{ "id": 8595890, "name": "J. TERRY WEST, ANDRE P. PILLOT, CHESTER S. FAIRGRIEVE, and WILLIAM J. BUTLER, Trading as C. E. WELLES & CO., v. W. T. SATTERFIELD", "name_abbreviation": "West v. Satterfield", "decision_date": "1925-09-16", "docket_number": "", "first_page": "89", "last_page": "95", "citations": [ { "type": "official", "cite": "190 N.C. 89" } ], "court": { "name_abbreviation": "N.C.", "id": 9292, "name": "Supreme Court of North Carolina" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "163 N. C., 124", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 11270779 ], "opinion_index": 0, "case_paths": [ "/nc/163/0124-01" ] }, { "cite": "173 N. C., 234", "category": "reporters:state", "reporter": "N.C.", "opinion_index": 0 }, { "cite": "138 N. C., 724", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 11270374 ], "weight": 2, "opinion_index": 0, "case_paths": [ "/nc/138/0724-01" ] }, { "cite": "80 N. C., 295", "category": "reporters:state", "reporter": "N.C.", "opinion_index": 0 }, { "cite": "153 N. C., 169", "category": "reporters:state", "reporter": "N.C.", "opinion_index": 0 }, { "cite": "171 N. C., 383", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 11270489 ], "opinion_index": 0, "case_paths": [ "/nc/171/0383-01" ] }, { "cite": "147 N. C., 634", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 11271057 ], "opinion_index": 0, "case_paths": [ "/nc/147/0634-01" ] }, { "cite": "178 N. C., 46", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 11270819 ], "opinion_index": 0, "case_paths": [ "/nc/178/0046-01" ] }, { "cite": "106 Fed., 880", "category": "reporters:federal", "reporter": "F.", "case_ids": [ 6728728 ], "pin_cites": [ { "page": "882" } ], "opinion_index": 0, "case_paths": [ "/f/106/0880-01" ] } ], "analysis": { "cardinality": 792, "char_count": 18076, "ocr_confidence": 0.471, "pagerank": { "raw": 6.209811994104169e-08, "percentile": 0.3844913352091184 }, "sha256": "540fe6cf019546d2ab55d595c552d1ff1d408e2e8de1e183c1fbd72ebf3e34d6", "simhash": "1:27537a62f728bbea", "word_count": 3162 }, "last_updated": "2023-07-14T22:38:29.672014+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "J. TERRY WEST, ANDRE P. PILLOT, CHESTER S. FAIRGRIEVE, and WILLIAM J. BUTLER, Trading as C. E. WELLES & CO., v. W. T. SATTERFIELD." ], "opinions": [ { "text": "Claekson, J.\nDefendant repudiates his promise made to plaintiffs and sets up the defense \u201cthat the alleged contract ... is contrary to public policy and the statute law of the State of North Carolina, and this defendant pleads O. S., ch. 39, entitled 'Gaming Contracts and Futures,\u2019 in bar of plaintiffs\u2019 right to recover in this action.\u201d\nThis brings us to consider the statute law on the subject. This is a matter of considerable importance to commercial transactions, and, notwithstanding their length, we give the statutes on the subject:\n\u201cC. S., 2144. Certain contracts as to \u2018futures\u2019 void. Every contract, whether in' writing or not, whereby any person shall agree to sell and deliver any cotton, Indian corn, wheat, rye, oats, tobacco, meal, lard, bacon, salt pork, salt fish, beef, cattle, sugar, coffee, stocks, bonds, and choses in action, at a place and at a time specified and agreed upon therein, to any other person, whether the person to whom such articles is so agreed to be sold and delivered shall be a party to such contract or not, when, in fact, and notwithstanding the terms expressed of such contract, it is not intended by the parties thereto that the articles or things so agreed to be sold and delivered shall be actually delivered, or the value thereof paid, but it is intended and understood by them that money or other thing of value shall be paid to the one party by the other, or a third party, the party to whom such payment of money or other thing of value shall be made to depend, and the amount of such money or other thing of value so to be paid to depend upon whether the market price or value of the article so agreed to be.sold and delivered is greater or less at the time and place so specified than the price stipulated to be paid and received for the articles so to be sold and delivered, and every contract commonly called 'futures,\u2019 as to the several articles and things hereinbefore specified, or any of them, by whatever other name called, and every contract as to the said several articles and things, or any of them, whereby the parties thereto contemplate and intend no real transaction as to the article or thing agreed to be delivered, but only the payment of a sum of money or other thing of value, such payment and the amount thereof and the person to whom the same is to be paid to depend on whether or not the market price or value is greater or less than the price so agreed to be paid for the said article or thing at the time and place specified in such contract, shall be utterly null and void; and no action shall be maintained in any court to enforce any such contract, whether the same was made in or out of the State, or partly in and partly out of this State, and whether made by the parties thereto by themselves or by or through their agents, immediately or mediately; nor shall any party to any such contract, or any agent of any such party, directly or remotely connected with any such contract in any way whatever, have or maintain any action or cause of action on account of any money or other thing of value paid or advanced or hypothecated by him or them in connection with or on account of such contract and agency; nor shall the courts of this State have any jurisdiction to entertain any suit or action brought upon a judgment based upon any such contract. This section shall not be construed so as to apply to any person, firm, corporation, or his or their agent engaged in the business of manufacturing or wholesale merchandising in the purchase or sale of the necessary commodities required in the ordinary course of their business.\u201d\n\u201cC. S., 2145. Prima facie evidence of illegal contract in \u2018futures Proof that anything of value agreed to be sold and delivered was not actually delivered at the time of making the agreement to sell and deliver, and that one of the parties to such agreement deposited or secured, or agreed to deposit or secure, what are commonly called 'margins,\u2019 shall constitute prima facie evidence of a contract declared void by the preceding section.\u201d\n\u201c0. S., 2146. Burden shifted by plea of illegality; pleadings not evidence in criminal action. When the defendant in any action pending in any court shall \"allege specifically in his answer that the cause of action alleged in the complaint is in fact founded upon a contract such as is by this chapter made void, and. such answer shall be verified, then the burden shall be upon the plaintiff in such action to prove by the proper evidence, other than any written evidence thereof, that the contract sued upon is a lawful one in \u2019its nature and purposes; and tbe defendant may likewise produce evidence to prove tbe contrary: Provided, nevertheless, tbat any allegation or statement of fact made in any pleading in any sucb action, or tbe evidence produced on tbe trial in any sucb action, shall not be evidence against tbe party making or producing tbe same in any criminal action against sucb party.\u201d\nPlaintiffs\u2019 group of assignments of error in regard to tbe meaning of \u201cmarginal requirements,\u201d etc., cannot be sustained. It appears from tbe complaint of plaintiffs, \u201cwhereupon plaintiffs notified tbe defendant tbat unless be made payment of margin they would take steps to close out tbe account and collect from him any loss,\u201d etc.\nFrom tbe complaint, answer, and letters of both parties, it appears tbat defendant was to put up \u201cmargin.\u201d It was clearly permissible for either party to define tbe meaning. In fact, plaintiffs, on cross-examination, asked defendant tbe meaning.\nCyc. Law Dictionary, under tbe bead of \u201cmargin,\u201d says see \u201cgambling contracts,\u201d and under sucb bead defines \u201cmargin\u201d: \u201cMoney or collat-erals deposited with a broker to protect contracts, usually for future delivery.\u201d\nTbe evidence given by defendant in bis definition of \u201cmargin\u201d could in no way be prejudicial, as it is substantially tbe definition given by tbe courts. \u201cA payment made on account by a customer to a stockbroker, under an agreement between tbe customer and tbe stockbroker in which tbe stockbroker agreed either to sell or to buy from tbe customer a certain number of shares of stock, but under which, in fact, no delivery or transfer of shares was contemplated, is known in stockbrokers\u2019 parlance as a 'margin.\u2019\u201d McClain v. Fleshman (U. S.), 106 Fed., 880, 882. C. S., 2145, supra.\nIn an action by tbe purchasers of potatoes by contract providing they should stand any shrinkage while in storage for future delivery, tbe goods being warranted sound and No. 1 at tbe time of making tbe contract, question whether tbe potatoes were up to specifications, also tbe meaning of tbe terms \u201cshrinkage to be stood by tbe purchaser,\u201d held for tbe jury, tbe terms being sufficiently ambiguous to permit explanation by parol. Richardson v. Woodruff, 178 N. C., 46.\nWe think tbe evidence objected to was competent. Tbe charge of tbe court as to tbe burden was in accordance with tbe statute and as to what was and what was not a valid contract, a correct interpretation of tbe law as plainly written by tbe lawmaking pow\u00e9r of tbe State. This position is fully sustained by our decisions. Burns v. Tomlinson, 147 N. C., 634; Randolph v. Heath, 171 N. C., 383.\nIn Edgerton v. Edgerton, 153 N. C., 169, it was said: \u201cTbe form of tbe contract is not conclusive in determining its validity when it is assailed as being founded upon an illegal consideration and as having been made in contravention of public policy. If under the guise of a contract of sale, the real intent of tbe parties is merely to speculate in the rise or fall of the price and the property is not to be delivered, but only money is to be paid by the party who loses in the venture, it is a gaming contract and void. \u2018The true test of the validity of a contract for future delivery is whether it can be settled only in money and in no other way, or whether the party selling can tender and compel acceptance of the particular commodity sold or the party buying can compel the delivery of the commodity purchased. The essential inquiry in every ease is 'as to the necessary effect of the contract and the real intention of the parties/ \u201d citing 20 Cyc., 930; Williams v. Carr, 80 N. C., 295; S. v. McGinnis, 138 N. C., 724; S. v. Clayton, ibid., 732.\nWalker, J., in Orvis v. Holt, 173 N. C., 234, said: \u201cIn this ease, was it the intention of both parties that the cotton should not be delivered, or was it their purpose to conceal, in the deceptive terms of a fair and lawful contract of sale, a gambling deal or transaction, by which they contemplated no real bargain as to the article agreed to be delivered? If so, the contract is void. Holt v. Wellons, 163 N. C., 124. We said in that case: \u2018Of course, the law deals only with realities and not appearances \u2014 the substance and Hot the shadow. It will not be misled by a mere pretense, but strips a transaction of its artificial disguise in order to reveal its true character. It goes beneath the false and deceitful presentment to discover what the parties actually intended and agreed, knowing that \u201cthe knave counterfeits well \u2014 a good knave.\u201d It always rejects the ostensible for the real in looking for fraud or a violation of law. The essential inquiry, therefore, in every case is as to the necessary effect of the contract and its true purposed \u201d\nThe statute in this State makes contracts for \u201cfutures\u201d utterly null and void. The statute clearly defines what are \u201cfuture\u201d contracts: \u201cWhereby the parties thereto contemplate and intend no real transaction as to the article or thing agreed to be .delivered.\u201d\nThe Legislature in its wisdom has seen fit to pass a drastic act to stop this kind of gambling or vicious contracts, no doubt fully aware of the wreckage to the human family. The mischief the act is intended to prevent is plain \u2014 that no one should get something for nothing, or nothing for something. The defendant repudiates his promise and relies upon the law \u2014 this he has a legal right to do. In fact, th'e statute makes such transactions, under C. S., 2147, a misdemeanor. Under C. S., 2148, opening offices for sales of \u201cfutures\u201d (bucketshop) is also made a misdemeanor. S. v. McGinnis, 138 N. C., 724.\nOn the record we find\nNo error.", "type": "majority", "author": "Claekson, J." } ], "attorneys": [ "W. D. Pruden for plaintiffs.", "Herbert R. Leary for defendant." ], "corrections": "", "head_matter": "J. TERRY WEST, ANDRE P. PILLOT, CHESTER S. FAIRGRIEVE, and WILLIAM J. BUTLER, Trading as C. E. WELLES & CO., v. W. T. SATTERFIELD.\n(Filed 16 September, 1925.)\ncts \u2014 Futures\u2014Wagering Contracts \u2014 Parol Evidence \u2014 Statutes, statutes rendering void and unenforceable in our courts a contract le sale of futures upon margin covered by tbe purchaser, that lot contemplate tbe delivery of tbe thing bargained for, but only a mt to be made for a loss incurred or a profit to be received in lance with tbe fall or rise of tbe market, looks to thq substance of ntract and not to its form, and parol evidence is competent to show tention of tbe parties entering therein. C. S., 2144.\n^-Evidence \u2014 Prima Facie Case \u2014 Burden of Proof \u2014 Instructions.\nto whether a contract for tbe sale of shares of stock was intended [ parties to be upon speculation, in violation of C. S., 2144, or con-Lted tbe actual delivery of tbe shares contracted to be sold, the lant in tbe action, tbe purchaser, makes out a prima facie case upon \u00a1ce that it was founded upon a gambling or wagering consideration iation of tbe statute, C. S., 2145, and thereupon tbe burden of proof v to tbe contrary rests upon the plaintiff, and upon conflicting evi-becomes a question for tbe jury under proper instructions from tbe C. S., 2146.\nce \u2014 Contracts\u2014Futures\u2014Appeal and Error,\nio^oimony of a witness as to what facts constitute a marginal payment under tbe terms of a contract in violation of our statute is unobjectionable when correctly stating tbe law.\nAppeal by plaintiffs from Bond, Jand a iury, at March Term, 1925, of ChowaN.\nThis is a civil\u2019action brought by plaintiffs, stockbrokers, at 71 Broadway, New York, members of the New York Stock Exchange. On 30 April, 1922, defendant wrote plaintiffs the following letter from Eden-ton, N. C. :\n\u201cI received your letter of 25 April stating that you would recommend International Nickel. Please buy 100 shares of it at market and send me your invoice. I will forward you check for the marginal requirement.\u201d\nIn compliance with the letter, plaintiffs purchased International Nickel (I. K.), 100 shares, from Block, Maloney & Co., 74 Broadway, at 18.75 per share. Defendant, on 11 May, 1922, wrote plaintiffs the following letter:\n\u201cI received a letter from you stating you would like to have some money on my account, but you did not state how much. Please advise me at once.\u201d\nPlaintiffs, on 15 May, 1922, wrote defendant:\n\u201cReplying to your letter of 11 May, kindly forward $750 to cover the margin on your account.\u201d\nOn 26 January, 1923, plaintiffs closed out the \u201cInternational Nickel\u201d at 14.87% a share, and sued defendant for difference, including commissions and interest \u2014 $498.14.\nPlaintiffs\u2019 evidence was to the effect that they advanced their own funds for the purchase, and that \u201csaid stock was immediately delivered to O. E. Welles & Go., and payment therefor made by them through the Stock Clearing Corporation in accordance with the rules of the New York Stock Exchange. . . . That payment for said stock was made by the plaintiffs on 3 May, 1922, and charged to defendant\u2019s account. That said stock was immediately delivered to the plaintiffs as defendant\u2019s brokers, arid that they held said stock as security for- defendant\u2019s account.\u201d\nThe plaintiffs in their complaint allege that they \u201cmade repeated demands upon defendant for the payment-of margin on his account, which payment defendant wrongfully failed and neglected to make, whereupon plaintiffs notified the defendant that unless he made payment of margin they would take steps to close out the account and collect from him any loss.\u201d\nDefendant in his answer says: \u201cThe defendant admits the plaintiffs demanded payment of \u2018margin,\u2019 and that the same was refused, this defendant contending he has never entered into a legal contract with the plaintiffs and owes them nothing.\u201d\nThe defendant, for a further answer, says, in part: \u201cThat the alleged contract, this defendant is advised and so avers the fact to be, is contrary to public policy and the statute law of the State of North Carolina, and this defendant pleads C. S., eh. 39, entitled 'Gaming Contracts and Futures/ in bar of plaintiffs\u2019 right to recover in this action.\u201d\nDefendant testified that he was in the insurance business at Edenton and never been engaged in the nickel business. After receiving plaintiffs\u2019 circular letter about International Nickel stock, he gave them order as contained in letter.\nPlaintiffs in apt time duly excepted and assigned error to the following questions and answers of the defendant:\n\u201cQ. Did you expect to get the stock delivered unless you paid for it? A. No, sir. I did not buy the stock to be delivered; I bought it on marginal account. It means hedging the stock. They asked me for $500. Because I did not know whether I was going to get it or not, I would not send it. \u2022\n\u201cQuestion by judge: If you had sent them the money for the stock, did you expect them to send the stock to you? A. No. On a marginal basis they could not.\n\u201cQuestion by judge: They have got your order to buy 100 shares. Suppose they had' written to you on the date you sent it in, would you expect a delivery of the stock? A. No, sir; I didn\u2019t know anything about it. It was a gambling proposition and I would not send check for it. I would not have expected anything from them.\n\u201cQ. What is the meaning, so far as this expression of 'marginal\u2019 requirements goes? A. It is known as a gambling contract. Stock goes up or down; you get whatever the margin is; you rise up of go down; lose according to the fluctuation of the market.\u201d\nOn recross-examination, defendant said: \u201cMargin is what they call so many points on the stock. If you buy over the purchase price, that is the margin.\u201d\n\u201cThe burden is on the plaintiff to show that it was a legal contract. We have the evidence of only one. Satterfield comes in and files answer claiming it was a gambling contract; that it is upon the plaintiff to show that the contract was not a gambling contract. In other words, that the stock was actually to be delivered up to the defendant, Satter-field. ... If you accept the other version and find it was a gambling contract, that both parties knew it would not be delivered to Satterfield, in that event your answer shall be 'Nothing.\u2019 ... A gambling, bargain is by the purchase of stock by parties knowing that the stock is to be held by them.\u201d\nTo the above charge exceptions and assignments of error were made.\nThe court below charged the jury further as follows:\n\u201cIf both parties knew that stock was never to be delivered to Satter-field, then the law says the contract was not a valid contract, and there can be no recovery. If, on the other hand, the stock was bought to be delivered to Satterfield, and actual delivery was intended, it was a valid contract, or if Satterfield bad a right to know the contract existed upon actual delivery, that would make it a valid contract and keep it from being a gambling contract, because a gambling bargain is by the purchase of stock by parties knowing that the stock is to be held by them. . . . The question at issue is: Is Satterfield indebted to plaintiff; if so, in what amount? If you find in favor of plaintifE, C. E. Welles & Co., the amount due is $498.14, with interest on same from 29 January, 1923. If you accept the other version and find it a gambling contract, that both parties knew it would not be delivered to Satterfield, in that event your answer shall be Nothing.\u2019 \u201d\nThe issue and answer is as follows:\n\u201cIs defendant, Satterfield, indebted to plaintiffs, and, if so, in what amount? A. Nothing.\u201d\nThere was a verdict for the defendant and judgment rendered accordingly. Exceptions and assignments were duly made to evidence and charge, as before stated, and appeal taken to the Supreme Court.\nW. D. Pruden for plaintiffs.\nHerbert R. Leary for defendant." }, "file_name": "0089-01", "first_page_order": 193, "last_page_order": 199 }