Lee v. Boyd

SOMERVILLE, J. The action is brought for the alleged conversion by the defendant, Lee, of certain bonds of the city of Troy, Ala., which the plaintiff, Boyd, claims as the property of a minor child, of whom he is the legal guardian. These bonds, according to the plaintiff’s version of the case, had been pledged by one Higgins, as collateral security for money advanced by Lee, to be .invested in a joint purchase of what is commonly known as “cotton futures.” According to the defendant’s 'version of the testimony, however, they had been Sold to him for fifty cents in the dollar, the proceeds to be applied, by Higgins’ direction, to pay his half of the bonus required for the purchase of such futures, “subject to the rules of the New York Cotton Exchange.” If the contraeb of loan, on the one hand, or of sale, on the other, as the case may be, is illegal, the plaintiff is entitled to recover, even though the bonds in question be regarded as negotiable instruments; for, in the former alternative, the pledge of the bonds, made to secure an illegal loan, would be equally void with the loan itself; and in the latter, if the contract of sale be illegal, although binding between the immediate parties as being in pari delicto, the purchaser can not be protected as a bona fide holder, so far as concerns the plaintiff, who is the true owner of the securities sued for in the action. The purpose to which the money was to be devoted was an illegal enterprise, being a bet or wager on the future price of cotton, which, the evidence tends to show, was to be promoted by the defendant on joint account with Higgins, [287] who procured from him the money, whether by pledge or sale of the bonds, for the furtherance of this express design. The evidence, if believed, shows that the transaction was a mere speculation in cotton “futures”; that no cotton was actually intended to be delivered, but the' whole speculation was dependent upon, the future rise or fall in, the price of cotton, as governing the loss or gain of the venture —-a simple staking of “margins,” in other words, to cover the difference in price. The evidence fails to show what were the rules of the New York Cotton Exchange controlling such transactions, and we can not assiime to know what they were. The case must stand upon the evidence contained in the record. In Hawley v. Bibb, 69 Ala. 52, it was decided by this court, that a bill given for money to be advanced to the maker by the payee, to enable him to engage in buying and selling such futures in the State of New York, was a mere contract founded on a loan or advance of money to bet, as a wager, on the. future price of cotton, and as . such would be illegal and void between the immediate parties, and purchasers with notice, as a contract made in violation of the public policy. The rule,, accordingly, is now generally established by authority, that where an optional contract for the purchase or sale of property is made, and there is no intention on the one side to deliver, or on the other to actually buy, but merely that the difference in price should be settled according to the. market fluctuation' — the rise or fall in the value of the commodity — the contract is. a mere wager or bet upon the future price of the commodity, and as such is reprobated by the law, and void for illegality. Bigelow v. Benedict, 70 N. Y. 202; s. c., 26 Amer. Rep. 573; Gregory v. Wendell, 30 Mich. 337; s. c., 33 Amer. Rep. 390; Kirkpatrick v. Ronsall, 72 Penn. St. 155; Fareira v. Gdbell, 89 Penn. St. 89; Yerker v. Solomon, 18 N. Y. (11 Hun), 473; Grizewood v. Blane, 11 C. B. 526; s. c., 73 E. C. L.5 26; Irvin v. Williar, 110 U. S. 499; Bishop on Contracts, § 534. The enterprise itself being a cotton gambling transaction, it becomes immaterial whether the bonds. were pledged or sold by Higgins to Lee, provided the. parties had in contemplation, at the time, a joint investment for their mutual benefit — Lee knowing that the money was intended to be used in furtherance of it. If the money was loaned, or advanced for this express purpose, the contract of borrowing would [288] be illegal, and the pledge of tbe bonds to secure it equally so, as in violation of the public policy. — Bishop on Contract, §535; Raymond v. Leavitt, 46 Mich. 447; s. c., 41 Amer. Rep. 170; Comley v. Hillegaas, 94 Penn. St. 132; s. c., 39 Amer. Rep. 774; Milner v. Patton, 49 Ala. 423; Hananer v. Doane, 12 Wall. 342; Shepherd v. Reese, 42 Ala. 329; DeLeon v. Trevino, 30 Amer. Rep., note, pp. 107-112; 1 Daniel Neg. Instr. (3d Ed.), § 200; 2 Eandolph Com. Paper, §535; Morgan v. Groff, 5 Denio, 364; s. c., 49 Amer. Dec. 273. The case of White v. Yarbrough, 16 Ala. 109, is entirely unlike this case. There, money had been advanced by one of the payees of a note, to a third person, at the request of the maker, in payment of a debt due by such maker for an illegal wager, the illegal transaction being then complete, not in contemplation, and the parties to it having no common interest. So, on the other hand, if the bonds were purchased by Lee for the purpose of aiding Higgins to raise the money to engage in such illegal enterprise, in the fruits, of which the seller and buyer were jointly interested, the latter knowing the uses to which the proceeds were to be devoted, the sale would be illegal, and although binding on the seller and buyer, as an executed illegal sale, the defendant, as buyer, could not claim to be a bona fide purchaser, or innocent holder, so as to cure the infirmity of title arising ' from the fact that the bonds did not belong to Higgins, but to the ward of the plaintiff, for whose benefit this suit is brought. The illegality of the transaction would taint the title of the buyer, so as to destroy the bona fides of the purchase, as fully as actual fraud or want of consideration would do. McCall v. Rogers, 77 Ala. 349; Saltmarsh v. Tuthill, 13 Ala. 390; Ramsdell v. Morgan, 16 Wend. 574. Under these principles, the court did not err in any of its rulings, so far as the appellant is concerned. The jury having found for the defendant Mount, we do not consider the rulings affecting him alone. It is sufficient to say, that the charge given ex mero motu by the court was correct; aird there' was no error in giving charge numbered two requested by the plaintiff, nor in refusing charges numbered one and three requested by the defendant. The fourth charge is abstract in referring to the testimony of one Curtis, which is not set out in the bill of exceptions. The other rulings we need not discuss fur [289] ther than to observe that they were either erroneous, misleading, or prejudicial only to Mount, who does not appeal. Affirmed.