William Howard Taft

“ The petitioners argue that a seat in the exchange, even if it be property, is incapable of manual possession, that it is really only a chose in action, and that the bankrupt or his trustee is no more in actual possession of it for the purposes of summary jurisdiction than the trustee would be in manual possession of a debt, to enforce the payment of which the trustee must certainly bring a plenary action against the resisting debtor. ”

“ A corporation is not admitted to membership of the board, but under the rules it may do business on the exchange, if two of its executive officers, substantial stockholders, are members in good standing and give its name as principal in their contracts. ”

“ The right of the objecting creditor members differs, however, from the common-law lien, in that the latter, to exist and be effective, must deprive the owner of possession and enjoyment, whereas the former is consistent with possession and personal enjoyment by the owner and only interferes with and prevents alienation. ”

“ The objections of most of the petitioners herein were filed within 5 days after the petition in bankruptcy, and the board never has acted on the application for transfer. The objections are therefore valid.
The claims of the petitioners are also attacked on the ground that they were debts of Lipsey & Co. and not of Henderson, the bankrupt. There is nothing in this. The rules make the agent of a corporation who is a member and does business and makes contracts in its name on the exchange subject to discipline for a default in the obligations of the corporation. ”

“ The rules further provide that, if the corporation is accepted as a party to a contract and fails to comply with any of its obligations under the rules, its officers as members are subject to the same discipline as if they had failed to comply with an obligation of their own. ”

“ This impairs the membership of the agent and prevents transfer under section 2, rule 10.
Nor is there any weight to the argument that as the preference claims of petitioners were not asserted until after bankruptcy proceedings were begun, the transfer to the trustee was rendered free from their objection. Such a claim was negatived in Hyde v. Woods, supra. The preference of the member creditors is not created after bankruptcy. The lien, if it can be called such, is inherent in the property in its creation, and it can be asserted at any time before actual transfer. ”

“ He can transfer it or sell it, subject to a right of his creditors to prevent his transfer or sale till he settles with them, a right in some respects similar to the typical lien of the common law defined as 'a right in one man to retain that which is in his possession belonging to another till certain demands of him, the person in possession, are satisfied.' Hammond v. ”