Opinion
June 30, 1955.
In an action to establish a lien upon a membership seat on the American Stock Exchange and for foreclosure of the lien, the executors of the estate of the deceased holder of the seat and three creditors of the deceased appeal from a judgment in favor of plaintiff. Judgment reversed on the law and the facts, with costs, and the case remitted to the Special Term for the making of an appropriate judgment in favor of defendants, directing the city treasurer to pay to the executors of the estate of the decedent the net amount held by him to the credit of this case. Section 4(d) of article IV of the constitution and rules of the American Stock Exchange granted certain priorities in the distribution of the proceeds of a sale of a seat, which priorities were, in order, to the exchange itself for dues, fines, assessments, contributions to the exchange's gratuity fund and to other charges which the exchange's committee on admissions might assess; to a named clearing corporation in an amount which the said committee on admissions might assess; and to creditors who are members, member firms or member corporations of the exchange, upon certain types of claims. In view of the fact that the decedent had not, in connection with his agreement with respondent to appropriate the seat as security for the respondent's loan to him, relinquished his power to encumber the seat or diminish its value by allowing claims entitled to priority under the stated provisions of the exchange's constitution and rules to remain unpaid and attach to the proceeds of a sale of the seat, the putative lien in favor of respondent was void ( Benedict v. Ratner, 268 U.S. 353, 360; Matter of Hoey Co., 19 F.2d 764, certiorari denied 275 U.S. 550). There was not here, as there was in Matter of Gruner ( 295 N.Y. 510), a covenant by the seat holder that the seat was and would be kept free and clear of any claims, liens or encumbrances.
We are of the opinion that the agreement between respondent and the decedent does not indicate any intention to impress decedent's stock exchange seat with a lien to secure decedent's indebtedness to respondent. The language employed in the agreement, as well as the fact that, to the knowledge of the parties, decedent's continued ownership and use of his membership in the exchange could subject the proceeds of a sale of his seat to the payment of claims of others, in priority to respondent's claim, negatived any such intent. (Cf. Benedict v. Ratner, 268 U.S. 353, and Matter of Friedlander, 178 Misc. 65.)
Respondent lent to the decedent a sum of money on decedent's agreement to retain a stock exchange seat. He was not to transfer or assign it until the loan had been repaid. Under the rules of the stock exchange the value of the seat, in the event of sale, was subject to certain specific charges and indebtednesses, if any, and the surplus was payable to the seat holder or his legal representatives. Respondent is chargeable with knowledge of, and the effect of, the rules. After decedent's death, the seat was sold for $13,000; the exchange deducted some $750, which was due under the rules, and paid the surplus into court. The judgment decrees that respondent has an equitable lien on the surplus proceeds and directs that they be paid to him. Under the agreement, respondent acquired an inchoate lien upon the surplus proceeds. It is immaterial that decedent had the power, under the rules, to reduce or extinguish the amount of the surplus proceeds. The prior lien created by the rules has been satisfied. ( Matter of Gruner, 295 N.Y. 510; Stevens v. Coolidge, 154 App. Div. 884, affd. 211 N.Y. 604.)