Nes v. Union Trust Co.

Jones, J., delivered the opinion of the Court. In August, 1902, the appellant in this case entered into an agreement in writing to purchase of the appellee corporation twenty first mortgage bonds par value $1,000 of the Philadelphia, Bristol and Trenton Street Railway Company, a corporation organized under the laws of Pennsylvania. The agreement recites that “Whereas the Union Trust Company of Maryland (appellee) has acquired the right to purchase six hundred and fifty thousand ($650,000) dollars face value of the first mortgage five per cent gold bonds of the Philadelphia, Bristol and Trenton Street Railway Company, being a part of the total issue of one million ($1,000,000) dollars in bonds to be issued by said company to bear interest from September 1st, 1902, the remaining- three hundred and fifty thousand ($350,000) dollars in bonds being reserved by the railway company and held by the trustee for further extensions and improvements, as set forth in the prospectus hereto annexed marked ‘A’ and has also acquired the right to purchase one hundred and ninety-five thousand ($195,000) dollars, par value, of the capital stock of said railway company, being part of a total issue of one million dollars ($x,ooo,000).par value of capital stock; and whereas, the undersigned, hereinafter designated subscribers, are desirous of ²¹ purchasing from said Trust Company the said bonds and stocks at the price and upon the terms and conditions hereinafter set forth. Now, therefore, this agreement witnesseth, that the subscribers do each hereby respectively agree, each acting for himself and none other, with the Union Trust Company of Maryland and with the other subscribers, and each of them as follows:” Then follows the agreement of the subscribers to purchase the number of bonds set opposite their respective signatures or such less number as may be allotted to them respectively and such number of shares of stock as, at par value, will equal 30 per cent of the amount of bonds allotted to them and “make payment therefor at ninety per cent of the face value of the said bonds as allotted together with accrued interest * * * as and when called upon to do so,” and upon failure of any subscriber to so make payment the Trust Company to have the right to sell his interest in the bonds and stock, subscribed to, either at public sale at the stock board or by private sale, and to purchase the same and make the subscriber liable for any deficiency of the proceeds of sale to pay his subscription.

It is then agreed that the Trust Company shall be appointed syndicate manager with power and discretion to call for and receive payment of subscriptions “at such times and in such amounts as to it may seem best;” that it “shall issue to the subscribers negotiable syndicate receipts upon which shall appear amount paid;” that it may "sell for pro rata accounts of the subscribers all or any” of the bonds subscribed for “at not less than ninety-seven and one-half per cent (97 %) and accrued interest and account for same to said subscribers * * provided such sale be made on or before the first day of September, 1903,” when or prior thereto the syndicate could be dissolved at the discretion of the syndicate manager; that the syndicate manager be authorized on behalf of the subscribers to borrow money for their benefit on such terms as to it might seem fit to carry out the object of the syndicate agreement “and to pledge as security for such loan their subscriptions—with all securities ²² covered by”' the same; and finally it was agreed that the agreement should not take effect until the entire $650,000 of bonds should be subscribed for. The period within which, under the foregoing agreement, the Trust Company was authorized to sell the securities or bonds in question and dissolve the syndicate was, just prior to September 1st, 1903, the time limited therein, extended by written agreement signed by the appellant for one year from that date. The original agreement was signed by a sufficient number of subscribers to, with the appellant, take the whole of the $650,000 of bonds mentioned therein; and it appears in evidence that all of the subscribers, except the appellant, have paid their subscriptions, and the bonds subscribed for have been delivered to them. Upon a call made upon the appellant for the payment of the balance of his subscription, of which he had paid $3,000 at or about the time of his subscription to the agreement, he refused payment, and, on the 31st day of August, 1904, filed in the Circuit Court for Baltimore City his bill of complaint which inaugurated the proceedings in which was passed the decree now the subject of his appeal to this Court.

The allegations of the bill need not be set out at length. It prayed that the appellant’s agreement of subscription for the bonds in question be adjudged and declared null and void, and that the appellee be required to surrender the same for cancellation and be enjoined from setting up any rights thereunder; and be enjoined from attempting Or prosecuting any proceedings for the enforcement thereof; and be decreed to account for and pay over to the appellant the $3,000 paid by him on account of said subscription; and for further relief. The allegations of' the bill and the proofs show that, with but little pains, the appellant could have made himself aware of all of the grounds he now urges for relief before he entered into the agreement in question and of course could have refused to unite therein if there was in the proposed subscription anything unsatisfactory to him; and after he made his subscription, and up to the time the call was made upon him to ²³ pay the same, every fact and circumstance was open and accessible to him that go to make up his grounds' of relief. After the lapse of a year from the time of making his subscription he renewed his agreement and gave it new life for another year without any attempt to first inform himself if conditions were satisfactory to him.

After obtaining the information upon which he now bases his claim to relief he did not call the attention of the appellee to the conditions that he deemed unsatisfactory and demand and give opportunity, to have the same remedied or removed that he might carry out his contract. He ignores his agreement as respects the other subscribers with whom he contracted in express terms as well as with the appellee; and to whom he owed good faith if nothing more. He seeks to set aside the contract after the appellee has acted upon the faith of it by borrowing money upon his and other subscriptions for the common benefit of all interested under the agreement; and after performance of it by all of the other subscribers. Further than this he can get now exactly what he alleges he contracted to get; could have gotten it at the time of the trial of the case below, and before; and it is rendered probable from what appears in the case that he could have gotten it without instituting the proceedings at all.

It does not appear that he has sustained any loss or injury from anything complained of. Under these circumstances the considerations that would induce a Court of equity to grant relief here prayed or sought, it would seem, ought to be such as it would not be possible to ignore. Before adverting to other aspects of the case the ground of the decision of the Court below may be noticed. The learned Judge there held that the agreement in controversy was a gambling contract and unenforceable on that ground.

With that view we do not agree. The rule by which contracts are to be judged in the regard under consideration would seem to be well stated as the result of the authorities in 20 Cyc., 926-931, where it is said: “In the absence of some constitutional or statutory provision to the contrary, a contract for the sale of stock or other commodity to be deliv ²⁴ ered at a future day, is valid, even though the seller has not the goods and has no other means of getting them than to go into the market and buy them before the day of delivery, provided that the parties really intend that the goods are to be delivered by the seller and that the price is to be paid by the buyer. And where stocks or commodities are bought and sold, although upon speculation and on margin it is not a gambling transaction if it is understood by the parties that they are to be delivered and paid for. If however, under the guise of a contract of sale, the real intent of both parties is merely to' speculate in the rise and full, of prices, and the property is not to be delivered, but at the time fixed for delivery one party is to pay to the other the difference between the contract price and the market price the whole transaction is a wager and invalid.

If this unlawful intent is entertained by only one of the parties, the transaction is not illegal, in the absence of statute to the contrary. The true test of the validity of a contract for future delivery is whether it could be settled only in money and in no' other way, or whether the party selling could tender and compel the acceptance of the particular commodity sold or the party buying could compel the delivery of the commodity purchased * *; the essential inquiry in every case is as to the necessary effect of the contract and the real intention of the parties.” Among other cases referred to in support of the text is that of Appleman v. Fisher, 34 Md. 540 , which is in point. Of other cases decided in this Court to which reference may be made as defining the essential characteristics of a gambling contract of the class now being considered are Stewart v. Schall, 65 Md. 289 ; Billingslea v. Smith, 77 Md. 504 ; Cover v. Smith, 82 Md. 586, cited in appellant’s brief. The contract here in question is not a gambling contract on the face of it and it seems manifest the parties to it did not so regard it.

All of the bonds other than those in controversy in this case have been delivered to the