Waugh v. Beck

• Decision Date: 01 November 1886
• Docket Number: 173
• Citation: 114 Pa. 422,6 A. 923
• Parties: Waugh v. Beck
• Court: Pennsylvania Supreme Court

6 A. 923

114 Pa. 422

Waugh v. Beck

No. 173

Supreme Court of Pennsylvania

November 1, 1886

October 15, 1886

ERROR to the Court of Common Pleas of Mercer county: Of October Term 1886, No. 173.

This was a feigned issue wherein William Waugh was plaintiff and Nicholas Beck was defendant.

The following are the facts as they appeared on the trial:

Some time in the month of August, 1884, the defendant Beck applied to the plaintiff, to loan or advance him some money for the purpose of purchasing some oil, stating at the same time that his friend, J. C. Cornwell, would advance him a like amount for the same purpose, and that Mr. Cornwell would take control of and manage the purchase of the oil.

Some days after this Mr. Cornwell with Mr. Beck called on Mr Waugh, when, after some conversation between the parties and after Mr. Cornwell had informed Mr. Waugh that he was willing to loan his friend, Mr. Beck, some money, Mr. Waugh agreed to advance or loan Mr. Beck a sum of money not exeeeding one thousand dollars ($1,000) when called upon.

In pursuance of this arrangement Mr. Cornwell, through his broker, Mr. Lamberton, of Oil City, drew on Mr. Waugh for five hundred dollars ($500). Mr. Waugh informed Mr. Beck of the draft and called on him for his note for the same before he would honor it. Mr. Beck then, on the 8th of August, 1884 gave Mr. Waugh his promissory judgment exemption note at one day for the amount of the draft, to wit, $500, and Mr. Waugh the next day remitted the amount, per express, to Mr Cornwell's broker. A few days subsequent thereto Mr. Beck called on Mr. Waugh and requested a further loan of $500, and on September 6th, 1884, he gave his promissory judgment exemption note at one day for the sum of $500. Mr. Waugh then, according to the direction of Mr. Beck, remitted the amount, per draft, to Mr. Cornwell's broker. These two notes were entered respectively at Nos. 446 and 447 September Term, 1884.

On September 21st, 1885, on the petition of the defendant Nicholas Beck, a rule to show cause was granted why these judgments should not be opened, and, after answer and argument, his Honor opened the judgments and directed an issue to try the following facts, to wit: (1) "Whether the notes on which these two judgments are based were given as part of a gambling transaction, in which the plaintiff and defendant were engaged for their mutual gain; or (2) whether the plaintiff furnished the money which formed the consideration of the said notes for the benefit of the defendant, but knowingly and with the purpose of furthering a gambling transaction."

In the general charge the court instructed the jury, inter alia, as follows:

The serious legal question arises under the second part of the issue.

The learned counsel for the plaintiff have most ably argued that even though the facts involved in this part of the issue be found in favor of the defendant, still the plaintiff can recover the money represented by these notes." With this position, however, we cannot agree, and we therefore instruct you that if the plaintiff furnished the money represented by these notes knowingly and with the purpose of furthering a gambling transaction, as above explained, then your verdict must be for the defendant, even though Judge Waugh, the plaintiff, had no interest in the expected profits of the transaction. (First assignment of error.)

* * *

Secondly. The turning point in the case is as to Judge Waugh's knowledge of what was to be done with the first sum of money for if he knew what was to be done with the first he knew what was to be done with the second, for it was all part of the same transaction, and that is not a matter in dispute. It seems to me that if it be an established principle of law, as it is, that a contract made as part of a gambling transaction is unlawful as against good morals, it follows that all parts of the transaction are unlawful. (Second assignment of error.)

* * *

"The test as to whether or not Judge Waugh in this matter is entitled to recover, is to my mind the same test that would be applied if this gambling transaction were a misdemeanor or felony. If it were a misdemeanor, would the facts alleged by the defendant make him a principal? If a felony, would the facts alleged by the defendant make him an accomplice? (Third assignment of error.)

* * *

The burden of proof in this issue is upon the defendant. It is for him to show by the weight of the evidence that Judge Waugh knew that this was being used for the purchase of oil upon margins. You will take all the evidence in the case and conclude whether he did know that fact. (Fourth assignment of error.)

The plaintiff presented, inter alia, the following point:

2. That if the jury believe, from the evidence, that the plaintiff loaned the money which formed the consideration of the notes for the benefit of the defendant, and although he knew the money was to be used in buying oil on margins, still the plaintiff can recover, and the verdict should be for the plaintiff.

Answer. Simple knowledge by the lender of money that the borrower was likely to, or was going to, use it in gambling might not be enough to prevent a recovery of the money loaned, but if the plaintiff paid this money to Mr. Lamberton, the oil broker, in accordance with an arrangement made between himself and Mr. Cornwell, and if he knew that this money was to be used for the purchase of oil on margins, he could not recover. Therefore, so far as this case is concerned, this request is refused. There is one matter in this request that has been left indefinite. I presume the time of the knowledge, of course, is meant to apply to the time of the loaning of the money. Of course, if Judge Waugh did not know at the time the money was loaned and the notes were given that this money was to be used in a gambling transaction, but learned that afterwards, he would not be bound by that subsequent knowledge. The question is, what did he know at the time when these notes were given.

A general verdict was given for the defendant, and on motion for a new trial and argument had, the court overruled the motion in an opinion filed, inter alia, as follows:

There were virtually two issues tried by the jury in this case. They had been framed by the court. The jury were not directed to pass upon these issues separately by their verdict, but they rendered a decision generally for the defendant. Of this we think the plaintiff has cause to complain. But the defendant consents that the record shall be made to show that the jury found the first clause of the issue in favor of the plaintiff, but found for the defendant upon the second. This will repair any injury the plaintiff might sustain because of the general verdict. It is urged further upon behalf of the plaintiff, that the second clause of the issue was not properly framed. We think, however, that it could not have been otherwise framed and have included all the elements necessary for defendant's defence. An order will be made correcting the verdict as indicated above and, as it is considered that the plaintiff has not been injured in any other particular, the rule is now dismissed.

Judgment was entered upon the verdict, whereupon the plaintiff took this writ and filed the above assignments of error.

Judgment reversed, and venire facias de novo awarded. *** pa000644 p063 0616

S. Griffith & Sons (E. P. Gillespie with him), for plaintiff in error. -- Stock jobbing is not contrary to any statute in Pennsylvania. Contracts in relation thereto have not been enforced by our courts not because they were contrary to statute but because the courts have held them contra bonas mores: Maxton v. Gheen, 75 P.S.R., 166; Farrira v. Gabell, 89 Id., 89; North v. Phillips, 89 Id., 250; Ruchizky v. De Haven, 97 Id., 202; Dickson's Exec. v. Thomas, Id., 278; Griffith's Appeal, 16 W.N.C., 249; Griffith v. Sears, 17 Id., 468; Scofield v. Blackmarr, 17 Id., 518. Each and every one of these cases has been decided by our court on the principle that such transactions are contrary to public policy, contra bonas mores.

One feature of all these cases to which we wish to call the special attention of the court is the important and vital fact that in every case the controversy arose between the actual parties to the transaction, the contracting parties themselves, who deal with or for each other and were the parties to gain or lose by the venture, and not an outsider who merely loaned money to another to engage in such transactions or ventures, -- one who had nothing to gain by the result of the venture, and therefore should not be affected by that result, a mere stranger to the contracting parties and their dealings.

The court erred in submitting to the jury the second branch or clause of the issue and directing them to find whether or not the plaintiff furnished the money which formed the consideration of the said notes for the benefit of defendant, but knowingly and with the purpose of furthering a gambling transaction.

Judge Waugh was a mere lender of money; he was not a confederate, agent, broker or accessory of Beck. He was guilty of no violation of the law. He loaned Beck money. He had no interest or share in the gain that Beck might make. Simple knowledge of Beck's intention to purchase oil on margin is not sufficient to prevent his recovering an honest claim.

Mason &amp Mason, for defendant in error. -- In all the states where the question has arisen it has been uniformly held, that there can be no recovery upon a contract where the intention of the parties was not to deliver the article, but to settle the difference in margins, and this whether the offence was in violation of a statute or the common law: Lyon v. Culbertson, 83 Ill. 33; Sampson v. Shaw, ...