Mullinix v. Hubbard, No. 6809.

CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)
Writing for the CourtLEWIS, Circuit , and VAN VALKENBURGH and FARIS
Citation6 F.2d 109
Decision Date27 May 1925
Docket NumberNo. 6809.
PartiesMULLINIX et al. v. HUBBARD et al.

6 F.2d 109 (1925)

MULLINIX et al.
v.
HUBBARD et al.

No. 6809.

Circuit Court of Appeals, Eighth Circuit.

May 27, 1925.


Robert E. Fuhr and Arthur L. Adams, both of Jonesboro, Ark. (H. M. Cooley, of Jonesboro, Ark., on the brief), for appellants.

Henry Craft, of Memphis, Tenn., for appellees.

Before LEWIS, Circuit Judge, and VAN VALKENBURGH and FARIS, District Judges.

LEWIS, Circuit Judge.

This is an appeal from a decree foreclosing a mortgage on lands in Arkansas. Appellant Mullinix is trustee of the bankrupt estate of the mortgagor. Appellant J. T. Fargason Co. is also mortgagee, though subsequent in lien to appellees' mortgage. The defense made below and relied on here by appellants is that the indebtedness of the bankrupt, Guy F.

6 F.2d 110
Bryant, which his mortgage to appellees purported to secure, is a gambling debt incurred by him in dealing in cotton, and cannot be recovered. The transactions out of which Bryant's indebtedness to Hubbard Bros. & Co. arose consisted in the purchase and sale of cotton on the New York Cotton Exchange for future deliveries, made in full compliance with the rules and regulations of the exchange and United States Cotton Futures Act (Comp. St. §§ 6309a-6309v). Hubbard Bros. & Co. were and had been for many years members of the exchange, acting as brokers for customers, and they made the purchases and sales for Bryant on telegraphic orders from their branch office at Memphis, in compliance with Bryant's request, and each purchase and sale as made was at once reported to Bryant. No cotton was delivered or received, but the transactions were all closed out in keeping with the rules and regulations of the exchange, resulting in losses to Bryant, which appellees had to pay, and these, with the broker's usual commissions, made up the amount of the mortgage debt

The principles of law to be applied to such transactions have become firmly settled by repeated decisions of the Supreme Court and this court. Irwin v. Williar, 110 U. S. 499, 4 S. Ct. 160, 28 L. Ed. 225; Embrey v. Jemison, 131 U. S. 336, 9 S. Ct. 776, 33 L. Ed. 172; Bibb v. Allen, 149 U. S. 481, 13 S. Ct. 950, 37 L. Ed. 819; Clews v. Jamieson, 182 U. S. 461, 21 S. Ct. 845, 45 L. Ed. 1183; Board of Trade v. Christie Grain Co., 198 U. S. 236, 25 S. Ct. 637, 49 L. Ed. 1031; Ponder v. Jerome Hill Cotton Co., 100 F. 373, 40 C. C. A. 416; Cleage v. Laidley, 149 F. 346, 79 C. C. A. 284; Wilhite v. Houston, 200 F. 390, 118 C. C. A. 542; Gettys v. Newburger (C. C. A.) 272 F. 209; Browne v. Thorn (C. C. A.) 272 F. 950; Id., 260 U. S. 137, 43 S. Ct. 36, 67 L. Ed. 171; Lamson v. Turner (C. C. A.) 277 F. 680; Bond v. Hume, 243 U. S. 15, 37 S. Ct. 366, 61 L. Ed. 565.

The New York Cotton Exchange affords opportunity to buy and sell cotton for future delivery, and when the business there carried on is conducted in accordance with its rules and regulations there is legitimate aid and not obstruction to commerce. When a purchase or sale is made it can only be made by members of the exchange, called brokers, from one to the other as principals to the contract, and each is bound by security theretofore required and given to carry out the contract, unless before delivery date settlement is made in keeping with the requirements of the rules and regulations. These settlements and the way in which they may be made, to be within the law, are considered and stated in the cases referred to. But each broker, in making the contract, acted also as agent for his customer who gave the order to buy or sell. That was the manner in which the purchases and sales here involved were conducted. They were made in the usual and regular way by broker's signed slips and were prima facie valid contracts. Bryant as customer gave the orders to appellees as his brokers, who filled them; no deliveries were made, they were all closed out before delivery dates, in compliance with the rules, regulations and legal requirements stated in Gettys v. Newburger, which rests on the principles announced in the cases that preceded it, all presenting transactions of the kind here. Bryant's losses first fell on appellees, which they were compelled to pay and did pay. This suit is for reimbursement.

The right of A. to sell to B. for future delivery and to buy from C. for delivery to be made at the same time is not questioned, nor the right of all of them by mutual consent to provide before delivery is due that there shall be delivery only from C. to B., where the amount and quality of the commodity in both sales is the same. A step further, if B. should make a like sale to C., why delivery at all, an idle, useless and expensive performance? Set-offs of sales against purchases and payment of the differences if any in the prices agreed on is the sensible, practicable, legal and economic procedure. The number of like transactions may be indefinitely multiplied, but as they increase adjustment by mutual consent becomes impossible without centralized agencies and a common clearing house. This and other lawful methods of adjusting and settling such transactions is the service that exchanges and their memberships render, and we find no reason to look upon them with suspicion with a view to discovering if possible some ground on which it might be said there was a secret purpose to merely gamble on the future price of the commodity, thus making them void. It is, of course, plain that facilities thus extended for legitimate business may be abused, and customer and broker intend only a wager on price of the commodity at the time named for delivery. That supposable condition is hardly conceivable here as to the broker, inasmuch as he was bound by security deposited

6 F.2d 111
beforehand and expulsion from the exchange to perform or adjust and settle within the law. However, to make sure of keeping transactions on the exchange within its lawful purpose the rule established in the cases supra is that if both customer and broker intended, when the purchases and sales were made, that there should be no delivery and no lawful settlement before delivery came due, but a wager whether the market would be above or below the named price on that day, it would be a gambling transaction and no recovery could be had. One cannot gamble with himself, a sinister intent must be mutual to render the formal contract void. In Irwin v. Williar, supra, an instruction to the jury was accepted as a correct statement of the law which in part read

"A contract for the sale of personal property which the vendor does not own or possess, but expects to obtain by purchase or otherwise, is binding if an actual transfer of property is contemplated. A transaction which on its face is legitimate cannot be held void as a wagering contract by showing that one party only so understood and meant it to be. The proof must go further, and show that this understanding was mutual — that both parties so understood the transaction. If, however, at the time of entering into a contract for a sale of personal property for future delivery it be contemplated by both parties that at the time fixed for delivery the purchaser shall merely receive or pay the difference between the contract price and the market price, the transaction is a wager, and nothing more. It makes no difference that a bet or wager is made to assume the form of a contract. Gambling is none the less such because it is carried on in the form or guise of legitimate trade."

This was reannounced in Bibb v. Allen, and followed in Gettys v. Newburger and Browne v. Thorn.

Transactions on boards of trade where cotton,...

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10 practice notes
  • Lipschutz v. Gordon Jewelry Corporation, Civ. A. No. 70-H-649.
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • February 22, 1974
    ...dism'd); Early-Foster Co. v. A.P. Moore's Sons, Inc., 230 S.W. 787 (Tex. Civ.App.—Texarkana 1921, no writ). See also Mullinix v. Hubbard, 6 F.2d 109 (8th Cir. 1925); 1 Williston on Contracts § 82A at 270 (Jaeger ed. 1957); Restatement of Contracts § 65 (1932); Restatement of Conflicts § 326......
  • Alamaris v. Jno. F. Clark & Co, 30425
    • United States
    • United States State Supreme Court of Mississippi
    • February 13, 1933
    ...Gambling is none the less such because it is carried on in form or guise or legitimate trade. [166 Miss. 127] Mullinix v. Hubbard, 6 F.2d 109; Chickasaw Cotton Oil Co. v. Chapman et al., 4 F.2d 322: Hyman & Co. v. Hay, 227 F. 898; 27 Corpus Juris, 1053; Andrews v. George M. Shutt & ......
  • Gamer v. Dupont Glore Forgan, Inc.
    • United States
    • California Court of Appeals
    • December 24, 1976
    ...Brooks v. People's Bank, 233 N.Y. 87, 134 N.E. 846; Solomon v. Newburger, 35 F.2d 328; Hoyt v. Wickham, 25 F.2d 777; Mullinix v. Hubbard, 6 F.2d 109; Jacobs v. Hyman, 286 F. 346; In re Clement D. Cates & Co., 283 F. 541; Lamson Bros. & Co. v. Turner, 277 F. 680; Wilhite v. Houston, ......
  • In re Armstrong, Bankruptcy No. 96-50087 S
    • United States
    • United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — Eastern District of Arkansas
    • March 4, 1998
    ...preclude application of Mississippi law or enforcement of valid and legal gambling debts incurred in Mississippi. Cf. Mullinix v. Hubbard, 6 F.2d 109 (8th Cir. 1925). Accordingly, Arkansas policies against unregulated gambling cannot be used to obviate the existence of Good Faith. Good fait......
  • Request a trial to view additional results
10 cases
  • Lipschutz v. Gordon Jewelry Corporation, Civ. A. No. 70-H-649.
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • February 22, 1974
    ...dism'd); Early-Foster Co. v. A.P. Moore's Sons, Inc., 230 S.W. 787 (Tex. Civ.App.—Texarkana 1921, no writ). See also Mullinix v. Hubbard, 6 F.2d 109 (8th Cir. 1925); 1 Williston on Contracts § 82A at 270 (Jaeger ed. 1957); Restatement of Contracts § 65 (1932); Restatement of Conflicts § 326......
  • Alamaris v. Jno. F. Clark & Co, 30425
    • United States
    • United States State Supreme Court of Mississippi
    • February 13, 1933
    ...Gambling is none the less such because it is carried on in form or guise or legitimate trade. [166 Miss. 127] Mullinix v. Hubbard, 6 F.2d 109; Chickasaw Cotton Oil Co. v. Chapman et al., 4 F.2d 322: Hyman & Co. v. Hay, 227 F. 898; 27 Corpus Juris, 1053; Andrews v. George M. Shutt & ......
  • Gamer v. Dupont Glore Forgan, Inc.
    • United States
    • California Court of Appeals
    • December 24, 1976
    ...Brooks v. People's Bank, 233 N.Y. 87, 134 N.E. 846; Solomon v. Newburger, 35 F.2d 328; Hoyt v. Wickham, 25 F.2d 777; Mullinix v. Hubbard, 6 F.2d 109; Jacobs v. Hyman, 286 F. 346; In re Clement D. Cates & Co., 283 F. 541; Lamson Bros. & Co. v. Turner, 277 F. 680; Wilhite v. Houston, ......
  • In re Armstrong, Bankruptcy No. 96-50087 S
    • United States
    • United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — Eastern District of Arkansas
    • March 4, 1998
    ...preclude application of Mississippi law or enforcement of valid and legal gambling debts incurred in Mississippi. Cf. Mullinix v. Hubbard, 6 F.2d 109 (8th Cir. 1925). Accordingly, Arkansas policies against unregulated gambling cannot be used to obviate the existence of Good Faith. Good fait......
  • Request a trial to view additional results

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