Waugh v. Beck , 1886 Pa. LEXIS 453 ( 1886 )

Mr. Justice Trunkey

delivered the opinion of the court,

In England wagers were not unlawful or unenforceable at common law, and therefore 'some of the decisions in that country upon -wagering contracts, are inapplicable where such contracts are unlawful.

It has never been held in the highest tribunals of Pennsylvania that a wager is recoverable, and from 1803 the uniform current of authority is to the contrary. Every species of gaming contract, whether of insurance by a valued policv where the insured has no interest, or a bet on the existence of a letter, or the purchase of stocks or other commodities without the intention to deliver or receive them, is reprobated- by our law: Pritchett v. Insurance Co., 3 Yates, 458; Edgdell v. McLaughlin, 6 Whar., 176; Brua’s Appeal, 55 Pa. St., 294. In the latter case, Thompson, C. J., remarked: “ Anything which induces men to risk their money or property without any other hope of return- than to get for nothing any given amount from another, is gambling, and. demoralizing to the community. All gambling is immoral.”

A transaction in stocks by way of margin, settlement of differences, and payment of gain or loss, without intending to deliver the stocks, is a mere wager: Maxton v. Gheen, 75 Pa. St., 166. It is a gambling or wagering operation which the law does not sanction and will not carry into effect. And a broker who advances money to pay losses incurred in such operations, cannot recover the amount advanced, nor even his commissions for his services: Farrira v. Gabell, 89 Id., 89; Dickson’s Ex’rs v. Thomas, 97 Id., 278. Where an infant dealt in stocks or margins, through brokers who did not know he was an infant, until the losses amounted to more than $5,000, which he had paid them, it was held that he dealt with the brokers as principals and could recover back the .whole amount he had deposited with them as margins: Ruchizky v. De Haven, 97 Id., 202. A bond given to cover margins in a gambling transaction will not be enforced in favor of an assignee, unless the obligor precluded defence by stating that he had none, to the assignee before his purchase from the obligee : Griffiths v. Sears, 112 Id., 523.

Although not prohibited by statute, a wagering or gambling transaction in stocks, grain, oil or other commodities, is unlawful in this state. A gambling agreement, being in violation of the law and in the nature of a public wrong, has no legal effect. The law forbids it on the ground that it is demoralizing to the community. In an issue which involves inquiry whether such wrong was agreed to be committed, and was committed, it is as fitting to call it a gambling transaction as if it were so declared by statute.

The jury have found that the plaintiff furnished the money, that is, the consideration of the notes for the benefit of the defendant, but knowingly and with the purpose of furthering a gambling transaction. No question has been made as to what commodity was the.subject of the transaction, or whether the money was used for the purpose of gambling. It would be well that the record show a finding of what the transaction was, not only that it appear whether it was violation of a statute, or of the common law, but also that it may appear whether the act was a public wrong. If a statute prohibit an act, it is not necessary in 'order to invalidate a contract to do the act, that the statute should provide a penaltjr; nor does it follow because the statute imposes a penalty on a particular act, that such act is illegal: Whar. Cont., §§ 863, 364. The issue should be so framed that the verdict will show the character of the transaction or agreement.

As a general rule money loaned for the specific purpose that it shall be used by the borrower to do an act in violation of law, and has been so used, cannot be recovered back by the lender. -It is not enough to defeat recovery by the lender that he knew of the borrower’s intention to illegally appropriate the loan; he must know that the borrower is purposing the specific illegal use, and must be implicated as a confederate in the transaction: Wharton Cont., 841-2-8. “Where stock-jobbing is illegal, money lent for the purpose of carrying it on cannot be recovered, supposing it was lent knowingly and with the purpose of furthering the illegal act:” Id., 453.

Money lent and applied by the borrower for the express purpose of settling losses on illegal stock-jobbing transactions,. to which the lender was no party, cannot be recovered back. It being unlawful for one man to pay, it cannot be lawful for another to furnish him the means of paying. This is said of a case where the means were furnished with a full knowledge of the object to which they were to be applied, and for the express purpose of accomplishing that object: Cannan v. Bryce, 3 B. & Ald., 254. That case arose out of the violation of a statute, founded on public policy to prevent* stock-jobbing, and it prohibits payment or receipt of money for satisfying or making up any difference under penalty of ¿£100.

When the plaintiff, whilst engaged with the defendant and others in gaming and playing at cards for money, lent the defendant a sum of money for the purpose of enabling the defendant to engage and continue iii the gaming, it was held that the loan was an illegal contract, and that the money could not be recovered. The law which prohibits the end will not lend its aid in promoting the means designed to carry it into effect. That which the law prohibits, either in terms, or by affixing a penalty to it, is unlawful, and it will not promote in one form that which it declares wrong in another: White v. Buss, 3 Cush., 448.

The cases of Cannan v. Bryce and White v. Buss were where the acts were violative of statutes. But the principle is not limited in its application to such. It applies in many cases where the acts are illegal solely on the ground of public policy. A bond given in consideration of the loan of money with which to put a substitute in the Confederate army, cannot be enforced: Chritchlu v. Holloway, 64 N. C., 526. A note given for money knowingly lent to be applied to the purpose of suppressing a prosecution for a crime is illegal: Plumer v. Smith, 5 N. H., 553. Whether such offences are forbidden or punished by statute or not, money advanced for the purpose of furthering their commission, and so used, cannot be recovered.

At the argument, the case of Third Nat. Bank, 10 Fed. Rep., 243, was cited as favoring the position that the rule that money lent knowingly and for the purpose of furthering an illegal act cannot be recovered, applies to acts contrary to statute law, and not those contrary to the law founded on public policy. That case was upon promissory notes, the plaintiff claiming to be an innocent holder for value. The notes were given for balances on an illegal agreement, unenforceable between the original parties; but it was not within the gaming statute of Missouri which destroys the negotiable character of a note given for a gaming consideration, within the terms of that statute, for it pronounces a gaming contract absolutely void. And it was held that an innocent holder for value could recover. In the opinion it is said that the great weight of authority supports the rule that a broker or agent, employed to buy or sell commodities for the purpose of speculating on the rise and fall of prices merely, and the agent buys in his own name, but on his principal’s account, and after losses have occurred in such transactions, he advances money at his principal’s request to pay such losses, or if he pays such losses and afterwards his principal gives him a note therefor, may recover against his principal the advances so made, or the note so executed, notwithstanding the illegal character of the original venture. Whether such be the rule in this state need not be considered. But it is further remarked: “If a broker or factor supply his principal with funds for the express purpose of enabling him to engage in illegal transactions, and if lie (the agent) conducts the illegal venture in his own name, it seems clear that he becomes a particeps criminis, and the law will not aid him to recover moneys advanced for such purposes, nor will it enforce securities taken therefor.” And this makes near approach to the controlling principle and facts, as alleged in the case before us.

Where a man lends money to another for the express purpose of enabling him to commit a specific unlawful act, and such act be afterwards committed by means of the aid so received, the lender is a particeps criminis.

The instructions of the learned judge of the common pleas, were in the main correct, and in accord with the views herein-before stated. There was no dispute as to the use which was made of the money. The gist of the controversy was whether the plaintiff confederated with the defendant for its unlawful use. The court referred to the cases of felony and misdemeanor, stating what would make an accomplice in one, and a principal in the other, to enable the jury to understand that there must have been an agreement that the plaintiff would furnish for the defendant’s benefit $500 for the defined purpose of buying oil for the defendant’s benefit, and for the further defined purpose that that purchase should be upon margins, in order to defeat the plaintiff’s recovery. There was.no error in that. The third assignment is not sustained.

The plaintiff’s second point was — “ That if the jury believe, from the evidence, that the plaintiff loaned the money which formed the consideration of the notes for the benefit of the defendant, and, although he knows the money was to be used in buying oil on margins, still the plaintiff can recover.” Answer: “Simple knowledge by the lender of money that the borrower was likely to, or was going to, use it in gambling might not be enough to prevent a recovery of the money loaned, but if the plaintiff-paid this money to Mr. Lamberton, the oil broker, m accordance with an agreement made between himself and Mr. Cornwall, and if he knew this money was going to be used on margins, he could not recover. Therefore so far as this case is concerned, this request is refused.”

The general charge concluded as follows : “ The burden of proof in this issue is upon the defendant. It is for him to show by the weight of the evidence that Judge Waugh knew that this was being used for the purchase of oil upon margins. You will take all the evidence in the case and conclude whether he did know that fact.”

The plaintiff’s second point omitted reference to the allegation that he furnished money for the purpose of purchasing oil on margins, although there was evidence from which the jury could find that fact. If they believed all that was assumed in the point, it did not follow that the verdict should be for the plaintiff. It was rightly refused. The jury might find the facts assumed and also find that the plaintiff gave the money for the purpose of being used to speculate in the rise and fall in the price of oil, that is, to purchase oil upon margins. Then, the money having been so used, the verdict should be for the defendant. But the point simply referred to the plaintiff’s knowledge of the borrower’s purpose. The answer was explicit that if the plaintiff knew of the defendant’s intention to purchase oil upon margins, he could not recover. And the same thought was expressed in the closing part of the charge. That, we think, was error. While proper instruction was embodied in the remarks respecting a felony or misdemeanor, it is by no means clear that the jury would not understand that they could infer the purpose from the mere fact of knowledge. The fourth and fifth assignments of error are sustained.

Judgment reversed, and venire facias de novo awarded!