First Nat. Bank of Lyons v. Oskaloosa Packing Co.

• Decision Date: 23 April 1885
• Citation: 23 N.W. 255,66 Iowa 41
• Parties: THE FIRST NAT. BANK OF LYONS v. THE OSKALOOSA PACKING COMPANY
• Court: Iowa Supreme Court

23 N.W. 255

66 Iowa 41

THE FIRST NAT. BANK OF LYONS v. THE OSKALOOSA PACKING COMPANY

Supreme Court of Iowa, Davenport

April 23, 1885

Appeal from Mahaska District Court.

THIS is an action upon a promissory note. There was a trial by jury and a verdict and judgment for the defendant. Plaintiff appeals.

AFFIRMED.

R. T Spence, Bolton & McCoy, E. S. Bailey and Grant & Brady, for appellant.

John F Lacey, G. W. Lafferty and Smith McPherson, for appellee.

OPINION

ROTHROCK, J.

The note in suit is for the sum of $ 15,000, with interest at eight per cent per annum. It was executed by the defendant on the sixth day of July, 1883, payable to the order of Stiles, Goldy & McMahon, and indorsed to the plaintiff. The defendant admitted the execution of the note, but alleged that it was given for margins upon certain purchases of short ribs of pork on the Chicago board of trade, and that it was not intended by the parties that said short ribs should ever be delivered, "but that the purchase thereof was a mere wager or gambling contract, invalid under the laws of both Iowa and Illinois; that said wagering contracts were void, and could not be enforced by the plaintiff; and that there was no legal consideration for said note." The defendant having admitted the execution of the note, the burden was on it to establish the defense upon which it relied. It introduced as a witness one J. N. Green, who testified, in substance, as follows: That he was president of the packing company, and as such president he signed the note in question. That the firm of Stiles, Goldy & McMahon did business on the board of trade in Chicago, and that the packing house bought, through the house of Stiles, Goldy & McMahon, some short rib sides for future delivery, and said commission house wrote to the packing company that they had put up a margin, and wanted something to indemnify them, and that the company sent them the note in suit. That the packing company never received anything for the note, and that the transactions were all by letters and telegrams. That the packing company was a corporation, and its property consisted of the packing house, and tools and implements connected therewith, and that it had no other property or assets. That in November, 1882, he had a conversation with Mr. Stiles, of the firm of Stiles, Goldy & McMahon, in Chicago, in which Stiles inquired as to the amount of capital stock paid up, and amount invested in the property at Oskaloosa, and that he informed Stiles that the capital stock was $ 50,000, and mostly paid up, and invested in the property, tools and fixtures. That it was not the purpose or intention of the company to take the short rib sides, but to sell the property through the commission house at the maturity of the option, or before. It was expected that it would advance in value, and that there would be a profit in it about that time. "It was my understanding that it would be sold at the end of that time, and the difference would be settled. If there was a profit, it would be credited to the company; if there was a loss, it would be charged to the company. The company had no means to pay for that amount." That he (the witness) never gave any verbal authority to close out these deals.

In addition to the testimony of Green, the defendant introduced the correspondence between the defendant and Stiles, Goldy & McMahon in relation to the transactions between them. It appears that Stiles, Goldy & McMahon acted upon telegrams from the packing house. The first of these telegrams was sent on the fifth day of May, 1883, and is as follows:

"MAY 5, 1883.

"To Stiles, Goldy & McMahon, Chicago, Ill.: Buy hundred thousand August ribs to-day, your discretion.

"OSKALOOSA PACKING COMPANY."

There were five other telegrams, dated May 17, 23, 25, 31, and June 6, each ordering the purchase of 100,000 pounds of ribs. Some of these telegrams fixed the price to be paid, and others did not. In response to one of these telegrams, Stiles, Goldy & McMahon made reply as follows:

"To Oskaloosa Packing Company: B'ot hundred August ribs, fifty-five. "STS. & McM."

Another is as follows: "Bought hundred thousand August ribs, ten forty-five." In answer to the telegram of June 6, the following letter was written:

"CHICAGO, June, 7, 1883.

"Oskaloosa Packing Company, Oskaloosa, Iowa--GENTLEMEN: Yours of the sixth inst. received. We bought for your account one hundred thousand pounds of August ribs at $ 9.92 1/2, and wired you the same. Our market did at one time to-day sell down to $ 9.82 1/2, but closed at $ 9.95. We have had a slow, dull market all day. * * * *

"STILES, GOLDY & MCMAHON."

There are a number of other letters written by Stiles, Goldy & McMahon to the defendant, in all of which it appears that the value of short ribs very materially declined. On the third day of July, 1883, they wrote the following letter:

"CHICAGO, July 3, 1883.

"Oskaloosa Packing Company, Oskaloosa, Iowa--DEAR SIR: Yours of the second inst. received. We telegraphed you this morning the stocks as reported. They have been changed some since by the report of one house that was left out. You will notice by the circulars the details. We have been writing you for some days that we thought that particular day was the worst, and that the bottom had been reached. We are now going to write, this particular day is the worst so far, and are not going to guess the bottom was reached. We incline to look for still lower prices. The bears have been so successful, they will follow up the gain until some outlook brings them to a stand. We shall include statement of your account. You will see the balance now is $ 18,891.22. We have bought for you 600 M. August ribs, at an average of 10:30. The closing price to-night is 7.85, making balance against you, that account, say, of $ 14,700, or in all, to date, $ 33,591.22. We have not only margined your trades down to the market, but ten per cent more. We have put up as margins about five thousand dollars, not taken into the above account. Now we are out so much money. We have large trades of this kind, and it takes lots of money. We suppose you will send us a note or draft for $ 20,000 to renew the old paper, as stated in your letter, or, if you cannot send us some money, we should like you to send us your paper for, say, fifteen thousand dollars, say 30 days, so that we may use it the same as the other. Respectfully,

"STILES, GOLDY & MCMAHON."

We suppose that it was in response to this letter that the note in suit was executed. The last letter of the series was dated July 9, and is as follows:

"CHICAGO, July 9, 1883.

"Oskaloosa Packing Company, Oskaloosa, Iowa--GENTLEMEN: Yours of the seventh instant received. You will see by the circulars that we have had another very bad day. Aug. ribs sold down to 7.30, which shows a loss on your 600 M. of over eighteen thousand dollars. You must send us some money or we shall be obliged to close out your deals. Send five thousand dollars by return mail, and we think you will be able to carry through, and, in the end, regain part of your loss. Your dispatch of this date received. We shall look for you, Mr. Green, to-morrow.

"Respectfully, STILES, GOLDY & MCMAHON."

In all this correspondence the name of the person or persons from whom the six separate purchases of 100,000 pounds of ribs were made is not disclosed. The purport of all the correspondence is that the price of the property was going down, and the loss of the defendant increasing, and a demand for more margins. These demands do not appear to have been made by any persons designated as the sellers of the property, but by Stiles, Goldy & McMahon.

We have set out the evidence with some particularity, because the case turns upon the question whether there was sufficient evidence to warrant the jury in finding that the note was void, as being founded upon an illegal and gambling transaction; and it is proper to say at the outset that, as there is no claim made that the plaintiff is invested with any right which did not exist in favor of the payees of the note, the rights of the parties are to be determined by the same rules as though the note had not been indorsed, and as though the action had been brought in the name of the payees. It is well settled that, when the parties to an executory contract for the sale of property intend that there shall be no delivery thereof, but that the transaction shall be settled by the payment of the difference between the contract price and the market price of the commodity at the time fixed, the contract is void. Gregory v. Wattowa, 58 Iowa 711, 12 N.W. 726; Murry v. Ocheltree, 59 Iowa 435; Pixley v. Boynton, 79 Ill. 351; Logan v. Musick, 81 Ill. 415; Corbett v. Underwood, 83 Ill. 324; Bigelow v. Benedict, 70 N.Y. 202.

These and many other cases that might be cited, hold that, in order to establish the invalidity of one of this class of contracts, it must be shown by a preponderance of the evidence that both parties to the contract intended that it should be performed by a mere payment of differences, and not by a delivery of the property. This rule is not disputed by counsel for appellant, and the court fully and fairly instructed the jury that they must, in the determination of the case, be governed by that rule. Some...