Elmore-Schultz Grain Co. v. Stonebraker

ALLEN, J. This is an action whereby plaintiff corporation seeks to recover from the defendant the sum of $1783.45 upon an account ■ stated. The petition, as amended by interlineation, avers that plaintiff is an Illinois corporation, authorized to transact business in Missouri, and engaged in the business of buying and selling grain on commission, with its principal office in the city of St. Louis; that for a long time”prior to June 12, 1912, plaintiff and defendant had mutual dealings with each other, and that plaintiff on defendant’s orders bought and sold for defendant grain of all kinds, and paid out and expended divers sums of money for defendant at his instance and request; that on or about June 12, 1915, an account was stated between plaintiff and defendant whereby it was agreed between them that there was due to plaintiff from defendant a balance of $1783.45, which' balance defendant promised to pay plaintiff. Averring no part thereof had been paid, judgment is prayed accordingly. *86 The answer first denies generally the allegations of the petition except the averment that defendant had certain dealings with plaintiff corporation.; specifically denying, however, that defendant owes plaintiff any sum by reason thereof. The answer further denies that there was an account stated between the parties, or that defendant ever promised to pay plaintiff the amount mentioned in the petition or any part thereof, denies that plaintiff expended divers sums of money for defendant, at his instance and request, as alleged in the petition, and avers that if any money was paid out or expended by plaintiff for defendant it was without his knowledge or consent, authority or request, “upon wagering and gambling transactions known in the commercial world as ‘deals in options;’ ” that whatever dealings and transactions defendant had with plaintiff, at the times mentioned in the petition, consisted of pretended sales and purchases of grain, etc. for future delivery, when neither plaintiff nor defendant expected or intended defendant to deliver or to have delivered to'him any such commodities, and that none Avere ever delivered by or to defendant in the course of his said dealings with plaintiff, and that plaintiff’s claim herein is based wholly upon said pretended dealings and wagers which were illegal and void and in violation of the statutes of this State; that if the whdle or any part of the sum mentioned in the petition was paid out or expended by plaintiff, it was upon forfeitures termed “margins on futures,” which were illegal and void. And it is averred that at the time of defendant’s dealings with plaintiff, plaintiff’s officers in charge of .its affairs knew that defendant did not have any grain, etc., on hand and did not expect to have or deliver or receive any of the same, in the dealings aforesaid, but knew that such dealings were “simply for the margin, on the rise and fall of prices” and that they were not made in good faith by plaintiff or defendant but were illegal transactions. *87 The reply puts in issue the new matters in the answer. The trial, before the court and a jury, resulted in a verdict and judgment in plaintiff’s favor for the said sum of $1783.45' with interest from the date of the institution of the suit. The evidence shows that plaintiff is a foreign corporation doing a “grain and commission” business in this State with its only business office in the city of St. Louis. And the/evidence in plaintiff’s behalf is to the effect that during the period mentioned in the petition the defendant had many transactions with plaintiff, the later acting as defendant’s agent in executing various orders for defendant in the Chicago and St. Louis grain markets; that a statement as to each such transactions was given to defendant by plaintiff, usually upon the day following the same; that when defendant ceased doing business with plaintiff the latter mailed to him a statement of the amount of money claimed to be due from him to plaintiff, which defendant retained for several months without questioning the correctness thereof; that thereafter plaintiff’s vice-president and manager, one Trave Elmore, met defendant at a hotel 'in the city of St. Louis and spoke to him in regard to the account, and that defendant did not question the correctness thereof, but, on the contrary, said that he owed the money and would pay it. On cross-examination, Trave Elmore, plaintiff's only witness in chief, testified that plaintiff simply filled orders for defendant Tor the purchase or sale of grains; that it was defendant’s custom to come to plaintiff’s office and by means-of “memorandum slips” direct plaintiff to purchase or sell for him grain for future delivery, and that plaintiff carried out these transactions. The witness testified that in purchasing grain plaintiff did not buy the grain itself for defendant, “but bought, contracts,” and that in each instance delivery was contemplated. When asked if any grain was ever delivered to defendant in these transactions, *88 the witness answered in the affirmative; Akhen asked .when any delivery took place, he said that he did not know the date — that the books would show. Certain daily statements given by plaintiff to defendant touching these transactions were introduced in evidence. They purported to show that defendant had bought or sold grain through plaintiff for future delivery, or had purchased “offers.” When asked by the court what was meant by the term ‘ ‘ offer ’ ’ the witness said that it was “on the same principle” as a “call,” saying': “Chicago calls them ‘offers,’ we call them ‘calls;’ ” that this means that “you have the privilege at the end of so many days to buy” — referring to it as an “option;” that if the holder “exercises his privilege then he gets a contract for wheat.” For defendant, one Harry Gr. Bailey, who was formerly plaintiff’s cashier, testified as to defendant’s dealing’s with plaintiff. He stated that defendant “Avould buy options for the different months, buy and sell them both in Chicago and in St. Louis;” that defendant “traded in everything — in puts and calls, bids and offers, and options;” that “options are future contracts for delivery;” that as to defendant’s transactions he did not know Avhether “any delivery of a contract was contemplated or not;” that he had no conversation aaúüi defendant regarding the matter and did not know Avkat defendant contemplated, or what was “the company’s contemplation.” Referring to one, transaction shown in evidence he said that in that instance “the contract was taken up” but. the deal was “closed out” before delivery month arrived. He further testified that he did -not know of any actual deliveries of grain to defendant in the course of these transactions; that he “never made any purchase other than an option or a put and a call deal.’ ’ Defendant testified, in effect, that his transactions with plaintiff were purely for the purpose of speculating on the grain market; that he advanced to plaintiff a certain margin onjiis deals, usually buying options, and *89 that as the market fluctuated he would close out his deals and receive his profit or accept his loss. He testified that he was a traveling salesman, had no grain to sell, never owned any grain in his life, and never expected to deliver or to receive any grain in any of his deals; that at no time did he pay anything for the pretended or actual value of the grain .itself, but merely put up margins in order to enable him to thus speculate. He testified that his dealings were both in the Chicago and St. Louis markets, the greater part thereof being in the former; and that all of his dealings were on his individual account, “with the idea of making a little money by gambling in grain.” From his testimony it appears that he had received statements sent him by plaintiff, and that he had estimated that plaintiff’s claim against him was about $2000; that he did not promise to pay plaintiff, but refused to settle the account because he was dissatisfied with the manner in which plaintiff “closed out” his last deal. One Watson, manager of the St. Louis Grain Clearing Company, said to be the ‘‘clearing house” of the Merchants Exchange in the city of St. Louis, called as a witness for plaintiff in rebuttal, testified that there is really no such thing as an “option” in the grain business as conducted in the St. Louis Market; that the term is sometimes used to designate a grain contract, but that “members of the Merchants Exchange define these things to be a contract for the future delivery of grain, and the only option part about it is the time of delivery;” that the seller of grain for delivery in a certain future month “may elect to deliver that grain upon the first or the last day of that month,” and that this is the only option feature of the transaction. He testified that in such transactions on Merchants Exchange delivery is made of the actual grain unless the contract has been sold in the meantime,. The court gave certain instructions at plaintiff’s request and certain others of its own motion, and refused all of the instructions requested by defendant. *90 As to the account stated the court gave an instruction which, in substance, told the jhry that if they found that defendant received from plaintiff the statement of account shown in evidence, and did not object thereto within a reasonable time, then the law presumes it to be a correct statement of the account, and it devolved upon defendant to prove the contrary by the preponderance of the evidence, and that unless defendant had done so, then to find for plaintiff, unless the jury further found, under the other instructions, that the dealings between the parties were illegal. An instruction given by the court of its own motion is as follows: “The court instructs the jury that a sale of goods to be delivered in the future is valid even though there is an option as to the time of delivery, and, although the seller has no other means of getting the goods than to go into the market and buy them; but if the real purpose and intention of both parties at the time of making' the contract is merely to speculate on the rise and fall in prices of such goods, and the goods are not to be delivered, but only differences paid between the contract and the market price, then such a contract is a wager and is void. Bu!t it is not enough to render the contract void that one party only intended by it a speculation is prices; it must be shown that both parties at the time of making the contract did not intend to deliver the goods and that both contemplated and intended a settlement of differences in prices only before the contract is under the law illegal and void.” Other instructions given proceed along the same general theory as does that set out above. I. It is appellant’s contention that the evidence failed to establish an account stated. But obviously the evidence sufficed to warrant a finding that there had been an account stated between the parties, as alleged in the petition; and the instruction, supra, touching this matter was a proper one. [See Piper v. St. Louis, L. *91 & G. Ry. Co., 200 S. W. 687; Kenneth Investment Co. v. Bank, 96 Mo. App. 125, 70 S. W. 123.] II. But “an account stated presupposes that the transactions upon which it is based, were not illegal.” [1 R. C. L., 209; Raymond v. Leavitt, 46i Mich. 447.] Consequently the defense set up- by the answer, namely, that the transactions out of which plaintiff’s account arose were illegal and void, was available to defendant if supported by the facts .in evidence." Plaintiff cannot recover its commissions or advancements on account of the transactions handled by it for defendant, as defendant’s agent, if those transactions were illegal. [Edwards Brokerage Co. v. Stevenson, 160 Mo. 516, 61 S. W. 617.] At common law transactions of such general character as those conducted by plaintiff for defendant, i. e., the buying and selling, or pretended buying or selling, of grain or other comniodities, ostensibly for future delivery, were not illegal, as gambling transactions, unless both parties thereto intended that they should not be bona-fide transactions, but mere speculations in tlie rise and fall of the market. [Edwards Brokerage Co. v. Stevenson, supra; Connor v. Black, 119 Mo. 126, 24 S. W. 184; Atwater v. Brokerage Co., 147 Mo. App. 436, 126 S. W. 823.] But in this State the common-law rule on the subject has been changed by statute. Sections 4780, Revised Statutes 1909, provides as follows: “All purchases and sales or pretended purchases and sales, or contracts and agreements for the purchase and sale, of the share of stocks or bonds of any corporation, or petroleum, provisions, cotton, grain or agricultural products whatever, either on margin or otherwise, without any intention of receiving and paying for the property so bought, or of delivering the property so sold, and all the buying or selling or pretended *92 buying or selling- of such property on margins or on optional delivery, when the party selling the samé, or' offering to sell the same, does not intend to have the full amount of the property on hand or under his. control to deliver upon such sale, or when the party buying any of such property or offering to buy the same does not intend actually to receive the full amount of the same if purchased are hereby declared to be gambling and unlawful, and the same are hereby prohibited.” The next succeeding section, 4781, provides that it shall not be necessary, in order to commit the offense defined by section 4780, that both the buyer and the seller shall agree to do any of the acts prohibited by that section. In the recent case of Smith v. Bailey, 209 S. W. 945, decided by the Kansas City Court of Appeals, in considering the effect of these sections in a case such as that before us, it is said by Bland, J.: “Under decisions in this State construing sections 4780- and 4781, Revised Statutes 1909, the intent off either one of the parties to the buying or selling- to gamble in such transaction, or to speculate on the rise or fall of the market, is sufficient to and does render the contract absolutely void, notwithstanding the other party may be ever so innocent and wholly unaware of the intention to gamble entertained by the other. [Connor v. Black, 119 Mo. 126, 24 S. W. 184; Edwards Brokerage Co. v. Stevenson, 160 Mo. 516, 61 S. W. 617; Atwater v. Brokerage Co., 147 Mo. App. 436, 126 S. W. 823.] And in order that there be a valid contract for the sale of commodities to be delivered in the future, there must be an actual intention to deliver or receive the commodity on the delivery day. An intention to simply settle thei difference according to the fluctuations of the market prices of such commodity makes the transaction a gambling one. [Lane v. Grain Co., 105 Mo. App. loc. cit. 218, 79 S. W. 722, and cases therein cited.”] *93 “However, it was not necessary for plaintiffs to Have known of defendant’s intention to gamble in order that the demand sued for be not recoverable. The contracts, as we have already stated, were void, although it may have been the intention of only one of the parties to the contract to gamble. It is held that such contracts are void in the hands of a person who is a party to them, even though he acted in ignorance of the fact that the delivery of the commodity purchased or sold was not intended. [Stewart v. Hutchinson, 120 Mo. App. loc. cit. 37, 96 S. W. 253; Connor v. Black, supra; Edwards v. Stevenson Brokerage Co., supra; Atwater v. Brokerage Co., supra, 147 Mo. App. loc. Cit. 445, 126 S. W. 823.] This being the policy of the law, it is apparent that the agent or broker 0 conducting the operations, even though entirely innocent of any knowledge that they were unlawful, is precluded as well from his right to recover by the unlawful intention of his principal. The contract which he has negotiated through his principal is absolutely void} and no enforceable rights may accrue to any one thereunder, and he is not entitled to recover his commission. [Stewart v. Hutchinson, supra; Connor v. Black, supra; Edwards v. Stevenson Brokerage Co., supra; Atwater v. Brokerage Co., supra, 147 Mo. App. loc. cit. 445, 126 S. W. 823.] This ruling is not based upon any contention that the statute by its terms includes brokers; that is to say, that it provides expressly that a broker may not recover when it is the intention of his principal to gamble, but on the broad ground that' the statute makes the contract which the broker negotiated void, and being, void, no enforceable rights may accrue thereunder. ■ [See Wool-folk v. Duncan, 80 Mo. App. loc. cit. 427.]” It is unnecessary for us to review at length the authorities cited in the case from -which we have just quoted; they will be found to sustain the doctrine there announced, however harsh the operation of the statute may appear. In Connor v. Black, supra, l. c. 141, following a decision of the Supreme Court of Tennessee under *94 a similar statute, it is said that, “the act was intended to make it unlawful if either of the parties had no intention of effectuating a real purchase or sale; that the purpose and object of the statute was to suppress the evil of dealing in futures, and limit such operations to sales made in good. faith, by those who wished to sell and buy; and that in making the seller responsible for the intent of the buyer and the buyer responsible for the intent of the seller, its intention and purpose was to suppress gambling by confining the business of buying and selling for future delivery to such limits as would ■'effectually preclude the possibility of it.” In the instant case the evidence is, of course, abundant from which a jury may find that the defendant was merely speculating or gambling on the rise and fall of the grain market. And, as Avas said to be the case in Smith v. Bailey, supra, the facts and circumstances are such as to warrant a jury in finding that plaintiff knew that the defendant Avas so speculating, though it appears to be unnecessary that the jury so find in order that defendant may defeat a recovery in the action. It is said for respondent, however, that since the evidence showed that a great part of the dealings in question were in the Chicago market, and failed to shoAv what portion of the account arose out of transactions conducted in this State — defendant’s testimony merely showing that “most of them were in Chicago”— the court beloAA7 was “compelled to treat the whole account' as if made up of Illinois contracts, and since the Illinois law was neither pleaded nor proved, the common law governed, and the common-law test was correctly applied by the trial court. ’ ’ It is quite true that our statute can have no extraterritorial effect; and respondent’s argument that, under the circumstances, the transactions in Illinois are to be treated as governed by the common-law rule, is sound enough. [Edwards Brokerage Co. v. Stevenson, supra; Atwater v. Brokerage Co., supra.] But the argument to the effect that all of the transactions out of *95 which, the account in suit arose must be treated as Illinois transactions, is clearly unsound. On the contrary, since' it affirmatively appears that some of the transactions upon which plaintiff’s account stated is based, were had within this State, and hence were within the' operation of the statute, it necessarily follows that if those transactions are illegal and void under the statute, then the entire account is tainted with illegality and no recovery may be had thereon. The account stated upon Avhich plaintiff sues is .an entirety; the various items of which it is composed do not appear, and the case affords no means for distinguishing between those items which might be found valid and those which might be found invalid. Consequently, if any substantial part of the account is illegal, the whole is infected thereby, preventing a recovery thereon. [See Bick v. Seal, 45 Mo. App. 475; Parke, Davis & Co. A. Mullett, 245 Mo. 167, l. c. 173 and cases cited, 149 S. W. 461.] It is further argued for respondent that under the decision of this court in Taylor v. Sebastian, 158 Mo. App. 147, 138 S. W. 549, “puts and calls are not within the purview of the sections named. ’ ’ In the Taylor case it was said that the contract there under consideration, being a call or option which gave the holder the privilege during: ten days of demanding a contract for AA'heat — ¡ or as said by the court, being ‘ ‘ a contract for a. contract of purchase and sale of grain” — AATas not within' the statute. What is said on this subject in the Taylor case may be regarded as mere obiter dicta, since, notAvithstanding the view expressed as to this matter, the ruling below, forcing plaintiff to a nonsuit ,was affirmed on appeal upon the ground that the evidence shoAved a contract different from that sued upon, and hence there Avas a failure of proof to sustain the averments of the petition. In that view of the case, if mattered not whether the evidence did or did not tend to establish.the defense of illegality set up in the answer. And we are of the opinion that what is statéd in the Taylor case on this particular question is unsound, and ought not to *96 be followed. We think that puts and calls, or options, are Avithin the statute, if indeed they are employed for the mere purpose of gambling on the rise and fall of the market. It is true that the statute is to he strictly construed. “But by the expression ‘strict construction’ is meant that the scope of the statute shall not be extended by implication beyond the literal meaning of the terms employed, and not that the language of the terms shall be unreasonably interpreted. Courts ought neither enlarge nor narrow the true meaning of p'enal statutes by construction, but should give effect to the plain meaning of Avords, and where they are doubtful should adopt the sense in harmony with the context and obvious purpose and object of the enactment.” [Moore v. Telegraph Co., 164 Mo. App. 165, l. c. 171,172, 148 S. W. 157.] Section 4780, supra, denounces as gambling and void “all purchases and sales, or pretended purchases and sales, or contracts and agreements for the purchase and sale of . . . grain ... either on margin or otherwise,” without the intention of receiving or delivering the property, etc. In construing and apjhying the expression “contracts for the purchase and sale,” the word “for” may properly be taken in as equivalent to the words “with respect to” — a sense in which it is frequently used. [See 3 Words & Phrases, 2861.] In other Avords the statute may be regarded as striking not only at purchases and sales or pretended purchases and sales, but agreements with respect to the purchase and sale of commodities, Avith no intent to receive or deliver the same but with the intent merely to speculate on the rise and fall of the market. The language of the Statute, when taken as a whole, is entirely consonant with this view. And it is quite obvious that when the statute is construed Avith respect to the object and purpose of its enactment, namely, to suppress the evil of gambling on the stock and grain markets, the construction suggested is' the natural ohe; and “puts” and “calls,” or “options,” fall within the *97 act. [See Lane v. Logan Grain Co., 105 Mo. App. 215, 79 S. W. 722.] Indeed such transactions are said to be merely methods adopted for speculating in the differences in the market value of grain or other commodities (Minnesota Lbr. Co. v. Coal Co., 160 Ill. 85, l. c. 97); the very thing which the statute seeks to suppress. In this view it is immaterial whether defendant, in any of his deals did or did not receive the formal contract which, it is said, he had the option to demand, if in point of fact he had throughout no intention of ultimately receiving or delivering any grain thereunder, but his object was merely to speculate. And the evidence shows that while defendant had numerous transactions on the grain market, conducted by plaintiff in his behalf, it does not appear in a single instance he ever received or delivered any grain in any of his dealings. From the testimony of the witness Watson, supra, it is obvious that defendant was using a process by means of which he could have conducted his trades lawfully; but the evidence in his behalf goes to show that in point of fact he was simply making use thereof In order to gamble on the rise and fall of the market. [See Smith v. Bailey, supra.] It follows that the instructions as to the defense of illegality did not properly submit the case to the jury. The judgment should therefore be reversed and the cause remanded for further proceedings consistent with the views expressed above. It is so ordered. Reynolds, P. J., and Becker, J., concur.