Pelouze v. Slaughter

• Decision Date: 06 October 1909
• Citation: 241 Ill. 215,89 N.E. 259
• Parties: PELOUZE et al. v. SLAUGHTER et al.
• Court: Illinois Supreme Court

241 Ill. 215

89 N.E. 259

PELOUZE et al.

v.SLAUGHTER et al.

Supreme Court of Illinois.

June 16, 1909.

Rehearing Denied Oct. 6, 1909.

Appeal from Appellate Court, First District, on Appeal from Circuit Court, Cook County; J. W. Mack, Judge.

Bill by Helen T. Pelouze and others, executors of Medora Gale Thompson, deceased, against Harrison B. Slaughter, as executor, and others. A decree in favor of defendants was affirmed by the Appellate Court (142 Ill. App. 657), and complainants appeal. Affirmed.

Rehearing denied; Hand, J., dissenting.William E. O'Neill and Morris St. P. Thomas, for appellants.

Jacob Newman, Hiram T. Gilbert, and John J. Herrick, for appellees.

CARTWRIGHT, J.

Medora Gale Thompson died on February 14, 1902, and 17 months afterward the appellants, as executors of her last will and testament, filed the bill in this case in the circuit court of Cook county against appellees to recover the possession of certain stocks held by appellees, or the value of the same, on the ground that such stocks were received by virtue of gambling transactions carried on between said Medora Gale Thompson and the appellees from January, 1896, to the time of her death. The appellees filed an answer denying that the transactions between them and Medora Gale Thompson were gambling transactions, and alleging that at the time of her death she was indebted to them in a large sum of money, for which they held as security shares of stock purchased by them for her which could readily have been sold at that date for $169,000, and also 225 shares of Chicago City Railway stock deposited with them by her, that at the time of her death the appellants had full knowledge of the transactions and the nature of the same, and that the appellants, as executors, at different times ordered the sale and delivery of the stock so purchased and held by appellees. After the filing of the bill, the appellees sold at public sale, on notice to the appellants, the stocks then in their hands, except 49 shares of Chicago City Railway stock, and applied the proceeds on the indebtedness to them, which reduced it to $13,714.34, and they afterward filed a cross-bill to enforce a lien against said remaining stocks for the indebtedness. The cross-bill was answered, with a denial that the appellants were indebted in the sum of $13,714.34, as charged in the cross-bill, or that the appellees had any right to the 49 shares of the Chicago City Railway stock as security for the same.

The facts were not in dispute, and are, in substance, as follows: The appellees, as members of the firm of A. O. Slaughter & Co., or its successor, A. O. Slaughter, Jr., & Co., were engaged in business in Chicago in the purchase and sale of stocks, bonds, and other securities on commission, and loaning money. In 1896 Mrs. Thompson, who was a widow of mature age, personally managing her own business and worth somewhere about $250,000 commenced to give orders to the appellees to buy such stocks for her as she from time to time desired to purchase. An arrangement was made by which they let her have money for the purpose of making the purchases, and she deposited with them, from time to time, securities to protect them against loss in the purchases and sales, and they let her have money, for which she agreed to pay interest at rates agreed upon from time to time. She ordered purchases of certain stocks and her orders were carried out and reports made to her the same day. When she chose to sell, she gave an order for a sale, and it was made and reported to her in like manner. About September 30, 1898, she authorized certain members of the firm to buy and sell stocks for her as before, but without specific orders and on their own judgment. The business was carried on up to her death in the same manner as before, except that the purchases and sales were made under that arrangement, and each purchase and sale was reported to her the same day that it was made any was ratified and confirmed by her. The stocks were bought in Chicago and New York, but almost wholly in New York, and in every instance they were actually bought and paid for and delivered. The appellees had correspondents in New York who were members of the stock exchange and would wire a correspondent to buy certain stocks. The correspondent thereupon bought the stocks for cash, and the certificates were delivered to the purchaser the next day by 2:15 p. m. and the purchase price was paid. The price was charged to the appellees on the books of the New York firm, and when sales were made the selling price was received and credited to the appellees. If a sale of stocks not on hand was made, the stocks were borrowed to make delivery to the buyer, and a check was given to the lender for the market value, and when such stocks were bought the certificates were received and paid for and delivered to the person from whom the stocks were borrowed. Every transaction was actual, bona fide, and for cash, and the certificates were received and held by the New York correspondents for the appellees, ready to be delivered upon payment. The appellees, upon receipt of each statement from the New York correspondent, charged Mrs. Thompson with the amount of the purchase or credited her with the amount of the sale, and their only interest was the commissions for attending to the business and interest on money advanced to her. In addition to the report of each purchase and sale, the appellees, at the end of each month, sent Mrs. Thompson a statement of her account showing the stocks on hand, their market value, the condition of the account, and the balance due them. She acknowledged the receipt of each statement down to November 30, 1901, which was acknowledged by her daughter, helen T. Pelouze, one of the appellants, for her. Each letter acknowledging the receipt of a statement stated that the account had been examined and found correct, and each statement contained this: ‘All orders for the purchase and sale of any article are received and executed with the distinct understanding that actual delivery is contemplated and that the party giving the order so understands and agrees.’ At the death of Mrs. Thompson the balance of the account against her was $199,411.48, and appellees had on hand stocks of the value of $173,000, and also 225 shares of Chicago City Railway stock which had been deposited with them by Mrs. Thompson. On the whole series of transactions there was a profit to her. After her death, at various times, the appellants directed the appellees to sell certain of the shares and to deliver other shares to certain brokers in New York and receive payment for the same. The appellants in that way disposed of all the stocks on hand at the death of Mrs. Thompson except 2,100 shares of Union Bag & Paper, which was of the value of $36,000 at her death. Appellants also deposited with the appellees, as security, certain stocks, and after the bill was filed the appellees sold the stocks, except 49 shares of Chicago City Railway stock, at auction, as before stated, by which the indebtedness was reduced to $13,714.34.

The master reported the evidence, with his conclusions that all the transactions were a continuous series and were legitimate speculations and not gambling transactions, and that the appellants were not in a position, at the time of filling their bill, to claim the benefit of section 130 of the Criminal Code (Hurd's Rev. St. 1908, c. 38), which is the section prohibiting options. He recommended that the bill of complaint be dismissed for want of equity, and that the prayer of the cross-bill be allowed. The cause was heard on exceptions to the report, and the court modified it by dividing the transactions between Mrs. Thompson and the appellees into three periods: The first, from their commencement to February 15, 1897; the second, from February 23, 1897, to September 30, 1898; and, the third, from the latter date to her death. The court entered a decree reciting that the transactions down to September 30, 1898, were legitimate, and that the transactions after that date were gambling transactions, but that the conduct of appellants as executors, and the course of dealing between them and the appellees from the death of Mrs. Thompson to the commencement of this suit, were such as to constitute a new contract between the appellants and appellees, by which the appellants were precluded from receiving the benefits which might otherwise have accrued to them under the statutes respecting gambling. The court adopted the recommendation of the master, but on different grounds, and dismissed the original bill for want of of equity and granted the relief prayed for in the cross-bill. From that decree appellants removed the cause by appeal to the Appellate Court for the First District, and the branch of that court affirmed the decree.

In giving the reasons for an affirmance of the decree, the Appellate Court stated that the appellants, knowing that the appellees held shares of stock of the market value of $180,000 at the death of Mrs. Thompson which they claimed to have bought for her, disposed of four-fifths in value of said stcoks. The court expressed no opinion on the question whether such action fixed the character of the transactions or amounted to a new contract, but did express the opinion that the transactions were legitimate and not gambling transactions, which was conclusive of the case. The appellees did not assign cross-errors in the Appellate Court, and counsel for the appellants, pointing to the opinion, say that the appellees are precluded in this court from insisting that the transactions were legitimate. Their argument is that, the appellees not having assigned cross-errors in the Appellate Court, that court could not consider any question except whether gambling transactions could be ratified or confirmed by what the appellants did, and that the appellees cannot support the judgment of the Appellate Court except...