Summary
describing typical early twentieth-century bucket shop
Summary of this case from In re Thrifty Oil Co.Opinion
Thomas R. Shepard and Shepard & Bailey, for appellant.
Wm. Martin, George H. Bailey, and Franklin K. Lane, for appellees.
Before GILBERT and ROSS, Circuit Judges, and HAWLEY, District Judge.
GILBERT, Circuit Judge, after stating the case, .
The appellant's contentions, in the order in which we shall consider them, are, first, that the transactions which it had with Howard Joslyn were legitimate business contracts. The appellant is a corporation organized under the laws of Washington, and having its principal place of business at Seattle. Its codefendant in the suit is an incorporation of the same company under the same name, organized under the laws of Oregon, having its principal place of business at Portland. The appellant had branch offices also at Walla Walla and Spokane, in Washington, and at Salem, Or. In all of the nearly daily transactions which Howard Joslyn had with the appellant there never was one actual delivery of stock or commodity. In some of the transactions Joslyn figured as purchaser, in others as seller, and all were had with reference to what purported to be the prices of the Chicago Board of Trade-- prices represented to have been received by the appellant by daily telegraphic reports. The real price of the stocks or commodities so dealt in would in a single day amount to from $50,000 to $60,000. The appellant, through its manager, admitted that the appellant itself carried on all these transactions with Howard Joslyn, and charged him commissions thereon aggregating $7,722.50, that the only orders which it placed anywhere were hedging orders placed with its own branch offices, and that the appellant had no stocks or commodities to deliver, and was not in the market buying the same from the owners thereof. It is true that the manager pretended to say that the appellant had the opportunity to buy, and would have done so, if delivery had been insisted upon, but he was unable to mention a single instance of such sale and delivery, either to Howard Joslyn or to any one, at any time before the commencement of the present suit. It is too evident to require discussion that no such delivery was ever contemplated in the course of the appellant's business. The testimony convinced the trial court, as it does us, that the transactions were gambling deals or bets on the market price of stocks and commodities, and that the appellant was conducting what is commonly known as a 'bucket shop.' This view of the nature of the business which it carried on is sustained by its own admission in a case proper here to be adverted to (Cullison v. Downing (Or.) 71 P. 70), in which it made a successful defense to an action brought against it on a contract for commissions by one of its employes on the ground that the business it was engaged in was unlawful, and that its contracts were gambling contracts. In that case the following is found in the opinion of the court:
'A careful examination of the testimony introduced by the plaintiff shows that defendants falsely represented to their customers that all orders received for the purchase of grain were transmitted by telegraph to the Chicago Board of Trade, and, after the commodity had been thus secured, orders for the sale thereof were sent in the same manner, for which the defendants charged a commission of one-eighth or one-fourth of a cent a bushel; that but few of such orders were ever sent, the defendants 'crossing' in their office orders for the purchase of wheat with orders for the sale thereof, whereby they secured two commissions without performing any service therefor. * * * The methods pursued by them were fictitious.'
It is contended that the appellant was not aware that the money which it took from Howard Joslyn was a trust fund, and that since he, even if the transactions were illegal, could not recover the money, the appellees stand in no better attitude. The appellant had notice at the beginning of its dealings with Howard Joslyn that he was embarrassed financially. His account was opened in a name other than his own. He did not tell the appellant who N. S. Joslyn was, but he informed its manager that he wished to carry his deposits in that name on account of his personal embarrassment and to avoid attachment by creditors. The appellant thus had knowledge of facts sufficient, we think, to put it upon inquiry to ascertain who N. S. Joslyn was, and whose the money was that was being so used. But it is unimportant whether knowledge of those facts was or was not sufficient to put the appellant upon inquiry, for the right of the owners in this instance to recover the money does not depend upon notice to the appellant that the money was held in trust. The appellees did not participate in the gambling transactions. They had no knowledge that their money was being thus used. Howard Joslyn had possession of their money in trust only for the purpose of transmitting it to them. The appellant in receiving the money parted with nothing of value. It was not a holder for value. It received the money without lawful consideration, and it has no legal or equitable ground for refusing to restore it to the true owner, with interest thereon from the dates on which it was received. No objection has been interposed to the nature of the remedy by which it is sought to recover the money in this equitable suit. Central Stock & Grain Exchange v. Bendinger, 109 F. 926, 48 C.C.A. 726, 56 L.R.A. 875.
The further contention is made that the appellees cannot recover for the reason that they have failed to distinguish their money paid to the appellant by Howard Joslyn from the money paid by him which belonged to him. Howard Joslyn testified that all the money which he received from the sale of appellee's property was paid by him to the appellant. The trial court found the dates and amounts of specific payments of money made during March and April, amounting to the total sum of $7,708. Its finding is amply sustained by the record, an examination of which leaves no doubt that those sums were paid by Howard Joslyn to the appellant out of the proceeds of the sale of appellees' property. We are convinced, moreover, that that sum does not represent the full amount which the appellant should, in equity, be
Page 320.
required to account for, and that at least $1,500 in addition thereto is justly due to the appellees from the appellant.
But, in view of the issues framed in the pleadings upon which the case went to trial, and the absence of a cross-appeal, we think that we are without power to extend further relief to the appellees than to affirm the decree of the court below, which we do.