two. The $2,000 note above mentioned was discounted at the bank of Mack Bros., of Weedsport, N. Y. Geyer Bros. having failed to perform this part of their agreement to pay the $2,000 note at maturity, the same was paid or taken up by Lawrence Bros. Co., by their substituting their own paper to the amount thereof, which they subsequently in fact paid. It will thus be seen that as between Geyer Bros. and Lawrence Bros. Co. no action can be maintained by Geyer Bros. against Lawrence Bros. Co. upon any of this commercial paper. Does the plaintiff stand in any better situation than Geyer Bros.? He manifestly does not, because it is admitted in this action that the notes in suit were given to him by Geyer Bros. after they were due, and that he took them, not upon any new consideration, but as collateral security for an indebtedness theretofore due and owing him by Geyer Bros. He is not, consequently, a bona fide holder of the paper for value, and cannot claim any greater rights in this action than his transferrers had. The payment by Geyer Bros. of the $2,000 note was, under the arrangement, as shown by the evidence, a condition precedent to any liability, as between the parties, of Lawrence Bros. Co. upon these several notes. Having failed to pay such $2,000 note, and such failure compelling the Lawrence Bros. Co. to pay the same, the notes in suit became void as between the original parties to the agreement, and consequently they are unavailable to any person who is unable to show himself a purchaser in good faith and for value. The condition of the defendants Brewster & Becker, who do not appeal, is different. They are the original and principal debtors upon the paper, and the referee properly has given judgment against them for the amount thereof. The judgment appealed from should be affirmed, with costs.

Van Brunt, P. J., and BARTLETT, J., concur.

NATIONAL STATE BANK OF CAMDEN v. RICHARDSON.

(Supreme Court, General Term, First Department. November 23, 1888.) NEGOTIABLE INSTRUMENTS-ACTIONS-PRESUMPTION IN FAVOR OF HOLDER.

Upon the production in court of a negotiable note sued on, properly indorsed, the presumption arises, not only that plaintiff is the holder, but also that he became the holder before maturity, and for full value.

Appeal from judgment on report of referee.

Action on a promissory note by the National State Bank of Camden, N. J., against George H. Richardson. Judgment was entered for plaintiff on report of the referee, and defendant appeals.

Argued before VAN BRUNT, P. J., and BARTLETT and MACOMBER, JJ. William W. Goodrich, for appellant. F. K. Pendleton, for respondent.

MACOMBER, J. The promissory note which is the subject-matter of this action was made by the defendant for the accommodation of a corporation known as the "United States Foreign & Domestic Fruit Company," of which the defendant was at the time president. No benefit was derived by the defendant himself by means of the note, but he gave thereby to such fruit company the right to use the same as its officers should see fit. No particular duty was laid upon the payee, Mr. Joslin, to devote the note or its proceeds to any special purpose, so long as it was used for the benefit of the corporation in which both were largely interested. It was competent, therefore, for the payee to have the same negotiated in the usual course of business, at the bank of the plaintiff, which was accordingly done. It is claimed in behalf of the appellant that only a portion of the proceeds of the paper was turned over to the fruit company, and that the sum of seven or eight thousand dollars thereof was used to take up commercial paper owing by Joslin to the plaintiff, upon

which neither the fruit company nor the defendant was liable, either as maker, indorser, or otherwise. If such contention were established by the evidence, it would follow that by so much the note had been diverted from the purpose for which it was given; and if knowledge of the accommodation character of the paper, and of the purpose for which it was made, were brought home to the plaintiff or its officers, before the alleged payment of Joslin's debt with its proceeds, a partial defense would clearly be established. The serious question, therefore, is whether or not a portion of the proceeds of defendant's note was used to take up the commercial paper of Joslin then lying in the plaintiff's bank. It is noticeable that no such defense is interposed in the answer, and that no request is made by the defendant's counsel of the referee to find such fact specifically, although the case shows in various forms that the defendant constantly contended that the plaintiff was not a holder for value before maturity. This question is to be determined mainly by the evidence of Mr. Martindale, who was the cashier of the bank, and of Mr. Joslin, who was the payee of the note. There is much in the testimony of Mr. Joslin, particularly that part of it which was given by him when he was recalled by the plaintiff in rebuttal, that would render the decision of the referee upon this question somewhat doubtful; but the deposition of Mr. Martindale, produced in evidence by the defendant, establishes affirmatively that the entire proceeds of the $20,000 note were placed to the credit of the United States Foreign & Domestic Fruit Company, and that such company had the benefit of the whole thereof. The case is somewhat deficient in fullness of details as to the manner in which Joslin's indebtedness to the bank was adjusted. Aside from the positive testimony of Martindale, the circumstances attending the transaction are not inconsistent with the attitude of the plaintiff, that the entire consideration of the note inured to the benefit of the fruit company. Upon the production of the note in court the presumption of law was raised, not only that the plaintiff was the holder of it, but that it was the holder thereof before maturity, and for full value. Collins v. Gilbert, 94 U. S. 753; Kidder v. Horrobin, 72 N. Y. 169. If the contrary is asserted, the burden of proof is upon the defendant to establish the fact by evidence, which he has failed to do.

It is further contended on behalf of the appellant that the defendant was, by agreement of the directors of the fruit company, to be secured against loss by reason of the making of the note, by the transfer to him of two steamships which the company then owned, namely, the Acadia and the D. J. Foley, and that the fact of such arrangement was known to the officers of the plaintiff at the time of the making of the discount, and that subsequently the bank itself received such steam-ships as security to itself for other commercial paper than the note in question. Upon an examination of the testimony, however, it is established that there was no such agreement made by the fruit company, although the evidence tends to show that two out of its seven directors, aside from the defendant himself, asserted or promised that any person who might make the note for the benefit of the fruit company should be indemnified by a chattel mortgage or bill of sale of these two vessels. Had the fruit company in fact agreed thus to indemnify the appellant, and had he executed the note upon the condition that such indemnity should be given him, a serious question would arise in regard to the right of the plaintiff to recover the full amount of the note, because Martindale, who was the cashier of the plaintiff, was also a director of the fruit company, and was a party to the conversation with the defendant upon that subject. But it is not necessary upon this appeal to consider that question, because of the failure of the defendant to establish the fact alleged in his answer that such agreement was in truth made by the fruit company. Upon an examination of the exceptions to the rejection and reception of evidence, and to the refusal of the referee to find in accordance with requests, and the exception to his re

port as filed, there appears to be no error which would warrant us in granting a new trial. The judgment should be affirmed, with costs.

VAN BRUNT, P. J., and BARTLETT, J., concur.

LEWIS v. WILSON.

(Supreme Court, General Term, First Department. November 23, 1888.) 1. ASSOCIATIONS-MEMBERSHIP-EXPULSION FOR BREACH OF CONTRACT-GAMING CON

TRACTS.

The constitution of a voluntary association provided that a member accused of a breach of contract, with another member, should be summoned before the complaint committee, who should investigate the case, and if the committee rendered a decis ion establishing a money difference between the parties it should, upon notice, stand as a claim against the party, and be paid within 48 hours, or taken on appeal to the arbitration committee. A failure to pay or appeal subjected the party in default to suspension. Plaintiff failed to appeal or pay the amount found due from him by the complaint committee for a breach of contract for the future delivery of stock, and was suspended. Thereupon he brought action to restrain the enforcement of his suspension. Held that, to render the contracts under which plaintiff was found indebted illegal and void, under statute prohibiting betting and gaming, it must ap pear affirmatively that they were entered into as gaming contracts, and not as real transactions for the purchase of property, and, when the intent is not made to ap pear, a contract for the future sale or delivery of stock owned by the seller at the time is a valid agreement, capable of being enforced.

2. SAME-APPEAL TO COURTS-WAIVER OF OBJECTIONS.

The question whether the contracts were speculative or fictitious, which article 19 of the constitution forbade members to enter into, should have been shown to the complaint committee, before whom plaintiff was summoned, who by the constitu tion had full power to determine the question. The member must avail himself of all his rights provided for in the constitution before he can appeal to the courts.

Appeal from special term, New York county.

Argued before VAN BRUNT, P. J., and BRADY and DANIELS, JJ. Albert A. Abbott, for appellant. Sullivan & Cromwell, for respondent. DANIELS, J. The defendant was sued as the president of the Consolidated Stock & Petroleum Exchange of New York, an association, unincorporated, consisting of more than seven members. Its business was limited to furnishing facilities to its members for the purchase and sale of petroleum, stocks, bonds, and other securities, agricultural and commercial products, ores, metals, and other minerals. The plaintiff became a member of the association at or about the time when it was formed, and he entered into contracts with William M. Banks for the sale to him of stock of the Delaware & Hudson Canal Company, the Union Pacific Railroad Company, Western Union Telegraph Company, and Delaware, Lackawanna & Western Railroad Company. The form of the agreements made by the plaintiff was the same in each instance, and the following is one of these agreements:

"NEW YORK, Dec. 10, 1886. "For value received, the bearer may deliver me one hundred (100) shares of the stock Delaw. & Hudson Canal Company, at one hundred and three (103) per cent., any time this year. All dividends for which transfer-books close during said time go with the stock. One day's notice required, except last day. "SAMUEL W. LEWIS.

"Expires Dec. 31, 1886, 2:15 P. M.

"Indorsed: 1007. S. W. L. O'C. Dec. 16."

The plaintiff failed to perform the agreements entered into by him, and a loss was thereby occasioned, which was audited and fixed by a broker at the sum of $937.50. The evidence of the broker was to the effect that the plaintiff empowered him to adjust this loss, and the testimony given by W. M. Banks, as to what took place between himself and the plaintiff when he called upon the latter for payment, tended further to establish the authority of the

broker to make the adjustment. This, however, was denied by the plaintiff. but in this state of the evidence no more than an ordinary question of fact was presented, the decision of which by the court in favor of the defendant has become conclusive against the plaintiff. The constitution of the association to which the plaintiff became a party provided for the existence of a complaint committee, consisting of five members, and that committee was empowered to take cognizance of complaints made by one member against another for failing to fulfill contracts entered into between them, or to pay and adjust the amount which, by virtue of the contract, should become due from one of the members to the other. By these provisions it was declared that (section 9) "any member of this association, who shall be accused of * * * a breach of contract, shall upon complaint be summoned before the complaint committee, who shall hear and investigate the case. In the matter of a breach of contract, if the committee shall render a decision establishing a money difference between the parties, it shall, upon notice to the party or parties against whom the decision is rendered, stand as a claim against him, and shall be paid within forty-eight hours, or taken on appeal to the arbitration committee. A failure to pay or appeal within the time specified shall subject the party in default to suspension.' The plaintiff did fail to discharge the amount adjusted against him by reason of his default in the performance of the agreements made by him, and a complaint was thereupon made by W. M. Banks, the other party to the agreements, setting forth this default, and notice was thereupon given to the plaintiff that, if the amount remained unpaid for 24 hours, he would be reported for suspension. He failed to make this payment, and he was thereupon summoned to appear before the complaint committee on the 28th of January, 1887, at 3:45 P. M., and a copy of the complaint previously filed was served upon him with this summons. He was also afterwards summoned to appear and attend before the committee, to be examined as a witness in the proceeding. He did appear before the committee, and objected to their proceeding upon the complaint which had been made. Questions were asked him on what ground he refused to answer, and whether he had authorized Mr. O'Connor to settle the claims, and whether he denied the authority of O'Connor, or admitted it. These questions he declined to answer, neither admitting nor denying the authority of O'Connor. The committee, after hearing the case, made their decision against the plaintiff for the adjusted differences in the contracts, and notice was given to him of this decision, directing his attention to section 9 of article 6 of the constitution, that the amount must be paid within 48 hours, or an appeal taken to the arbitration committee, on penalty of suspension. The plaintiff failed to take the appeal, or make the payment, and he was suspended from his privileges as a member of the association.

The action was brought by him to restrain the enforcement of his suspension under these proceedings, and in support of it the position has been taken that the association was without authority to proceed against him, or to suspend him, as it did, for the reason that the contracts entered into between himself and W. M. Banks were illegal and void under the provisions of the statute of the state prohibiting betting and gaming; and if they were of that description, then the conclusion would follow that these contracts entered into by the plaintiff were inoperative, and void. But to render agreements of this description illegal and void it must appear affirmatively that they were entered into as gaming contracts, and not as real transactions for the purchase and sale of property. Story v. Salomon, 71 N. Y. 420; Yerkes v. Salomon, 11 Hun, 471; Kingsbury v. Kirwan, 77 N. Y. 612. And the other authorities relied upon in support of the appeal concede the correctness of this principle. Kiley v. Telegraph Co., 39 Hun, 158; Irwin v. Williar, 110 U. S. 499, 4 Sup. Ct. Rep. 160; Gregory v. Wendell, 39 Mich. 337. And when that intent is not made to appear, a contract for the future sale or delivery of

stocks, or other property, not owned by the seller at the time, is a valid agreement, capable of being enforced between the parties making it. Bigelow v. Benedict, 70 N. Y. 202. But if these agreements, or either of them, were speculative or fictitious, which article 19 of the constitution of the associatian forbade the members to enter into, that should have been shown to the committee before whom the plaintiff was summoned to appear and answer the complaint filed against him; for by the constitution of the association the committee was empowered to try that complaint, and, as incidental to that authority, to hear and consider any matter which should be alleged or proved, forming an answer to the complaint, either legally, or by proving the facts complained of to be unfounded. This authority was clearly provided and stipulated for in the constitution of this association; and that it might legally be so provided has the sanction of the authorities, considering the powers in this manner delegated to a committee of an unincorporated association. Dawkins v. Antrobus, 17 Ch. Div. 615; White v. Brownell, 2 Daly, 329; Olery v. Brown, 51 How. Pr. 92. And so much, at least, was assumed to be the authority of such an association in Loubat v. Leroy, 40 Hun, 546. This legal and equitable principle is obnoxious to nothing that was held in Austin v. Searing, 16 N. Y. 112, which was an action brought to enforce a title to property through the forfeiture of a subordinate lodge, for alleged misconduct on its part. The proceeding before the committee of this association was invested with no such power. Neither has any such consequence been insisted upon as resulting from what has taken place. No proceeding has been, or can be, under the constitution of the association, taken against the plaintiff to enforce the collection of the money he has failed to pay by seizure or sale of his property. All that it is claimed may be done, is the forfeiture of his privileges as a member of the association, while he shall fail or refuse to comply with the decision which has been made against him. And the fact that the forfeiture might possibly hereafter be followed by expulsion will not change the nature of the proceeding. So far as it has been extended, that has been done under the clear authority of the constitution of the association. It has resulted in no more than the suspension of the plaintiff from the privileges of the association, and, if he was not subject to the imposition of this disability, he should not only have appeared, but have shown the fact to be so before the committee, and in that manner protected himself against the exercise of even this power of suspension; and if he had made that fact to appear, and the committee had improperly decided against his evidence, the constitution supplied him with means of redress by way of an appeal to the arbitration committee, which was empowered to re-examine and rehear the case. And when authority of this description is provided for the security and protection of the rights of a member, he is required to avail himself of it before he can appeal to the courts to restrain the action of the committee or the association. Loubat v. Leroy, supra; Lafond v. Deems, 81 N. Y. 507, where it was said that courts should not, as a general rule, interfere with the contentions and quarrels of voluntary associations, so long as the government is fairly and honestly administered, and those who have grievances should be required in the first instance to resort to the remedies for redress provided by their rules and regulations. Id., 514. It has been urged, under the authority of Heath v. President, etc., 7 Abb. Pr. (N. S.) 251, that the plaintiff had the power to disaffirm the authority of the committee, and to refuse to be bound by the proceedings; and that was held to be the right of the party in that case, on the principle that a person agreeing to submit a dispute to arbitration might revoke the authority of the arbitrators. But this was not such a case. It was not an arbitration, nor within this principle applicable to those proceedings; but it was a hearing over which the committee had jurisdiction as long as the plaintiff remained a member of the association, and he could only disaffirm or disregard that authority by terminating his membership in the