JACKSON V. FOOTE.
the money he has paid for the purpose of protecting her property. The complainant was not obliged to file this petition. She could, if she had chosen so to do, have brought ejectment, made parol proof of her title, and contested the validity of this tax deed at law; but she has preferred to come into a court of equity to get relief, and must make the defendant whole, as I think, to the same extent as if she had redeemed in apt time from the ta.x purchase.
(Circuit Court, N. D. Illinois. April 17,1882.)
CONTRACT OF SALE-FuTURE DELIVEHy-OrTION DEALS.
Where a firm of brokers and commission merchants, dealing in grain and prOVisions on the board of trade in Chicago, transacted business for its customers, some of whom were buyers and. some sellers, under the rules and regulations of the board, intending to deal in time contracts and to settle the differences, so as to avoid paying for and carrying the commodites bought, held, not a dealing in "options to buy or sell at a future time," and is not within the prohibition of thc statute of Illinois. St. Ill. c. 38, § 130. .
SAME-CONTRACTS VALID AND BINDlNli.
Where the indebtedness which accrued from the defendant to the finn of brokers was for commissions earned -by the firm in making trades for the defendant, duly authorized by him, and for moneys actually paid by the firm in the settlement of differences in such trades, and that none of these differences were paid upon" options to buy or sell grain or other-commodities at a further day," but upon sales or purchases of grain or other commodities, where the seller had only an option as to the time of delivery, such contracts are not within the Illinois statute, and are valid and binding upon the parties. 3.
SAME-GUARANTY ON NOTES-BoNA FIDE HorJDER.
Where, under such a contract, defendant became indebted to the firm for balances, and on final settlement gave to tbe firm the notes sued on, the payment of which he guarantied, and the notes were given to the bank, with defendant's guaranty written thereon, in payment of a debt due the bauk by the firm, even though the demand of the firm was tainted as a gambling- claim at common law, defendant cannot be heard. to set up the illegality of the dealings lJetween himself and the firm as a defence to these guaranties in the hands of a bona fide holder.
A guaranty in the hands of a bona fide holder is valid, and not affected by any of the equities between the original parties.
Dent ct Black and Lyman ct Jackson, for plaintilf. L. II. Bisbee and Albion Gate, for defendant.
BLODGETT, D. J. This is a suit on a guaranty of payment by de. fendant of two promissory notes, of $5,000 each, made by the trustees
of the ,estate of Ira Couch, both dated July 1, 1876, and made payable to'defendant,-one on July 1 and the other on October 1, 1877, with interest at the rate of 8 per cent. per annum. The plaintiff is receiver of the 'l'hird National Bank of this city, and the notes in question were delivered to the bank with the guaranty of defendant written thereon, about December 30, 1876, with other notes, as collateral security for the payment of a note of S. G. Hooker & Co. to the bank for the sum of $13,gOO, due from that firm to the bank for money loaned on the note of Hooker & Co.; being dated December 80, 1876, payable to the bank in 90 days after date, with interest at 10 per cent. per annum. The defence insisted on at the trial is that the two notes in question were transferred by the defendant to the firm of S. G. Hooker & Co. in settlement of a claim or indebtedness due from the defendant to said firm for certain gambling dealings, conducted by the firm for the defendant, on the Chicago board of trade. The facts, as developed by the proof, appear to be that in the fall of 1874, and for about two years thereafter, the firm of S. G. Hooker & Co. were brokers and commission merchants, dealing in grain and provisions on the board of trade in this city, were members of the board, and transacted business for their customers under its rules and regulations; that Foote had some dealings on the board through another broker, in which his broker had taken and paid for a large quantity of oats which had been bought on an order of the defendant, but the expenses of storing, interest, etc., had been so large that the defendant had become dissatisfied, and some difficulty occurred in effecting a settlement with his broker. Mr. Hooker, of the firm of S. G. Hooker & Co., was applied to and counselled with ,by the defendant in securing this settlement, and Hooker, being an old friend of the defendant, advised him that if he wished to speculate or deal any more on the board of trade he had better do it with his, Hooker's, firm. The defendant assented to this, provided he could only trade or deal in differences; that is, Hooker's firm was not to take in or carry any commodities bought, but defendant was only to payor receive the diffArences between the selling and buying or buying and selling prices of the commodities dealt in. In pursuance of this arrangement the defendant from time to time gave orders to Hooker & Co. to buy or sell commodities on the board for his account, and they executed these orders by buying or selling as directed on the boa'rd in the usual form of such transa-ctions where the seHer had the 0l?tion to deliver within a certain time,-as for
illustration, during the whole of the next month, or during the first half or last half of the next month, or of the month in which the transaction took place,-the only option in the transaction being as to the time within which the seller was allowed to make delivery. These dealings continued until some time in Mayor June, 1876, Hooker & Co. buying or selling grain, pork, or lard as directed by the defendant, and settling the differences; paying the money when the market was against the defendant, and iG for him wllen tho market was in his favor; charging to him whatever sums were paid in settling differences when they were against him, and giving him credit when they received differences in his fl1vor. In two or three transactions the firm seems to have taken in and paid for grain and provisions bought for defendant and held them for 8r short time, and then sold them, charging the defendant with the interest, storage, etc., incident to such transactions. The ant was also debited on the books of the firm with commissions for transacting the business, and with divers sums of money paid him , om time to time, so that, at the time the dealings of the firm for the defendant· closed, he stood debited to them on their books in' the sum of about $22,000. In payment of this indebtedness the fendant transferred and delivered to Hooker & Co. four notes of $5,000 each held by him against the Couch estate, the payment of which notes he guarantied and two of which are the notes in question, and the firm of Hooker & Co. transferred the two notes now before the court, with the defendant's guaranty of payment thereon, to the Third National Bank of Chicago, to secure their own indebtedness to the bank for money borrowed. The testimony in the case fully satisfies me that Mr. Hooker, when he assumed for his firm to act as the defendant broker in his dealings on the board of trade, did not contemplate or intend to make any different transactions for the defendant than for his other custom- ers. He undoubtedly intended to make purchases or sales where the buyer had an option as to the time Withip. which to make delivery, and he intended to so conduct the defendant's transactions as to avoid taking and paying for any article bought, and he seems to have explained to the defendant how, by reason of his many customers,. some of whom were sellers and others buyers on the market, he could so manage the defendant's deals that he need not take any commodity bought, but could settle simply the difference between the purchase price and the market price, when the seller had the right of delivery. Hooker did not, I am satisfied from the proof, intend to
de!U in "options.to buy or sell at a future time," such as are prohibited by the Illinois statutes, (Rev. St. Ill. c. 38, § 130,) but intended, as I have said, to deal in time contracts, and to settle the differences so as to avoid paying for and carrying the commodities bought. I am also satisfied that, while the defendant may have known but little when he commenced with this firm as to the mode in which the business was to be transacted by them for him, yet he did not contemplate dealing in "puts and calls," or "options to buy and sell at a future time, " and that he was very soon aware of the forms and modes in which the business was done for him by the firm. He intended without doubt that his brokers should so manage his trades that differences should be paid or collected, instead of his taking or holcling the article dealt in, or having his broker do it for him and athis expense. He may have contemplated dealing wholly in differences to such an extent as to make the transactions such as have been construed by the courts of this state to be wager contracts or gambling contracts at common law; but he did not, I am satisfied, intend that his brokers should make for him such contracts as are expressly made illegal by the Illinois statutes, but, at most, they were to be transactions where it was not intended that any commodity should be actually received or delivered, but that he was to deal in differences only, coming perhaps within the rule laid down by the supreme court of this state in Lyon v. Culbertson, 83 Ill. 33, where the court said:
"The fact that no wheat was offered and demanded shows that neither party expected the delivery of any wheat, but in case of default in keeping margins good, or even as to the time of delivery, they only expected to settle the contract on the basis of differences, without even performing or offering to perform his part of the agreement, and if this was the agreement it was only gambling on the price of wheat. If sllch gambling transactions shall be permitted, it must eventually lead to what are called 'corners,' which engulf hundreds in utter ruin, derange and unsettle prices, and operate injuriously on the fair and legitimate trader in grain as well as the producer, and are pernicious and highly demoralizing to the trade. A contract to be thus settled is no more than a bet on the price of grain during or at the end of a limited period. If the one party is not to deliver or the other to receive the grain, it is in all but name a gambling on the price of the commodity, and the change of names never changes the quality or nature of things."
In other words, as I understand the court in this case, where there is an intention to deal only in differences, the transaction is held to be a wager contract at common law.
It is also equally evident from the proof that the indebtedness which accrued from the'defendant to S. G. Hooker & Co. was for commissions earned by the firm iu making trades for the defendant, duly authorized by him, and for moneys' actually paid by the firm in the settlement of differences in such trades, and that none of these differences were paid upon "options to buy or sell grain or other commodities at a future day," but upon sales or purchases of grain or other commodities where the seller had only an option as tothe time delivery,-contracts which have been held not to be within the Illinois statutes, and to be valid and binding upon the parties. Pixley v. Boynton, 79 Ill. 351; Wolcott v. Heath, 78 Ill. 433; Oole v. Milmine, 88 TIL 349; Porter v. Viets, 1 Biss. 177; Olarke v. Foss,;7 Biss. 5:40 j 14 Bush, (Ky.) 727; Gelbert v. Gangar,lO Leg. N. 340. Assuming, then, that' the defendant, by his agreement withB:ooker & Co;, intended. to deal orily in and the bulk ?f the debit against him on the books of the firm accrued' for paid by the firm on trades made for him in pursuance of this ttgreement, the only question is" do these facts so taint this paper as to make this guaranty of payment void in the hands of this bank? There is no dispute but what the bank is a bona fide holder of these notes, with defendant's guaranty thereon, taken for value before due and without notice of any defence. The statute of Illinois makes notes and other securities given in payment of gambling contracts to "sell or buy grain or other commodities at a future time" void in the hands of any assignee Qr holder; but the transactions out of which this indebtedness between Hooker & Co; and the defendant arose were not "options to buy or sell at a future time," but were contracts of sale, in which the seller was ,bound to deliver at a future time within certain limits. They were not, therefore, gambling contracts within the Illinois statuteS. They may have been, as I have already said, gambling or wager contracts at common law, to such an extent as that if Hooker & Co. had sued the defendant he could have successfully defended; but the common law will not help either party to a gambling contract; it simply leaves them where it finds them. If one, having lost money by gambling or on a wager, pUJ's it, t,he law will not aid him to recover it back from the owner. 2 Smith, Lead. Cas. 307; Gregory v. Kin.g, 58 Ill. 169. It seems to me to follow, then, as a necessary conclusion, that the defendant having delivered these notes with his guaranty upon them to Hooker & Co. in settlement of their demand against him, even though their demand was tainted as a gambling claim at common
law, he cannot be allowed to set up the illegality of the dealings be. tween himself and Hooker & Co. as a defence to these guaranties in the hands of a bona fide holder. He has put this paper, with his guaranty affixed to it, afloat upon the market. Unless.a clear case of violation 01 the statute is made out, and the burden of making such a case is upon the defendant, this guaranty in the hands of a bonafide holder is valid, and not tainted by any of the defences between the original parties. I may say further that it se6ms from the defendant's own testimony and from the accounts rendered-,-a transcript of S. G. Hooker & Coo's books-that the settlement in question and upon which these notes and guaranties were given, was for an account into which cash paid, commissions, and other elements entered which were not of a gamblinR nature; and it is ex.tremely doubtful in my mind, even if suit had been brought by S. G. Hooker & Co. against the defendant, he could, upon the showing now made upon this trial,. have successfully defended against their claim. The issues are found for the plaintiff.
See Melchert v. Am. U. Tel. Co. 11 FED. REP. 201, note.
(Oircuie Oourt, D. Indiana.
MORTGAGEE IN POSSEBSION-EN'rITLED TO POSSESSION AND RENTS.
Amor.tgagee in possession of the mortgaged premIses with the consent 01 the mortgagor is entitled to keep such possession and collect the rents on the property until the mortgage debt is paid, even though the mortgage be held to be a mere lien.
SAME-PAnOL AGREEMENT FOR POSSESSION'.
If a mortgage does not provide that the mortgagee shan be entitled to the possession of the premises, a subsequent parol agreement to that effect can be . made, and if the mortgagee goes into possession under it the contract between the parties then stands as though this prOVision were contained in the mortgage.
SAME-PRIOR RIGHT TO RENTS OVER PURCHASER m
Possession so taken cannot be disturbed by a purchaser of the property on execution·sale on a judgment, the lien of which attached after such POSsesliion' was taken, and such \Uortgagee is entitled to hold any rents collected by him as against such purchaser, notwithstanding a statutory provision which \Uakes the occupant of property sold at judicial sale the tenant of the purchaser of the same.
Submitted on Bill and Answer.