Central Stock & Grain Exchange of Chicago v. Bendinger

After the foregoing statement* of the case, GROSSCUP, Circuit Judge, delivered the opinion of the court, as follows: The second and third assignments of error on the main appeal are already disposed of in the statement of the case. The evidence convinces us that Forbus & Company were but feeders to the Chicago house, the appellant; and that whatever monies were deposited with the former as margins were, in effect, acquired by the latter. The transactions may be treated as if they had taken place through no intermediary, but primarily with the Chicago house. Indeed, some of the transactions were directly with the appellant. The dealings were, in law, gambling transactions. Each one, so far as it was done in Ohio, was a violation of the laws of that state, and, so far as done in Illinois, was a violation of the laws of Illinois. Each transaction was punishable in one state or the other — possibly in both — as a statutory misdemeanor. 'Each transaction, from beginning to.end — including the deposit of appellee’s money as margins, and its absorption by appellant in the deals — was illegal and void. Section 131, c. 38, Rev. St. Ill.; subdivision 2, § 6939, Rev. St. Ohio. See, also, Higgins v. McCrea, 116 U. S. 679, 6 Sup. Ct. 557, 29 L. Ed. 764. What right, then, has appellee against appellant respecting her money so deposited and disposed of. At common law money lost in gaming could not be recovered. But the statute of Hlinois (section 132, c. 38), as interpreted by the Appellate Court of Illinois (Elder v. Talcott, 43 Ill. App. 439), changes the common law, and authorizes such recovery, either by an action at law, for debt, replevin, assumpsit, or trover, or by a proceeding in chancery. Under [929] this statute, thus interpreted, had appellee herself been a party to the transactions, through Slichtenoth, as her agent, an action by her to recover would lie. It is not necessary, however, that we should go to that extent, for appellee was not a participant in, but the unconsenting victim of, the proscribed transactions. There can be no doubt that whenever a principal confides to his agent money for the accomplishment of a particular object, the law impresses upon that money, for the benefit of the principal, a trust for the performance of the object contemplated, which can only be satisfied by its devotion to that object, unless the principal directs it otherwise. Mechem,.Ag. § 780. This trust is not confined to the period during which the money remains in the possession of the agent, but follows the fund into the hands of whomsoever it may come, until it reaches the possession of one who has an equity superior to that of the principal; but such an one must be a bona fide holder for value, without notice of the trust; for, if the fund come into the hands of a third person receiving it without consideration, the principal may recover from such third person, as well as from the agent. The application of this rule makes the appellant responsible to the appellee for the return of her money. The appellant is not a bona fide holder for value. An act that is criminal and void can not be said to be founded upon good faith, or a valuable consideration. The third person, holding the money, and defending against the owner, must show some better case than that he acquired the money in violation of law. There can be no doubt that in some form of action monies thus acquired are recoverable by the owner. That equity affords a remedy seems equally clear. Being for the recovery of money which, in the hands of appellant, was in the nature of a trust, the suit is one of equitable assumpsit, and cognizable, therefore, in law, or in chancery. 11 Am. & Eng. Enc. Law (2d Ed.) p. 203. Especially is this true when the recovery depends upon'an accounting, compulsory, tedious, and more or less intricate. In such a case it cannot be said that the appellee had a full, plain, and adequate remedy at law. The cross appeal presents a more difficult question. The Central Stock and Grain Exchange, so far as the proof shows, had no knowledge that the monies deposited as margins were pot Stiehtenoth’s. or that he was not authorized to deal with the Central Stock and Grain Exchange as he did. There is no element in the case of a wrongful appropriation by the Central Stock and Grain Exchange of Mrs. Bendinger’s money, knowing it to be her money; and it seemed to the Circuit Court inequitable that, having paid back a part to the only person known to have had an interest therein, no credit should be allowed for the part repaid. But, on the other hand, the decree of the Circuit Court, in respect to this repayment, works, in our opinion, an inequity to Mrs. Bendinger. The use of her money as margins was, so far as Stichtenotli is concerned, a clear trespass upon her rights, and, in this trespass, the Central Stock and Grain Exchange became a participant; for, the taking possession of the money as margins being illegal, the [930] attitude of the Central Stock and Grain Exchange to the trust money became, and remained, that of an intermeddler — the act of a person who had no lawful concern with the money, and no justification for its possession — and an intermeddler makes himself a trustee de son tort. Perry, Trusts (4th Ed.) § 245. Now, the liability of a trustee de son tort dates from the moment of the trespass, that is, from the moment the money was diverted from its true destination. This was the moment the money was deposited as margins. The wrong to Mrs. Bendinger was then already done. A repayment, total or partial, to Stichtenoth, after three months, in the guise of profits, does not of itself make good the injury, for both the trust thus broken into, and the trustee himself, are no longer what they were before the trespass was committed. There is a wide chasm between the situation of Mrs. Bendinger, parting with her money to an agent in whom she confides, and who has not yet broken that confidence, and her situation when the agent had already broken faith, was already in the midst of losses swamping the funds, and had probably spent, from time to. time, the monies repaid as if they were his individual profits. A trustee de son tort, either by direct act, or by unlawful intermeddling with the trust funds, is not freed qf responsibility until there has been full restoration to the one injured, and any restoration that does not make the cestui que trust whole — that is, as applied to this case, that does not either replace the money, or replace her, with reference to the fund and the trustee, in the situation occupied before the trespass — is not full and complete. This conclusion may appear like a hardship to the Central Stock and Grain Exchange, but the hardship is traceable to its violation of law. A contrary ruling would be a hardship to Mrs. Bendinger; and in choosing on whom the hardship must fall, this case is without room for much hesitation. The decree of the Circuit Court is affirmed, in so far as it is affected by the main appeal;* and reversed, in so far as it is affected by the cross appeal; and the cause is remanded with instructions to enter a decree in favor of Mrs. Bendinger, against the Central Stock and Grain Exchange of Chicago, for the sum of seven thousand six hundred and forty-two dollars and fifty cents.