Whitesides v. Hunt

• Decision Date: 18 September 1884
• Docket Number: 10,775
• Citation: 97 Ind. 191
• Parties: Whitesides v. Hunt et al
• Court: Indiana Supreme Court

97 Ind. 191

Whitesides v. Hunt et al

No. 10,775

Supreme Court of Indiana

September 18, 1884

From the Johnson Circuit Court.

R. M Johnson, for appellant.

G. M Overstreet, A. B. Hunter, H. C. Allen and L. H. Bisbee, for appellees.

OPINION

Franklin C.

Appellees as commission merchants, sued appellant for commission and money advanced in the purchase of five thousand bushels of wheat. The transaction was consummated through the Chicago Board of Trade.

The defendant answered that no wheat was actually purchased; that the transaction was a contract upon margins, and gaming upon the future price of wheat, and to be settled by paying or receiving at a future day the difference between the price of wheat then and at the date of the contract; that the advancements of margins made were to keep the payment of differences secure, and that the contract was contrary to public policy, illegal and void.

Appellees replied by a denial. There was a trial by jury, verdict for the plaintiffs, and, over a motion for a new trial, judgment was rendered upon the verdict.

The errors assigned are:

1st. Overruling the motion for a new trial.

2d. Overruling the demurrer to the complaint.

3d. Sustaining the separate demurrers to each paragraph of the answer.

As to the third specification, appellant did not stand upon the rulings upon the demurrers to his answer, but filed amended paragraphs of answer; and the original ones to which the demurrers were sustained are not in the record. Therefore, this specification presents no question for consideration. As to the second specification, appellant has not discussed or even referred to it in his brief. It must, therefore, be considered as waived. The overruling of the motion for a new trial is the only specification to be considered.

The reasons stated for a new trial are:

First. The verdict is not sustained by the evidence.

Second. The verdict is contrary to law.

Third. Error occurring at the trial in awarding the plaintiffs the right to open and close the argument.

Fourth. Error in admitting the testimony of Lee Hunt as to the contents of a telegram.

Fifth. Error in giving instructions.

We will consider these specifications in the inverse order of their statement. The instructions complained of read as follows:

"1. Plaintiffs claim that defendant is indebted to them in the sum of $ 12.50 as commission due them as commission merchants in the purchase of five thousand bushels of wheat; also, that they purchased in the city of Chicago five thousand bushels of wheat for the defendant, and by the terms of such sale the defendant was required to place in their hands a sufficient sum of money to protect and indemnify them against loss, and by reason of the decline in wheat, the sum of $ 200 in the hands of plaintiffs belonging to the defendant was not a sufficient protection and indemnity to them against loss; and after notice to defendant to place in their hands a greater sum of money, they sold the wheat, which they claim the right to do, at a loss to them of $ 487.50, from which deduct the sum of $ 200, made a clear loss of $ 287.50.

"2. The defendant insists that they purchased no wheat, nor did the plaintiffs sell him any wheat, but that in the month of February, 1882, he contracted with plaintiffs for the purchase of 5,000 bushels of wheat, to be delivered in the month of March, 1882, with the mutual understanding that no wheat was purchased or sold or would be required to be delivered, but that the transaction should be adjusted between the parties upon the bases of the market value of wheat in Chicago at the date of the pretended purchase and pretended sale (or maturity of the contract), when, in fact, no wheat was bought or sold. In brief, a bet or wager on the price of wheat at a given time.

"3. If defendant did purchase of plaintiffs 5,000 bushels to be delivered to him at a future date, this would be a legitimate and proper transaction, and it is competent for parties to make such contract.

"4. It is for you to determine from the evidence whether the plaintiffs were, by the nature of the contract, authorized to sell the wheat before the maturity thereof, and whether the plaintiffs should have served notice upon defendant that a further deposit of money was demanded from him to make his contract good, and if, in point of fact, such notice was served on defendant.

"5. If by the terms of the contract and nature of the business, the plaintiffs required of the defendant any sum of money 'to make his deal good,' it was the duty of plaintiffs, before they could 'close him out,' or sell his wheat, to notify him of such fact and give him a reasonable time to respond. Unless there was such a usage or custom in the business being transacted, and in connection with the transaction out of which the alleged indebtedness grew, of which the defendant was advised or had notice, and demand was waived by him, then the plaintiffs, by selling the wheat before the date of delivery of the wheat or the maturity of the contract for delivery, could not sell the same and charge the defendant with the loss thereon.

"6. If the plaintiffs purchased the wheat for the defendant, and by reason of his failure, he failed to put up further margins to protect them after 'a call' therefor, and by reason of such failure, they did, to protect themselves from loss while holding such wheat for the defendant, sell the same, and a loss was incurred, and this was within their contract, and so contemplated and understood by them, then the defendant must make the loss good, and respond in damages to the extent of such loss.

"7. If the sum of money sued for was paid out at the request of defendant, or a liability was incurred by the plaintiffs at request of defendant, whereby they were required to pay out such sum of money upon such liability for his use and benefit, then he should refund such sum of money thus paid out.

"8. If it was the mutual contract of parties plaintiffs and defendant, and they so mutually understood the same, that no wheat was actually to be delivered, and that the contract was not, in fact, to be performed, and 'the deal' should be settled upon the basis of the contract and market price, then the plaintiffs can not recover in this case. But it is not sufficient that the defendant so understood the contract or 'deal,' but the plaintiffs must be a party to such contract and understanding. If it was a proper and lawful contract on their part, and entered into by them in good faith, intending to perform the same, then it is immaterial as to the private understanding of defendant."

The class of contracts that forms the subject of this suit has become so extensive in business transaction, and has recently so often been before the courts, that we deem it advisable to give the subject a more extended investigation than usual. Trading in options, and buying what are called "futures," have become parts of the commercial transactions of the country.

It was formerly held that when the vendor had neither the goods, nor entertained any contract to buy them, at the time of the sale, nor had any reasonable expectation of receiving them by consignment, but intended to go into the market and buy the articles he engaged to deliver, no action could be maintained on such contract. But that rule has been changed by the later authorities, and there have been numerous decisions, particularly in this country, holding that the vendor may contract for the sale of an article not in his possession, and this doctrine seems to be entirely in accordance with the rules of public policy. Bryan v. Lewis, Ry. & Moody, 386, and note a; Wolcott v. Heath, 78 Ill. 433; Brua's Appeal, 55 Pa. 294; Brown v. Hall, 5 Lans. (N. Y.) 177; Noyes v. Spaulding, 27 Vt. 420; Hibblewhite v. McMorine, 5 M. & W. 462; Kingsbury v. Kirwin, 43 N.Y.S. (J. & S.) 451; Pixley v. Boynton, 79 Ill. 351; Rumsey v. Berry, 65 Me. 570; Disborough v. Neilson, 3 Johns. Cas. 81; Cassard v Hinman, 1 Bosw. (N. Y.) 207; Ashton v. Dakin, 4 H. & N. 867; Chapman v. Campbell, 13 Gratt. 105; Cole v. Milmine, 88 Ill. 349; Logan v. Musick, 81 Ill. 415; Gregory v. Wendell, 39 Mich. 337.

In the last case cited, the court says: "The mercantile business of the present day could no longer be successfully carried on if merchants and dealers were unable to purchase that which as to them had no actual or potential existence. A dealer has a clear right to sell and agree to deliver at some future time that which he then has not, but expects to go into the market and buy; and it is equally clear that the parties may mutually agree that there need not be a present delivery of the goods, but that such delivery may take place at some other time."

There is a difference, and a distinction must be made, between a contract where there is a bona fide intent to fulfil the agreement according to its terms, and those where the difference in the market price is to be paid.

There can be no doubt but that sales of a commodity to be delivered at some other time are valid, but if the parties agree at the time of making the contract that no title to any property shall pass or any delivery be made, or when, from the nature of the contract, it must be apparent that the intent of the parties was such that at some future specified time the losing party should pay to the other the difference between the selling price at that time and the time of making the contract, it would be a contract which the law would refuse to enforce, for the reason that it is clearly a wager upon the price of the commodity at some future day. Yerkes v. Salomon, 11 Hun 471; Grizewood v. Blane, 11 C. B. 526; Story v. Salomon, 71 N.Y. 420; Pickering v. Cease, 79 Ill. 328; Lyon v. Culbertson, 83 Ill. 33 (25 Am. R....