Waite v. Frank

• Decision Date: 12 June 1901
• Citation: 86 N.W. 645,14 S.D. 626
• Parties: WAITE v. FRANK.
• Court: South Dakota Supreme Court

86 N.W. 645

14 S.D. 626

WAITE v. FRANK.

Supreme Court of South Dakota

June 12, 1901

Appeal from circuit court, Lawrence county; Joseph B. Moore, Judge.

Action by Charles Waite against Alpheus E. Frank. From a judgment in favor of defendant, plaintiff appeals. Affirmed.

Moody Kellar & Moody, for appellant. Rice & Polley, for respondent.

CORSON J.

This is an action for the foreclosure of a real-estate mortgage given to secure the payment of a promissory note for $1,000 executed by the defendant to the plaintiff. Judgment for the defendant, and the plaintiff appeals. As a defense to the action, the defendant pleaded that the note in suit was a renewal of a note given by him to the plaintiff in June 1896, upon the express understanding that the defendant could have the privilege of dealing to the extent of the $1,000, as margins in differences in the future state of the market in grain and provisions at the plaintiff's place of business, and with the understanding between plaintiff and defendant that no grain or provisions were to be delivered on account of any purchases, but that such purchases as might be made were to be mere bets on the future state of the market which contract, defendant claims, is contrary to the policy of the laws of this state, and therefore void. The case was tried to the court without a jury, and it found substantially the following facts: That the defendant executed and delivered the note in controversy; that, at the time of the execution of the note and mortgage, it was understood between plaintiff and defendant that the defendant was to use the money evidenced by said note in speculating upon the future state of the market in grain, pork, lard, and other commodities, and that no delivery of the commodities sold and purchased was to be made, but all settlements were to be made upon the rise and fall or fluctuations of the market; that, at the time of the execution of the note and mortgage, plaintiff gave defendant credit for the amount on the Deadwood Stock Exchange, which at that time was under the management of the plaintiff; that between the 27th day of June and the month of November, 1896, the defendant gave orders to the plaintiff from time to time for the purchase of 50,000 bushels of wheat, 60,000 bushels of corn, 1,000 tierces of lard, and 50,000 pounds of ribs, all for pretended future delivery, and all by putting up margins out of the $1,000 credited to the defendant, and without any delivery or attempted delivery of the commodities attempted to be purchased, and that during said time defendant also gave orders for the sale of wheat, corn, lard, and ribs, without any delivery or offer of delivery, and in all cases of both purchases and sales by the defendant no acceptance or delivery was made or intended to be made, but settlements were made on the fluctuations of the market; that in the month of November, 1896, the defendant was notified that the $1,000 had been exhausted, and that he could not deal further on the exchange without putting up more money; that during the time the defendant was operating, divers other parties were making pretended purchases and sales on said exchange by putting up margins and without delivery and all settlements were made on the rise and fall of the market; that on the 16th day of November, 1896, the defendant extended the note sued on in this action, as a renewal of the original note, without any additional or further consideration; that the rules and regulations of the Chicago Board of Trade were the rules and regulations of the Deadwood Stock Exchange; that all of the options and transactions between the plaintiff and defendant were subject to said rules and regulations, and in accordance therewith; that said $1,000 was used in paying commissions to the plaintiff as broker, and in paying the losses sustained by the said defendant in his operations on the stock exchange. And the court finds for the defendant, and against the plaintiff, on all the issues. From these findings the court concluded, as matter of law, that the contract between plaintiff and defendant was for gambling purposes, contrary to law and public policy, and was illegal and void, and that defendant is entitled to have the mortgage in controversy in this action canceled and set aside. Judgment was thereupon entered in accordance with the conclusions of law. The plaintiff moved for a new trial upon the ground of the insufficiency of the evidence to justify the decision of the court, and that such decision is against law, and also for errors in law occurring at the trial, and duly excepted to by the plaintiff. This motion was overruled, and from the order overruling the said motion, as well as from the judgment, the plaintiff has appealed to this court.

It is assigned as error, among others, that the court erred in its findings as to the agreement between the parties, for the reason that they were not supported by the evidence. The plaintiff contends that whatever may have been the intention of the defendant, at the time the loan was made to him and the note executed, as to making and accepting deliveries under his contracts, there is no evidence that the plaintiff did not intend, in making the contracts, to make acceptances and deliveries in accordance therewith, and, unless the plaintiff intended at the time of the execution of the note that no acceptances or deliveries should be made under the contracts thereafter entered into by him for the purchase and sale of the commodities mentioned, then the loan would not be made for the purpose of gambling, and would constitute a valid and legal contract. It is well settled that where a contract for the delivery and sale of wheat, corn, and other commodities in the future is not made with the intention that such commodities shall be received or delivered, but with the understanding, either express or implied, that the transaction shall be settled by the payment of the difference between the contract price and the market price at the time fixed, or some future time, such a contract is a mere wager or gambling contract, and is therefore void. Jamieson v Wallace, 167 Ill. 388, 47 N.E. 763; Pope v. Hanke, 155 Ill. 617, 40 N.E. 839; Schneider v. Turner, 130 Ill. 28, 22 N.E. 497, 6 L. R. A. 164; Barnard v. Backhaus, 52 Wis. 593, 6 N.W. 252, 9 N.W. 595; Crawford v. Spencer, 92 Mo. 498, 4 S.W. 713; First Nat. Bank v. Oskaloosa Packing Co., 66 Iowa, 41, 23 N.W. 255; Irwin v. Williar, 110 U.S. 499, 4 S.Ct. 160, 28 L.Ed. 225; Ruchizkey v. De Haven, 97 Pa. 202; Flagg v. Baldwin, 38 N. J. Eq. 219, 48 Am. Rep. 308; Wakefield v. Farnum, 170 Mass. 422, 49 N.E. 640; Embrey v. Jemison, 131 U.S. 336, 9 S.Ct. 776, 33 L.Ed. 172; Dows v. Glaspel, 4 N. D. 251, 60 N.W. 60; 14 Am. & Eng. Enc. Law (2d Ed.) 609 et seq. The intention of the parties in such case may be determined from the nature of the transaction, and from the manner and method of carrying on the business. Jamieson v. Wallace, supra. In that case the supreme court of Illinois says: "The intention of the parties may be determined from a variety of circumstances. Among these circumstances, besides the mode of dealing between the parties, is the pecuniary ability of the party purchasing. If the purchases of the party so ordered through the broker are larger in amount than he is able to pay for, it is a strong circumstance indicating that there was no intention to receive the property, but, rather, an intention to settle the difference between the market price and the contract price. Such intention may be also inferred when the party making the purchase never calls upon the party ordering the purchase for the purchase money, but only for margins. It makes no difference whether the real intention is formally expressed in words or not, if the facts and circumstances in proof show that it was the real understanding that there should be no actual purchase and no delivery or acceptance of the property involved in the contract, but merely an adjustment of damages upon differences." In that case the brokers purchased for defendant, who was sued for losses, railroad stock of the value of $17,500, and it was shown that the defendant was worth only about $7,500; and the court finds from that circumstance, mainly, that the transaction was not intended to be a purchase or sale of stocks, but was intended to be a mere settlement upon differences between the market and the...