Rountree v. Smith
108 U.S. 269 (1883)

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U.S. Supreme Court

Rountree v. Smith, 108 U.S. 269 (1883)

Rountree v. Smith

Decided April 18, 1883

108 U.S. 269

Syllabus

When the question at issue is whether certain contracts for the sale and purchase of merchandise were gambling, and the defendant who impeaches

Page 108 U. S. 270

them in his pleadings, says as a witness testifying about them,

"I could not say that I had any understanding on the subject of the nature and character of the board of trade deals, whether the property was to be actually delivered or whether it was be settled for,"

the court rightly instructed the jury that there was no evidence in regard to this issue which they could consider.

Action to recover moneys paid out and expended by the plaintiffs below to the use of the defendant below. The second count in the complaint set forth:

"That the said plaintiffs during the time hereinafter mentioned were and are co-partners in business in the City of Chicago and Illinois under the name and style of Smith & Lightner, and engaged in purchasing and vending grain, pork and lard, and transacting a general commission business as commission merchants."

"That on or about the second day of February, 1879, at the City of Chicago aforesaid, said defendant employed said plaintiffs, as such co-partners as aforesaid, to purchase large quantities of grain of various kinds and pork and lard for him and to make thereon certain advances of money to and for the use and benefit of said defendant, and also to make sales of said grain, pork, and lard for him, and that in consideration of such purchases, and making such advances by said plaintiffs to and for the use and benefit of said defendant, and for making such sales, he agreed to pay and allow them certain reasonable commissions by way of compensation on all such purchases so made by them for him, and on all sales so made by them for him as aforesaid."

"That under and pursuant to such employment, they, said plaintiffs, in good faith and in the usual course of business, purchased for said defendant at divers times between the first day of February, 1879, and the twenty-ninth day of April, 1879, large quantities of wheat, pork, lard, oats and corn, to-wit, sixteen thousand seven hundred fifty barrels pork, twenty-two hundred fifty tierces of lard, forty thousand bushels of wheat, twenty thousand bushels of oats, and fifty thousand bushels of corn, and made advances thereon for said defendant, which advances amounted in the aggregate to the sum of nine thousand five hundred six dollars and twenty-five cents, and that during the time aforesaid they sold,

Page 108 U. S. 271

under and pursuant to the directions and authority of said defendant, all of said lard, pork, wheat, oats and corn for said defendant."

"That their services in the purchase of said pork, lard, wheat, oats and corn, and making sales thereof, and in making such advances as aforesaid, were reasonably worth the sum of twelve hundred forty-three dollars and seventy-five cents."

"That during the time aforesaid, the defendant paid, to apply thereon, and was credited by said plaintiffs with divers sums of money, amounting in the aggregate to the sum of five thousand three hundred thirty-seven dollars and fifty cents."

"That all of said business transactions were concluded by the sale of the last part of said property on the 29th day of April, 1879; that on that day, after making such last sale and giving the defendant the benefit of all the credits to which he was entitled, there remained due and owing to said plaintiffs from said defendant for such advances so made as aforesaid, and for their commissions on such purchases and sales as aforesaid, the sum of five thousand four hundred twelve dollars and fifty cents, which now remains due and unpaid."

The answer admitted the partnership and the' employment of the firm, and said that the defendant had deposited large sums in their hands for the purchase of options upon representations made by the firm, and further said

"that certain articles, that is to say, wheat, oats, corn, lard and pork, would probably and almost certainly bear a higher price in the market within a short time than they then bore in such market. That by making contracts agreeing in form to purchase such articles for future delivery at the end of said time above named he would, without receiving or handling, or actually purchasing or paying for the said articles or any of them, realize large profits from the difference between the price said articles then bore in the market and the price they would probably bear at the end of the time aforesaid; that it would not be necessary, nor was it expected or in any way understood, that either this defendant or the plaintiffs as his brokers should ever actually see, touch, handle, pay for, or own, receive, or possess any of the said articles. That the large sums of money placed by this defendant in the hands of said plaintiffs should be used to

Page 108 U. S. 272

keep good the margins, so called, upon the said articles purchased -- that is to say, said plaintiffs were to purchase, in their own names, the said 'options,' but the same were to be so purchased and held by their for the use and benefit of this defendant. If the said articles should rise and increase in value the said profits should be his, and if they should decrease in value the loss would fall on him."

"That said plaintiffs should so purchase such articles for such future delivery to a nominal amount of many times the money so placed by this defendant in their hands. The said sum of money so placed by this defendant in the hands of said plaintiffs being equal to about ___ percent of the whole nominal value of the said articles so to be bought for future delivery as aforesaid, and the said moneys were to be held by said plaintiffs to protect them from loss in case of a depreciation in value of said articles, and the same was adjudged and deemed by them sufficient for that purpose. That afterwards and during the month of February, l879, this defendant placed in the hands of said plaintiffs certain other large sums of money with which to purchase other options, in all amounting, including said moneys so first placed in their hands as aforesaid, to the sum of about three thousand one hundred and fifty dollars. That all of said moneys were paid by this defendant to them, to be used, and were in fact used as he is informed, solely for the purpose of making and keeping good the 'margins,' so called, to protect said plaintiffs from loss in case of depreciation in the market value of such articles so to be bought by them on his account as aforesaid. That this defendant has no knowledge or information sufficient to form a belief as to whether the statement in said complaint contained of articles bought by said plaintiffs for him is a true statement of the amount of such articles actually purchased or not, and he therefore denies the same and asks that said plaintiffs may be required to make proofs thereof, and of the prices agreed to be paid therefor, and the prices for which the same was sold if it was ever sold. That on the 11th day of March, 1879, he gave said plaintiffs notice that he had no more money to put up or pay over for margins, and that he would not pay or advance another dollar, or invest, or be, or become liable for another dollar in or about the transactions or any of them. That as he is informed and believes, all of the articles bought or agreed to be bought or bargained for by said plaintiffs,

Page 108 U. S. 273

for him or on his account, were bought and carried in the names of said plaintiffs and not in the name of this defendant; that it was within their power at any time to close out and end the said transactions."

The answer further charged that if the firm had closed up the transactions, there would have been no loss, and it denied any liability. It further charged, as to both counts, that the transactions were gambling and void.

At the trial the parties were the principal witnesses, and sundry questions upon the evidence arose, which are explained in the opinion of the court, so far as they are important. The jury returned the following general and special verdict:

"We, the jury sworn and empanelled to try this case, find for the plaintiffs, and assess their damages at the sum of five thousand six hundred and fourteen and 46/100 dollars. And we further find, in answer to certain special questions submitted to us by the court, as follows:"

"First. Did the defendant notify the plaintiffs, or either of them, on or abort March 11, 1879, that he would not be responsible for any money beyond the amount of money they then had in their hands belonging to him? Answer. Yes."

"Second. If he did so notify them or either of them state, if you are able, whether the amount of money he then had in their hands was sufficient to cover all losses he had then sustained? Answer. We are unable to state."

"Third. If you find that the defendant did so notify the plaintiffs as submitted in the first question, was there any mutual understanding or contract between the plaintiffs and defendant on or about March 11, 1879, that the defendant should not be held liable on the contracts made on his behalf by the plaintiffs beyond the amount of money then already placed by the defendant in the plaintiffs' hands? Answer. No."

"Fourth. If you find there was such a contract or understanding between the parties as is mentioned in the last question, did the defendant, by his subsequent acts, declarations, directions, or conduct, waive the same and become liable for further losses incurred over and above the money so placed in plaintiffs' hands? Answer. Yes. "

Page 108 U. S. 274

The case was brought here on a writ of error. The material assignments of error were the third and fourth.

"Third. Said court further erred in withdrawing from the said jury and refusing to allow said jury to consider the defense set up by said defendant in the answer herein, that the contracts upon which the said action was based were gaming contracts and illegal and void."

"Fourth. The court further erred in holding and deciding that there was no evidence in said cause to impeach the legality of said contracts, and the said contracts were valid and binding."

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