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Smith et al v. Bailey.

that plaintiff, Smith, agreed to advance the money to margin said wheat. Defendant instructed Smith to sell his December wheat. Smith disappeared from the trading pit about eleven o'clock of that day and in the afternoon, after the closing of the Exchange, he told defendant that plaintiffs had failed in business and had closed all of defendant's deals. Defendant complained of plaintiffs having closed his September deals.

When plaintiffs were directed to buy grain they went into the pit on the trading floor of the Kansas City Board of Trade, of which they were members, and bought the same from a fellow broker, likewise a member of the Board of Trade. Each broker had a card called a "pit card;" one side of this card was the "bought" side and the other the "sold" side. The broker buying would make a record of the sale on the bought side of his pit card, showing the quantity, the delivery month, kind of grain, the price, the trading party and the account of his client. He furnished, as required by section 4783, Revised Statute 1909, a written confirmation statement to his clients signed by him showing these facts. The selling broker made a record identical in form on the sold side of his pit card and also gave a written report to the grain Clearing Company of the sale, having thereon a revenue stamp required by the laws and regulations of the State. The grain Clearing Company collected from each of said brokers the money necessary to carry out and perform said contracts on the delivery date and to protect it in its obligation to so carry out and perform the contracts on that day. (That is to say, it collected margins.) The company checked these records against each other and entered upon its bought and sold sheets respectively the full record of each side of the entire transaction reported to them by the brokers, from thence on the contracts were carried by the grain Clearing Company to the last day of the delivery month. None of the wheat was manually delivered on the delivery day but the brokers' demands against each other were off-set and the balance settled in warehouse receipts covering

Smith et al v. Bailey.

the grain. One member of the grain Clearing Company stated that it operated practically the same as a bank clearing house and that it was organized for the purpose of facilitating the handling of trades for future deliveries, "by concentrating a good deal of bookkeeping into the hands of one company so that the buyer for the wheat could look to that company for the delivery of it, and the seller of the wheat could make his deliveries to the Clearing Company on all their contracts instead of scattering them around with the different individual traders." Without going into the merits of the matter we will assume for the purpose of this case that this process constitutes an actual delivery of the grain by the grain clearing company.

The actual amount of money carried by the transactions was not placed with the grain Clearing Company but only enough to secure it against a decline in the market. Plaintiffs were not members of the grain Clearing Company, an association carried on by some members of the Board of Trade, so it was necessary for them to clear their trades for future delivery through one Hinsen, who was a member of said company. Plaintiffs, at the close of the day's market, would make through Hinsen written reports of their transactions to, the grain Clearing Company, showing the facts as above. The rules of the Board of Trade and the grain Clearing Company prohibited all gambling. Defendant testified that he knew his contracts were being executed on the Board of Trade and he knew that the Board of Trade had rules but "I didn't know much about the rules of the Board of Trade."

It is apparent from the testimony that there were facts from which the jury could say that defendant intended to speculate on the fluctuations of the market and did not intend a bona-fide transaction in buying and selling the grain out of which plaintiffs' demand arose. However, it is insisted upon by the plaintiffs that as defendant knew that his contracts were being executed upon the Kansas City Board of Trade, that he must have known that they were executed in accordance with

Smith et al v. Bailey.

the rules and regulations of such Board and the grain Clearing Company, and that as these rules and regulations require actual delivery of the grain, defendant cannot now be heard to say that he was speculating, and for this reason, among others, plaintiffs say their demurrer to defendant's evidence should have been sustained. Assuming that the rules and regulations of the Kansas City Board of Trade and the grain Clearing Company provided for actual delivery and that as defendant knew where his contracts were being executed it must be regarded that he knew of the regulations of these two organizations. [See Bibb v. Allen, 149 U. S. 481.] We think that he could, nevertheless, speculate under such rules but the rules were admissible in evidence as throwing light on the defendant's intention. [James v. Haven & Clement, 185 Fed. 692.]

Section 4780, Revised Statutes 1909, provides:

"All purchases and sales or pretended purchases and sales, or contracts and agreements for the purchase and sale, of the shares of stocks or bonds of any corporation, or petroleum, provisions, cotton, grain or agricultural products whatever, either on margin or otherwise, without any intention of receiving and paying for the property so bought, or of delivering the property so sold, and all the buying or selling or pretended buying or selling of such property on margins or on optional delivery, when the party selling the same, or offering to sell the same, does not intend to have the full amount of the property on hand or under his control to deliver upon such sale, or when the party buying any of such property or offering to buy the same does not intend actually to receive the full amount of the same if purchased, are hereby declared to be gambling and unlawful, and the same are hereby prohibited. Any company, co-partnership or corporation, or meinber, officer or agent thereof, or any person found guilty of a violation of the provisions of this section, shall be fined in a sum not less than three hundred dollars nor more than three thousand dollars."

Smith et al v. Bailey.

Section 4781, Revised Statutes 1909, provides that it shall not be necessary, in order to commit the offense defined in section 4780, that both the buyer and seller

shall agree to do the things prohibited in said section 4780.

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Under decisions in this State construing sections 4780 and 4781, Revised Statute 1909, the intent of either one of the parties to the buying or selling to gamble in such transaction or to speculate on the rise or fall of the market, is sufficient to and does render the contract absolutely void, notwithstanding the other party may be ever so innocent and wholly unaware of the intention to gamble entertained by the other. [Connon v. Black, 119 Mo. 126; Edwards Brokerage Co. v. Stephenson, 160 Mo. 516; Atwater v. Brokerage Co., 147 Mo. App. 436.] And in order that there be a valid contract for the sale of commodities to be delivered in the future there must be an actual intention to deliver or receive the commodity on the delivery day. An intention to simply settle the difference according to the fluctuations of the market prices of such commodity makes the transaction a gambling one. [Lane v. Grain Co., 105 Mo. App. 1. c. 218, and cases therein cited.]

It cannot be said that because the rules and regulations under which defendant's transactions were being executed provided that the grain Clearing Company make actual delivery of the grain bought and sold, defendant was not gambling, when the evidence shows that he was trading on the fluctations of the market. Defendant testified that he intended to deliver no grain nor to receive any grain. Various trades were made by plaintiffs for him, none of them were carried to delivery date, but plaintiffs bought or sold to protect his trades as the market fluctuated. Defendant, therefore, was using a legitimate process, by which, if he so desired, he could have conducted his trades lawfully, for the purpose of effectuating an unlawful venture, that is, gambling. The fact that others carried out his contracts for him to consummation does not control his intention

Smith et al v. Bailey.

in the matter. This was only a guise, as far as he was concerned, to cover up his violation of the law. As was said approvingly by the Supreme Court of the United States in Irwin v. Williar, 110 U. S. 1. c. 511:

"It makes no difference that a bet or wager is made to assume the form of a contract. Gambling is none the less such because it is carried on in the form or guise of legitimate trade."

When he sold wheat he had no intention whatever of carrying the contract to consummation whether his investment was good or bad, but it was bis intention to make money through speculation if the price thereafter went down by buying an equal amount of other wheat at the new price and collecting his "profits" from his brokers. If the price went up then a similar process was gone through with and defendant paid his brokers the amount of his losses. If he bought wheat it was not his intention to carry the contract to consummation so that the wheat might be delivered by him, but to speculate upon the change in the market, and if the market went up it was his intention to sell his contract or to sell an equal amount of other wheat at the new price and pocket the difference as his "profit." If the market went down then a similar process was gone through with and he would pay his brokers the amount of his losses. If this was not speculating on the fluctuations of the market, it would be hard to imagine a case where such speculation would be present.

It is the contention of the plaintiffs that as defendant did not tell plaintiffs that he was gambling or intended to gamble that they are "innocent brokers" and that the transactions were not void and invalid as to them, and that they may recover their commissions and the money advanced. The evidence of Smith, one of the plaintiffs in this case, set forth supra, is almost conclusive of the fact that defendant was gambling and that plaintiffs knew it. This case comes very near being one where we could say as a matter of law that plaintiffs knew this fact. A person may lawfully sell personal property for future delivery which he may not

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