Becher-Barret-Lockerby Co. v. Sjothun

• Decision Date: 18 October 1935
• Docket Number: No. 6370.,6370.
• Citation: 262 N.W. 691,66 N.D. 168
• Parties: BECHER-BARRET-LOCKERBY CO. v. SJOTHUN et al.
• Court: North Dakota Supreme Court

66 N.D. 168

262 N.W. 691

BECHER-BARRET-LOCKERBY CO.

v.SJOTHUN et al.

No. 6370.

Supreme Court of North Dakota.

Oct. 18, 1935.

Syllabus by the Court.

1. All transactions in grain or other commodities made with the understanding that at the appointed time the account is to be adjusted by paying and receiving the difference between the contract price and the current price are gambling transactions.

2. A party claiming that transactions on the board of trade are gambling transactions has the burden of proving that they are.

3. Where the defense in an action is that transactions on the board of trade are gambling transactions, the board of trade rules providing for acceptance and delivery are not controlling, and it may be shown by direct or circumstantial evidence that no delivery was actually intended by the parties.

4. The actual intention to gamble on the market need not be formally expressed in words. If the circumstances in evidence show such intention, it is sufficient.

5. Evidence examined, and held, that at the time of making the contract it was the understanding of the parties that at the appointed time the account would be adjusted by paying and receiving the difference between the contract price and the current price.

Appeal from District Court, Sargent County; Geo. M. McKenna, Judge.

Action by the Becher-Barret-Lockerby Company against Julius Sjothun and A. R. Carlson. The action against the last-named defendant was dismissed. From an adverse judgment, plaintiff appeals.

Affirmed.

Hugo P. Remington, of Lisbon, for appellant.

Burdick & Burdick, of Fargo, for respondent.

BURKE, Chief Justice.

On August 19, 1929, Earl Robinson, manager of the Rutland Farmers Co-operative Elevator Company, wired the plaintiff, Becher-Barret-Lockerby Company, a grain commission firm at Duluth, Minn., as follows: “Buy one Dec. durum account Sjothun.” The next day, August 20, 1929, the said Robinson wrote the said commission firm at Duluth and inclosed a check for $150, with instructions to “margin Julius Sjothun December durum.” On August 22, 1929, the plaintiff wrote to Mr. Robinson, as manager of the Rutland Farmers Co-operative Elevator Company, stating: “We also have your letter of the 20th enclosing check for $150, which has been credited to the account of Julius Sjothun to margin his open trade. We take it that you will guarantee all of these trades which we are carrying at the present time and will consequently not close them up when markets (probably means margins) are exhausted but will notify you when we need further protection.” Robinson, as manager and on behalf of the Rutland Farmers Co-operative Elevator Company, did guarantee the accounts referred to in plaintiff's letter, Exhibit 5. Under date of August 19, 1929, plaintiff sent Robinson a confirmation of the Julius Sjothun purchase of one thousand bushels of durum. On October 29, 1929, the defendant paid to the said Earl Robinson $50, as a further margin. On November 26, 1929, said Earl Robinson wrote a letter to the plaintiff at Duluth, in which he states: “In regard to open trades sent in from here, would like to have them changed over to May. Walter Strand would like to have his Dec. Durum changed to July if possible but if there is no trading in July, change to May.” On November 29, the plaintiff sold the thousand bushels of durum wheat on the market and made a repurchase of another thousand bushels of durum wheat for May delivery, upon which there was a loss of $221.37, $21.37 more than the margins paid. On April 28, 1930, Robinson again instructed the plaintiff to change the time of the delivery from May to July, and the plaintiff accordingly sold the thousand bushels of May wheat and repurchased a thousand bushels to be delivered in July, upon which there was a loss of $317.60, making a total loss claimed by the plaintiff of $338.97, which was charged to the Farmers Co-operative Elevator Company of Rutland on May 6, 1930. On May 24, 1930, Julius Sjothun indorsed a wheat check for Robinson for $137.30, which was credited to the account of Sjothun by the plaintiff. On June 27, 1930, the said Robinson again instructed the plaintiff to change the time of the delivery from July to September, which resulted in another loss of $156.24. On July 12, 1930, Robinson wrote the plaintiff company to “place stop loss orders on all options at 80 cents.” On July 17, 1930, the plaintiff sold out the defendant's thousand bushels of December durum, which resulted in a further loss of $25.09, which the plaintiff charged to the account of the Farmers Co-operative Elevator Company. On August 15, 1930, the defendant paid to Earl Robinson $123.90 to margin another thousand bushels of grain, which grain was duly purchased by the plaintiff and sold out in September, upon which there was a loss of $111.53. The losses, over and above the amount of money paid by Sjothun as margins, were charged, by the plaintiff, to the Rutland Farmers Co-operative Elevator Company, and Sjothun was credited therewith. Robinson, under instructions from the plaintiff, made the same charge against the same elevator company and gave the same credits to the defendant, and out of the proceeds of the grain shipped, by the said elevator company to the plaintiff, the losses were paid leaving, on the plaintiff's books, a balance due defendant of $12.57.

The only correspondence that the defendant had directly with the plaintiff was the letter of January 2, 1931, asking for a statement of his account. On January 5, 1931, the plaintiff sent the defendant a statement showing a balance of $12.57 due the defendant from the plaintiff. On receipt of this statement the defendant wrote asking for payment of the balance and the plaintiff forwarded to the defendant check for $12.57, to balance its account with the defendant.

Thereafter the Rutland Farmers Co-operative Elevator Company brought an action against the plaintiff to recover the losses occurring through the purchase and sale of grain on the Duluth market ordered and guaranteed by Robinson and paid out of the proceeds of grain actually shipped to the plaintiff's commission house. The case was settled by the plaintiff paying to the Rutland Farmers Co-operative Elevator Company the amount of said losses, and the claims against Sjothun, which had been charged to Sjothun on the books of the elevator company amounting to $383.10 were assigned to the plaintiff, who brought action against the defendant on the assigned claims. The case was tried to the court without a jury and the trial judge found as a fact: “That the transactions * * * resulting in the loss of cash margins of $448.83, and a further indebtedness on account in the sum of $383.10, * * * were transactions where the actual receipt and delivery of grain was neither intended or performed, by the defendant or the plaintiff and where said transactions were mere wagers on the future price of grain and known by both parties to be such.” And as a conclusion of law the court said, “That said transactions were gambling transactions, and were null and void.” The action against the defendant A. R. Carlson was dismissed without objection. The plaintiff duly appealed and demanded a trial de novo in this court.

[1] It is well settled that while contracts for the sale of property to be delivered in the future are valid where the parties actually contemplate a delivery of the subject-matter, even though the seller has not the goods, nor any other means of getting them than to go into the market and buy them, yet if, under the guise of a contract which has the appearance of validity on its face, the real intention is merely to speculate on the rise or fall of the market, without any purpose that any property shall be delivered or received, but with the understanding that at the appointed time the account is to be adjusted by paying and receiving the difference between the contract and the current price, then the contract is a gambling contract and void. Dows v. Glaspel, 4 N. D. 251, 60 N. W. 60;Beidler & R. Lumber Co. v. Coe Commission Co., 13 N. D. 639, 102 N. W. 880;John Miller Co. v. Klovstad, 14 N. D. 435, 105 N. W. 164;Thoreson v. Hector, 54 N. D. 651, 210 N. W. 169;Mohr v. Miesen, 47 Minn. 228, 49 N. W. 862;McCarthy v. Weare Commission Co., 87 Minn. 11, 91 N. W. 33;Askegaard v. Dalen, 93 Minn. 354, 101 N. W. 503;Elliott v. McAllister, 106 Minn. 25, 117 N. W. 921;Bolfing v. Schoener, 144 Minn. 425, 175 N. W. 901;Fraser v. Farmers' Co-op. Co., 167 Minn. 369, 209 N. W. 33, 913;Riordon v. McCabe, 341 Ill. 506, 173 N. E. 660, 83 A. L. R. 512, and voluminous note beginning on page 523; Dickson v. Uhlmann Grain Co., 288 U. S. 188, 53 S. Ct. 362, 77 L. Ed. 691, 83 A. L. R. 492, reversing (C. C. A.) 56 F.(2d) 525.

If it was the intention of both parties to speculate on the rise and fall of the market without any purpose that any property should be delivered or received, but with the understanding that at the appointed time the account was to be adjusted by paying and receiving the difference between the contract and the current price, then the contract is void and the plaintiff cannot recover.

It clearly appears, from the record, that Sjothun was gambling on the market. He testified that when the durum wheat was purchased he had no intention it would ever be delivered. He says he told Robinson that when a change-off was necessary Robinson was to make it, like in all speculating transactions. Robinson admits he made the changes without consulting Sjothun, although he states he told him afterwards. Sjothun testified that at the time he turned over the warehouse receipt he had about 160 bushels of wheat, or as he says “maybe one or two bushels either way in the elevator,” which was represented by the warehouse receipt. There is nothing to show it was durum wheat, and if that is all the wheat he had, the purchase of a thousand bushels of durum couldn't be hedging against a sale of 160 bushels; besides the...