Pacaud v. Waite

• Decision Date: 24 October 1905
• Parties: PACAUD et al. v. WAITE et al.
• Court: Illinois Supreme Court

218 Ill. 138

75 N.E. 779

PACAUD et al.

v.WAITE et al.

Supreme Court of Illinois.

Oct. 24, 1905.

Appeal from Appellate Court, First District.

Bill by Charles Waite and others, doing business as Waite, Thorburn & Co., against A. Duncan Pacaud and others. From a judgment of the Appellate Court affirming a decree for complainants, defendants appeal. Reversed.

Rehearing denied December 7, 1905.

James E. Munro, for appellant Picaud.

Henry S. Robbins, for appellant Jackson.

Lynden, Evans & Sears and Meagher & Whitney, for appellees.

HAND, J.

On the fifth day of August, 1902, Charles Waite and Robert H. Thorburn, doing business as Waite, Thorburn & Co., filed a bill in chancery in the superior court of Cook county against A. Duncan Pacaud, William S. Warren (president of the Board of Trade of the city of Chicago), and the Bank of Montreal, for an injunction and an accounting. It was averred that the complainants and the defendant A. Duncan Pacaud on May 2, 1902, were members of said board of trade; that on that day the complainants, subject to the rules of said board, contracted to sell to the defendant A. Duncan Pacaud 5,000 bushels of ‘standard’ oats at 37 cents a bushel, also 5,000 bushels of ‘old style’ oats at 34 1/2 cents per bushel, both of which said sales were made for July, 1902, delivery; that the complainants deposited with the Bank of Montreal the sum of $2,350 to margin said contracts pursuant to the rules of said Board of Trade; that thereafter the market for July oats advanced, and on the last day of July the price for ‘standard’ oats in 5,000 bushel lots was 64 cents per bushel and that of ‘old style’ oats in 5,000 bushel lots was 47 1/2 cents per bushel. The bill alleged that these high prices were the results of manipulations of the market and the creation of a ‘corner’ by persons other than the defendants; that the complainants had failed to deliver said oats; that said A. Duncan Pacaud was about to take steps to have said margins paid to him by said Bank of Montreal upon the basis of said fictitious prices under the rules of the said Board of Trade, and prayed that A. Duncan Pacaud be enjoined from taking any steps to secure the indorsement of said margin certificates which evidenced said deposit; that the president of the board of trade be enjoined from indorsing or delivering said certificates to A. Duncan Pacaud under the rules of said Board of Trade, and that said Bank of Montreal be enjoined from paying said margins to A. Duncan Pacaud. The bill also sought an accounting between the complainant and A. Duncan Pacaud upon the basis of the real market prices of said oats as distinguished from the alleged fictitious prices thereof at the time the contracts matured. The said complainants offered to pay to said A. Duncan Pacaud, were so manipulated by certain operators between the contract prices and the actual market prices of oats of those grades in the city of Chicago on the 31st day of July, 1902. Answers and replications were filed, and the court, upon a hearing, entered a decree finding that on July 31, 1902, the market prices of said two grades of oats on the Board of Trade in the city of Chicago were so mainpulated by certain operators other than the parties to this suit as to be in a condition commonly known as ‘cornered,’ whereby the prices for oats in 5,000 bushel lots were stimulated in an abnormal degree, and that the reasonable market prices of ‘standard’ oats and ‘old style’ oats for July delivery were on July 31, 1902, only 42 1/2 cents and 33 cents per bushel, respectively, and decreed that $275 of said margins held by said Bank of Montreal be paid to A. Duncan Pacaud and the balance thereof to complainants, and that the margin certificates evidencing the deposit of said margins be surrendered and canceled. An appeal was prosecuted to the Appellate Court for the First District, where the decree of the superior court was affirmed, and a further appeal has been prosecuted to this court by A. Duncan Pacaud and William S. Jackson, the now acting president of the Board of Trade.

The Board of Trade of the city of Chicago is a voluntary association, which was incorporated by special act of the Legislature on February 18, 1859, and whose objects are stated in its by-laws to be, ‘to maintain a commercial exchange; to promote uniformity in the customs and usages of merchants; to inculcate principles of justice and equity in trade; to facilitate the speedy adjustment of business disputes; to acquire and to disseminate valuable commercial and economic information, and, generally, to secure to its members the benefits of co-operation in the furtherance of their legitimate pursuits.’ And by section 1 of its charter it is declared to be a body politic and corporate, with power to sue and to be sued, implead and be impleaded, receive and hold property not to exceed in value $200,000, to have a common seal, and to make such ‘rules, regulations, and by-laws, from time to time, as they may think proper or necessary for the government of the corporation hereby created, not contrary to the laws of the land,’ and section 4, 6, 7, 8 and 12 of its charter are as follows:

‘Sec. 4. The said corporation is hereby authorized to establish such rules, regulations, and by-laws for the management of their business, and the mode in which it shall be transacted, as they may think proper.’

‘Sec. 6. Said corporation shall have the right to admit or expel such persons as they may see fit, in manner to be prescribed by the rules, regulations and by-laws thereof.

‘Sec. 7. Said corporation may constitute and appoint committees of references and arbitration and committees of appeals, who shall be governed by such rules and regulations as may be prescribed in the rules, regulations, or by-laws for the settlement of such matters of difference as may be voluntarily submitted for arbitration by members of the association or by other persons not members thereof. The acting chairman of either of said committees, when sitting as arbitrators, may administer oaths to the parties and witnesses, and issue subpoenas and attachments, compelling the attendance of witnesses, the same as justices of the peace, and in like manner directed to any constable to execute.

‘Sec. 8. When any submission shall have been made in writing and a final award shall have been rendered, and no appeal taken within the time fixed by the rules or by-laws, then, on filing such award and submission with the clerk of the circuit court, an execution may issue upon such award as if it were a judgment rendered in the circuit court, and such award shall thenceforth have the force and effect of such a judgment and shall be entered upon the judgment docket of said court.’

‘Sec. 12. Said corporation shall have no power or authority to do or carry on any business excepting such as is usual in the management of boards of trade or chambers of commerce or as provided in the foregoing sections of this bill.’

And in pursuance of its charter the said Board of Trade passed a code of rules, regulations, and by-laws for the government of its members, and the regulation and control of the business which they should do, which were in force at the time the parties to said contract became members of said Board of Trade and at the time said contracts were entered into on May 2, 1902, and at the time they matured on the 31st of July of that year, and which are, in part, as follows:

By section 1 of rule 10 each person becoming a member of said Board of Trade is required to sign an agreement to abide by the rules, regulations and by-laws of the association and all amendments that may be made thereto; and section 1 of rule 20, which regulates the margining of future sales, is, in part, as follows: ‘On time contracts, purchasers shall have the right to require of sellers, as security, a deposit of 10 per cent., based upon the contract price of the property bought, and further security, from time to time, to the extent of any advance in the market value above said price. Sellers shall have the right to require as security from buyers a deposit of 10 per cent. on the contract price of the property sold, and, in addition, any difference that may exist or occur between the estimated legitimate value of any such property and the price of sale. All securities shall be deposited either with the treasurer of the association or with some bank duly authorized by the board of directors to receive such deposits'-which depositary shall issue a certificate, the form of which is prescribed by said rule.

Section 6 of rule 20 in part is as follows: ‘Upon the fulfillment or settlement of any or upon the closing of any contract under the provisions of section 5 of this rule, deposits upon which have been made, and when the full adjustment of all differences relating to the same shall have been effected, the deposits shall thereupon be payable to the party depositing the same, and the joint indorsement of both parties upon the certificate shall be a sufficient authority to the party holding the deposit to pay the same to the holder of the certificate; or in case of a failure between the contracting parties to adjust and settle their respective claims upon the deposit within three besiness days after the maturity of all contracts upon which the deposit is applicable, the matter in dispute shall, upon the application of either party to such contracts, be submitted to a select committee...