Court Opinion

ID: 9308016
Source: CourtListenerOpinion
Date Created: 2022-12-02 17:18:44.026325+00
Date Added: 2024-06-11T17:14:00.377025
License: Public Domain

GltOSSCUP, District Judge.
When, in violation of his right, an agent makes an appropriation of his principal’s money, and turns it over to a third person, the principal may recover from the third person the money so appropriated, unless the third person is a bona fide holder for value and without notice. Under this rule, the plaintiff can, indisputably, recover from the defendants upon the facts found, unless the defendants are bona fide holders for value and without notice. The principal question, therefore, is whether the findings of fact show that the defendants are chargeable with notice of Cassatt’s misappropriation.
Transactions in futures, of a purely speculative character, where nothing is put up, except for margins, are, in many essential results, *872different from ordinary business transactions. There is, in these transactions, no investment of money in anything tangible, — in any property of supposedly equivalent value, — that remains when the deal is ended. If a trader in ordinary pursuits meets misfortune, or becomes involved, something usually remains of his investment. Unless his fortune be entirely swept away or he be dishonest, there is an estate. But the speculator, investing his money in margins, invests, practically, in nothing but a turn in the market. If he meet misfortune, nothing remains. It is essentially putting his money into a turn of chance. The effect, upon the man, of transactions so radical in their money outcome has come to be notable. Transactions of this kind are, indeed, separated very narrowly, if at all, from gambling, pure and simple. Both feed upon the same human propensity, and both lead to the same result. Each is an attempt, by the exercise of wit, to get what another is expected, by the want of wit, to lose. Both lead up to false notions of wealth accumulation. Both bring on the loss of mental equipoise. Each fills its participant with a dangerous character of excitement,— often a radical and desperate aggressiveness. No one knows thesethings better than the brokers themselves. They see, now and then, striking instances of moral and business degeneration under the stimulus of this excitement. They see, now and thenj instances of men, pressed for margins, losing all sense of what is their own and what is another’s. They witness, as well as the public, that almost unaccountable submergence of judgment and sense, under the effect of which trust funds are misappropriated, and bank funds embezzled, by those who have, at the time, no thought of not eventually making good the loss. They, as well as the public, know how quickly crime, thus secretly begun under the radiance of hope, soon expands into the daring of despair. They have seen, in nearly every community, men press eagerly. towards these rainbows of fortune, only to fall ^quickly into disgrace and a prison. These impressive lessons are a part of the history of every considerable community. Instinctively we shudder for him who loves speculation, and can find the means for feeding that love in access to the moneys of another.
Cassatt was a banker, so far as the record discloses, without means of his own. Through 10 years he had, to the knowledge of defendants, poured a steady stream of margins into his deals on the board of trade. Whence did the money come? How was it recruited? Why should this losing, almost desperate, play against ill fortune keep on? No real friend of Cassatt, who knew his opportunities in Iowa, and his practices in Chicago, would have been without painful apprehension. No depositor in the Pella bank, coming into a knowledge such as the defendants had, would have let a day go by before withdrawing his deposit. No stockholder would have failed to institute instant and thorough investigation. The facts known to these defendants would, if communicated to the world, have put every intelligent man, interested in Cassatt’s pecuniary.condition, upon inquiry. They would have, intuitively, marked him out as a man in peril. Inquiry, in the sitúa*873tion of the defendants, was a moral duty. In their omission to perform that duty they proceeded at their peril. Neglect, in such a case, is followed by all the consequences of bad faith. “If,” in the language of Knapp v. Bailey, 79 Me. 195, 9 Atl. 124, “a party has knowledge of such facts as would lead a fair and prudent man, using ordinary caution, to make a further inquiry, and he avoids the inquiry, he is chargeable with notice of the facts which, by ordinary diligence, he would have ascertained. He has no right to shut his eyes against the light before him. He does a wrong in failing to heed the signs and signals seen by him. It may be well concluded that he is avoiding notice of that which he, in reality, believes or knows.”
These marts of trade are, in many respects, greatly beneficial to the interests of mankind. They balance, like the governor of an engine, the otherwise erratic course of prices. They focus intelligence from all lands, and the prospects for the whole year, by bringing together minds trained to weigh such intelligence and to forecast the prospects. They tend to steady the markets more nearly to their right level than if left to chance or unhindered manipulation. Nor are the purchase and sale of futures intrinsically wrong. They are the means of bringing about those stable and steadying results. But the tendencies and excesses of human nature — its susceptibility to warp in the fierce heat of excitement or distress-are facts to be heeded by the broker as well as by the public. He may not close his eyes to probabilities, or even strong possibilities, that are patent to the rest of mankind. If he does, the law rightly makes him accountable to those who thereby innocently suffer.