Hately v. Kiser (162 Ill. App. 542, 1911)

Mr. Presiding Justice Brown

delivered the opinion of the court.

Hately, the plaintiff below, the appellee here, on March 6, 1909, recovered a judgment in the Municipal Court of Chicago against John W. Kiser, the defendant below, the appellant here, for $5,836.43 and costs. This sum was the amount of a verdict rendered by a jury less a remittitur of $254.69 for some reason entered by the plaintiff before judgment was given on it.

To reverse this judgment this appeal has been prosecuted.

The cause involves a transaction in stocks, which stated according to the contention of the plaintiff as to what was proved at the trial, was this:

The defendant Kiser was a man of large affairs and resources living in Chicago, who frequently dealt through stock brokers in accordance with the usages and customs of business so conducted in stocks commonly bought and sold on the stock market for purposes of speculation as well as of investment. He had so traded prior to the transaction involved here through the well known stock brokerage houses of Finley Barrell & Co. and Bartlett, Frazier & Carrington of Chicago. While thus trading in stocks for speculation through Finley Barrell & Co. he became well acquainted with the plaintiff Hately, a young man then about twenty-seven years old, and connected with Finley Barrell & Co. as an employee or otherwise. This was in 1903. As Mr. Kiser was known to be a man of substantial fortune, a large line of credit was extended to him by Finley Barrell & Co.

Mr. Hately in 1903 or 1904 took up the stock brokerage business for himself, forming a partnership under the name of Geddes & Hately. Mr. Geddes did not remain long in the business, which became that solely of the plaintiff Hately in August 15, 1905, and was afterward conducted under the name of Furness Hately & Co. Hately and Kiser were members of the same Club and met there and upon the street occasionally. Hately informed Kiser that he was in business for himself and solicited an order from him. In the latter part of 1904 Kiser gave Hately an order to buy 200 shares of Chicago, Milwaukee and St. Paul stock at a given price, and it was bought at that price and “carried” by Geddes & Hately until August 9, 1905, when apparently by the order of Kiser it was sold. Ho money was put up as margin by Kiser on this transaction nor payment made on account of the business nor for carrying the stock, nor did Hately ask for any. On the 9th of August, 1905, however, the sale of the stock produced a profit which left to the credit of Kiser with Hately after all the customary charges (as may be presumed) were deducted, $1,285.63, which at Kiser’s request was sent by check to him. In the meantime one other transaction took place within the compass of a day. On December 8, 1904, at the order of Kiser, Hately bought for him 100 shares of Union Pacific stock at 108 and sold it, likewise at Kiser’s order, at 109. Ho money was paid as margin on this transaction, but it would appear that whatever small amount may have been left to Kiser’s credit out of the profit after the ordinary commissions were charged against him so remained to his credit during the pendency of the deal in Milwaukee and St. Paul stock, and was finally included in the check of $1,285.63 which was sent to him September 28, 1905. That was then the amount of his balance, and Hately says he never had at any time any occasion to pay Kiser any other money.

Trade letters such as -stock and grain brokers’ offices are accustomed to send out were sent by Hately to Kiser after September 28th and before December 5, 1905. December 5th Mr. Kiser called Mr. Hately on the telephone, told him that he had received one of these letters containing advice on the subject of “Hickel Plate” stock (the name given the stock of the New York, Chicago & St. Louis Kailroad), and asked if he would still advise the purchase of it. Hately replied in the negative and recommended the purchase of International Mercantile Marine Preferred stock, which had been a rather inactive stock at about 36 for some timé. Whereupon Kiser told Hately to buy 200 shares for him and let him know by telephone when the order was executed. Hately bought the stock through the stock exchange or brokerage house of Bartlett, Frazier & Carrington, which had an office in Chicago and held a membership in the New York Stock Exchange, which Hately did not.

The International Mercantile Marine stock was not then listed on the New York Stock Exchange and was known, therefore, as a “curb” stock, because it could not be traded in on the Exchange, but was bought and sold on the street in New York near the Exchange with other stocks not so listed. The brokers who trade in these stocks, however, represent reputable stock exchange houses, and the transactions there which fix the market price are reported as news in the financial journals and daily newspapers. Kiser put up no margin with Hately and was asked for none by him, but Hately, as we read his testimony, says that contemporaneously with the order to Bartlett, Frazier & Carrington, or shortly subsequent thereto, he sent Bartlett, Frazier & Carrington a margin for a portion of the price, 100 shares at 35|- and 100 shares at 35$. However that may be, Bartlett, Frazier & Carrington reported to Hately within a few minutes that they had bought the stock in question at said price, and Hately reported the same by telephone to Kiser, and afterward on that date sent through the mail to Mr. Kiser a letter of advice stating the transaction as follows:

“Chicago, December 5, 1905.

J. W. Kiser,

Dear Sir: We have this day bought for your account and risk according to the rules of the New York Stock Exchange,

100 International Mercantile Marine Pfd., 35£.

100 International Mercantile Marine Pfd., 35$.

This account received by telegraph. '

* * * * ' * -x- x- x- * -x

Respectfully yours,

Furness Hately & Co.”

Shortly afterward, but later than January 12,1906, Hately and Kiser met accidentally at their club, and spoke about the transaction, in which conversation Kiser told Hately that if there was “ever a profit in it” (the stock) “over and above commissions and interest,” he was to sell it out. At various indefinite times thereafter, in incidental meetings, Kiser and Hately spoke together about the stock and the transaction. “It came up as a natural topic of conversation,” Hately says. Hately did not receive from Bartlett, Frazier & Carrington the certificates of stock, but from the fifth day of December, 1905, to the 14th day of ¡November, 1907, Bartlett, Frazier & Carrington had possession of them subject to the order of the plaintiff and for his account. Hately did not call on Kiser for “margin” or “carrying charges” or money for any other purpose until October, 1907. During the time between January 12, 1906, and ¡November 14, 1907, the stock never reached a price on the market at which it could have been sold without a loss to Kiser.

In October, 1907, Hately wrote Kiser demanding $5,000 as “margin” or security on the transaction, and later in ¡November wrote him two more letters, one requesting him to take the stock up or settle for it, and one on ¡November 7th as follows:

“As we are going out of the stock business immediately please instruct what house we shall deliver your Int. Her. Marine 200 pfd. shares to and oblige,

Yours very truly, Furness Hately & Co.”

Hately received no answers to these three letters, but after some ineffectual efforts he reached Kiser over the telephone ¡November 14, 1907, and asked for such an answer. Kiser then asserted that he had no transaction with Hately in the stock involved and had never had such stock bought or carried for his account. Hately replied over the telephone to Kiser that he would “sell him out,” and gave orders to Bartlett, Frazier & Carrington to sell for his account the 200 shares of International Mercantile Marine which they held for him on his order of December 5, 1905. This Bartlett, Frazier & Carrington did at the market price of 11^-. They gave Hately credit for the margin which he had paid them and for the amount received for the stock, which must have heen $2,300, and deducting these credits from the price at which they bought (which was $7,162.50) plus interest on the debit balance which had remained on their books on their advances and commissions, called on him for the balance due them, which he paid. Neither the amount of the margin advanced by Hately nor of this balance seems in the evidence to be specifically named, but together by computation they must have amounted to $4,862.50 plus the interest and commissions which they charged. The record seems to us singularly lacking in precise figures showing what that interest and commissions or charges were, but so far as Hately’s charges for advances against Kiser went they would seem from the evidence properly to be (assuming that those matters were proven which Hately contends were proven) the amount of the price at which the stock was bought on December 5, 1905, with proper interest on that amount of $7,162.50 to November 14,1907, when it was sold, and on the balance then shown after the amount of $2,300 realized on the sale was deducted, to the date of the verdict. This would account for the amount of the judgment, which may properly, we think, be assumed to be equaled by the advances shown by the evidence to have been made by Hately on account of this “deal,” without addition of broker’s charges for commissions. This fact is important in some views of the law applicable to this controversy which might be taken.

Kiser refused to acknowledge any liability in connection with these transactions, and Hately brought a suit of the first class in assumpsit in the Municipal Court against him, putting the ad damnum, at $7,000, and attached to the declaration an affidavit that the demand was for money due from the defendant to the plaintiff for the purchase and sale of 200 shares of the preferred capital stock of the International Mercantile Marine Steamship Company, and that the amount due was $5,973.20, with interest from November 15, 1907.

The declaration itself contained two special counts and the consolidated common counts. The special counts claimed from the defendant the amount at which the stock was alleged to be bought for him with brokerage fees and. interest “according to the custom of the Chicago Stock Exchange of the city of Chicago.” The common counts contained of course the usual counts for money laid out and expended for the defendant at his request.

The defendant first pleaded the general issue with an affidavit of defense denying that he ever entered into any engagement whatever with the plaintiff in respect to the stock mentioned in the plaintiff’s declaration. Subsequently, on leave granted by the court, the defendant filed an additional plea to the special counts of the declaration, averring that the plaintiff at the time of the transactions alleged in the said counts of the declaration “was engaged in the business of a stock broker in the city of Chicago aforesaid relative to property with the custody of which he had no concern and as such and in that capacity and not otherwise acted in respect of each and all of the matters and things in said two counts of his said declaration therein respectively stated and that the said plaintiff did not at any time prior to the said 5th day of December, A. D. 1905, nor at any time thereafter, obtain a license from the city of Chicago authorizing or permitting him to engage in the business or act in the capacity of a broker.”

Before the case was submitted to a jury a demurrer filed by the plaintiff to this additional plea was overruled. The plaintiff then amended the special counts before set forth by verbal changes which substituted “agent” and “agents’ fees” for “broker” and “brokerage fees,” and eliminated reference to the custom of brokers or of the stock exchange. The general issue and the additional plea were ordered to stand to the amended counts, and the plaintiff filed a replication to the additional plea, which replication traversed the allegation of the plea that the plaintiff was engaged and acting in the matters described in the declaration in the business of a broker relating to property with the custody of which he had no concern, alleged that he was on the contrary so acting with reference to property with the custody of which he had concern and control, and concluded to the country.

The case was submitted to a jury, which, as before recited, found the issues for the plaintiff and assessed the plaintiff’s damages at $6,091.12, which counsel for appellee in his argument says made no allowance for commissions or other charges, but was for the amount expended or advanced by the plaintiff for the defendant, with interest charges thereon, less the sum received on the sale of the stock. This assertion is not questioned by counsel for appellant, and is borne out by computation. It may therefore be assumed as an admitted fact in the cause.

A remittitur for $254.09 was entered by the plaintiff and judgment given, as before stated, for $5,836.43.

This judgment the appellant, under the assignments of error made and argued, attacks on several grounds; which we shall separately consider.

He first says that even assuming to be proven the state of facts which we have" set forth as alleged by the plaintiff, the judgment cannot as a matter of law be maintained, because the evidence also shows a nonjoinder of a necessary plaintiff. One Thomas E. Wells was interested, he maintains, in the profits of the plaintiff’s business in such a way as to make him a partner therein and a necessary party to this suit. During the time of these transactions it appears by an answer of the plaintiff to interrogatories filed by the defendant and in the testimony of plaintiff that “Wells was interested in the profits of the business conducted by plaintiff.” But it also appears by the testimony of the plaintiff that this share or interest in the profits was paid “for office space and for service of Wells’ office force in taking care of plaintiff’s bookkeeping.” There is no other evidence on the matter, and we think that the share in the profits must be held to have been merely compensation for services and the use of property in the business, and therefore not by itself to establish a partnership. Fougner v. First Nat’l Bank, 141 Ill. 124. Irrespective, therefore, of any question of pleading, we do not think a nonjoinder was established in the cause.

The defendant also maintains that even if the jury had been justified in believing the transactions t° have beep proven as before set forth in the statement of plaintiff’s contentions, they should not have found a verdict for the plaintiff, because it also appeared by stipulation in the cause that “at the times in the declaration referred to and since the plaintiff had no license from the city of Chicago as a broker.” Therefore, it is maintained, the plaintiff was,, according to his own testimony, engaged in an illegal transaction through which he acquired no standing to recover from the defendant at law either commission and brokerage charges (which are not now in controversy) or damages from the defendant in respect of his breach of the contract with him, which was involved in those transactions.

This position is carefully distinguished by the defendant from any claim that the transaction alleged was void as a gambling transaction involving nothing hut wagers on the market, and therefore illegal and void under the statutes or at common law. Such a view of the matter is disclaimed—a disclaimer that we shall hereafter have occasion to advert to. The illegality which forbids the recovery of the advances and expenditures made in this matter by the plaintiff, on the authority and request, as it is contended, of the defendant, lies, according to the defendant’s contention, in the fact that the business in which they were made was in contravention of a general ordinance of the city of Chicago, of which the Municipal Court took judicial notice and of which we therefore, in reviewing the action of that court, also take judicial notice,

The ordinance in question is chapter xiv. of the Revised Municipal Code of Chicago of 1905. The entire chapter is concerning “Brokers.” The provisions asserted to be directly applicable to the matter herein involved are as follows:

"Section 192. It shall be unlawful for any person or corporation to engage in the business or act in the capacity of a brokér within the city without first obtaining a license therefor.”

“Section 194. A broker is one who is engaged for others in negotiating contracts relativq fo property with the custody