Sprague v. Warren

• Decision Date: 10 April 1889
• Citation: 41 N.W. 1113,26 Neb. 326
• Parties: SPRAGUE v. WARREN ET AL.
• Court: Nebraska Supreme Court

26 Neb. 326

41 N.W. 1113

SPRAGUE

v.WARREN ET AL.

Supreme Court of Nebraska.

April 10, 1889.

Syllabus by the Court.

1. In an action on a promissory note, the defense being that it was given for losses sustained by the sale of options on corn in Chicago, testimony showed that the persons purchasing the corn were young men employed as clerks in the town of A., Nebraska, and that they had little or no property; that they purchased 5,000 bushels of wheat in Chicago through commission men, and gave the commission men in Chicago a draft for $250 as margins; that the wheat deal resulted in a profit to the purchasers. A second wheat deal also resulted in a small profit. An order was thereupon given to purchase 5,000 bushels of corn, and the aforesaid $250 was continued as a margin. A decline in the price of corn absorbed the margin, and a further decline left the purchasers indebted to the commission men, for which the note in suit was given. Held, that where there was no intention of the parties to purchase and receive the grain, and no intention of the sellers to deliver the same, no recovery could be had on the contract.¹

2. In considering such contracts, although the outward forms of law may have been complied with, yet where the defense is that the contract is a wagering one, and not intended for the actual sale and delivery of property, it is the duty of the courts to go behind the contract, and examine the facts and circumstances which attended the making of it, in order to ascertain its true character.

3. Where doubt is cast upon the validity of the contract by the testimony, it is the duty of the party claiming any rights under it to make it satisfactorily and affirmatively appear that the contract was made with the intention to deliver the grain.

4. Where a commission merchant testifies that he never had a warehouse receipt for grain in a warehouse which he claimed to have purchased on the order of certain parties residing at A., in this state; that he did not know in what elevator the alleged grain was which he claimed to have purchased; and that he settled the alleged losses by “ringing up” in the board of trade,-- held, that his testimony failed to show a bona fide purchase of grain for actual delivery.

Error to district court, Kearney county; GASLIN, Judge.

Action by Nathan H. Warren and others against C. G. Sprague on a promissory note. There was a judgment for plaintiffs, and defendant brings error.

REESE, C. J., dissenting.J. L. McPheely, William Leese, and J. M. Stewart, for plaintiff in error.

Calkins & Pratt, for defendants in error.

MAXWELL, J.

This action was brought in the district court of Kearney county, by the defendants in error against the plaintiff in error, upon the following instrument: “$351.02. MINDEN, April 18th, 1883. On the 18th day of April, 1885, for value received, I promise to pay, to the order of N. H. Warren & Co., three hundred and fifty-one and 02-100 dollars, at Chicago, with interest equal to ten per cent. per annum from date until paid, together with a sum equal to ten per cent. of amount due as liquidated damages, if action is brought on this note, or on the mortgage given to secure the same, or if the same is not paid when due. No. ___, of this date. P. O. address: ______ C. G. SPRAGUE. Date due, April 18th, 1885.” The defendant in his answer “admits the execution of the said note sued upon, described and set forth in petition of plaintiffs herein, but denies that he is indebted to plaintiffs on said note and said cause of action set forth in the petition in the sum of $351 02-100 and interest, or in any other sum. Defendant, for further answer and defense herein, complains of the plaintiffs, and says that heretofore, on the 1st day of February, 1882, plaintiffs were commission merchants in Chicago, Ill.; that plaintiff at said time, in the firm name of N. H. Warren & Co., dealt and traded in what is known as ‘options,’ on change in Chicago, in grain, by selling and buying in market, on 'change, certain grain for future delivery, when in fact no delivery was ever intended or demanded, and no grain was bought or sold, or intended to be; that on said date defendant took an option of said plaintiffs on grain as aforesaid for future delivery, when in fact no delivery was ever intended or demanded, and no grain was bought or sold, or intended to be; that the whole transaction was a venture and speculation on margins, depending for profit or loss on the fluctuation of the market, and purely a fictitious and gambling transaction; that in such and said transaction no consideration was received; that the said note sued upon herein was given for loss in so trading in said options, at said time as aforesaid, and is without consideration, and wholly void, which plaintiffs well knew, in violation of the law, and contrary to public policy.” On the trial of the cause the jury returned a verdict in favor of the defendants in error, and, a motion for a new trial having been overruled, judgment was entered on the verdict.

The testimony shows that in December, 1882, the plaintiff in error and one Daniel W. Fisher were young men, employed as clerks, and without capital, and resided at Aurora, in Nebraska. In December of that year they sent a telegram, signed, “C. G. SPRAGUE & Co.,” to the defendants in error, at Chicago, to purchase 5,000 bushels of wheat for them, which, it is claimed, was done. The defendants in error were engaged in business as grain and commission merchants at Chicago, Ill. Sprague & Co. were required by the defendants in error to put up a margin of $250. This they did. This wheat deal was closed out about January 23, 1883, the profit being $275. Sprague & Co. thereupon directed the defendants in error to make a second purchase of 5,000 bushels of wheat, the former margin of $250 to remain to their credit as a margin. This wheat deal was closed out a few days afterwards; the net profits of Sprague & Co. being $12.50. In neither of these cases had the wheat been delivered to Sprague & Co. On the 27th of January, 1883, Sprague & Co. directed the defendants in error to purchase for them 5,000 bushels of February corn, the $250, heretofore spoken of, to remain as a margin. Fisher testifies that Sprague & Co. directed the defendants in error, as soon as the corn deal was closed out, to purchase for them 5,000 bushels of May wheat; that the defendants in error did not wait for the closing of the corn deal, but purchased 5,000 bushels of May wheat; and that as the price declined, and heavy demands were made upon Sprague & Co. for margins, Sprague assumed the corn deal, and Fisher the deal in wheat, and that the note in question was given by Sprague for alleged losses in the sale of the corn.

The deposition of Nathan H. Warren, one of the defendants in error, was taken in the case, and on cross-examination he testifies as follows: “ Answer. We do sometimes deal in options in the future; the firm. Question. Now will you please answer my first question? Do you know, from your experience on the board, whether the bulk of the transactions there in grain consists of speculations in the future? A. My impression is there is a good deal; I have no means of knowing. Q. Are all the contracts in question, which you have testified to, what is known as deals in future options? A. None of them are. Q. Will you explain what is meant by that phrase, ‘Dealing in future options?’ A. Dealing in future options is where you have option to take the grain or not. The contract is where you contract to take it. Q. Was any of the wheat or grain purchased by you under the orders you have testified to delivered to your knowledge? A. The grain was delivered. Q. Which grain? A. There was but one 5,000 bought. Q. From whom was that grain purchased? A. J. B. Peabody & Co. Q. When? A. On the 27th of January. Q. Where? A. On the Board of Trade, in Chicago. Q. What was done with the grain when it was purchased? A. It was paid for on the 1st of February. It was February delivery. Q. (Question repeated.) Now, please answer. A. It was purchased on the 27th of January for delivery in February. In February it was paid for. Q. (Question repeated.) Now, please answer. What was done with the grain when it was purchased? A. That is an idiotic question,--what was done with the grain when it was purchased in January, for February delivery. Q. Nevertheless, I ask you to state again what was done with the grain when it was purchased? A. It was taken in and paid for in the office. Q. Taken into what office? A. Into my office. Q. The grain was? A. The grain is represented by receipts for grain. Q. What did you do with it then? A. We carried it. Q. Now please state what became of the grain? A. It was sold on the 18th day of April. Q. Was it delivered to you? A. It was. Q. When? A. On the 1st day of February. Q. What did you do with it then? A. We carried it. Q. Where did you put it? A. We probably put it in the bank. Q. The grain? A. The receipts. Q. I am now asking you about the grain itself. Do you know what became of the grain which you purchased? A. It was kept in the elevators of the city. Q. In what elevator? A. I do not know. In a regular elevator. It was stored in a regular elevator. I do not know which particular elevator it was stored in. It makes no difference. Q. If the 5,000 bushels of grain now in question were ever delivered to you, state when and where. A. At my office. The 1st day of February. Q. Did you ever see or handle or store the grain yourself, and, if so, where? A. I am not a storer of grain. Q. Did any...