§ 1030. Sales promotive of wagering speculation - Speculating in "futures."- Wagering contracts, as such, were not invalid at common law unless affected with some special cause of illegality, as, for example, that they were calculated to injure third persons, or were immoral in their subject-matter, or were opposed to a sound public policy. They were, however, early restrained by the English statutes and discountenanced by the English courts. In the United States, judicial opinion has been still more strongly opposed to them, and in most of the States the exceptions have become the rule, and all wagering contracts are denied enforcement. In many of the States, also, there are express statutory declarations against them.1 § 1031.- The cases, however, in which this ground of illegality has been most frequently urged in connection with the subject of sale are those involving a contract for the sale and future delivery of merchandise, or what have popularly come to be known as "futures." There is no legal objection to a sale of goods to be delivered in the future, even though the seller be not possessed of the goods at the time, and have no other means of acquiring them than to go into the market and buy them. If the parties actually intend a sale and delivery of the goods, the contract is entirely valid; but if, under the guise of such a contract, valid on its face, the real intention of the parties is not to deliver the goods, but merely to speculate in the rise or fall of prices and to pay the difference between the contract price and the market price at the time agreed upon, then the transaction is a wagering one and is void. This conclu (1899), 76 Minn. 246, 79 N. W. R. 111. The facts here were that Young, who was a resident of Fargo, N. D., telephoned from that place to the brewing company at Moorhead, Minn., ordering beer to be delivered at his residence in Fargo. At this time the statute of North Dakota forbade the sale of beer in that State. The court held that the sale was made in North Dakota, and, "the sales being illegal, void and non-enforceable in the State where they were made, no action can be maintained upon them in this State." One judge dissented. 1 The subject of the validity of wagering contracts generally is quite fully discussed in the opinion and notes to Bernard v. Taylor (1893), 23 Oreg. 416, 37 Am. St. R. 693, 18 L. R. A. 859, 31 Pac. R. 968. 2 Lester v. Buel, 49 Ohio St. 240, 34 sion is reached by the English courts under the provisions of the English statutes; but in the United States, though there 1 Am. St. R. 556, 30 N. E. R. 821; Sondheim v. Gilbert, 117 Ind. 71, 10 Am. St. R. 23, 5 L. R. A. 432, 18 N. E. R. 687; Snoddy v. American Nat. Bank, 88 Tenn. 573, 17 Am. St. R. 918, 7 L. R. A. 705, 13 S. W. R. 127; Crawford v. Spencer, 92 Mo. 498, 1 Am. St. R. 745, 4 S. W. R. 713; Oliphant v. Markham, 79 Tex. 543, 23 Am. St. R. 363, 15 S. W. R. 569; Floyd v. Patterson, 72 Tex. 202, 13 Am. St. R. 787, 10 S. W. R. 526; Kahn v. Walton, 46 Ohio, St. 195, 20 N. E. R. 203; Harvey v. Merrill, 150 Mass. 1, 5 L. R. A. 200, 22 N. E. R. 49; Sprague v. Warren, 26 Neb. 326, 3 L. R. A. 679, 41 N. W. R. 1113; Seeligson v. Lewis, 65 Tex. 215, 57 Am. R. 593; Conner v. Robertson, 37 La. Ann. 814, 55 Am. R. 521; Whitesides v. Hunt, 97 Ind. 191, 49 Am. R. 441; Hatch v. Douglass, 48 Conn. 116, 40 Am. R. 154; Gregory v. Wendell, 39 Mich. 337, 33 Am. R. 390; Gregory v. Wendell, 40 Mich. 432; Donovan v. Daiber, Mich. 82 N. W. R. 848; Wall v. Schneider, 59 Wis. 352, 48 Am. R. 520, 18 N. W. R. 443; Bigelow v. Benedict, 70 N. Y. 202, 26 Am. R. 573; Flagg v. Baldwin, 38 N. J. Eq. 219, 48 Am. R. 308; Lyon v. Culbertson, 83 Ill. 33, 25 Am. R. 349; Irwin v. Williar, 110 U. S. 499; Bibb v. Allen, 149 U. S. 481, 13 Sup. Ct. R. 950; In re Chandler, 13 Am. L. Reg. (N. S.) 310; Cobb v. Prell, 5 McCrary, 80, 15 Fed. R. 774, 22 Am. L. Reg. (N. S.) 609; Bartlett v. Smith, 4 McCrary, 388, 13 Fed. R. 263; Bryant v. Western Union Tel. Co., 17 Fed. R. 825; Kirkpatrick v. Adams, 20 Fed. R. 287; Bangs v. Hornick, 30 Fed. R. 97; Mutual L. Ins. Co. v. Watson, 30 Fed. R. 653; Ward v. Vosburgh, 31 Fed. R. 12; Boyd v. Hanson, 41 Fed. R. 174; Perryman v. Wolffe, 93 Ala. 290, 9 S. R. 148; Hawley v. Bibb, 69 Ala. 52; Tomblin v. Callen, 69 Iowa, 229, 28 N. W. R. 573; First Nat. Bank v. Oskaloosa Packing Co., 66 Iowa, 41; Lowe v. Young, 59 Iowa, 364; Counselman v. Reichart, 103 Iowa, 430, 72 N. W. R. 490; Phelps v. Holderness, 56 Ark. 300, 19 S. W. R. 921; Watte v. Wickersham, 27 Neb. 457, 43 N. W. R. 259; Morrissey v. Broomal, 37 Neb. 766, 56 N. W. R.383; Mohr v. Miesen, 47 Minn. 228, 49 N. W. R. 862; Billingslea v. Smith, 77 Md. 504, 26 Atl. R. 1077; Lawton v. Blitch, 83 Ga. 663, 10 S. E. R. 353; Davis v. Davis, 119 Ind. 511, 21 N. E. R. 1112; Rumsey V. Berry, 65 Me. 570; Clay v. Allen, 63 Miss. 426; Gaw v. Bennett, 153 Pa. St. 247, 25 Atl. R. 1114; Waugh v. Beck, 114 Pa. St. 422, 6 Atl. R. 923; Harper v. Young, 112 Pa. St. 419, 3 Atl. R. 670; Griffiths v. Sears, 112 Pa. St. 523, 4 Atl. R. 492; Brua's Appeal, 55 Pa. St. 294; North v. Phillips, 89 Pa. St. 250; Dunn v. Bell, 85 Tenn. 581, 4 S. W. R. 41; Beadles v. Ownby, 16 Lea (Tenn.), 424; Beadles v. McElrath, 85 Ky, 231, 3 S. W. R. 152; Barnes v. Smith, 159 Mass. 344, 34 N. E. R. 403; Burt v. Myer, 71 Md. 467, 18 Atl. R. 796; Cover v. Smith, 82 Md. 586, 34 Atl. R. 465; Flagg v. Gilpin, 17 R. I. 10, 19 Atl. R. 1084; Cothran v. Ellis, 125 Ill. 496, 16 N. E. R. 646; Jamieson v. Wallace, 167 IIL 388, 47 N. E. R. 762. 1 The English statute of 8 & 9 Vict., ch. 109, sec. 18, provides that "all contracts or agreements, whether by parol or in writing, by way of gaming or wagering, shall be null and void." Under this statute contracts of the kind now under consideration are general statutes against gambling,' and though many special statutes have been expressly enacted against this form of gambling, the same conclusion is almost unanimously arrived at upon grounds of public policy. § 1032. Unless so declared by statute, it is not enough to render the contract void that one party only intended by it merely to speculate in prices: it must appear that such was the intention of both of the parties to the contract, and that have been held void. Grizewood v. change, 85 Tenn. 572, 4 S. W. R. 38; Blane (1851), 11 Com. B. 526. But, as will be seen in § 1039, a broker employed to conduct such transactions upon commission may recover where he has not participated in the wrongful intention. Thacker v. Hardy (1878), L. R. 4 Q. B. Div. 685, where the opinion is expressed that the jury in Grizewood v. Blane, supra, came to a wrong conclusion upon the facts. (But in Barnard v. Backhaus, 52 Wis., at p. 604, Cole, C. J., expresses the opinion that the judges in Thacker v. Hardy "draw a very fine sight and are quite astute in finding reasons to uphold the contract.") Where both parties to contracts for the sale and purchase of stocks intend that no stocks shall be deliv. ered and that "differences" only shall be accounted for, the mere fact that the contracts provide that either party may require completion of the purchase does not prevent their invalidity under the statute. Universal Stock Exchange v. Strachan, [1896] App. Cas. 166. 1 General statutes against gaming have been held to render contracts void whose purpose was merely a settlement of differences. Dunn v. Bell (1886), 85 Tenn. 581, 4 S. W. R. 41; McGrew v. City Produce Ex Barnard v. Backhaus (1881), 52 Wis. 593, 6 N. W. R. 252, 9 N. W. R. 595; Everingham v. Meighan, 55 Wis. 354, 13 N. W. R. 269; Lowry v. Dillman, 59 Wis. 197, 18 N. W. R. 4; Wall v. Schneider, 59 Wis. 352, 18 N. W. R. 443, 48 Am. R. 520; Flagg v. Baldwin (1884), 38 N. J. Eq. 219, 48 Am. R. 308; Bigelow v. Benedict (1877), 70 N. Y. 202, 26 Am. R. 573. 2 As in Arkansas (Dig. Stats. 1884, § 1848), Georgia (Code, § 2638), Illinois (Rev. Stats. 1883, ch. 38, § 131), Iowa (L. 1884, ch. 93), Kentucky (Stats. 1884, ch. 1613), Michigan (Comp. L. 1897, § 11, 373; 3 How. Stats., 9354f), Mississippi (L. 1882, ch. 117), Ohio (L. 1885, p. 254), South Carolina (Stats. 1883, No. 306), Texas (L. 1887, ch. 113), and Wisconsin (L. 1881, ch. 81). 3 See Irwin v. Williar, 110 U. S. 499, 28 L. ed. 225, 4 Sup. Ct. R. 160; Barnard v. Backhaus, 52 Wis. 593, 6 N. W. R. 252, 9 N. W. R. 595: Gregory v. Wendell, 40 Mich. 432; Dickson v. Thomas, 97 Pa. St. 278; Love v. Harvey, 114 Mass. 80; Lyon v. Culbertson, 83 Ill. 33; Melchert v. American Union Tel. Co. (1882), 11 Fed. R. 193, and cases cited in note 2, § 1031. 4 "If either party meant it as a lawful and legitimate transaction, it must be held to be lawful and legiti such was their intention when they made it.' And where the contract is fair upon its face, the courts will not presume that it was made the cover of an illegal transaction: the party who alleges the illegality must assume the burden of establishing it.2 mate," per Cooley, J., in Gregory v. Wendell, 40 Mich. 432. To same effect: Wall v. Schneider, 59 Wis. 352, 18 N. W. R. 443, 48 Am. R. 520; Murry v. Ocheltree, 59 Iowa, 435, 13 N. W. R. 411; Whitesides v. Hunt, 97 Ind. 191, 49 Am. R. 441; Clay v. Allen, 63 Miss. 426; Williams v. Carr, 80 N. C. 294; Crawford v. Spencer, 92 Mo. 498, 4 S. W. R. 713, 1 Am. St. R. 745, and note; Sawyer v. Taggart, 14 Bush (Ky.), 727, 18 Am. L. Reg. (N. S.) 222, and note; Pixley v. Boynton, 79 Ill. 351; Lehman v. Strassberger, 2 Woods, 554; Conner v. Robertson, 37 La. Ann. 814, 55 Am. R. 521; Taylor v. Bailey, 169 Ill. 181, 48 N. E. R. 200; Donovan v. Daiber, Mich. 82 N. W. R. 848. The rule is changed by statute in Tennessee (Acts 1883, ch. 251). McGrew v. Produce Exchange, 85 Tenn. 572; and in Missouri: Connor v. Black (1893), 119 Mo. 126, 24 S. W. R. 184. 1 If the contract was valid when made, the fact that the parties subsequently see fit to settle upon the basis of the difference does not affect its validity. Wall v. Schneider, 59 Wis. 352, 18 N. W. R. 443, 48 Am. R. 520 (citing Brua's Appeal, 55 Pa. St. 294; Smith v. Bouvier, 70 Pa. St. 325; Fareira v. Gabell, 89 Pa. St. 89; Clarke v. Foss, 7 Biss. 540; Gilbert v. Gauger, 8 Biss. 214; Williar v. Irwin, 11 Biss. 57; Sawyer v. Taggart, 14 Bush, 727); Kent v. Miltenberger, 13 Mo. App. 503; Conner v. Robertson, 37 La. Ann. 814, 55 Am. R. 521. On the other hand, though the parties might not originally have deemed the contract absolute, still if the purchaser subsequently elects to treat it as an absolute purchase, it is said that "this made it valid whatever had been its original character." Estate of L. H. Taylor & Co. (1899), 192 Pa. St. 313, 43 Atl. R. 975, citing Peters v. Grim, 149 Pa. St. 167; McNaughton v. Haldeman, 160 Pa. St. 144; Anthony v. Unangst, 174 Pa. St. 10. 2 Crawford v. Spencer, 92 Mo. 498. 4 S. W. R. 713, 1 Am. St. R. 745, and note; Irwin v. Williar, 110 U. S. 499, 28 L. ed. 225, 4 Sup. Ct. R. 160; Cockrell v. Thompson, 85 Mo. 510; Conner v. Robertson, 37 La. Ann. 814, 55 Am. R. 521; Rumsey v. Berry, 65 Me. 570; Bigelow v. Benedict, 70 N. Y. 202, 26 Am. R. 573; Williams v. Carr, 80 N. C. 294; Whitesides v. Hunt, 97 Ind. 191, 49 Am. R. 441; Clay v. Allen, 63 Miss. 426; Bangs v. Hornick, 30 Fed. R. 97; Ward v. Vosburgh, 31 Fed. R. 12; First Nat. Bank v. Oskaloosa Packing Co., 66 Iowa, 41, 23 N. W. R. 255; Pratt v. Boody, 55 N. J. Eq. 175, 35 Atl R. 1113. Where, however, the contract is, apparently, within the forbidden class, or the circumstances are such as to impeach its validity, it is said to be the duty of the party who seeks to sustain it to make it affirmatively appear to be legitimate. Barnard v. Backhaus, 52 Wis. 593, 6 N. W. R. 252, 9 N. W. R. 595; Sprague v. Warren, 26 Neb. 326, 3 L. R. A. 679, 41 N. W. R. 1113; Cobb v. Prell, 5 McCrary, 80, 15 Fed. R. 774, 22 Am. L. Reg. (N. S.) 609. The question whether the contract is a wagering one or not, within the rule, is one of fact for the jury.1 2 § 1033. Legitimate speculation. It must be kept in mind that it is not merely speculation which is deemed illegal, for it is entirely legitimate to buy property with the hope of profiting by its rise in value: the vice in the prohibited contracts is that there is really no purchase or intent to purchase and receive the property, but simply, under the guise of such a sale, to lay a wager upon the rise or fall of the market price. § 1034. The fact that there may be an option vested in one party as to the time or the fact of delivery is also of itself harmless, unless declared otherwise by statute; if an actual sale and delivery are contemplated in the event of the exercise of the option, the contract is a valid one; otherwise it is invalid. A "put," therefore, which is an option to sell," 1 Gregory v. Wendell, 39 Mich. 337, 33 Am. R. 390; Gregory v. Wendell, 40 Mich. 432; Gaw v. Bennett, 153 Pa. St. 247, 25 Atl. R. 1114; Brand v. Lock, 48 Ill. App. 390; Morrissey v. Broomal, 37 Neb. 766, 56 N. W. R. 383; Cover v. Smith, 82 Md. 586, 34 Atl. R. 465. 2 Thus, in Gregory v. Wendell, 40 Mich. 432, Cooley, J., says: "That if the parties contemplated an actual purchase of corn, and acted in good faith in making such purchases, the fact that speculation was the object was of no legal importance whatThe right to buy grain in the open market in the hope to profit by a rise in market value is as plain as the right to buy wild lands or any other property." ever. 3 The Illinois statute forbids an option to sell or buy at a future A "put" is defined in Pixley v. Boynton, 79 Ill. 351, as "a privilege of delivering or not delivering the time." The construction supposed to be put upon this statute by the earlier cases, such as Wolcott v. Heath, 78 Ill. 433; Pickering v. Cease, 79 Ill. 328; Pixley v. Boynton, 79 Ill. 351; Tenney v. Foote, 95 Ill. 99; Pearce v. Foote, 113 Ill. 228, seems to be modified in Schneider v. Turner, 130 Ill. 28, 6 L. R. A. 164, 22 N. E. R. 497, in which it is held that, while prior to the act it was lawful to contract to have or give an option to sell or buy grain or other commodity at a future time, they are now unlawful and void. 4. The optional contracts that are void are such as do not contemplate the actual delivery of the commodity purchased, but rather contem. plate that the subject of the contract is not intended to be delivered." grain." See also In re Chandler, 13 Am. L. Reg. (N. S.) 310; Cobb v. Prell, 22 Am. L. Reg. (N. S.) 609, note. |
