Welles Co. v. . Satterfield

Claekson, J. Defendant repudiates his promise made to plaintiffs and sets up the defense “that the alleged contract ... is contrary to public policy and the statute law of the State of North Carolina, and this defendant pleads O. S., ch. 39, entitled 'Gaming Contracts and Futures,’ in bar of plaintiffs’ right to recover in this action.” This brings us to consider the statute law on the subject. This is a matter of considerable importance to commercial transactions, and, notwithstanding their length, we give the statutes on the subject: “C. S., 2144. Certain contracts as to ‘futures’ void. Every contract, whether in' writing or not, whereby any person shall agree to sell and deliver any cotton, Indian corn, wheat, rye, oats, tobacco, meal, lard, bacon, salt pork, salt fish, beef, cattle, sugar, coffee, stocks, bonds, and choses in action, at a place and at a time specified and agreed upon therein, to any other person, whether the person to whom such articles is so agreed to be sold and delivered shall be a party to such contract or not, when, in fact, and notwithstanding the terms expressed of such contract, it is not intended by the parties thereto that the articles or things so agreed to be sold and delivered shall be actually delivered, or the value thereof paid, but it is intended and understood by them that money or other thing of value shall be paid to the one party by the other, or a third party, the party to whom such payment of money or other thing of value shall be made to depend, and the amount of such money or other thing of value so to be paid to depend upon *93 whether the market price or value of the article so agreed to be.sold and delivered is greater or less at the time and place so specified than the price stipulated to be paid and received for the articles so to be sold and delivered, and every contract commonly called 'futures,’ as to the several articles and things hereinbefore specified, or any of them, by whatever other name called, and every contract as to the said several articles and things, or any of them, whereby the parties thereto contemplate and intend no real transaction as to the article or thing agreed to be delivered, but only the payment of a sum of money or other thing of value, such payment and the amount thereof and the person to whom the same is to be paid to depend on whether or not the market price or value is greater or less than the price so agreed to be paid for the said article or thing at the time and place specified in such contract, shall be utterly null and void; and no action shall be maintained in any court to enforce any such contract, whether the same was made in or out of the State, or partly in and partly out of this State, and whether made by the parties thereto by themselves or by or through their agents, immediately or mediately; nor shall any party to any such contract, or any agent of any such party, directly or remotely connected with any such contract in any way whatever, have or maintain any action or cause of action on account of any money or other thing of value paid or advanced or hypothecated by him or them in connection with or on account of such contract and agency; nor shall the courts of this State have any jurisdiction to entertain any suit or action brought upon a judgment based upon any such contract. This section shall not be construed so as to apply to any person, firm, corporation, or his or their agent engaged in the business of manufacturing or wholesale merchandising in the purchase or sale of the necessary commodities required in the ordinary course of their business.” “C. S., 2145. Prima facie evidence of illegal contract in ‘futures Proof that anything of value agreed to be sold and delivered was not actually delivered at the time of making the agreement to sell and deliver, and that one of the parties to such agreement deposited or secured, or agreed to deposit or secure, what are commonly called 'margins,’ shall constitute prima facie evidence of a contract declared void by the preceding section.” “0. S., 2146. Burden shifted by plea of illegality; pleadings not evidence in criminal action. When the defendant in any action pending in any court shall "allege specifically in his answer that the cause of action alleged in the complaint is in fact founded upon a contract such as is by this chapter made void, and. such answer shall be verified, then the burden shall be upon the plaintiff in such action to prove by the proper evidence, other than any written evidence thereof, that the contract sued *94 upon is a lawful one in ’its nature and purposes; and tbe defendant may likewise produce evidence to prove tbe contrary: Provided, nevertheless, tbat any allegation or statement of fact made in any pleading in any sucb action, or tbe evidence produced on tbe trial in any sucb action, shall not be evidence against tbe party making or producing tbe same in any criminal action against sucb party.” Plaintiffs’ group of assignments of error in regard to tbe meaning of “marginal requirements,” etc., cannot be sustained. It appears from tbe complaint of plaintiffs, “whereupon plaintiffs notified tbe defendant tbat unless be made payment of margin they would take steps to close out tbe account and collect from him any loss,” etc. From tbe complaint, answer, and letters of both parties, it appears tbat defendant was to put up “margin.” It was clearly permissible for either party to define tbe meaning. In fact, plaintiffs, on cross-examination, asked defendant tbe meaning. Cyc. Law Dictionary, under tbe bead of “margin,” says see “gambling contracts,” and under sucb bead defines “margin”: “Money or collat-erals deposited with a broker to protect contracts, usually for future delivery.” Tbe evidence given by defendant in bis definition of “margin” could in no way be prejudicial, as it is substantially tbe definition given by tbe courts. “A payment made on account by a customer to a stockbroker, under an agreement between tbe customer and tbe stockbroker in which tbe stockbroker agreed either to sell or to buy from tbe customer a certain number of shares of stock, but under which, in fact, no delivery or transfer of shares was contemplated, is known in stockbrokers’ parlance as a 'margin.’” McClain v. Fleshman (U. S.), 106 Fed., 880, 882. C. S., 2145, supra. In an action by tbe purchasers of potatoes by contract providing they should stand any shrinkage while in storage for future delivery, tbe goods being warranted sound and No. 1 at tbe time of making tbe contract, question whether tbe potatoes were up to specifications, also tbe meaning of tbe terms “shrinkage to be stood by tbe purchaser,” held for tbe jury, tbe terms being sufficiently ambiguous to permit explanation by parol. Richardson v. Woodruff, 178 N. C., 46. We think tbe evidence objected to was competent. Tbe charge of tbe court as to tbe burden was in accordance with tbe statute and as to what was and what was not a valid contract, a correct interpretation of tbe law as plainly written by tbe lawmaking powér of tbe State. This position is fully sustained by our decisions. Burns v. Tomlinson, 147 N. C., 634; Randolph v. Heath, 171 N. C., 383. In Edgerton v. Edgerton, 153 N. C., 169, it was said: “Tbe form of tbe contract is not conclusive in determining its validity when it is *95 assailed as being founded upon an illegal consideration and as having been made in contravention of public policy. If under the guise of a contract of sale, the real intent of tbe parties is merely to speculate in the rise or fall of the price and the property is not to be delivered, but only money is to be paid by the party who loses in the venture, it is a gaming contract and void. ‘The true test of the validity of a contract for future delivery is whether it can be settled only in money and in no other way, or whether the party selling can tender and compel acceptance of the particular commodity sold or the party buying can compel the delivery of the commodity purchased. The essential inquiry in every ease is 'as to the necessary effect of the contract and the real intention of the parties/ ” citing 20 Cyc., 930; Williams v. Carr, 80 N. C., 295; S. v. McGinnis, 138 N. C., 724; S. v. Clayton, ibid., 732. Walker, J., in Orvis v. Holt, 173 N. C., 234, said: “In this ease, was it the intention of both parties that the cotton should not be delivered, or was it their purpose to conceal, in the deceptive terms of a fair and lawful contract of sale, a gambling deal or transaction, by which they contemplated no real bargain as to the article agreed to be delivered? If so, the contract is void. Holt v. Wellons, 163 N. C., 124. We said in that case: ‘Of course, the law deals only with realities and not appearances — the substance and Hot the shadow. It will not be misled by a mere pretense, but strips a transaction of its artificial disguise in order to reveal its true character. It goes beneath the false and deceitful presentment to discover what the parties actually intended and agreed, knowing that “the knave counterfeits well — a good knave.” It always rejects the ostensible for the real in looking for fraud or a violation of law. The essential inquiry, therefore, in every case is as to the necessary effect of the contract and its true purposed ” The statute in this State makes contracts for “futures” utterly null and void. The statute clearly defines what are “future” contracts: “Whereby the parties thereto contemplate and intend no real transaction as to the article or thing agreed to be .delivered.” The Legislature in its wisdom has seen fit to pass a drastic act to stop this kind of gambling or vicious contracts, no doubt fully aware of the wreckage to the human family. The mischief the act is intended to prevent is plain — that no one should get something for nothing, or nothing for something. The defendant repudiates his promise and relies upon the law — this he has a legal right to do. In fact, th'e statute makes such transactions, under C. S., 2147, a misdemeanor. Under C. S., 2148, opening offices for sales of “futures” (bucketshop) is also made a misdemeanor. S. v. McGinnis, 138 N. C., 724. On the record we find No error.