Corbett v. Underwood

• Decision Date: 30 September 1876
• Citation: 25 Am.Rep. 392,1876 WL 10342,83 Ill. 324
• Parties: JOHN CORBETTv.PHINEAS UNDERWOOD.
• Court: Illinois Supreme Court

83 Ill. 324

1876 WL 10342 (Ill.)

25 Am.Rep. 392

JOHN CORBETT

v.PHINEAS UNDERWOOD.

Supreme Court of Illinois.

September Term, 1876.

OPINION TEXT STARTS HERE

APPEAL from the Circuit Court of Cook county; the Hon. JOHN G. ROGERS, Judge, presiding.

This was an action of assumpsit, by the appellant against the appellee. The material facts of the case are stated in the opinion of the court.

Messrs. TRUMBULL, CHURCH & TRUMBULL, for the appellant.

Messrs. GOOKINS & ROBERTS, for the appellee.

Mr. JUSTICE CRAIG delivered the opinion of the Court:

This was an action, brought by John Corbett against Phineas L. Underwood, to recover a certain amount of money lost in a grain transaction in Chicago.

It appears, from the evidence, that Corbett, who resided at Jerseyville, on the 15th day of May, 1873, gave appellee, who was a commission merchant in Chicago, doing business under the firm name of Underwood & Co., an order to purchase for him 50,000 bushels of corn, to be delivered at any time during the month of August, at seller's option. $2000 was deposited as a margin. The corn was purchased at 45 cents per bushel, and so reported to appellant. On the first day of September, 1873, another order was given for the purchase of 50,000 bushels more of corn for October delivery. This last order was filled at 43 1/4 cents per bushel, a margin of $2500 having been deposited. The plaintiff had other transactions on the board of trade, through Underwood as commission merchant, but this litigation involves only the two transactions in corn.

On the 20th and 21st of June, the corn first purchased was sold by defendant at a loss, on account of the failure of plaintiff, after due notice, as is claimed, to keep on deposit a sufficient margin to protect the contract. The last purchase was also sold, for the same reason, on the 24th and 25th days of September. An account of the whole transaction was furnished plaintiff, showing a balance of $157.42 in defendant's hands subject to the order of plaintiff, $150 of which he drew, leaving a balance of $7.42, for which the court, who heard the cause without a jury, rendered judgment.

It is first urged that the parties sustained the relation of pledgor and pledgee, and no sale of the corn could be legally made without notice to plaintiff of the time and place of sale.

The arrangement entered into between the parties can not be regarded, in a legal sense, as a pledge of personal property. A pledge is defined to be delivery of goods by a debtor to his creditor, to be kept till the debt is discharged. Jones' Bailment, 117; 2 Kent's Com. 577.

Parsons, in his work on Contracts, Vol. 3, page 271, says, a pledge is a lien created by the owner of personal property by the mere delivery of it to another, upon an express or implied understanding that it shall be retained as security for an existing or future debt.

In this case, no corn was delivered to the defendant to hold as security for a debt or liability, nor did he secure warehouse receipts representing corn. He had neither the possession nor control of personal property, which is necessary to create the relation of pledgor and pledgee.

The defendant was a commission merchant, dealing on the board of trade in Chicago. The letters and telegrams in evidence show that the plaintiff was familiar with the rules and regulations that governed dealers on the board. Indeed, he, in connection with a partner, had been dealing in various products on the board for some time, through the defendant as commission merchant, and the evidence is clear that he was familiar with the usages and rules that controlled operators on the board.

When the plaintiff ordered the corn bought, he knew he was required to advance to his commission merchant ten cents per bushel as a margin, and, if corn declined in the market before the day of delivery, he was required to make additional advances so as to keep the margin good. The margin required in the first instance was advanced, and the defendant purchased the corn of third parties, and entered into a contract by which it was to be delivered at a future day. Under the contract, the corn contracted for was to be delivered to the defendant, and he was responsible to the plaintiff for its delivery to him; but if the plaintiff failed to keep the margin good in case corn declined before the day of delivery arrived, then the defendant had the right to sell on the market, and charge the losses to the plaintiff.

This, in brief, was the transaction entered into by the parties, from which it will readily be seen that the relation of pledgor and pledgee did not exist. The defendant held merely an executory contract for the delivery to him of a certain amount of corn on a future day. On that day the plaintiff would be entitled to the corn, provided in the meantime he kept his margin good, and was ready to pay for and receive the corn on the day it was required to be delivered.

The case of Markham v. Forden, 41 N. Y. 235, cited by appellant as an authority to control this case, is so different in its facts that the rule there announced can not apply here.

In that case, the stocks, which had been purchased by the commission merchant, and where it was held the relation of pledgor and pledgee existed, were delivered into the actual possession of the commission merchant; while here, the property bought never came into the possession of the defendant; he held merely an executory contract.

If the corn purchased had been delivered to the defendant, and he had paid for the same, and held the possession thereof as security for the money advanced, then it might, with propriety, be claimed that the relation of pledgor and pledgee existed, and notice of the time and place of sale should be given; but such is not the case presented by this record.

It is next urged, that the evidence of usage on the board of trade in Chicago to sell property held for a customer...