Higgins v. McCrea

• Decision Date: 01 March 1886
• Citation: 6 S.Ct. 557,116 U.S. 671,29 L.Ed. 764
• Parties: HIGGINS and another, Partners, etc., v. MCCREA. 1 Filed
• Court: U.S. Supreme Court

6 S.Ct. 557

116 U.S. 671

29 L.Ed. 764

HIGGINS and another, Partners, etc., v. MCCREA.¹

Filed March 1, 1886.

The plaintiffs in error were the plaintiffs in the circuit court. They brought this action to recover $31,644.31, and interest, for moneys paid by them, as they alleged, in executing the orders of the defendant for the purchase, in May, 1883, of certain lots of pork and lard in the exchange of the Chicago Board of Trade, to be delivered in the following August. The petition averred that the plaintiffs were commission merchants and members of said board of trade; that the transactions out of which the suit arose were governed by the rules of the board; and that the defendant had knowledge of said rules. The petition then averred, as a first cause of action, that on May 19, 1883, the plaintiffs purchased, on the order of defendant, and as his brokers and agents, and for his account, 1,000 barrels of pork and 1,000 tierces of lard, to be delivered in August next, on such day as the vendor might elect; that on August 1, 1883, the property was tendered, and payment demanded of the plaintiffs, and, in accordance with the defendant's instructions, and the terms and conditions of their agency, the plaintiffs received the pork and lard, and paid therefor $58,553.34, the price thereof, and $56 for inspection charges thereon,—all which the plaintiffs were bound and compelled to do by the terms of the contract and the rules and regulations of the board of trade, which constituted a part of the contract of agency between the parties, and of the contract of purchase; that on the same day notice was given to the defendant that the pork and lard had been received and paid for; that he failed to give directions for the disposition of the property, and failed to pay therefor, and plaintiffs thereupon sold the same in the exchange of the board of trade and according to its rules, and received therefor, and credited to the account of the defendant, $42,615.97; that they had previously received from the defendant on that account the sum of $6,631.66; and that the balance due from him, and unpaid on account of that transaction, was $9,361.71, with interest from the date of sale. For a second cause of action the plaintiffs set up transactions in all respects similar to those alleged in the first, namely, their purchase, on May 22, 1883, for defendant, on his order, of 2,000 barrels of pork and 2,000 tierces of lard, deliverable in August following; the delivery of the produce on August 1st, and the payment therefor by the plaintiffs; its subsequent sale by them at a loss of $21,832.60. By a third count the plaintiffs claimed $450 for commissions in said transactions. The petition then averred that there was due to the plaintiffs from the defendant, by reason of the premises, the sum already stated, for which they demanded judgment.

The defendant, in an amended answer, averred that the plaintiffs were engaged in carrying on for themselves and others gambling transactions in pork, lard, and other commodities on the Chicago Board of Trade; that, being solicited by the plaintiffs, and being desirous himself to gamble and speculate on the prices of pork and lard, he engaged with the plaintiffs in such gambling transactions; that on May 19, 1883, he directed the plaintiffs to deal for him in prok and lard options, to the amounts specified in the plaintiffs' petition; that the plaintiffs did, on or about the nineteenth of May, 1883, enter into contracts in their own name, but, as they now claim, upon account of this defendant, with certain named persons and firms, to-wit, G. C. Eldridge & Co. and others; that they did not contract for the actual delivery of any pork or lard whatever, but the pretended purchases were mere options, and that it was the understanding of all parties to said transactions that no pork or lard should be delivered on the contracts, and that the same should be settled upon the differences between the contract and the market price. The answer further averred that soon after the making of the contracts the plaintiffs disposed of the same for their own benefit, converted the proceeds to their own use, and released the parties with whom they had made said contracts, and that at no time after June 16, 1883, did the plaintiffs hold any contracts whatever for the account of defendant, but falsely re- ported to him that they were carrying said contracts for his benefit, and required him, from time to time, to pay, and he did pay, into their hands, large sums of money, amounting in the aggregate, with a balance already in their hands due to the defendant, to $19,895, and that in the latter part of June, 1883, the defendant gave the plaintiffs notice that he would no longer participate in said gambling transactions, and that he repudiated the same. The answer also denied that any pork or lard was actually delivered to the plaintiffs on said contracts, or that they paid any money thereon for account of defendant, and pleaded in bar the statute of the state of Illinois, which declares option contracts to be illegal and void. By way of counter-claim the defendant, in his answer, demanded judgment against the plaintiffs for his said advances, amounting in all to $19,895, and averred that this money was paid by him to the plaintiffs to promote and carry on said gambling transactions; that said transactions, belong the purchase of option contracts, were forbidden by the statute of Illinois, and were illegal and void; that the said sum was so lost by the defendant to the plaintiffs in the said gambling transactions and option contracts as set forth. The reply of the plaintiffs put in issue the new matter set up in the answer and counter-claim of the defendant.

The issues made by the pleadings were tried by a jury. The bill of exceptions states that the plaintiffs first offered in evidence section 6 of rule 26 of the Chicago Board of Trade, which was as follows: 'In case any member of the association, acting as a commission merchant, shall have made purchases or sales by order and for account of another, whether the party for whom any such purchase or sale was made shall be a member of the board of trade or otherwise, and it shall subsequently appear that such trades may be offset and settled by other trades made by said commission merchant, he shall be deemed authorized to make such offset and settlement, and to substitute some person or persons for the one from or to whom he may have purchased or sold the property originally: provided, that in case of such substitution the member or firm making the same shall be held to guaranty to his or their principal the ultimate fulfillment of all the contracts made for account of such principal which have been so transferred, and shall be held liable to such principal for all damages or loss resulting from such substitution.'

Frederick F. Gilbert, one of the plaintiffs, was put on the stand as a witness in their behalf, and testified in substance as follows: The plaintiffs actually bought the property mentioned in the petition, in pursuance of orders received from the defendant. None of the transactions were made with an understanding that the property was not to be delivered, and the property was delivered to the plaintiffs on the first of August, and was received and paid for by them. They notified the defendant of such receipt, and that, unless he took the property, and reimbursed the plaintiffs for their advances, the same would be sold for his account. The defendant gave no orders, and consequently the property was sold by the plaintiffs on the board of trade, and the proceeds of sale credited to his account. The witness produced the checks given to George W. Higgins and others, of whom the property was bought, and stated that these checks were given in payment for defendant's account; that the difference between the purchase and selling price, and the consequent loss to the plaintiffs, was the sum mentioned in their petition.

The plaintiffs having rested, the deposition of the said Frederick F. Gilbert, taken by the defendant, was offered by him in evidence, in which the witness testified in substance as follows: Neither Eldridge & Co., nor any other parties with whom the plaintiffs made contracts for the defendant, delivered any pork or lard for him on August 1st, or at any time. During the latter part of the month of May and the month of June the plaintiffs canceled all the contracts they had made for the defendant with Eldridge & Co. and others, for pork and lard, and released them from the performance thereof, but gave the defendant no notice of these facts. The contracts were canceled by offsetting them with contracts they had made with other parties for the sale of pork and lard, and this was done for the advantage of the plaintiffs, and to facilitate their business transaction. When the contracts for the defendant were made with Eldridge & Co. and others, they were entered upon the books of the plaintiffs, and the books showed that the contracts were made for account of the defendant; but, after the contracts made for the defendant were canceled by the process of offsetting them against other contracts, no contracts were substituted for them by any mark or sign upon the books of the plaintiffs. The substituted contracts were afterwards canceled by the process of offsetting them against other contracts, and this process was continued as the convenience of the plaintiffs required, but none of the substituted contracts were at any time specially assigned to the defendant on the books of the plaintiffs. The plaintiffs, however, took care to have on hand contracts for the sale of pork and lard equal in quantity to their contracts for the purchase of the same commodities, and it was their purpose and practice to apply the first produce delivered on contracts of sale to the oldest contract of purchase, but the plaintiffs could not tell what produce would be applied to...