be taken olthe amount of that loss, and that they pay the amount when costs j and that the bill be dismissed as ascertained to the to the defendants Edward A. Sowles and Hall,without costs.
WARD V. VOSBURGH.
(Oircuit Goure, E. D. Wisconsin. May.1887.)
1. CiONFLtci 'OF LA
itoriJlfapp¢ar that 'the, cop.t,ract was made with an actual view to the delivery ·an4,rllcelpt of grltin. and n9t as Itn evasion of ·the Wisconsin,statute against galtjing; or a cover for 3 gambling transaetidil, " does not apply to an action in, the federal courts in tliiatstate by a broker; resident in Illinois, to recover and commissions growing out of orQers given him by a citizen, of Wisconsin. to be executed on the floor of the Chicago Board of Trade. The rights of'the parties to suCh '11 suit are governed by the laws of Illinois. ' ,
graril at a future date fo1' a'price certain, it must' afflrIJ1atively and satisfac-
The rule laid down in Barnard v. Backhau8. 52 Wis. 598; 6 N. W.' Rep. 252, and 9 N. W. 595, uphold ,a contract, for,a sale and delivery of
2. 'CON'1".RACTs-GAMINa-OPTIONS-1N'1'ENT--'-BuRDEN OF PROO}lL-;LU'BILITYFOR COld:MlIilSIONS AND ADV ANMS.
, ,UnQ-,er,thellIinois statutes. a simple option, reserved by theseUerto himwithin certain limits,ahd the settleself, lilt·tt> time of deliver}' of 'ment:.of aifferencesuponsuch 8. contraot, does not render the contract void all a ,ttansactjop,., The, burden of proof,.in an action OD, such a contract, b;Y' a broker for commissions and advances for settlements made by the '''ringing up" process, is'therefore upon the defendant to show the gambling intent; and it does not follow, from the fact that he himself intended no de-_ ,livery, !InCh was the intention of the broker and of ,the other principal, or that deliveries were not made as a matter of fact. , The custom 'of "ringing up," in vogue among brokers and commission 'JIlerchants, is. founded in qommercialconvenience, and when not adopted to transaqtion, is not in contravention of the law. A speculator'who is familiar with the' methods and usltges of the Chicago Board:ofTrade is presumed, upon giving orders to his broker, a meinber of that body, to contrac,t withreference thereto; and he will not be heard to set up, as a defense to a suit py the broker for commissions and advances, that the cust'om prevailing there, in 'obedience to which the advances were made, enlarged his liability u,nder the contract.
O;F-EsTOPPEL. . .
8. CttsT6MANDUSAGE-"RmGlNG UP"-GA:MING.
At L a w . , Joseph, Wright and Shepard & for plaintiff. QuarlqJ i& Spence, for defendant.
DYER,J. ',['his is a hard case for the defendant, and, if the court could see clear to relieve him from the liability which is sought ,to be against ;him, it would be glad to do so. So many decisione have rendered by various courts,upon the particular q1J.estionwe have here to decide, in which may be found the expression of conflicting views, that it is not easy to arrive at a conclusion unattende4,:wi$ doubts. One proposition, is well settled, namely, that
where in fact no purchase or sale of property is but simply a wager on the rise or fall of price!'!, the transaction is a gambling one, and cannot be upheld. It is also equally true and well settled by authorities, SQ familiar they, need not here be cited, that where the gambling .intent exists only, on Qne side, and the other party intends an actual purchase or sale, then the transaction is valid. The difficulty always is in applying thrse principles of law to the facts as they are developed in the given case. It has been of late repeatedly decided, that, if the parties intend in fact to buy or sell property to be delivered at a future time -agreed upon by them, it is not a gambling transaction,although they exercise the option of settling the difference in price, rather than make 1delivery of the property. '" ' Upon a careful perusal of the opinion of the court in Barnard v. Backhaus, 52 Wis. 593, 6N. 252, and 9 N. W. Rep. 595, and of the record and testimony in thll.t case submitted by counsel for the defendant, lam strongly inclined to the opinion that if. tht' case in judgment inv9lved a Wisconsin· transaction, arising under the Wisconsin 'statute, thatopinion might be considered acontrollihgauthority in favor of the, (lefenailIlt here. The ,1111e 'laid down in that case was that, to tiphold aco;ntract for a sale aliddelivery of grain at a fl,lture date, fora pricBcertain, it must affirmatively and satisfactorily appear that the contract was made with an actual view to the delivery and receipt of grain, not as, an evasion of the statute against gaming, or as a cover for a gambling transaction. The meaning ,of this proposition would seem to be thattnebiuden of proof to uphold such contract is upon the party who . seeks to recover upon it. It waS held by Judge GRESHAM, then district, now circuit judge in this circuit, in Williar v. Irwin, 11 Biss. 60, that "the burden of show,ing that the parties were carrying on a wagering business, and were not engaged in legitimate trade or speculation, rests upon the On their face, these transactions are legal, and the law does not, in the absence of proof, presume that parties are gambling, A person may make a contract for the sale of personal property for future delivery which he has not got. Merchanta' and traders often do this,. 4- Contract for the sale of personal property which the vendor does not qwn or possess, but expects to obtain by purchase Or otherwise, is binding, if an actual transfer of property is contemplated. A transaction which on its face legitimate cannot beheld void, as a wagering by showing that one party only so understood and meant it to be. ' ," The proof must go further, and show that this understanding was mutual; that both parties so understood the transaction. If, however, at the time of entering into a contract for the sale of personal property for future delivery, it be contemplated by both parties that, at the time fixed for delivery, the purchaser shall merely receive or pay the difference betweJ:ln, the contract and t4e market price,' the transaction is a ' wager, and nothing more." Other cases Qlight be cited in which the same rule is applied to these . contracts for the sale and or grain on the board of trade as is
applied to every other contract, namely, that presumptively they are , legal and valid; and'that the burden is not, in the first instance, upon the plaintiff to show that the contract 'was not an evasion of the statute, or a cover for a gambliiig transaction; The Sl,lpreme court of the United 'States in Irwin v. Williar, 1l0U. S. 507, 508,4 Sup. Ct. Rep. 160, expressly approve the statement' of the law on this point, as it has just been quoted from the opinion of Judge GRESHAM; and I must therefore hold thnt the burden here is not upon the plaintiff to make it satisfactorily and affirmatively appear that the contracts in question were legal, but that it is incumbent upon the defendant to show that the contracts were in fact gambling transactions; and this is not shown by merely As was well said in Olarke proving his own intention in the v. F088, 7 Biss. 548: ' "It is very easy for either party to swear to what his own understanding of the contract was, but that, standing alone, is manifestly immaterial. The secret intentions of one party,eontraryto what appears on the face of the con,tract, and not communicated to the other party, cannot prevail to make a contract il,legal Which is otherwise real question is, ,what was the contract? and that implies an inquiry as to the mutual understanding and meeting of the minds of the parties. What was that? It is easy for a party to swear what· his own understanding' and intentions ,: were; but, when he comes to swear to the intentions and understanding of the other party, the consideration due to his testitnonystands on an entirely different footing. He may be presumed to know hisownilltentions, but the evidence of the intentions of the other party should not b.e of a merely subjective character, but shonld consist of tangible facts and cirQumstances, outside of his own consciousriess, and a knowledge of which be capable of satisfying other minds." , v. HOT1I,ick, 30 Fed. Rep. 97, Judge BREWER in his opinion says: , "Counsel for defllndant say that it is the absolute duty of the court to denounce this: transaction, unless it clell.rly appears that itwas a valid and honest one. I thlnk the duty of the court is precisel! the reverse, and that it is the duty of the court to uphold it, unless it 'appears that it was an invalid and dishonest one." ' This is a ,terse and accuratastatement of the rUle of law applicable to the present case. The plaintif1; was a broker or agent of the defendant in the transaCtions in question;"Ite was the middle-mnn between the defendant and other parties, 'to whom sales ahd from whom pur:chases of commodities were the case of Eangs v. Hornick, just cited, as there observed' by' Judge BREWER,. it is not a case where the defendant, as principaronthe'one side, was-dealing with the plaintiff as principal on. the other. Therl:! was no contract of purchase 01' sale, rElal or pretended, between them. He was merely a broker,--an ,. agent. to do tpe· in transactions real or pretended. "There is no presumption /iQ agent does not obey the instructions he does notintena to obey them;. and, it matters not what given, Or the intent or 8upposi'tioti of thifpi'ititiipal may be, theJaw will presume , the: agent obeyed the instructions that weregiveri; and' as they were giveu;an,a; if the contrary it mustbe proved." NoW', B:1tholigh the defendant'rriilfnot have intended any real pur-
or sale of grain or other commociities, it is not satisfactorily proven ,that the ,parties whom the pla,intifi'dealt for the defendant, did not contemplate the actual receipt of property, purchased, and delivery of property sold. Just heril, is the with the defendant's proofs do not come up to,the point ofshowing that both or all the parties to the various transactiona, l!egarded them simply as wagers on differe;nces in prices. As we have seen, the wst of illegality is the intention, not alone of one of the parties, of both or all. As before, observed, these were ,transactions arising in Illinois, and therefore governed by the Illinois statute. The Wisconsin statute is broader in it-s. scope. ,Ipdeec;l, as pointed out by Judge HOPKINS in Re "Green, 7 Biss., 338, the statute of this state on the subject Qf gl1ming has gone further than ,the English stt\tutes on the subject. Olarke v. F088, v!Gaugar, 8 Biss. 214; and Jack8Q1l, v. Foote,lLBiss. 223, decided this circuit,-were cases involving transactions statutes. Olarke v. F088, in Ipll,ny ,of its prominent features, is on all fours with the case at bar, involving also tlle ,validity settleme,n,ta made by" tpe so-called, U ringing up".prOQess, and thecon,trapts which that :cll-se arose, were susta:ined. In that , as in ,this, showed that in some.ofthe triuwactions, grain was'actU!111ydelivered and paid for, and inother resPects, case ',:was, simil.a,r tothll"t herejIlhaIld. .Although not officially reported, I happen to know that an appeal was taken froni the BUNN in Olarke.v. F088,tO tre .circuit court, and that, inanoral opiq.ion fromtneqench'byJudge D.RUMMoND, the ,contracts there inand the de,cision of the district qourt wasJuliy , affirmed., ,In Jack80n v. Foote,Judge BLODGETT decided that an agreement between a person arid his'broker on the Chicago Board of Trade, by which hids to deal itl"timecontmcts for the purchase and sale of the as to avoid p!lying for and carrying the coun:llodities bOught, does not show an intention to deal in to buy: or sell fl,t a such as are prohibited by the'lllin()is statute, though the contraots might be wagering contracts at common law, and thats\1bh statute does not cover dealing in differences. So in , Gilbertv. Gaugar, Bupra,the same judge decided, that the statute was 'not inten<ied ,'to of grain or other .for ,future delivery, where the ,seller reserves to himself a simple.\lptipp as to thetimeoj;delwlWgwithin certain limits jand that if one makes!a.contract to delivel' grain during a future month, at a fixed price', and, by reason of the !ldvarse lispect of the market,ditects his broker to settle ",ith the purchasers before'the inaturity of the contract, this does not niakethecontractvoid transaction, ,and he the differences pl!oid, by tp,ebrokers in his behalf, as well as for their .-coQlmissions. The weight ofauthoritYi therefore, in this circuit, is all one waY,8s applied to Illinois transactiOils,;namely, that· a simple option reserved , by the seller to him;sel,faS'tb time of delivery of property within certaln ]imits, differences upon such :a dqes not
make the contract void a$a gambling transaction. The proofs must gofurther,and affirmatively show that it was not the intention of either seller 'orbuyel', ''When the cOntract was made, to deliver any property; and this is not proved by ifierely the intention of one party, even coupled with the intention of his agent representing him in the transaction. In the case at bar; some of the property was actually delivered and paid for. In other i'nstances'there was a payment of differences. The actulJ,l delivery of some ,of the property is a fact which goes to uphold the transactibn in question as lawful and valid. The fact that in other therewa,s a Bettlement of differences, is not' to show an original intention of both seller and buyer, :wh,en tbecolltracts were made; not to deliver any property. This being 'the, state: of the case, I do nofsee h9wthedontracts entered into by tha (defendant "through 'his broker, the plnintiff,'cari be reId to begalllbtransactions', so infcltred from the methods in which, in ',sbriie instances', a settlemeiit,was made as a basis. for arriving at differ-
, .. ,
Jri/]latke v. P088; '.mpra,the uringingup" process iSdom'mentedupon, 'uhd:shown to be in and, of itself a legitimate method of adjusting differences, in accordance with, the ruleS' 6fbusiness prevailing in" the clearlng-Houses ofthe country. '. :' , '. _ ' "In Williarv. IrWin, Btipra,' it was said '-by J udgeGREsHAM in his , chgrge the jury: . ,' ." ,hThe testimony tends show that a custom obtained amoIlg grain ,commission merchants in Baltimore to the following effeot:, When one com· 'niission merchant,upon the order of a cnstomer, sells to another commission mro;chatnt a quantity of grain for futttredelivery, and it occUrs that at some .other timehefore the ma,turity of the contract .the same commission mercha:ot ':JitlCg!ye!l order from.another to purchase the same or a larger of the same kind of for the same future delivery, and he exe'cutes this second order by making tllll purchase from the same commission merchant .to whom he. had made the sale in the other case, that then, in such :lase, the two commission merchants meet together, and exchange or cancel the' c:lOO\tracts l\B"between themselves, adjusting the difference in the prices between tbetwo contracts, and restoring any margins that may have been . put tiP; and tJ;om tha.t time forth first commission merchant holds tor the "beneJ1t of thecusi:omer forwbom he sold 'the Ol:der orcontra.ct of the pur'eMserfor wb.bhi he bought, so that of the selling customer may, Wnen delivered, betilrned:in on tlie'order or contract of the purchasing customer, and tlIat the oommission merchant is held responElible as guarantor to his tomer. .The evidence also tends to show a custom obtained among comDlis"sion merch&nts in Baltimore, to ,the furtber effect that, though the second ,transaction may have been had with a, ,different commission" merchant from the one with which the first was had, yet where it can be found that a series of contracts are inexistencell:ll" the sale of like grain for like deso tbatthe'seller owes the wheat to the buyer to whom he sold, and he to another who owes like wheat for like delivery to the first commission merch,ant, that. then, in such case, they settle by what they call a ·ring,' that is, ,they all reciprocally surrender or contracts, adjust differences in . price.between themselves, and all. margins that have been put up; that l,n all such cases the commission merchant substitutes the contract of anothei'C'Ustomer in place of that with thecomll1issioll merchant whose conj
tract has been 'canceled or surrendered ; and that he guaranties to his customer the performance of the contract originally made In his behalf." This is a very good statement of what the testimony in the case at bar shows transpired between the parties, in the transactions here in question; and Judge GRESHAM held that the customs referred to were founded in commercial convenience, and that ihey were not in contravention of the law,but valid. The supreme court df the United States in its review of the elise in 110 U. 8': 499,4 Sup. Ct. Rep. 160, although it reversed the juclgment of the court below upon an<lther point, did not question the correctness of Judge G:Il:ESRAM'sru!ing 'upon the validity of' the methods of· business ·wMc1:J. differences were adjusted., " ,. ", Ie must hdld; therefore; that, fOT want of adeqtlate proof of an actual iJ;'iteqti6rton the part Of both the defendlint and theplii'ties with whom 'the :pltdiltiff as his not to make real purchases,'dr not deliveries of property sold and"purchased; the coneontractswete mere gamblingtransactlons- is ndtestab"
It has, however, been a further question with the court whether, upon
another point, the case was'"ithin the ruling of the supreme court of the United States in Williar v. Irwin, wherein it was held that the defendant was not liable to his brokersfqr moneys paid inllettlement of differences, because it was not shown that the methods of settlement by means of which differences were arrived at were not known and therefore the settlements were not made with his assent. The plaintiffs in that case were commission merchants and grain broke,rs,in' Baltimore, and the def(!ndant and his deceased partner were in business in Indiana. The contracts of sale were made and settled' by the plaintiffs on account of their customers according to the custom o( tbe grain and flour exchange in Baltimore, of which they were members,and there was no proof whatever that thedefendli.nts, living thus remote from the scene of had any knowledge of the customs of the exchange. The court bEllow decided that the, defendants,bavingemployed the plaintiffs as grain commission merchants, to engage in transactions for them on the excMnge, were bound by the general usages and customs of business there prevailing, whether they had knowledge: of them or not. This ruling was held by the supreme court td have been error, not on the ground that the customs tended in any way to show that the transactions but because they worked a material change in the prinwere cipalts rights, and the obligations of third parties to him, and therefore could not be binding upon him withoui his assent. The evidence in the case at bar shows that the defendant Vosburgh mUl:ltba.veheen familiar with the methods and usages ofbusiness on the Chicago Boal'd of Trade atthe time when the transactions between him and the plaintiff He lived not very remote from Chicago; 'was frequently in that city; and had for a considerable tifuebeen accustomed'to '.transact on the board of trllde through brokers whom he employed. He sold 'butter and cheese on the board of trade at Elgin, v.31F.no.1-2
Illinois; occasionally visited the board of trade in Chicago with t4e plaintiff; and the plaintiff testifies unqualifiedly that the defendant was familiar with the methods of busip6Ss ,upon the board. This testimony is not contradicted by the defendant, and he nowhere in his testimony attempts to deny knowledge of such methods of business. He was in constant communication, with the plaintiff, gave orders for purchases and sales by letter and telegraph. received statements from the plaintiff as often as transactions took place, and no other oonclusion is consistent with all the facts, than that he must have known the manner in which various trades made in his behalf, 'Yere closed out. The case, therefore, in its facts upon this point, is unlike that of. WiUiarv. Irwin., , Appreciating, as I dOtRs indicated in the bly entailed u pOI!- the defendant by an. adverse ruling ,in this case" the court feels constrained to hold, upon the testimony as it ia presented, .and upon what it conceives to be the weightofa.uthority, especially in this circuit, defendant is liable to the plaintiff for the amount of the plaintiff's claim for advances .and cpmmissiona ip the transactions in dispute.
S'rARtt and othera. '
. ' ,'I
C(Jirouit . (Jourt, D.OoWrado;' :May 4,1887.)
, :A creditor is:aHiJ,>el'ty,to apply payments of a debtor'up,on anyone of the ,the debtor names the debt oJ;! is making
DEB'l'8. ;" ' Where there are'two debts; one secured and the other l1Dsecured, tho court will as a rule apply B.payment upon the,unsecured
The renewal by dne partner of a'partnership nOte, after 'dIssolution' of 'the , , partnership, is bhuling upQn 'the co-partner, if the latter!recognized and con· ,santed to it.
Motion for New Tri8J.. ,.},f. B. Carpenter, for plaintiff. ,J. W. lforyur, for
BREWER, J. In this matter. of Sanborn against motion for new trial on two grounds, first.that one pa.yment of six hundred and odd dollars was not credited note of $650, but on som.eothedndebtedness of the other partner. There is nothing in tpat;, t4e .creditor is at AWJl'ty to apply payment upon any, one of the obligations of his debtor, unless the debtor nlj.m13S the debt on which he is making the payment. Even if he had not made that application himself, where there are two debts, ope secured and the other unsecured, the cour,t ordinarily will ap,ply a payment upon the unsecured debt; and the claim here is that this