The Rock Island Argus. (Rock Island, Ill.) 1877-1885, 1885-05-09
RINGING A TRADE,
AND WHAT 1T COST A CHICAGO FIRM
OF BROKERS.
A Decision That May Cause a Deal of
Trouble If Not Reversed by the
United States supreme
Court.

CHICAGO, May "A case of great impor
lance to boards of trade was decided
"wednesday at Cleveland, Ohio by judge
Baxter of the United States circuit court.
higgins q Gilbert firm of brokers doing
business on the Chicago board of trade,
brought suit against James McCrea, of
Cleveland, to recover $50 900 alleged to be
due on margins. McCrea had Sl9,0 to his
credit with his brokers, and bought 900
barrels of pork and 5000 tiercei of lard.
The market went against him, and when
the $4,000 on deposit was exhausted his
brokers called him for additional mar
gins. Mr.. McCrea had been sufficiently
amused by this time, and declined to re-
spond. he repudiatei the trade. The pork
and lard had been bought for future delv-
cry, and when the time arrived for closing
the deal the brokers sold out the property
and sued him for the difference, S32 500.
MIR. McCrea's original defense was that the
| deal was a gambling transaction, but his
plea was amended later, AMI the case was
made to hinge on the system of ringing"
trades ON change. Nine tenths of the spec
ulatiye trades entered into on the board of
trade are closed out by this convenient
process OF ringing, or olfsetting, and the
payment of differences No property
changes hands in these transactions. The
rule under which trades are Offset on the
board of trade is as follows:
| In case any member of the association,
acting as a commission merchant, shall
| nave made purchases or sales by order and
for account of another, whether the party
| Tor whom such purchase or sale was made
shall be member of the board of trade or
otherwise, and it shall subsequently appear
that such trades may be Offset and settled
| by other trades made by said commission
merchant, he shall be deemed authorized to
| make such Offset and settlement and to sub
stltute some other person or persons for the
one from or to whom he may have pur-
chased or sold the property originally. Pro-
| vided, that in case of such substitution the
member or firm making the same shall be
held to guarantee to his or their principal
the ultimate fulfillment of all such contracts
made for account of such principal which
have been so transferred, and shall be held
liable to said principal for all damages OF
loss resulting from such substitution.
MIR. McCrea's lawyers succeeded in con
vincing the court that there was no active
substitution of parties as the law requires
and that the transaction were not valid in
consequence. They attacked the system
and insisted that there must be an absolut.
specific substitution of parties to make offse
trades legal; that the mere showing tina
there was as much property due to tn,
broker as there was due to the other from
him was not enough. but that the identica
property described in the original contrac
must always be kept in sight.
Judge Baxter, of the United States cir
cult court of northern Ohio, before whom
the case was tried, instructed the jury tx
bring in verdict for tho defendant in tn
matter of the $50, coo sued for, and also 70
the $4,000, it having been shown that thu
McCrea pork and lard had been "rung up
within two or three days of the origina
purchase.
If the supreme court Of the United States
before whom the case will be taken on az
peal, should sustain the rulings of til
lower court, every man who la
lost money on the Chicago boar
of trade for three years ut least can re
cover from his broker. 1t is very rarel
that the books of commission man wi
show an actual substitution of names, as r.
quirel by the law, or by a strict construG
ton Of the rules of the board, where trad
has been 'rung," and as speculative trade
ara almost invariably closed this way enc
less litigation may result This question
one OF the most important in its possibl
consequences TO the members Of the Chicag
board of trade that has been before th
courts for years. Its course from now O
will be watched with consuming interest