MORRIS v. NORTON, 75 F. 912

TAFT, Circuit Judge, after stating the facts as above, delivered tbe opinion of the court. The first question is whether there was any evidence to show that (Morris’ dealings for Norton with Merriman & Rockefeller were not legitimate purchases of oil, but were gambling transactions. It is well settled that sales and purchases by deposit of margins, and tbe settling of differences on the rise and fall of the market, with no intention of delivering or receiving the commodity nominally dealt in, are gambling contracts, and void at common law on grounds of public policy. Irwin v. Williar, 110 U. S. 499, 4 Sup.

Ct. 160; Embrey v. Jemison, 131 U. S. 336, 9 Sup. Ct. 776; Kahn v. Walton, 46 Ohio St. 195, 20 N. E. 203. Moreover, such purchases and sales are in violation of the act of the legislature of Ohio passed April 15, 1882 (79 Ohio Laws, p. 11*8), which reads as follows: “Sec. 6934a.

That whoever contracts to have or give to himself or another the option to sell or buy, at a future time, any grain or 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 gamblihg 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 dealings between Morris and the brokers were in Ohio, and their character would be determined by the laws of that state. The testimony of Mrs.

Slawson, the stenographer, and of Morris, is very clear to the point that Merriman Rockefeller neither delivered nor received oil, and that all settlements made with their customers were made “on the tape”; i. e. by the market reports, and without any intention of real transactions in oil; Morris testifies that all his dealings with them were of that character. Rockefeller was not asked concerning this, and there is nothing in his evidence inconsistent with actual sales and purchases of oil.

Morris’ evidence, however, is sufficiently broad to cover this very transaction in which he acted for Norton; and we do not see why, under the federal statute, it was not competent for him to tell just what in fact his dealing on this occasion with the brokers was. By

section 858 of the Revised Statutes, this being an action against an administrator, Morris, as the party plaintiff, was not competent to testify- against the defendant “as to any transaction with or statement by * * * the intestate.” The section, both in its enabling and qualifying clauses, has always been held to govern trials in courts of the United States, though the state statutes of the state in which the court- is sitting make different rules as to the competency of witnesses. Ex parte Eisk, 113 U. S. 713, 721, 5 Sup. Ct. 724; Monongahela Nat. Bank v. Jacobus, 109 U. S. 275, 3 Sup. Ct. 219; Potter v.

Bank, 102 U. S. 163; Page v. Burnstine, 102 U. S. 664; King v. Worthington, 104 U. S. 44. Morris’ dealings with the brokers in the absence of Norton, though with his money and on his behalf, were not transactions with Norton, within the meaning of the statute. Hill v. McLean, 10 Lea, 107, 115; Jones v. Waddell, 12 Heisk. 338; Giles v. Wright, 26 Ark. 476; Insurance Co. v. Sledge, 62 Ala. 566; Huckabee v. Nelson, 54 Ala. 12; Gray v. Cooper, 65 N. C. 183; 1 Whart. Ev. 450.

Transactions with the intestate refer to things done in his presence, to which he might testify of his personal knowledge, were he alive, and not to transactions out of his hearing and presence, though they may affect the liability of his estate. Of course, Morris could not be permitted to say what he told Norton about his dealings with the brokers, or what Norton in fact knew of them, but he certainly could testify as to the real character of the contract between him and Merriman & Rockefeller. This being tlie case, there was evidence to show that Morris was gambling with Norton’s money.

Second, was there evidence to show that Norton knew the real character of the transaction? We think there was. Norton was the cashier of a hank, and a man of large experience in business. The telegrams and letters passing between Morris and Norton during the four or five months after the investment, and before the transaction was closed, are full of phrases of Norton which might lead a reasonable man to believe that he knew he was in a very speculative enterprise, and that it was to be concluded without a real investment in oil.

He refers to the investment in one place as “an oil dicker.” In another he says that the market is very panicky, and cautions Morris not to let him be sold out, and to draw on Mm to prevent it. Nominally, he had bought 10,000 barrels of oil, and had deposited §3,000 of the purchase money as a margin. He was not an oil merchant. He had no place to store the oil. It is possible that he intended to store it in a public warehouse and sell it again, or that he thought this was actually being done for him, but there are circumstances from which a. contrary inference can be drawn.

He once or twice refers to Monis’ knowledge of the inside workings of the market, as a reason for Ms making the investment, and for trusting his judgment as to when to sell. The jury might infer, from the evident desire of Norton to sell the moment the market advanced, that he had gone into Hie scheme only to win on the rise in the market, and that real ownership in the oil was not in his mind.

Considering all the circumstances, we think that, if the question is material in deciding the issues in the case, there was enough evidence tending to show Norton’s knowledge of the gambling character of the investment made for him to require its submission to the jury. We come now to consider the evidence as to the settlement. Rockefeller’s testimony shows that his firm became insolvent in May because of the failure of their principal and correspondent in New York.

This was before Norton ordered Morris peremptorily to sell out his oil purchase, and before June 8th, when Morris telegraphed that he had closed the oil at 1.14;', and would render an account as soon as he got it. Norton went to Cleveland, and his account of the settlement is very short. Being asked how he came to get the notes, he said: “The account showed in my favor 5,000-odd dollars, and Mr. Morris was perfectly good, and I told him to give me his note in settlement of the deal. Q. Will you state whether, in that conversation, ho said anything about Rockefeller settling up the account? A. I don’t know.

He ga.ve me a note, to settle up the matter.” The explanation is not at all full or satisfactory. It would seem to be quite inconsistent with a belief on Norton’s part that the money had been realized by Morris on the transaction; for, if Morris then had the money, why should Norton suggest taking his note? There is an omission or suppression of some circumstance known to the parties to the settlement, which prompted the execution of the note. Norton’s memory fails him as to whether there was any conversation concerning Rockefeller.

In view of the fact that Rockefeller’s firm had failed quite two weeks before, and the investment had been with them, it might be a legitimate inference for the jury to draw that Norton was then advised that no proceeds had been realized from the reported sale, and that Morris assumed an obligation to reimburse Norton for the loss arising through the insolvency of Rockefeller’s firm, and gave the note accordingly.

Norton was given a full opportunity to give the details of the settlement when a witness in tire bank case, and his failure to explain justifies the inference that his right to have the note paid would not be made stronger by any fuller statement of what occurred. The subsequent correspondence between Morris and Norton concerning the renewals of this note, and the original consideration, was offered in evidence, and rejected by the court on the ground that it occurred after the note was given.

While the question is not free from doubt, we are of opinion that this correspondence was competent evidence against Norton’s administratrix. The rule is well settled that conversations between parties to a controversy, in which one makes a statement of fact of which both have personal knowledge, and which naturally call? for a denial by the other if the statement is untrue, are competent against the silent party, as admissions, by acquiescence, of the truth of the statement.

The weight of the admissions varies with the circumstances of the case, and the strength of the probability that the statement, if untrue, would have evoked a denial, and is always for the jury, guided by a proper caution of the court as to the theory upon which such conversations are admitted. Com. v. Kenney, 12 Metc. (Mass.) 235, 237; Com. v. Harvey, 1 Gray, 487, 489; 2 Whart. Ev. § 1136; 1 Greenl. Ev. § 199.

With respect to written communications, however, the rule is different, because the failure of one receiving a letter to answer it may be attributed to many causes besides an acquiescence in the truth of what is written, and such a rule would furnish a dangerous weapon in the hand of an unscrupulous party to make evidence in his favor against a careless opponent.. It cannot be said, however, to be an unvarying rule that an unanswered letter may not be evidence against the person addressed, because there are cases in which such letters have been admitted. Fenno v. Weston, 31 Vt. 345; Gaskill v.

Skene, 14 Adol. & E. (N. S.) 668; Gore v. Hawsey, 3 Fost. & F. 509; Lucy v. Mouflet, 5 Hurl. & N. 229; Roe v. Day, 7 Car. & P. 705. These authorities are explained — some of them — on the view that a demand by the plaintiff of the defendant was necessary to the plaintiff’s case, and the letter unanswered was competent to show this, but it will be observed that even in those cases the jury was permitted to draw inferences from the failure to answer the demand.

The better-supported rule, probably, is that unanswered letters are ordinarily not evidence against the person addressed, as admissions of the truth of statements contained therein. Learned v. Tillotson, 97 N. Y. 8; Talcott v. Harris, 93 N. Y. 567, 571; Fearing v. Kimball, 4 Allen, 125; Percy v. Bibber, 134 Mass. 404; Commonwealth v. Eastman, 1 Cush. 189, 215. But the rule has some exceptions. Hayes v. Kelley, 116 Mass. 300; Wiggins v. Burkham, 10 Wall. 129. In Sturtevant v. Wallack, 141 Mass. 119, 4 N.

E. 615, the question was of the competency of the fact that bills had been sent to the defendant, and a letter demanding payment, and that no reply had been received, on the issue whether defendant or another was the party liable for the goods, which were sent in cases addressed to the defendant. The evidence was not objected to, but the court was asked to charge that the marking of the eases had no weight'. Mr.

Justice Holmes, in delivering the opinion, said: “We do not say tliat tlie marking oí tlie cases, alone, would have keen evidence against the defendant; and we readily admit that it is ‘not every charge, however expressly made, that calls for an answer. * * * But when a charge is of such a kind that, according to common experience, a man would naturally repudiate it if unfounded, the fact that it was made and not repudiated may he left to the jury.

We cannot say that it might not have keen found properly that, if the defendant had denied Tudor’s authority to charge him with the machinery, he would naturally have written to the plaintiff that he was sending his bills to the wrong mail, and must look to Tudor.” After all, it comes to this: that unanswered statements in letters are seldom to be regarded as admissions by the person addressed, but that exceptional circumstances may justify the court in submitting them to the jury with a proper caution. Jn the case at bar the letters relied upon cannot properly be said to have been unanswered.

They were part of a running correspondence, in which Norton was pressing Morris for the payment of the notes, and using falsehood in respect to the ownership of the notes, in order to compel payment, and Morris was resenting tlie pressure, because of the circumstances under which he claimed to have given the notes, — circumstances necessarily as well known to Norton as to Morris. Morris’ statements were so specific, and made such an equity in his fai\ , that it is highly probable that Norton would have denied tlie statements, if he could have done so.

Instead of this, he finally answers that he had supposed Morris was an honorable man, and would do what be said be would do, — a remark rather confirmatory, than otherwise, of Morris’ written version of the way in which the notes came to be made. Norton’s letters bear marks of studied efforts to make no damaging admissions, and impress one who reads them that he was conscious of the truth of Moms’ statements as to the circumstances under which the notes were given.

In one letter, Norton denies knowledge of the facts stated in Morris’ letter containing a reference to Ms assumption of the debt; but, when challenged in a subsequent letter, he limits Ms denial, to the extent and manner of Morris’ individual loss. The letter of August 31st from Morris was unanswered, but in subsequent letters Norton refers to statements made in it, in such a way that we think it cannot be regarded as without recognition and reply.

On the whole, we think the correspondence set forth in the statement of fact, with any additional letters which Norton’s administratrix may wish to introduce, if any there are, explanatory of those above set out, should be submitted to the jury, with a caution that Monis’ statements concerning the giving the notes are not evidence against Norton, unless they shall be satisfied from Norton’s answer and failure to reply on this point that lie was silent in regard to them because be could not deny them.

We are of opinion, therefore, that there was evidence before the jury tending to show that Norton gave Morris $4,000 to gamble with in margins on oil; that the investment was successful, in that, according to the agreement of the brokers, he was entitled to $5,000; that no proceeds were realized, however, because of the failure of the brokers; and that Morris, with Norton’s knowledge and acquiescence, then assumed the loss into which he had led Norton by recommending the brokers, and gave him his note for the same.

The evidence leaves it a question, upon which reasonable minds may differ, whether in the agreement of settlement it was stipulated as the consideration for the notes that Norton should transfer to Morris all his beneficial interest in the claim against the Rockefeller firm, or whether the assumption by Morris was merely a matter of honor, based on no valuable consideration at all. The decision of the question involves disputable inferences of fact, and is peculiarly within the province of the jury to decide.

It is to be observed with reference to these alternative conclusions that there is a distinction between consideration and motive. “The motive for making a promise may be something entirely different from the act, or forbearance or promise thereof, which is offered and accepted in exchange for the promise.” Wald, Pol. Cont. (2d Ed.) Am. editor’s note, p. 9; Philpot v. Gruninger, 14 Wall. 570, 577. A sense of honor might have induced Morris to agree with Norton that, in consideration of a transfer of his claim against the Rockefeller firm, he would give the note.

In that case the legal consideration would be the transfer, and the sense of honor only the motive. On the other hand, if Morris had said to Norton, “I’ll assume this obligation of the broker, because I feel in honor bound to do so,” and accordingly gave him the note, without any agreement between them as to the claim against the brokers, the sense of honor would have been, not only the motive, but also the consideration. “Nothing is consideration that is not regarded as such by both parties.” Wald, Pol. Cont. (2d Ed.) 9; Ellis v. Clark, 110 Mass. 389; Sterne v. Bank, 79 Ind. 549, 551; Holmes, Com. Law, 293, 295.

Hence the question as to the real consideration for this note is to be determined by what the parties regarded as the consideration when the notes were given, and that depends on what they said and did at the time. This is wholly a matter of conjecture from the circumstances, the conduct of the parties, and the correspondence afterwards in regard to the giving of the notes. It is our province to consider the rights of the parties on each of the alternative hypotheses above suggested.

The transfer of Norton’s claim against the brokers for his winnings on a gambling transaction would be a good consideration to support the obligation of Morris’ note. This would be so on two grounds: First, the assignment of the right to the fruits of an illegal transaction after the transaction has been closed is not illegal. The assignment would not be in furtherance of the illegal purpose of the original contract, and no public policy forbids a transfer of the unenforceable rights which may grow out of such a contract after the contract and its purpose are things of the past. McBlair v.

Gibbes, 17 How. 231, 235, 237; Armstrong v. Toler, 11 Wheat. 258, 269 ; Rothrock v. Perkinson, 61 Ind. 39; Buchanan v. Bank, 5 C. C. A. 83, 6 U. S. App. 566, 577, 55 Fed. 223; Wald, Pol. Cont. (2d Ed.) 325; Greenh. Pub. Pol. 36. In such a case there is the possibility that the person owing the illegal debt may not rely on the illegality as a defense, and, considering it a matter of honor, may pay it. This possibility makes the assignment of the claim a valuable consideration. More than this, under the act of 1882 (79 Ohio Laws, p. 118), and

section 4270 of the Revised Statutes of Ohio, as construed by the supreme court of Ohio in Lester v. Buel, 49 Ohio St. 240, 30 N. E. 821, Norton would have the right to recover hack the §4,000 from the brokers with whom the gambling was done; and we see no reason why an assignment by Norton of his claim against the brokers would not carry this right with it. The right to recover $4,000 from the brokers would certainly constitute a good and valuable consideration to support Morris’ note.

On the hypothesis that the jury may ñnd from the evidence that the note was given by Morris for the consideration that he felt in honor bound to reimburse the loss Norton had made through trust iu brokers recommended by him, and that there was no stipulation as to the transfer of the claim from Norton, to Morris, a different result follows. The note could not be enforced, because Morris’ sense of honor was not a valuable consideration. Eastwood v. Kenyon, 11 Adol. & E. 438, 446; Mills v. Wyman, 3 Pick. 207; Dodge v. Adams, 19 Pick. 429; Wiggins v. Keizer, 6 Ind. 252; Hendricks v.

Robinson, 56 Miss. 694; Dearborn v. Bowman, 3 Metc. (Mass.) 155; Updike v. Titus, 13 N. J. Eq. 151; Cook v. Bradley, 7 Conn. 57; Wald, Pol. Cont. (2d Ed.) 169. More than this, the note would he void for illegality, because it would merely be evidence of Morris’ assumption of ihe brokers’ obligation to pay a gambling debt, without any new consideration. It would be the same debt, with only a change of debtors, and would be subject to the same defense of illegality by the new debtor as by the old. Coulter v. Robertson, 14 Smedes & M. 18; Edwards v. Skirving, 1 Brev. 548; Blasdel v. Fowle, 120 Mass. 447.

The result of our consideration of this case is that upon the testimony admitted, and which should have been admitted, there was evidence enough to sustain a special verdict by the jury, upon which judgment would have to he entered in favor of Morris on the question of the legality and binding effect of the two notes in suit, which were only renewals of the original note. The action of the court below in excluding evidence,, and in directing a verdict for Norton’s administratrix, was therefore erroneous.

The judgment of the circuit court is reversed, at the costs of defendant in error, with directions to order a new trial.