Albertson v. Laughlin

Opinion by Mr. Justice Williams, The important facts in this case may be very briefly stated. The defendants Laughlin and McManus were stock brokers. Albertson, the plaintiff, had been for some years one of their customers. In February, 1893, he borrowed $10,000 from Laughlin for which he gave his own note. About the same time he turned over to Laughlin a note for $29,134.92, which was known as the “ Bass note,” as collateral security for the payment of his own note and for the payment of “ any losses that might be be [529] tween the said firm of Laughlin and McManus and said Lewis Albertson ” in their stock transactions. Within a few days after this was done a balance on account of losses appeared on the books of the firm against Albertson of about $20,000. On the 2d day of March, 1898, the firm with the consent of Laughlin transferred the Bass note to David H. Lane for the sum of $29,000. The master has found that Lane was a purchaser bona fide and without notice of any equity of Albertson in the note. Laughlin and McManus made an assignment for the benefit of creditors within a few hours after the transfer of the Bass note to Lane. On the 4th day of the following August, this bill was filed against Laughlin and McManus, against Hopkins the receiver, and against Lane the holder of the Bass note. It alleges that the $10,000 borrowed from Laughlin was obtained, with the knowledge of the lender,-for use in stock gambling operations; and that the balance of $20,000 appearing against him on the books of the firm was for losses incurred in stock gambling done by him through them. These allegations, with another asserting notice to Lane of the title of the plaintiff to the Bass note, make the basis on which is grounded a prayer for a decree directing that the plaintiff’s own note for the $10,000 borrowed from Laughlin, and the Bass note, be delivered up to him. The delivery of the note for $10,000 has not been insisted on in the argument for the appellant made in this court, but the right of the plaintiff to the Bass note both as against Laughlin and McManus and against Lane has been urged with great earnestness. We are unable to see, however, how we can interfere with the transactions between the plaintiff and his broker which they have already closed. If we assume the truth of every averment in the bill stating the nature of the transactions in stocks in which the losses were sustained no ground for the interference of a chancellor is disclosed. It does not matter so far as the legal effect of payment is concerned whether the loser in a gambling transaction pays his losses in cash or in negotiable securities. He cannot recover what he has voluntarily paid in either case. The winner could not recover from him by an action at law if he refused to pay, nor could he recover back from the winner the money or the security paid by him to cover his losses. The law will leave both parties just where it finds them, and will afford its help to [530] neither. A fortiori will a court of conscience turn away from the illegal transaction and deny its aid either to the winner to compel payment of his unpaid gains, or to the loser who has paid his losses to enable him to recover them back. In this case it appears by the proofs and is found as a fact by the master, that the plaintiff provided for the payment of his losses, to the extent of the balance due upon the Bass note over his own note to Lauglilin, by an agreement in writing delivered at the time the Bass’ note was delivered by him to Laughlin. This security so delivered was negotiable, and has been actually negotiated by the firm for the payment of the very losses for which it was pledged to them. What we are asked to do is to compel its return because it was held by the firm for a gambling debt. This we cannot do. Having provided for the payment of his losses, and the note put in the hands of the firm for that purpose having been negotiated, as the court below have held, to one who bought for full value and without notice, the plaintiff is in the position of any other loser who has paid his losses. We agree with the court below in holding the Bass note to be negotiable, and we have been shown no sufficient reason for overruling the finding of the master, concurred in by the learned judge of the court below, that Lane is a purchaser bona fide and without notice. In this view of the case it becomes unnecessary to enter upon an examination of the transactions between Albertson and his brokers. The master thinks they were not of a gambling character but were purchases and sales for actual delivery. Whether the evidence showing the purchase and sale of over a half million dollars worth of stock in a few years, not one share of which was delivered to the plaintiff or actually paid for by him, but all of which was settled for on margins and the profit or loss alone accounted for, justifies his finding is a question that we shall not enter upon. It is not necessary for the decision of this case. Give the plaintiff the full benefit of his position on this question and treat the stock transactions as all illegal, a mere wager on the course of the market, and we can see no way in which a chancellor can help him to regain what he has lost. The case of Peters et al. v. Grim, 149 Pa. 163, and Gaw v. Bennett, 153 Pa. 247, hold that a purchase and sale on margin is not necessarily illegal, but they both adhere to the [531] rule that a contract that appears to be an illegal and gambling contract is one with which the courts will not interfere to assist either the unpaid winner or the loser who has paid his losses. Leaving the plaintiff therefore to stand on his own position, we can afford him no relief. The decree is affirmed; the costs to be paid by the appellant.