[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 488
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 489 The gratuity fund of the New York Produce Exchange was established pursuant to chapter 36 of the Laws of 1882, which authorized the corporation to make provision for the widows and families of deceased members, and provide for an assessment of such sum as should be fixed in the by-laws of the corporation upon the death of any member, which sum or such proportion thereof as the by-laws might provide, and such proportion of the surplus income of the corporation as the by-laws might provide, might be paid to the widow, children, next of kin or other persons dependent upon said deceased member, in such manner as the by-laws should prescribe.
Among the by-laws relating to the gratuity fund established *Page 491 under the authority of this statute, was the following: "Nothing herein contained shall be construed as constituting any estatein esse which can be mortgaged or pledged for the payment of any debts, but it shall be construed as the solemn agreement of every subscribing member of the New York Produce Exchange to make a gift to the family of each deceased member, and of the exchange to collect and pay over to the family the said gift."
The language of this by-law is such as to constitute a clear and unmistakable prohibition against the assignment or pledge by the beneficiaries of any interest in the gratuity fund of the New York Produce Exchange in payment or to secure the payment of a debt having no relation to such fund and in no wise incurred for the purpose of keeping alive the interest of the beneficiaries in such fund. So far, therefore, as the first assignment assumed or purported to charge the interest of the plaintiff in the gratuity fund with any liability on account of the debt to the Oriental Bank of $3,614.00 owing by Holmes to the Oriental Bank and paid by the defendant, together with the interest thereon, that assignment was ineffectual, and to that extent the referee was right in adjudging it to be void.
In the same instrument, however, and wholly irrespective of the contents of the second assignment, the plaintiff expressly authorized and empowered the New York Produce Exchange, its trustees and managers, or the trustees of the gratuity fund, to pay over to the defendant not only the said sum of $3,614.00 with interest thereon, but "such further sums of money as he, the said Egbert B. Seaman, shall or may pay to the said Produce Exchange or the Trustees of the gratuity fund thereof, hereafter, for or on account of dues or assessments upon the said certificate, together with interest on each of such payments from the date thereof," and the principal question presented upon this appeal, in the view which we take of the controversy, is whether or not this portion of the instrument was effectual to constitute a legal charge or lien upon the plaintiff's interest in the gratuity fund to the extent of the *Page 492 sum paid out by the defendant to the Produce Exchange upon the faith of the instrument and for the purpose of keeping the plaintiff's interest in that fund alive.
The referee has answered this question in the negative on the authority of McCord v. McCord (40 App. Div. 275). In that case the assignment was made during the life of the member of the Produce Exchange by his wife, who was the sole beneficiary of the fund, and the husband joined in the assignment. The instrument was executed to secure the plaintiff for advances made or to be made, and the evidence tended to show that the plaintiff made advances upon the faith of the assignment partly for the support of the member and his wife and partly to pay assessments imposed upon the member under the gratuity plan. The Appellate Division held that the member's interest in the gratuity fund was not thus assignable, and Mr. Justice BARRETT, who wrote the opinion of the court, quoted the language of CULLEN, J., in Kemp v. New YorkProduce Exchange (34 App. Div. 175), where he said: "The by-laws provide, in express terms, that nothing therein contained shall be construed as constituting any interest which can be mortgaged or pledged for the payment of any debt. Equally it was incapable of assignment. It was the intention to create provision for the family of the deceased member, which should be beyond the hazard of loss from pecuniary misfortune."
So far as the McCord case decides that a beneficial interest in the gratuity fund of the New York Produce Exchange could not be assigned as security for a pre-existing debt, and that no valid charge could be made thereon for any future indebtedness outside of payments necessary to keep alive the interest of the beneficiaries in the fund, we think that the decision was correct. We are unable to approve it, however, so far as it denies to a beneficiary in the gratuity fund the power to charge his interest with the repayment of such amounts of money as may be paid by another to maintain that interest in existence, and without which payments it must have been absolutely destroyed. *Page 493
To hold that this may not be done would be to defeat the manifest purpose of the by-laws, as expressed by Mr. Justice CULLEN in Kemp v. New York Produce Exchange (supra), where he declared it to be the intention to create a provision for the family of a deceased member which should be beyond the hazard of loss from pecuniary misfortune. Take the case of the wife or child of a member of the exchange who had paid his dues and assessments for years and suddenly found himself unable to pay them any longer. The wife or child is equally destitute. None of the parties in interest has any means whereby to provide for the payment of the assessments, without which the right of the wife or child to receive anything whatever from the gratuity fund will at once cease and determine. If the provision in the by-laws against any assignment is deemed to be a prohibition against creating a charge upon the beneficial interest which will reimburse a third party for advances made to prevent its destruction, then under such circumstances all that has been paid by the member during his lifetime will go for naught, and the widow or orphan will be left penniless. A construction which will have this effect should not be adopted unless it is the only construction of which the by-law is capable. Taking into consideration the plain object in view in the establishment of the gratuity fund and the enactment of the by-law, we think it must be held to warrant and justify the creation of such a charge as was made upon it by the execution of the first assignment in this case.
The referee's finding to the effect that this assignment was signed and delivered by her in ignorance of her rights does not import any fraud or misrepresentation in fact, but is plainly based upon the proposition, which we deem erroneous, that the instrument was ineffectual in law. As we regard this first instrument as amply sufficient of itself to charge the plaintiff's interest in the gratuity fund with the sum thereafter paid out by the defendant to keep it alive, the circumstances under which the second assignment was obtained become wholly immaterial. Upon the evidence in the two *Page 494 cases the defendant was entitled to receive out of the plaintiff's interest in the gratuity fund the aggregate of all the amounts paid by him after the execution of the assignment on account of dues upon Holmes' certificate of membership and the assessments against Holmes on account of the gratutity fund with interest upon such payments from the dates at which they were made. He was not entitled to receive anything on account of the debt of Holmes paid to the Oriental Bank or interest thereon. The whole of the amount payable out of the gratuity fund on account of Holmes' membership was payable to the plaintiff less the sum heretofore mentioned as due to the defendant on account of the amounts paid by him to save the plaintiff's interest.
The judgment in each action should be reversed and a new trial granted, with costs to abide the event.
CULLEN, Ch. J., O'BRIEN, HAIGHT, VANN, WERNER and HISCOCK, JJ., concur.
Judgment reversed, etc.