Rice v. Winslow

• Decision Date: 27 February 1902
• Citation: 62 N.E. 1057,180 Mass. 500
• Parties: RICE v. WINSLOW.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

180 Mass. 500

62 N.E. 1057

RICE v. WINSLOW.

Supreme Judicial Court of Massachusetts, Worcester.

February 27, 1902

COUNSEL

Thayer & Rugg, for plaintiff.

Herbert Parker and Ralph A. Stewart, for defendant.

OPINION

LORING J.

We are of opinion that the defendant is right in his contention that there was no evidence that the relation between the plaintiff and defendant was that of buyer and seller, within the first clause of the second section of St 1890, c. 437. There seems to have been some confusion at the trial as to the true construction of St. 1890, c. 437, and as to the application of it to the purchase of securities by brokers for their customers, to be carried by them on a margin. The evil aimed at by St. 1890, c. 437, is the making of 'wagering contracts.' It is stated in the title that the act is an act 'relative to wagering contracts' and the title of an act is part thereof, and is to be considered in determining its true construction. Proprietors of Mills on Monatiquot River v. Inhabitants of Randolph, Holbrook, and Braintree, 157 Mass. 345, 32 N.E. 153. It is to be noticed that St. 1890, c. 437, applies not only to the purchase and sale of securities, but to the purchase and sale of personal chattels of all kinds. But as securities are the kind of chattels dealt in in the case at bar, we shall, for convenience, speak of securities only in discussing the statute. The transactions which are described by the first clause of section 2 are contracts between A. and B., whereby A. agrees to buy of or to sell to B. The statute provides that in case of such a transaction, if there was no intention to perform the contract by the actual receipt and delivery of the securities bought or sold, and payment of the price, the other party having reasonable cause to believe that no intention to perform existed, any money paid may be recovered back. That is to say, if it was intended on one side of the transaction to make a wager under the guise of a contract, and the other side had reasonable cause to believe that that was the understanding, the rule of the common law is changed, and either party might recover back what he had paid under the contract. See Knowlton, J., in Lyons v Coe, 177 Mass. 382, 383, 59 N.E. 59. The transaction which is described by the second clause of the section is one where a person employs another to make in his behalf such a contract as is described in the first clause. That is to say where A. employs B. to make a wager under guise of contract for the purchase and sale of securities, where no securities are to be delivered, but a settlement is to be made by the payment of differences, if A. employs B. to make a contract for the purchase or sale of securities, and A. had no intention that the contract which he employed B. to make was to be performed and B. Had reasonable cause to believe that such was A.'s intention, A. can recover any sum paid by him to B. The actual receipt and delivery of the securities which is material in both clauses of section 2 is the actual receipt and delivery under the contract of purchase or sale. If A. employs B. to buy for him, intending that B. should receive the securities bought from the person from whom he buys them in A.'s behalf, the transaction is not within the statute, and it is entirely immaterial whether A. intended to have B. hold the securities for him until they should be actually sold and delivered by B. in pursuance of his orders, and then to receive the balance from, or pay the loss to, B., or whether he intended ultimately to pay the balance of the purchase money and receive the securities from B. Each case is equally outside of the scope of the act. The contention of the plaintiff here, and the reasoning of the presiding judge at the trial, seems to be this: Where a broker carries stock for a customer, the relation between them is a contractual one. Wood v. Hayes, 15 Gray, 375; Covell v. Loud, 135 Mass. 41, 46 Am. Rep. 446; Weston v. Jordan, 168 Mass. 401, 47 N.E. 133. If the relation is a contractual one, the broker sells to the customer, and that sale brings the transaction within the first clause of section 2 of St. 1890, c. 437. But that is a mistake. Where a broker is employed to buy and carry stocks on a margin, his relation to the customer in buying the stock is that of an agent. For the purchase of the stock the broker receives the same commission, and in the purchase of the stock he owes the same duty to his customer that he owes to him where he is employed to buy stocks which are to be taken and paid for by the customer, in place of being taken and paid for by the broker for the customer. The fact that after the stocks have been bought by the broker he is to actually receive them from the seller, and to pay for them, for...