Case Name: The Spring Valley National Bank v. E. O. Somers
Court: Montgomery County Court of Common Pleas
Jurisdiction: Ohio
Decision Date: 1910-04
Citations: 9 Ohio Nisi Prius (n.s.) 481
Docket Number: 
Parties: The Spring Valley National Bank v. E. O. Somers.
Judges: 
Reporter: Ohio nisi prius and general term reports (new series)
Volume: 9
Pages: 481–491

Head Matter:
PROVISIONS OF THE CRIMINAL CODE NOT REPEALED BY THE NEGOTIABLE INSTRUMENTS ACT.
Common Pleas Court of Montgomery County.
The Spring Valley National Bank v. E. O. Somers.
Decided, April, 1910.
Gambling—Promissory Notes—Criminal Code and the Negotiable Instruments Act—Provisions of the Former not Repealed by the Lat'teT—Law Merchant—Police Power and Suppression of Crime and Fraud—Sections 8157, 5965 and 13069, General Code.
The. negotiable instruments act does not by implication repeal Section 6934a, providing that contracts for options on grain, cornering the markets, etc., shall be held void; and a note given in furtherance of such a contract is not enforcible even though in the hands of an innocent holder for value.
Murphy & Eliff, for plaintiff.
McKeny & Kline, contra.

Opinion:
Snediker, J.
In this case a jury was waived and trial had to the court. The action is brought to recover five hundred dollars and interest on a promissory note made by the defendant at the instance the Chamberlin Bros. Company, stock brothers, to the Citizens Savings Bank & Trust Company of Hamilton, Ohio, or order.
The note sued upon was to cover advances in the purchase of futures from the Chamberlin Bros. Company, and was by said bank endorsed without recourse in blank; and thereupon the Chamberlin Bros. Company sold the note to the Miami Valley National Bank, and it was then transferred to plaintiff, which acquired it in due course and in good faith without any knowledge of the consideration therefor.
- Defendant denies liability on the ground (fourth defense) that the note is void for the reason that at the time of its execution and delivery, defendant and the Chamberlin Bros. Company were engaged in certain unlawful dealings, to-wit: Purchase of options, by defendant, from the said the Chamberlin Bros. Co. and purchase and sale of grain on margin without intent on the part of either the defendant or the said the Chamberlin Bros. Co. to make actual purchase or delivery of said commodity at any time. And it was in -these transactions that it is claimed by defendant that the note passed between himself and the Chamberlin-Bros. Co.
By way of reply, plaintiff denies each and every allegation set forth in the answer not admitted in the petition.
The evidence showed very conclusively that the note was given for the purpose- claimed by the defendant. Plaintiff admits- in its brief that if Section 4269, Revised Statutes (5965 General Code), applicable to such a transaction is still in force, that it must fail. The plaintiff's contention is that the act of April 17, 1902, does and was intended to cover all questions arising with reference to'negotiable paper of every character; and that by its enactment all other acts of the Legislature are implidly repealed, including Sections 4269 and 6934a, Revised Statutes (13069, General Code). The defendant, however, insists that notwithstanding this act, familiarly known as the negotiable instruments code, Sections 4269 and 6934a, are in full force and effect.
Section 4269, which is part of an act entitled "an act for the prevention of gaming,'"passed March 12, 1831, reads as follows:
"All promises, agreements, notes, bills, bonds, or other contracts, mortgages or other securities, when the whole, or any part of the consideration of such promise, agreement, conveyance, or security is for money or other valuable thing whatsoever, won or lost, laid, staked, or betted, at or upon any game, of any kind, or under any denomination or name whatsoever, or upon any horse race or cock fight, sport or pastime, or on any wager, or for the repayment of money lent or advanced at the -time of any game, play, bet or wager, for the purpose of being laid, betted, staked or wagered, shall' be absolutely void, and of no effect. ' '
Section 6934a, which is a supplement to Section 6934 of the Revised Statutes, which last- act was passed April 15, 1857, and is entitled "to amend an act more effectually to prevent gambling, ' ' is in these words:
- " [ Contracts for Options on Grain; Cornering the Market, etc.] That whoever contracts to have or give to himself or an other the option to sell or buy, .at a future time, any grain, of other commodity, stock of any railroad or other company, or forestalls the market by spreading false rumors to influence the price of commodities therein, or corners the market, or attempts to do so in relation to any such commodities, shall be fined not less than twenty, nor more than five hundred dollars, or confined in the county jail not exceeding six months, or both; and all contracts made in violation of this section, shall be considered gambling contracts, and shall be void; provided, that the provisions of this law shall only be held to mean and apply to such contracts, where the intent of the parties thereto is that there shall not be a delivery of the commodity sold but only a payment of differences by the parties losing upon the rise or fall of the market."
The act relating to negotiable instruments generally was passed April 17, 1902, and is entitled ' ' an act to establish a law uniform with the laws of other states on negotiable instruments."
Pertinent to the controversy between these parties are the following sections:
"Section 3172*, Revised Statutes (8757, General Code). [What constitutes a holder in due course.] A holder in due course is a holder who has taken the instrument under the following conditions:
' ' 1. That it is complete and regular upon its face.
"2. That he became the holder of it before it was overdue, and without notice that it has been previously dishonored, if such was the fact.
"3. That he took it in good faith and for value.
"4. That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it."
"Section 3173&, Revised Statutes (8162, General Code). [Bights of holder in due course.] A holder in due course holds the instrument free from any defect of title of prior parties, and free from defenses available to prior parties, among themselves, and may enforce payment of the instrument for the full amount thereof against all parties liable thereon.
"Section 3173c, Revised Statutes (8173, General Code). [When subject to original defenses.] In the hands of any holder other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were non-negotiable. But a holder who derives his title through a holder in due course, and who is not himself a party to any fraud, or illegality affecting the instrument, has all the rights of such former holder in respect of all parties prior to the latter.
' "Section 3173(7, Revised Statutes (8174, General Code). [Who deemed holder in due course.] Every holder is deemed prima facie to be a holder in due course; "
"Section 3178e, Revised Statutes (8300, General Code). [Law merchant; when governs.] In any case not provided for in this chapter, the rules of law merchant shall govern."
It does not appear anywhere in this .act that Sections 4269 and 6934a are specifically repealed thereby.
Does it impliedly do so?
Two lines of authorities on this question present themselves to the court for consideration. In a similar case, in the 17 Appeal Cases, Dist. of Columbia, p. 283, Wirt v. Stubblefield, the court says:
"It is difficult conceive, if we bear in mind the object and policy intended to be promoted by, as well as the entire scope and express provisions of,, the 'negotiable instrument law,' that the framers of that act ever intended to save and preserve- unrepealed, as part of the law governing negotiable instruments, the old English statutes of 16 Car. 2, and 9 Anne, against gaming. On the contrary, it was most clearly among the objects and purposes of that act, to get rid of all such impediments and hindrances- to the circulation of negotiable instruments as had been created by those old statutes, and to embody the entire law upon the subject, as far as practicable, into one well digested and consistent act. It is true, as a general rule, that where there are two acts on the same subject, the rule is to give effect to both, if it can consistently be done. 'But if the two are repugnant in any of their provisions, the latter act, without any repealing clause, operates to the extent of repugnancy as a repeal of the first; and even where two acts are not in express terms repugnant, yet if the latter act covers the whole subject of the first, and embraces new provisions, plainly showing that it was intended as a substitute for the first act, it will operate as a repeal of that act' (Davies v. Fairbairn, 3 How., 636; United States v. Tynen, 11 Wall., 88, 92). It is quite clear that the act of Congress was intended to cover the whole subject of negotiable instruments as- far as it could be done by statute; and therefore to exclude the operation and effect of former statutes like those of Charles and Anne. But there is manifest inconsistency or repugnancy, as we have shown, between the effect and operation of those old English statutes, so far as they affect negotiable instruments, and the provisions and policy of the 'negotiable instrument law' of Congress; and this construction of the latter act is strongly fortified by the general provision of that act which declares, that ' in any case not provided for in this act the rules of the law merchant shall govern.'' We know that no such prohibition or nullity as that declared in the old statutes against gaming has any recognition in the law merchant. The law merchant is a system of commercial law founded upon the most liberal and enlarged customs and usages, for the promotion of trade, and which is applied for the decision of the causes of merchants, by such general rules as obtain in all commercial countries, and is, therefore, wholly inconsistent with the gaming statutes; and it applies often even in matters relating to domestic trade, as, for instance, with regard to the.drawing, the acceptance, and the transfer of inland bills of exchange (1 Black. Corn., 173). And since the Statute 3 and 4 Anne, Ch. 9, promissory notes, when indorsed, are placed upon the same footing of inland bills of exchange, if they were not so before that statute.
"We are clearly of opinion that the British Statutes of 16 Car. 2, Oh. 8, and 9 Anne, Ch. 14, against gaming, so far as they might or would, if in force, affect the validity of the negotiable instruments embraced by the act of Congress, are inconsistent with the provisions of the latter act, and they are, therefore, to the extent that they are so inconsistent or repugnant to the act of Congress, repealed, and no longer, as to negotiable instruments, in force in this district."
In a concurring opinion in the 114 Appellate Division, New York Supreme Court Reports, p. 554, case of Schlesinger v. Kelley, Laughlin, Judge, expresses the same view in this language :
"It is, I think, evident that the purpose of the commission representing the various states of the Union in preparing the draft of the negotiable instruments law, and of -the various Legislatures in enacting it, will be thwarted if Section 96 is to receive the construction that even as against bona fide holders in due course for value the maker of the note may successfully defend upon the ground that in the inception of the note some local law was violated. # Of course a person taking negotiable paper must determine at his peril whether or not it has had an inception, but having ascertained that fact, I think it was the purpose and intent of the Legislature to relieve him from any latent infirmity, as by a discount at a usurious rate of interest at its inception, or other analogous-latent infirmities."
In 191 N. Y., p. 75, Schlesinger v. Lehmaier, the court says:
"In the negotiable instruments law it is expressly provided that a holder, who becomes such before maturity in good faith and for value without notice of any infirmity, holds the same 'free from any defect of title of prior parties and free from defenses available to prior parties among themselves, and may enforce the payment of the instrument for the full amount thereof against all parties liable thereon.' Here we have the legislative intent expressed in clear and unmistakable language. It establishes a just and proper rule which protects the bank in making purchases of commercial paper in good faith before maturity, for value and without notice of infirmity-. But where it purchases with actual knowledge of the infirmity, or defect or knowledge of such facts that its- action in taking the instrument amounted to bad faith, it is not protected." See also 47 Miscellaneous N. Y. Reports, p. 415; 149 Federal Reporter, 818.
These different authorities in themselves furnishing reasons for the opinion held by the respective courts, are the plaintiiff's view of this case.
As quoted, the general provisions contained in Section 3178e incorporate the law merchant as applicable in a case not specifically provided for. By the law merchant—•
"Stock jobbing contracts, that is to say, agreements for the sale or transfer of stocks made by a person who is not the owner of the stock at the time the contract is made and not authorized by any person to sell the same, are declared void; they are in substance wagering contracts. And hence as between the immediate parties, bills and notes founded on the transaction, are also void.. But where the statute does not annul all such securities, they are valid in the hands of a bona fide holder, who takes them for value and before maturity." Edwards on Bills and Promissory Notes, 351; 19 Eng. Common Law Rep., p. 20.
We recognize the value of the opinions of the courts so far quoted, and the force of the application of the law merchant under the provision of Section 3178e, but there is a contrary view taken by some courts, who therefore sustain the contention of the defendant. These are entitled to our careful review and consideration.
In the case of George Alexander & Co. v. Hazelrigg, 97 Southwestern Reporter, p. 353, the Court of Appeals of Kentucky,' in considering a like ease, in the body of the opinion, uses this language :
"The real question to be determined is whether a negotiable note executed for money lost on a bet or wager can be successfully defended, when owned and held by -an innocent purchaser for value without notice of the infirmity or illegal consideration of the note. As we understand the appellant's position, he concedes that prior to the passage and the taking effect of the negotiable instruments act, referred to, such a note could be successfully defended in the hands of an innocent purchaser; but since that act took effect he contends that all laws inconsistent with that act stood repealed. He claims that under Section 57 the question of consideration can' not be inquired into as against the holder in due course. He takes the paper free from defenses."
And in support of this position we are referred to the case of Wirt v. Stubblefield, 17 App. D. C., 283. In that ease it was held that the section, the same as Section 57 referred to above, changed the law of the District of Columbia, as to a note given for a gambling debt in the hands of a holder in due course, the court saying: (here the court quotes the language of the decision of the Court of Appeals in D. C. already incorporated in this opinion.) ,
"It has been the policy of this state to suppress gaming, and the statutes making gaming contracts void are founded upon what the Legislature has for many years deemed to be sound public policy. It is inconceivable that the General Assembly, in the passage of the act of 1904 for the- protection of innocent holders of negotiable instruments, intended to or did repeal Section 1955, Ky. St., 1903, which declares all gaming contracts void. In ouiopinion, the disappointment now and then of an innocent holder of a negotiable instrument would not be as hurtful and injurious to the best interests of the state as the removal of the ban from gaming contracts."
Mr. Daniel in his work on Negotiable Instruments (Section 197) says: , '
"The bona fide holder for value, who has received the paper in the usual course of business, is unaffected by the fact that it originated in an illegal consideration, without any distinction between cases of illegality founded in moral crime or turpitude, which are termed mala in se, and those founded in positive statutory prohibition, which are termed mala prohibita. The law extends this peculiar protection to negotiable instruments, because it would seriously embarass mercantile transactions to expose the trader to the consequences of having a bill or note passed to him impeached for some covert defect. There is, however, one exception to this rule—that when a statute, expressly or by necessary implication, declares the instrument absolutely void, it gathers no vitality by its circulation in respect to the parties executing it. " •
In the case of Sondheim v. Gilbert, 117 Ind., 71 (18 N. E., 687; 5 L. R. A., 432), reported in 10 Am. St. Rep., at page 23, the court said:
"In order, therefore, to uphold a judgment which invalidates commercial paper in the hands of innocent holders, such as plaintiffs are conceded to be, it is essential that a statute should be shown governing the case, which in direct terms declares that transactions such as those here involved are unlawful, and that notes given under circumstances exhibited by the facts in this case are .absolutely void. The principle may be considered as well established that when a statute in express terms pronounces contracts, bills, securities, and the like, resulting from or growing out of wagering or gambling transactions, which are prohibited by statute, absolutely void, no recovery can be had thereon; and the doctrine that transactions which a statute in direct terms declares to be unlawful can not acquire validity by the transfer of commercial paper based thereon, which is also under direct legislative denunciation, is fully supported by authorities."
The authorities are referred to, and the court continues:
' ' In such a case, the note will be declared void in. the hands of an innocent holder." In the ease of Bohon's Assignee v. Brown, etc., 101 Ky., 355 (41 S. W., 275; 38 L. R. A., 503; 72 Am. St. Rep., 420), the court said:
"In the case of Cochran v. German Insurance Bank, 9 Ky. Law Rep., 196, the Superior Court held that 'a bill or note based upon a gambling consideration is absolutely void, and the drawer or maker is not bound to even an innocent holder. ' And in the case of Farmers' and Drovers' Bank of Louisville v. Unser, 13 Ky. Lew Rep., 966, the court says: 'The whole current of authority is that the obligor may insist upon the illegality of the contract of consideration, notwithstanding the note is in the hands of an innocent holder for value, in all those eases in which he can point to an express declaration of the Legislature that such an illegality makes the contract void. ' "
On the same subject, in the case of Lawson et al v. the First National Bank of Fulton, 102 Southwestern Reporter, p. 324, the same court says:
"The statute makes such notes void. It is of a police nature, intended to prevent imposition and fraud. The negotiable instruments act does not repeal this statute in terms nor does it by necessary implication. It has never been the policy of the courts to extend the doctrine of implied repeals further than the evident purpose of the last legislation required. The negotiable instruments statute is a most comprehensive piece of legislation. It goes into minutest detail in dealing with the subjects embraced by it. The whole scope of it is shown to be the dealing with commercial paper, so as to protect innocent purchasers of such against mere defenses available as between the original parties. It gives such paper currency, free from original defenses. But it only applies to paper that might have been obligatory between the parties. But, where the parties were never bound, because the law made the note void, as contrary to public policy as expressed in the statutes, the negotiable instruments act does not apply, and ought not to. The prevention of crime is of more importance than the fostering of commerce. _ The later act should read in view of its purposes, and not as intending to repeal other statutes passed in the exercise of the police power of the state to suppress crime and fraud."
In the 'dissenting opinion, in the case of Schlesinger v. Gilhooly, 189 N. Y., 33, Chief Justice Cullen, says:
"I shall not discuss at any length the effect of the negotiable instruments law (L. 1897, eh. 612, See. 96). I think that under well-settled principles of statutory construction we can not construe its general language as repealing the provisions of the usury, gaming and lottery laws, which render obligations given on such considerations absolutely void. The negotiable instruments law applies only to commercial paper, and the effect of the usury and gaming statutes, like that relating to patent rights, is to withdraw notes given on such considerations from the domain of negotiable instruments. ' '
The good sense and sound reasoning of the last three noted authorities appeal to us very strongly. In this contention it must be remembered that Section 6984a, which especially applies to contracts of -the character here sued upon, relates to the prevention of gambling, is intended for that particular purpose and is a part of the criminal code of this state. The negotiable instruments law is intended to promote uniformity of law as to negotiable instruments, and is a part of the civil code of the state. This section and this act may not be said, therefore, to relate to the same subject and are not enacted for the same purpose. In the ease of People, Respondent, v. Andreas Burtleson, Appellant, 14 Utah, p. 258, the court says:
"Where two statutes do not relate to the same subject, and are not enacted for the same purpose, they are not repugnant to each other. ' '
In the ease of United States v. Claflin, in the 97 United States Supreme Court Reports, p..546, the court holds:
"In the absence of any repealing clause, it is, however, necessary to the implication of a repeal that the objects of the two statutes are the same. If they are not, both statutes will stand, though they refer to the same subject."
In the case of The Chesapeake & Ohio Railway Company v. Hoard et al, the Supreme Court of Appeals of. West Virginia holds: .
"A statute general in its terms and without negative words will not be construed to repeal by implication the particular provisions of a former statute which are special in their application to a particular case, or class of cases, unless the repugnancy be so glaring and irreconcilable as to indicate the legislative intent to repeal."
In Lewis' Sutherland Statutory Construction, Vol. 1, at page 469, we find:
"When there is a difference in the whole purview of two statutes apparently relating to the same subject, the former is not repealed. '
In Ohio there are .no common law crimes. All crimes are declared such by statutory enactment. The state must reserve to itself, and the Legislature must be held to have intended to so reserve the right to differ with other states as to its criminal code, which may grow from the peculiar necessities of the people in this particular state.
Whatever may be found in a section of the criminal law and therefore deemed by the Legislature as necessary to make the criminal code effective, is an inseparable part thereof.
Having found it necessary for a proper enforcement of the criminal act to declare all gambling contracts void, the Legislature should not be construed to have impliedly intended to make its criminal section non-effective by the enactment of a general civil provision relating to any such contract.
Our view, after a full and careful consideration of all the foregoing authorities, is that the negotiable instruments law does not repeal Section 6934a, whatever may be construed to be its effect upon 4269 of the Revised Statutes.
Believing Section 6934a to be in full force and effect, our finding must be for the defendant. Let an entry be drawn accordingly.