MURPHEY v. SPRINGS & CO., 200 F. 372

SHELBY, Circuit Judge (after stating the facts as above). In England it was held that contracts, although wagers, were not void at common law; but in this counti-y it has been generally held that all wagering contracts are illegal and void as against public policy. Irwin v. Williar, 110 U. S. 499, 4 Sup. Ct. 160, 28 L. Ed. 225. The rule that such contracts afe void is reinforced and affirmed by the Georgia statutes. Georgia Civil Code 1895, § 3668; Acts of Georgia (1906) p. 95.

A contract for the sale of goods to be delivered at a future day, in the absence of a statute to the contrary, is valid, although the seller has not the goods; but such contract is only valid when the parties really intend and agree that the goods are to be delivered by the seller and the price paid by the buyer.

If, under the guise of such a contract, the real intent be merely to speculate on the rise and fall of prices, and the goods are not to be delivered, but one party is to pay the other the difference between the contract price and the market price at the date fixed for executing the contract, then the whole contract is a wager, and is null and void. Embrey v. Jemison, 131 U. S. 336, 9 Sup. Ct. 776, 33 L. Ed. 172. When an action is brought at law to enforce such illegal contract, unquestionably the defendant may set up the illegality in a plea or answer.

The trial court, it seems, recognized the fact that wagering contracts and contracts commonly known as dealing in futures are illegal and void by the laws of Georgia, for it was announced that a defense based-on the illegality of such contracts would have been sustained, if it had been promptly presented.

The court was of the opinion, however, that if an account was stated on such transactions, although the transactions were, in themselves, illegal, and the defendant had promised to pay the account, he could not then defend at law on the ground of such illegality, but that it would be necessary tq present the defense in equity. . . It is true that, under the federal practice, an equitable defense is not permitted at law; for example, a defense that required to sustain it the rescission of a contract, the parties to which were not before the court (Lantry v. Wallace, 182 U. S. 536, 21 Sup. Ct. 878, 45 L.

Ed. 1218), or a defense alleging fraud, seeking to vacate a sale, and praying for an accounting (Northern Pacific Railroad v. Paine, 119 U. S. 561, 7 Sup. Ct. 323, 30 L. Ed. 513), or a defense that involved the settlement of partnership accounts, all the partners not being parties to the suit at law (Burnes v. Scott, 117 U. S. 582, 586, 6 Sup. Ct. 865, 29 L. Ed. 991); and in similar cases.

We think, however, there is nothing in the fact that an account was stated, nor in the fact that the defendant promised to pay it, that could deprive him of the right to make the defense of illegality or wagering contract at law. The new promise could not wipe out the original taint of illegality. Dunbar v. Johnson, 108 Mass. 519. Such a plea is not an equitable defense, but presents a legal bar to the action. In James v. Haven & Clement, 185 Fed. 692, 107 C. C. A. 640, which was an action at law, it was held that a promise to pay a demand arising out of a wagering contract, which is illegal, is not binding.

An answer or a replication in a case at law ordinarily may set up fraud or other illegality. Wagner v. National Life Insurance Co., 90 Fed. 395, 33 C. C. A. 121. In an action on a promissory note, fraud in obtaining the note may be pleaded at law. Marshall v. Hubbard, 117 U. S. 415, 418, 6 Sup. Ct. 806, 29 L. Ed. 919; Hume v. United States, 132 U. S. 406, 10 Sup. Ct. 134, 33 L. Ed. 393. In an action for goods sold, a defense may be made at law, based on the fraudulent representations of the seller as to the quality of the goods. Dushane v. Benedict, 120 U. S. 630, 7 Sup. Ct. 696, 30 L. Ed. 810.

We are of the opinion that there is nothing in the fact that an account has been stated, and that the defendant has promised to pay it, that would deprive him of the right in an action at law to defend on the ground that the account was based on an illegal or wagering transaction. The trial court erred in striking the answer from the files and in refusing to receive evidence to sustain it. Reversed.