Layton v. State , 165 Ga. 265 ( 1927 )

Gilbert, J.

The first headnote does not require elaboration.

One ground of the motion for new trial was based upon the refusal of the court to instruct the jury, as duly requested, viz.: “Dealings in all kinds of contracts for the future delivery of commodities are not forbidden by the act under which the defendant is indicted in the first count of the indictment. The only kinds of contracts which are forbidden by the act are contracts or agreements whereby some person or corporation agrees to bny or sell and deliver or sell with an agreement to deliver on margin wheat, cotton, or other commodity, stocks, bonds, or other securities, to any other person or corporation, when in fact it is not in good faith intended by the parties that an actual delivery of the article or thing shall be made, and when the intention or understanding of the parties is to receive or pay the difference between the agreed price and the market price at the time of settlement.” This ground does not require a reversal. The brief of plaintiff in error concedes, in fact, that the matter requested was “in accordance with the court’s general charge.” We construe this as an admission that the request was covered by the general charge. The act of 1906 (Civil Code, § 4257 et seq.), properly construed, does not apply to contracts for future delivery where there is an intent that the commodity bought or sold shall actually be delivered, but makes penal transactions on margins for future delivery where it is the intent to gamble on the fluctuations of the market; that is, where there is no intent to make actual delivery, and “when the intention or understanding of the parties is to receive or pay the difference between the agreed price and the market price at the time of settlement.” Transactions in commodities and securities, whether called speculation, gambling, or simply contracts for future delivery, have been the subject of legislative and judicial interpretation for many years. Some 200 years ago these dealings had become so demoralizing in England that Parliament passed an act to prevent the “practice of stock jobbing.” It was directed against apparent sales which, in fact, were not intended to be real and where no deliveries were intended to be actually made. 6 E. C. L. 782, § 187. Georgia is only one among a number of States which have undertaken to prohibit gambling in stocks and commodities. The Georgia act of 1906, prohibiting “dealing in futures,” does not prohibit real contracts, entered into in good faith, with the intention at the time that an actual delivery shall be made. It is intended to prohibit and punish gambling or speculation upon chance, where no real delivery is contemplated and where the parties expect or intend at the time to settle on the basis of the difference between the agreed price at the time of contracting and the market price at the time of their settlement. “If under the guise of a contract for future delivery the real purpose is merely to speculate in the rise or 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 of the goods at the date fixed for executing the contract, the whole transaction constitutes nothing more than a wager. It makes no difference that a bet or wager is made to assume.the form of a contract. Gambling is none the less such because it is carried on in the form or guise of legitimate trade. The mere fact that there was specific property about which the transaction occurred would make no difference. Parties may as effectually gamble with reference to actual property as with reference to the prices of different classes of property.” 6 R. C. L. 781, § 186, and cit.

This court has dealt with several phases of the subject, before and since passage of the 1906 act. Alexander v. State, 86 Ga. 246 (supra); Forsyth Mfg Co. v. Castlen, 112 Ga. 199 (supra); Kilpatrick v. Richter, 139 Ga. 643 (77 S. E. 1065); Robson v. Weil, 142 Ga. 429 (83 S. E. 207); Arthur v. State, 146 Ga. 827 (supra). These eases cite others bearing on the question. Anderson v. State, 2 Ga. App. 1 (58 S. E. 401). The Federal court first dealt with the matter out of which the present case arose, when the firm of Fenner & Beane filed suit therein to enjoin the solicitor-general and the sheriff of Fulton County from proceeding in Fulton superior court with a criminal prosecution which finally resulted, after the injunction was refused, in the conviction of Layton, Atlanta manager for Fenner & Beane. The opinion of Judge Sibley of the United States Northern District of Georgia is so clear and applicable that we quote from it as follows: “The statute is, we think, to be construed as condemning only gaming transactions, and not all sales for future delivery where a margin is deposited in lieu of full payment or full credit given. The earlier Georgia decisions did not clearly mark the distinction between contracts for future delivery where there was an intent that the goods bought should really be delivered and those in which neither party had such intent, but assumed all contracts for future delivery made on margins to be gaming. . . In 1900 the question received elaborate consideration in Forsyth Mfg. Co. v. Castlen [supra]; and in line with the general rule elsewhere, contracts for future delivery were held valid though the seller had not the property sold, if either party contemplated an actual delivery, but to be gaming and contrary to public policy if neither party so intended but both expected to settle by the fluctuation in market price of the goods contracted for. The statute here in question was passed a few years later. Its title indicates a purpose to prohibit what was 'commonly known as dealing in futures,’ and the establishment or operation of a place where 'such contracts’ are made or offered. . . Section 2 contains the elaboration and describes 'what is commonly called dealing in futures’ as being a contract or agreement for the sale of commodities, whether made or to be performed wholly within the State or partly within and partly without the State 'when in fact it is not in good faith intended by the parties that an actual delivery of the articles or thing’ was to ba made, and 'when the intention or understanding of the parties is to receive or- pay the difference between the agreed price and the market price at the time of settlement.’ The act, therefore, is but a legislative sanction of the law as stated in the O. asilen case and imposes penalties as for a crime upon what was already unlawful. The sections raising presumptions show that the intent of the parties is to be a part of the crime, for otherwise the presumptions would be useless. . . Transactions such as are here condemned are not commerce at all, and if carried on across State lines are not sanctified thereby. They are not interstate commerce, but interstate gambling. Alexander v. State [supra].” Fenner v. Boykin, 3 Fed. (2d) 674. This decision was affirmed by the United States Supreme Court. Fenner v. Boykin, 271 U. S. 240 (supra).

In' the Arthur case, supra, the accused was indicted under the 1906 act, and the evidence was very similar to the evidence here. The rulings there made are in harmony with the rulings now made in this case. Cases in other jurisdictions are so numerous that we select for citation, as a fair example, Winward v. Lincoln, 23 R. 1. 476 (51 Atl. 106, 64 L. R. A. 160), which is elaborately annotated. It deals with sales of “stocks” for future delivery. The present case is one of sales of cotton for future delivery, but the principle is the same. In the Winward case the court said: “The rapid fluctuations in the market price of stocks, and the ease with which transfers and hypothecations of stocks may be made, render them a favorite subject for speculation, either legitimate or otherwise; and where there is suspicion that a given transaction in stocks is only cover for a wager, a court will very carefully scrutinize the circumstances of the case, and disregard the form, if the illegal substance appears. But the indicia of a wager upon the rise and fall in the price of stocks are no different from those of wagers upon any uncertain future event. And so lawful trading in stocks has the same characteristics as lawful trading in any commodity. Mitchell, J., in Hopkins v. O’Kane, 169 Pa. 478 (32 Atl. 421), says: ‘It ought not to be necessary to say again, after Peters v. Grim, 149 Pa. 163 (24 Atl. 192, 34 A. S. R. 599), and other cases, that a purchase of stocks on margin is not necessarily a gambling transaction. Stocks may be bought on credit, just as flour or sugar, or anything else; and the credit may be for the whole price or for a part of it, and with security or without it. “Margin” is security, nothing more; and the only difference between stocks and other commodities is that, as stocks are more commonly made the vehicle of gambling speculation than some other things, courts are disposed to look more closely into stock transactions, to ascertain their true character. If they are real purchases and sales, they are not gambling, though they are done partly or wholly on credit.’ . . Morris v. W. U. Tel. Co., 94 Me. 423 (47 Atl. 926), is a case where the contract was expressed in scrupulously legal form; but it was admitted ‘that “in such a transaction or deal the method of business in the plaintiff’s deal is as follows: Such trades are made on quotations only, no actual stock being in fact sold; but settlements of differences are fully made when the deals are closed as to profits and. losses.” This admission,’ says the court, ‘is fatal to the plaintiff’s case. It strips the transaction of the semblance of legitimate business, with which the memorandum endeavored to clothe it, and leaves it a naked bet or wager upon the rise and fall of the price of the stock, which the law terms a gambling contract, and pronounces immoral and void.’ ” Based on what is said above, we construe the act of 1906 to authorize a penal conviction thereunder whenever the evidence warrants a finding that the accused has done the things prohibited in the act and when at the time it is not in fact intended, in good faith, by such accused “that an actual delivery of the articles or thing” should be made, but where the intention is “to receive or pay the difference between the agreed price and the market price at the time of settlement.” This finding may be authorized, whatever the form of the transaction or however scrupulously the form of the contract may follow the mandates of the law, if in the guise of a legal transaction it is in fact at the time the intention of the parties to gamble on the fluctuation of prices and to settle the differences as aforesaid and without actual delivery.

It is earnestly insisted by counsel for plaintiff in error that under the facts of this case there were no purchases or sales within this State; that the agent of Fenner & Beane in Atlanta merely represented Georgia clients and communicated their wishes to the New Orleans or other office outside this State, and that such office thereupon executed the same on the floor of the cotton exchange with a broker representing another party. If the jury had accepted this view, the contention just stated would undoubtedly raise another question; but, as we have said elsewhere, we think the act does not denounce real sales, such as the defendant claims. If, as contended by the prosecution, there were no bona fide contracts calling for actual deliveries, but only transactions where no actual deliveries were intended, then we have no occasion to deal with the question sought to be raised. The testimony by the State shows a large number of transactions. All of these are substantially alike. Clients or customers of Fenner & Beane initiated the transaction through the defendant in Atlanta, and in no case was there any actual delivery of cotton to any of these persons. Section 6 of the 1906 act (Civil Code. § 4262) declares that proof that the commodity “was not actually delivered, and that one of the parties to such agreement deposited or secured, or agreed to deposit or secure, what are commonly known as ‘ margins/ ” shall constitute prima facie evidence of a contract declared unlawful by the act. It appears that in the transactions the customers deposited margins or were allowed credit, and that Fenner & Beane, in the Atlanta office, maintained a board on which was posted information of fluctuating prices of cotton and other commodities. This is made by the act prima facie evidence of guilt. The presumptions, of course, were rebuttable. It therefore became a question whether the presumptions were rebutted. Where substantially all of the transactions in the Atlanta office with the witnesses introduced by the State were not followed by any actual deliveries to or by these clients, it became a jury question whether the presumptions were rebutted. We do not overlook the fact that these clients were not required to make personal deliveries. They could make deliveries by assigning or transferring their contracts and imposing the duty upon others to make them in their stead. Nor do we overlook the documentary evidence tending to show that Fenner & Beane, as brokers for Georgia clients, went through the form of making contracts with other named brokers for unnamed principals. Notwithstanding this evidence, it was a question for the jury to find what was the truth.

None of the remaining headnotes require elaboration.

Judgment reversed.

Hill, J., concurs. Russell, G. J., and Hines, J., dissent from the judgment. Beck, P. J., and Atkinson, J., dissent from the ruling in the eighth headnote.