
 ' Matter of Eenville, 46 N. Y. App. Div. 31, 61 N. T. Supp. 
 549; "Wilson v. Commercial Telegram Co., 18 N. Y. St. Eep. 
 78, 3 N. Y. Supp. 633; Board of Trade v. Christie Grain and 
 Stock Co., 116 Fed. 944. 
 
 ° Marine Grain and Stock Exchange v. Western Union Tele- 
 graph Co., 22 Fed. 23; Exchange Telegraph Co. v. Gregory, 
 supra. Contra : New York and Chicago Grain and Stock Ex- 
 change V. Board of Trade, supra. 
 
 ' Exchange Telegraph Co. v. Gregory, supra. 
 
 " Commercial Telegram Co. v. Smith, 47 Hun (N. Y.) 494, 
 15 N. Y. St. Eep. 19. 
 
 " Sullivan v. Postal Telegraph Co., 123 Fed. 411, 61 C. 0. A. 
 1; Exchange Telegraph Co. v. Gregory, supra; see also Dos 
 Passos on Stock-brokers and Stock Exchanges, vol. I, (2d 
 ed.), pp. 22-28. 
 
Market Quotations of an Exchange. 289 
 
 courts have been called upon to pass upon a large 
 number of fundamental questions -wMcli thor- 
 oughly tested the entire proposition. While, ordi- 
 narily, it is sufficient in a treatise of this kind to 
 state the legal conclusions of the courts upon par- 
 ticular propositions with the authorities sustain- 
 ing such conclusions without venturing into a dis- 
 cussion in detail of the various steps which the 
 courts have taken in arriving thereto, yet in 
 deciding the right of the Exchanges to control 
 their market quotations, the opinions of the courts 
 and the arguments of counsel have taken such a 
 wide range that it may be well to consider in a 
 general way some of the more important legal 
 principles upon which the courts have' predicated 
 their final decisions. 
 
 (a) Are market quotations property? — In an 
 earlier chapter,^" although considering an entirely 
 different question, it was carefully pointed out 
 that it was in no way fatal to the classification of 
 a thing as property that it was invisible or 
 intangible." In the light of modern legal develop- 
 ment many things, including a corporation fran- 
 chise, an easement, the good-wiil of a business, a 
 patent right, among innumerable others are 
 familiar examples of what the law designates as 
 property although the exact substances which com- 
 pose theni are not apparent to the ordinary physi- 
 
 " See section 14, supra. 
 
 " National Telegraph News Co. v. Western Union Tel. Co., 
 supra. 
 
 Com. Exc. — 19. 
 
290 The Law op Commebciax, Exchanges. 
 
 cal senses. And modern law has never found any 
 difficulty by appropriate process in protecting the 
 owner of all forms of property whether it be 
 tangible or intangible in his lawful use and enjoy- 
 ment of the same. Accordingly, it is in this sense 
 of property that the courts have seen fit to protect 
 the Exchanges in the control of their market, quo- 
 tations. The decisions ^^ leave no doubt upon the 
 proposition that such market quotations are a 
 species of property which the courts will protect 
 from unlawful exploitation. In a well-reasoned 
 and leading case/^ the court clearly defined the 
 exact legal nature of these quotations in the fol- 
 lowing language : 
 
 " Standing apart, the symbol or speech is not 
 property. Disconnected from the business in 
 which it is utilized, it cannot be monopolized. But 
 used as a method of making an enterprise succeed, 
 so that its appropriation by another would be a 
 distinctive injury to the enterprise to which it is 
 attached, the name, or mark, becomes at once the 
 subject-matter of equitable protection. Here, as 
 elsewhere, the eye of equity jurisdiction seeks out 
 results, and, though the immediate thing to be 
 acted upon by the injunction is not itself, alone 
 considered, property, it is enough that the act 
 complained of will result, even though somewhat 
 remotely, in injury to property. ' ' 
 
 " See cases cited in note 3. 
 
 "ISTational Telegraph News Co. v. Western TJaion Tele- 
 graph Co., supra. 
 
Market QtroTATioNS or an Exchange. 291 
 
 (b) Are marJcet quotations impressed with a 
 public use? — When defeated in their contention 
 that the market quotations were not such a prop- 
 erty right as the courts should protect, the an- 
 tagonists of the Exchanges have gone to the other 
 extreme and have contended that they were so far 
 property as to be impressed with a public use and 
 accordingly that the Exchanges had no lawful 
 right to deprive any one from using and enjoying 
 them. This position is clearly set forth in a lead- 
 ing case " in Illinois, decided in 1889, where the 
 court in upholding this contention said at page 
 163 of the opinion : 
 
 "Assuming these market quotations and re- 
 ports are property, and the private property of 
 the Board of Trade, yet if they have been so used 
 by the board, and by the telegraph companies with 
 the knowledge and consent of the board, as to be- 
 come affected with a public interest, then they are 
 subject to, such public regulation by the legisla- 
 ture and the courts as is necessary to prevent in- 
 jury to such public interest. The doctrine in 
 question has application both to the property of 
 individuals and of corporations, and it is there- 
 fore immaterial that any such corporation may 
 be a mere private corporation. If the interest is 
 public, then it is necessarily, to all alike, common 
 to all, and upon equal terms The doctrine, as ap- 
 plied to the matter of these market quotations, 
 
 "New York and Chicago Grain and Stock Exchange v. 
 Board of Trade, supra. 
 
292 The Law of Commercial Exchanges. 
 
 would forbid that a monopoly should be made of 
 them by furnishing them to some and refusing 
 them to others who are equally willing to pay for 
 them and be governed by all reasonable rules and 
 regulations, and would prevent the Board of 
 Trade or the telegraph companies from unjustly 
 discriminating in respect to the parties who will 
 be allowed to receive them. ' ' 
 
 The propositon above set out was, in the opin- 
 ion of the court which rendered it, a logical de- 
 duction from an application of the doctrine pro- 
 mulgated by the Supreme Court of the United 
 States in the famous case of Munn v. Illinois.^' 
 Space forbids any discussion in detail of the cor- 
 rectness of this ruling or of the legal principles 
 which mark those businesses which are in their 
 nature public and those which are private. 
 Whether any business can be impressed with a 
 public use except by the voluntary dedication of 
 the same by the owner to the public is still one of 
 the mooted legal questions awaiting a final de- 
 termination. However this may be, in three de- 
 cisions ^' rendered after that, of Munn v. IlKnois, 
 supra, and before that of New York and Chicago 
 Grain and Stock Exchange v. Board of Trade, 
 supra, the lower Federal courts refused to concur 
 
 "' 94 U. S. 113, 24 L. Ed. 11. 
 
 '" Metropolitan Grain and Stock Exchange v. Board of 
 Trade, 15 Fed. 84Y, 11 Biss. 531, 4 Ky. Law Eep. 840; Bryant 
 V. Western Union Telegraph Co., 17 Fed. 825 ; Marine Grain 
 and Stock Exchange v. Western Union Telegraph Co., 22 
 Fed. 23. 
 
Maeket Quotations of an Exchange. 293 
 
 in such a doctrine, and later decisions " in the 
 Federal courts and among the various States as 
 well have clearly repudiated the entire proposi- 
 tion. In one case, Board of Trade v. Christie 
 Grain and Stock Company, supra, Judge Hook, of 
 the Federal circuit, clearly expressed his dis- 
 approval of the doctrine in the following lan- 
 guage : 
 
 " Courts cannot, by their decrees, assume the 
 initiative in declaring private property to be im- 
 pressed with a pubhc use. There should first 
 exist that condition of growth or expansion of a 
 private business, or of its relation to the public 
 service or public necessity, which justifies the as- 
 sertion of a public interest therein, and the accom- 
 paniment of public control, followed by legislative 
 recognition or declaration of such condition. The 
 power to bring under governmental control the 
 lawful business of individuals and private cor- 
 porations not vested with the power of eminent 
 domain, and who are not engaged in what, by 
 common acceptation, is termed a pubhc service, 
 for the reason that such business, through the en- 
 terprise and prudent management of its con- 
 ductors, h^s grown to be of great public interest 
 
 " Board of Trade v. Christie Grain and Stock Co., 116 Fed. 
 944; Commercial Telegram Co. v. Smith, 4Y Hun (N. T.) 
 494, 15 N. T. St Eep. 19 ; In re Eenville, 46 N. Y. App. Div. 
 37, 61 N. T. Supp. 549; Wilson v. Commercial Telegram Co., 
 18 N. T. St. Eep. T8, 3 N. Y. Supp. 633; Sterrett v. Phil. 
 Local Telegraph Co., 18 Phila. 316. 
 
294 The Law of Commebcial Exchanges. 
 
 and concern, is of the gravest and most moment- 
 ous characted. It is doubtful doctrine that, in the 
 absence of legislative action, a suitor in a court of 
 equity may be denied relief merely because the 
 chancellor is of the opinion that his business, 
 originally private in its character, has grown to 
 such magnitude that the public is entitled to an 
 interest therein, and to a control thereof com- 
 mensurate with that interest. When such a con- 
 dition arises, the measure of the public control is 
 limited by the extent of the public interest, and 
 the making of regulations pertaining thereto is of 
 legislative, not judicial, recognizance." 
 
 As a natural corollary of the proposition de- 
 cided by the clear weight of the authorities that 
 the market quotations of the Exchanges are not 
 clothed with a public use, but on the other hand 
 are essentially the private property of the Ex- 
 change which collects them, it naturally follows 
 that such Exchange may distribute them as it sees 
 fit.^* Even the courts of Illinois ^^ hold clearly 
 that an Exchange may refuse to furnish its quota- 
 tions to a " Bucket-shop " and this proposition 
 is everywhere recognized as fundamentally sound 
 and morally correct.^" Moreover, the principle 
 
 " See notes cited in notes 6, Y, 8 and 9. 
 
 " Christie Commission Co. v. Board of Trade, 94 111. App. 
 229; Central Stock and Grain Exchange v. Board of Trade, 
 196 111. 396, 63 N. E. Y40. 
 
 " See Western Union Telegraph Co. v. State, 164 Ind. 492, 
 76 N. E. 100, 3 L. E. A. (N. S.) 153, and cases cited in note 
 thereto. 
 
Market Quotations of an Exchange. 295 
 
 seems clearly estabpshed that such Exchange may 
 withhold such market quotations entirely from 
 the public, fir, may give them to some and deny 
 them to others, and at all times may make any 
 conditions it sees fit relative to their use and en- 
 joyment by those who receive them." 
 
 (c) Illegal nature of transactions on exchanges 
 no bar to protection of quotations. — One of the 
 contentions most strenuously urged to defeat the 
 right of the Exchanges to control the dissemina- 
 tion of their market quotations has been that such 
 quotations themselves were but records of trans- 
 actions entered into in violation of law and ac- 
 cordingly the Exchanges, as the owners thereof, 
 could not with good conscience demand their pro- 
 tection in the courts. Dismissing for the moment 
 any consideration of the question whether the 
 transactions upon such Exchanges are, or, are not 
 contrary to law, there would seem a lurking in- 
 consistency in joining this contention with one 
 which alleged that these market quotations were 
 such a paramount factor in modern commercial 
 affairs that they are properly clothed with a 
 public use. In several cases ^^ in the lower Federal 
 courts, however, this contention was expressly up- 
 held as a reason for denying the petition of the 
 Exchange for an injunction to protect such quota- 
 
 " See cases cited in preceding notes. 
 
 =" Board of Trade v. O'Dell Commission Co., 115 Fed. 574; 
 Board of Trade v. Donovan Commission Co., 121 Fed. 1012; 
 Board of Trade v. Ellis, 122 Fed. 319. 
 
296 The Law op Commercial Exchanges. 
 
 tions, but whatever doubt once existed as to the 
 validity of this contention has been finally set at 
 rest by the decision of the Supreme Court of the 
 United States in the case of Board of Trade v. 
 Christie Grain and Stock Company,^^ supra. In 
 meeting this contention, the court said in the 
 course of the opinion : 
 
 " If then, the plaintiff's collection of informa- 
 tion is otherwise entitled to protection, it does 
 not cease to be so, even if it is information con- 
 cerning illegal acts. The statistics of crime are 
 property to the same extent as any other statis- 
 tics, even if collected by a criminal who furnishes 
 some of the data. The Supreme Court of Illinois 
 has recognized, in the fullest terms, the value and 
 necessity of the knowledge which the plaintiff's 
 control. It must have known, even if it did not 
 have the evidence before it, as to which we cannot 
 tell from the report, what was the course of deal- 
 ing on the Exchange. Yet it was so far from 
 suggesting that the plaintiff's work was unmeri- 
 torious that it held it clothed with a public use. 
 (New York and Chicago Grain and Stock Exch. v. 
 Board of Trade, 127 111. 153, 2 L. E. A. 411, 19 
 N. E. 855.)" 
 
 (d) Time within which control of market quota- 
 tions exists. — There would seem, therefore, at 
 the present time no doubt upon the proposition 
 that an Exchange has a property right in the 
 
 "" Board of Trade v. Christie Grain and Stock Co., 198 U. S. 
 236, 49 L. Ed. 1031, 25 Sup. Ct. Eep. 637. 
 
Maekbt Quotations of an Exchange. 297 
 
 market quotations and, as well, absolute control 
 over their distribution. At this point the question 
 ■naturally arises. For what length of time does the 
 Exchange continue to hold its property interest in 
 such quotations? At common law, the products 
 of one 's skill and labor were entitled to protection 
 from exploitation by others so long as he had not 
 voluntarily parted with them or published them 
 to the public.^* Only by the statutory grant of a 
 copyright is the creator of a work produced by 
 skill or labor entitled to multiply and dispose of 
 copies thereof and still maintain Ms control over 
 it.^^ It has been clearly established that the 
 market quotations of the Exchanges are not the 
 subject of copyright.^* Accordingly, only by a 
 showing that there has been in fact no publication 
 of such market quotations and no dedication of 
 the same to the public can the Exchanges control 
 their dissemination after they have once been 
 distributed to subscribers." 
 
 The question then for determination is at what 
 moment does such publication of its market quota- 
 tions take place as will constitute a surrender by 
 
 " See cases cited in note, 11 L. E. A. 267. 
 
 '^ See Drone on Copyright, p. 101. 
 
 " National Telegraph News Co. v. Western Union Tel. Co., 
 supra. 
 
 "Board of Trade v. Thomson Commission Co., 103 Fed. 
 902; a>ard of Trade v. Hadden-Krull Co., 109 Fed. Y05; 
 Board of Trade v. Cella Commission Co., 145 Fed. 28, 76 C. 
 C. A. 28; MeDearmott Commission Co. v. Board of Trade, 
 146 Fed. 961, 77 C. C. A. 479. 
 
298 The Law op Commebcial Exchanges. 
 
 the Exchanges over their control. The method of 
 distributing these market quotations is sub- 
 stantially as follows: Immediately upon the es- 
 tabhshment of the prices in the various pits upon 
 the trading floor of the Exchange, they are col- 
 lected either by the Exchange itself or certain 
 telegraph companies which act as distributing 
 agents and thenceforth transmitted by telegraph 
 or telephone to commercial Exchanges, brokers 
 and others throughout the country upon the ex- 
 press condition that the quotations will be used 
 in the private and individual business of the re- 
 ceiver; that they will not be sold, communicated 
 or otherwise given to news distributers of others ; 
 and no one shall be allowed either directly or in- 
 directly to take them from the office of such re- 
 ceiver. There seems to be two methods whereby 
 the market quotations are delivered to such re- 
 ceivers, first, by means of an instrument known as 
 a " ticker " and, second, by means of an ordinary 
 telegraphic instrument. Upon other commercial 
 Exchanges and generally in the various brokers' 
 offices, these quotations are upon receipt im- 
 mediately posted upon blackboards, so that they 
 can be viewed by all who gather there to observe 
 them. Within a few moments and very often 
 seconds one quotation will be superseded by an- 
 other, and in fact one market quotation ceases to 
 be commercially valuable the moment it is super- 
 seded by a later one. 
 
 It is now firmly established that by allowing an- 
 other company to collect these quotations, there 
 
Market Quotations of an Exchange. 299 
 
 has been no dedication of them to the public,^' and 
 this appHes as well when this collection agency in 
 turn delivers them to one of the regular telegraph 
 companies for distribution to certain designated 
 licensees.^' In reality, between the time such 
 quotations are established on the Exchange floor 
 and the time they appear in the office of such 
 licensee, the law is clearly settled that there has 
 been no such publication of the quotations as will 
 defeat the control of the Exchanges over their 
 dissemination.^" 
 
 When such market quotations are received by 
 the subscriber in his office, or, the regular tele- 
 graph wire and in all probability posted upon the 
 blackboard used for that purpose, the problem be- 
 comes far more complex. And, yet, even in this 
 situation the authorities seem clear that there has 
 been as yet no publication to the world.'^ This 
 has been held both where the quotations were de- 
 livered by the '' ticker " service,^^ and likewise 
 
 "^ Cleveland Telegraph Co. v. Stone, 105 Fed._ 794. 
 
 ^ Commercial Telegram Co. v. Smith, 47 Hun (IST. T.) 494, 
 15 N. T. St. Eep. 19'; McDearmott Commission Company v. 
 Chicago Board of Trade, supra. 
 
 '" Board of Trade v. Thomson Commission Co., supra; 
 Board of Trade v. Hadden-Krull Co., supra; McDearmott 
 Commission Co. v. Chicago Board of Trade, supra. 
 
 *' Board of Trade v. Thomson Commission Co., supra; 
 Board of Trade v. Hadden-Krull Co., supra; McDearmott 
 Commission Co. v. Chicago Board of Trade, supra; Board of 
 Trade v. Cella Commission Co., supra. 
 
 " National Telegraph News Co. v. Western Union Tele- 
 graph Co., supra. 
 
300 The Law of Commeecial Exchanges. 
 
 "when transmitted by means of the ordinary tele- 
 graph instruments and posted upon the black- 
 board in the' receiver's office.^^ Both positions 
 would seem sound upon principle apart from au- 
 thority. Publication cannot take place except 
 upon the voluntary surrender of the quotations to 
 the public ^* and such voluntary assent to the pub- 
 lication must be shown either by an express 
 declaration of such intention, or, by circumstances 
 which negative any intention to the contrary. It 
 has long been the law that a professor who de- 
 livers orally to his classes his lectures does not 
 communicate them to the public so as to entitle 
 one to print and circulate them without his per- 
 mission,^" nor does the author of a drama sur- 
 render his rights thereto by permitting another 
 to represent it upon the stage.^° The principle is 
 
 ''McDearmott Commission Co. v. Board of Trade, supra. 
 
 " McDearmott Commission Co. v. Board of Trade, supra. 
 
 ''2 Story, Eq. Jur., §§ 943, 949; Abernethy v. Hutchinson, 
 1 Hall & T. 28; Caird v. Sime, L. E. 12 App. Cas. 326; Bart- 
 lette V. Crittenden, 4 McLean 300, Fed. Cas. No. 1,082 ; New 
 Jersey State Dental Soc. ■;;. Dentacura Co., 57 N. J. Eq. 593, 
 41 Atl. 672 (affirmed 58 N. J. Eq. 582, 43 Atl. 1098). 
 
 "2 Story Eq. Jur., § 950; Macklin v. Eichardson, 2 Ambl. 
 694, 7 English Euling Cases 66; Turner v. Eohinson, 10 Ir. 
 Ch. Eep. 121, 510; Eoberts v. Meyers, Brunner Col. Cas. 698, 
 Fed. Cas. No. 11,906 ; Boucicault v. Fox, 5 Blatchf . 87, Fed. 
 Cas. No. 1,691; Crowe v. Aiken, 2 Biss. 208, Fed. Cas. No. 
 3,441; Tompkins v. Halleck, 133 Mass. 32, 43 Am. E«p. 480; 
 Palmer v. De Witt, 47 N. Y. 532, 7 Am. Eep. 480. 
 
Maeket Quotations of an Exchange. 301 
 
 no different when the Exchange under a contract 
 that they shall be used for private business pur- 
 poses only, grants to a subscriber or licensee the 
 use of its market quotations. In no way is any 
 clear intent shown to surrender such market quo- 
 tations to the public. The proposition was clearly 
 expressed in a leading case ^^ as follows : 
 
 ' ' "Without extending the reference to adjudged 
 cases, we hold that the effect of the publication 
 relied upon by the appellants is to be determined 
 by inquiring whether it is so restricted in point 
 of place, purpose, and persons as to be consistent 
 with the retention by the appellee of its pro- 
 prietary rights, or is so general or unqualified as 
 to indicate an intent to surrender or dedicate 
 them to the public at large. Tested in this way, 
 the facts before recited admit of but one conclu- 
 sion. The publication relied upon consists alto- 
 gether in the posting of the quotations by those 
 who subscribe for them. This is done in places 
 which, by reason of their ownership and use, are 
 private. Its controlling purpose is that of stimu- 
 lating and facilitating trade with the subscriber, 
 and not of conferring a benefit upon the public. 
 It implies, of course, a permission that in dealing 
 with the subscriber his patrons may use the in- 
 formation which the quotations contain, but not 
 that they may be copied and taken away or repro- 
 duced and used elsewhere. It does not make 
 
 " McDearmott Commission Co. v. Chicago Board of Trade, 
 sv/pra. 
 
302 The Law of Commebcial Exchanges. 
 
 knowledge of them general, or make them accessi- 
 ble to the public as of right, or render them of no 
 further value. In short, it is so restricted as to 
 be consistent with the retention by the appellee 
 of its proprietary rights, and does not indicate an 
 intent to surrender or dedicate them to the 
 public." 
 
 In several cases ^* the sugge'stion has been made, 
 although never actually decided, that the control 
 of the Exchange merely covers the " continuous 
 quotations," the inference being that as to those 
 quotations which are not continuous no such con- 
 trol exists. Although the proposition has never 
 as yet been decided in any case, on principle, such 
 contention would appear fundamentally unsound. 
 The control of the Exchange over its quotations 
 arises as we have seen from the authorities, not 
 because they are continuous or not continuous, but 
 solely because in law and fact they have not been 
 surrendered or published to the public. Certain 
 of the quotations, the Exchanges usually dedicate 
 to the public and make no effort to control their 
 dissemination. These are the quotations which 
 are issued at regular and designated " fifteen " 
 minute intervals. The only definition of the 
 term " continuous quotations " is found in the 
 contract which every subscribed must sign with 
 the telegraph company, where it is set forth that 
 " continuous quotations are those wherein the 
 
 "^ Board of Trade v. Consolidated Stock Exchange of Buf- 
 falo, 121 Fed. 433. 
 
Market Quotations of an Exchange. 303 
 
 price of any commodity shall be quoted oftener 
 than at intervals of ten minutes." It is no- 
 where provided, however, that those quotations 
 which within this term are not " continuous " 
 and yet are not those issued at the regular fif- 
 teen minute intervals are any less under the 
 control of the Exchange than those which are 
 " continuous." Only by some af&rmative act of 
 the Exchange surrendering or publishing its quo- 
 tations to the pubhc is its control thereof lost. 
 Accordingly, it must follow that as to all market 
 quotations except those issuad at the regularly 
 designated fifteen minute intervals, the Exchange 
 still retains its control whether they be issued each 
 consecutive second, or every fifteen minutes or 
 even every hour. 
 
CHAPTER VIII. 
 
 OLEAEING HOUSES OF MODEEN COMMEEOIAL 
 EXCHANGES. 
 
 Section 41. Clearing Houses Eequired by Business upon 
 Exchanges. 
 
 42. Description of Clearing Systems upon Various 
 
 Excbamges. 
 
 43. Legal Problems Arising in Clearing Trades. 
 
 (a) Is system for clearing trades illegal? 
 
 (b) Wien are non-members bound by system 
 
 of clearing trades. 
 
 Section 41. Clearing Houses Required by Busi- 
 ness upon Exchanges. 
 
 The establishment of organizations known as 
 Clearing Houses within the various commercial 
 Exchanges has been due to the expansion of 
 speculative trading and a desire to reduce the con- 
 fusion and risk naturally involved therein. Upon 
 the Exchanges as in the field of banking, when the 
 amount of business interchanged between the 
 various members was small and particularly when 
 the number engaged was comparatively few, it 
 was a simple matter to adjust their common deal- 
 ings with one another without the aid of any out- 
 side agency. With the growth of these trans- 
 actions in volume and the increase in the number 
 of those with whom one member naturally had 
 business dealings in the course of each business 
 
 [304] 
 
Clbaeing Houses of Modern Exchanges. 305 
 
 day, however, the establishment of some ^uoh 
 system as had been found so convenient and help- 
 ful among banks in a particular locality was soon 
 suggested. While the systems employed upon the 
 various Exchanges may differ to a greater or less 
 extent in point of organization and methods, yet, 
 fundamentally their function is everywhere the 
 same, namely, to facilitate the transaction of a 
 large volume of business and reduce the risks 
 thereby involved. 
 
 The best definitions of a Clearing House are 
 obtained in cases arising in the law of banking. 
 Accordingly, it may be well to borrow a definition 
 from the latter field. One would need to look far 
 for a better description of a Clearing House than 
 the following from a Massachusetts case:^ " A 
 Clearing House is an association, the object of 
 which is to effect at one time and place the daily 
 exchanges between the several banks which are 
 members, and the payment of the balances result- 
 ing from such exchanges." This description is as 
 applicable to the Clearing Houses among the 
 various Exchanges as it is to a Clearing House 
 among the banks. 
 
 At the end of each day's business there is as 
 much need for the payment of balances and the 
 settlement of trades between members of the Ex- 
 change as there is between bank members of a 
 Clearing House association. During the course of 
 
 ' National Exch. Bank v. National Bank of North America, 
 132 Mass. 147. 
 
 Com. Exc. — 20. 
 
306 The Law of Commeecial Exchanges. 
 
 a business day, the time of the member, or, as he 
 is commonly but often erroneously designated, the 
 broker, is occupied in making in behalf of cus- 
 tomers contracts with fellow members, or brokers, 
 to buy or sell various quantities of wheat, cotton, 
 stocks, etc. These contracts do not disclose the 
 name of the customer, but, from surface indica- 
 tions, all members or brokers are dealing with 
 one another as principals. Moreover, a member 
 or broker dealing in these commodities does not 
 hold himself out simply to buy or to sell, but ac- 
 cepts indiscriminately all orders whether they be 
 to buy or sell. It thus transpires that at the end 
 of each business day, a member or broker will find 
 that he has bought varying amounts of these com- 
 modities of one or more fellow members or 
 brokers and, likewise, that he has sold varying 
 quantities of such commodities to the same or to 
 other fellow members or brokers. It becomes 
 necessary in such case to employ some method 
 which, while not destroying the integrity of the 
 contract of the customer, will nevertheless permit 
 the various brokers to balance among themselves 
 the ' ' bought ' ' contracts against the ' ' sold ' ' con- 
 tracts, and thereby reduce the amount of any par- 
 ticular stock or commodity which is owing to or 
 from each member or broker. The system by 
 which this result is accomplished is known as 
 " clearing," " offsetting " or " settling " trades, 
 and when a separate agency is thereby employed, 
 the latter is known as a " Clearing House. ' ' 
 
Cleaeing Houses of Modeen Exchanges. 307 
 
 Section 42. Description of Clearing Systems upon 
 Various Exchanges. 
 
 The methods employed upon the various com- 
 mercial Exchanges of clearing, offsetting, or 
 settling trades, while substantially ahke in their 
 general features and functions, differ greatly in 
 point of detail. These various systems or methods 
 may he divided into three distinct classes: first, 
 "where the Clearing House is employed simply to 
 pay and collect cash balances which become due 
 upon the offsetting or setthng of trades between 
 the members; second, where the Clearing IJouse 
 receives from all members the list of trades to be 
 cleared and then offsets such trades so far as 
 possible and substitutes the names of other mem- 
 bers, if necessary, for the net balances of each 
 commodity or stock bought and sold by each clear- 
 ing member; third, where the Clearing House, a 
 separate association or corporation, offsets as 
 many trades as possible and assumes the responsi- 
 bility of the opposite broker or member for all net 
 balances of stock or commodity bought or sold by 
 the members of the Exchange. 
 
 The first method is that used on the Board of 
 Trade of the city of Chicago. A careful investiga- 
 tion has failed to discover any other prominent 
 Exchange at the present time where such a system 
 prevails. In this system, while there exists what 
 is designated as a Clearing House, yet this is 
 merely an agency maintained for the purpose of 
 paying money differences between members or 
 
308 The Law of Commeecial Exchanges. 
 
 brokers and takes no part in the settlement or sub- 
 stitution of trades between the various members 
 or brokers. This latter act is performed entirely 
 by the brokers themselves. When a member both 
 buys and sells with another member or broker an 
 equal amount of any commodity, the trades are 
 offset by the members themselves and the profit 
 or loss balances arising therefrom are adjusted 
 through the Clearing House. This is termed a 
 direct settlement. The system known as " ringing 
 up " is merely a more complex form of this 
 method. By a comparison of the books among the 
 clerks of clearing members or brokers, a series of 
 transactions is selected beginning and ending with 
 the same party, all of which trades, therefore, may 
 be eliminated ; as, if A had sold to B 5,000 bushels 
 of December corn, B has sold a like amount to C, 
 and C in turn has sold a like amount to A, it be- 
 comes possible to cancel all of these contracts as 
 between the members by the payment of the profit 
 or loss balances, if any, arising therefrom. It 
 should be noted, however, that this system of 
 * ' ringing up "or settling direct is entirely volun- 
 tary among the brokers. No one of them need 
 enter into this arrangement except of his own 
 accord. 
 
 This system is somewhat cumbersome in its ope- 
 ration and causes considerable work in selecting 
 the series of transactions for ' ' rings. ' ' Yet it has 
 many marked advantages. It enables the member 
 who has a large amount of a commodity bought or 
 
Clearing Houses of Modern Exchanges. 309 
 
 sold to retain his contracts, if he wishes, with the 
 original parties to the trades, who may be much 
 more acceptable to him than substituted parties 
 might be. It maintains to an extent not possible 
 under any other system the identity of the original 
 contract made by a member for a customer, and 
 such customer can, when he enters into a contract, 
 inform his broker that he does not wish such 
 " ring " or settlement made, and his instructions 
 will be followed. Moreover, it enables the mem- 
 ber to preserve a secrecy as to the extent of his 
 " open " interest in the market and the conduct 
 of his business such as is not possible when other 
 methods of clearing are employed. Its chief dis- 
 advantage lies in the fact that a party, although 
 having the same amount of any commodity bought 
 or sold, cannot always form such a " ring," and 
 hence more contracts are open on the books of the 
 clearing members under this than under any other 
 system. 
 
 The most prominent feature of the second sys- 
 tem is the substitution and offsetting of trades, 
 not by the members or brokers themselves as 
 under the method above described, but by the 
 clearing house itself. The latter agency, as under 
 the first method, is also used to collect and pay 
 out money balances arising between members or 
 brokers in the settlement of trades. At the end 
 of each business day all members of such clearing 
 house turn in a sheet showing a complete list of 
 bought and sold contracts made during the day 
 
310 The Law of Commeecial Exchanges. 
 
 and the prices at which such trades were made. 
 The clearing house then reduces the open con- 
 tracts between these members to the net amount 
 bought or the net amount sold for the day. These 
 net amounts are then adjusted by the clearing 
 house in such a manner that parties having more 
 bought than sold will . be given, in place of the 
 party with whom the original contract was made, 
 the name of a party who has more sold than 
 bought, and the price of the substituted trade is 
 fixed at approximately the closing price for the 
 day. The clearing house, however, does not as- 
 sume any responsibility for the carrying out of 
 the substituted contracts but only acts to accom- 
 modate the members of the Exchange and facili- 
 tate the offsetting of their contracts. 
 
 The practical operation of this system can be 
 shown if we suppose that A and B are members 
 of the clearing house and that at the end of a par- 
 ticular day the sheet of A shows that he has sold 
 100,000 bushels of wheat for July delivery and has 
 bought 50,000 for the same delivery month. Ac- 
 cordingly, he is net " short " 50,000 bushels. 
 Likewise, the sheet of B shows that he has bought 
 100,000 bushels of wheat for July delivery and has 
 sold only 50,000 bushels. Accordingly, he is net 
 ' ' long ' ' 50,000 bushels of wheat. Although the 
 various trades of A and B have been made orig- 
 inally with other brokers of the Exchange, never- 
 theless the manager of the clearing house would 
 notify A that he had sold 50,000 bushels of wheat 
 
Cleaeing Houses of Modekn Exchanges. 311 
 
 to B and likewise would notify B that he had 
 bought 50,000 bushels of wheat from A. The 
 prices at which such substituted trades are made 
 would be based upon a standard ' ' settling price. ' ' 
 
 The chief advantage of this system is its ex- 
 treme simplicity. It reduces the bookkeeping re- 
 quired in the business to a minimum. The prin- 
 cipal disadvantages charged against it are that it 
 increases the risks involved and renders impossi- 
 ble that secrecy which is beheved to be necessary 
 to the business. As an illustration, broker A may 
 have been perfectly willing to rely upon the finan- 
 cial integrity of broker B with whom he made the 
 transaction originally, but in the settlement he 
 obtains another broker, C, in whom he has not 
 equal confidence. And, yet, where such a system 
 prevails, he is forced to take the substituted broker 
 whether he has faith in him or not. Again, the 
 sheets when turned in at the clearing house show 
 absolutely how each broker is involved in the 
 market and this is alleged to be an unsatisfactory 
 condition in case any one having obtained this in- 
 formation surreptitiously should guide his market 
 operations accordingly. 
 
 The third method, namely, a separate corpora- 
 tion, known as a Clearing House, has -been adopted 
 upon the Minneapolis Chamber of Commerce and 
 various other Exchanges and from all reports has 
 worked very satisfactorily. The fundamental 
 idea of the system is that the Clearing House sub- 
 stitutes itself in place of the opposite brokers with 
 
312 The Law of Commercial Exchanges. 
 
 whom the transactions were made originally. All 
 members of the Clearing House must own a cer- 
 tain portion of its stock, and this is pledged with 
 the Clearing House as part protection against the 
 insolvency of such members. Let us suppose that 
 brokers A, B and C are members of such Clearing 
 House. At the end of each business day all mem- 
 bers turn in their sheets showing the amount of 
 the grain or other commodities which they have 
 bought and sold during the day and the prices at 
 which each contract was made. For instance, sup- 
 pose during the day a customer had ordered 
 broker A to sell for his account 100,000 bushels of 
 wheat for July delivery and, likewise, during that 
 day customer Y had ordered broker A to buy 
 50,000 bushels of wheat for the same delivery 
 month. Disregarding the prices at which these 
 commodities were bought or sold, at the end of the 
 day A would have sold 50,000 bushels of wheat 
 more than he had bought. The Clearing House 
 then becomes the buyer of that surplus amount of 
 wheat in place of the original broker or brokers 
 to whom it was originally sold. Likewise, in case 
 broker B, for the account of customers, had bought 
 50,000 bushels of wheat during that day more than 
 he had sold, his sheet would show that he was 
 " long " 50,000 bushels of wheat, and, accord- 
 ingly, the Clearing House would substitute itself 
 as the seller of this amount of wheat to B in place 
 of the original broker. Eules of the Exchange, 
 where this system operates, moreover, provide 
 
Clearing Houses op Modern Exchanges. 313 
 
 for the establishment of a settling price each day, 
 at which price the Clearing House buys or sells, 
 as the case may be, this surplus, and collects from 
 the one broker and pays to the other the differ- 
 ences between such settlement prices and the 
 prices at which the original contracts were made 
 between the brokers. Provision is also made for 
 the deposit of margins of a certain amount per 
 bushel with the Clearing House to protect the 
 trades made with it. 
 
 In point of simplicity, the system is far in ad- 
 vance of any yet devised. The bookkeeping re- 
 quirements are reduced to a minimum, and the 
 duphcation of " margin calls " is rendered im- 
 possible. On the other hand, its critics contend 
 that simplicity has been gained at the expense of 
 secrecy and even of safety. The fornier criticism, 
 however, is the one most seriously entertained. 
 Whether these criticisms are sound or unsound is 
 a question about which men of equal intelligence 
 and experience differ widely. The system has 
 been operated satisfactorily upon the smaller Ex- 
 changes. Whether it would be equally satisfac- 
 tory upon such Exchanges as the Chicago Board 
 of Trade and the New York Stock Exchange, 
 where the operations in the markets are tremen- 
 dous and the amount of money involved often 
 times staggering, is impossible of positive state- 
 ment. 
 
314 The Law op Commercial Exchanges. 
 
 Section 43. Legal Problems Arising in Clearing 
 Trades. 
 
 An examination of the cases where the Clearing 
 House and methods of clearing trades upon the 
 various Exchanges have heen before the courts 
 reveals two distinct situations where their vahd- 
 ity has been questioned. First, there is the situa- 
 tion where the person affected by the methods of 
 settling trades, as described herein, objects solely 
 on the ground that in view of his ignorance of such 
 methods he is in no way bound thereby, and the 
 second and entirely distinct situation where a 
 customer puts forth the claim that the settlement 
 oftrades between the various members or brokers 
 on the Exchange is positively illegal, and hence 
 taints the contract between himself, the customer, 
 and the original broker. Accordingly, it rhay be 
 well to discuss in some detail the cases involving 
 both situations above suggested, beginning with 
 the latter. 
 
 (a) Is system for clearing trades illegal? — It 
 is now firmly established by the authorities that a 
 contract to purchase or sell commodities for 
 future delivery is legal and will be enforced by 
 the courts where there is a bona fide intention at 
 the time the contract is made to make or accept 
 delivery.^ The proposition can be stated more 
 clearly, and yet no less accurately, by saying that 
 no such contract for future delivery will be held 
 
 ' See 20 Oyc. 92Y, title " Gaming," and cases cited in notes 
 thereto. 
 
Cleaeing Houses of Modeen Exchanges. 315 
 
 unenforceable, and no broker will be denied the 
 right to recover from such customer his commis- 
 sions ^ and for any advances made in behalf of 
 his client upon the commodities bought or sold, 
 unless the court can see that at the time the orig- 
 inal contract was made there was a mutual agree- 
 ment or understanding between the broker and his 
 customer not to make a bona fide contract of pur- 
 chase or sale, but rather to wager upon the rise 
 ot fall of the price.* If the intent of the broker 
 be honest, however, hejnay recover regardless of 
 the undisclosed intent of the customer not to make 
 or accept such delivery.^ A determination of the 
 intent of the parties to such transactions in the 
 absence of express proof thereof is for the jury 
 to decide in the light of all the surrounding cir- 
 cumstances of the case.^ The practical problem, 
 therefore, under consideration,- is whether a sys- 
 tem of clearing trades among the brokers or 
 members of the Exchange devised for the obvious 
 purpose of avoiding or reducing the amount of 
 actual deliveries between such brokers, except as 
 to the portion of the trades which cannot be 
 
 ' See 20 Cyc. 954, title " Gaming," and cases cited in note 
 94 thereto; see also cases cited in 11 L. E. A. (N. S.) 575, 14 
 L. E. A. (N. S.) 1251. 
 
 * See 20 Cyc. 929, title " Gaming," and cases cited in note 
 60 thereto. 
 
 " Irwin V. "Williar, 110 F. S. 499, 28 L. Ed. 225 ; see also 11 
 L. E. A. (N. S.) 575. 
 
 " See 20 Cyc. 965, title " Gaming," and cases cited in note 8 
 thereto. 
 
316 The Law of Commercial Exchanges. 
 
 thereby " cleared," in any way establishes that 
 no deliveries were contemplated originally be- 
 tween customers and brokers or between the 
 various brokers themselves. 
 
 Whatever doubt may once have existed upon the 
 proposition, there can no longer be any question 
 in view of the number and weight of the author- 
 ities as to the legality of such offsetting and sub- 
 stitution of trades between brokers. Whether 
 the method employed be one of direct settlement 
 between two brokers, or that known as " ringing 
 up," '' the more complex system of substitution of 
 new parties,^ or the still more intricate and ex- 
 treme method where use is made of a separate 
 corporate body known as the Clearing House,® 
 the courts have within recent years unequivocally 
 upheld them all. The crux of the entire question 
 has been to determine whether a physical transfer 
 of possession was essential to constitute a de- 
 livery. That is to say, the real problem was to 
 determine whether if A, a broker, had sold for a 
 customer 10,000 bushels of wheat to B for a cer- 
 tain delivery month, and later B, upon order of 
 his customer, had sold 10,000 bushels of wheat to 
 
 ' See Board of Trade v. Christie Grain & Stock Co., 198 TJ. 
 S. 236, 49 L. Ed. 1031, 25 Sup. Ct. Rep. 63Y; see also Irwin v. 
 Williar, supra. 
 
 ' Clews V. Jamieson, 182 U. S. 461, 45 L. Ed. 1183, 21 Sup. 
 Ct. Eep. 845. 
 
 ° Van I>usen-Harrington Co. v. Jungeblut, Y5 Minn. 298, 74 
 Am. St. Eep. 463, YY N. W. 9Y0; Hallet v. Aggergaard, 21 
 S. D. 532, 114 N. W. 696, 14 L. E. A. (N. S.) 1251. 
 
Clearing Houses of Modeen Exchanges. 317 
 
 A for the same delivery month, it was necessary 
 for A to wait until delivery day and then actually 
 deliver 10,000 bushels of wheat to B and then have 
 B immediately deliver back 10,000 bushels of 
 wheat to A in order to constitute a bona fide de- 
 livery upon such contracts. The victory of the 
 Exchanges was really won when the courts first 
 recognized that ' ' set-off was in legal effect a de- 
 livery. ' ' 
 
 The case which, to a large extent, settled 
 the law in this country that physical transfer of 
 possession was not necessary to constitute a bona 
 fide delivery upon contracts for future delivery 
 was Chicago Board of Trade v. Christie.^" In 
 this case the complainant was endeavoring to pre- 
 vent by an injunction the defendant from using its 
 market quotations on the ground that the latter 
 was a bucket shop. The defense of the defendant 
 was that the Board of Trade was itself a bucket 
 shop by reason of the methods employed In clear- 
 ing and offsetting trades between various mem- 
 bers. The court, speaking through Justice 
 Holmes, answered this defense in language which 
 by its incisiveness and irresistible logic com- 
 pletely destroyed it : 
 
 ' ' It appears that in not less than three-quarters 
 of the transactions in the grain pit there is no 
 physical handing over of any grain, but that there 
 
 "Board of Trade v. Christie Grain & Stock Co., 198 TJ. S. 
 236, 49 L. Ed. 1031, 25 Sup. Ct. Eep. 63Y. 
 
318 The Law of Commeecial Exchanges, 
 
 is a settlement, either by the direct method, so 
 called, or by what is known as ringing up. The 
 direct method consists simply in setting off con- 
 tracts to buy wheat of a certain amount at a cer- 
 tain time, against contracts to sell a like amount 
 at the same time, and paying the difference of 
 price in cash at the end of the business day. The 
 ring settlement is reached by a comparison of 
 books among the clerks of the members buying 
 and selling in the pit, and picking out a series of 
 transactions which begins and ends with dealings 
 which can be set against each other by eliminating 
 those between — as, if A has sold to B 5,000 
 bushels of May wheat, and B has sold the same 
 amount to C, and C to D, and D to A. Substitut- 
 ing D for B by novation, A's sale can be set 
 against his purchase, on simply paying the differ- 
 ence in price." . . . 
 
 ' ' We must suppose that from the beginning, as 
 now, if a member had a contract with another 
 member to buy a certain amount of wheat at a 
 certain time, and another to sell the same amount 
 at the same time, it would be deemed unnecessary 
 to exchange warehouse receipts. We must sup- 
 pose that then as now, a settlement would be 
 made by the payment of differences after the 
 analogy of a Clearing House. This naturally 
 would take place no less that the contracts were 
 made in good faith, for actual dehvery, since the 
 result of actual delivery would be to leave the 
 parties just where they were before. Set-off has 
 
Cleaeing Houses of Modeen- Exchanges. 319 
 
 all the effect of delivery. The ring settlement is 
 simply a more complex case of the same kind. 
 These settlements would be frequent, as the num- 
 ber of persons buying and selling was compara- 
 tively small." 
 
 " The fact that contracts are satisfied in this 
 way by set-off and the payment of differences de- 
 tracts in no degree from the' good faith of the par- 
 ties, and if the parties know when they make such 
 contracts that they are very likely to have a 
 chance to satisfy them in that way, and intend to 
 make use of it, that fact is perfectly consistent 
 with a serious business purpose, and an intent 
 that the contract shall mean what it says. There 
 is no doubt, from the rules of the Board of Trade 
 or the evidence, that the contracts made between 
 the members are intended and supposed to be 
 binding in manner and form as they are made. 
 There is no doubt that a large part of those con- 
 tracts is made for serious business purposes. 
 Hedging, for instance, as it is called, is a means 
 by which collectors and exporters of grain or 
 other products, and manufacturers who make con- 
 tracts in advance for the sale of their goods, 
 secure themselves against the fluctuations of the 
 market by counter contracts for the purchase or 
 sale, as the case may be, of an equal quantity of 
 the product, or of the material of manufacture. 
 It is none the less a serious business contract for 
 a legitimate and useful purpose that it may be 
 
320 The Law of Commercial Exchanges. 
 
 offset before the time of delivery in case delivery 
 should not be needed or desired." 
 
 " Purchases made with the understanding that 
 the contract will be settled by paying the differ- 
 ence between the contract and the market price at 
 a certain time stand on different ground from 
 purchases made nearly with the expectation that 
 they will be satisfied "by set-off. . . . A set-off 
 is, in legal effect, a delivery. We speak only of 
 the contracts made in the pits, because in them 
 the members are principals. The subsidiary 
 rights of their employers where the members buy 
 as brokers we think it unnecessary to discuss." 
 
 " In the view which we take, the proportion of 
 the dealings in the pit which are settled in this 
 way throws no light on the question of the pro- 
 portion of serious dealings for legitimate business 
 purposes to those which fairly can be classed as 
 wagers or pretended contracts. No more does 
 the fact that the contracts thus disposed of call 
 for many times the total receipts of grain in Chi- 
 cago. The fact that they can be and are set off 
 sufficiently explains the possibility, which is no 
 more wonderful than the enormous disproportion 
 between the currency of the country and contracts 
 for the payment of money, many of which in like 
 manner are set off in clearing houses without any 
 one dreaming that they are not paid, and for the 
 rest of which the same money suffices in succes- 
 sion, the less being needed the more rapid the cir- 
 culation is." 
 
Clearing Houses of Modebn Exchanges. 321 
 
 Later cases in the Federal courts," and in the 
 various State courts as well/^ clearly indicate no 
 tendency to recede from the legal principles which 
 the Supreme Court of the United States so de- 
 cisively promulgated in this case. In the case of 
 Cleage v. Laidley, supra, the court, at page 352 of 
 the opinion, had this to say with reference to the 
 system employed upon the Merchants' Exchange 
 of St. Louis and the Board of Trade of the City 
 of Chicago: 
 
 " In other words, contracts for future delivery 
 made with the intention of settling them by pay- 
 ing to the other parties to the contracts the dif- 
 ference between the contract prices and the market 
 prices at the time of delivery are wagers and are 
 void. But contracts for future delivery made 
 with the intention of settling them by set-off or 
 by " ringing up " and by the payment of differ- 
 ences in accordance with the rules and practice of 
 the Board of Trade are valid and enforceable 
 agreements under this decision," and in the case 
 of Springs v. James, supra, in upholding the 
 methods of clearing trades upon the New York 
 Cotton Exchange, the court said, at page 1060 of 
 the opinion: 
 
 "A broker upon the Exchange may represent 
 many customers, and may execute during the day 
 
 "Cleage v. Laidley, 149 Fed. 346; Haven & Clement v. 
 James, 1Y2 Fed. 250. 
 
 " Springs v. James, 121 N. T. Supp. 1054, 137 App. Div. 
 110. 
 
 Com. Exo. — 21. 
 
322 The Law or Commercial Exchanges. 
 
 with many other members many contracts both of 
 sale and purchase. It would be as idle to insist 
 upon an actual delivery between the members of 
 the Exchange as it would be to compel the banks 
 to cart to each other's banking house the actual 
 money called for by the checks severally received 
 by each upon the other." 
 
 A recognition of the fundamental fact that re- 
 gardless of the system employed by the brokers 
 to " clear " or set off trades among themselves, 
 the integrity of the original contract between a 
 particular customer and his broker is in no way 
 disturbed, has " saved the day " for the Ex- 
 changes when such system has been attacked in 
 the courts. This can be more clearly illustrated 
 by a practical example of the methods of clearing 
 trades. Beginning with the simplest case where 
 but two brokers are concerned and hence a direct 
 set-off is possible, let us suppose that a customer 
 (X) orders broker A to sell 10,000 bushels of grain 
 for July delivery and A in the course of business 
 sells it to B for 75 cents per bushel. Later in the 
 day, customer (Y) orders A to buy for him 10,000 
 bushels of grain to be delivered on the same day 
 and A in the course of business buys it of C for 
 
 74 cents per bushel. 
 
 A physical delivery here would result in A de- 
 livering 10,000 bushels to B for account of X at 
 
 75 cents per bushel and receiving immediately 
 from C for account of Y 10,000 bushels at 74 cents 
 per bushel. The same result is reached, however. 
 
Cleaeing Houses of Modebn Exchanges. 323 
 
 when the trades between A, B, and C are offset 
 and A collects from B or C as the case may be 
 one cent per bushel. The only result of the off- 
 setting of these trades has been to avoid the con- 
 fusion which would arise if because of the fluctua- 
 tions in the price before delivery day A were re- 
 quired from time to time to " call " further 
 margin from B or C or vice versa. By this settle- 
 ment A thenceforth has merely to keep in mind 
 his customers (X) and (Y). When instead of the 
 two brokers B and C there is a long series of 
 brokers beyond B and C, an escape from such a 
 result is of no small convenience. In spite of this 
 offset, however, the books of A continue to show 
 that he is " short " for X ten thousand (10,000) 
 bushels and " long " for T the same amount. If 
 the price should advance, he would in due course 
 demand further margin from X and likewise if 
 the price declined further margin from Y. More- 
 over, if both of these trades " stood open " upon 
 his books at the delivery day, under the rules of 
 all legitimate Exchanges, broker A would have no 
 choice but to demand the grain from X and deliver 
 a like amount to Y. Whether A delivers to Y the 
 actual grain which he receives from X, or goes 
 into the open market and purchases for the ac- 
 count of X this amount of grain and delivers it to 
 Y the practical effect is absolutely the same. The 
 grain which he got by such a purchase would be 
 that of a customer of some other broker, just as X 
 is his customer. The customers of B and C are 
 
324 The Law op Commeeciax, Exchanges. 
 
 no more affected by such settlement than were the 
 customers of A in the above illustration. Accord- 
 ingly, not alone upon the legal authorities, but 
 upon the facts as well, it can be concluded that, 
 however the transactions between the various 
 brokers are settled among themselves, the validity 
 and integrity of the original contracts between 
 broker and customers are in no way disturbed. 
 
 In several of the cases ^^ the point has been 
 raised by customers that by reason of such settle- 
 ments or " clearing " of trades, no grain, stocks 
 or cotton, etc., as the case may be, has ever been 
 actually purchased or sold and therefore inasmuch 
 as the broker himself has not been subjected to 
 any loss by any subsequent fluctuations in price, 
 he cannot collect such losses from his customer. 
 In the case of Springs v. James, supra, at page 
 1062 of the opinion, this contention was thus 
 phrased : 
 
 " What is it that he (defendant) complains of? 
 That because the contracts which were purchased 
 or sold for his account were settled by way of sub- 
 stitution and set-off between the plaintiffs and 
 other members of the Exchange before the time 
 when he gave his order to close the transaction, 
 therefore no moneys had been laid out and ex- 
 pended for his benefit." 
 
 Accordingly, it may be well to analyze further 
 the process of offsetting or clearing trades in 
 order to determine whether this contention which 
 
 " Springs v. James, supra; L&hman v. Feld, 37 Fed. 852. 
 
Cleabing Houses of Modebn Exchanges. 325 
 
 the authorities have held unsound as a legal 
 proposition is sound or unsound as a matter of 
 fact. 
 
 Let us revert again to the former illustration 
 where A had sold for the account of his customer 
 (X) 10,000 bushels of grain to broker B and later 
 for the account of his customer (Y) had bought 
 10,000 bushels of grain for the same delivery time 
 from C. We saw that in this situation A, B and C 
 merely offset the trades one against the other and 
 that thereafter the books of A showed that he was 
 ' ' short ' ' the amount of grain for X and ' ' long ' ' 
 a hke amount for Y. In this state of affairs, is it 
 true that A, having settled the trades with B and 
 C, can no longer be subject to any loss in carrying 
 them for his customers X and Y? Let us suppose 
 further, in order to simplify matters as much as 
 possible, that X had sold the grain and Y had 
 bought it at the same price, to wit, $1.00 per 
 bushel. Then let us suppose that after the con- 
 tracts were made but prior to delivery day the 
 grain increased from $1.00 per bushel to $1.10 per 
 bushel. 
 
 In such a situation Y would have made a profit 
 of 10 cents per bushel or $1,000 in the aggregate 
 and would be entitled to this profit from A. But 
 X on the other hand has contracted to sell a com- 
 modity at $1.00 per bushel which at that moment 
 his broker A could not go into the market and buy 
 for less than $1.10 per bushel. Thus the amount 
 A has to pay over to Y as a profit, he must collect 
 
326 The Law op Commebcial Exchanges. 
 
 from X. If there had been no off-set between A, 
 B and C the same thing would have transpired, the 
 only difference being that B would have demanded 
 the ' ' margin ' ' from A and A in turn from C and 
 likewise all through the series of brokers, and then 
 each broker would have called upon his customer 
 for reimbursement. By such method of offset- 
 ting, however, this endless ' ' calling ' ' of margins 
 and confusion in bookkeeping are avoided. The 
 trades are thereby localized .between the broker 
 and his customers. 
 
 The same result is shown, moreover, if we sup- 
 pose further that at the time of delivery both con- 
 tracts remain " open " upon the books of A. If 
 X actually delivers to him the grain, A would de- 
 liver it in turn to Y. Obviously, however, in such 
 ease, no question could arise that A had not made 
 an actual transaction for both X and Y. But, 
 suppose that X does not deliver the grain. In 
 such case, A would have to go into the open market 
 and purchase for the account of X 10,000 bushels 
 of grain at a total cost not of $10,000 but $11,000 
 due to the increase in price of ten cents per bushel. 
 He would then deliver this grain to Y. But, ob- 
 viously, A cannot pay out $11,000 for a commodity 
 in order to deliver it to Y and get in return only 
 $10,000 from X. The excess must come from the 
 latter. Without pursuing the discussion to 
 greater length, it is obvious that however the 
 " bought " trades and " selling " trades are 
 settled among the various brokers, the responsi- 
 
Clearing Houses of Modeen Exchanges. 327 
 
 bility of the broker towards his customer still re- 
 mains. He gains no advantage by adopting the 
 system of clearing in vogue upon the Exchange, 
 however simple or complex this system may be, 
 except that of escaping the useless and endless 
 "duplication in margin " calls " and of adopting a 
 more simple and less expensive system of book- 
 keeping. 
 
 (b) When are non-members bound by system 
 of clearing trades? — The second situation where 
 the validity of the methods employed upon the 
 various Exchanges to settle and offset trades has 
 arisen on the complaint not that such methods 
 were essentially illegal, but rather that they were 
 not binding upon a customer except upon a clear 
 showing that he had knowledge thereof and agreed 
 to be bound by them. 
 
 We have already considered in a former 
 chapter " the question as to when a non-member 
 is bound by the rules, by-laws or customs of an 
 Exchange when dealing thereon. We there found 
 that under the later and better reasoned authori- 
 ties, such non-member was bound thereby even 
 though he was ignorant of them, except where it 
 was clearly shown that such rules, by-laws or 
 customs were illegal and positively unreasonable.^^ 
 With the general proposition, we shall not deal 
 here. Our concern now is to determine the specific 
 question, when will a non-member be bound by the 
 
 "See section 36, supra, sub-section (c). 
 " See section 36, supra, sub-section (c). 
 
328 The Law of Commeecial Exchanges. 
 
 methods of offset and substitution employed upon 
 a particular Exchange in the event that he is 
 ignorant of them? In a leading case/" Justice 
 Matthews, of the Supreme Court of the United 
 States, thus tersely put the problem : 
 
 " The question is not whether, in a given case,- 
 without the assent, express or implied, of the 
 principal, this change of his rights and obligations 
 can be effected (for that proposition is not doubt- 
 ful), but whether the fact of his transacting busi- 
 ness through a member of the Exchange, without 
 other knowledge of the custom, makes it part of 
 his contract with the broker. ' ' 
 
 This case of Irwin v. Williar, supra, is often 
 cited as conclusive authority that such customer 
 of a broker is not bound by the rules and customs 
 prevailing upon a particular Exchange whereby 
 the various brokers settle and substitute trades 
 between one another. Wherein this case cannot 
 be distinguished upon its own facts, it is submitted 
 that later cases from the same court," as well as 
 cases ^' from the highest courts of the various 
 States of this country, have reduced its force al- 
 most to the vanishing point. In this case the firm 
 of Irwin & Davis was engaged in the flour milhng 
 
 " Irwin V. Williar, 110 U. S. 499, 28 L. Ed. 225, 4 Sup. Ct. 
 160. 
 
 " BiBb V. Allen, 149 U. S. 481, 13 Sup. Ct. 950, 3Y L. Ed. 
 819; Clews v. Jamieson, supra. 
 
 " Hallett V. Aggergaard, supra; Van Dusen v. Jungeblut, 
 supra. 
 
Cleaeing Houses of Modern Exchanges. 329 
 
 and grain business at Brazil, Indiana, and were 
 in the habit of sending consignments of grain to 
 Williar, a member of the Corn and Flour Ex- 
 change at Baltimore. Davis, without the knowl- 
 edge of Irwin, had also sold from time to time 
 various quantities of wheat for future delivery 
 through Williar. Before the maturity of such con- 
 tracts, DaAds died, and upon the delivery day, fail- 
 ing to receive grain from the surviving partner, 
 Williar went into the open market and bought for 
 their account sufficient wheat to close their trades. 
 It was for the loss incurred in this latter trans- 
 action that suit was brought. 
 
 The real point at issue in the case and in faet 
 the only point which the court passed upon 
 directly was, whether Davis had any authority to 
 bind the partnership by selling grain for future 
 delivery. It was not contended that there was any 
 express authority given him to do so and in fact 
 no evidence was shown that Irwin, the other mem- 
 ber of the firm, had any knowledge whatever of 
 such transactions. The only question, therefore, 
 was whether Davis had such authority by implica- 
 tion. The trial court had practically instructed 
 the jury to bring in a verdict for the plaintiff, Wil- 
 liar, when it charged that a partnership " deal- 
 ing in grain " included by implication the pur- 
 chase and sale for future delivery as well as deal- 
 ing in the cash commodity. To this charge, the 
 defendant excepted and it was for this charge to 
 the jury that the Supreme Court upon appeal re- 
 
330 The Law of Commebcial, Exchanges. 
 
 versed and remanded the case for a new trial. In 
 deciding this issue, the court said in the course Of 
 its opinion: 
 
 ' ' What the nature of that business in each case 
 is ; what is necessary and proper to its successful 
 prosecution; what is involved in the usual and 
 ordinary course of its management by those en- 
 gaged in it, at the place and time where it is car- 
 ried on, are all questions of fact, to be decided by 
 the jury, from a consideration of all the circum- 
 stances which, singly or in combination, affect its 
 character or determine its peculiarities, and from 
 them all, giving to each its due weight, it is its 
 province to ascertain and say whether the trans- 
 action in question is one which those dealing with 
 the firm had reason to believe was authorized by 
 all its members. The difficulty and duty of draw- 
 ing the inference suitable to each case from all its 
 circumstances cannot be avoided or supplied by 
 affixing or ascribing to the business some general 
 name, and deducing from that, as a matter of law, 
 the rights of the public and the duties of the part- 
 ners. ' Dealing in grain ' is not a technical 
 phrase from which a court can properly infer, as 
 matter of law, authority to bind the firm in every 
 case irrespective of its circumstances ; and if, by 
 usage, it has acquired a fixed and definite mean- 
 ing, as a word of art in trade, that is matter of 
 fact to be established by proof and found by a 
 jury. It may mean one thing at Brazil, in In- 
 diana, another at Baltimore. It may not be the 
 
Cleaeing Houses op Modeen Exchanges. 331 
 
 same when standing alone with what it is in con- 
 nection with a flouring mill in a small interior 
 town. It may mean dealing in grain on hand for 
 present dehvery for cash or on credit, or it may 
 mean, also, dealing in futures by means of con- 
 tracts of sale or purchase for purposes of specu- 
 lating upon the course of the market. We are 
 quite clear that the latter feature of the business, 
 as it may sometimes be prosecuted, is not as mat- 
 ter of law an essential characteristic of every busi- 
 ness to which the name of dealing in grain may be 
 properly assigned. And yet this is distinctly 
 what in the present case was given to the jury as 
 the law, and in that respect the Circuit Court 
 erred. ' ' 
 
 The court, however, with a view solely of assist- 
 ing the lower court in the retrial " of the case did 
 go on by way of dictum to express its opinion of 
 some other features of the case, one of which was 
 the system of ' ' clearing ' ' trades between brokers 
 upon the Baltimore Exchange. Evidence of such 
 system was introduced at the trial over the objec- 
 tion of defendant. This system was described by 
 the court as follows : 
 
 *' Thus, if commission merchant A, upon the 
 order of his customer X, has sold grain for a 
 designated future delivery to commission mer- 
 chant B, and afterwards, upon the order of cus- 
 tomer Y, buys like grain for like delivery from B, 
 A and B adjust the difference, cancel their con- 
 
 " 110 tr. S. 499, statement at p. 507 of tlie opinion. 
 
332 The Law of Commercial Exchanges. 
 
 tracts, and surrender any margins that may have 
 been put up by them, and in such a case A sub- 
 stitutes his second customer Y in place of B, so 
 that the grain he had sold on the order of X 
 would be delivered to Y instead of to B ; A stand- 
 ing as guarantor to Y that X will deliver the grain, 
 and to X that Y will receive and pay for it, and 
 that X shall receive the full price at which the 
 grain had been contracted to B. That where such 
 second transaction is- not with the same commis- 
 sion merchant with whom the first had occurred, 
 but a different one, and it is found that a circuit 
 of like contracts exists, by which commission mer- 
 chant A has sold grain to merchant B, who has 
 sold like grain to C, who has made like sale to A, 
 the commission merchants settle as among them- 
 selves by what is called a ' ring.' " 
 
 The defendant did not claim that he had been 
 injured by the system. It was obvious, inasmuch 
 as the defendant did not deliver any wheat upon 
 the contract of sale, that it was immaterial 
 whether his broker, the plaintiff, had purchased 
 the wheat for his account and had delivered it to 
 the original broker to whom he sold it, or, to the 
 other customer of the plaintiff who had been sub- 
 stituted in place of such original broker. The de- 
 fendant did object, however, on the ground that 
 the custom being unknown to him, he was not 
 bound by it, since if allowed it " would work a 
 change in the relation between the broker and his 
 principal, by permitting the agent to buy to con- 
 
Cleaeing Houses of Modben Exchanges. 333 
 
 vert himself into a principal to sell." The court 
 ' ' swallowed ' ' this proposition without a murmur 
 and basing its opinion upon the noted English 
 case of Robinson v. MoUett,^" where the facts upon 
 analysis were fundamentally different from the 
 case before it, held that the defendant, in the ab- 
 sence of knowledge, was not bound by such custom 
 or system The court adopted the following state- 
 ment of Baron Cleasby in the case of Robinson v. 
 MoUett, supra, as decisive of the case at bar : 
 
 " The vice of the usage set up in the present 
 case cannot be appreciated by examining its parts 
 separately It must be looked at as a whole, and 
 its vice consists, I apprehend, in this: That the 
 broker is to make the contract of purchase for 
 another whose interest as buyer is to have the ad- 
 vantage of every turn of the market; but if the 
 broker may eventually have to provide the goods 
 as principal, then it becomes his interest as seller 
 that the price which he is to receive should have 
 been as much in favor of the seller as the state of 
 the market would admit. Thus the two positions 
 are opposed." 
 
 The soundness of the legal principle set forth 
 in the dictum of Irwin v. Williar, supra, has been 
 questioned in many later cases," and one case in 
 
 =" L. E. Y H. L. 802. 
 
 " Clews V. Jamieson, supra; Hallett v. Aggergaard, supra; 
 Van Dusen-Harrington v. Jungeblut, supra; Bibb v. Allen, 
 supra; Lehman v. Feld, supra; Boyle v. Henning, 121 Fed. 
 376. 
 
334 The Law of Commebcial Exchanges. 
 
 particular from the Supreme Court of the United 
 States, although not expressly, yet substantially, 
 overrules it upon this proposition. This is the 
 case of Clews v. Jamieson." In this case Clews 
 had ordered his broker, Schwartz, Dupee & Co., 
 upon the Chicago Stock Exchange to sell for him 
 in the aggregate 700 shares of the stock of the 
 Diamond Match Company. Without going into 
 the details of the system of clearing trades in 
 vogue upon this Exchange, it is sufficient to state 
 that Schwartz, Dupee & Compnay had sold this 
 stock originally to other brokers than the defend- 
 ant Jamieson, but in accordance with the rules of 
 the Exchange and the system of settling trades 
 employed thereon the defendant Jamieson had 
 been substituted, as buyers of this stock, in place 
 of such original broker. All parties agreed that 
 these transactions were executed on the Exchange 
 and were intended to be executed in accordance 
 with its rules. When the time for the delivery of 
 this stock arrived, Schwartz, Dupee & Company, 
 acting for the complainant Clews, tendered to 
 Jamieson & Company 700 shares of Diamond 
 Match Company stoc^ at the settling price estab- 
 lished of $222 a share, but Jamieson refused to 
 receive it. The stock was then sold in the open 
 market for the account of Jamieson and it was to 
 recover the loss suffered thereby that Clews, the 
 undisclosed principal of Schwartz, Dupee & Com- 
 pany, brought this suit against Jamieson & Com- 
 
 *■ 182 tr. S. 461, 45 L. Ed. 1183, 21 Sup. Ct. 845. 
 
Cleaeing Houses of Modern Exchanges. 335 
 
 pany. The defense of Jamieson & Company was 
 that' there was no privity of contract between the 
 complainant and Jamieson & Company, and that 
 the system of clearing trades upon the Exchange, 
 whereby Jamieson & Company were substituted 
 in place of the original buyers of the stock, could 
 not be used to establish such privity of contract. 
 The lower courts sustained the contentions of the 
 defendant, but this position was reversed by the 
 Supreme Court. The court at page 488 of the 
 opinion had the following to say with reference 
 to the binding effect of the system of settling 
 trades and the substitution of brokers as employed 
 upon the Chicago Stock Exchange : 
 
 " The rules of the Chicago Exchange clearly 
 contemplate and provide for a substitution of 
 names between the selling and the delivery days, 
 and each party is kept secured by the margin 
 originally put up, which is added to and taken 
 from as the stock fluctuates in price from day to 
 day. Hence it may be that the parties buying 
 or selling may by virtue of this rule be liable to 
 different principals represented in one original 
 contract between the brokers. Whatever the rules 
 or practice of the Exchange may be, it is of course 
 plain that no principal can be held to the perform- 
 ance of a contract which he never made, author- 
 ized, or ratified. The stipulation made between 
 the parties relating to this matter, while not en- 
 tirely plain, might affect the right fo maintain 
 this action but for the fact that all other claims 
 
336 The Law op Commebcial Exchanges. 
 
 were settled, leaving only the controversy regard- 
 ing the 700 shares to be disposed of between these 
 parties. Upon the facts before us we think there 
 was sufficient privity of contract between them to 
 sustain this suit." 
 
 In this case the defendant was a member of the 
 Exchange and he, it was, who was objecting to the 
 obligation which he incurred by virtue of the sys- 
 tem of settling trades between brokers upon the 
 Exchange. In this respect, therefore, it may be 
 conceded that, however strong may be the lan- 
 guage of the court, the facts may not warrant the 
 conclusion that a non-member when dealing upon 
 an Exchange is in all cases bound by the system 
 of offset and substitution employed thereon. 
 Several other cases ^^ in the State and lower Fed- 
 eral courts '* do, however, present this identical 
 situation and all of them uniformly and unequivo- 
 cally hold that such non-member is bound thereby. 
 
 The ease of Van Dusen-Harrington v. Junge- 
 blut ^^ is squarely in accord with the proposition 
 that a non-member, when dealing upon an Ex- 
 change, is bound by the system of clearing trades 
 employed thereon. The facts show that the de- 
 fendant, Jungeblut, ordered the plaintiff, a mem- 
 ber of the Minneapolis Chamber of Commerce, to 
 purchase for him 5,000 bushels of May wheat at 78 
 
 ""Hallett V. Aggergaard, supra; Van Dusen-Harrington. v. 
 Jungeblut, supra. 
 '* Lehman v. Feld, 37 Fed. 852. 
 ""Van Dusen-Harrington v. Jungeblut, supra. 
 
Cleabing Houses oe Modekn Exchanges. 337 
 
 cents per bushel, and placed with his broker $250 
 for margins. The plaintiff executed the order upon 
 the Exchange and notified the defendant of this 
 fact. But several months afterwards, the price of 
 wheat having dechijed to SSi/g cents per bushel, 
 the defendant refused to forward additional 
 margins and, accordingly, the plaintiff closed out 
 the trade at a loss of some $243.75, which sum, 
 with an additional $6.25 for commission, the plain- 
 tiff then brought an action against the defendant 
 to recover. The defendant set up the defense that 
 by reason of the system of clearing trades em- 
 ployed upon the Minneapolis Chamber of Com- 
 merce a wholly different contract was made for 
 his account than that which he originally contem- 
 plated and, therefore, he, the defendant, was not 
 bound inasmuch as he did not know the methods 
 whereby the contracts between brokers on the Ex- 
 change were settled with one another. The system 
 employed upon the Minneapolis Exchange was 
 very clearly described by the court in the follow- 
 ing language : 
 
 " There is another corporation, known as the 
 Clearing Association, which acts as a universal 
 go-between, or clearing-house, for these trans- 
 actions. At the close of each day's business all 
 of these transactions are reported to the Clearing 
 Association, which then becomes the opposite 
 party to the transactions of each member for the 
 purpose of offsetting the same. When the mem- 
 ber is the buyer, the Clearing Association becomes 
 
 Com, Exc, — 22, 
 
338 The Law of Commeecial Exchanges. 
 
 the seller, and when the member is the seller, the 
 Clearing Association becomes the buyer. Then 
 all of the transactions between that member and 
 the clearing-house are offset, and the balance car- 
 ried in the account between them until the next 
 day, when a new balance is struck. 
 
 " But balancing new transactions is but a part 
 of the business of the clearing-house in regard to 
 sales for future delivery. As the price goes up 
 or down each day, the clearing-house pays to the 
 member or receives from him the difference in 
 price on that day's balance; if, on balancing all 
 transactions with him, it appears that he has 
 bought more than he has sold, he is buyer as to 
 such balance and the clearing-house is seller, and 
 vice versa. If he is buyer as to such balance, and 
 wheat fell in price that day, he must pay to the 
 clearing-house the difference between the price on 
 that day and the price on the day before, and vice 
 versa. 
 
 ' ' It will thus be seen that each member acts as 
 a clearing-house within himself as to all his cus- 
 tomers, and that he offsets the transactions of his 
 customers against each other, and only resorts to 
 the Clearing Association for any balance of 
 buyers over sellers or sellers over buyers among 
 his own customers. Except as hereinafter stated, 
 it does not appear by the evidence whether or not 
 defendant knew that this was the customary way 
 of doing business in the Chamber of Commerce." 
 
 The court in its opinion carefully distinguished 
 
Clbaeing Houses or Modeen Exchanges. 339 
 
 the facts in this case from those in the case of 
 Irwin V. Willier, supra, and held that inasmuch as 
 the methods employed upon -the Minneapolis 
 Chamber of Commerce were neither illegal nor 
 unreasonable, the defendant was bound thereby 
 whether he was acquainted with such methods or 
 not. This case is very interesting, moreover, in- 
 asmuch as the Clearing-house upon this Exchange 
 was a separate and distinct corporation, and, 
 therefore, presents the most extreme situation 
 where such methods of clearing trades upon the 
 various Exchanges have been upheld by the 
 courts. 
 
 In the course of this chapter we have observed 
 the workings of various systems of settling trades 
 between brokers as practiced upon the Exchanges, 
 and, as well, the legal principles which the courts 
 have applied when those practices have come be- 
 fore them. As has been shown, the various sys- 
 tems range from the simple set-off between two 
 brokers on the one extreme to the most highly de- 
 veloped form of a separate corporation, the sole 
 function of which is to take the opposite side of 
 every transaction which a particular broker may 
 make upon the Exchange, at the other extreme. 
 While the courts appreciate that the various sys- 
 tems may differ one from another in matters of 
 detail, yet they have been quick to see that es- 
 sentially and fundamentally these methods are 
 everywhere the same. In whatever fashion the 
 multitude of trades executed upon a legitimate 
 
340 The Law of Commeeclax. Exchanges. 
 
 Exchange during the course of a day may be dealt 
 with between the various brokers themselves, both 
 in fact and in law, the contract between a par- 
 ticular broker and his customer is in no way 
 affected. 
 
 FINIS. 
 
INDEX 
 
 (Eeferences are to pages.) 
 
 A PAGE. 
 
 Abuse of fellow members, rule as to 136 
 
 Action of member against Exchange : 
 
 For invasion of property rights 247 
 
 For wrongful discipline 248 
 
 Acts for which member may be expelled * 108 
 
 Adjudications of Exchanges. See Review of Decisions. 
 
 Administrative power 71 
 
 Of board of directors 195 
 
 Of Exchange over non-member 261 
 
 Admission to membership. See Members and Member- 
 ship. 
 
 Agents of the Exchange : 
 
 Liability of Exchange for acts of 256 
 
 Power to bind Exchange 21 
 
 Agreements to arbitrate : 
 
 As bar to action on contract 155 
 
 As discontinuance of action 157 
 
 Award of arbitrators 157 
 
 Breach of 155 
 
 Eevocation of 155 
 
 Validity of 153 
 
 Agreements in restraint of trade. See Contracts in 
 Restraint of Trade. 
 
 Amendment of rules and by-laws. See Eules and 
 By-laws. 
 
 Antwerp Bourse ' 
 
 [341] 
 
342 Index. 
 
 PAGE. 
 
 Appeal Committee, necessity of appeal to 217 
 
 Application : 
 
 For admission. See Members and Membership. 
 
 For reinstatement, necessity of 97 
 
 Arbitrary termination of membership 39, 213 
 
 Arbitration Committee 151 
 
 Assets of Exchange on dissolution, distribution of 31 
 
 Assets of member, distribution of. See Distribution of 
 Assets of Member. 
 
 Assignability : 
 
 Of member's interest in Exchange property 23 
 
 Of membership 66 
 
 Associations, Exchanges are voluntary 18 
 
 Attachment : 
 
 Of member's interest in Exchange property 23, 24 
 
 Of membership 60, 61 
 
 Award : 
 
 Of Arbitration Committee of Exchange 172 
 
 Of arbitrators 157 
 
 B 
 
 Bankruptcy Act: • 
 
 Conflict with rule as to preferences in distributing 
 
 proceeds from sale of bankrupt's seat 122 
 
 Membership as property within 54 
 
 Bankruptcy of member : 
 
 Distribution of assets. See Distribution of Assets. 
 Eight of trustee to call for assignment of seat . 57, 58, 59 
 Right of trustee to proceeds of sale of seat to the 
 
 exclusion of Exchange creditors 56 
 
 Right of trustee to proceeds of sale of seat where 
 
 there are no Exchange creditors 55 
 
 Basis of court's jurisdiction to review decisions of Ex- 
 changes 209, 210 
 
 Battery, rule as to expulsion by 84 
 
Index. 343 
 
 Binding effect : page. 
 
 Of amendments on members 197-201 
 
 Of rules on non-members. See Non-members. 
 
 Binding on Exchange, how far act of member is 21, 22 
 
 Blackboard, posting market quotations on 300 
 
 Board of directors. See Directors. 
 
 Boards of Trade. See Exchanges. 
 
 Bourse : 
 
 Antwerp , 7 
 
 Greshain's 9 
 
 Breach of contract, rule as to. See Particular Rules. 
 
 Breach of member's duty toward Exchange: 
 
 As ground of expulsion 109 
 
 What is 236 
 
 Broker : 
 
 How far rules bind his principal. See Non- 
 members. 
 Origin of the term 10 
 
 Bucket-shops : 
 
 Refusal of market quotations to 294 
 
 Rule prohibiting trading with 187 
 
 Business : 
 
 Exchange transacts no 17 
 
 Right of member to transact business on Exchange 
 
 floor 35 
 
 Rule prohibiting solicitation of 189 
 
 Business disputes, rule relative to arbitration of. See 
 Particular Rules. 
 
 Business hours, rule as to 190 
 
 Business obligations of members, rule as to. See Par- 
 ticular Rules. 
 
 By-laws of Exchanges. See Rules and By-laws. 
 
 Causes of action against Exchange. See Liabilities of 
 Exchange. 
 
344 Index. 
 
 PAGE. 
 
 Causes of expulsion 109 
 
 Certificate of membersliip, presenting an unimpaired. .44, 95 
 
 Certificate of stock, origin of 8, 10 
 
 Cestui que trust of membersliip 65 
 
 Characterization of act as ground of objection to Ex- 
 change decree 234 
 
 Charges against members : 
 
 Form of 225 
 
 Who may bring 225 
 
 Charter as a grant from the State 72 
 
 Charter auiihorization of power to pass rules. See Rules 
 
 and By-laws. .... 
 
 Charter limitations on power to pass rules. See Rules 
 and By-laws. 
 
 Charter provision as to voluntary arbitration 168 
 
 Claims against Exchanges, suing members on 258 
 
 Classes of Exchanges 12 
 
 Clearing houses: 
 
 Classes of 30Y 
 
 Definition of 305 
 
 Legality of system for clearing trades: 
 
 Legality of future trading 314, 315 
 
 Legality of offsetting trades 314 
 
 Mode of operation 307 et seq. 
 
 Necessity of 305 
 
 Principals of members, how far system binding on . . 327 
 
 Set-off as a delivery 318, 320 
 
 Club, difference between membership in Exchange and in. 38 
 Collection of market quotations by independent company 
 
 is no publication 298 
 
 Commercial activities of members, rules restricting. See 
 
 Particular Rules. 
 Commercial conduct of members, rule regulating. See 
 
 Particular Rules. 
 Committee, Governing. See Directors. 
 
Index. 345 
 
 PAGE. 
 
 Committee : 
 
 Delegation of power to expel to 112 
 
 Necessity of appeal to 217 
 
 Committee on arbitration, rule providing for. See Par- 
 ticular Rules. 
 
 Commission rule 180 
 
 Compelling admission to membership 95 
 
 Compulsory arbitration, rule as to. See Particular 
 Rules. 
 
 Conduct of members, rule regulating 132 
 
 Constitution of Excbange as a contract Y3 
 
 Continuous market quotations 302 
 
 Construing rules by means of regulations 204 
 
 Construction of rules as objection to Exchange decree. . . 234 
 
 Constructive trust of seat 65 
 
 Contracts in restraint of trade 175 
 
 Contract is basis of membership 35 
 
 Contracts of non-members are subject to rules, how far. 
 
 See Non-members. 
 Contracts, rule as to non-performance of. See Particular 
 Rules. 
 
 Contractual liability of Exchange 256 
 
 Control of market quotations. See Market Quotations. 
 Control over Exchanges by State. See Visitorial Power. 
 
 Copyright, market quotations not subject of 297 
 
 Corner rule 192 
 
 Corporations for profit: 
 
 Difference between membership in Exchanges and. . 38 
 
 Similarity of Exchanges to 18 
 
 Counsel fees as measure of damages 252 
 
 Counsel in Exchange proceedings : 
 
 Eight of Exchange and member to have 228 
 
 Who may be 228 
 
 Court, questions of law for the : 
 
 As to reasonability of contracts in restraint of trade. 179 
 As to what laws are within implied power of Ex- 
 change 80 
 
346 Index. 
 
 PAGE. 
 
 Courts do not distin^ish between incorporated and un- 
 incorporated Exchanges as to rules 84 
 
 Courts, review of decisions of Exchanges by. See Ee- 
 view of Decisions. 
 
 Courts' visitorial power over Exchanges 211 
 
 Creditors of Exchange: 
 
 Members as 28, 248 
 
 Right to sue member on claim against Exchange. ... 27 
 Eight to sue member on judgment against Exchange. 2Y 
 
 Eights upon dissolution 29 
 
 Creditors of members : 
 
 Eight to priority over equitable owner of seat 65 
 
 Eight to proceeds of sale of seat 55 
 
 Eight to reach member's interest in Exchange prop- 
 erty 23 
 
 Eight to reach seat by legal process 60 
 
 Criminal responsibility of Exchange for illegal rules .... 282 
 
 Cross-examination of witnesses in Exchange trials 227 
 
 Customers of brokers, rules ' binding on. See Non- 
 members. 
 Customs, are contracts made on Exchange subject to. 
 See Non-members. 
 
 D 
 
 Damages in case of wrongful expulsion, measure of. .... 252 
 Death of member, distribution of his assets on. See 
 
 Distribution of Assets. 
 Debtors on Exchange, distribution of assets of. See 
 
 Distribution of Assets. 
 
 Debts from Exchange to member 248 
 
 Decisions of Exchanges. See Review of Decisions. 
 Decrees of Exchanges. See Eeview of Decisions. 
 Defects in procedure of Exchange. See Eeview of 
 
 Decisions. 
 Defense is necessary, opportunity of 226 
 
Index. 347 
 
 PAGE. 
 
 Delegation of power : 
 
 To enact rules 193, 194, 195 
 
 To expel 112 
 
 Delivery, set-off as a 318, 320 
 
 Difference between : 
 
 Exchange and partnership 19 
 
 Membership in Exchange and in club, firm or cor- 
 poration 38 
 
 Eule and regulation. See Regulations. 
 Directors : 
 
 Administrative power of 195 
 
 Delegation of power of expulsion to 113 
 
 Enactment of rules by 193, 194, 195 
 
 Power to effectuate rules by regulation 202 
 
 Power to interpret rules by regulation 204 
 
 Power to pass regulations 201 
 
 Preliminary investigation by 224 
 
 Eight to act as prosecutors of members 225 
 
 Wrongful expulsion, liability for 250 
 
 Disciplinary power of Exchanges: 
 Over members. See Exchanges. 
 
 Over non-members 261 
 
 Discipline of members, See Expulsion and Suspension. 
 Discontinuance of action by virtue of arbitration contract 157 
 Discrimination in distribution of market quotations. .. . 288 
 Dishonorable conduct, rule as to. See Particular Eules. 
 Disrepute, rule as to bringing Exchange into. See Par- 
 ticular Eules. 
 Dissolution of Exchange -and its incidents : 
 
 As punishment for illegal rules 2YY, 2T8 
 
 Mode of : 
 
 Charter or constitutional provision for 29 
 
 Majority vote insufficient 30 
 
 Non-user as 30 
 
 Eetirement of member as 29 
 
 Suit in equity for involuntary 30 
 
 Unanimous consent of members 30 
 
348 Index. 
 
 PAGE. 
 
 Dissolution of Exchange and its incidents — Oontimied. 
 
 Eights of Exchange creditors upon 31 
 
 Eights of members as to Exchange property upon. . 31 
 
 Distribution of assets of Exchange on dissolution 31 
 
 Distribution of assets of members : 
 
 As a defense in case of wrongful expulsion 253 
 
 Eule giving Exchange creditors preference as to 
 
 proceeds upon settlement of " open trades " 128 
 
 Eule giving Exchange creditors preference as to pro- 
 ceeds of sale of seat 118 
 
 Applicability to non-Exchange transaction 124 
 
 Conflict with Bankruptcy Act 122 
 
 Inapplicability to debts arising prior to mem- 
 bership 128 
 
 Power of Exchange to enact 119 
 
 Trustee's right to proceeds where there are no Ex- 
 change creditors 55 
 
 E 
 
 Effect of arbitration rule on contract or claim 162 
 
 Elements of a property right 46, 50, 51 
 
 Enactment of rules. See Eules and By-laws. 
 
 England, Exchanges in 9 
 
 Equal operation of rules 86 
 
 Equitable ownership of seat : 65 
 
 Equitable proceeding against Exchange for illegal rules. 279 
 Equity : 
 
 Dissolution of Exchange in 30 
 
 Suing unincorporated Exchange in 27 
 
 Estoppel of member to set up invalidity of rule 233 
 
 Evidence : 
 
 Of knowledge of rules by non-member 265 
 
 To sustain Exchange decree, lack of 241 
 
 Exchanges : 
 
 Adjudications of. See Eeview of Decisions. 
 Administrative power over members. See Eules and 
 and By-laws. 
 
Index. 349 
 
 Exchanges — Continued. page. 
 
 Administrative power over non-members 253 
 
 America, Exchanges in 12 
 
 Are voluntary associations 18 
 
 Baltimore Produce Exchange 15 
 
 Baltimore Stock Exchange 14 
 
 Birth of Exchanges .' 1 
 
 Boston Stock Exchange 14 
 
 Buffalo Stock Exchange 14 
 
 Business, transacts no 17 
 
 By-laws of. See Eules and By-laws. 
 
 Chicago Board of Trade 14 
 
 Chicago Stock Exchange 14 
 
 Cincinnati Stock Exchange 14 
 
 Claims against, liability of members for 258 
 
 Classes of , 12 
 
 Clearing houses of. See Clearing Houses. 
 
 Cleveland Stock Exchange 14 
 
 Control of Exchanges by State. See Visitorial 
 
 Power. 
 Control of market quotations. See Market Quota- 
 tions. 
 
 Counsel in trials of members, right of Exchange to. 228 
 
 Creation of 18, 20 
 
 Criminal responsibility of 282 
 
 Decisions of. See Review of Decisions. 
 Decrees of. See Review of Decisions. 
 
 Definition of 16 
 
 Denver Stock Exchange 14 
 
 Detroit Produce Exchange 15 
 
 Detroit Stock Exchange 14 
 
 Difference between : 
 
 Exchange and partnership 19 
 
 Stock Exchange and Produce Exchange 12 
 
 Disciplinary power : 
 
 Over members. See Rules and By-laws. 
 
 Over non-members 261 
 
350 Index. 
 
 Exchanges — Continued. page. 
 
 Dissolution of. See Dissolution. 
 
 Dulutli Produce Exchange 15 
 
 Edinburgh Stock Exchange 12 
 
 Exhausting remedies within. See Keview of De- 
 cisions. 
 
 Fairs, similarity of Exchanges to 5 
 
 Glasgow Produce Exchange 12 
 
 Glasgow Stock Exchange 12 
 
 Good name of Exchange, rule as to involving 137 
 
 Guilds, similarity of Exchanges to 5 
 
 In America, Exchanges 12 
 
 In England, Exchanges 9 
 
 Indianapolis Stock Exchange 14 
 
 Judgments against 27 
 
 Judgments of. See Review of Decisions. 
 Judicial functions of. See Review of Decisions. 
 Jurisdiction, objection to Exchange decree because 
 of lack of. See Review of Decisions. 
 
 Kansas City Produce Exchange. 15 
 
 Kansas City Stock Exchange 14 
 
 Legal status of 16 
 
 Legislative power over members. See Rules and 
 By-laws. 
 
 Legislative power over non-members 259 
 
 Liabilities of. See Liabilities of Exchange. 
 
 Liverpool Produce Exchange 12 
 
 London Coal Exchange 12 
 
 London Corn Exchange 12 
 
 London Hide and Skin Exchange 12 
 
 London Hop and Malt Exchange 12 
 
 London Stock Exchange 11 
 
 Los Angeles Stock Exchange .* 14 
 
 Manchester Produce Exchange 14 
 
 Manchester Stock Exchange 12 
 
 Market quotations of Exchanges. See Market 
 Quotations. 
 
Index. 351 
 
 Exchanges — Continued. page. 
 
 Members of. See Members and Membership. 
 
 Members' power to bind 21 
 
 Membership in. See Members and Membership. 
 
 Merchants' Exchange of St. Louis 15 
 
 Middle Ages, Exchanges in the 1 
 
 Milwaukee Produce Exchange 15 
 
 Minneapolis Chamber of Commerce 15 
 
 Montreal Stock Exchange 14 
 
 New Jonathan's Exchange 11 
 
 New Orleans Produce Exchange 15 
 
 New Orleans Stock Exchange 14 
 
 New York Coffee Exchange 15 
 
 New York Cotton Exchange 15 
 
 New York Produce Exchange 15 
 
 New York Stock Exchange 13 
 
 Officers' power to bind 21 
 
 Omaha Produce Exchange 15 
 
 Organization of 18 
 
 Ownership of property 22 
 
 Partnership, similarity of Exchange to 18 
 
 Philadelphia Board of Stock Brokers 14 
 
 Philadelphia Stock Exchange 14 
 
 Pittsburgh Stock Exchange 14 
 
 Power of Exchange : 
 
 To adjudicate. See Eeview of Decisions. 
 To enact rules. See Rules and By-laws. 
 
 To hold property 22 
 
 To sue and be sued 24 
 
 To terminate membership. See Members and 
 Membership. 
 
 Power of member to bind 21 
 
 Power of officer to bind 21 
 
 Premises of Exchange, trespassing on 256 
 
 Procedure in trials. See Keview of Decisions. 
 
352 Index. 
 
 Exchanges — Continued. page. 
 
 Property of Exchanges : 
 
 How held 22 
 
 Market quotations as 289 
 
 Memhers interest in 22 
 
 Transfer of 24 
 
 Trusteeship of 24 
 
 Providence Stock Exchange 14 
 
 Quotations of. See Market Quotations. 
 Remedies against Exchanges, in case of erroneous 
 decision : 
 
 Classes of 242 
 
 Injunction 243 
 
 Mandamus 245 
 
 Responsibility to State : 
 
 Criminally ". 281 
 
 Dissolution for illegal rules 277, 278 
 
 Eichmond Stock Eachange 14 
 
 Eoyal Exchange 9 
 
 Rules of. See Rules and By-laws. 
 
 San Francisco Stock Exchange 14 
 
 Source of power to adjudicate 206 
 
 St. Louis Stock Exchange 14 
 
 Status of 16 
 
 Suit by and against Exchanges : 
 
 As between Exchange and member 28 
 
 Incorporated Exchange 25 
 
 In equity 27 
 
 Unincorporated Exchange ^ 25 
 
 Toledo Produce Exchange 15 
 
 Toledo Stock Exchange 14 
 
 Toronto Stock Exchange 14 
 
 Trade guilds, similarity of Exchanges to 5 
 
 Transacting business on floor, member has right of. 38 
 
 Transacts no business, Exchange 17 
 
 Trespassing on premises of 256 
 
Index. 353 
 
 Exchanges — Continued. page. 
 
 Visitorial power of State over. See Visitorial 
 Power. 
 
 Voluntary associations. Exchanges are 18 
 
 Washington Stock Exchange 14 
 
 Winnipeg Produce Exchange 15 
 
 Execution : 
 
 Right to reach member's interest in property of Ex- 
 change on execution 27 
 
 Eight to reach membership on execution 60 
 
 Exhausting remedies within Exchange. See Eeview of. 
 
 Decisions. 
 Expulsion and suspension of members : 
 
 Acts for which members may be expelled or sus- 
 pended 108 
 
 Adjudications as to. See Eeview of Decisions. 
 
 Arbitrary expulsion 39, 213 
 
 Causes of expulsion or suspension : 
 
 When covered by rules 108 
 
 When not covered by rules 116 
 
 Decisions expelling or suspending member. See 
 Eeview of Decisions. 
 
 Delegation of power to expel to committee 112 
 
 Directors' power to expel 112 
 
 Expelled or suspended members, rule as to trading 
 
 with 185 
 
 Enjoining expulsion 243 
 
 Forfeiting membership without trial . . „ 114 
 
 Injunction against threatened expulsion 244 
 
 Invalid expulsion. See Wrongful Expulsion, infra. 
 
 Invalid rule, expulsion for breach of 231 
 
 Power to expel for breach of void rule 231 
 
 Power to expel for breach not covered by rules 116 
 
 Procedure to be followed in. See Eeview of De- 
 cisions. 
 Remedies in case of erroneous decision. See 
 Remedies. 
 Com. Exc — 23. 
 
354 Index. 
 
 Expulsion and suspension of members — Continued. page. 
 Rules providing for, validity of. See Particular 
 
 Rules. 
 Validity of. See Review of Decisions. 
 Validity of rules providing for. See Particular 
 Rules. 
 
 Void rule, power to expel for breach of 231 
 
 Wrongful expulsion: 
 
 Liability of Exchange for 249 
 
 Liability of officers for 251 
 
 Objection to, by non-members 254 
 
 Remedies looking to correction of. See 
 Remedies, supra. 
 
 F 
 
 Eailyre to perform award of Arbitration Committee. .. . 173 
 Fairs, medisBval : 
 
 Influence on law merchant 7 
 
 Similarity to Exchanges 7 
 
 Federal Bankruptcy Act : 
 
 Conflict with rule as to preferences 122 
 
 Membership as property within 54 
 
 Feelings as measure of damages, injury to ; 252 
 
 Fees of counsel as measure of damages 252 
 
 Finality of decisions of Exchanges. See Review of De- 
 cisions. 
 
 Fining of members 116 
 
 Form of charges against member 225 
 
 Former jeopardy as defense to trial of member 227 
 
 Foundation of membership is contract 35 
 
 Frauds, non-performance of contract within Statute of. . 147 
 
 Future trading, legality of 314 
 
 O 
 
 Giving effect to rule by means of regulation 203 
 
 Good name of Exchange, rule as to acts involving 137 
 
Index, 355 
 
 PAGE. 
 
 Governing Committee. See Directors. 
 
 Gresham, Sir Thomas • 9 
 
 Gresham's Bourse 9 
 
 Guilds: 
 
 Similarity to Exchanges 6 
 
 Trade and merchant 5 
 
 H 
 
 Hanseatic League, The 4 
 
 Hearing in Exchange trials, necessity of 226 
 
 Hearsay evidence in Exchange trials 227 
 
 Hours, rule limiting business 190 
 
 Houses, clearing. See Clearing Houses. 
 
 How to amend rules 197 
 
 I 
 
 niegal contracts, non-performanoe of 149 
 
 Illegal rules of Exchanges : 
 
 As objection to decree of Exchange 231 
 
 Criminal responsibility for 282 
 
 Dissolution for enactment of 277, 278 
 
 Estoppel of member to set up illegality 233 
 
 How far binding on non-members 261 
 
 Illegality insisted on by non-members 253 
 
 Hlegal transactions, use of market quotations in 295 
 
 Illegality : 
 
 Of contracts in. restraint of trade 175 
 
 Of future trading 314 
 
 Of rules. See Illegal Eules. 
 
 Of system of clearing houses 316 
 
 Impartial hearing necessary in expulsion trial 228 
 
 Implied power to enact rules. 76 
 
 Implied power to enact particular rules. See Particular 
 Rules. 
 
 Impressed with public use, are market quotations 291 
 
 Inability to perform Exchange contracts 144 
 
356 Index. 
 
 PAGE. 
 
 Incidentals of membersliip. See Members and Mem- 
 
 bership. 
 Incorporated Exchanges. See Exchanges. 
 Injunction : 
 
 Against expelling member from Exchange 244 
 
 Against starting trial of member 244 
 
 Unauthorized use of quotations 285 
 
 Injury to feelings as a measure of damages 252 
 
 Insolvency of member: 
 
 Eight of trustee to call for assignment of seat. 57, 58, 59 
 Right of trustee to proceeds of sale of seat to the 
 
 exclusion of Exchange creditors 56 
 
 Eight of trustee to proceeds where there are no 
 
 Exchange creditors 55 
 
 Rules as to distribution of assets. See Distribution 
 of Assets. 
 
 Intangible things as property 46, 47, 48 
 
 Interference of State with illegal rules 282 
 
 Interpretation of rules : 
 
 As objection to decree of Exchange 234 
 
 By means of regulations 204 
 
 Invalidity : 
 
 Of contracts in restraint of trade 175 
 
 Of decrees of Exchanges. See Review of Decisions. 
 Of particular rules. See Particular Rules. 
 Of rules in general : 
 
 As objection to decree of Exchange 231 
 
 Estoppel of member to set up invalidity 233 
 
 Expulsion for breach of invalid rule 231 
 
 Invalidity insisted on by non-members 253 
 
 Tests of validity 83 
 
 Investigation of charges, preliminary 224 
 
 Involuntary dissolution of Exchange : 
 
 Eor enactment of illegal rules 277, 278 
 
 In general 29 
 
 Involving good name of Exchange, rule as to 137 
 
 Irregularities in procedure. See Review of Decisions. 
 
Index. 357 
 
 ^ PAGE. 
 
 Jeopardy twice, putting member into S2Y 
 
 Joining other Exchanges, rule as to. 192 
 
 Judgment creditors of Exchange or member. See Cred- 
 itors. 
 
 Judgment against Exchanges: 
 
 How satisfied 2Y 
 
 Liability of members on 27 
 
 Judgments of Exchanges. See Eeview of Decisions. 
 
 Judicial functions of Exchanges. See Review of De- 
 cisions. 
 
 Jurisdiction of courts : 
 
 Arbitration rule ousting jurisdiction 153 
 
 Basis of jurisdiction to review decisions 209, 210 
 
 Lack of jurisdiction as an objection to Exchange 
 decree. See Eeview of Decisions. 
 
 Jury trial in Exchange trials, right of 227 
 
 K 
 
 Kinds of clearing houses 307 
 
 Kinds of Exchanges 12 
 
 Knowledge of rules by non-members, necessity of . . . .264, 265 
 
 L 
 
 Lack of jurisdiction as an objection to Exchange decree. 
 See Review of Decisions. 
 
 Lack of rule as an objection to Exchange decree 236 
 
 Law merchant, iniluence of mediaeval fairs on 7 
 
 Law, rules must not be contrary to £3 
 
 Legal process: 
 
 Liability of membership 60 
 
 To reach member's interest in Exchange property. . . 27 
 
 Legal status of Exchange 16 
 
 Legal status of membership. See Members and Mem- 
 bership. 
 
358 Index. 
 
 PAGE. 
 
 Legislative power of Exchanges: 
 
 • Over members. See Eules and By-laws. 
 
 Over non-members 259 
 
 Levy of execution: 
 
 On member's interest in Exchange property 27 
 
 Of membership .• • 61, 62 
 
 Levy of tax on membership 63 
 
 Liabilities of Exchange : 
 
 Acts in restraint of trade, criminal respdnsibility for. 282 
 
 Agents, liability for acts of 256 
 
 Damages in case of wrongful expulsion 252 
 
 Debts from Exchange to members 248 
 
 Discipline, liability for wrongful 248 
 
 Dissolution of Exchange for illegal rules 277, 278 
 
 Equitable proceedings against Exchange for illegal 
 
 rules 279 
 
 Expulsion, liability for wrongful 252 
 
 Members, liabilities to: 
 
 Distribution of proceeds of seat as a defense in 
 
 wrongful expulsion 253 
 
 Invasion of property rights 248 
 
 Wrongful expulsion, liability for 248 
 
 Non-members for acts of agents or servants, lia- 
 bility to 256 
 
 Property rights of members, invasion of 248 
 
 Quo warranto for illegal rules 279 
 
 Eules in restraint of trade, criminal liability for. . . . 282 
 
 Servants, liability for acts of 256 
 
 State, responsibility to the 276 
 
 *■ Tort liability for acts of servants 256 
 
 Visitorial power of State over Exchanges 211 
 
 Wrongful expulsion, liability for 253 
 
 Liabilities of members : 
 
 On claims against Exchange 27 
 
 On judgments against Exchange 27 
 
Index. 359 
 
 PAGE. 
 
 License : 
 
 Elements of 41 
 
 Identity with privilege 34 
 
 Membership in Exchange as. See Members and 
 Membership. 
 
 Eevocability of 41 
 
 Theatre ticket as .' 42 
 
 Transferability of 45 
 
 Licensees of market quotations 288 
 
 Limitations : 
 
 On members' commercial activity. See Particular 
 
 Eules. 
 On pov^er to pass rules. See Eules and By-laws. 
 On transfer of membership 49 
 
 Loss of prospective profits as measure of damages 252 
 
 M 
 
 Majority vote: ' 
 
 Insufficient for dissolution 29, 30 
 
 Necessary for enactment of a rule 193, 194 
 
 Mandamus to compel restoration to membership 246 
 
 Margins : 
 
 Applicability of arbitration rule to disputes as to.l69, 170 
 
 Eule providing for hypothecating securities on 275 
 
 Market quotations: 
 
 Blackboard is no publication, posting on 300 
 
 Continuous quotations 302, 303 
 
 Control of quotations by Exchange : 
 
 Conditions on licensees, right of imposing 288 
 
 Discrimination in distribution of 147, 288, 303 
 
 Property, market quotations as 289 
 
 Eefusal to bucket-shops 294 
 
 Eefusal to publish at all 286, 303 
 
 Illegal use by Exchange of no effect on its rights 295 
 
 Not impressed with public use 291 
 
 Not subject of copyright 297 
 
360 Index. 
 
 Market quotations — Continued. page. 
 
 Protection by injunction . . '. 285, 290 
 
 Publication of quotations : 
 
 Terminates control 296, 297 
 
 What amounts to 29Y-303 
 
 Measure of damages in case of wrongful expulsion. . .252, 253 
 Members and membership : 
 
 Actions of members against Exchange. See Lia- 
 - bilities of Exchange. 
 
 Activities of members, rules restricting. See Par- 
 ticular Rules. 
 Admission to membership : 
 
 Compelling admission 95, 96, 97 
 
 Modes of admission 44, 95 
 
 Validity of rules regulating 93 
 
 Amendments of rules, members bound by 197 
 
 Application for admission. See Admission, supra. 
 As a license, membership. See Legal Status, infra. 
 As a property right, membership. See Legal Status, 
 
 infra. 
 Assets of member. See Distribution of Assets. 
 
 Assignability of seat 66 
 
 Assignment of seat on bankruptcy, rules as to. See 
 Particular Rules. 
 
 Attachment of membership 60, 61 
 
 Bankruptcy Act, is membership property within .... 54 
 Bankruptcy of member: 
 
 Distribution of assets. See Distribution, of 
 
 Assets. 
 Trustee's right to call for assignment of seat. 
 
 57, 59, 60 
 
 Trustee's right to proceeds of sale of seat 55 
 
 Certificate of membership, presenting unimpaired. 44, 96 
 Charges against members : 
 
 Form of 225 
 
 Who may bring. 225 
 
Index. 361 
 
 Members and membership — Continued. page. 
 
 Commercial activities of members, rules restricting. 
 
 See Particular Eules. 
 Commercial conduct of members, rule as to. See 
 
 Particular Eules. 
 Conduct of members, rule as to. See Particular 
 Rules. 
 
 Constructive trust of membership 65 
 
 Contract is foundation of membership 35 
 
 Corporation for profit, difference between member- 
 ship in Exchange and 38 
 
 Creditors of members. See Creditors of Members. 
 Customers of members, how far rules binding on. 
 
 See Non-members. 
 Death of member, distribution of assets on. See 
 Distribution of Assets. 
 
 Definition of membership 34 
 
 Difference between membership in Exchange and 
 
 club, firm or corporation 38 
 
 Discipline of members. See Expulsion and Suspen- 
 sion. 
 Dissolution of Exchange, member's interest in prop- 
 erty upon 31, 32 
 
 Distribution of assets of member. See Distribution 
 
 of Assets. 
 Duty toward Exchange, what is breach of member's. 
 
 236, 237 
 
 Equitable owner of seat 65 
 
 Estoppel of member to allege invalidity of rule 233 
 
 Execution, right to reach seat on '. . . 60 
 
 Expulsion and suspension of members. See Expul- 
 sion and Suspension. 
 
 Eining of members 117 
 
 Incidentals of membership 35 
 
 Insolvency of member. See Banruptcy, supra. 
 Intangibility of membership 48 
 
262 The Law of Commeecial Exchanges. 
 
 laws which can ever affect in any way a non- 
 member are those which regulate the transaction 
 of business upon such Exchanges. Such rule or 
 by-law may provide, for the charging of a par- 
 ticular rate of interest for money advanced to a 
 customer, or the payment of certain rates of com- 
 mission ; the method of substituting and offsetting 
 trades; the power of such member to close out 
 trades standing in the name of customers; the 
 time of payment; the mode of delivery; the re- 
 sponsibility of members to fellow menibers and 
 customers in case of insolvency, as well as many 
 more. 
 
 A person who employs a member of an Ex- 
 change to execute a transaction thereon for him, 
 unnecessarily authorizes the latter to enter into 
 contracts in his behalf with other members. 
 Ordinarily, when parties contract with one an- 
 other, all the terms of that agreement are set down 
 in writing and it is a fundamental legal propo- 
 sition that thereafter no party thereto can by 
 parol evidence vary the terms of that agreement, 
 or seek to show that his intention was any differ- 
 ent than is imported by the plain terms thereof.^" 
 While this proposition is still well settled, yet, in 
 the course of time and with the growth and 
 progress of commercial dealings generally, various 
 exceptions have been ingrafted upon the legal 
 doctrine. Among the most prominent of such ex- 
 ceptions is that which holds that the " usage " or 
 
 '" See 17 Cyo. 567, title " Evidence," and cases there cited. 
 
Liability of Exchange, Its Officers, Etc. 263 
 
 ' ' customs ' ' current in any particular trade, occu- 
 pation or market, when general and well estab- 
 lished, and not unreasonable or unlawful, or in 
 contravention of the express terms of a contract, 
 constitute a part of every contract made with ref- 
 erence to such trade, occupation or market and are 
 presumed to enter into the intention of all parties 
 to such contracts.*' 
 
 In no field of trade or business is this principle 
 more settled, and, in fact, more necessary as a 
 practical proposition than in transactions upon 
 our Exchanges. The methods of transacting 
 business thereon render absolutely essential the 
 introduction of the usages and customs prevailing 
 thereon and the rules or by-laws thereof govern- 
 ing such transactions, for otherwise, such trans- 
 actions could not possibly give rise to a full and 
 intelligible business agreement. The volume of 
 trading in securities and agricultural commodities 
 upon our modern Exchanges has grown to such 
 proportions and time is so largely of the essence 
 in the execution of such transactions that no op- 
 portunity is afforded for the making of formal 
 and comprehensive agreements as in other lines 
 of trade. An offer to buy or sell is made and 
 accepted by the utterance of hardly more than a 
 few words or the sign of the hand, although the 
 transaction may involve thousands of dollars in 
 value. At best, the only writing which takes 
 
 " See 9 Cyc. 582, title " Contracts ; " also Dos Passos, Stock- 
 brokers and Stock Exchanges (2d ed.), vol. I, p. 410. 
 
364 Index. 
 
 Members and membership — Contimied. page. 
 
 Status of membership. See Legal Status, supra. 
 Suspension of members. See Expulsion and Sus- 
 pension. 
 
 Taxation of seat 63 
 
 Termination of membership arbitrarily 39 
 
 Transfer of membership: 
 
 Fact of transferability 44 
 
 Limitations on right of transfer 49 
 
 Presenting unimpaired certificate 44 
 
 To trustee in bankruptcy 59, 60 
 
 Transferability as bearing on legal status of 
 
 seat 49 
 
 Trust of seat 65 
 
 Trustee in bankruptcy of member: 
 
 Eight to call for assignment of seat 59, 60 
 
 Eight to proceeds of sale of seat 55, 56 
 
 Uncommercial conduct of member, rule as to. See 
 
 Particular Eules. 
 Villification of members, rule as to. See Particular 
 Eules. 
 
 Merchants' guilds, similarity of Exchanges to 6 
 
 Merits of Exchange trial, review of. See Eeview of , De- 
 cisions. 
 
 Methods of amendment of rules 19Y 
 
 Minimum rates of commission rule 180 
 
 Mode of operation of clearing houses 307 
 
 Modes of amendment of rules 197 
 
 Monopoly of market quotations. See Market Quotations. 
 
 N 
 
 Nature of membership. See Members and Membership. 
 
 Non-members : 
 
 Administrative power of Exchanges over 260, 261 
 
 Bringing charges against members 225 
 
 Disciplinary power of Exchanges over 260 
 
Index. 365 
 
 Non-members — Continued. page. 
 How far they are bound by rules and customs of 
 Exchanges in making contracts thereon: 
 Bound by rules of which they have knowl- 
 edge 264, 265 
 
 Bound by rules of which they have no knowl- 
 edge 265, 266 
 
 Classification of rules for this purpose 261, 262 
 
 Difference between customs and rules 260, 261 
 
 Exception to general doctrine in case of rules 
 
 changing contract 273 
 
 Exception to general doctrine in case of rules 
 
 contrary to law 271 
 
 Exception to general doctrine in case of un- 
 reasonable rules 270, 271 
 
 Legislative power of Exchanges over 261 
 
 Objection to expulsion of member 255 
 
 Objection to invalid rule 253 
 
 Trespassing on Exchange premises 256 
 
 Non-performance of Arbitration Committee award 172 
 
 Non-performance of business obligations, rule as to. See 
 
 Particular Eules. 
 Non-publication of quotations. See Market Quotations. 
 
 Non-user as a dissolution of Exchange 30 
 
 Notice of trial is necessary in Exchange trials 226 
 
 O 
 
 Objections to decisions of Exchanges. See Review of 
 
 Decisions. 
 Offsetting trades. See Clearing Houses. 
 
 Officers' liability for wrongful expulsion 251 
 
 Officers' power to bind Exchange 21 
 
 Open trades, rule giving preference as to proceeds of . . . . 128 
 
 Operation of clearing houses 307 
 
 Operation of rules : 
 
 Eetrospectively 86 
 
 Unequally 86 
 
366 Index. 
 
 PAGE. 
 
 Opportunity of defense necessary in Exchange trials . 226, 227 
 Oral contracts within Statute of Frauds, non-perform- 
 ance of 147 
 
 Organic law of Exchanges 72 
 
 Organization of Exchanges 18 
 
 Origin of Exchanges: 
 
 In America 12 
 
 In England 9 
 
 In general 1 
 
 Origin of stock certificates 8 
 
 Origin of warehouse receipts 8 
 
 Ousting jurisdiction of courts by arbitration rule. ..160, 161 
 
 Ownership of property by Exchange 22 
 
 P 
 
 Partnership : 
 
 Difference between membership in Exchange and 
 
 in 18, 19, 22, 23 
 
 Similarity of Exchange to 18 
 
 Particular rules and by-lays. See also Eules and By- 
 laws in General. 
 Admission, rule regulating: 
 
 Modes of admission provided for 95 
 
 Power of courts to override rule 95 
 
 Eight of Exchange to enact 93, 94 
 
 Affiliation with other Exchanges, rule prohibiting. . 192 
 Arbitration rule. See Compulsory Arbitration Eule, 
 infra. 
 
 Bucket-shop rule 187 
 
 Business obligations, rule as to performance of. See 
 
 Uncommercial Conduct Eule, infra. 
 Commercial conduct rule. See Uncommercial Con- 
 duct Eule, infra. 
 Commission rule 180 
 
Index. 367 
 
 Particular rules and by-laws — Continued. page. 
 
 Compulsory arbitration rule: 
 
 Charter provision as to voluntary arbitra- 
 tion 158, 159, 171 
 
 Distinction between refusal to arbitrate and to 
 
 meet obligation 156 
 
 Effect of rule upon action on claim 161 
 
 Margin disputes, applicability to 168 
 
 Legality of 159 
 
 Eefusal to abide by award 156, 157, 172,. 173 
 
 Revocation by rule by member 167 
 
 Within express or implied power of Exchange . . 158 
 
 Conduct of members, rule regulating 132 
 
 Comer rule 192 
 
 Contracts of members, rule as to non-performance 
 
 of. See Uncommercial Conduct Rule, infra. 
 Decorum on Exchange premises, rule regulating. . . 132 
 Dishonorable conduct, rule as to. See Uncommer- 
 cial Conduct Rule, infra. 
 
 Disrepute, rule as to bringing Exchange into 137 
 
 Expelled members, rule as to trading with 185 
 
 Expulsion and suspension, rules providing for: 
 
 Acts which may be made ground of 108 
 
 Delegating power of expulsion to directors 112 
 
 Express power to enact 100, 107, 108 
 
 Implied power to enact in case of incor- 
 porated 101, 108 
 
 Implied power to enact in case of unincor- 
 porated 106, 108 
 
 Necessity of such rules 99, 100 
 
 Eines and fining, rules providing for 116 
 
 Forfeiture without trial, rule providing for 114 
 
 Good name of Exchange, rule as to involving 137 
 
 Hours of trading, rule regulating 190 
 
 Involving good name of Exchange, rule as to 137 
 
 Joining other Exchanges, rule prohibiting 192 
 
 Minimum rates of commission rule 180 
 
368 Index. 
 
 Particular rules and by-laws — Continued. page. 
 
 Non-performance of business obligations, rule as to. 
 
 See Uncommercial Conduct Rule, infra. 
 Preference of Exchange creditors as to proceeds of 
 
 open trades, rule establising 128 
 
 Preference to Exchange creditors as to proceeds of 
 
 sale of seat, rule establishing 118 
 
 Applicability to non-Exchange transactions.. .. 124 
 Applicability to non-Exchange transactions by 
 
 express provision 127 
 
 Conflict with Bankruptcy Act 122 
 
 Inapplicability to debts arising prior to member- 
 ship 128 
 
 Power to enact 118 
 
 Procedural rules must be followed in trials 221 
 
 Prohibiting solicitation of business, rule 189 
 
 Rate of commissions, rule establishing 180 
 
 Reinstatement, rules governing 97 
 
 Solicitation of business, rule prohibiting 189 
 
 Suspended members, rule as to trading with 185 
 
 Trades, rule prohibiting solicitation of 189 
 
 Trading with expelled members, rule as to 185 
 
 Uncommercial conduct rule: 
 
 Application to transactions off Exchange floor. . 144 
 
 Application to void and unlawful contracts. . . . 146 
 
 Power to pass 137, 138 
 
 When non-performance is due to financial in- 
 ability to 144 
 
 Uniform commission rule 180 
 
 Vilification of fellow-member rule 136 
 
 Pledge of seat 66 
 
 Posting quotations on board as publication 300 
 
 Powers of Exchanges: 
 
 To adjudicate. See Review of Decisions. 
 
 To enact rules. See Rules and By-laws. 
 
 To hold property 22 
 
Index. 369 
 
 Powers of Exchanges — Contimied. page. 
 
 To sue and be sued 24 
 
 To terminate membership. See Members and 
 Membership. 
 
 Power of members to bind Exchange 21 
 
 Preferences to members. See Distribution of Assets. 
 
 Prejudice of prosecutor as defense in Exchange trial. . . . 225 
 
 Preliminary investigation of charges 224 
 
 Preventive remedies of members against erroneous 
 
 decisions 242 
 
 Principals of brokers. See Non-members. 
 
 Priorities to members. See Distribution of Assets. 
 
 Private property, are market quotations 289, 291 
 
 Privileges of members. See Members and Membership. 
 
 Procedure : 
 
 In amending rules 197 
 
 In Exchange trials. See Eeview of Decisions. 
 
 Proceeds of sale of seat. See Distribution of Assets. 
 
 Process. See Legal Process. 
 
 Produce Exchanges. See Exchanges. 
 
 Profits as measure of damages, loss of 252 
 
 Property : 
 
 Applicability of term to intangible things 46, 48 
 
 Elements of a property right 46 
 
 Pranchises, easements, patents as 48 
 
 Meaning of the term 48 
 
 Membership as. See Members and Membership. 
 
 Quotations as. See Market Quotations. 
 
 Senses in which term is used 45 
 
 Property of Exchange : 
 
 How held 22 
 
 Member's interest therein: 
 
 Assignability of interest 23, 24 
 
 Attachmnt of interest 60, 61 
 
 Attachment of interest 60, 61 
 
 Ownership of 22 
 
 Quotations as 289 
 
 Com. Exc — 24, 
 
370 Index. 
 
 Property of Exchange — Continued. page. 
 
 Transfer of 33, 24 
 
 Trusteeship of 59, 60, 65 
 
 Property rights of member : 
 
 As basis of court's review of decisions 209 
 
 Invasion of, by Exchange 248 
 
 Prosecutor in Exchange trials 225 
 
 Public interest in market quotations 291 
 
 Publication of market quotations. See Market Quota- 
 tions. 
 
 Q 
 
 Questions of law for the court: 
 
 As to reasonableness of contracts in restraint of 
 
 trade 179 
 
 As to what laws are within implied powers of Ex- 
 change 79 
 
 Quo warranto against Exchange for illegal rules. . . . 277 
 Quotations. See Market Quotations. 
 
 R 
 
 Rates of commission, rule as to 180 
 
 Eealty of Exchange. See Property of Exchange. 
 
 Reasonable restraint of trade 175 
 
 Reasonable, rules must be 87, 89 
 
 Receipts, origin of warehouse 8 
 
 Refusal to arbitrate distinguished from uncommercial 
 
 conduct 172 
 
 Refusal to meet award of Arbitration Committee. ...... 172 
 
 Refusal to publish quotations. See Market Quotations. 
 Regulating admission to Exchange. See Particular 
 
 Rules. 
 Regulations : 
 
 Carrying rules into effect by means of 204 
 
 Classes of 201 
 
 Interpreting rules by means of 204 
 
 Power to pass 201 
 
Index. 371 
 
 Eeinstatement to membership: page. 
 
 After illegal expulsion 98 
 
 After valid expulsion 97 
 
 Necessity of application for, after expulsion 218 
 
 Eemedies of member in case of erroneous decision of 
 Exchange : 
 
 Classes of 242 
 
 Injunction : 
 
 Against expelling member 243 
 
 Against starting expulsion proceedings 244 
 
 Mandamus 245 
 
 Eemedies within Exchange, exhausting. See Review of 
 Decisions. 
 
 Bes adjudicaia plea in Exchange trials 227 
 
 Eesponsibility of the Exchange: 
 
 Criminially 281 
 
 To the State, in proceedings for dissolution 276 
 
 Eestoration to membership by mandamus 245 
 
 Eestorative remedies of members in case of erroneous 
 
 decisions 242 
 
 Eestraint of trade : 
 
 Contracts in. See Contracts in Eestraint of Trade. 
 Criminal responsibility of Exchange for rules in. .. 281 
 Eestrictions on members. See Particular Eules. 
 
 Eetrospective operation of rules 86 
 
 Eeview of decisions of Exchanges by courts : 
 
 Adjudicating power of Exchanges, source of 206 
 
 Basis of court's jurisdiction to review 209 
 
 Charges against members: 
 
 Form of .'. 225 
 
 Who may bring 225 
 
 Counsel in Exchange trials 227, 228 
 
 Defects in procedure. See Procedural Objection, 
 infra. 
 
 Defense is necesasry, opportunity of 226 
 
 Enjoining the trial 243 
 
372 Index. 
 
 PAGE. 
 
 Review of decisions of Exchanges by courts — Continued. 
 
 Estoppel of member to set up invalidity of rule. . . . 233 
 Evidence necessary to sustain decision. See Merits, 
 
 infra. 
 Exhausting remedies within associations: 
 
 Enjoining the trial 216 
 
 Exception to the general rule 219 
 
 General rule as to 215 
 
 Necessity of appeal to higher body 216, 217 
 
 Necessity of application for reinstatement 218 
 
 Eemedy in case of exception 243 
 
 Finality of decisions, grounds for attacking 220 
 
 Form of charges against member 225 
 
 Former jeopardy as a defense 22Y 
 
 Grounds for attacking finality of decisions 220 
 
 Hearing is necessary, fair and impartial 223, 226 
 
 Interpretation of rule as ground of objection 234 
 
 Invalidity of rule as ground of objection 231 
 
 Irregularities in procedure. See Procedural Ob- 
 jection, infra. 
 
 Jurisdiction of courts to review, basis of 209 
 
 Jurisdictional objection to finality of decision : 
 
 Interpretation of rule as ground of objection. . . 234 
 
 Invalidity of rule as ground of objection 231 
 
 Lack of any rule as ground of objection 236 
 
 Waiver of lack of jurisdiction 230 
 
 Lack of evidence to sustain decision 238 
 
 Lack of rule as ground of objection 236 
 
 Merits of the case, objection on the : 
 
 General rule 238 
 
 Exception thereto 241 
 
 Misinterpretation of rule as ground of objection. . . . 234 
 
 Non-member's right to bring charges 225 
 
 Notice of trial is necessary 226 
 
 Objections to finality of decisions 220 
 
 Opportunity of defense is necessary 226 
 
 Preliminary investigation 224 
 
Index. 373 
 
 PAGE. 
 
 Review of decisions of Exchanges by courts — Continued. 
 
 Presentation of defense, opportunity of 226 
 
 Procedural objections to finality of decisions: 
 
 Absence of specific rules as to procedure 
 necessitates notice, opportunity of defense 
 
 and hearing 226, 227 
 
 Counsel for both sides, questions as to 22Y, 228 
 
 Form of charges. . . » 225 
 
 Notice of hearing 226 
 
 Preliminary investigation 224 
 
 Presentation of defense 226 
 
 Prosecutor 225 
 
 Rules as to procedure must be followed 221 
 
 Technical procedure unnecessaiy 227 
 
 Trial by jury 227 
 
 Waiving defects in procedure 229 
 
 Witnesses 227 
 
 Prosecutor, who may be 225 
 
 Remedies in cases of erroneous decision : 
 
 Classes of 242 
 
 Injunction 243 
 
 Handamus 245 
 
 Source of adjudicating power of Exchanges 206 
 
 Technical procedure unnecessary 227 
 
 Trial by jury is unnecessary 227 
 
 Trial of member, enjoining 216 
 
 Waiver : 
 
 Of lack of jurisdiction 230 
 
 Of procedural defects. 229 
 
 Witnesses in trials 227 
 
 Revocability : 
 
 Of license 43 
 
 Of membership 43, 213 
 
 Revocation : 
 
 Of contract to arbitrate 155 
 
 Rights of action against Exchange. See Liabilities of 
 Exchange. 
 
374 Index. 
 
 PAGE. 
 
 Eights of member as such. See Members and Member- 
 ship. 
 
 Rights of membership are founded on contract 35 
 
 " Eings," definition of 309 
 
 " Einging up " trades, definition of 308 
 
 Eules and by-laws in general: 
 
 Adjudications on rules. See Eeview of Decisions. 
 Admission of members, rules as to. See Particular 
 
 Eules. 
 Amendments of rules: 
 
 How far binding on members 19Y 
 
 Procedure in 197 
 
 Validity of 198 
 
 Arbitration rule. See Particular Eules. 
 Broker's principals, how far rules bind. See Non- 
 members. 
 
 Bucket-shop rule 187 
 
 Commission rule. See Particular Eules. 
 Compulsory arbitration rule. See Particular Eules. 
 
 Construing rules by means of regulations 204 
 
 Construction of rules as ground of objection to Ex- 
 change decree 234 
 
 Contrary to law, rules not to be 83 
 
 Contrasted with regulations. See Eegulations. 
 
 Corner rule 192 
 
 Courts do not distinguish between incorporated and 
 
 unincorporated as to rule-making power 87 
 
 Customers of brokers, how far rules bind. See Non- 
 members. 
 Decisions of Exchange on its rules. See Eeview of 
 
 Decisions. 
 " Decorum of members, rule as to. See Particular 
 Eules. 
 Difference between rules and regulations. See 
 Eegulations. 
 
Index. 375 
 
 Rules and by-laws in general — Continued. page. 
 
 Enactment of rules : 
 
 Assumption of power by directors 195 
 
 Delegation of power in absence of charter 
 
 provision 195 
 
 Express delegation of power in charter or con- 
 stitution 193 
 
 Power to enact resident in majority of mem- 
 bers 194 
 
 Equal operation of rules 86 
 
 Ex post facto rules 192 
 
 Express power to pass rules : 
 
 In certain specified cases Y6 
 
 In general 72, 77 
 
 Expulsion and suspension, rules as to. See Par- 
 ticular Eules. 
 Fines and fining, rules as to. See Particular Eules. 
 Forfeiture without trial, rules as to. See Particular 
 Eules. 
 
 Hours of trading, rules as to 190 
 
 Illegal rules : 
 
 Criminal responsibility for 282 
 
 Interference with their enforcement by State. . 276 
 Implied power : 
 
 To pass rules or by-laws in general 76 
 
 Whether rule is within such power is question 
 
 for court 80 
 
 Interpretation of rule of objection to Exchange de- 
 cree 234 
 
 Interpreting rules by means of regulations 204 
 
 Invalidity of rules: 
 
 As objection to Exchange decree 231 
 
 Estoppel of member to set up 233 
 
 Non-members cannot raise question 253 
 
 Joining other Exchanges, rule as to 192 
 
 Knowledge of rules by non-members 264, 265 
 
 Lack of rule as objection to Exchange decree 116 
 
376 Index. 
 
 Rules and by-laws in general — Continued. page. 
 
 Limitations on power to pass 77 
 
 Must be within power of Exchange and not illegal. . 79 
 
 Must not be unreasonable 89 
 
 Must not disturb vested rights 86 
 
 Must not operate retrospectively 86 
 
 Must not operate unequally 86 
 
 Non-members : 
 
 Objection to validity of rule 253 
 
 Subjection to rules. See Non-members. 
 Operation of rules : 
 
 Eetrospectively 86 
 
 Unequally 86 
 
 Particular rules. See Particular Rules. 
 Power of courts as to rules is no broader in incor- 
 porated than unincorporated bodies 87 
 
 Power of Exchange to govern members, need of. .71, 72 
 Power to enact rules. See Enactment, supra. 
 Preferences to members, rule as to. See Particular 
 
 Rules. 
 Principles of members, how far rules bind. See 
 
 Non-members. 
 Regulations versus rules. See Regulations. 
 Reinstatement, rules as to. See Particular Rules. 
 Restraint of trade, criminal responsibility for rules 
 
 in 282 
 
 Retrospective rules 86 
 
 Solicitation of business, rules as to 189 
 
 Source of power of Exchange to goveyn members and 
 
 make rules 72 
 
 Specific rules. See Particular Rules. 
 
 State interference with illegal rules 281, 282 
 
 Trading with expelled or suspended member, rule as 
 to. See Particular Rules. 
 
 Ultra vires rules 82 
 
 Unequal operation of rules 86 
 
 Unreasonable rules 89 
 
Index. 377 
 
 Rules and by-laws in general — Continued. page. 
 
 Vested rights, rule must not disturb 192 
 
 Vilification of members, rule as to 136 
 
 S 
 
 Sale of quotations to one company as publication 286 
 
 Sale of seat on bankruptcy 55, 56 
 
 Satisfaction of judgment against Exchange 27 
 
 Seat in Exchange. See Membership. 
 
 Self-governing power of Exchange Y2, Y3 
 
 Servants, liability of Exchange for acts of 256 
 
 Settling trades. See Clearing Houses. 
 
 Set-off as a delivery of the goods 318, 320 
 
 Similarity of Exchanges to : 
 
 Merchant guilds 6 
 
 Partnerships and corporations for profit 18 
 
 Solicitation of business, rule regulating 189 
 
 Source of membership is contract 35 
 
 Source of power of Exchange to adjudicate 206 
 
 Specific rules. See Particular Rules. 
 
 State : 
 
 Responsibility of Exchange to State: 
 
 Criminally 282 
 
 In dissolution proceedings for illegal rules. .27Y, 2Y8 
 Visitorial power of State. See Visitorial Power. 
 
 Status : 
 
 Of commercial Exchanges 16 
 
 Of membership. See Members and Membership. 
 
 Statute of Frauds, non-performance of contract within 
 
 the 147 
 
 Stock brokers, origin of term 10 
 
 Stock certificates, origin of 8 
 
 Stock Exchanges. See Exchanges. 
 
 Substitution of trades. See Clearing Houses. 
 
 Sufficiency of evidence to sustain Exchange decree. .239, 240 
 
 Suing member on claim against Exchange 27 
 
378 Index. 
 
 Suit by and against Exchange : page. 
 
 As between Exchange and member 28 
 
 For dissolution of Exchange 30 
 
 In equity 30 
 
 Incorporated Exchange 25 
 
 Unincorporated Exchange 25 
 
 Suspension of member. See Expulsion and Suspension. 
 
 T 
 
 Taxation of seat 63 
 
 Technical procedure unnecessary in trials 227 
 
 Telegraph wires as publications, placing quotations on. . 299 
 Termination of membership by Exchange arbitrarily. .39, 213 
 Testimony in Exchange trials. Defendant's right to 
 
 introduce 226 
 
 Theatre ticket as a license 42 
 
 Ticker service as publication of market quotations 299 
 
 Tort liability of Exchange 256 
 
 Trade, contracts in restraint of. See Contracts in Ee- 
 
 straint of. 
 Trade guilds. See Guilds. 
 Trades : 
 
 Clearing trades. See Clearing Houses. 
 
 Closing out open trades of insolvent member, rule as 
 
 to. See Particular Rules. 
 OfFsetting trades. See Clearing Houses. 
 Hinging of trades. See Ringing of Trades. 
 
 Rule prohibiting solicitation of 189 
 
 Settling of trades. See Clearing Houses. 
 Substitution of trades. See Clearing Houses. 
 Trading : 
 
 For future delivery, legality of 314 
 
 Hours, rule establishing 190 
 
 Rule prohibiting solicitation of 189 
 
 With bucket shops, rule as to 187 
 
 With expelled or suspended members 185 
 
Index, 379 
 
 Transaction of business: page. 
 
 By Exchange 17 
 
 By member on Exchange floor 35 
 
 Transfer of Exchange property 24 
 
 Transfer and transferability of seat. See Members and 
 Membership. 
 
 Transferability of license 45 
 
 Trespassing on Exchange premises 256 
 
 Trial, rule providing for forfeiture without 114 
 
 Trial in Exchange expulsion, necessity of 226 
 
 Trial by jury unnecessary in Exchange proceedings 227 
 
 Trial of member, enjoining 244 
 
 Trials of members. See Eeview of Decisions. 
 
 Trust of seat, constructive 65 
 
 Trustee in bankruptcy of member: 
 
 Eight to call for assignment of seat 57, 58, 59 
 
 Eight to proceeds of sale of seat 55, 56 
 
 Trusteeship of Exchange property 24 
 
 U 
 
 Ultra vires rules of Exchange 82 
 
 Unanimous consent to dissolution of Exchange 30 
 
 Uncommercial conduct: 
 
 Difference between failure to arbitrate and 172 
 
 Eule as to. See Particular Eules. 
 
 Unenforceable contracts, non-perf romance of 146 
 
 Uniform rate of commission rule. See Particular Eules. 
 
 Unimpaired certificate of membership, presenting. . . .44, 95 
 
 Unincorporated Exchanges. See Exchanges. 
 
 Unlawful contracts, non-perf orinance of 149 
 
 Unlawful rules : 
 
 Criminal responsibility for 282 
 
 Dissolution at suit of State for enactment of 277, 278 
 
 Unreasonable restraint of trade 179 
 
 Unreasonable rules : 
 
 How far binding on non-members 253 
 
 Invalidity of • 89 
 
380 Index. 
 
 PAOE. 
 
 Usage on Exchange, how far non-members and contracts 
 bound by. See Non-members. 
 
 V 
 
 Validity of amendments 197 
 
 Validity of arbitration contracts 152 
 
 Validity of contracts n restraint of trade 1Y9 
 
 Validity of decrees of Exchanges. See Review of De- 
 cisions. 
 Validity of particular rules. See Particular Rules. 
 Validity of rules in general. See Rules and by-laws. 
 Verbal contracts within Statute of Frauds, non-perform- 
 ance of . . . . : 146 
 
 Vested rights, rules must not disturb 192 
 
 Vilification of fellow-members, rule as to 136 
 
 Visitorial power of State over Exchanges: 
 
 As basis of interference with illegal rules 211 
 
 As source ol power to review decisions 211 
 
 Void contracts, non-performance of 146, 147 
 
 Void rule, power to expel for breach of 231 
 
 Void rules. See Rules and By-laws. 
 
 Voluntary arbitration, charter provision as to 168 
 
 Voluntary associations. Exchanges are 11 
 
 Voluntary dissolution of Exchange 29, 30 
 
 Voting for rule as estoppel to question its validity 238 
 
 W 
 
 Waiver : 
 
 Of lack of jurisdiction in Exchange 230 
 
 Of procedural defects in trials 229 
 
 Warehouse receipts, origin of 8 
 
 Ways of amending the rules 197 
 
 What a membership consists of 35 
 
 When courts will review decisions. See Review of 
 Decisions. 
 
Index. 381 
 
 PAGE. 
 
 Who may bring charges against member 225 
 
 Witnesses in Exchange trials: 
 
 Direct and cross-examination of 227 
 
 Eight to have 227 
 
 Wrongful expulsion. See Expulsion and Suspension. 
 
 Whole Number of Pages, 415.