Becher-Barret-Lockerby Co., a Corp. v. Sjothun

• Decision Date: 18 October 1935
• Docket Number: 6370
• Citation: 262 N.W. 691,66 N.D. 168
• Court: North Dakota Supreme Court

262 N.W. 691

66 N.D. 168

BECHER-BARRET-LOCKERBY CO., a Corporation, Appellant, v. JULIUS SJOTHUN and A. R. Carlson, and JULIUS SJOTHUN, Respondent

No. 6370

Supreme Court of North Dakota

October 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, for appellant.

It is not true that all speculation is gambling. Bailey v Graham, 159 F. 535.

When the parties do not contemplate a delivery of the grain itself, but rather a settlement based on differences between the contract price, the contract is invalid. Dows v Glaspel, 4 N.D. 251, 60 N.W. 60; Beidler & Robinson Co. v. Coe Commission Co. 13 N.D. 639, 102 N.W. 880; Irwin v. Williar, 110 U.S. 499.

Neither does the fact that such future dealings are carried on by margins instead of by actual payment of the purchase price tend to brand them as gambling transactions. Williston Contr. § 1669, p. 2941; Gettys v. Newberge, 272 F. 209; Am. Law Inst. Restatement, Contracts, 1014, § 522.

Hedging agreements are not rendered invalid by the fact that they are handled upon margin. Miller Co. v. Klovstad, 14 N.D. 435, 105 N.W. 164.

In the parlance of boards of trade a set-off is in legal effect a delivery. 27 C.J. 995; Board of Trade v. Christie G.S. Co. 198 U.S. 236.

The unexpressed or uncommunicated intention of one party to a contract is not binding upon the other party to the contract. Farnum v. Whitman (Mass.) 73 N.E. 473; Miller v. Klovstad, 14 N.D. 435, 105 N.W. 164; Wall v. Schneider (Wis.) 18 N.W. 443; Donovan v. Daiber (Mich.) 82 N.W. 848.

Generally the presumption is in favor of the validity of the transaction, and the burden of proving that a contract or transaction was in fact a gambling transaction is on the party asserting it. 27 C.J. 1099; Miller v. Klovstad, supra; 4 Enc. of Ev. 166; Ponder v. Hill Cotton Co. 100 F. 373; Bibb v. Allen, 149 U.S. 480.

Burdick & Burdick, for respondent.

If, under the guise of such a contract, the real intent be merely to speculate in the rise and fall of prices, and the goods are not to be delivered, but one party is to pay the other the difference between the contract price and the market price of the goods at the date fixed for executing the contract, the whole transaction constitutes nothing more than a wager, and is null and void. Irwin v. Williar, 110 U.S. 499, 28 L. ed. 225, 4 S.Ct. 160.

It is not too much to require a party claiming rights under a contract to make it appear satisfactorily and affirmatively that the contract was made with an actual view to the delivery and receipt of the grain, and not an evasion of the statute against gaming, or as a cover for a gambling transaction. Bernard v. Backhouse (Wis.) 9 N.W. 596; Sprague v. Warren (Neb.) 41 N.W. 1113, 3 L.R.A. 679.

The sale by a producer for future delivery of his prospective crop at the market price at the time of the contract, in order to realize the price for his crop when mature, is a hedge and is not illegal as a gambling transaction, although, because of crop failure, grain must be purchased to fill the contract or a loss settled in cash. Edgeley Co-op. Grain Co. v. Spitzer, 48 N.D. 406, 184 N.W. 880, 20 L.R.A. 1417.

When the defense, in a suit on a promissory note, is that the consideration was a gambling deal on the Board of Trade, it is incumbent upon the defendant to prove that the other party to the transaction intended that there should be a bona fide sale and purchase and receipt and delivery of a commodity in the future. John Miller Co. v. Klovstad, 14 N.D. 435, 105 N.W. 164; Buchanan Elevator Co. v. Lees, 37 N.D. 27, 163 N.W. 264; Waite v. Frank (S.D.) 86 N.W. 645; Hallet v. Aggergaard, 21 S.D. 554, 114 N.W. 696.

A state law making gambling in grain futures illegal is not superseded by the Federal Grain Futures Act of September 21, 1922, chap. 369, 42 Stat. at L. 998, so as to render lawful transactions in which the requirements of the Grain Futures Act have been met. Dickinson v. Uhlmann Grain Co. 77 L. ed. 454.

The burden of proving that a transaction in grain futures is a wager rests upon the party alleging it. Lyons Mill Co. v. Goffe & Carkner, 46 F.2d 241, 83 A.L.R. 501; Rierdon v. McCabe, 341 Ill. 506, 173 N.E. 660, 83 A.L.R. 512; Fraser v. Farmers Co-op. Co. (Minn.) 209 N.W. 33; Sunderland v. Hibbard, 97 Neb. 21, 149 N.W. 57; Wagner v. Engel-Millar Co. 144 Wis. 486, 129 N.W. 392; Rogers v. Marriott, 59 Neb. 759, 82 N.W. 21.

Burke, Ch. J. Burr, Christianson and Morris, JJ., concur. Nuessle, J., concurs in the result.

OPINION

BURKE

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, Minnesota, 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 enclosed 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 endorsed 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 sen...