Lamson Bros. & Co. v. Bane

• Decision Date: 02 May 1913
• Docket Number: 3,803.
• Citation: 206 F. 253
• Parties: LAMSON BROS. & CO. et al. v. BANE.
• Court: U.S. Court of Appeals — Eighth Circuit

206 F. 253

LAMSON BROS. & CO. et al. v. BANE.

No. 3,803.

United States Court of Appeals, Eighth Circuit.

May 2, 1913

Joseph W. Moses, of Chicago, Ill. (Moritz Rosenthal, Henry H Kennedy, Julius Moses, Hamilton Moses, and Walter Bachrach all of Chicago, Ill., N. T. Guernsey, of New York City, and W. E. Miller and A. C. Parker, both of Des Moines, Iowa, on the brief), for plaintiffs in error.

Jerry B. Sullivan, of Des Moines, Iowa (John B. Sullivan, of Des Moines, Iowa, on the brief), for defendant in error.

Before HOOK and SMITH, Circuit Judges, and VAN VALKENBURGH, District judge.

SMITH Circuit Judge.

The defendant in error, I. W. Bane, is a lawyer engaged in the practice of his profession at Des Moines, Iowa, and will hereafter be called the 'plaintiff.' Lamson Bros. &amp Co. are composed of L. J. Lamson, W. A. Lamson, and L. F Gates, and will hereafter be called the 'defendants.' They have for a considerable period been engaged in business at Chicago, Ill., as brokers and commission merchants. They maintained branches in 14 Iowa cities, one at Des Moines, where three men, including a manager, were employed. The Des Moines office received considerable sums of money which were deposited in a bank in that city, and notice was sent directly to the Chicago office of the amount of these deposits and to whom they should be credited. On December 27, 1909, the plaintiff entered into a contract through the defendants' manager at Des Moines for the purchase of 100 shares of M.K. & T. stock at 48 1/4, and after being notified that the stock had been purchased he paid $500 as a margin upon it. On January 8, 1910, he similarly contracted to buy 100 shares of Wabash preferred at 57 1/4, and after being notified that the stock had been purchased paid as a margin thereon the sum of $600. Subsequently he from time to time deposited other sums of money to meet declines in the market until his total deposits amounted to $3,800 including $500 deposited at Chicago while there. Both M.K. & T. stock and Wabash preferred were listed at the Stock Exchange in New York, but neither of them was so listed at Chicago.

When the plaintiff authorized the purchase of the 100 shares of M.K. & T. stock, the defendant's manager or agent at Des Moines wired them at Chicago to purchase the stock. Defendants telephoned J. J. Townsend & Co., of Chicago, to make the purchase, and they wired to Sternberger, Sinn & Co., of New York, to make the purchase, and upon their reply that they had done so Townsend & Co. notified the defendants, they sent the news to their Des Moines agency, and it was there delivered to the plaintiff, and he then paid $500 as a margin.

On February 4th, this stock having fallen, the defendants notified J. J. Townsend & Co., to sell the same. They in turn notified Sternberger, Sinn & Co., who reported that they had sold the stock at 39 3/4. In a similar way when the plaintiff gave his order for the purchase of 100 shares of Wabash preferred the defendants' agency at Des Moines telegraphed the home office at Chicago, which telephoned J. J. Townsend & Co., who in turn wired Sternberger, Sinn & Co., at New York, to purchase the stock. They wired back to J. J. Townsend & Co. that the order had been complied with and the stock cost 57 1/4. They notified the defendants by telephone, who wired the information to their Des Moines agency, which notified the plaintiff, and thereupon he deposited a margin of $600.

On July 26, 1910, the defendants telegraphed to S. B. Chapin & Co., of New York, to sell the Wabash preferred. They telegraphed back that it had been sold at 30 1/4. This left a balance due the plaintiff on the defendants' theory of $58.64 for which they sent him a check.

It is the theory of the plaintiff that these were mere gambling transactions, that there was no intention that these stocks should ever be delivered to him, and that if the defendants bought stocks they were 'hedging' against loss on their wager.

Under the general law, if these were wagers the plaintiff could not recover the money lost thereon, and this is conceded to be the law of Iowa. Code 1897, Secs. 4967, 4968; Counselman & Co. v. Reichart, 103 Iowa, 430, 72 N.W. 490; People's Savings Bank v. Gifford, 108 Iowa, 277, 79 N.W. 63.

But certain states have believed that gambling could be better suppressed by providing that money lost in gambling may be recovered, among them New York, California, Tennessee, and Illinois. The statutes of Illinois contain the following:

'Sec. 130. Gambling in Grain, etc. Whoever contracts to have or give to himself or another the option to sell or buy, at a future time, any grain, or other commodity, stock of any railroad or other company, or gold, or forestalls the market by spreading false rumors to influence the price of commodities therein, or corners the market, or attempts to do so in relation to any of such commodities, shall be fined not less than $10 nor more than $1,000, or confined in the county jail not exceeding one year, or both; and all contracts made in violation of this section shall be considered gambling contracts, and shall be void.

'Sec. 131. Gaming Contracts. All promises, notes, bills, bonds, covenants, contracts, agreements, judgments, mortgages, or other securities or conveyances made, given, granted, drawn or entered into, or executed by any person whatsoever, where the whole or any part of the consideration thereof, shall be for any money, property or other valuable thing, won by any gaming, or playing at cards, dice, or any other game or games, or by betting on the side or hands of any person gaming, or by wager or bet upon any race, fight, pastime, sport, lot, chance, casualty, election or unknown or contingent event whatever, or for the reimbursing or paying any money or property knowingly lent or advanced at the time and place of such play or bet, to any person or persons so gaming or betting, or that shall, during such play or betting, so play or bet, shall be void and of no effect.

'Sec. 132. Losses by Gaming. Any person who shall, at any time or sitting, by playing at cards, dice or any other game or games, or by betting on the side or hands of such as do game, or by any wager or bet upon any race, fight, pastime, sport, lot, chance, casualty, election of unknown or contingent event whatever, lose to any person, so playing or betting, any sum of money, or other valuable thing, amounting in the whole to the sum of $10, and shall pay or deliver the same or any part thereof, the person so losing and paying or delivering the same, shall be at liberty to sue, for and recover the money, goods or other valuable thing, so lost and paid or delivered, or any part thereof, or the full value of the same, by action of debt, replevin, assumpsit or trover, or proceeding in chancery, from the winner thereof, with costs, in any court of competent jurisdiction. In any such action at law it shall be sufficient for the plaintiff to declare generally as in actions of debt or assumpsit for money had and received by the defendant to the plaintiff's use, or as in actions of replevin or trover upon a supposed finding and the detaining or converting the property of the plaintiff to the use of the defendant, whereby an action hath accrued to the plaintiff according to the form of this act, without setting forth the special matter. In case the person who shall lose such money or other thing, as aforesaid, shall not, within six months, really and bona fide, and without covin or collusion, sue, and with effect prosecute, for such money or other thing, by him lost and paid or delivered, as aforesaid, it shall be lawful for any person to sue for, and recover treble the value of the money, goods, chattels and other things, with costs of suit, by special action on the case, against such winner aforesaid; one-half to use of the county, and the other to the person suing. ' Hurd's Rev. St. 1911, c. 38.

Assuming that under the Illinois law these were gambling contracts, it then becomes material whether the contracts are governed by the laws of Iowa or of Illinois.

It must be borne in mind that it is the contention of plaintiff that these were gambling contracts, and that he did not in fact buy the M.K. & T. and Wabash preferred, but that he in effect made a wager that the stock would go up against the defendants' wager that it would go down and what defendants did, if anything, in the way of buying such stock or an option thereon, was a mere 'hedging' against loss with which he had nothing whatever to do. Consequently upon his theory the contract was never to be performed or executed in the sense of buying the stock, and the court properly charged the jury that:

'If you find that the defendants never intended to deliver the actual stock to the plaintiff upon the payment of the purchase price, and you should then find that defendant did purchase stocks as it did for the purpose of 'hedging' or protecting itself, then the fact that the defendant purchased stock in New York City would not avail it, and there would be no defense here.'

It follows that upon the plaintiff's theory that these were gambling contracts there was nothing to do in Illinois or New York with reference to the purchase of stocks. This is important, as it is conclusive that upon the plaintiff's theory the contracts were not to be performed by the purchase of stocks either in Illinois or New York. It is important because in many cases where contracts are made to be performed in...