Stewart v. Hutchinson
| Decision Date | 05 June 1906 |
| Citation | 96 S.W. 253,120 Mo.App. 32 |
| Parties | STEWART, Appellant, v. HUTCHINSON, Respondent |
| Court | Missouri Court of Appeals |
Appeal from Lawrence Circuit Court.--Hon. F. C. Johnston, Judge.
REVERSED AND REMANDED.
Judgment reversed and cause remanded.
I. V McPherson and H. H. Bloss for respondent.
The confessed facts in this case stamped the business that the plaintiff and defendant were engaged in as gambling transactions, as we view it, beyond dispute. The great quantity of grain bought, the settlements made at the marginal differences in the rise and fall of the price, and the confessed fact that these parties had no use for the grain, were not looking for grain and contemplated only to speculate in the variations of the price of wheat, made it gambling within the meaning of section 2337, Revised Statutes 1899, even though the buyers alone purposed the non-delivery of the wheat. Sec. 2342, R. S. 1899; Conner v Black, 119 Mo. 126, 24 S.W. 184; Lane v. Logan Grain Co., 105 Mo.App. 215, 79 S.W. 722; Flack & Co. v Orr, 55 App. 407; State v. Kenter, 178 Mo. 487, 77 S.W. 522; State v. Cunningham, 154 Mo. 161, 55 S.W. 282; Edwards Brokerage Co. v. Stevenson, 160 Mo. 516, 61 S.W. 617. It has invariably been held that the broker who promotes or encourages the business of gambling in futures and then, at the same time, loans money or pays the loss of the person or persons thus assisted in the business, can not recover for such advances made or money loaned. Hill v. Johnson, 38 Mo.App. 383; McLean v. Stueve, 15 Mo.App. 317; 14 Am. and Eng. Ency. of Law (2 Ed.), p. 640, and citations; Atwater v. Manville, 81 N.W. 985; Plank v. Jackson, 128 Ind. 424.
McNatt & McNatt for appellant.
(1) A substitution of obligations is a sufficient consideration to support a promise, and where one note is given in consideration of the cancellation of another, the latter is founded on a valuable consideration. Siemans & Haske Electric Co. v. Ten Broek, 97 Mo.App. 173, 70 S.W. 1092; Zuendt v. Doerner, 101 Mo.App. 528, 73 S.W. 873. (2) Where either a plaintiff or a defendant comes into court to establish or defeat an obligation, the one who is compelled to rely on an illegal transaction connected with the obligation in suit, in order to make his cause of action or defense, such person is precluded by law, from showing his own moral turpitude, to establish or defeat a cause of action. This applies as well to a defendant as to a plaintiff. Ward v. Hartley, 178 Mo. 135, 77 S.W. 302; Roselle v. Beckermeir, 134 Mo. 380, 35 S.W. 1132; Greene v. Corrigan, 87 Mo. 359; Woolf v. Bernero, 14 Mo.App. 518; Deleon v. Trevino, 49 Tex. 89; Hoffman v. McMullen, 83 F. 372 (45 L. R. A. 410). (3) There is a difference, where a person loans money or credit in the first instance, to be used for an illegal purpose, and where he advances money or credit, to cover an indebtedness of another contracted in an illegal enterprise. In the former case there can be no recovery for the money advanced, in the latter case, there can. Armstrong v. Bank, 133 U.S. 434.
--Action on a promissory note for $ 2,200 dated April 5, 1902, executed by defendant and payable to the order of plaintiff drawing interest at the rate of eight per cent from date. In his answer the defendant admitted the execution of the note, but pleaded in defense that the consideration for it was an indebtedness contracted in gambling deals in which he and plaintiff were jointly interested. The gambling deals were alleged to be speculations on the rise and fall of the future market values of wheat, the parties not contemplating the delivery of the wheat they pretended to purchase, but only to gamble on its future price. It is averred that the note was given by defendant for that proportion of the joint loss sustained in the ventures, which plaintiff had borne in excess of the amount of loss borne by defendant. This special defense was put in issue by a general reply. Plaintiff introduced the note in evidence and rested. Thereupon defendant introduced plaintiff's deposition as an admission against interest. The deposition and other testimony would support the conclusion that plaintiff and defendant had been engaged in bucket-shop transactions with which the note in suit was connected. Indeed, we have no doubt that their dealings were of a gambling character, consisting of marginal speculations on the market prices of wheat, without the sellers intending to deliver the wheat or the buyers to receive it. The buyers were the two parties to this action and a man named Wilson, who was connected with the deals in some manner. But though the evidence to prove the business of the parties was of a gambling nature is satisfactory, the plaintiff swore he understood the wheat was to be delivered whenever the buyer wanted it. He did not swear he was trading in the expectation of deliveries being wanted or made. The dealings in which the parties were interested began in January, 1902, and ceased by April. They had borrowed money to use from the Bank of Aurora. Their ventures entailed a heavy loss and when over the parties owed the bank $ 6,400; for which, at different times during the period of the dealing, they had given six or seven promissory notes signed by both of them. The bank advanced the money principally on the credit of plaintiff, who was considered good and deposited collateral obligations for security. The cashier of the bank demanded payment of the notes early in April and at that time a settlement occurred between the parties which led to the execution of the note in suit. The indebtedness to the bank was discharged principally by the plaintiff. Defendant sold some securities he owned and with the money thus raised, paid $ 400 on what he and plaintiff owed and plaintiff gave his individual note and collateral for the balance of $ 6,000. Defendant's part of the indebtedness was $ 3,200, and as he only paid $ 400, plaintiff assumed $ 2,800 of defendant's part. This was done pursuant to an arrangement made the day the bank was settled with and was participated in by Davis, the cashier. That is to say, at the request of the parties Davis made whatever computations were necessary. It was agreed at the time that plaintiff should assume and discharge the balance owing the bank and that defendant should give him negotiable promissory notes for the amount assumed by plaintiff over and above the latter's half of the indebtedness. Thereupon, as we have stated, the partnership notes were cancelled and surrendered, plaintiff assuming the full debt to the bank and defendant executing and delivering to plaintiff twelve promissory notes for $ 50 each and the note in suit for $ 2,200, or notes amounting in all to $ 2,800. Defendant paid the twelve small notes but refused to pay the large one. He testified that when the settlement occurred he and Stewart jointly owed the bank and that he (defendant) did not then dispute his part of the indebtedness. It is to be borne in mind that defendant paid $ 400 to the bank, plaintiff gave his individual note for the remaining $ 6,000, the bank surrendered the joint notes of plaintiff and defendant and the latter executed to the former the note in suit and the twelve small notes at the same time and as parts of one transaction. The only conflict is in regard to the extent of the settlement between plaintiff and defendant. Most of the testimony goes to show the settlement embraced nothing more than an arrangement regarding the indebtedness to the bank and was made at the request of and to satisfy that institution. But it is contended by defendant and conceded by plaintiff, that some testimony went to show the settlement of the parties litigant was really an adjustment between themselves of their losses in speculations, and that in the course of the settlement the indebtedness to the bank was adjusted. As plaintiff concedes there was such testimony, we will assume there was, though we find little or no trace of it in the record before us.
The court directed a verdict for defendant and plaintiff appealed.
Plaintiff's testimony that he was innocent of any knowledge that the transactions in which he and defendant were engaged were of a wagering character and not to be followed by deliveries of wheat, is said to have raised an issue of fact for the jury which the court erred in ignoring. Though admissions made by plaintiff on the stand regarding his knowledge of the nature of the transactions, went far to refute the notion that he believed the purchases of wheat to be genuine and not marginal dealings, we may concede, for argument's sake that an inference fairly might be drawn in favor of his innocence, and yet it does not follow that the note in suit was valid and he entitled to a judgment on it. If he was an innocent party, he was the only innocent one connected with the transactions. His partners and the sellers of the wheat had no thought of deliveries and intended to settle the profits and losses of the deals on differences. In construing the act of March 9, 1889 (R. S. 1899, secs. 2337 to 2342, inclusive), the Supreme Court has held that obligations arising out of option transactions, are void in the hands of a person who is a party to such transactions, even though he acted in ignorance of the fact that a delivery of the commodity purchased was not intended. In other words, that the purpose of one of the parties to a trade not to deliver or receive the property, invalidates an agreement arising out of the business. This was the interpretation given to the statutes by the decisions in Connor v. Black, 119 Mo. 126, 24 S.W. 184; S. C., 132 Mo. 150, 33 S.W. 783; Brokerage Co. v. Stevenson, 160 Mo. 516, 527, 61 S.W. 617. Those decisions changed not only the rule which...
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