Bolfing v. Schoener

• Decision Date: 16 January 1920
• Docket Number: No. 21452.,21452.
• Citation: 144 Minn. 425,175 N.W. 901
• Parties: BOLFING v. SCHOENER, Sheriff, et al.
• Court: Minnesota Supreme Court

144 Minn. 425

175 N.W. 901

BOLFING

v.SCHOENER, Sheriff, et al.

No. 21452.

Supreme Court of Minnesota.

Jan. 16, 1920.

Appeal from District Court, Stearns County; John A. Roeser, Judge.

Action by Maggie Bolfing against Ben Schoener, as Sheriff, etc., and the Hagenberg Company, Incorporated, to cancel a mortgage. Judgment for plaintiff. From a denial of a new trial, defendant corporation appeals. Affirmed.

Syllabus by the Court

Evidence examined and held sufficient to sustain the finding that the indebtedness secured by the mortgage in controversy arose out of wagers on the rise or fall of the market price of grain. Jamison Swan, Stinchfield & Mackall, of Minneapolis, for appellant.

Paul Ahles, of St. Cloud, for respondent.

TAYLOR, C.

Action to cancel a real estate mortgage on the ground that it was given to secure an indebtedness incurred by gambling in wheat options. The court found that the indebtedness arose out of gambling transactions and ordered judgment canceling the mortgage. Defendant appealed from an order denying a new trial and contends that the evidence does not justify the finding.

Joseph Bolfing bought grain and operated a small elevator in the village of Cold Springs in Stears county. Defendant is a grain commission merchant engaged in buying and selling grain on the Minneapolis Chamber of Commerce of which it is a member. Joseph Bolfing had very little capital and made an arrangement with defendant under which defendant advanced him money to buy grain and he shipped his grain to defendant to be sold for his account on the Minneapolis market. On April 24, 1917, he and his wife executed the mortgage in controversy on their homestead to secure the balance of defendant's account against him. He died on July 5, 1917, and thereafter plaintiff, his widow, brought this action. The balance of the account remaining unpaid at his death was the sum of $907.08 and the interest thereon.

Bolfing began dealing in options on the Minneapolis Chamber of Commerce through defendant as his broker in 1915 and continued such dealings until July, 1917, and the evidence fully justified the finding that no purchase or sale of actual grain was intended or contemplated in any of these option deals by either Bolfing or defendant. The court further found ‘that all of such transactions were wagers upon the rise or fall of the market, were contrary to law and void.’ There is no pretense that the passing of actual grain was ever contemplated in any of these option deals. They were to be settled by paying or receiving the amount of the rise or fall in the market price of the grain and were clearly illegal unless justifiable as ‘hedges.’ In the territory tributary to Minneapolis the price of grain is fixed by the Minneapolis market-the price where purchased being the Minneapolis price less the expense of shipping it from the place of purchase of Minneapolis and the profit or charge of the buyer for handling it. The price of grain varies from day to day, and the country buyer who pays the market price at the time he receives the grain stands to lose if the price should fall before the grain arrives at the place where he sells it. To guard against such loss a practice has grown up known as ‘hedging.’ Under this practice, in theory at least, when a buyer purchases grain in the country he also sells on the board of trade for future delivery a sufficient quantity to cover such purchase so that whether the price goes up or down his gain on one transaction will offset his loss on the other. As sales for future delivery in the terminal markets are made for delivery on the last day of either May, July, September, or December a country buyer who is ‘hedging’ usually sells his grain when it arrives at the terminal market and then closes his previous sale for future delivery by buying back an equal quantity on the board of trade. One board of trade transaction thus cancels the other and the gain or loss balances approximately the loss or gain on the actual grain bought, shipped and sold, leaving the dealer his regular profit.

Defendant insists that by ‘hedging’ in this manner the country grain buyer merely insures himself against loss from the fluctuations of the market, and that the practice is not only legitimate but that a buyer of limited means could not safely do business without adopting it, and further insists that the transactions here in question were simply ‘hedging’ transactions engaged in by Bolfing for the purpose of insuring himself against loss. For present purposes we shall assume without deciding that ‘hedging’ transactions are lawful, and come directly to the question of whether the evidence so conclusively established that the option deals here involved were in fact ‘hedges' that we can say that the court erred in holding that they were illegal wagers on the future price of grain instead of finding that they were ‘hedges.’

Defendant makes the claim that the indebtedness secured by the mortgage arose out of losses which Bolfing sustained in buying grain of low grade and poor quality at too high a price. This claim is not borne out by the record. It is true that h...