Burke Grain Co. v. St. Paul-Mercury Indemnity Co.

• Decision Date: 11 February 1938
• Docket Number: No. 10973.,10973.
• Citation: 94 F.2d 458
• Parties: BURKE GRAIN CO. v. ST. PAUL-MERCURY INDEMNITY CO.
• Court: U.S. Court of Appeals — Eighth Circuit

94 F.2d 458 (1938)

BURKE GRAIN CO. v. ST. PAUL-MERCURY INDEMNITY CO.^*

No. 10973.

Circuit Court of Appeals, Eighth Circuit.

February 11, 1938.

COPYRIGHT MATERIAL OMITTED

Tom Kirby, of Sioux Falls, S. D. (Hugh S. Gamble, of Sioux Falls, S. D., on the brief), for appellant.

Holton Davenport, of Sioux Falls, S. D. (George J. Danforth, of Sioux Falls, S. D., on the brief), for appellee.

Before STONE, GARDNER, and WOODROUGH, Circuit Judges.

GARDNER, Circuit Judge.

In this case the appellee as plaintiff below brought this action at law to recover from appellant as defendant funds in the amount of $25,000, representing losses in certain transactions alleged to be wagering in character. Burke Grain Company, a corporation, and J. C. Vandagrift were named as defendants below, and we shall refer to the parties as they were designated in the lower court.

Plaintiff is a surety company, and on or about July 21, 1934, it executed a fidelity bond to the Union Savings Bank, of Sioux Falls, S. D., as obligee, by the terms of which it agreed to reimburse the said bank for any embezzlement or wrongful abstraction of the funds of the bank by said J. C. Vandagrift, up to the sum of $25,000. Vandagrift was president and active managing officer of the Union Savings Bank during all the times in question, and embezzled and wrongfully abstracted various sums of money from the bank amounting to approximately $96,000. Plaintiff reimbursed the bank to the extent of its liability, to wit, $25,000, and thereby became subrogated to such rights as the bank might have against the defendant Burke Grain Company. Of the funds so embezzled by Vandagrift from the bank, some $93,000 was placed directly by him to the account of the Burke Grain Company in the Union Savings Bank. The Burke Grain Company was and is a brokerage concern, and S. A. Burke, its president and managing officer was a member of the Chicago Board of Trade, thereby entitling the grain company to its trading privileges.

Vandagrift had transactions with the grain company in the form of orders for the purchase or sale of grain for future delivery. The grain company acted as broker and consummated these transactions through a correspondent, generally on the Board of Trade in Chicago. Vandagrift was required to keep a margin or deposit with the grain company, and the grain company received a commission on each alleged sale or purchase. When the purchase or sale was made, the grain company notified Vandagrift, using a form indicating that it had bought or sold for his risk and account a certain quantity of grain, describing the transactions. Shortly after the purchase or sale, Vandagrift would close out the transaction by an offsetting sale or purchase, and would be credited or charged on the books of the Burke Grain Company with either the profit or loss. As losses depleted the margins deposited, additional deposits were required which he from time to time made. It is claimed that these transactions were gambling transactions, and therefore illegal, in that neither of the parties intended an actual purchase and sale, but it was the purpose of Vandagrift merely to speculate in the rise or fall in prices, and the grain was not to be delivered, but one of the parties was to pay the other the difference between the contract price and the market price of the wheat dealt in at the date fixed for executing the contract.

It was contended in the lower court, and asserted here, that there was no valuable consideration for the transfer of the money to the Burke Grain Company, and hence the bank, the real owner of the money, had a right to recover it. It was also contended that, even if the contracts were not void by reason of the gambling character of the transactions, yet the grain company knew, or should be charged with notice, that the money did not belong to Vandagrift, and hence it did not act in good faith, and plaintiff should be entitled to recover.

At the conclusion of all the evidence, plaintiff interposed a motion for directed verdict in its favor. Defendant also made a motion for a directed verdict, but embodied in its motion the following request: "And the defendant asks that this motion of the defendant be considered by the court separate and apart from the motion of the plaintiff, and that if the defendant's motion is denied, that the issues of fact be submitted to the jury." The court announced that, as both parties had moved for a directed verdict, that eliminated any jury issue, and the jury was thereupon discharged.

The court found that the transactions were gambling in character, announced orally that it found for the plaintiff on all the issues, and requested plaintiff's attorneys to prepare and submit findings in the form of judgment. Counsel for defendant excepted on the ground that the ruling of the court denied its right to have the issue of fact submitted to the jury, because it had reserved that right in its motion. Two days later, plaintiff submitted to the court findings of fact and conclusions of law, which the court signed. To some of these defendant excepted. It submitted proposed findings of fact, which the court refused to make, and defendant excepted, and judgment was thereupon entered for plaintiff. On application the grain company was granted an order of severance, and it alone prosecutes this appeal. It seeks reversal on substantially the following grounds: (1) It was error for the court to discharge the jury and decide the disputed questions of fact, in view of the reservation contained in defendant's motion for a directed verdict; (2) the court erred in holding that the transactions between Vandagrift and the Burke Grain Company were gambling transactions; (3) the court erred in holding that the Burke Grain Company was put on notice that the funds or credits transferred to it were embezzled by Vandagrift from the bank; (4) that it could not be said as a matter of law, or from the undisputed evidence, that the transactions were gambling transactions, and hence the evidence should have been submitted to the jury for their determination.

1. The first question presented is one of practice. When both of the parties interposed a motion for directed verdict, the court took the view that this dispensed with the jury and amounted to submitting any dispute in the evidence to the court for its determination, and this is doubtless the general rule. But here the defendant did something more. It embodied in its motion for a directed verdict a reservation by which it requested that, if its motion should be denied, the issues of fact be submitted to the jury. Where the request is so coupled with a reservation, the party does not waive the right of trial by jury. General Tire Co. v. Standard Accident Ins. Co., 8 Cir., 65 F.2d 237, 239; Aetna Ins. Co. v. Kennedy, 301 U.S. 389, 57 S.Ct. 809, 811, 81 L.Ed. 1177.

In the last-cited case after stating the established rule with reference to an unreserved motion for a directed verdict, it is said: "But, as the right of jury trial is fundamental, courts indulge every reasonable presumption against waiver. And unquestionably the parties respectively may request a peremptory instruction and, upon refusal of the court to direct a verdict, have submitted to the jury all issues as to which opposing inferences may be drawn from the evidence."

In General Tire Co. v. Standard Accident Insurance Co., supra, the opinion in which was written by Judge Van Valkenburgh, it is said: "It is well settled that where the request for directed verdict is coupled with a reserved right to submit further requests for instructions, if that for a directed verdict is refused, no waiver of trial by jury results. * * * No doubt the proper and usual practice is to couple the request for a directed verdict with a reservation, in some form, contingent upon the overruling of that motion."

Recognizing the effect of this rule, plaintiff urges that the reservation was not sufficiently specific as to the issues which defendant desired to have submitted to the jury, to avoid the waiver of the right to trial by jury. But, as said by the Supreme Court, in the Kennedy Case, supra: "As the right of jury trial is fundamental, courts indulge every reasonable presumption against waiver." We think the reservation in defendant's motion was sufficient to repel the inference that it was waiving its constitutional right to a jury trial. American Cyanamid Co. v. Wilson & Toomer Fertilizer Co., 5 Cir., 51 F.2d 665.

It is further contended that by requesting special findings, and excepting to those proposed by plaintiff, defendant waived the right to have a jury pass on the issues. If in this regard we must follow the practice in South Dakota, then we think it clear that defendant, by invoking the decision of the court upon the facts, waived its right to complain of the ruling of the court which deprived it of a jury trial.

In Sioux National Bank v. Lundberg, 54 S.D. 581, 223 N.W. 826, 828, the lower court, after both parties had moved for a directed verdict, but the appellant had made it plain that there was no intention to waive the right to trial by jury on issues of fact, discharged the jury, and announced that it would decide the case. Thereafter appellant prepared and presented to the trial court proposed findings of fact and conclusions of law, and requested that they be adopted. The Supreme Court on this question said: "When appellant did this, he himself invoked the decision of the court upon the facts and thereby conceded that the facts were for the court to decide. By so doing, he lost the benefit of his previous reservation of the right to go to the jury and stands in the same position as though he had made no such reservation and the case is in the same situation as though both parties had moved for directed verdict without reservation, thereby waiving a jury, and the court had dismissed the jury and made findings."

We note in passing that there was...