Baxter v. Deneen
Decision Date | 04 December 1903 |
Citation | 57 A. 601,98 Md. 181 |
Parties | BAXTER v. DENEEN et al. |
Court | Maryland Court of Appeals |
Appeal from Circuit Court, Allegany County; A. Hunter Boyd, Chief Judge.
Suit by George E. Deneen against A.B. Baxter and others. From the decree, defendant Baxter appeals. Reversed.
Argued before McSHERRY, C.J., and FOWLER, BRISCOE, PEARCE SCHMUCKER, and JONES, JJ.
W Calvin Chestnut and Robert R. Henderson, for appellant.
David J. Lewis and Benjamin A. Richmond, for appellee.
The appellee, Deneen, in the bill filed by him in this case declares his purpose to repudiate certain contracts made with the appellant, Baxter, a stockbroker, for speculating in stocks on margins, and asks the court to compel the return to him of the margins paid by him to Baxter under the contracts. He also asks for an injunction to prevent the withdrawal from bank by Baxter of certain money standing there to his credit, upon the ground that it consists of the margins so paid. Both parties to the record admit on their briefs that the contracts in question were mere gambling contracts, predicated upon the expected rise or fall of the stock market, and were not intended to be executed by actual purchases or sales of stocks. They both also concede the proposition that equity will not lend its aid to enforce gambling contracts, but the appellee contends that his bill does not ask the court to enforce any contracts, but simply to compel the return to him of the margins which he paid upon gambling contracts that he now repudiates.
The material facts of the case, as we find them from the record, may be stated as follows:
Early in September, 1902, Baxter, at his office, in Pittsburg, Pa., informed Deneen that he was considering the desirability of opening what is commonly called a "bucket shop," for speculating in stocks on margins, in the city of Cumberland, where Deneen resided. A similar business had theretofore been conducted in Cumberland by one Cummings, who is said to have decamped with all the funds of the business; thereby inflicting serious losses upon Deneen and other persons who were his customers. Deneen replied to Baxter that it would be useless to send a stranger there, as he could get no trade, and advised him to get H.H. Hartsock, who had been Cummings' agent, to take charge of the office, if he determined to open one, and to permit Hartsock to handle the money. To this Baxter replied that he would not put money in Cumberland in any other name than his own, but he was willing to do anything else, and would not object to permitting it to be known how much money he had in bank in Cumberland from time to time. Within a few days thereafter, Baxter opened a bucket shop in Cumberland, and placed it in charge of Hartsock, as manager. He at the same time deposited $10,000 in his own credit in the Third National Bank of Cumberland, and instructed the bank to inform Hartsock from time to time of the amount standing to the credit of the account. Hartsock thereafter deposited to the credit of the bank account thus standing in Baxter's name all margins received from customers in the course of the business at the Cumberland office. When the deal of any customer at the office was closed, the balance, if any, due to him, was paid out of this money standing to Baxter's credit in the bank, which was drawn out by checks signed by Baxter, and not by Hartsock. Deneen, who was a frequent, if not habitual, speculator in stocks on margins, at once began operating through the Cumberland office, and soon became its chief customer. Within a few days after opening the office, Hartsock, its manager, wrote, with the knowledge of Deneen, the following letter to Baxter, his principal:
Subsequently, after Deneen had been trading for some time with the Cumberland office, he was called by it for over $6,000 additional margins. When he responded to that call with the money asked for, he said to Hartsock that his understanding was that all margins were to remain in bank until the trades for which they were put up were closed, or the margins were exhausted, and he desired to know something more about it. Hartsock thereupon telegraphed to Baxter for information on the subject, and received from him a reply saying: The precise meaning of the technical expression, "more money than the sheet is worth," was the subject of a conflict of testimony, but it is not necessary, in the view which we take of this case, to settle that controversy. After these occurrences, Deneen continued to deal heavily with the Cumberland office in similar stock transactions, until October 7, 1902, up to which time he had paid to Hartsock $18,253 as margins on deals then remaining open and unfinished. At that time $33,253 stood to the credit of Baxter on the account already referred to, in the Third National Bank. On that day, October 7th, just before the bank closed, Baxter drew out of it $15,000, through an agent whom he had sent to Cumberland for that purpose, and who on the next morning presented a check for $17,000. The bank refused to pay this check, as Deneen, having gotten wind of Baxter's purpose to withdraw the money, had filed the present bill, and procured an injunction thereon restraining the bank from paying out any of the money standing to Baxter's credit until the further order of the court. Deneen also sued out of the law side of the court an attachment against Baxter for the recovery of the $18,253 of margins, and laid it in the hands of the bank.
The bill of complaint alleges that all of the contracts were entered into by the plaintiff, and the margins thereon paid by him, upon the distinct understanding and agreement between him and Baxter, with the knowledge and assent of the bank, that the margins were to remain in the bank until the contracts on which they were paid were closed. The evidence, however, does not satisfy us that Baxter made any positive agreement to do more than keep money enough there to make the sheet good, whatever may be the exact meaning of that expression, although he disclaimed any desire to withdraw the balance of his account. There is no evidence at all that the bank had any knowledge of, or gave any assent to, the arrangement or understanding between Deneen and Baxter relative to the retention of the money in bank. The bill also charges that the drawing of the $15,000 out of bank by Baxter, and the attempted drawing of $17,000 more, constituted flagrant violations of the agreement under which Deneen had paid his margins, and that it had been done with a deliberately fraudulent intent and purpose to remove the money from this state and convert it to his own use, and cheat and defraud Deneen and the other customers who had dealt with him at Cumberland upon the same terms. It is also averred that the other persons who are named as defendants had similar stock dealings with Baxter, and may be interested in the balance to his credit in bank, and also that he is financially irresponsible. The prayer for relief asks for a decree for an accounting between the parties to the suit in respect to their relative rights to the money in bank to Baxter's credit, and for an injunction to restrain the bank from parting with the money pendente lite, and for general relief. An injunction was granted as prayed, and the defendant made a motion for its dissolution.
The bank's answer admits the making of the several deposits with it, and that it was instructed by Baxter to let Hartsock know the balance whenever he wished, but it flatly denies that it had any knowledge of any agreement between Deneen and Baxter as to the deposits, or the uses to which they were to be put. Baxter's answer admits the dealings on margins in stocks with Deneen, but insists that it was definitely understood that the margins were to...
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