Murlas Bros. Commodities, Inc. v. Bushman
| Decision Date | 27 August 1979 |
| Docket Number | No. 76-736,76-736 |
| Parties | MURLAS BROTHERS COMMODITIES, INC., a Foreign Corporation, Plaintiff-Respondent, v. Ernest BUSHMAN, Defendant-Appellant. |
| Court | Wisconsin Supreme Court |
C. Duane Patterson, Wausau (argued) for defendant-appellant; Tinkham, Smith, Bliss, Patterson & Richards, Wausau, on brief.
John P. Louderman, III, Madison (argued), for plaintiff-respondent; Eisenberg, Giesen & Ewers, Madison, on brief.
This is an action on a promissory note and a counterclaim for recovery of investment funds. The issues are whether there was a valid antecedent obligation for the note, and whether the trial court erred in its award of damages.
Ernest Bushman (Bushman), a potato grower, began to invest in commodity futures in the Chicago Mercantile Exchange (Exchange) through a Stevens Point agent of Murlas Brothers Commodities, Inc. (Murlas), in September, 1968. He had during preceding years dealt in commodity futures through another broker. On April 21, 1969, Bushman instructed the Murlas agent in Stevens Point to close the account if his balance of $16,860 was exhausted because he could not afford to put any more money into the account. Bushman made the decisions to buy or sell the commodities himself until May, 1969, when his account went into a deficit of $8,384. Murlas did not close the account, and George Murlas personally assumed control of the account and tried to stem the losses through a strategy of "straddling." 1
Bushman received confirmation statements from Murlas reporting each transaction. Such statements showed his cash position with Murlas. Notwithstanding the earlier instruction to close the account when it went into deficit, Bushman made no effort to terminate the trading done on his behalf by George Murlas after the account was in deficit. Murlas advanced the funds necessary to settle the Bushman account with the Exchange after each transaction.
On October 27, 1969, Bushman wrote the following note to George Murlas:
Bushman testified that by November 25, 1969, his account reached a deficit of $16,000 to $17,000; and at George Murlas's insistence, Bushman executed a promissory note to Murlas in the amount of $25,000. Apparently the note was executed while Bushman was visiting the Exchange as a guest of George Murlas. George Murlas testified that he took the note as "collateral" for Bushman's deficit, and he never credited Bushman's account with the amount of the note. On November 28, 1969, Bushman wrote another letter to George Murlas:
On December 3, 1969, Bushman executed a power of attorney authorizing Murlas to buy and sell commodity futures contracts on his behalf. Murlas closed out Bushman's account August 6, 1970. The account had an unpaid deficit of $31,002.50.
Murlas sued Bushman to recover on the note. Bushman counterclaimed for $23,861, the net amount allegedly deposited by Bushman with Murlas during their business relationship.
The jury found: (1) There was consideration for the note executed by Bushman to Murlas; (2) Agents of Murlas were told by Bushman to close his account when it reached a deficit position; (3) Bushman subsequently authorized or requested Murlas to trade on his behalf; (4) George Murlas improperly traded in the Bushman account after it reached a deficit. The jury found the sum of $14,000 would reasonably compensate Bushman for Murlas's failure to follow instructions to close Bushman's account or his trading improperly after the account reached a deficit position.
The trial court entered judgment in the amount of the note, set off by $14,000, for a net recovery of $11,000, plus interest as provided in the note. Bushman appeals, raising two issues: (1) Was there no valid antecedent obligation for the note? (2) Did the trial court err in its computation of damages?
The jury found there was consideration for the note. No consideration is necessary for a note given in payment of or as security for an antecedent obligation. Sec. 403.408, Stats.; Hessman v. O'Brien, 258 Wis. 243, 45 N.W.2d 730 (1951). Bushman contends that no valid antecedent obligation existed because (1) the transactions were illegal gambling transactions, (2) the debt was incurred in violation of the Exchange rules, (3) the debt was incurred contrary to Bushman's instructions, and (4) the debt was procured by fraud.
Bushman's claim that the note was incident to a gambling transaction was never raised in the trial court. Sec. 241.24, Stats., 2 generally validates futures contracts unless neither party intends to perform. In Carson v. Milwaukee Produce Co., 133 Wis. 85, 94-95, 113 N.W. 393 (1907), the court said that even legitimate transactions furnished many opportunities for collateral wager contracts and gambling, and whether or not the parties had such intention is a question of fact and should be submitted to the jury.
Bushman was a potato farmer and his Exchange transactions in potatoes might reasonably be inferred to be legitimate and consistent with his need to hedge in the potato market, but such an inference would not be applicable to his dealings in pork bellies. The heavy black printed proviso on the confirmations of trade notices sent by Murlas to Bushman provided as follows:
"NOTICE It is understood and agreed that all futures transactions made by us for your account are either hedges or contemplate actual delivery and receipt of the property and payment therefor; and that all property sold for your account is sold upon the representation that you have the same in your possession actually or potentially."
We conclude that on this record we will not consider for the first time on appeal the issue of intent which would be crucial to the question of...
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