Embrey v. Jemison

• Decision Date: 13 May 1889
• Citation: 131 U.S. 336,9 S.Ct. 776,33 L.Ed. 172
• Parties: EMBREY v. JEMISON
• Court: U.S. Supreme Court

131 U.S. 336

9 S.Ct. 776

33 L.Ed. 172

EMBREY v. JEMISON.

May 13, 1889.

This is an action of debt, to recover from the plaintiff in error, who was the defendant below, the amount of four negotiable notes executed by him January 21, 1878, and payable at the office of E. S. Jemison & Co., in the city of New York, to the order of Moody & Jemison, by whom they were indorsed, before maturity, to the plaintiff, Jemison. Each note was for the sum of $7,594.15; two of them payable six months, and the remaining two twelve months, after date. There was a trial before a jury, resulting in a verdict and judgment in favor of the plaintiff for the amount demanded in the declaration. The case has been brought here for review, the defendant contending that the court committed such errors of law as entitles him to a reversal of the judgment and to a new trial.

In addition to a plea of nil debet, the defendant filed a special plea of wager, in which it was averred, in substance, that on the last of February, or the 1st of March, in the year 1877, he contracted with the firm of Moody & Jemison, brokers and commision merchants of the city of New York, and members of the cotton exchange, to purchase for him, through the plaintiff, one of that firm, 'on a margin,' in said cotton exchange, not actual cotton but 4,000 bales of 'future delivery' cotton, for May delivery, commonly called 'futures,' which he did; that at the time of the purchase the defendant had in the hands of Moody & Jemison about $8,000 as a margin to protect said purchase against fluctuations in the market; that in the first few days of the month of March the plaintiff, as a member of the firm of Moody & Jemison, reported that the margin was about exhausted by a decline in the market, and called for more margin, which defendant informed him he was unable to put up; that no agreement or contract was at that time, or afterwards, made with the firm of Moody & Jemison to have the said 'cotton futures' carried for his account; that no report was afterwards made to him of any sale of such futures; that on the 21st day of January, 1878, in the city of New York, the plaintiff called on him for his four notes for losses which he alleged the firm of Moody & Jemison had sustained by carrying said 'cotton futures,' which notes the defendant executed, and which are the identical notes described in the declaration; 'that the purchase or delivery of actual cotton was never contemplated, either by the defendant or the said Moody & Jemison, and it was understood between them that the settlement was to be made between said parties by one party paying to the other the difference between the contract price and the market price of said cotton futures, according to the fluctuations in the market; and therefore the defendant says that the said contract was a wagering contract, and that it and the said four notes for the consideration aforesaid, are void, and of no force in law.'

A demurrer to this plea was sustained, the defendant taking his exception in proper form.

On the trial of the case on the plea of nil debet the plaintiff, to maintain the issue upon his part, gave in evidence the four notes described in the declaration, and the defendant testified to the facts set forth in the above special plea of wager; and this was all the evidence before the jury. Thereupon the defendant asked the court to instruct the jury as follows: 'If the jury shall believe from the evidence that it was not the intention of either party that a contract should be made by the plaintiff to buy and hold the bales of cotton for delivery to the defendant, but that it was the real intention and understanding of the parties that a contract should be made which should be closed at a future day, not by delivery of the cotton and payment of purchase price, but by payment of money to the one party or the other, the party to receive the same, and the amount to be paid to be determined upon a basis of the difference between the agreed purchase price on the ___ day of% 6d____ 18 __, and the actual market value of the cotton on the day when the contract was to be closed, then the jury are instructed that such a contract is invalid in law and void, and that they must find for the defendant.' The court refused to give this instruction, and the defendant duly excepted.

Although the notes in suit are dated at the city of New York, and were payable at the office of E. S. Jemison & Co., in that cith, it does not clearly appear whether the original contract between Embrey and the firm of Moody & Jemison, referred to in the special plea of wager and in the above instruction, was made in Virginia or in New York. There was consequently some discussion as to whether the statute of Virginia or that of New York should control the determination of the question as to the illegality of that contract. The statute of Virginia provides that 'every contract, conveyance, or assurance, of which the consideration, or any part thereof, is money, property, or other thing won or bet at any game, sport, pastime, or wager, or money lent or advanced at the time of any gaming, betting, or wagering, to be used in being so bet or wagered, (when the person lending or advancing it knows that it is to be so used,) shall be void.' Code Va. 1873, p. 984, § 2. By the statute of New York it is provided that 'all wagers, bets, or stakes, made to depend upon any race, or upon any gaming by lot or chance, or upon any lot, chance, casualty, or unknown or contingent event whatever, shall be unlawful. All contracts for or on account of any money or property, or thing in action, so wagered, bet, or staked, shall be void.' 1 Rev. St. N. Y. tit. 8, art. 3, § 8, p. 662.

Joseph Christian and James M. Matthews, for plaintiff in error.

H. M. Herman, for defendant in error.

[Argument of Counsel from pages 340-343 intentionally omitted] Mr. Justice HARLAN, after stating the facts in the foregoing language, delivered the opinion of the court.

Whether the validity of the original contract for the purchase of future delivery cotton must depend upon the New York statute or upon the Virginia statute it is not important to determine; for, if such contract, as alleged, is a wagering contract, it is void under the law of either state. The plea makes a case of money advanced by the plaintiff's firm solely for the purpose of carrying 'cotton futures,' for which he or they contracted, when, according to the averments of the rejected plea, neither party contemplated the purchase or delivery in fact of cotton, and when it was understood that any settlement in respect to such purchases should be exclusively upon the basis of one party paying to to the other only 'the difference between the contract price and the market price of said cotton futures, according to the fluctuations in the market.' If this be not a wagering contract, under the guise of a contract of sale, it would be difficult to imagine one that would be of that character. The mere form of the transaction is of little consequence. If it were, the statute against wagers could easily be evaded. The essential inquiry in every case is as to the necessary effect of the contract, and the real intention of the parties. Mr. Benjamin, in his Treatise on Sales, (volume 2, 6th Amer. Ed., by Corbin, p. 716, § 828,) after stating that at common law wagers that did not violate any rule of public decency or morality, or any recognized principle of public policy, were not prohibited, says. 'It has already been shown that a contract for the sale of goods to be delivered at a future day is valid, even though the seller has not the goods, nor any other means of getting them than to go into the market and buy them.' 'But such a contract,' he proceeds to say, 'is only valid where the parties really intend and agree that the goods are to be delivered by the seller, and the price to be paid by the buyer. If, under guise of such a contract, the real intent be merely to speculate i the rise or fall of prices, and the goods are not to be delivered, but one party is to pay to the other the difference between the contract price and the market price of the goods at the date fixed for executing the contract, then the whole transaction constitutes nothing more than a wager, and is null and void under the statute.' The statute referred to by the author is that of 8 & 9 Vict. c. 109, § 18, which provides 'that all contracts or agreements, whether by parol or in writing, by way of gaming or wagering, shall be null and void; and that no suit shall be brought or maintained in any court of law or equity for recovering any sum of money or valuable thing alleged to be won upon any wager, or which shall have been deposited in the hands of any person, to abide the event on which any wager shall have been made.'

In Irwin v. Williar, 110 U. S. 499, 508, 510, 4 Sup. Ct. Rep. 160, the general subject of wagering contracts was carefully considered, and in the opinion, delivered by Mr. Justice MATTHEWS, we expressed approval of the doctrine as announced by Mr. Benjamin, observing that generally, in this country, all such contracts are held to be illegal and void as against public policy. It was there said: 'It makes no difference that a bet or wager is made to assume the form of a contract. Gambling is none the less such because it is carried on in the form or guise of legitimate trade.' Referring to the decision in Roundtree v. Smith, 108 U. S. 269, 2 Sup. Ct. Rep. 630, it was further said: 'It is certainly true that a broker might negotiate such a contract without being privy to the illegal intent of the principal parties to it which renders it void, and in such a case, being innocent of any violation of law, and not suing to enforce an unlawful contract, has a meritorious ground for the recovery of compensation for services and advances. But we are also of the opinion that when the broker is privy to the unlawful design of the parties, and brings...