Farmers' Milling & Grain Co. v. Urner

• Decision Date: 10 June 1926
• Docket Number: 23.
• Citation: 134 A. 29,151 Md. 43
• Parties: FARMERS' MILLING & GRAIN CO. v. URNER.
• Court: Maryland Court of Appeals

134 A. 29

151 Md. 43

FARMERS' MILLING & GRAIN CO. v. URNER.

No. 23.

Court of Appeals of Maryland

June 10, 1926

Appeal from Circuit Court, Frederick County; Glenn H. Worthington Judge.

"To be officially reported."

In foreclosure proceedings against land owned by Thomas A Conaway, sale was made. Thomas A. Conaway was adjudicated insolvent, and Princeton Buckey became permanent trustee. The auditor stated the account distributing the balance in the hands of the assignee to the Farmers' Milling & Grain Company. The insolvent's preliminary trustees in insolvency, Princeton Buckey and Reno S. Harp, excepted to the ratification of the audit. From the ruling sustaining the exception and the order passed in pursuance of it, the Farmers' Milling & Grain Company appeals, and is opposed by Milton G. Urner, assignee. Order affirmed.

Argued before BOND, C.J., and URNER, OFFUTT, DIGGES, PARKE, and WALSH, JJ.

Leslie N. Coblentz and Alban M. Wood, both of Frederick, for appellant.

H Kieffer DeLauter, of Frederick (Reno S. Harp and D. Princeton Buckey, both of Frederick, on the brief), for appellee.

WALSH J.

The chief question to be determined in this case is whether or not certain agreements involving the buying and selling of grain for one Thomas A. Conaway by the appellant were wagering transactions. The record shows that Conaway in 1922 owned a farm near Mt. Airy in Frederick county, that the farm was worth about $7,000 and had two mortgages on it totaling $4,800 and that Conaway's sole other possessions consisted of about $1,300 worth of personal property. In March, 1922, Conaway, apparently at the suggestion of Mr. Kline, president of the appellant company, began to trade in grain "futures," and continued doing so until January 29, 1925. On October 23, 1924, he owed the appellant $1,441.11 for losses sustained by him in these transactions, and at the request of the appellant he gave a confessed judgment note for $2,000, which note was applied to his then existing indebtedness, and the balance credited to his account and used as margin for subsequent transactions. These transactions resulting in further losses, a judgment was entered on the note on November 12, 1924, and when Conaway stopped dealing in grain in January, 1925, he owed the appellant $558.89 over and above the amount of that judgment. On April 25, 1925, Conaway's farm was sold under the first mortgage, and on the same day he was adjudicated an insolvent debtor in the circuit court for Frederick county, and D. Princeton Buckey and Reno S. Harp were appointed preliminary trustees, and later, on August 19, 1925, Buckey was elected permanent trustee.

The actual amount paid for the farm by the purchaser at the mortgage sale was $7,000, and after the payment of the costs and expenses, and the principal and interest due on the first and second mortgages, there remained in the hands of the assignee who made the sale the sum of $1,539.60, which sum the appellant claimed as a payment on its judgment. The auditor stated an account in which this $1,539.60 was distributed to the appellant, and Conaway's preliminary trustees in insolvency thereupon excepted to the ratification of the audit on the ground, inter alia, that the note on which the judgment was based was given for a debt growing out of a wagering transaction, and so was without consideration, and the judgment obtained on it invalid. The learned court below, after a full hearing in open court, sustained this exception, and, from this ruling and the order passed in pursuance of it, the appellant has appealed.

There has been a great deal of litigation in this country dealing with the question of what is and what is not a gambling or wagering contract, and the respective rights of the parties to such contracts, and the decisions are not all harmonious. But here in Maryland the following principles have been established and must now be considered the settled law of the state.

In Emerson v. Townsend, 73 Md. 224, 20 A. 984, it was held, quoting from the headnote, that:

"Under the Statute of 9 Anne, c. 14, in force in Maryland, a note, a part of the consideration of which was for money loaned for gambling purposes, and the judgment recovered on such note, are both void, and execution will be enjoined."

In Stewart v. Schall, 65 Md. 289, 308, 4 A. 399, 401 (57 Am. Rep. 327), it was held, quoting with approval from Irwin v. Williar, 110 U.S. 499, 4 S.Ct. 160, 28 L.Ed. 225, that:

"Where a broker is privy to a wagering contract, and brings the parties together for the very purpose of entering into an illegal agreement, he is particeps criminis, and cannot recover for services rendered or losses incurred by himself in forwarding the transaction."

And in the same case the court said:

"In cases like this, it is competent to show that, although in form the contract is perfectly legal, it is in fact a mere guise under which a gambling transaction may be conducted. The true nature of a fraud upon the law and public morals could not otherwise be exposed, and the evil of wagers under the guise of a legitimate enterprise be prevented."

In Burt v. Myer, 71 Md. 467, 502, 18 A. 796, 807, the court held that a prayer was proper which instructed the jury:

"That, if [they] believed from the evidence in the cause that it was not the intention either of the plaintiff or defendants that there should be an actual delivery of the wheat purchased on account of the plaintiff, but that it was their mutual intention in such transactions that the difference between the cost of said wheat and the amount realized from the sale of the same should be settled by money, then the plaintiff [who was suing his brokers to recover money advanced to them for margins] is not entitled to recover."

These principles have also been applied and affirmed in Billingslea v. Smith, 77 Md. 504, 26 A. 1077, Cover v. Smith, 82 Md. 586, 34 A. 465, Dryden v. Zell, 104 Md. 345, 65 A. 33, Nes v. Union Trust Co., 104 Md. 15, 64 A. 310, and Richter v. Poe, 109 Md. 20, 71 A. 420, 22 L. R. A. (N. S.) 174; and they are sustained by the great weight of authority throughout the country. See 19 C.J. 1088 to 1092, and 6 R. C. L. 780-783.

While the foregoing principles are well established, considerable difficulty is sometimes experienced in applying them. There is no law against speculating. A man can buy an article or commodity to-day and sell it to-morrow, or next year, without in any way violating the laws against gambling, nor does the fact that he gains or loses in the transaction render it illegal. Practically every commercial transaction involves the element of gain or loss, and the task of distinguishing wagering contracts from admittedly valid speculations is often not an easy one. The test seems to be that if, at the inception of the contract, the parties did not intend to deliver the articles dealt in but merely expected to settle in money the difference between the purchase and sale prices, the transaction is illegal. The application of this test requires the ascertainment of the intention of the parties, and, where there is a conflict between them as to what their intentions were, the courts admit evidence of the surrounding facts and circumstances so that the real intention of the parties can, if possible, be determined. 27 C.J. 1058 to 1060, and cases cited supra.

In the present case Conaway testified that he never intended to accept delivery of the grain he purchased, but that his sole intention was to always sell it before the time of delivery and accept the profit or loss which resulted from such sales. On the other hand, the two officers of the appellant with whom he dealt testified that all of Conaway's orders to buy grain were transmitted to a grain broker in Baltimore and his broker testified that his firm purchased the grain through its representative in Chicago, and that the grain could have been delivered if called for. It is...