Gregory v. Wendell

• Decision Date: 08 April 1879
• Citation: 40 Mich. 432
• Court: Michigan Supreme Court
• Parties: Henry B. Gregory et al. v. John H. Wendell et al

40 Mich. 432

Henry B. Gregory et al. v. John H. Wendell et al

Supreme Court of Michigan

April 8, 1879

Submitted January 30, 1879

Error to Wayne. Submitted Jan. 30. Decided April 8.

No error in the record and judgment affirmed with costs.

Atkinson & Atkinson and J. Logan Chipman for plaintiffs in error.

Otto Kirchner and G. V. N. Lothrop for defendants in error.

Cooley J. The other Justices concurred.

OPINION

Cooley J.

Defendants in error are produce brokers and commission merchants in the city of Detroit, doing business under the copartnership name of J. H. Wendell & Co. Plaintiffs in error are dealers in produce, among other things, at Owosso, Michigan, under the firm name of Gregory & McHardy. In April, 1877, Gregory was at the office of Wendell & Co. in Detroit, and made an arrangement for the purchase by Wendell & Co. for them, of twenty thousand bushels of corn on the Chicago market, for delivery in June. In pursuance of this arrangement the firm of Colley & McHenry, produce brokers in Chicago, were at once by telegraph, as is claimed, directed to make the purchase, and they made it on the same day, at a fraction over fifty-nine cents a bushel. On the purchase, Wendell & Co. received from Gregory & McHardy one thousand dollars for "margin," and the price, except as to this, remained unpaid. The price of corn declined from the time of purchase, and on May 18, Gregory & McHardy decided to sell, and the Chicago brokers made sale at a net loss of $ 1,689. Three days previous to this Wendell & Co. had bought for Gregory & McHardy ten thousand bushels of corn through Erskine, another broker, and on May 18th they bought twenty thousand bushels through Cooley & McHenry. These purchases were made at a little over fifty-four cents, for July delivery.

After these last transactions the price of corn continued to decline, and on May 21st Wendell & Co. wrote Gregory & McHardy a letter from which the following is extracted:

"Gents:--We find on figuring up your Chicago deals that you are short of margins some $ 600, and this is after taking balance of account, and giving you credit for the two cars of wheat at about to-day's prices. Will you send a draft for the amount, or shall we draw? Our Chicago parties make prompt demands on us, and we in consequence have to keep dealers well up."

No reply was made to this letter, nor to a letter and telegram on the same subject, three days later. May 26th, without orders from Gregory & McHardy, Wendell & Co. sold the contracts for July delivery at a large loss. When this sale was reported to Gregory & McHardy, the latter placed the matter in the hands of their attorney, who under date of June 5th wrote Wendell & Co. as follows:

"Gentlemen:--I am instructed by Gregory & McHardy to say that as you have sold, according to your statement, the corn which you profess to have held for them, thus rendering it impossible for you to fulfill the contract on your part, they will treat it as at an end, and hold you responsible for the amount paid you."

Immediately, and on the same day, Wendell & Co. replied, addressing their reply to the principals:

"Gentlemen:--As you fail to notify us that you are satisfied with our action in making sale of the corn heretofore purchased by us for your account for delivery in July, you are hereby notified that we shall hold ourselves in readiness to deliver such corn to you at the time you become entitled to such delivery by the terms of your order to purchase."

At the same time they ordered the purchase of thirty thousand bushels of corn in Chicago for July delivery, and the purchase was made. July 2nd, 1877 Wendell & Co. caused Chicago elevator receipts for this amount of corn to be tendered to Gregory & McHardy at Owosso, and demanded payment for the corn at contract prices, which was refused. They thereupon sold the corn at a net loss, measured by the May purchases, of $ 2,071.75, and seek in this suit to recover the losses on the two transactions, after deducting certain credits which are not now in question.

The controversy in the court below was mainly over two questions: First, Whether the transactions out of which the suit sprung were not mere gambling transactions, and therefore opposed to the policy of the law, and incapable of affording a ground of action; and second, Whether plaintiffs, by making sale of the July contracts in May, had not, as the letter to them of defendants' attorney assumed, put it out of their power to perform on their part, and thereby discharged the defendants. Certain collateral questions bearing upon these were also raised, and some questions of evidence which will be referred to further on.

Defendants in the court below undertook to establish that the transactions between the parties never contemplated any actual sale or delivery of corn; that the supposed contracts were in the nature of wagers on the rise or fall in the price of corn between the respective days of purchase and the times when the nominal purchasers would receive delivery if the contracts were performed; that the unexpressed purpose was that the contracts should be closed only by the payment of differences, and that for these reasons it was not, and was never intended to be a legitimate business transaction, but was wholly illegal and void.

Another branch of the same litigation was before this court at the October session thereof in 1878, and it was then declared that if these were purely gambling transactions, and so understood by both parties, neither of them could maintain an action against the other in respect to them. Gregory v. Wendell, 39 Mich. 337. A like doctrine was laid down in Lyon v. Culbertson, 83 Ill. 33, and in other cases cited further on. But this court also held that if the parties contemplated an actual purchase of corn, and acted in good faith in making such purchases, the fact that speculation was the object was of no legal importance whatever. Mr. Justice Marston, who wrote the opinion, did not dwell upon this point, but the right to buy grain in the open market in the hope to profit by a rise in market value, is as plain as the right to buy wild lands or any other property, and required no elucidation or special examination at the hands of the court. Neither can any question exist that if one party to a transaction contemplates an actual purchase, or the other an actual sale, the transaction may be perfectly valid irrespective of any illegal views or purposes that may have been indulged by the other. This makes the question of the legality or illegality of a transaction, as we held in the former case, a question of fact depending on the intent; and as such it was treated by the parties on the trial of this case at the circuit.

If there is a right to purchase produce on speculation, it may be purchased for future delivery; and this, though at the time the seller may have none to deliver. Cassard v. Hinman, 1 Bosw. 207; Ashton v. Dakin, 4 Hurl. & N. 867; Brua's Appeal, 55 Pa. 294; Pixley v. Boynton, 79 Ill. 351. But in this case it was denied that delivery was ever contemplated. The defendant Gregory testified that in the dealings with Wendell & Co. the transaction was talked about and understood as a mere speculation, to be closed up without the delivery of any corn under or because of the nominal purchases. Mr. Clark, on the other hand, the member of the firm of Wendell & Co. with whom the negotiations were had, testified that while the talk and expectation was that Gregory & McHardy would order the corn sold before the time for delivery came, yet that the plaintiffs expected to obtain title to the corn for delivery at the maturity of the contracts if not disposed of sooner. On cross-examination Mr. Clark was asked if he had ever, on any such dealings, received any corn. The question was objected to and ruled out. Had the question been allowed, and had a negative answer been given to it, it would have been said that the answer gave support to the evidence of Gregory, where it conflicted with that of Clark, since it must be altogether improbable that in this instance something different was contemplated from any thing which had ever taken place before. We are inclined to think, however, that the court was right in overruling the question. Had there been a series of gambling transactions between these same parties; and had the question related to them, it might have been proper, because the inference that a continuance of the like dealings was contemplated would have been legitimate and forcible. But there had been no such transactions; and it would be very dangerous to permit the previous illegal conduct of one party to be proved as the foundation for an inference that a new dealer contemplated the like illegality. On the face of the transaction the contract was perfectly good and lawful; it could not have been a gambling contract unless both parties participated in the illegality by uniting in the intent; and where apparently the contract is good, the right of either party to an enforcement cannot be taken away except by showing concurrence in the unlawful purpose. If either party meant it as a lawful and legitimate transaction, it must be held to be lawful and legitimate. If the purposes of defendants were to engage in genuine dealings in this instance, the right of Wendell & Co. to enforce the contract would be complete, even though they had never engaged in a like transaction before; for gamblers may make lawful contracts as well as others.

If a miller from the interior of Michigan were to go to Chicago and there request a produce broker who for a series of years has been engaged in gambling transactions in grain, to purchase for him ten thousand bushels of wheat for future delivery, contemplating at...