Riordon v. McCabe

• Citation: 341 Ill. 506,173 N.E. 660
• Decision Date: 11 December 1930
• Docket Number: 19971.,Nos. 19970,s. 19970
• Parties: RIORDON et al. v. McCABE et al.
• Court: Supreme Court of Illinois

341 Ill. 506

173 N.E. 660

RIORDON et al.

v.McCABE et al.

Nos. 19970, 19971.

Supreme Court of Illinois.

Oct. 25, 1930.

As Modified on Denial of Rehearing Dec. 11, 1930.

Error to Appellate Court, Second District, on Appeal from Circuit Court, Bureau County; Joe A. Davis, Judge.

Consolidated suits by James K. Riordon, trustee, and others, against William McCabe and others, wherein defendants filed cross-bills. Decrees dismissing bills were affirmed by the Appellate Court (254 Ill. App. 177), and complainants bring certiorari.

Judgment of the Appellate Court affirmed.

DE YOUNG and ORR, JJ., dissenting.James C. McMath, of Chicago, Barnes & Magoon, of Lacon, Claude Brown, of Princeton, and Kirkland Fleming, Green & Martin, of Chicago (Weymouth Kirkland, Charles F. Rathbun, and William H. Symmes, all of Chicago, of counsel), for plaintiffs in error.

J. L. Spaulding, of Princeton, for defendants in error.

STONE, J.

These consolidated causes were brought by separate bills filed in the circuit court of Bureau county to foreclose two trust deeds, one given to secure a note for $25,000, dated August 27, 1921, due one year after date, with interest at 7 per cent. per annum, and the other for $30,000, dated October 15, 1921, given to secure a note for a like amount with interest at 6 1/2 per cent. per annum. These notes and trust deeds were signed by defendants in error, made payable to the order of themselves, indorsed in blank by them and delivered to plaintiffs in error. The bills contain the usual averments for foreclosure of such trust deeds. The answers filed thereto allege that the notes and trust deeds were given to cover gambling transactions conducted by plaintiffs in error for defendant in error William McCabe on the Chicago Board of Trade, and that there was no other consideration for such notes and trust deeds; that such gambling transactions consisted of pretended purchase and sale of grain and provisions for future delivery and in the purchase and sale of ‘bids' and ‘offers'; that at the time of such transactions neither plaintiffs in error nor defendant in error McCabe intended that delivery of the commodities sold or purchased should be made or received, but intended to settle such transactions on the difference in market prices of such commodities when the trade was opened and when it was closed; that in all such gambling transactions plaintiffs in error, with that knowledge, aided and assisted in concluding from for defendants in error, and that such notes and trust deeds were therefore wholly void. Defendants in error also filed cross-bills, praying that the notes and trust deeds be canceled and set aside as clouds on the title of defendants in error. The causes were referred to the master in chancery, who found that the allegations of the answers and cross-bills were true, and recommended that the prayers of the cross-bills be allowed, and that the bills be dismissed for want of equity. Exceptions to the master's report were overruled, and separate decrees were entered in accordance with the recommendations of the master. Appeals were taken to the Appellate Court, where the causes were consolidated, and the decrees of the circuit court were affirmed. The consolidated causes come here on writ of certiorari.

As to the transactions which took place between these parties there is little controversy in the evidence, although extended arguments are made as to the construction to be placed on the evidence and the figures adduced thereby. The defense to these notes and trust deeds is based on sections 130 and 131 of the Criminal Code (Cahill's Rev. St. 1929, c. 38, pars. 308, 309). Section 130 is as follows: ‘Whoever contracts to have or give to himself or another the option to sell or buy, at a future time, any grain, or other commodity, * * * where it is at the time of making such contract intended by both parties thereto that the option, whenever exercised, or the contract resulting therefrom, shall be settled, not by the receipt or delivery of such property, but by the payment only of differences in prices thereof, * * * shall be fined not less than $10 or more than $1,000, or confined in the county jail not exceeding one year, or both; and all contracts made in violation of this section shall be considered gambling contracts and shall be void.’ Section 131 provides that all promises, contracts, or agreements entered into, where the whole or any part of the consideration shall be for any money, property, or other valuable thing won by any gaming, shall be void and of no effect.

Defendant in error William McCabe is a farmer residing near Tampico, in Bureau county. In 1903 he began dealing on the board of trade and did so intermittently from that time until the conclusion of the transactions out of which these causes originated. He had dealt with a number of different commission houses. He was at the time of the filing of these bills sixty-four years of age. In 1918 one of the plaintiffs in error, James K. Riordon, was then a member of the firm of Kempner & Co., which firm was later succeeded by the firm of Riordon, Windsor & Co., and after the death of Windsor the firm was organized and continued business as Riordon, Martin & Co., the plaintiffs in error here. They did, and do, a grain commission business. In the early part of 1919 McCabe's transactions with plaintiffs in error increased very largely. During 1919, 1920, and the greater portion of 1921 plaintiffs in error conducted for him very large transactions in the purchase and sale of grain and provisions, totaling seventeen hundred and nine purchases and a like number of sales. The total transactions aggregated 27,868,500 bushels of grain at a total price of $31,794.208.75. McCabe was not a member of the Chicago Board of Trade and could not execute such transactions in his own name on the board. He bought no grain or provisions for immediate delivery either through plaintiffs in error or any other broker or commission firm. A large part of his purchases and sales, and likewise ‘bids' and ‘offers,’ were conducted through an independent broker, who, as soon as the purchase or sale was made, turned in the transaction to the plaintiffs in error, who then entered it in McCabe's account, took charge of the transaction until closed, and the result, whether profit or loss, was reflected in their account with McCabe. Plaintiffs in error paid the brokerage fee to the broker and charged McCabe the regular commission. All transactions were made on the board of trade, the rules of which provided that each purchase or sale contemplated a delivery or acceptance thereof, as the case might be. McCabe's account with plaintiffs in error showed only his profit or loss. He was at no time charged with the purchase price of the commodity purchased for future delivery nor credited with the sale price, though the books noted the amount of the commodity and purchase and sale price. His account with plaintiffs in error shows that he was either debited or credited with a difference between the purchase and sale price. McCabe put up no margin and paid for no grain and took or made delivery of none. While he paid to plaintiffs in error large amounts of money in these three years, the same was not used to margin but to pay his losses, government taxes, and commissions. The deals made by plaintiffs in error with other members of the board of trade, or by the broker and turned over to plaintiffs in error, were settled by plaintiffs in error, for McCabe by paying the loss or receiving the profit on the deal and the same was charged or credited in McCabe's account.

It is evident that in the early period of the transactions of McCabe with plaintiffs in error the latter considered him to be a man of means. The evidence showed that in 1918 he had 1,400 acres of farm land, valued at $200 per acre, and a bank credit of $125,000. During 1920, after the price of lands had decreased, the evidence shows that McCabe's 1,400 acres of land was valued at $100 per acre. It also shows he had paid out to plaintiffs in error, on transactions conducted for him, the $125,000. McCabe's speculation grew more and more unfortunate. Late in 1920 defendants in error executed to plaintiffs in error a mortgage for $50,000, proceeds of which were turned over to meet McCabe's losses. On June 1, 1921, this mortgage was taken up through a loan secured from a fraternal benefit society in the sum of $60,000, and the balance of the proceeds was turned over to plaintiffs in error. As we have seen, on August 27, 1921, the trust deed involved here, securing a note of $25,000, was given plaintiffs in error, and on October 14, 1921, the trust deed and note for $30,000 followed the same course. These notes, mortgages, and trust deeds were given to pay McCabe's overdraft in his account with plaintiffs in error representing his losses and were not used to purchase grain or provisions. From time to time McCabe drew out of his account various sums of money. By January 1, 1920, his net gains had amounted to many thousands of dollars. On that day, however, according to McCabe's evidence, his account showed an overdraft of $692.92. Plaintiffs in error's evidence puts the amount at something over $700. During the year 1920 McCabe paid to plaintiffs in error in money, checks, drafts, and certificates of deposit an aggregate of $186,624.08 and drew out of his account $125,048.49. In 1921 he paid in $70,444,02 and drew out $4,333.70, showing a loss in 1920 of $61,575.59, and in 1921 of $66,110.32, or a total loss in the two years immediately preceding the giving of the second trust deed here involved of $127,685.91. Later this loss was reduced somewhat by a net credit of $13,800 on an account carried in the name of his son.

Counsel do not seriously disagree as to the law but rather as to its application in this case. The only question involved is whether the deals were made with the intention on the part of both...