Wheeler v. Metro. Stock Exch.

• Decision Date: 03 November 1903
• Parties: WHEELER v. METROPOLITAN STOCK EXCHANGE (eleven cases).
• Court: New Hampshire Supreme Court

56 A. 754

72 N.H. 315

WHEELER

v. METROPOLITAN STOCK EXCHANGE (eleven cases).

Supreme Court of New Hampshire. Coos.

Nov. 3, 1903.

Exceptions from Superior Court; Wallace, Judge.

Actions by F. N. Wheeler against the Metropolitan Stock Exchange. Judgment for plaintiff, and defendants except. Exceptions overruled.

Assumpsit to recover money paid as margins upon stock gambling contracts. Plea, the general issue and a release. Replication, that the release was obtained by fraud. Trial before Wallace, C. J., at the November term, 1901, of the superior court. This case and ten others against the same defendants were tried together, and in five of them there were no releases.

For some time prior to December 18, 1899, one Letourneau was in business as a stockbroker in Berlin. The defendants, who were stockbrokers in Boston, furnished a private wire from their office to that of Letourneau. who did most of his business with them. The plaintiff gave orders to Letourneau to sell or buy a certain number of shares of stock, making written contracts with him in which no reference was made to the Metropolitan Stock Exchange. Each contract specified the margin paid, and how much the plaintiff was willing to pay to protect it. If it was a purchasing contract, and the market price fell more than the amount of the margin, or if it was a selling contract, and the market price rose more than the margin paid, the transaction was closed, unless a further margin was advanced. If in a purchasing contract the price of the stock rose, or if in a selling contract the price fell, the plaintiff could at any time order the deal closed, and would receive as his profit the difference between the contract price and the market price at that time, less the commission retained for doing the business. The contracts were made as though the stock was to be actually bought or sold, and, if the plaintiff had desired, he could have had the shares delivered to him in case of a purchase; but it was the understanding of both the plaintiff and Letourneau that there was to be no stock delivered at any time. Both understood that they were buying and selling on margins exclusively, and that the only result of the contracts would be the payment of money from one to the other in settlement of the difference between the price named in the con-bracts and the market price. No evidence was introduced on the part of the defendants, but from the protracted course of business with Letourneau they must have known and understood that 99 per cent. of their business with him was buying and selling stocks on margin. When Letourneau received the plaintiff's orders he transmitted them to the defendants by telegraph, and also remitted all money received on the contracts. It was understood between Letourneau and the defendants that all trades sent by him to them were to be kept good by the payment of all the margins called for on them, and that, if Letourneau failed to do this, all trades could and would be closed out, regardless of the fact that some customers had paid their margins. The plaintiff did not so understand, but believed that, if he advanced the margins required by his contracts, he would be protected, whether others paid or not. Letourneau was not in fact the agent of the defendants, but their correspondent. From the method of conducting the business, which was known to the defendants, the plaintiff understood, and had a right to understand, that Letourneau was their agent; and upon such understanding he made the contracts with Letourneau and paid money to him. All the money received from the plaintiff was sent to the defendants, who paid one-half of the commission to Letourneau, or gave him credit therefor; and they received the money knowing that it was paid to Letourneau while he held himself out as their agent.

About December 18, 1899, Letourneau failed to pay the margins called for on all the contracts, and they were closed out by the defendants. The margins which the plaintiff was called upon to pay a few days before amounted to $720. Letourneau would not accept the money then, for he knew that, unless he could pay a large indebtedness to the defendants, the plaintiff would not be protected. The plaintiff was not aware of this fact. He was informed that Letourneau was having some trouble with the defendants, but he did not know that his contracts were thereby affected. The defendants subsequently agreed with Letourneau to receive the $720 and to reinstate all the plaintiff's transactions. The stock named in the plaintiff's purchasing contract rose in value, entitling him to a profit. He thereupon ordered the trades closed out, and Letourneau failed. At the time of the failure the defendants telephoned Letourneau to keep his office open until matters could be adjusted, and a few days later they sent one Mepham to Berlin for that purpose. Mepham, as a representative of the defendants, informed the plaintiff that his trades were all in Letourneau's name, that they had long been closed out because the margins were not paid, and that they were not reinstated by the payment of $720, but that new trades were made, on which there was a much smaller profit than the plaintiff expected. He said to Letourneau, in the plaintiff's presence, that the former was not an agent of the defendants, to which Letourneau said, "I can't help it; I was your agent" Mepham asked: "Didn't we notify you to take that agency business off your letter heads?" Letourneau replied, "I can't help it; I didn't take it off." The plaintiff believed Mepham's statements, and acted upon them in accepting $915.16, which the defendants were willing to pay for a release, and he executed and gave to them a release of all claims to that date.

At the close of the evidence the defendants' motion for a nonsuit was denied, subject to exception. The court made the following findings and rulings: "(1) Letourneau was not in fact the agent, but the correspondent, of the defendants; but he held himself out as the defendants' agent, with their knowledge, and they received the money on the contracts made by him as their agent with that knowledge, and in that way ratified them, and are estopped to deny his agency in these transactions. (2) The releases were obtained by fraud. (3) Although the contracts between the plaintiffs and Letourneau were for the future sale of stocks, yet both parties at their inception and there afterwards understood that there was to be no delivery of stock, but only a settlement of differences between the price named in the contract and the market price at some future time. (4) These contracts are held to be gambling ones within the provisions of sections 15-18, c. 270, of the Public Statutes of 1901; and it is further held that under said statute the plaintiffs can recover the amounts they have lost in these stock gambling transactions with the defendants, and judgment is therefore ordered for the plaintiff in each case for the amounts heretofore found that they have lost." The defendants excepted to the last ruling, and also to the admission of oral testimony as to the intention and understanding of the parties.

Foster & Hersey, Harry G. Noyes, and Chamberlin & Rich, for plaintiffs.

Drew, Jordan & Buckley, for defendants.

PARSONS, C. J. The superior court ruled that the defendants were estopped to deny Letourneau's agency for them in the transactions upon which the action arises. There is no contention that this ruling was erroneous in law, or unauthorized by the facts. The case, therefore, upon the main question, may be considered as though the plaintiff's dealings were directly with the defendants, it does not appear that any questions arising upon contracts for the purchase or sale of stocks such as are described in the case have heretofore reached this court for decision. In other jurisdictions the questions now raised have often been presented and decided. In such cases it has been held that contracts for the purchase and sale of merchandise for future delivery at a fixed price are valid if the parties contemplate the actual delivery of the subject of the contract. But when the parties do not in fact intend such actual delivery, but their real purpose, whatever the language of the contract, is to adjust the same at some future time by the payment of the difference between...