the property should be delivered to him, but that the difference in the market price should be adjusted between the parties, is admissible. But such testimony should be supported by collateral evidence.

KNOWLEDGE OF THE CUSTOMER'S BUSINESS.-The mere fact that a future trader deals also in the actual commodity is not sufficient to prove that his future trades were not gambling contracts, although it is relevant and does indicate some knowledge of the subject, including a degree of acquaintance with the workings of the exchanges. In the case of James v. Clement there was evidence introduced to show that the defendant owned a cotton warehouse at Blake, Ga., which was his place of business, and bought and sold actual cotton there. But the communications from his broker not only did not show a connection between this business and his future trades, but definitely suggested the absence of such connection in the minds of the parties. That James may have known more of the rules and methods of the New York Cotton Exchange than he professed to could make no difference where broker as well as customer were so evidently participants in the intent to gamble.

1

There is a significant Iowa case in which the officers of a packing company speculated and lost heavily in short ribs, and the company was sued upon a note given in this connection. Judgment for the defendant was affirmed on appeal. In the correspondence (by telegraph, chiefly) between broker and customer there is no intimation that the actual ribs might be used by the packing company, or that the purchases were to hedge selling contracts. The court makes some (at this date) irrelevant remarks as to "hidden and undisclosed sellers" that refer to the apparently ill-understood or perhaps imperfectly developed method of settlement and substitution then in use. Finally, the court says:

Another very important fact in the case is that Stiles, Goldy & McMahon knew that the packing company did not intend to receive and pay for the property. They knew this because they were fully advised that the whole property of the corporation was insufficient to pay the $60,000. In their correspondence they repeatedly advised the defendant that it had lost so much money, naming the amount. In one letter they say, "Your loss is becoming a serious matter." In another it is said, "You must keep us fully informed how far you want to carry this deal, and do not carry it further than you are prepared to pay the loss." In another letter they say, "As the market closed tonight your loss on the ribs will amount to about $11,000." As we have said, there was no intimation at any time that there would be a tender of the property to the defendant and a demand of payment. * It can not with any plausibility be claimed that any of the parties to this transaction intended or expected that the defendant would take the 600,000 pounds of ribs.

* *

1 First National Bank of Lyons v. Oskaloosa Packing Co. (1885) (66 Ia. 41; 23 N. W. 255).

The lack of relation in time and of proportion as to quantity between dealings in futures and cash dealings will show whether the former are hedges. There may also be such evident disproportion of the open trades of a speculator to his quick assets as in effect to constitute a warning to the broker of his gambling intent.1

2

MEMBERSHIP IN AN EXCHANGE NOT A SHIELD FOR THE BROKER.-The opinion of the Supreme Court of Illinois in the recent (1916) case of Miller v. Sincere has effectively disposed of an attempt to except transactions on legitimate exchanges from some of the legal consequences of their possible gambling character. Brokers can not, merely because they handle orders regularly, be exempted from the provisions of the criminal code of the State with regard to the recovery of losses from "winners" in gambling transactions. This decision indicates the necessity of the exercise of discrimination by the broker and his responsibility in that respect, which has been emphasized in the preceding discussion. In the words of the court:

There is no reason why the Chicago Board of Trade, or Stock Exchange, or any similar institution anywhere in the State, should be made a sanctuary for those who commit the crime of gambling on futures in grain or stocks.

Section 7.-The defense of wager and the recovery of losses sustained from gambling in futures.

THE DEFENSE OF WAGER.- -In most of the cases that come before the courts where the question of gambling intent is the point at issue a broker sues a customer for the recovery of losses incurred by him on the customer's account, and the latter interposes the defense of wager.

The general legal principles covering most such cases are summed up in the following: A broker or commission merchant who is privy to his principal's unlawful intent in a speculative transaction is particeps criminis, and can not recover for services rendered, losses incurred, or advances made by himself on behalf of his principal in forwarding the transaction. It is otherwise, however, where the broker has no knowledge of or is not privy to the principal's illegal intent, since in this event he is not a party to the illegality.

It is of practical importance that whether a particular transaction in futures is gambling or not is a question of fact to be determined in cases of uncertainty by the jury.*

While the broker will often find difficulty in recovering losses incurred on account of a gambling customer, the customer is, by reason of the same taint, also at some disadvantage before the courts. As a general rule money or property deposited as a margin or paid for

Cf. Irwin v. Williar, 110 U. S. 499.

112 N. E. 664. The provision declared to be unconstitutional is quoted and further mentioned of this case may be found on p. 316.

20 Cyc. 951.

420 Cyc. 965.

losses in an illegal speculative or stock transaction can not be recovered back either by way of set-off or otherwise, unless permitted by statute, as is the case in several States. Money or property, however, to which plaintiff may establish his right without the aid of the illegal transaction may be recovered, as where the illegal transaction has been closed and money or property belonging to the customer is admitted or shown to be in the broker's hands, or where the person making the deposit acts in good faith and is not a party to the illegal intent of the broker, or where the illegal contract is never carried out.1

STATUTORY PROVISIONS.-For reasons of public policy, the State may radically change the situation above described. It may provide by statute that a person who has lost money in a gambling transaction shall have a right of action to recover the amount. And it need not limit the right of action to him alone, but may proceed further and allow an action to be brought by a common informer who may recover the money. It is competent for a State in furtherance of a plan to suppress gambling to provide that not only an action may be brought for the recovery of losses from the winner, but also to make the owner of the building in which the loss was sustained liable when he has knowledge that gambling is being carried on on his premises.

The interposition of the defense of wager supposes the transaction in question to be gambling. On this point intent is decisive. Whether such intent must be entertained by both parties if the defense of wager is to be effective, or, if by one only, by whom, are the important general questions to be decided. The following tabular statement shows the situation under the statutes of the States named.3

It will be noted that it is rarely possible for the customer of a speculative commission house to escape the consequences of his speculative venture by alleging that he was gambling. In some States detailed provisions of the law that can not be shown in a tabular statement are worth noting.

120 Cyc. 951.

Huntington v. Attrill, 146 U. S. 657; Marvin v. Trout, 199 U. S. 212.

These States are the ones from among the 19 listed on p. 331 whose statutes spccifically cover the subject under discussion.

In Oklahoma if the rules of an exchange permit settlement by delivery of a different grade at a price other than the actual spot price for such other grade, the trading is gambling and a misdemeanor. Apparently this is so, irrespective of the intent of the parties.

In Nebraska the intent of either party is sufficient only if “there is in fact no actual purchase and sale or sale and purchase of such commodities for or on account of the party or parties thereto."

In Arkansas proof that “margins" were deposited or that the party agreed to deposit "margins" establishes a prima facie case of a violation of the law declaring such contracts illegal. Proof that the commodity was not actually delivered and that settlement was made or agreed to be made upon the difference in value is likewise prima facie evidence of the illegality of the transaction. In Iowa it is specifically provided that if "either of the parties to the contract in good faith" contemplate delivery it

is not illegal.1

*

* *

In Michigan the illegal intent necessary to defeat the contract must be the common itnent of both parties.

3

In Wisconsin the law provides that "an intention on the part of either not to perform any such contract shall not invalidate it if the other party shall in good faith intend to perform the same."

In a Missouri case 4 it is held that a broker can not recover commissions and margins lost in the course of an illegal transaction, even though he did not know the intention of his client not to deliver the grain.

STATUTES PERMITTING RECOVERY OF GAMBLING LOSSES.-Apart from the defense of wager, the outsider involved in losses may be favored by statutes providing for the recovery of gambling losses. The following enumeration shows States that do not provide for such recovery of losses incurred in gambling transactions in connection with dealing in grain, and also States that do so provide. Most of the States of which the laws were examined do not provide for such recovery. It is therefore simplest to enumerate these and then discuss the exceptions. It appears that no recovery is possible in Nebraska, Kansas, Washington, Iowa, Michigan, Missouri, North Dakota, Indiana, Minnesota, South Dakota, Oklahoma, and Illinois. The situation in some of the States listed calls for comment, after some consideration of the laws of Wisconsin, Kentucky, Ohio, and Arkansas, where recovery is provided for.

1 On this proposition see Tomblin v. Callen et al. (69 Ia. 229; 28 N. W. 573).

2 On this point see Donovan r. Daiber (124 Mich. 49) and Gregory v. Wendell (40 Mich. 437).

Sec. 2319, Wis. Misc. Sts. 1917.

Connor v. Black (119 Mo. 126.)

*

The language of the Wisconsin law refers to "betting or wagering on any future contingent or unknown occurrence or result in respect to anything whatever." There should be no doubt as to this language permitting recovery of losses sustained in gambling in grain, whether through pretended trades at a bucket shop or by trading on a regular exchange through a legitimate commission merchant.

* * *

*

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* *

66

In Kentucky1 it is held that "gambling in futures," being a process by which money is won and lost," is a "wager," within the meaning of a statute of that State which declares void all contracts the consideration for which is money or other property "lost or bet" in any "wager." The statute in this State provides that "if any person shall lose to another $5 or more such loser may recover the same from the winner." It does not appear that this particular act has been construed by the court in this State. The Illinois courts, however, in construing an act of that State, held that a "broker" was a "winner" within the meaning of an act of that State permitting a recovery of losses. It would appear, therefore, that recovery of losses may be had in Kentucky.

* * *

In Illinois losses are recoverable under a statute which provides such recovery from the "winner" where the loss was sustained by any wager or bet upon any "chance, casualty or unknown or contingent event whatever." The word "winner" was interpreted by the Illinois courts to include a broker with whom another had deposited securities to cover losses sustained upon a gambling contract. On June 11, 1913, this act was amended so as to exclude from the effect of this interpretation any person "who executes any order given him by another person on any regular board of trade or commercial or stock exchange." But this amendment was declared unconstitutional as granting special privileges and immunities to certain individuals.2

In Ohio recovery is allowed where the loss was sustained by "playing a game, or by a bet or wager." As is indicated at the end of section 10 of this chapter, a gambling trade in futures will be interpreted to be a wager, hence the conclusion appears warranted that the courts would permit the recovery of losses on gambling in futures. Similarly the Arkansas law provides for a recovery of losses sustained as the result of a "game," "gambling device," or a "bet or wager." It may be assumed that the courts will interpret the last as including a gambling venture at future trading.

Lyons t. Hodgen (90 Ky. 280).

3

2 Miller v. Sincere, Supreme Ct. of Illinois, Apr. 20, 1916, 112 N. E. 664. The Arkansas law (sec. 4065) reads as follows: "The heirs, executors, administrators or creditors of the person losing any money or property at any game or gambling device, or on any bet or wager whatever, may have the same remedy as is provided in the preceding section for the person losing."