Case ID: ny-super-ct_43/html/0451-01.html
Source: Caselaw Access Project
Author: {"author": "By the Court.—Curtis, Ch. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

GEORGE P. KINGSBURY and HOWARD GALLUP, Plaintiffs and Respondents, v. MICHAEL KIRWIN, Defendant and Appellant.
    
      Decided March 4, 1878.
    BROKERS’ CONTRACTS, THEIR VALIDITY, &c.
    Purchases of cotton for future delivery by a broker for Ms principal, are not in contravention of the statute against gaming and betting, unless it appears they intended to lay a wager (Tyler 0. Burrows, 6 Bolt. 110 ; Cassard a. Hinman, 1 Bosw. 207).
    It was a proper exercise of discretion on the part of the court (warranted by the proofs in this case), to allow the plaintiffs to amend their complaint at the trial, by inserting an allegation of due notice to the defendant, that he would be closed out if he did not keep his margin good (Lounsbury s. Purdy, 18 J7. 7. 521).
    And if, after such demand and notice, the defendant failed to keep Ms margins good, the plaintiff had a. right to close the transaction (White 0. Smith, 54 If. 7. 522).
    The defendant must be presumed, to know the usages pertaining to the matters as to which he made his agreement (Wells 0. Bailey, 49 2f. 7. 472), and the proofs establish that he was not ignorant of the meaning of the term “ closing out ” and the mode in which it is done, under like contracts, by cotton brokers.
    Before Curtis, Ch. J., and Freedman, J.
    Appeal from a judgment, entered on a verdict in favor of the plaintiffs against the defendant, and from an order denying a motion for a new trial on the minutes.
    In July and August, 1876, the plaintiffs were cotton brokers, and one of them a member of the cotton exchange. During those mo'nths, acting as brokers for the defendant, their principal, they sold one thousand bales of cotton for delivery in the months of September and October, 1876, for a certain price, and received from the defendant certain sums of money or margin to cover losses, if any should arise, by increase of the market value of the cotton as might daily occur from the changes of the market.
    It was agreed that the defendant’s margins should be kept good, and should be paid by him on demand, and that the plaintiffs should continue to act as his brokers, and carry the contracts they should make for him only so long as he did so.
    After these sales made by the plaintiffs for future delivery, the market price of cotton advanced, so that if the defendant had bought cotton to cover his sales, and made delivery at their maturity, he would have lost the difference between the two prices, and his margins deposited with the plaintiffs to meet such a loss would have become exhausted.
    The plaintiffs claimed at the trial, that when the margins became exhausted, they were liable to the other brokers, to or through whom the sales were made, by the rules and customs of the exchange, for all such losses, and that they demanded from the defendant the deficiency, and notified him that if he did not respond, they would close out the contracts of sale, and that they did so upon his refusal to keep his margins good, and settled the loss with the other parties to the transactions by paying it.
    The plaintiffs bring this action, to recover these margins advanced by them for him, and their commissions.
    The defendant claimed that the transactions were void under the statute against gaming and betting; that no actual sales or purchases were made; and that no ■ notice of the time, place and manner, of closing out was given him. Various exceptions were taken at the. trial by the defendant, and he also claimed a return of all moneys paid by him to the plaintiffs as margins.
    There was a verdict for the plaintiffs.
    
      Thomas Bracken, for appellant.
    
      Albert Gallup, for respondents.
   By the Court.—Curtis, Ch. J.

—The evidence does not sustain the defendant’s claim, that these purchases through his brokers of the cotton for future delivery, were in contravention of the statute against gaming and betting. There is no proof of any intention on the part of the plaintiffs not to deliver, or on the part of the vendees not to accept the cotton pursuant to the contracts. Such a contract as the parties to the suit entered into is not objectionable, unless there is evidence to show that they intended to lay a wager (Tyler v. Barrows, 6 Robt. 110; Cassard v. Hinman, 1 Bosw. 207).

The permission given at the trial by the court to the plaintiffs, to amend their complaint by inserting an allegation of due notice to the defendant, that he would be closed out, if he did not keep his margin good, was a proper exercise of discretion on the part of the court, and warranted by the proofs (Lounsbury v. Purdy, 18 N. Y. 521).

The answer admits, in substance, that the defendant ordered the sale of the cotton, and agreed that he would keep the margins good as the cotton advanced in the market. If then, after demand and. notice, the defendant failed to keep his margins good, the plaintiffs had a right to close the transaction (White v. Smith, 54 N. Y. 522).

There was some conflicting testimony as to the demands for margins and as to the notice, but it was left to the jury to find whether the plaintiffs made the demands and gave the defendant notice of the time and place in which they intended to close out the transaction, and also as to whether the defendant put up the margins he was notified to put up, and there is no just reason shown for disturbing the conclusion of the jury, which was adverse to the claims of the defendant in these respects, and which was in accordance with the weight of the evidence.

The defendant must be presumed to know 'the usages, pertaining to the matters as to which he made his agreement (Wells v. Bailey, 49 N. T. 472). The usages in respect to cotton brokers and the cotton exchange were in evidence, and also the fact that the defendant had been closed out on a former occasion. He had such previous knowledge of the nature of the business, that he is not in the position of a person of inexperience, and ignorant of the meaning of the term “closing out,” and the mode in which it is done, by going into the market, and buying the cotton, at the lowest price at the time that it could be bought, and using that in settlement of the contract with the buyer on the principal contract.

The court charged the jury that if the plaintiffs failed to prove to them that due notice was given to the defendant, that then the plaintiffs violated their duty to' the defendant, and that he was entitled to recover back the amount of margins he paid, with interest.

There are some exceptions to the admissibility of evidence, but they are not well taken. The refusals of the judge to charge as requested by the defendant, are sustained by our views of the law, and by what the testimony at the trial establishes. The same should be said as to those parts of the charge to which the defendant excepts.

The court left it to the jury to determine whether, as the plaintiffs claimed, the margin of $800 was demanded of the defendant on Saturday, also, whether he was told he must furnish that margin on Monday by ten o’clock, and thereupon acquiesced in it, and promised to do so. The jury were properly instructed that if they found such to be the facts, it was a sufficient and reasonable notice, because there was a time to which the defendant agreed, and an amount as to which he was notified.

The judgment and order appealed from should be affirmed with costs.

Freedman, J., concurred.