Hoyt v. Wickham

• Decision Date: 19 April 1928
• Docket Number: No. 7943.,7943.
• Citation: 25 F.2d 777
• Parties: HOYT v. WICKHAM et al.
• Court: U.S. Court of Appeals — Eighth Circuit

25 F.2d 777 (1928)

HOYT v. WICKHAM et al.

No. 7943.

Circuit Court of Appeals, Eighth Circuit.

April 19, 1928.

Robert Healy, of Ft. Dodge, Iowa (Charles D. Goldsmith, of Sac City, Iowa, on the brief), for plaintiff in error.

C. A. Helsell, of Ft. Dodge, Iowa (Samuel G. Pickus, of Sioux City, Iowa, and Helsell, Helsell & McCall, of Ft. Dodge, Iowa, on the brief), for defendants in error.

Before KENYON and VAN VALKENBURGH, Circuit Judges, and JOHN B. SANBORN, District Judge.

VAN VALKENBURGH, Circuit Judge.

Defendants in error, plaintiffs below, are co-partners, under the firm name and style of Beach-Wickham Grain Company, and citizens and residents of the state of Illinois, doing a grain commission business as members of the Board of Trade of Chicago in that state. They will be hereafter designated as plaintiffs. Plaintiff in error, hereinafter designated as defendant, is a citizen of the state of Iowa, residing at Carroll, in that state. October 29, 1925, plaintiffs filed in the District Court of the United States for the Northern District of Iowa their application for the recovery against defendant of $4,712.01, evidenced by a promissory note dated April 21, 1925, together with interest and attorney's fees, as in said note provided.

The original answer admitted the citizenship of the parties and the execution of the note, but denied consideration and alleged that said instrument was "executed and delivered for an illegal and unlawful purpose." By amendment the further defense was interposed that plaintiffs maintained and operated, at Carroll, Iowa, a bucket shop, as defined in the Iowa Code (Code 1927, § 9899); that prior to the execution of the note in suit plaintiffs and defendant engaged in acts and transactions forbidden and prohibited thereby; that these transactions resulted in a claim of indebtedness from defendant to plaintiffs in the sum evidenced by the note in suit; that said transactions were gambling contracts, which, under the laws of Iowa, were void and unenforceable; that theretofore plaintiffs had instituted a suit in the district court of Carroll county, Iowa, to recover upon said alleged indebtedness; that after the service of said notice of suit defendant signed his name to the instrument upon which this action was brought.

In their reply plaintiffs denied that the note was executed and delivered for an illegal and unlawful purpose; alleged that it was given for a good and valid consideration, to wit, for an agreed balance owed by defendant to plaintiffs as commissions earned for buying and selling grain for the defendant on the Board of Trade of Chicago, Ill., at his instance and request; that by reason of defendant's refusal to pay said balance plaintiffs retained counsel, who prepared the notice of suit referred to in defendant's answer; that this notice was served on defendant March 31, 1925, and the petition in said suit was prepared and ready for filing; that as a result of negotiations between the parties the claim and controversy were mutually compromised and settled at the amount of the note in suit on or about April 21, 1925, and upon reaching said mutual compromise and settlement the defendant voluntarily made, executed, and delivered to the plaintiffs the note declared on; that thereupon plaintiffs discontinued said suit, paid their attorney for his services in bringing the same, and accrued costs.

The reply further alleged that the contracts entered into by the defendant through plaintiffs for the purchase and sale of grain on the Chicago Board of Trade were to be performed and the grain was to be delivered at the city of Chicago in the state of Illinois; that said contracts were legal and valid under the laws of the state of Iowa, and in accordance with the rules and regulations of the Chicago Board of Trade; that the transactions contemplated by said contracts constituted interstate commerce, and were and are governed by the statutes of the United States and the rules and regulations of the Interstate Commerce Commission.

At the conclusion of the testimony counsel for plaintiffs moved for a directed verdict in their behalf. The court was of the view that plaintiffs had made full proof under the allegations of their petition and that the testimony of defendant failed to establish the defenses pleaded. Its ruling, however, was based upon its opinion that the testimony, taken as a whole, showed a settlement and compromise at the time of the delivery of the note; that, because of this, the suit, which had been instituted, was discontinued and an extension of time given, as evidenced by the date of maturity of the note in suit. Plaintiffs' motion for a directed verdict was sustained. Judgment was entered for the amount of the note, with accrued interest and for costs.

The main contentions of defendant Hoyt are that he dealt directly with Githens & Nelson, local grain brokers at Carroll, Iowa, through whom the trades were placed with the plaintiffs; that Githens & Nelson had failed to comply with certain of the bucket shop sections of the Iowa statutes, thereby rendering the note in suit void under the Iowa law; that the theory of plaintiffs was that all the transactions involved were governed by the so-called Grain Futures Act of September 21, 1922 (42 Stat. 998, U. S. Comp. St. 1923 Supp. § 2825 7 USCA §§ 1-17); that the burden was imposed upon plaintiffs to establish the legality of the transactions under that act, and they had failed so to do; that the note in suit was for the alleged illegal consideration; that therefore the institution and discontinuance of the former action in the state court, which resulted in the giving of the note in suit, raise no estoppel against defendant. Defendant also insisted that there was no evidence of diversity of citizenship. This claim, however, is foreclosed by the admissions in his answer.

In a letter of April 10, 1924, written on the letterhead of the Beach-Wickham Grain Company, 332 South La Salle street, Chicago, F. F. Githens announced to the trade that he, together with Mr. L. J. Nelson, was about to enter upon the grain brokerage business at Carroll, Iowa; that they had made arrangements for service on the private wire circuit of the Beach-Wickham Grain Company; and that for this reason they would be in position to give the best of service at Chicago and other points outside of Iowa. While it is true that defendant made his trades in grain through Githens & Nelson, nevertheless the transactions were conducted directly with plaintiffs. The correspondence in evidence makes this plain. Githens & Nelson were independent brokers. Plaintiffs were not engaged in the brokerage business in Iowa. In Mullinix v. Hubbard, 6 F.(2d) 109, we held that orders placed in Arkansas and at Memphis, Tennessee, for the purchase and sale of cotton on the New York Cotton Exchange for future deliveries were direct contracts with the New York brokers through whom the cotton was purchased. This would be true, whether the party through whom the orders are placed is agent or independent broker, whose acts bring about the ultimate contractual relation.

The purchases and sales on the Chicago Board of Trade were made by plaintiffs. Accounts of sales and confirmations were transmitted directly from plaintiffs to defendant. April 24, 1924, plaintiffs wrote defendant as follows:

"Mr. M. A. Hoyt, Carroll, Iowa — Dear Sir: We inclose herewith confirmation of 10 Sept. wheat bought for you to-day at 1.06. * * * We are very glad indeed to get an account opened with you, and hope it will be profitable to you."

And again on the same day:

"M. A. Hoyt, Carroll, Iowa: We have this day made the following trades for your account:

                  =============================================================
                  Bought of        | Quantity. | Delivery. | Property. | Price
                  -----------------|-----------|-----------|-----------|-------
                  Bartlett Fr. Co. |    10     |   Sept.   |   Wht.    |  106
                  -------------------------------------------------------------
                  Sold to
                  -------------------------------------------------------------
                

"Orders good only for the days which they are given, unless specified.

"These transactions are made subject to the rules and customs of the Exchange at the place of contract, and the right is reserved to close the transactions when the funds are exhausted, or nearly so, without giving further notice.

"We solicit and will receive no business, except with the understanding with our customers that in all cases the intent to receive and deliver property bought and sold by us is contemplated and understood.

"Yours truly "Beach-Wickham Grain Co. "Chicago, April 24, 1924."

The foregoing are samples of numerous communications of the same general nature. Defendant wrote letters to plaintiffs. He knew through this correspondence, and through Githens & Nelson, that he was trading with plaintiffs. He testified that these confirmations of trades he made through plaintiffs were sent to him by the Beach-Wickham Grain Company through United States mail in sealed envelopes. They were all made out on the stationery of plaintiffs. The evidence is conclusive that defendant knew he was dealing with plaintiffs on the Chicago Board of Trade.

This being true, the contracts executed on the Chicago Board of Trade are governed by the law of that jurisdiction; whether by the state law of Illinois or the Federal Grain Futures Act is immaterial. The law of Iowa does not control, and the alleged failure of Githens & Nelson to observe certain provisions of that law is immaterial, both upon this ground and upon the further ground that the contracts of purchase and sale were between defendant and plaintiffs.

The court suggested that in its opinion the burden was upon defendant to prove that the transactions were gambling contracts, and that defendant had failed to carry this burden. Defendant's evidence was to the effect that when, for example, he bought corn for September...