67 N.J. Eq. 212 | New York Court of Chancery | 1904
Complainants are stockholders doing business in the New York Stock Exchange, and on May 2d, 1902, recovered a judgment in the supreme court of the State of New York against the defendant Frederick. B. Williamson for the sum of $10,-oSI'.OS, the balance due complainants on their account as brokers for the purchase and sale of stocks between March 8th, 1898, and May 31st,- 1899, with interest and costs. Suit in. the New
The judgment in New York was obtained in a suit in which the defendant appeared, and by an answer contested the complainants’ claim, not especially setting up, however, the defence of a gaming transaction, but the answer did set up that by the agreement between the parties the complainants, for all advances to him over $3,000, were to be repaid only out of the sale of the securities. Under the federal constitution full faith and credit must be given in the courts of this state to the judgment obtained in New York, and the same effect as to finality must here be given as would be given in the State of New York. There is no proof in this- case that in the State of New York a judgment so obtained is not final between the parties as to all defences which were or could have been set up in the suit, or that a judgment can there be avoided if founded on gaming transactions. In the absence of such proof, it must be presumed.
In each case the transaction was reported to the customer as a purchase or sale on his account, and the names of the brokers from whom the stock was purchased, or to whom it was delivered, were given in the report. On such purchase or sale the brokers charged a fixed commission — one-eighth of one per cent. The stocks .purchased were not, during the running of this account, in any instance, actually delivered by the brokers to the customer, but were, until directed to be sold, retained by them as collateral for the sums advanced for their purchase, and for the balance due on the account. Eor the purpose of raising money, the stocks themselves were sometimes pledged by the brokers with banks as collateral for their own loans, and on the sale for the customer were taken up for delivery. The customer was charged monthly with interest on the balances, the brokers crediting him with dividends on the stock received by them, and the commission, with these charges for interest balances, represents the entire profit or advantage to the brokers in the whole transaction. These amounts of commissions are fixed sums, and the rate charged for interest depended on the market rate for money, and was usually one per cent, more than the brokers themselves paid on procuring from their banks loans for executing these purchases and sales. On opening the account, in March, 1898, Williamson deposited $1,000 as a margin or security on ordering a purchase of one hundred shares of stock, which cost the brokers $9,250, but made no further deposits for this or any other purpose. During the running of the account he received, however, as stated above, from the brokers about $9,000 in cash, which was charged to his account,
And Mr. Thompson’s evidence shows, I think, that Mr. Williamson’s financial ability was actually relied on by the brokers, both in opening and in continuing the account. There was certainly no express agreement on their part to relieve the
There was in this case, as I have said, no- actual delivery by the brokers to Mr. Williamson of any of the stocks purchased for him, nor any delivery by him to the brokers of any stocks sold, and Mr. Williamson now swears that he did not expect nor intend to receive or deliver the stocks. The evidence clearly indicates, I think, that so far as Mr. Williamson was concerned his object and intention was not investment, but speculation, and that in a sense in which the word is often used he was gaming or gambling on the stock exchange. But the question in the case is not whether Williamson was speculating, and in this sense gaming or gambling through his brokers, but whether the contracts or agreements between him and the brokers, under which his speculations were carried on, were, on the part of both parties, wagers or gaming contracts, under our statute. The essence of a wager is that each party stands to win or lose on the result, and that the gains depend on the event. Carlill v. Carbolic Smoke Ball Co., 61 L. J. (N. S.) 696, 700 (1892); L. R. 2 Q. B. 484, 491; 14 Am. & Eng. Encycl. L. (2d ed.) 669. And both parties to the alleged illegal contract must intend a
I do not consider the evidence in this case sufficient to warrant the conclusion that there was any such agreement. There being no express agreement, and the whole evidence as to any implied agreement being derived from the account itself and the dealings of the parties, it seems to me that, in the view of the evidence most favorable to the defendants, it does not go further than to establish that it was the intention of both parties that the complainants should carry the stocks until other directions were given by either party, and while so carried Williamson should be liable only for the differences; but such mutual intention did not make a contract between them that the differences should be settled only in this manner, or that the brokers should have no right to malee deliveries. I conclude, upon the whole evidence, that the defence of illegality has not been made out.
It is proper to say that had I concluded that the defence was sustained, it would not, in my opinion, have been available to protect the grantees against the whole amount of the judgment, for the following reasons: The judgment in New York was recovered on a claim for the balance due on an account stated, between the defendant and the complainants, as his brokers, for the purchase and sale of stocks in the New York Stock Exchange, and, as appeared at this hearing, the judgment in New York was recovered upon proof of this account stated and an admitted balance of $9,053.39, due on June 15th, 1899. The
I will advise a decree declaring the conveyance to the debtor’s wife fraudulent as against the complainants, and that their judgment is a lien upon the lands other than those conveyed to Mrs. Emily B. Williamson, and that as to her the bill be dismissed.