4. In most of the states a judgment creditor 'by ,pJs levy the land of his debtor, subject to all equities j but the law of Massachusetts is somewhat different in this respect, and puts such a creditor in substl\JJ.tially the position of a. purchaser. But the bill in this case charges the defendant with having notice of the true contract and intent of the parties when he made the levy, and by Su,c)J. notice even apurchaserwould be bound. Rumrill v. Shay, 110 Mass. 170. And, if I am not mistaken in saying tba.t· the deed upon its face disc}o!lea the intention, then its may very well be held to be notice to subsequent purchasers of ljhe equity which that intention creates, overruled.
BARTLETT
and others
'V. SMITH.
(atrcua Court, D. Minn6$ota. 1.· BALE AND DELIVERy-Tnm CONTRACTS.
July, 1882.)
The purchase or sale of wheat to be delivered at a tuture time is a fair con. tract if the intention of the contracting parties is to deliver the wheat, although it is not in their possession at the time of the contract of Bale; but 'if the intention is not to deliver, but to settle differences between the contract price and the then market price, the transaction is illegal and void. 2. SAME-HIGHT TO RECOVER ADVANCES.
Where parties knowingly furnish meaus for an iilegal transaction, and make advances in the settlement of losses under illegal contracts, the 'court will not aid them to recover moneys thus paid out; but if parties acting as brokers in the sale and purchase of wheat, without disclosing the name of their principal, enter into bona fide contracts for the actual sale and delivery of wheat with third parties for defendant's account, and at his request settled the losses, and paid the amount due under the contracts, they are entitled to recover the mon. eys thus paid out.
3. "
SAME-SALE OF PROPERTY NOT ON
H.urD.
It is not necessary, in case of a sale or purchase of property for future deHv.,.
ery, that the property should actually be on hand at the time. CONTRACT-MuTUALITY OF INTENT.
A contract which is valid in law cannot be rendered illegal by the mere intention of one of the parties to the contract to do something which, if mutually intended, would render it invalid. II. PRiNCIPAL AND AGENT-ADVANCES BY AGENT-RECOVERY OF. .
If a principal employs an agent to transact a legitimate business for him, imd in conducting such business the agent is authorized to advance money on his principal's account, the law protects the agent, and he may recover the monel 80 advanced if the transactions are legitimate.
C. K. Davis, for plaintiff. Gordon E. Cole, for defendant.
264
REPORTER.
·Whenthe plaintiff's testimony was closed the defendant moved the court to instruct the jury to find a verdict for the defendant. After the argument and submission of this motion the court,-his honor, Judge NELSON, presiding,-in deciding the same, said: NELSON, D. J. I decline to take this case from the jury. t think there is an underlying question of fact here which they must deter. mine, and that is, were the contracts legitimately entered into? were they contracts for the actual delivery of wheat? or were they mere subterfuges, and entered into on the part of the plaintiffs and third parties for the purpose of promoting gambling transactions? That is an underlying question of fact which it seems to me the jury must determine, and I cannot say, in examining this rule, that although these contracts were made subject to this rule 9-and, perhaps, rule 10-of the chamber of commerce, they upon their face are gambling contracts. It is not an unusual thing, where parties enter into contracts for the delivery of personal property at a future time, to put up earnest money for the fulfillment and performance of those con· tracts. Under these rules, what is called a "margin" is required for the faithful performance of the contract that is entered into. It may be that parties under these rules-members of that chamber of commerce-may engage in illegitimate trade, but I canuot, from reading the rules, construe them (taking them together) to intend that all contracts which are entered into by the members of that chamber are gambling transactions. Now, the proviso to section 5, which was read by the counsel here, is one under which gambling contracts might be entered into, but it does not necessarily follow that when a contract like this in evidence is entered into by a member of that chamber, although providing that it is subject to the rules and regulations of the chamber of commerce, there shall be no actual deli very of wheat. If it was the intention of the parties to the contract that there should be a delivery of wheat, although subject to the rules and regulations of the chamber of commerce, it is not an illegal contract. It is a fair question for the jury to say, and it is for them to determine, in the light of all the evidence here as to the usages of the members of that chamber of commere, as to the facts and the circumstances attending these transactions and the conduct of the parties, whether they were actual contracts for the delivery of wheat, or whether they were mere subterfuges entered into to enable the parties to engage in speculation in margins.
BARTLETT tJ. SMlTH.
205
In that view, I propose to leave (under proper instructions) the whole question for them to determine, whether there was a fair con" tract for the delivery of actual wheat, or whether it was a speculation on margins. Now, the first part of this section 5, of rule 9, provides that"Any party ;vho shall contract toibuy or sell property, and wbo shall fail to respond within the next ORe and on&-half banking hours, after having been called on for security, [margins, in case the property rises or falls, J ll.fl bereinbefore provided, shall be judged to have defaulted on his contract case the right of such default, the party who has called for such seciIrity shall to bUy or sell (a9 the case maybe) the property in said contract, in the quantity and for the time of delivery specified in saId :contract,andatl'differ. ences between the contract pticeand the price at the propertY' may have been or sold bought, {as the case may be) in consequence of 8Uflh default, shall constitute the rule and of damages against the· party jar default j provided, that in case the calling far security shall elect not to buy, prsell the property, as hereinbefor.e wovided,he may have the ,rigl:1t, br to the delinquent, (as prOVided in,section 6 of this rule,) to considert'iie contract then terminated at the market price of the property named "fortna' delivery specified in the contract. And·the party so terminating thecontra:ct may forthwith proceed against the party so defaulting for the collection or enforcing payment of all damages sustained by reason of such default; and the rule and measure of such damages shllrll be' the difference the .contract price and the market price (at the time of giving such notice) the property named for the delivery specified in the contract."
of
These contracts are into for the purchase or sale ofacertainamount of wheat, at seller's qption for future delivery. Now, suppose A. has sold B. 5,000 bushels of wheat to be delivered in August, seller's option at one dollar j the wheat.falls off five cents, and B. calls for further security, (under these l'ules and regulations,) which is not put up by A. ,Now, under this rule, A. having failed to put up this further fJecurity has defaulted. Now, then, B. can go into the market and buy 5,000 bushels of wheat at the market price, (that is, it must be an a.ctual purchase,) and in case he brings suit against A., what is the measure of damages? It would be the difference between the price which he paid when he went into the market, and the contract price. That is the legal rule of damages. Where the earnest money is put up in that way, and the parties agree that in case of a rise or fall in the market. they may call for further security, and if that security has not been up, the party may go into the market and buy 5,000 bushels of wheat, (in this instance, say,) he can recover the difference between· contract
266
FEDERALRKPORTER.
price and the price that he paid in the market for the wheat. It may be this is all sham. It may bethese parties have entered into contracts of this character, and instead of going into the market, have merely drawn up between third parties ,and themselves contracts, which upon their face purport to be the purchase and sale of wheat, when it was never intended that there should be, an actual delivery of wheat at all. If this, is so, then it is a gambling transaction. The law never upholds gambling transactions in any instance, and particularly is a gambling'transaction in wheat pernicious and it cannot be sustained. , Parties who speculate in the bread-stuffs Qf the country, demoralize themselves. When the not only the trade, but injure the case arises, and the party seeks to enforce a gambling transa!Jtion, the court wilL say: "We will not 81idyou to enforce it." If there be any loss in the transaction, the party who loses cannot recover. ' I shall leave it, to the jury, gentleID:en, ,to determine whether there has been, in the first instance, any, Jtc.tual sale and delivery of wheat. The other instructions they will receive as I come to deliver my charge. After 9.11of the testimony was'in, and argument by counselNELSON, D. J., (charging jury.) You have listened to veryelaborate arguments· of the facts by comisel. If lean give you the law of the case, so you will understand it, I think you will have little diffi. culty in coming to a conclusion. The plaintiffs bring this suit against the defendant to recover for services advances made on t.he defendant's account in the sale and purchase of, wheat for fdture delivery during the years of 1879, 1880, and 188t. The plaintiffs are commission merehantsand brokers. They are citizens of the state of Wisconsin, and reside in the city of Milwaukee,and the defendant is a of the state of Minnesota. The amount claimed is about $13,000. The defendant isa wheat dealer, miller, and warehouseman, and during these years authorized the plaintiffs, by letters and telegrams, nearly every day, for the greater part of the time he operated, to sell a.nd purchase wheat on his account and for his benefit. Under these contracts, whether a purchase or sale of whea.t, the wheat was to be delivered in Milwaukee,and in most instances the defendant was a seller. The plaintiffs were members of the chamber of o()mmeree in the city of Milwaukee, (a corpo-
.:BABTLE'IlT 'V. SMITH.
'267
zoation created by the laws of Wisconsin,)'imd when orders were received by these plaintiffs from the defendants they made contracts with the members of the chamber, and in all c,ontrlicts stipulated that they were subject to the rules and regulations of the chamber of commerce. The plaintiffs oonducted the business in their own name, and upon the face of the contracts the name of their principal is not disclosed. The purchase or sale of wheat to be delivered at a future time is a fair contract, if the intention of the contracting parties is to deliver the wheat, although it is not in their possession at the time of the contract of sale. But if the contract does not contemplate the delivery of wheat, but the settlement of differences between the contract price and the then market price, the transaction is illegal and void, being contrary to public policy, and demoralizing to legitimate trade and commerce. The chief controversy in this case is about the character of the transactions between the parties. The defenses urged upon the part of the defendant to defeat a recovery may be reduced to two: Fir"', that thecontracta entered into by the plaintiffs as agents for'the defendant were wagers, contrary to public policy and void; second, that the plaintiffs furnished the defendant money for the express purpose of enabling him to engage in an illegitimate enterprise, and therefore cannot recover for any advances made for such purpose. This is the theory of the case on the part of the defendant, and evidence has been introduced tending to support it. The theory of the plaintiffs is, and evidence has been introduced tending to sustain it, that they were employed as brokers or mission merchants to purchasflor to sell wheat for future delivery, and that in all of the contracts entered into by them with third parties they conduoted the business in their own name, but for defendant's benefit and on his account, and :in every instance an actual delivery of wheat was intended by them and the other parties to the contract, and that subsequently they were instructed to close up and settle up these contracts by the defendant, and in doing so, at his request, advances were made and their'money paid out for his benefit, and to recover this sum suit is brought, and they are entitled to recover. These are the issues between the parties which you are to decide. If you believe from the evidence that no wheat was to be delivered, and that the contracts for the sale and purchase of wheat were merely colorable, and were made and executed asa cover:forspeculations ill
268
FEDERAL BBPOBTEB.
margins, and in case the price of wheat rOBe or fell in the market differences merely were to be paid, then the contracts are in their nattire and character wagers, and illegal. Neither an offer or an ability to perform is required of either party in order to entitle the party claiming a breach of contract to the differences. Hthe plaintiffs, in your opinion, are shown by the evidence to have been employed by the defendant to make contracts of this character with third parties, and have conducted the business in their own name and for defendant's benefit, and supplied the defendant with funds for the express purpose of enabling the defendant to engage in these transactions, and have paid out and advanced money in the settlement of losses arising urider such contracts, they cannot maintain this ,suit to recover ·the money so expended. In that case they knowingly furnish the means for an illegal transaction, and made. advances in the settlement of losses under illegal contracts, and the court will not aid them to recover moneys thus paid out. On the .other hand, if you believe the evidence shows that the plaintiffs, acting as the defendant's brokers in the sale and purchase of wheat, without di&closing the nailleof their principal, entered into bonafide contracts forthe actual sale and lleliveryof wheat with third parties for ·defendant's account, and at his request subsequently settled the losses·a,ndpaid the amount due under the contracts, they are entitled tl;Lrecover from the defendant the moneys thus paid out at his request. ,The form; however, of these contracts (which on their face specify wheat to be delivered) is not conclusive of their character. You must [email protected] tpemselves, from the testimony. and the facts and the circumstances attending thernaking of ,Gontraots, and the con.duct of the parties with reference to .them, wll,ether·the, ¢o:ntracts are illegal and void within.the rule laid down, ot,wh4jther theyali6 bonafide.,llnd.in determining this question you maytakeiDltQ ponsidemtion ;the fact that these contraots are subject to the Qf thecharnber of oommerce :iJn the city of ¥ilwl,iukee, and that unde17.. t.hose rules it is possible for persons on that Qoard to speculate in margins under ·the>forms of OOIltra.cts like in evi(lence; .and you may also look at the usages of this trade and, b.usiness in order: to. determine the intention of the parties thereto. If, Qn. fulteonsidel'lttion,you shQll1ddetermine the arrangement or updel;f!tandiJ;lg between ,to the contract was a gaming as defined, and the :\lloney was advanced by plaintiffs to enable the to eng.a.ge in such illegal transactions, and that
BARTLETT V. SMITH.
269
the plaintiffs and defendant had in mere wagering contracts upon the price of wheat, and the advances which the. plaintiffs made were paid out in contracts, which, between the plaintiffs and the parties with whom'they dealt, were bets upon the market price of wheat, no delivery having been made or contemplated, then the plaintiffs cannot recover, and your verdict will be for the defendant. If, on the other hand, you believe from the evidence the transactions were bona fide on the part of the plaintiffs; that they were employed by the defendant to buy and sell wheat for actual delivery, and bought and Bold for actual delivery in their own name, but for that losses,occurred in such transactions, and that defendant's plaintiffs advanced, money to pay such 10sses,-the ;plaintiffs are entitled to recover. You are to determine whioh theory is proved by the testimony. It is not the policy of the law to encourage or sanction wagering transactions (or any ,transactions) having an injurious and immoral tendthe other hand, if aprinc{pal emplqys an agent to ency. But, transact alegitimate busit;less for him, and in conductl,ng sugh ness the agent is authorized to advance money on account, in which (lase the law protects the agent, and he may reCClver the money so advanced, provided the transactions a.re legitimate. ' Several specialiristructions have been requested onthepa.rt of,the }?ll,tintiffs, the part Iwill read 'them with such modifications as I have made, giving some and rejecting others. ,The jury are instructed, that it is not gambling for a party to enter into a fair and bema fide agreement to purchase or, to sell property fOl."future delivery. And the jury are furtber, instructed that it is not necessary, in ,case of a sale. or purchase of property for future delivery, that the party buying or selling should actually have the property in his possession or u'nder his control at the time of entering into the contract :of salll, " If the jury find from the evidence that the defendant requested the plain. tiffs to purchase orto sell wheat for him for future delivery: 'and'furtherftnd from the evidence that plaintiffs made such purchases, and in doing ,so entered into the contract read in evidence, and such' contract'intended the actual delivery of wheat',lilldstib'sequently were obliged to pay and did pay losses occasioned by the making of the said contracts; and further findftomthe evidence that at'the time the said contracts of :sale and· purchase wetemade neither of the patties to the said'Contracts hadeitfier possessiOn or control of wheatienough"to 'fill the contracts,-that then and under such circumstances thecotltracts of purchase or sale are' not wagering or gambling contracts, although' the defendant, at tlle tim'e he gave the order to buy or to sell, had' no design,' pUrpO:l6, or intention to·.eitller receive! deliver this
or
I1IDImAL
wheat, but designell and intended merely to sell out the time of delivery or receipt, and settle or ,adjust the losses on the mere differences in the market value of the wheat. ' "
That is, in substance, tha.t it is not necessary for parties to enter into a contract for sale or purchase, wheat to be delivered at a future tillie, to have the wheat on hand at the time. That fact does not make it a gambling contract, neither does it make them gambling contraots if only one party intends to gamble by the transaction and not intend to furnish or deliver the wheat which upon the contracts themselves purport to be delivered at a future time. If the jury find from the evidence that the plaintiffs are commission merchants in the city of Milwaukee and members of the chamber of commerce in that city, and that they, from time to time, and at various times, in 1880 and 1881, received orders .from the defendant to buy or sell wheat; and further find from the eV,idence tllat plaintiffs, acting in good faith and in t,he belief that defendJl,nt was sending s.aid orders in good faith, made actual purchases and sales for sai!i defendant at his request, as ordered. and in such transactions. laid out 'and expended money for defendant for the purpose of such actual delivery, thEln theplalntiffs are' entitled to recover the amount thus paid, laid {)ut, and expended for this defendant. If the jury: find fJom the evidence that the plaintiffs !U"e commission merof Milwaukee and members of the of commerce chants in .tile in that city, and ,that they acted as the brokers of defendant and at defendant's request, and, from time to time and at various. times ,made in good faith and that said :conthe contracts read in evidence, on the order' of tracts intended the actual delivery of wheat therein mentioned, and in settlement of said contracts paid, laid out, and expended money, for the money thus paid, laid out, and expended for the defendant, they can recover in this action. The contracts read'inevidence are prima /ac£evalid contracts in law, and such contracts cannot be rendered illegal by the mere intention of the defendant alone that he did not intend to deliver or receive the property.
That is, it,takes two to make & contract. One party cannot defeat a contract and render it void in his own mind. To make,saidcontract read in evidence void, as wagering or gambling contracts, each party to the contract must have designed and intended at the time the contract was entered Jl1to not to buy or receive the property, but to sell on the mere difference between the contract price market price. If ,the jury lind from the evidence that the intended to gamble in wheat, and at no time to deliver or receive the property or pay for it, and further tinli from the evidence that the plaintiffs were. ignorant of such intention OJ) the part of ,the defendant. and received tile, order of defendant to buy ,and to. IIell. and in gPOd faith· proceeded to buy and to sell, on his orders, and, in d9ing so incurred obligations for said defendant, by the contract and said contracts intended delivery of wheat in evidence,
and that plaiiltiffsafterwards' patt1 tllereonmqney .to. settle· ,or: ' adjust· the action said contracts, then the plaintiffs are entitled to recover in the money so paid.
I refuse to give No.6. I refuse to give No.7. If the plaintiffs rendered the; from time to purchases and sales made on his account showing prices paid and and such purchases and sales were· for ihe actual delivery of wheat,"'"
(That is, you have hj3ard the statements 'which were' pbt in evi. dence, which were rendered; now, if you believe those statements represented purchases and sales for ,the actual delivery ofwheatj) " ,,"",,:,:A.nd he retain,ed did not within a reas9nable time object to them, the law implies their correctness,' and illlplies aCOI\tract br thq, defendant to pay the plaintiffs any balance that such statements show' to due'to them. . The burden of'proof is on the defendant to show that'these were transactions. Prima facie they are valid, and 'if the defendant has fa.iled to satisfy you by a fair preponderance of testimony that they were gambling the plaintiffs are entitled to recover.
be
There are several requests on the part of the defendant. three of them and refuse one:
I give
If the jury, believe from the evidence that the transactions between the plaintiffs and defendalit were transactions in which no actual sale and delivery of wheat was contemplated,but merely the payment of differences according to the rise and' fa.U df' the' grain market, the I contracts Were' gambHngTebntracts, and void in law. . .' . . ". .': If the jury find from the evidenc,e that the. plaintiffs in the transactions in controversy were brokers or factors 'ofJihe defendant, and that ,illsalll t,ans,actions no actual sale ,and delivery of contemplated, but merely the payment of differences accordiug to, the rise and· fall of the grain market. and that plaintiffs performed services for the defendant, and supplied him with funds, and made advances for the express purpose of enablitlgdefendant to engage in such transactions, and if they, as. agents of the defendant;' conducted such illegal ventures in their own name;' they brim,inis, and the law will not aid them to recover li\l)l1eys advanced'tor Such' purpose. or commissions earned in such transactiollS, and your verdict must be for the defendant. ." , . The jury may look to the usages of the trade or to iearnthe :real intentions of the parties. '. . ."
" I refnsetogividhe f01irth. '. Now, I have gone all over this case·. ', You will give it due considera.tion, enter upon your tQ give such &verdic.t as the .facts discloped, ,by the. the ,law applicable to ,them, will justify. '
272
FEDERAL REPORTER.
The evidence disclosed presents for your decision this inquiry, upon whioh the oaseturns: Did the contracts in evidence intend an actual delivery of wheat, or were they mere subterfuges for speculations in margins1 This is the simple issue upon which the case turns. If the former, plaintiffs are entitled to recover. If the latter, your verdict should be . for the defendant. This is a. very expensive litigation, involving a great deal of money. It is an important case, a:Q.d will. settle. not only prh;ate rights here, but matters in which the public are interested, and I hope you will go through withit with a determination to arrive at a verdict.. You have been selected to settle thEi controversies here involved. I hope you will exercise due fo:rbearance; not· yielding your 10onvictions. but entermto the jury-i'oorii with the determination to settle the versy. Let it end .with your verdict, sO)l1r as the tions of faot are concerned. .
THE ODER. (Oircuit Oourt, E. D. N61JJ York. July 22,1882.) COLI,ISION-SAIJ,-VESSEL IN FAULT-NEGLECT TO BHOW LrGlITIl.
Where a steam-ship in mid-ocean, on a dark night, was approaching a bark from aft in a course that rendered it impossible for her lookouts to see the regulation-lights of the bark, but the lights of the steamer were in full view of those oil the bark, who knew her to be a steamer approaching the bark on a course crossing her course, so as to involve the risk of collision, yet those on the bark, though having ample time so to do, did not show any light or give any other warning to the steam-ship to notify her in time of the position of the bark, and the steam-ship, immediately on discovering the bark, threw her wheel hard a-port, and, at the same time, backed at full speed, but too late to avoid collision, held, that the bark was alone in fault, and that the libel against the steamer be dismissed. . .
Henry T. Wing, for libelants. William G. Choate, for claimant. In this case I find the following facts: On the night of June 7,1879, a collision occurred in the Atlantic ocean, to the eastward of the Grand Banks, in about latitude 48 deg. 1 min. N. and longitude 38 deg. 9 min. W., between the libelant's bark, the Collector, and tbe claimant's steam-ship, the Oder. Tbe night was dark, and it was somewhat overcast at times, and no stars or moon were visible, but the lights of vessels, of ordinary brilliancy, and properly set and burning brightly, could be seen at a dis-