Stewart v. Schall

| Md. | May 14, 1886

Ritchie, J.,

delivered the opinion of the Court.

The plaintiffs sued defendant in assumpsit on the common counts to recover an alleged balance due them for services, advances and interest on purchases and sales of stocks, bonds and grain, alleged to have been made by them for defendant at his request. Both plaintiffs and defendant resided in York, Pennsylvania, where the former conducted the business of bankers and brokers. The plaintiffs bought and sold, ostensibly at least, on orders of the defendant, who deposited from time to time or left certain profits, as they accrued, with the plaintiffs, as margins, to cover and protect them in the fluctuations of prices. These transactions extended over a period of from two to three years, and reached in the aggregate some eight hundred thousand dollars.

The plaintiffs made their negotiations in the markets of New York, Baltimore, Chicago and Philadelphia; the margin to be kept up by defendant, as to the transactions in the last named city being five per cent., and for the dealings in the other cities ten per cent.

In course of time, the defendant failing to keep up his margins, the plaintiffs sold some stocks credited to him, and sued for the alleged balance still required for their reimbursement.

In addition to'the general issue, the defendant specially pleaded that by the law of Pennsylvania, where the contracts were made and to be performed, they were all gambling transactions and void, because both parties were and still are citizens and residents of Pennsylvania; that all of said alleged contracts w.ere to be performed within said State, and were for the purchase or sale of the bonds or shares of stock of incorporated companies, or for the purchase or sale of wheat for future delivery; that neither party ever contemplated or intended to deliver or receive the said stocks or bonds or wheat, and they never were in fact delivered, nor had the plaintiffs or defendant ever the said stocks, bonds or wheat for delivery, nor did they ever intend that the other was bound to deliver the same, but that in all of said contracts, the real intent of the parties was to wager on and to speculate in the rise or fall of the price of said articles, and that the one party was to pay and the other to accept the differences between the contract prices and the market prices of the same, at the dates fixed for executing said contracts, or when said contracts should be closed, . The plaintiffs replied, traversing these averments. An agreement was made by the parties that the following decisions, viz., Ruchizky vs. De Haven, 91 Penn. St., 202; Dickson’s Ex’r vs. Thomas, 97 Penn. St., 218; Fareira vs. Gabell, 89 Penn. St., 89; North vs. Phillips, 89 Penn. St., 250; Brua’s Appeal, 55 Penn. St., 294, should be read at the trial of the case as evidence of the law of Pennsylvania, and have the same effect as if proved under a commission or by the testimony of members of the bar of that State.

There was judgment for the plaintiffs and the defendant appealed.

The testimony of the defendant, taken subject to excep- ■ tion, including the Pennsylvania decisions offered under the agreement as to the alleged law of Pennsylvania, with reference to the validity of the dealings between plaintiffs and defendant, was on motion of plaintiffs improperly ruled out as irrelevant to the issues. The six prayers of the plaintiffs were granted. All the defendant’s eleven prayers were rejected.

'While the testimony of the plaintiffs tends to show that the dealings between them and defendant were bona fide, and that an actual delivery of the articles bought and sold by them for defendant, was intended, and there were actual purchases and sales made, and actual delivery to the defendant was not made because waived by him, or an equivalent under the rules of exchange was accepted by him ; the proof also shows that in the numerous transactions, there was no actual delivery but in a single instance, and the defendant testifies explicitly that “ it was the express understanding between him and plaintiffs that the.stocks and grain were not to be bought outright, and no delivery was to be made, but that he was simply to deal with them on margins; if the market was in his favor he would gain, if it went against him ho would lose ; that the total amount of margins put up by him, outside of mere profits from the fluctuations of the market, was 01700. lie further testified, that while the transactions carried on within his margins of five and ten per cent., aggregated 0800,000, some of the items of purchase and sale amounting to over 017,000, he was worth only $3500; that he was a lawyer by occupation, and resided next door to plaintiffs who knew him well. This and similar testimony from him, was competent to go to the jury. In cases like this, it is competent to show that although in form the contract is perfectly legal, it is in fact a mere guise under which a gambling transaction may be conducted. The true nature of a fraud upon the law and public morals could not otherwise be exposed, and the evil of wagers under the guise of a legitimate enterprise be prevented.

This principle is well settled apart from what the law in Pennsylvania may be. Grizewood vs. Blane, 11 C. B., 536 ; Benjamin on Sales, sec. 542 ; Irwin vs. Williar, 110 U. S., 499. The plaintiffs seem to assume that if they acted, merely as defendant’s broker in negotiating the contracts, and as they are suing not on the contracts themselves, but for services performed and money advanced for the defendant, they do not stand in the same position as if seeking to enforce the original agreement. But as laid down in Irwin vs. Williar, 110 U. S., 499, “ where a broker is privy to a wagering contract, and brings the parties together for the very purpose of entering into an illegal agreement he is particeps criminis, and cannot recover for services rendered or losses incurred by himself in forwarding the transaction.”

As to the locus of the contract between the parties, the jury should have been given the law of Pennsylvania, as comprised in the decisions of that State bearing on wagering contracts within its limits. The defendant employed plaintiffs to make purchases and sales, but the settlement was to be with them in York. His name was not disclosed in any of the transactions, and the plaintiffs conducted the negotiations in their own name and upon their own credit. And the plaintiffs have declared in assumpsit on the common counts for services rendered by them. It is their relations with defendant on which the suit is based. The parties with whom they dealt are in no wise connected with the suit. According to these Pennsylvania cases, if there was such an understanding between plaintiffs and defendant, as the latter testifies to, the transactions were mere wagers, and no recovery can be had hy plaintiffs.

It follows, that, defendant’s second, third and seventh prayers, going to the bona Jides of the transactions, should have been granted instead of refused. The defendant’s eighth prayer should also have been granted. This relates to the lex loci contractus. The law of the place where a contract is made is to be looked to im determining its validity and construction. Trasher vs. Everhart, 3 G. & J., 234. As to his ninth prayer, relating to the Consolidated Gas Company stock, we think it was properly refused, no tender to the defendant being required before sale, because of the authority given plaintiffs to sell when from exhaustion of margins it was necessary for their indemnification. His tenth prayer, however, relating to the sale and re-purchase of the said stock as one and the same transaction, by plaintiffs, should have been granted, as importing bad faith, and not compatible with their relations to the defendant. Defendant’s first prayer, instructing the jury there was no evidence of any purchases or sales of grain by plaintiffs or their agents, on behalf of defendant, was properly rejected. His fourth and fifth prayers, referring to the “ringing out” process, and asking an instruction that there was no evidence that defendant knew anything of such a mode of settlement, were likewise properly refused. His eleventh prayer w also correctly refused. It would be invading the province of the jury for the Court to characterize any piece of evidence as entitled to special and controlling weight with them.

(Decided 14th May, 1886.)

In regard to plaintiffs’ prayers, with the exceptio of the first two, which, in our opinion, were improperly granted, we think, based as they are upon the assumption of tona fides in the transactions, they might be allowed to stand with the granting of the instructions we have indicated as due to the defendant.

Judgment reversed, and new trial awarded.