New York County NyArchives Court.....Hanscom, Albert Vs. Mortimer Hendricks 1889
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Source: Reports Of Cases - New York
Written: 1889

First Department, March Term, 1889.

ALBERT L. HANSCOM, Respondent, v. MORTIMER HENDRICKS, Substituted in Place of 
the CONSOLIDATED STOCK AND PETROLEUM EXCHANGE OF NEW YORK, Appellant.

Debtor and creditor—money deposited with a stock exchange on the transfer of 
membership therein.

Under the rules of a stock exchange, upon the transfer of membership therein, it 
was required that a sum of money be deposited with the chairman of the exchange, 
from which was to be paid any amounts due to it, or to its members, and the 
balance of which was to be paid to the retiring member.

Held, that where a member of such exchange assigned his right of membership in 
payment of a pre-existing debt owing by him, and such assignee, for the purpose 
of obtaining a transfer of such membership, deposited the amount required by its 
rules with the chairman of the exchange, the balance of such deposit, after 
paying any amounts due to the exchange or its members, could not be taken by a 
judgment-creditor of the retiring member upon the assumption that it was the 
property of such judgment-debtor.

Appeal from a judgment, rendered at the New York Special Term of the Supreme 
Court, upon a trial before the court, entered in the New York county clerk's 
office September 17, 1888. The action was brought to recover a fund originally 
deposited with the Consolidated Stock and Petroleum Exchange of New York. By an 
order of interpleader, the appellant, Mortimer Hendricks, was substituted as 
defendant in place of the exchange, and the fund was directed to be brought into 
court and placed to the credit of the action. The sum so deposited amounted to 
$934.

The complaint alleged that on or about November 25, 1887, the plaintiff, Albert 
L. Hanscom, purchased from one Charles G. Wolff a membership in the Consolidated 
Stock and Petroleum Exchange; that Wolff had leased from one George W. Sutton a 
dwelling-house in New York city, at an annual rent of $1,800; that a large 
portion of the rent then due had not been paid; that rent for several months 
would still have to be paid before the lease expired; that by agreement with 
Sutton the membership was sold and transferred to plaintiff in lieu of the rent, 
and in return for the use and occupation of the dwelling-house until the 
termination of the lease; that by the rules of the said exchange plaintiff could 
not qualify as a member, or obtain a transfer of the said membership unless a 
sum equal to its reasonable value was deposited by him with the exchange, for 
the purpose of enabling it to satisfy all claims which it or its members might 
have against the person selling the seat or the person to whom it was sold; that 
plaintiff deposited the sum of $1,075 with the exchange in compliance with said 
rules; that Wolff at the same time, for the purpose of notifying the exchange 
that he had no interest or ownership in the money so deposited, gave to the 
plaintiff a power of attorney directing the exchange to pay the sum so deposited 
to the plaintiff after the required deductions had been made, which power of 
attorney was filed with the exchange; that such deductions amounted to the sum 
of $126; that the balance due from said exchange amounted to $949, and that 
plaintiff was the owner of this sum then deposited in court. The substituted 
defendant, Mortimer Hendricks, by his answer denied any knowledge or information 
as to the facts above alleged, and further stated that on or about November 18, 
1887, he recovered judgment against the said Charles G. Wolff for $2,164.79, 
upon which execution was duly issued and returned unsatisfied; that on January 
9, 1888, he instituted supplementary proceedings against the stock exchange, and 
examined its president, Charles G. Wilson, who testified that he had received 
from the plaintiff the sum of $1,075, the proceeds of the sale of the membership 
owned by the said Wolff, and that the moneys so deposited were in the possession 
of the exchange to the credit of Wolff. Defendant alleged that the moneys so 
deposited were the moneys of Wolff and that any pretended transfer of the same 
was for the purpose of hindering and defrauding the defendant. Defendant prayed 
for a dismissal, making no demand for affirmative relief.

Upon the trial the following facts appeared: In February, 1887, one George W. 
Sutton, through Reuben Skinner, his general real estate agent, leased to Charles 
G. Wolff premises in New York, for a period commencing March 1, 1887, and ending 
May 1, 1888, at a rental of $1,800 a year, payable quarterly. Skinner collected 
the rents and acted as the agent of Sutton in all the transactions growing out 
of the lease. In November, 1887, Wolff owed Sutton about $450 for rent. Upon 
demand being made by Skinner, Wolff stated that he was a member of the 
Consolidated Stock and Petroleum Exchange, and it was then agreed between 
Skinner, as Sutton's agent, and Wolff, that this membership should be 
transferred to Sutton as security for the payment of the rent on the said lease; 
that until the expiration of the lease Wolff might redeem the membership by 
paying the rent due, and that in case Wolff failed to pay the rent due at the 
expiration of the lease, the membership should become the absolute property of 
Sutton. Mr. Sutton was found to be ineligible to membership - in the exchange, 
being over fifty-five years of age. It was thereupon agreed between Skinner, as 
Sutton's agent, and Wolff, that the membership should be transferred to Hanscom, 
the plaintiff, for the same purpose and on the same terms. Skinner and Wolff 
went to the exchange to ascertain what formal proceedings were necessary to 
carry out this agreement. They were informed by the president and secretary that 
a deposit of $1,075 would be required to meet the indebtedness of Wolff to the 
exchange and its members. That sum was fixed as the upset price of the seat.

The rules of the exchange governing transfers of membership are as 
follows: "Whenever any member of this association shall desire to discontinue 
his membership and to name a successor, he shall send a written communication to 
the chairman of the committee on membership, stating the fact, with an official 
nomination of a successor, who shall pay to the chairman of the committee the 
amount of the consideration for such nomination. The money deposited with the 
chairman shall be distributed by him in the following manner: (1.) To the 
association, to the extent of any money due it. (2.) In payment pro rata of 
claims filed by members and adjudged as valid. (3.) The remainder, if any, to 
the retiring member or his legal representative." The nomination must be 
confirmed by the membership committee, and the person so admitted must duly 
qualify and deposit the sum fixed as the upset price of the seat sold before the 
membership will be transferred on the books of the exchange.

The amount fixed as the value of Wolff's seat ($1,075) was loaned by Sutton to 
the plaintiff Hanscom, who deposited it with the exchange. At the suggestion of 
the officers of the exchange, and in order that the balance of the sum 
deposited, remaining after the deductions required by the above rules, should be 
paid directly to Hanscom, a power of attorney, executed by Wolff and directing 
such payment, was lodged with the exchange. Hanscom passed the committee on 
admissions, duly qualified, and Wolff's seat was duly transferred to him on the 
books of the exchange. The amount of rent due at the expiration of Wolff's lease 
was $1,350, no part of which has been paid. Immediately after his election 
(about January 5, 1888) Hanscom made a demand for the balance of the moneys 
deposited, amounting to $949. In the meantime Mortimer Hendricks, the defendant, 
had obtained a judgment against Wolff and had instituted supplementary 
proceedings, serving a third party order upon the president of the exchange. In 
the course of his examination the deposit of the above sum was discovered, as 
was also the power of attorney making the same payable to the plaintiff. This 
action was then instituted, whereupon the exchange interpleaded the defendant 
Mortimer Hendricks, and the sum in question, less costs, was deposited in court.

Upon these facts the court below rendered judgment in favor of the plaintiff, 
from which defendant takes this appeal.

Abram Kling, for the appellant.

Carter, Hughes & Cravath, for the respondent.

Brady, J.:

It will be observed from the statement of facts that this is an action to 
recover a specific fund of which the plaintiff claims to be the owner. This is 
disputed by the defendant, who asserts it to be the property of his judgment-
debtor, and urges a lien by virtue of supplementary proceedings, an account of 
which is given in the statement. It is not, therefore, an action to reach a seat 
in the Consolidated Stock and Petroleum Exchange. The transaction out of which 
the controversy arises is one which was designed to secure to Mr. Sutton the 
rent which was due to him or would become due upon the expiration of the term 
for which Mr. Wolff had hired from him the premises he occupied. The statement 
seems to leave but little doubt about the ownership of the fund and the person 
to whom it should be paid. The evidence shows that for the purpose of 
accomplishing the transfer of the seat of Wolff to the plaintiff, it was 
necessary to make a deposit of a certain amount of money, which is the sum in 
dispute here; and that sum was loaned by Mr. Sutton to the plaintiff who, for 
the time being, became the trustee of Sutton for the purpose of accomplishing 
the security for his benefit. It may be here observed that there can be no doubt 
upon the evidence that the transfer of the seat was intended to cover the entire 
amount of the rent which was due and might become due under the lease to Wolff. 
The money which was thus deposited was to be distributed by the chairman of the 
committee on membership in the manner indicated in the statement, and at the 
suggestion of the officers of the exchange, and in order that the balance, after 
the deductions required by the rules, should be paid directly to the plaintiff, 
a power of attorney was executed by Wolff directing such payment, and was lodged 
with the exchange. Immediately after the election of the plaintiff he made a 
demand for the balance remaining of the moneys deposited, which amounted to $949.

It is quite apparent that whatever interest Wolff had in the fund was 
transferred to Hanscom, and that whatever sum was to be paid by the exchange was 
by Wolff's direction to be paid to him. This was a part of the original 
transaction itself, and was for a specific purpose, which was accomplished by 
these details. The defendant presents no equity superior to that existing 
between Sutton and the plaintiff, even if it be necessary to consider the case 
in that aspect. But he has nothing whatever to do with those equities. The 
details of the transaction between Wolff and Sutton and the plaintiff are 
sufficient to show a special property in the money by the plaintiff quite 
sufficient to enable him to maintain the action. Whatever relations were created 
by it between the plaintiff and Sutton are matters between them with which the 
defendant has no right to interfere. The extent to which he is entitled to 
consideration is whether or not the fund which he seeks to have applied to the 
payment of his judgment belongs, either in whole or in part, to Wolff, his 
judgment debtor. It is quite clear that it does not, inasmuch as the rent 
exceeded the amount of the value of the seat.

For these reasons, without any more extended discussion of the various points 
raised by the respective counsel herein, the controversy involving it may be 
said to be nothing more serious than a question of fact, the judgment should be 
affirmed.

Van Brunt, P. J., and Daniels, J., concurred in result.

Judgment affirmed, with costs.

Additional Comments:
Reports of Cases Heard and Determined in the Supreme Court of the State of New 
York. Marcus T. Hun, Reporter. Volume LIX, 1889, HUN 52. Banks & Company, 
Albany, NY. 1901.

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