Atwater v. A. G. Edwards & Sons Brokerage Co.

• Citation: 126 S.W. 823,147 Mo. App. 436
• Parties: ATWATER v. A. G. EDWARDS & SONS BROKERAGE CO.
• Decision Date: 22 March 1910
• Court: Court of Appeal of Missouri (US)

126 S.W. 823

147 Mo. App. 436

ATWATER v. A. G. EDWARDS & SONS BROKERAGE CO.

St. Louis Court of Appeals. Missouri.

March 22, 1910.

1. GAMING (§ 11) — VALIDITY OF CONTRACT — SPECULATIVE TRANSACTIONS.

Rev. St. 1899, § 2337 (Ann. St. 1906, p. 1444), prohibits and declares unlawful all purchases and sales, or contracts for the purchase and sale, of stocks and bonds, etc., either on margin or otherwise, without any intention of receiving and paying for the property bought, or of delivering the property sold, and imposes a fine for violating the section; section 2338 (page 1445) provides that the offense so defined shall be complete against any person, etc., pretending or offering to sell or buy, whether or not the offer is accepted; and section 2342 (page 1446) makes all contracts made in violation of the preceding sections gambling transactions and void. Held, that the intent of either party to a contract to speculate in stock contrary to the statute avoids the contract, though the other party did not intend to gamble or know that the one so intending intended to do so; each party being responsible for the unlawful intent of the other.

2. GAMING (§ 38) — RIGHTS OF PARTIES — BROKERS IN SPECULATIVE TRANSACTIONS — RIGHTS.

An agent or broker who conducts such transactions cannot recover for his services, though he has no knowledge of the unlawful intent of his principal, on the ground that no enforceable rights can accrue under the unlawful contract, and if the broker knows of the unlawful intention of the parties to the contract, and brings them together for the purpose of consummating it, he cannot recover, because he is in pari delicto.

3. GAMING (§ 2) — SPECULATIVE TRANSACTIONS — VALIDITY OF CONTRACTS — CONTRACTS MADE WITHOUT STATE.

Contracts made by a broker employed in this state for the purchase and sale of stock in another state are not void by reason of the intent of one of the parties thereto to gamble, unless made void by the laws of such other state; such contracts being valid at common law and the statutes having no extraterritorial effect.

4. GAMING (§ 38) — RIGHTS OF PARTIES — BROKERS.

The contracts declared illegal by the statute are those for the purchase or sale of stocks, etc., and not those creating the relation of principal and agent between a party thereto and the broker; so that, where the contracts of purchase and sale were valid as made in another state, a broker employed in this state could recover his commissions.

5. EVIDENCE (§ 591) — ESTOPPEL — TESTIMONY AS WITNESS.

In an action to recover money paid in settlement of an account in stock transactions, plaintiff is bound by his own testimony that the transactions were gambling transactions, so as to preclude recovery by him.

6. PLEADING (§ 36) — ADMISSIONS — CONCLUSIVENESS.

In an action to recover money paid in settlement of an account in stock transactions, in which defendant counterclaimed to recover a balance due, both plaintiff and defendant are bound by allegations, in the reply and counterclaim, respectively, that plaintiff intended to gamble in such transactions, so as to preclude recovery by either party under the statute.

7. GAMING (§ 11) — SPECULATIVE TRANSACTIONS — VALIDITY OF CONTRACT — VALIDITY AT COMMON LAW.

In absence of statute, speculative transactions in stocks are illegal, as gambling transactions, only where both parties intended to speculate.

8. EVIDENCE (§ 80) — PRESUMPTIONS — COMMON LAW IN OTHER STATES.

It is presumed that the common-law rule as to the validity of speculative transactions in stock obtains in another state, in absence of a showing that it has been modified by statute there.

9. CONTRACTS (§ 101) — LAWS OF OTHER STATES — ENFORCEMENT.

The comity between states does not require courts of one state to enforce rights accruing under contracts valid by the laws of another state, if to do so would violate the public policy of the state of the forum as declared by statute.

10. COURTS (§ 91) — RULE OF DECISION — SUPREME COURT.

Under the Constitution, a rule of law as declared by the Supreme Court is conclusive upon the Court of Appeals.

11. GAMING (§ 49) — RIGHTS OF PARTIES — ACTIONS — SUFFICIENCY OF EVIDENCE — ILLEGALITY.

In an action to recover commissions for conducting stock transactions, the broker is not conclusively bound by his principal's testimony that he intended to gamble in purchasing the stock, so as to preclude recovery, even if the principal's unlawful intention alone would preclude recovery.

12. GAMING (§ 11) — RIGHTS OF PARTIES — BROKERS.

If plaintiff's contracts with A. & Sons for the purchase and sale of stocks were valid, the fact that another brokerage company, which had purchased stocks for him, transferred to A. & Sons an amount due from it under unlawful contracts for the purchase of stocks, which amount A. & Sons accepted and credited on plaintiff's account with them, would not prevent recovery on the account arising out of the valid contracts with A. & Sons, though they knew that the amount transferred to them accrued under a gambling contract.

Appeal from St. Louis Circuit Court; Charles Claflin Allen, Judge.

Action by J. Garnett Atwater against the A. G. Edwards & Sons Brokerage Company, in which defendant counterclaimed. From a judgment dismissing the petition and counterclaim, defendant appeals. Reversed and remanded.

Geo. L. Edwards, for appellant. Thompson & Campbell, for respondent.

NORTONI, J.

This is a suit on an account for a balance alleged to be due plaintiff as a result of certain transactions conducted by the defendant as his agent in the matter of purchases and sales of stocks and bonds on the market. The defendant admitted the correctness of plaintiff's account, urged that it arose from gambling, and interposed two separate counterclaims, on which it prayed for a judgment against him. During the trial plaintiff testified that he did not intend to either receive or deliver the stocks or bonds purchased and sold on his account by the defendant, and at the conclusion of the case the court dismissed, not only the petition, but the defendant's counterclaims as well. From this judgment, the defendant prosecutes the appeal.

It appears the defendant is an incorporated concern engaged in the brokerage business in the city of St. Louis. It appears, too, that A. G. Edwards & Sons, a copartnership, conducts a brokerage business in the city of St. Louis in the same office occupied by the defendant, A. G. Edwards & Sons Brokerage Company. Defendant, A. G. Edwards & Sons Brokerage Company, conducts its brokerage business in St. Louis, and deals in local stocks, bonds, etc.; whereas the A. G. Edwards & Sons copartnership deals and conducts its business in buying and selling stocks on the Stock Exchange of the city of New York. It seems that the several copartners of the firm of A. G. Edwards & Sons are almost, if not quite, identical with the several stockholders of the defendant, A. G. Edwards & Sons Brokerage Company. Be that as it may, the two concerns are different and distinct, in that the corporation conducts its business in this state and the co-partnership deals in the New York Exchange. Although the two concerns, the corporation and the copartnership, maintain offices at the same place and in the same rooms in the city of St. Louis, they keep a separate and distinct set of books, and each conducts a separate and distinct business. The business of buying and selling stocks and bonds, conducted by the defendant brokerage company, pertains to local stocks and bonds, and the account with reference to such transactions on its books is known to the customers who deal with both as the "local account." The business conducted by the A. G. Edwards & Sons copartnership, in buying and selling stocks and bonds on the New York Exchange, is kept by that firm in their separate books, and known to the customers, who deal with both concerns, as the "New York account."

Several years before the institution of this suit, the plaintiff, without knowledge of the fact that there were two concerns doing business in the same office, entered into a course of dealing with both, by authorizing them to buy and sell certain stocks and bonds on the market for him. The plaintiff's account with both concerns ran along several years, and it seems that he was occasionally furnished a statement thereof from each. Such local stocks and bonds as were bought and sold for the plaintiff's account were bought and sold for him by the defendant brokerage company, and the accounts with reference thereto were carried in its books. So much of his transactions as pertained to the buying and selling of stocks and bonds in New York were conducted for him by the A. G. Edwards & Sons copartnership, and the accounts of those transactions were carried in the books of the copartnership. While the plaintiff says he did not know at the time, as a matter of fact, that he was dealing on the market through the agency of two different concerns, it appears that he knew the business was being carried in two separate accounts, one known as the "local" and one as the "New York" account, and that he received some statements of account from A. G. Edwards & Sons Brokerage Company and some from A. G. Edwards & Sons. Finally, after the transactions by the different concerns on plaintiff's account had continued for several years, the plaintiff suspended further operations on the market, and in effect revoked the agencies which theretofore obtained. At the time of suspending operations and revoking the agencies, the defendant brokerage company owed him, as a balance on its accounts pertaining to such transactions as were had in local stocks and bonds, the sum of $4,278.95. At the same time plaintiff owed the A. G. Edwards & Sons copartnership, for advances and commissions, a balance upon the New York account, pertaining to transactions conducted by it for him on the New York Exchange, of about $9,500. Plaintiff...