This opinion is not exactly to the point for a view of the law that considers future trading of itself, even with the purpose of mere speculation, not to be gambling, since the judge condemns "options" generally as gambling. But a close reading of the opinion indicates clearly that the criterion in his mind is still that of "contemplated delivery" and that his view of the facts causes him merely to displace the line of division between gambling and legitimate speculation somewhat in the direction of leaving nothing of the latter. A revision of his perspective in this particular would leave unaffected the significant peculiarity of the case, namely, the fact that those who defeated the corner by buying puts and selling futures did not intend to deliver, but, instead, intended to break Chandler and his corner. The italicized portion of the opinion shows this fundamental point. Since the cornerer also does not intend to acquire grain by means of futures, or contemplate delivery except in a subordinate degree, in the case of a few who may be able to deliver, but does intend to force a money settlement in lieu of delivery at much above the value of the cash grain for any other purpose than to meet the requirement of the future contract, it appears that both parties to the contract, under the circumstances, did not intend delivery, in so far as their transactions had reference to the projected corner.

Whether in law anything could be made of this absence of intent to deliver on the part of traders entering into contracts having in view the making or breaking of a corner, and thus having no relation to the trade in actual grain, except so far as the technique of the grain trade is employed as a basis for manipulative maneuvers, is merely raised as a question for lawyers and the courts to consider, as it appears they have not hitherto done from the angle indicated.

If the courts should decide that there is no intent to deliver on the part of either party to the contract under the circumstances noted, that would still leave out of consideration the sellers who were innocent of knowledge of the prospect of a corner and who deserve most consideration. But if the cornerer is guilty of gambling intent, he should not be able to recover from them. At least, there is no equity in compelling delivery under such circumstances, nor in letting the cornerer himself dictate a settlement price.

BOARD OF TRADE ATTEMPTS TO DEAL WITH CORNERS.- As regards attempts made to deal with corners by means of the exchange rules, there are always two sides to the question in the minds of the members of the exchange, since the cash-grain trade, like the public, does not feel any particular tenderness toward the short seller. Hence some fluctuations of policy. The effect of the present Chicago rule is to penalize the short seller who is caught in a corner and compelled to default, but also to prevent his being punished too much. The limit

of the punishment is 10 per cent above the "true commercial value” at about the close of the delivery month. To avail himself of this recourse the short seller defaults on delivery and a committee fixes the "true commercial value" as a basis of settlement, and also decides how much he shall pay, within the limits of 5 per cent and 10 per cent of such value, as damages.1

THE ILLINOIS LAW AGAINST CORNERS.-Under Illinois law, whoever corners the market or attempts to do so is, since 1874, punishable by a fine of not less than $10 nor more than $1,000, or by confinement in the county jail not exceeding one year, or both. This same law also prohibited put and call or privilege contracts until amended in 1913. Its prohibitions were not generally observed by the members of the Board: It appears to have had no appreciable effect as a remedy for corners. According to the law in question, it is not necessary to prove conspiracy or combination in order to establish guilt in connection with an attempt to manipulate the market by means of a corner. Neither the words of the law nor the necessary economic conditions suppose that an individual can not "attempt a corner." This law is cited in two cases as a reason for the court's refusing to enforce contracts having in view the running of a corner, but not

2

1 For a discussion of this situation under the rules of the Chicago board, see Ch. IV, sec. 7, above.

Foss v. Cummings (36 N. E. 553). This same law is again referred to as reason for refusing recovery under an alleged contract of partnership in Wright et al v. Cudahy (48 N. E. 39; 168 Ill. 86). Remarks of the court upon the facts and the law that are of particular interest are as follows:

* *

"The testimony of Cudahy, when called as a witness by the complainant, was that when he (Wright) proposed that they go into the deal together he said he could buy probably 150,000 or 160,000 barrels of pork, and get the market short and make his own price for the balance over the pork actually in existence; that there were not above 75,000 barrels in the Chicago market Wright himself testified that threefourths of such pork was packed in Chicago. He knew that mess pork, to be what is called "regular," must be packed in a certain way, and between October 1 and the 1st of the following April, and that the market could not be stocked with new pork after their operations were commenced, soon after the middle of April, and before the deal would be closed. On this branch of the case it is a strong circumstance tending to show that, whether Cudahy continued to be a partner with Wright or not, the scheme was to corner the market; that from 18,000 to 20,000 barrels of the pork purchases, and which was delivered through the Cudahy packing house, was taken out of the barrels by the direction of Cudahy and Wright, at least with the knowledge and consent of both, and made " irregular" by sawing the pieces through the ribs and repacking, thus so changing its condition that it could not be delivered on contracts made on board for "regular" mess pork, and reducing the amount of such pork on the market by the amount so changed. Wright testified that this was done so that the pork could not be shipped in again, resold, and delivered to them; that he did not want to be buying and selling the same pork over and over again. In his testimony he defined a 'corner' to be 'where somebody succeeds in buying for future delivery more property of a given kind than it is possible for the seller to deliver before the day of the maturity of the contract.' It is evident that that is precisely what he was attempting to do. By the attempt the market price of pork was advanced; and, although the deal eventually proved unsuccessful. the attempt to corner the market, and the contract under which this attempt was made, were in direct conflict with the statute *

Parties can not compel a court of equity to enforce a contract appearing by the evidence to be illegal by the simple device or inadvertence of omitting from the pleadings the charge of such illegality. In refusing to enforce such contracts the court does not act for the benefit nor for the preservation of the alleged rights of either party, but in the maintenance of its own dignity, to the public good,and the laws of the State."

in a way to involve any modification of the common-law doctrine of conspiracy.

In another case, interesting for its description of cornering procedure, it is referred to as applicable but for the fact that the transaction was had outside the State.1

Section 10.-Bucket shops and the bucketing of orders.

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THE BUCKET SHOP DEFINED.-"Trading in differences refers to bucket shops and to the bucketing of orders. The Hughes report defines bucket shops as "ostensibly brokerage offices where, however, commodities and securities are neither bought nor sold in pursuance of customers' orders, the transactions being closed by the payment of gains or losses as determined by price quotations." 2

The distinction between a bucket shop and a legitimate speculative broker or commission merchant hinges on whether the future trade (or trade in stocks) is executed in the pit (or on the floor) in the manner provided by the exchange or not. Orders given to a member of the exchange are required to be thus executed, and the speculative exchanges afford the only regularly available markets. The term "bucket shop" appears originally to have referred to retail or odd-lot transactions. Its suggestion of sale by the drink of beer

1 Samuel et al. v. Oliver et al. (Sup. Ct. of Ill. 1889), (22 N. E. 499; 130 Ill. 73). The court says:

There is no serious question of the illegal purpose for which appellants were employed. It was to give appellees control of the wheat market. They employed a large number of brokers of the city to cooperate with appellants secretly, and to buy up all the wheat actually in market, and at the same time procure contracts for the sale and future delivery of large quantities of such wheat, which they knew could not be had in the market. The witness, J. C. Ewald, at one time president of the Merchants' Exchange, and a member of it, says: By cornering the market I mean when parties have contracts on hand for greater amount than the sellers have cash grain to deliver. There was a greater amount of contracts than cash grain to deliver. The supply of cash wheat at that time in the market was owned entirely by Oliver. * * * I arrived at the conclusion that the market was cornered as above stated, because I knew that a great many owed wheat at the time to Oliver and his brokers that could not deliver it. It wasn't for sale on the market to deliver on the contracts to Oliver. This was occasioned from the fact that Oliver and his brokers had the wheat due them, and also owned the cash wheat at the time; and those who owed the wheat could not buy it to deliver it. Wheat could not be had at current prices at that time. I know that Oliver had all the cash wheat from the fact that I had some for him myself, and from the fact that others held it for him, and I know it from the fact that he told me so.' Public policy will not permit appellants to recover for the money advanced by them in the illegal business of appellees, nor will the law give an action to appellees to recover from appellants moneys paid to them by other parties in the prosecution of such illegal enterprise. Ex turpi causa non oritur actio. The enhancement of the price of an article of prime necessity, such as wheat or other articles necessary for food, for purposes of extortion, is against public policy. (Fuller v. Dame, 18 Pick. 472; Dewitt v. Brisbane, 16 N. Y. 508.) 'Combinations whose object is to create what are known as corners in the market, or to control the traffic in any staple which is a popular necessity, or to enhance the prices thereof, or to withhold the same from the market * void.' (Greenh. Pub. Pol. 642; Wright v. Crabbs, 78 Ind. 487; Craft v. McConoughy, 79 Ill. 350.) Such a transaction, if had in the State, would be void as being in contravention of the Criminal Code."

66

*

are

Report of Gov. Hughes's committee on speculation in securities and commodities, State of New York, June 7, 1909.

obtained from the brewer by the bucket ful conveys the contempt of exchange members for such business. Bucket shops were necessarily, to a greater or less extent, jobbers in securities, since they could not always make up round lots from their orders. Moreover, they often found it cheaper to save commissions on speculative orders for the quick turn by not executing them on the exchange at all. Hence the development of the present-day conception and legally recognized definition.

On the laws of New York and Massachusetts relating to bucket shops the Hughes report makes the following statement:

The law of this State, which took effect September 1, 1908, makes the keeping of a bucket shop a felony, punishable by fine and imprisonment, and, in the case of corporations, on second offenses, by dissolution or expulsion from the State. In the case of individuals the penalty for a second offense is the same as for the first. These penalties are imposed upon the theory that the practice is gambling; but in order to establish the fact of gambling it is necessary under the New York law to show that both parties to the trade intended that it should be settled by the payment of differences and not by delivery of property. Under the law of Massachusetts it is necessary to show only that the bucket-shop keeper so intended. The Massachusetts law provides heavier penalties for the second offense than for the first, and makes it a second offense if a bucket shop is kept open after the first conviction.

FOUGHT BY THE EXCHANGES.-The bucketing of grain-futures orders by their nonexecution in the pit was by no means confined to bucket shops prior to the enactment of laws against such practices and to the stiffening of exchange rules in this particular. Even after the Chicago Board of Trade sought to extirpate the bucket shops, members of the Board were in the habit of matching the orders of customers against each other instead of executing them in the pit, and even of themselves taking the other end of an order and assuming the responsibility for the difference between the price of the initial "transaction" and the price at which the trade would be ordered closed. Of course, the Board of Trade could not fight the bucket shop to good advantage when its own members were handling part of their trades in the same way. Hence, the bucketing of orders has been subjected to heavy penalties. The fight of the Chicago Board of Trade against the bucket shops began in the eighties, was renewed and intensified about 1900, and shortly thereafter the powers of the Poard to control its quotations were sustained by the courts, so that the evil can now be handled to a large extent administratively without reliance upon statutory prohibitions. The enactment of laws prohibiting such establishments in most of the States of the Union has, however, been largely due to the influence of the exchanges. For the purposes of this report only the grain States need be covered in an examination of bucket-shop laws.

STATUTES DIRECTED AGAINST BUCKET SHOPS.-Bucket shops ostensibly affording facilities for trading in grain are prohibited by statute in the following States: Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, Oklahoma, South Dakota, Washington, and Wisconsin. Apparently they are not prohibited in Oregon, Montana, Colorado, or Kentucky, which comprise the remaining States constituting the list covered by this examination, the total number whose laws were searched being 19.

This list included all the 14 great grain States of the central and northern portion of the interior basin of the United States and, in addition, Kentucky and Arkansas, contiguous States with considerable grain production, and, in the case of the latter especially, with interesting statutes on the subject of future trading; Washington and Oregon, which are important grain-producing States on the Pacific slope; and Colorado, which is possibly unique among the States in its toleration of bucket shops. In the various enumerations following it will be noted that some of these States are not listed. Such omission may be taken to mean the absence of statutory provisions on the particular point under discussion.

All the 14 important grain States, Montana excepted, have laws specifically prohibiting grain-futures bucket shops. The exception in the case of Montana, as will appear presently, is due to the failure of the law to include grain as well as securities within its prohibition of bucket-shop operations. This situation may be explained by the very recent development of Montana as a grain State. In this and some other States the prohibition is of a more sweeping character than the strict bucket-shop law, since it relates to sales "on margins," which phrase may be interpreted to refer to actual as well as pretended trading in grain for future delivery. Colorado, on the other hand, appears to have made no attempt by statute to abolish the bucket shop and its related evils.

In the States of North Dakota, Arkansas, Minnesota, Illinois, Indiana, Wisconsin, and South Dakota, keeping or assisting in the keeping of a bucket shop is punishable as a misdemeanor. In the States of Iowa, Michigan, Kansas, Missouri, Nebraska, Washington, Ohio, and Oklahoma the keeping of a bucket shop is a felony. The penalties imposed in these States range from $25 to $100, with imprisonment in the county jail until such fine is paid, but not exceeding six months, up to $500 to $1,000, with imprisonment in the penitentiary not exceeding five years.

An additional penalty is prescribed in all of these States (except South Dakota, Kansas, Washington, Nebraska, and North Dakota) upon conviction for a second offense. In cases where a corporation