Kent v. Miltenberger

• Decision Date: 01 May 1883
• Citation: 13 Mo.App. 503
• Parties: ELMER A. KENT ET AL., Respondents, v. EUGENE B. MILTENBERGER, Appellant.
• Court: Missouri Court of Appeals

13 Mo.App. 503

ELMER A. KENT ET AL., Respondents,

v.EUGENE B. MILTENBERGER, Appellant.

St. Louis Court of Appeals, Missouri.

May 1, 1883.

APPEAL from the St. Louis Circuit Court, LINDLEY, J.

Reversed and remanded.

OVERALL & JUDSON, for the appellant: Although the form of the contract to buy or sell for future delivery is on its face legitimate, the intent to bet or wager on market fluctuations by settlement of differences only, without delivery, is illegal, and against public policy.-- Waterman v. Buckland, 1 Mo. App. 45; Williams v. Tiedemann, 6 Mo. App. 269. If the original contract of employment is tainted with illegality; if plaintiffs were knowingly employed for the purpose of furthering an illegal intent, even under the guise of legitimate transactions, they cannot recover on the implied agreement of reimbursement under said contract of employment for losses sustained, or commissions earned therein.-- Armstrong v. Toler, 11 Wheat. 258; Whart. on Ag., sects. 25, 319, 324; Fareira v. Gabell, 89 Pa. St. 89; Barnard v. Backhaus, 52 Wis. 593; Tenny v. Fcote, 4 Bram. 600; s. c. 95 Ill. 99; In re Green, 7 Biss. 338. There was manifest error in the ruling that the burden of proof was upon defendant to prove the true value of August wheat in the St. Louis market on August 31, 1880.

GIVEN CAMPBELL, for the respondent: In order to make a contract waging, neither party thereto must intend an actual sale, and the defendant alleging a wager must prove it.-- Williams v. Tiedemann, 6 Mo. App. 269. Such is also the law in all the states.-- Pixley v. Boynton, 79 Ill. 351; Corbett v. Underwood, 83 Ill. 324; Story v. Solomon, 71 N. Y. 420; Harrison v. Tombudge, 83 N. Y. 99. If neither plaintiff nor his vendees intended an actual sale and delivery, then if the broker knew that he was conducting a wager, he could not recover, but such a case was not asked by the instructions offered by defendant, and refused. Under the evidence in this case the proof is all on the side of an actual sale to the vendees, and delivery is shown of most of it. All the cases hold that in a case of this kind the agent can and ought to recover.-- Lehman v. Strassberger, 2 Wood's C. Ct. 554; Sawyer v. Taggart, 14 Bush, 727; Durant v. Burt, 98 Mass. 167; Brooks v. Martin, 2 Wall. 70-78; Kingsbury v. Kirwan, 11 J. & Sp. 451.

THOMPSON, J., delivered the opinion of the court.

This is an action to recover a sum of money claimed to be due to the plaintiffs from the defendant, on account of certain sales of wheat for future delivery made by the former, as brokers for the latter, on the floor of the Merchants' Exchange of St. Louis. The sales were of the aggregate amount of fifty-five thousand bushels, a part of it deliverable at any time during the month of August, 1880, a part of it at any time during October, at the option of the seller, and a part at any time during that year, at the option of the seller. These sales were made at different times and represent several different transactions. Each of them was made by a contract in writing by the plaintiffs, acting toward the other contracting party as principal contractors. These contracts were all made in the same form upon a printed blank which is used for that purpose. One of them, which was put in evidence, will serve as an example of all the others. It reads as follows:--

“(88 3-4 c.)

GRAIN CONTRACT.

ST. LOUIS, July 31, 1880.

We have this day bought of E. A. Kent & Co. five thousand bushels No. two red winter wheat at eighty-eight and three-quarters cents per bushel, to be delivered at sellers' option, during the month of October, 1880, in regular elevator. This contract is subject in all respects to the rules and regulations of the Merchants' Exchange of the city of St. Louis.

REDMOND, CLEARY & CO. B.”

It is thus perceived that these contracts were what are known in the slang of the exchange as “option deals,” the seller having an option to make delivery of the commodity sold within certain days. There is much evidence in the record as to the general character of these contracts and the manner in which they are executed and discharged. It appears that delivery is always contemplated, not as a thing which will be necessarily insisted upon, but as a thing which the purchaser may insist upon. It sufficiently appears that this is the one thing which gives vitality to such contracts and which enables those who, during a particular month are on the successful side of them, to get up what is known as a “corner.” This happens when a much greater amount of any given commodity has been sold for future delivery within a given period than can be purchased in the market. The buyers, who are called in the slang of the exchanges the ““longs,” then insist upon delivery, and by this means succeed in running up the prices to a fictitious point, at which the “deals” are “rung out,” between the dealers by the payment of differences, or, where the purchasers insist upon it, by actual delivery. A very large majority of these transactions are, no doubt, merely speculative, but many of them are actual purchases by manufacturers and exporters. For instance, a miller knows that in his business he will consume so many thousand bushels of wheat during a certain month. When the market is favorable he buys upon the exchange this much wheat upon one of these contracts, by which the seller has the option of delivering the wheat at any time during the succeeding month; and an exporter, forecasting the market, may buy for exportation in the same way.

The defences to this action were, that the contracts were gambling contracts, mere wagers or bets, on the future state of the market, and that some of them were settled on the basis of a fictitious and manipulated market, contrary to the rules of the Merchants' Exchange, which settlement resulted in the loss which the plaintiffs are now asking the defendant to make good.

1. As to the validity of these contracts. From what has been said concerning them, it appears that there is no essential difference between them and the numerous contracts of the same kind which have been before the courts in England and in this country, and which have been almost uniformly upheld as valid contracts. All these decisions unite upon the proposition that these contracts are presumptively valid, but that, though valid on their face, they may be shown by extrinsic evidence to have been intended by the contracting parties, not as commercial transactions, but as mere wagers on the future state of the market; that the one thing which makes them wagers and renders them invalid is an agreement between the contracting parties, made at the time of the contract and understood as part thereof, that the contract may be discharged by the seller, not by the delivery of the commodity sold, but by paying to the purchaser the difference between the market price on the last day of the performance of the contract and the price at which the sale was made; or, on the other hand, that the purchaser, if the market goes the other way, shall not be bound to receive the commodity purchased, but may settle by the payment of a difference; and that such an agreement will not, if made subsequently to the making of the contract itself, taint the contract and render it invalid in law. Sawyer v. Taggart, 14 Bush, 727, 734; Williams v. Tiedemann, 6 Mo. App. 269.

This agreement, contemporaneous with the contract, that it may be discharged, not by actual delivery, but by the payment of differences, or by ““ringing out,” as it is expressed in the slang of the exchanges, is therefore the one thing which renders the contract void. That was the agreement in Waterman v. Buckland (1 Mo. App. 45), and this court held the contract void, just as we should do now if the evidence disclosed a like contract. But there is no evidence in this case of such an agreement, either between the plaintiffs and the defendant, or between the plaintiffs and the parties to whom they sold the wheat for the defendant. There was therefore no question to go to the jury as to whether or not this was a gambling contract, unless the learned counsel for the defendant was right in another proposition which we shall consider.

The defendant was, like the plaintiffs, a member of the St. Louis Exchange. He was not, however, a dealer in grain, but he dealt in liquors. He had no wheat to sell in the sense of having it in his actual possession, or expecting to have it in his actual possession, and he did not wish to buy any wheat, in the sense of receiving it in kind, for any purpose connected with the business in which he was engaged. He simply bought and sold, as hundreds do, for speculation. There is nothing unlawful in this. The law puts no restraint upon trade which renders it unlawful for a man to buy or sell commodities in which he does not generally deal, if he thinks he can catch a favorable turn of the market and make money by so doing. What one man is at liberty to do in this respect another man is equally at liberty to do. Furthermore, the fact that a man does not have on hand a commodity which he undertakes to sell for future delivery at the time when he makes the sale, and that he does not expect to have it on hand until the time arrives for delivery, but that he expects then to go upon the market and purchase it for delivery in pursuance of his contract, does not in any degree impair its validity. Williams v. Tiedemann, 6 Mo. App. 269; Nibblewhite v. McMorine, 4 Mee. & W. 462; Sawyer v. Taggart, 14 Bush, 727; Smith v. Bouvier, 70 Pa. St. 325. What he may do by himself in this respect he may obviously do by the agency of another. He may employ a broker to make the contract for him and to execute it for him, in any manner in which it would be lawful for him to make it and execute it if acting for himself in person. Any man, although not a dealer in wheat, may therefore lawfully employ a broker on exchange to sell wheat for him for delivery at a future time and to execute...