Petition for Writ of Certiorari — Edwards v. Dine

Olas - Surreme Oourt,

. FILBYD

JAN 21 1947

CHARLES ELBOTE arop ty

ER a te a

IN THE

Supreme Court of the United States

Ocrosrr TzRm, 1946.

No. 935

J. B. EDWARDS, RUTH BROUGHER and

MONTE PRESTON,

Petitioners,

vs.

JOSEPH DINE,

Respondcat.

PETITION FOR WRIT OF CERTIORARI TO TEE

UNITED STATES CIRCUIT COURT OF APPEALS

FOR THE SEVENTH CIRCUIT, AND SUPPORTING

BRIEF.

j

EDWARD M. BURKE,

10 S. La Salle Street, Chicago 3, Illinois,

Attorney for Petitioners.

NLM eALY CuPANY, ace <——See

—————

INDEX.

PAGE

Petition for writ of certiorari. ........+--+++eeeeee: 1

Summary statement ...........-++eeeeeeeeeees 2

Jurisdiction ..... Ce AE Ee SARA SES CSREES ES 9

Questions presented ......-.-..seeeeeeerereees 10

Reasons for granting the writ.........----.-++5 11

Conclusion .......cccccccecccccscesecreccescns 12

Brief in support of petition for writ of certiorari.... 13

The opinions below ........-0++s2eeeeeeeeeeees 19-27

Specification of errors to be UPBOD.. cc ceceeees 18

Argument .......0.eeee seen ence eee ceeeeeeseees 15

That the Illinois courts, in construing the

statutes in question, have consistently held that

when two parties jointly engage in a gambling

transaction, and both parties lose in such trans-

action, and thereafter adjust their losses be-

tween themselves by one of them paying money

or delivering personal property to the other,

that the party so paying money or delivering

personal property, cannot thereafter have a

decree setting aside a bill of sale to the personal

property, or sue for and recover back the money

or the value of the property so paid.........--

Conclusion ......cscccccceccemecsccececesscccccees

Appendix containing the opinions of the District Court

and the Cireuit Court of Appeals.......-..-+++++>

0 Felder rae in PRD i alten

ii

TaBLeE oF Cases CrTep.

Boddie v. Brewer & Hoffman Brewing Co. (1903) 204

a. f €e 2 ear ean: 13.

Brelesford v. Stoll (1940) 304 Ill. App. 222, 26 N. B.

SE SOLU EAE ad ee ObAb nd aehadh es cKhexuKe nk i 15

Brooks v. Brady (1894) 53 Ill. App, 155............. 14

Harris v. McDonald (1901) 194 Ill. 75, 62 N. E. 310... 17

Muleahy v. Vehon (1923) 229 Ill. App. 454........... 17

Pearce v. Rice (1891) 142 U.S. 28, 12 S. Ct. 180...... 15

Shaffner v. Pinchback (1890) 133 Ill. 410, 24 N. E.

BREA SIAR Pec otipery EA PEE Be. oeoia hls, Dia eS ela 13

Sternberger v. Wright (1926) 239 Ill. App. 490....... 14

Suttle v. Finnegan (1899) 86 Ill. App. 423........... 14

West v. Carter (1889) 129 Ill, 249, 21 N. E. 782.......

IN THE

Supreme Court of the United States

Octroser Term, 1946.

No.

J. B. EDWARDS, RUTH BROUGHER and

MONTE PRESTON,

Petitioners,

vs.

JOSEPH DINE,

Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES CiRCUIT COURT OF APPEALS

FOR THE SEVENTH CIRCUIT, AND SUPPORTING

BRIEF.

J. B. Edwards, Ruth Brougher, and Monte Preston re-

spectfully petition for a Writ of Certiorari to review the

decision and judgment of the United States Circuit Court

of Appeals for the Seventh Circuit, reversing a judgment

of the District Court of the United States for the Northern

District of Illinois, Eastern Division, and remanding the

case (R. 41). The judgment of the District Court had

sustained the Amended Motion of Defendants to dismiss

—

A me ag

7

the complaint of plaintiff, and dismissed said complaint

(R. 27.). Memorandum opinion (R. 22-26 and Appendix i

hereof). i

The. first opinion of the Circuit Court of Appeals was

filed October 16, 1946 (R. 38-41 and Appendix hereof), and

a clarifying opinion was filed on November 21, 1946 (R.

61-62 and Appendix hereof), when appellee’s petition for

rehearing was denied.

2

SUMMARY STATEMENT.

This suit was commenced by the filing of a complaint by

plaintiff on August 3, 1945, in the Superior Court of Cook

County, Illinois. The suit was removed to the District

Court of the United States on the grounds of diversity of

citizenship. The record of the said Superior Court was filed

in the District Court September 17, 1945 (R. 2-16). The

defendants filed an Amended Motion to Dismiss the Com- °

plaint of plaintiff (R. 21-22) and the said motion was sus-

tained, and the suit dismissed (R. 27). The complaint of

plaintiff (R. 2-6) was and is as follows:

Now comes Joseph Dine, plaintiff, by Aiken, Me-

Curry, Bennett & Cleary, his attorneys, and complain-

ing of J. B. Edwards, Ruth Brougher, and Monte

Preston, defendants herein, alleges as follows:

Count I.

(1) That at all times hereinafter referred to there was

in full force and effect, and still is, a certain statute of the

State of Illinois, being Sections 329 and 333 of Chapter 38,

Til. Rev. Stat. 1945, as follows:

‘*All promises, notes, bills, bonds, covenants, con-

tracts, agreements, judgments, mortgages, or other

- ne

securities or conveyances made, given, granted drawn

or entered into, or executed by any person whatsoever,

where the whole or any part of the consideration there-

of, shall be for any money, property, or other valuable

thing, won by any gaming or betting at cards, dice, or

any other game or games, or betting on the side or

hands of any person gaming, or by wager or bet spon

any race, fight, pastime, sport, lot, chance, casualty,

election or unknown or contingent event whatever, or

for the reimbursing or paying any money or property

knowingly lent or advanced at the time and place of

such play or bet, to any person cr persons so gaming

or betting, or that shall, during such play or betting,

so play or bet, shall be void and of no effect.

‘‘All judgments, mortgages, assurances, bonds,

notes, bills, specialties, promises, covenants, agree-

ments, and other acts, deeds, securities, or conveyances,

given, granted drawn or executed, contrary to the pro-

visions of this Act, may be set aside and vacated by

any court of equity, upon bill filed for that purpose, by

the person so granting, giving, entering into, or exe-

cuting the same, or by his executors or administra-

tors, or by any creditor, heir, devisee, purchaser or

other person interested therein; or if a judgment the

same may be set aside on motion of any person afore-

said, on due notice thereof given.”’

(2) That on or about December 11, 1943, plaintiff pur-

chased a certain two year old race horse named Valdina

Lamar, that on or about June 1, 1944, plaintiff purchased

a certain three year old race horse named First Command,

and that on or about June 15, 1944, plaintiff purchased a

certain three year old race horse named Colonel Al; that

the present fair cash market value of the three aforenamed

horses is $35,000; that subsequent to the purchase by plain-

tiff of each such horse plaintiff entered into an arrange-

ment with defendant J. B. Edwards whereby plaintiff

would inform defendant J. B. Edwards when either of

the aforesaid horses were to run in a race which plaintiff

LO NOE I TEN Ae EN

i es TaN a AN PT

4

believed such horse would win, and that thereupon de-

fendant J. B. Edwards would make a wager or wagers upon

such horse, and if such horse won the race defendant J. B.

Edwards would deduct from the winnings the amount of

his wager, as aforesaid, and divide the net profits there-:

from with plaintiff, or if such horse failed to win the race

defendant J. B. Edwards would charge the amount of any

wager made by him as aforesaid against the plaintiff.

(3) That up to and including August 22, 1944, defend-

ant J. B. Edwards had charged against the plaintiff under

the aforesaid arrangement the sum of $24,000, and that

plaintiff then and there executed a chattel mortgage to the

defendant J. B. Edwards for the sum of $24,000, charged

against the plaintiff by the defendant J. B. Edwards as

and for wagers made by defendant J. B. Edwards under

the arrangement between him and plaintiff as hereinbefore

set forth, and that such mortgage was executed by the

plaintiff in order to avoid difficulty with which plaintiff

was then and there threatened at the several race tracks in

the United States, the terms and provisions of which chattel

mortgage more fully appear from a copy thereof, attached

hereto as Exhibit ‘‘A’’ and hereby made a part hereof.

(4) That on or about June 1, 1945, defendant J. B. Ed-

wards represented to the plaintiff that plaintiff was then

indebted to him for a total amount of $30,700, being addi-

tional amounts wagered by defendant J. B. Edwards under

the arrangement with plaintiff as hereinbefore described,

together with interest thereon; that defendant J. B. Ed-

wards then and there informed plaintiff that defendant J.

B. Edwards would foreclose his chattel mortgage upon the

aforesaid horses unless plaintiff would agree to transfer

title in such horses to defendant J. B. Edwards in exchange

for an option to repurchase such horses within ninety days

7"

for the amount which defendant J. B. Edwards claimed was

then due him from plaintiff, or $30,700; that plaintiff, in

order to avoid such threatened foreclosure by the defend-

ant J. B. Edwards and to protect his interest in the afore-

said horses, signed a writing addressed to defendant J. B.

Edwards requesting defendant J. B. Edwards to release

plaintiff from the chattel mortgage indebtedness in ex-

change for a bill of sale from plaintiff and plaintiff’s nom-

inee, defendant Ruth Brougher, and an instrument desig-

nated ‘‘Bill of Sale’’, transferring title to the aforesaid

horses from plaintiff and his nominee, defendant Ruth

Brougher, to J. B. Edwards, copies of the aforesaid written

request and bill of sale being attached hereto as Exhibits

‘““B”’ and ‘‘C’’, respectively, and hereby made a part

hereof.

- (5) That thereafter, on June 23, 1945, the defendant

J. B. Edwards executed a certain option in writing for the

recited consideration of one dollar giving defendant Ruth

Brougher, alone, the right to repurchase the aforesaid race

horses for $30,700 on or before August 9, 1945; that the

actions and conduct of defendants Ruth Brougher and J. B.

Edwards, as aforesaid, amount to a fraud upon the plain-

tiff and constitute an unlawful conspiracy on the part of

defendants J. B. Sdwards and Ruth Brougher to defraud

plaintiff of his property.

(6) That the defendant Monte Preston has actual pos-

session of the aforesaid horses in Cook County, Illinois,

and claims and asserts an interest in such horses.

(7) That by reason of the premises a right of action

has accrued to the plaintiff under the [linois statutes to

set aside the chattel mortgage, bill of sale and option to

repurchase, hereinbefore referred to for fraud and illegal-

ity.

Wherefore, plaintiff prays that the Court may order

set aside the chattel mortgage, bill of sale and option to

repurchase, hereinbefore referred to, and for such other,

further and different relief in the premises as the nature

and exigencies of the case may require and which might

be deemed appropriate in equity.

Count IT.

(1) That plaintiff adopts and hereby realleges para-

graphs one to six, both inclusive, of Count I. hereof.

(2) That the defendant J. B. Edwards is a resident of

the State of Louisiana and the defendants Ruth Brougher

and Monte Preston are residents of the State of Texas;

that the unlawful and fraudulent seizure by the defendants

of plaintiff’s right, title and interest in and to the afore-

named horses, as hereinbefore set forth, has given rise

to a claim by plaintiff for the value of the chattels illegally

appropriated as aforesaid against the defendants for the

sum of $35,000.

(3) That the defendant Monte Preston, operating under

the name and style of ‘‘Utopia Stable’’, presently is in

possession of the aforenamed horses and is made a gar-

nishee defendant in this cause in attachment proceedings

filed herein by the plaintiff together with his affidavit of

non-residence as by the statute in such case made and

provided.

(4) That by reason of the premises a right of action

has accrued to the plaintiff under the Illinois statutes to

have an attachment against the property of his debtors

where such debtors are not residents of the State.

Wherefore, plaintiff prays that summons may issue in

this cause to the defendants and for service upon them by

7

posting and advertising in manner and form as provided

by the Statutes in Attachment and Garnishment pro-

ceedings, and that Writs of Attachment and Garnishment

may issue to the defendants herein under the aforesaid

statute; that upon service of summons on the defendants

herein, personally or by publication in accordance with

the Attachment Act, and upon hearing of this cause that

judgment may be entered in favor of the plaintiff for the

sum of $35,000, together with statutory interest and costs,

and for levy upon the attached property by execution is-

sued herein, whether in the hands of an officer of the Court

or secured by bond, and for the sale of such property levied

upon by execution as in other cases.

Attached to the complaint are Exhibits as follows:

Exhibit A—chattel mortgage (R. 7-11)

Exhibit B—a letter which reads as follows: (R. 1li-

12)

**Chicago, Illinois.

**June 9, 1945.

“Mr. J. B. Edwards

‘*Oakdale, Louisiana.

‘**Dear Sir:

‘“*This is to advise you that we have reached the

conclusion that we will be unable to pay the indebted-

ness secured by chattel mortgage to you, dated August

22, 1944, and, therefore, request you to accept our bill

of sale for the horses covered by said mortgage in con-

sideration of your cancelling the indebtedness thereby

secured.

‘**Yours very truly,

**Ruth Brougher Dine

**Joseph Dine’’

Exhibit C—hill of sale (R. 12-14)

8

The amended motion of defendants to dismiss the com-

plaint of plaintiff was and is as follows (R. 21-22):

Now come the defendants, J. B. Edwards, Monte

Preston and Ruth Brougher and move the Court to

dismiss the action herein for the following reasons:

1. The complaint herein fails to state a claim upon

which relief can be granted, for the following reasons:

A. Plaintiff does not come into equity with clean

hands.

B. The allegations of the complaint indicate that {

plaintiff and Edwards were engaged in a joint enter-

prise or partnership to carry on unlawful gambling |

transactions and a court of equity will not lend itself

to adjust disputes arising between such persons. |

C. The Illinois statute upon which this action is

based has to do only with cases where the loser in a

gambling transaction sues the winner to recover his

losses, but there is no allegation that plaintiff Dine

and defendant Edwards ever bet against each other.

D. The —— seeks this court of equity to reopen

a completely executed adjustment which the parties

have made of their differences thereby- accomplishing

an accord and satisfaction.

E. The federal courts will not lend their aid to set-

tle differences arising between gamblers.

The District Court sustained the amended motion of

defendants and dismissed the suit (R. 27). Memorandum

opinion (R. 22-26 also Appendix hereof). The opinion of

the District Court and the opinions of the Circuit Court

of Appeals were based solely on the Illinois Statute set out

in the complaint of plaintiff.

If it be thought that there were other issues, such as

fraud or conspiracy, presented by the complaint of plaintiff

and the amended motion of defendants to dismiss same,

rT

they were not dealt with by the said opinions. The fact is

that no ultimate facts were alleged in plaintiff’s complaint

sufficient to support a charge of fraud or conspiracy. Ex-

hibits attached to a pleading prevail over conclusions or

general allegations of pleadings, and Exhibit ‘‘B’’ attached

to the complaint of plaintiff and set out herein. (R. 11-12),

shows clearly that when Dine finally gave the bill of sale

to Edwards, the only consideration therefor was the can-

cellation of the mortgage indebtedness and the alleged op-

tion was not mentioned. The allegations of the complaint

and the Exhibits attached thereto show that Dine never

accepted Edwards’ alleged offer that Dine transfer title to

the horses to Edwards in exchange for an option to repur-

chase for $30,700.00, but on the contrary (Exhibit B, R. 11-

12), Dine made a counter offer to Edwards, that Dine

would transfer title to the horses to Edwards in exchange

for the cancellation of the mortgage indebtedness of $24,-

000, which offer Edwards accepted. Furthermore, the com-

plaint of plaintiff refers to no statute other than the

statutes pertaining to gaming, and then expressly states

that the cause of action has accrued under the Illinois

statutes. The only issue presented here is whether the com-

plaint of plaintiff is good under the statute set out in said

complaint.

JURISDICTION.

The jurisdiction of this court is invoked under Section

940 of the Judicial Code as amended, 28 U.S. C. 347.

O° ORLELEL ALLL SAA LANDA ANGIE DAM | ly

|

10

QUESTIONS PRESENTED.

The propositions of law presented by the complaint of

plaintiff and the amended motion of defendants to dismiss

same ate as follows:

A, the owner of three race horses, entered into an agree-

ment with B, whereby A would inform B when any of his

race horses were to run in a race which A believed such

horse would win, and that thereupon B would make a

wager upon such horse; if the horse won, B would deduct

from the winnings the amount of the said wager, and

divide the net profits therefrom with A; if the horse failed

to win, A would pay B the amount of the said wager. There

came a time when A owed B $24,000.00 under said agree-

ment, and A delivered to B his chattel mortgage note for

said sum, secured by a chattel mortgage on the three

horses. Then, on June 9th, 1945, A gave B a bill of sale

to said horses in exchange for a cancellation of the chattel

mortgage and the indebtedness secured thereby. Then on

August 3, 1945, A filed his complaint in court against B,

consisting of two counts, both relying on Chapter 38, Illi-

nois Revised Statutes, 1945, Sections 329 and 333. By

Count I, A prayed that the chattel mortgage and bill of sale

be set aside. By Count II, A prayed judgment against B

for the value of the horses, alleged to be $35,000.00, be-

cause of the alleged unlawful and fraudulent seizure of the

horses by B.

1. Is A entitled to a decree setting aside the chattel

mortgage and bill of sale?

2. Is A entitled to a judgment against B for the value

of the horses?

3. A, having voluntarily performed his part of the said

agreement by first giving B a chattel mortgage on the

7 —s

=-7"—" — Seeeaeee

11

horses for money which he owed B under the agreement,

and later a bill of sale for the horses in consideration of

the cancellation of the chattel mortgage indebtedness, is he

entitled to-a decree in a suit filed two months after the

date of the bill of sale, setting aside the chattel mortgage

and bill of sale, and is he entitled in said suit to a judg-

ment against B for the value of the horses?

REASONS FOR GRANTING WRIT.

The Cireuit Court of Appeals apparently did not ap-

prove the law of Illinois applicable to the issues presented

to it, and it arbitrarily decided an important question of

local law in a way which is in conflict with all of the appli-

cable local decisions. Furthermore, the. Illinois opinions

and the opinion of the Supreme Court of the United

States, cited by the Cireuit Court of Appeals in its opinion

as precedents, do not support its opinion, but on the con-

trary, if applicable at all, seem to hold contrary to its

opinion. The real substance of the opinion of the Circuit

Court of Appeals is that it will construe the statute in

question for itself, and not follow the numerous opinions

of the courts of Illinois since 1874, when the original

statute was enacted.

The Illinois courts have construed the iaw applicable to

the issues here presented many times. The substance of

all of the Illinois opinions is that on the issues presented

in this ease, plaintiff cannot recover. If the opinion of the

Cireuit Court of Appeals is allowed to stand, it will create

chaos in the law of Illinois on the proposition of law in

question, because henceforth no person can determine

whether the courts of Illinois will follow their previous

opinions, or reject them and follow the said opinion of the

Cireuit Court of Appeals.

REY I ener

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12

In construing the issue here presented, it must be re-

membered that this is not a case where the whole, or any

part, of the consideration for the chattel mortgage or bill

of sale in question was for money won by gaming, but on

the contrary both parties were losers. After they had

adjusted their respective losses pursuant to their agree-

ment, one of them seeks to recover from the other the

value of personal: property which he had delivered to the

other pursuant to their agreement, about 2 months before.

CONCLUSION.

Wherefore, the petitioners pray the granting of the writ

of certiorari to the United States Circuit Court of Appeals

for the seventh circuit.

Epwarp M. Burke,

Attorney for Petitioners.

oy

13

SUPPORTING BRIEF.

lllinois Revised Statutes, 1945, Chapter 38, Sections 329

and 333 were enacted March 27, 1874. They are set out in

the complaint of plaintiff contained herein. Since the date

of their enactment, the reviewing courts of Illinois have

filed opinions sustaining petitioners’ theory of the law, as

follows:

In Shaffner v. Pinchback (1890) 133 Ill. 410, 24 N. E. 867,

the highest court of Illinois held that where two persons

are partners in the business of betting on horse races, and

money is advanced by one to the other in furtherance of

such transactions, there can be no recovery in an action of

one of the partners against the other. The opinion men-

tioned the statute generally.

In Boddie v. Brewer & Hoffman Brewing Co. (1903)

204 Tl. 352, 61 N. E. 1047 the landlord sued the tenant at

law for certain installments of rent due under a lease of

premises used for gambling, and plaintiff had judgment;

then, the defendant lessee filed his bill in equity to set aside

said judgment because the premises had been used for

gambling, and also to recover back some money which he

had paid under executions levied on previous judgments

for rent under said lease. The trial court held that the

judgments were void and could not be collected, but that

the money which the lessee had already paid under execu-

tions on judgments for rent under said lease could not be

recovered back. The appellate and Supreme Courts af-

firmed. The sections of the Statute in issue in the case at

bar were specifically referred to in the above citation al-

though by section numbers under which they were then

known.

.

In Brooks v. Brady (1894) 53 Ill. App. 155, the parties

thereto had jointly bet and lost on an election. One hav-

ing paid more than his share of the loss, the other gave

him a note to adjust the difference. Plaintiff sued on the

note. Defendant pleaded that the consideration for the note

was illegal, being in violation of the statute relating to

gaming contracts and obligations. The court held that the

consideration was not within the inhibition of the statute

and said at page 156:

‘It was not money won by the payee of the maker by

betting with him upon the result of the election, but

an amount paid by the payee to another for the maker

after the loss had been sustained. We do not under-

stand that such a consideration is within the statute.’

Plaintiff had judgment against the defendant.

In Suttle v. Finnegan (1899) 86 Ill. App. 423, the court

held, in a suit on a note, that it was reversible error for the

trial court to refuse a proposition of law that a note given

by one loser to another loser for the purpose of adjusting

joint gambling losses is valid, and not within the prohibi-

tion of the statute in question. The judgment for defendant

was reversed and the case remanded with instructions to

enter a judgment for the plaintiff on the note.

In Sternberger v. Wright (1926) 239 Ill. App. 490, judg-

ment was confessed upon a note. Defendant filed his motion

to open the judgment and for leave to plead. He filed his

affidavit in support of the motion. The trial court denied

the motion. The Appellate Court said, page 491:

‘‘Even if the affidavit can be construed as showing

that the parties jointly bet and lost money on games

of chance, and that appellee paid more than his propor-

tion thereof, and that appellant executed the note in

question to adjust the differences between them, it has

been held that a note given under such circumstances

is a valid obligation, and not a gambling debt.’’

Pe ee Pg

15

The judgment was affirmed. The opinion does not men-

tion the statute, but it is clear that it was based thereon,

because the affidavit of the defendant specifically stated

that the consideration for the note was a gambling debt,

and prohibited by law. The reference to ‘‘prohibited by

law’’ clearly means the statute.

In Brelesford v. Stoll (1940) 304 Ill. App. 222, 26 N. E.

2d 159, the court held that where two persons are engaged

in a joint unlawful transaction, as gaming, whether as part-

ners or joint adventurers, and one takes advantage of the

other, and appropriates more than his proportion of the

. spoils, courts of equity will not assist either, but will leave

them where they place themselves. The statute in question

was expressly cited. This is the last Illinois case on the

issue here presented and it strongly supports petitioners’

contention.

Petitioners insist that it is clear from the foregoing cita-

tions that the Illinois courts in construing the statute in

question have consistently held that when two parties joint-

ly engage in a gambling transaction, and both parties lose

in such transaction, and thereafter adjust their losses be-

tween themselves by one of them paying money or de-

livering personal property to the other, that the party so

paying money or delivering personal property, cannot

thereafter have a decree setting aside a bill of sale to the

personal property, or sue for and recover back, the money

ur the value of the property so paid.

We now refer to the cases cited by the Cireuit Court of

Appeals in support of its opinion, for the purpose of show-

ing that they do not support it.

In Pearce v. Rice, (1891), 142 U. S. 28.12 8. Ct. 130, the

facts were as follows: A owed B, a stock broker, a balance

on gambling transactions on the Chicago Board of Trade.

16

He paid the balance by assigning, and guaranteeing pay-

ment of, the note of C payable to A. B gave the note, with

the guarantee thereon, to D, as collateral for a loan. The

loan not having been paid in full, D sued A on the guaran-

tee, and had judgment for the full amount of the note. B

did not owe D the full amount of the judgment. This Court

held that although B could not recover from A, on A’s

guaranty on the note, that D, being a bona fide holder,

could recover from A, but only to the extent that B owed

D, and that the remainder of the judgment was void. The

holding of this Court was, that if A gave B his note in

payment of a gambling transaction, B could not recover

from A thereon, but if B transferred the note to C, a bona

fide holder for value, that C could recover from A the

amount that he paid B for the note. Petitioners insist that

this citation by the Circuit Court of Appeals in support of

its opinion, has no bearing whatever on the issues in the

case at bar. :

In West v. Carter (1889) 129 Tl. 249, 21 N.. EK. 782, West

claimed that his horse won in a horse race, and he was en-

titled to the sum paid by the track to the winning horse.

The track claimed that West’s horse did not win. West

sued the track before a Justice of the Peace, and had judg-

ment for one-half of the purse. The track then appealed

to the Circuit Court of Cook County, and filed an appeal

bond with Carter as surety. The said appeal was dis-

missed. West sued Carter as surety on the appeal bond.

Carter defended on the theory that the judgment entered

by the Justice of the Peace was founded upon a gambling

contract, and therefore, the judgment and bond were void.

Judgment was for the defendant, but the Appellate Court

reversed said judgment, and held that Carter, being surety

on the appeal bond, could not interpose the defense that

the judgment was void because based on a gambling trans-

| pmanmeannias

17

‘

action. Then Carter filed his bill in equity in the Superior

Court of Cook County, setting up the facts and claiming

that West should not recover from him. That court held

that West could not recover. The Appellate Court affirmed,

and the Supreme Court of Illinois held West could recover

and remanded the case to the Superior Court with in-

structions to dismiss the bill. The Supreme Court held that

Carter was not a person interested either in the original

contract or in the judgment of the Justice of the Peace;

that he was a mere volunteer, who signed the appeal bond

as a surety, and when the judgment was not paid, he be-

came liable therefor, as surety. Petitioners insist that this

citation by the Cireuit Court of Appeals has no bearing

whatever on the issues in the case at bar.

In Harris v. McDonald, (1901) 194 Tll. 75, 62 N. E. 310,

A leased to B certain premises to be used as a gambling .

“house, and C, not knowing that the premises were to be so

used, guaranteed the payment of the rent, without receiving

any money or property for said guarantee. A sued C on the

guarantee for unpaid rent, and had judgment, which was

affirmed by the Appellate Court. C then filed his bill in

equity, praying to set aside said judgment, and have his

guarantee declared void, because the lease involved

gambling transactions. He had a decree as prayed, which

was affirmed by the Appellate Court, and the judgment of

the Appellate Court was affirmed by the Supreme Court in

this citation. Petitioners insist that this citation by the

Circuit Court of Appeals has no bearing whatever on the

issues in the case at bar.

In Mulcahy v. Vehon (1923) 229 Ill. App. 454, A gave his

note to B, the consideration being a gambling transaction

involving the future differences in the price of grain. B

sued A on the note, and for some reason not clearly dis-

closed by the above opinion, A was not present at the ttial,

eC

a ar

= re ae eR

18

and judgment was entered against him. A then filed his

bill in equity, praying that the said judgment against him

be vacated and set aside, because based on a gambling

transaction. A decree was entered enjoining the collection |

of the judgment, and affirmed in the above citation. Peti-

tioners insist that this citation by the Circuit Court of

Appeals has no bearing whatever on the issues in the case

at bar.

The Circuit Court of Appeals cited no other cases in

support of its opinion construing the statute in question.

Your petitioners say that it is clear from the opinion of

the Circuit Court of Appeals that it thought that the IIi-

nois courts had not properly construed the sttaute in

question, and that therefore, it would construe the statute

as it thought the statute should be construed. By so doing,

the Circuit Court of Appeals decided an important question

of local law in a way which is in conflict with all of the

applicable local decisions.

SPECIFICATIONS OF ERRORS.

The court below erred:

(1) In reversing the judgment of the District Court.

(2) In construing Illinois Révised Statutes, 1945, Chap-

ter 38, Sections 329 and 333.

(3) In disregarding all of the applicable decisions of

the courts of Illinois, construing a statute of Illinois, and

placing its own construction thereon.

Wherefore, petitioners pray the granting of a writ of

certiorari to the United States Circuit Court of Appeals for

the seventh circuit.

Respectfully submitted,

‘ Epwarp M. Burke,

Attorney for Petitioners.

a

19

APPENDIX.

The memorandum opinion of the District Court (R. 22-

27) (not reported) was as follows:

This proceeding was instituted by Joseph Dine in the

Superior Court of Cook County, Illinois, on August 3rd,

1945, against defendants J. B. Edwards, Ruth Brougher,

and Monte Preston. Defendants removed the case to this

court on the ground of diversity of citizenship.

Plaintiff seeks to have set aside a chattel mortgage, a

bill of sale and an option to repurchase three race horses,

Valdina Lamar, First Command, and Colonel Al, on the

ground that they were executed and delivered as a result

of certain gambling transactions, and under the statutes

of Illinois are therefore void and of no effect.

In Count I of his complaint plaintiff sets out that his

action is brought under Sections 329 and 333, Chapter 38,

Ills. Rev. Stats. 1945, which provides:

Section 329:

‘*All promises, notes, bills, bonds, covenants, con-

tracts, agreements, judgments, mortgaged, or other

securities or conveyances made, given, granted, drawn

or entered into, or executed by any person whatsoever,

where the whole or any part of the consideration there-

of, shall be for any money, property or other valuable

thing, won by any gaming, or betting at cards, dice, or

any other game or games, or betting on the side or

hands of any person gaming, or by wager or bet upon

any race, fight, pastime, sport, lot, chance, casualty,

election or unkown or contingent event whatever, or

for the reimbursing or paying any money or property

knowingly lent or advanced at the time and place of

such play or bet, to any person or persons so gaming

or betting, or that shall, during such play or betting,

so play or bet, shall be void and of no effect.’’

OE oo te.

20

Section 333:

** All judgments, mortgages, assurances, bonds,

notes, bills, specialties, promises, covenants, agree-

ments, and other acts, deeds, securities, or conveyances,

given, granted, drawn or executed, contrary to the

provisions of this Act, may be set aside and vacated

by any court of equity, upon bill filed for that purpose,

by the person so granting, giving, entering into or

executing the same, or by his executors or administra-

tors, or by any creditor, heir, devisee, purchaser or

other person interested therein; of it a judgment the

same may be set aside on motion of any person afore-

said, on due notice thereof given.’’

Count IT realleges paragraphs 1 to 6 of Count I, and then

asks for a writ of Attachment and Garnishment against

the defendants.

Both sides agree that the indebtedness which was the

consideration for the chattel mortgage and bill of sale here

in question was a gambling transaction.

Plaintiff, pursuant to an order of court, filed a bill of

particulars, after which defendants moved to dismiss the

complaint, which motion to dismiss plaintiff moved to

strike. Subsequently defendants asked leave to file an

amended motion to dismiss, and the matter is now before

me on defendants’ amended motion to dismiss the com-

plaint and plaintiff’s motion to strike the same. ;

It is agreed that this case arises out of certain gambling

transactions between Dine and Edwards, involving betting

on various horse races. The courts of Illinois have held

that betting money on horse races is gaming, in violation

of the statutes of the state. Shaffner v. Pinchback, 133 Tl.

410. Tatman v. Strader, 23 Til. 494.

In the case of Shaffner v. Pinchback, supra, Shaffner

brought an action against Pinchback to recover the sum of

$1,000, alleged to have been loaned by him to Pinchback.

The evidence showed that the money was intended to be

and was actually used as capital in the business of ‘‘making

books’”’ on horse races, and the court held that betting money

on a horse race is gaming and is prohibited by the statute,

and that a contract in aid of the offense is void, and cannot

21

be recovered upon. In deciding this case the Supreme

Court of Illinois said:

“Tt is ~—_ that the view that defendant can kee

the $1000. furnished by plaintiff, without any consid-

eration therefor, is so opposed to reason and con-

science as to be untenable. The judgments of the trial

and the mae Courts are conclusive of the fact

that plaintiff and defendant jointly engaged in a busi-

ness which was in violation of law. They were, in

respect to such business, in pari delicto, and the law

will refuse its aid to assist either, but will leave them

in the positions in which they have placed themselves.

Plaintiff in error having embarked his money in an

enterprise prohibited alike by the statute, by good con-

science and by public policy, placed himself and his

money outside of the pale of the law, and if he has

been despoiled by the failure of his associate to account

for the funds placed in his hands for the purpose of

carrying on the unlawful business, then both good

morals and public policy require that the law should

not aid him.”’

In the case of Boddie v. Brewer and Hoffman Brewing

Co., 204 Tll. 352, the court held that complainant, having

knowingly entered into # lease of property for use as ©

gambling house in violation of statute, a court of chancery

will leave complainant where it finds him, and will not in-

terpose to assist him in recovering back money paid in

furtherance of such unlawful leasing, though the payment

was coerced by an execution issued upon a judgment at .

law.

Brelsford v. Stoll, 304 Ill. App. 222, involved a suit for

dissolution and accounting with respect to an alleged

partnership relationship for the purchase, location and

operatiun of pinball machines. The Appellate Court, in

denying plaintiff equitable relief, said:

‘“The alleged contract was: illegal and void from its

inception as contravening the provisions of the gaming

statute of Ilinois-and against publie policy and was

therefore unenforceable in whole or in part in a court

of equity. All contracts and agreements entered into

or executed by any person whatsoever, where the

ce ee rm a a

22

whole or any part of the consideration thereof shall be

any money, property or valuable thing won by gaming

is expressly declared by Sec. 329, Chap. 38, Ill. Rev.

Statutes 1939, to be void and of no effect.

‘*Where persons engage in the unlawful business of

gaming, courts will not assist either one but will leave

them where they placed themselves. (Samuels v. Oli-

ver, 130 Ill. 73.) As is said in Shaffner v. Pinchback,

133 Tl. 410: ‘Plaintiff in error having embarked his

money in an enterprise prohibited alike by the statute,

by good conscience and by public policy placed himself

and his money outside of the pale of tha law, and if

he has been despoiled by the failure of his associate

to account for the funds placed in his hands for the

purpose of carrying on the unlawful business, then

both good morals and public policy requires that the

law should not aid him.’

‘‘This principle was early announced and ‘has been

uniformly adhered to by the courts of review of this

state. In the case of Miller v. Davidson, 8 Ill. (3 Gil.)

518, decided in 1846, Justice Caton used this language:

‘No principle is better settled, than that where two or

more persons embark in an unlawful transaction, and

one gets the advantage of the others, and appropriates

more than his proportion of the spoils to himself, the

court will not interfere to make him divide with the

others. As they commenced with a violation of the law,

they cannot invoke its aid in any way. The law will

not meddle with gains obtained by its outrage, as be-

tween those who have been engaged in trampling it

underfoot.

**The above principle was again cited with approval

in Mitchell v. Clem, 295 Tl. 150, and in the recent case

of Klein v. Chicago Title € Trust Co., 295 Ill. Ann. 208.

In the case of Mitchell v. Clem, supra, it was further

held that while ordinarily, as between the parties, a

defense must be set up in the answer, a bill in chancery

could be dismissed if the chancellor found that the

public interest and the rules of equity demanded such

a decree. It was there said (p. 156): ‘Another appli-

cation of the rule of equity is, that where a contract

is illegal or against public policy a court of equity

will not, at the suit of. one of the parties who partici-

—ssoree ee

"aimee

23

pates in the illegal or immoral intent, aither compel

the execution of the agreement or set it aside after it

has been executed, because to give relief in such a

case would injure and counteract public morals.* * *

(citing cases.) This application of the rule is not in

the interest of any party to the illegal or immoral

transaction but in the pyblic interest, and so far as

dismissing the bill is concerned, the chancellor might

do that and leave the parties where he found them

without the defense being set up in the answer.’

“To the same effect is the case of Vock v. Vock, 365

Tl. 482 * * * wherein the above quoted language

and citations are restated with approval by the court.

and it is further there said ‘that: ‘The law is that

where the parties are in pari delicto no affirmative

— of any kind will be given ‘to one against the

0 er.

Plaintiff’s motion to strike defendants’ motion to dis-

miss is denied, and defendant’s motion to dismiss is al-

lowed.

The two opinions of the Circuit Court of Appeals, (R.

38-41; R. 61-62) were as follows:

Before Sparks and Kerner, Circuit Judges, and Briccie,

District Judge.

Kerner, Circuit Judge. By his complaint plaintiff

sought to set aside a chattel mortgage, a bill of sale, and

an option to repurchase three race horses. Jurisdiction

rested upon diversity of citizenship and the requisite

amount in controversy. The District Court, on motion of

the defendants, dismissed the complaint for failure to

state a claim upon which relief could be granted.

The complaint alleged that while plaintiff was the owner

of three race horses he entered into an agreement with

defendant Edwards whereby Edwards would make wagers

upon the horses, and if the horses won, Edwards would

deduct from the winnings the amount of the wagers and

divide the net profits therefrom with plaintiff, but if the

horses failed to win the race the loss would be charged

against plaintiff; that up to August 22, 1944, Edwards

had advanced $24,000 for which plaintiff executed a chat-

tel mortgage in which he pledged the three horses as

ee gy

Lg er AA AME EO

24

security ; and that on or about June 1, 1945, Edwards repre-

sented to plaintiff that plaintiff was then, under the ar-

rangement mentioned, indebted to Edwards in the sum of

$30,700 and informed plaintiff that he would foreclose the

chattel mortgage unless plaintiff agreed to transfer title

to the horses to Edwards in exchange for an option to re-

purchase the horses within ninety days, whereupon plain-

tiff executed a bill of sale transferring the title to the

horses to Edwards.

The complaint further alleged that under the statutes

of Illinois the execution of any chattel mortgage or bill of

sale where the whole or any part of the consideration

thereof was a gambling transaction, is void and of no ef-

fect; that all mortgages or conveyances executed contrary

to the provisions of the statutes may be set aside and

vacated upon a bill filed for that purpose, by the person

executing the same; and that by reason of these premises

a right of action has accrued to plaintiff to set aside the

chattel mortgage, bill of sale, and option to repurchase.

In the District Court, in support of the motion to dismiss,

defendants asserted that a court of equity will not adjust

disputes arising out of gambling transactions. The trial

judge, after stating that it was agreed the case arose out

of certain gambling transactions between Dime and Ed-

wards involving betting on various horse races, gave as

his reason for dismissing the complaint, that the courts of

Illinois have held that betting money on horses is gaming,

in violation of the statutes, and that where the parties are

in pari delicto, no affirmative relief will be given to one

against the other, but each party will be left to enjoy all

that he has been able to obtain in the iniquitous trans-

action.

In this court defendants, relying solely on general

equitable principles, reiterate the argument made in the

District Court and cite, among other cases, Shaffner v.

Pinchback, 133 Til. 410; Boddie v. The Brewer & Hoffmann

Brewing Co., 204 Ill. 352; Brelsford v. Stoll, 304 Tll. App.

222; and Israel v. Selman, 263 Til. App. 351.

It is true that betting money on a horse race is gaming

and in violation of law, Shaffner v. Pinchback, supra, and

where parties engage in the unlawful business of gaming,

courts will not assist either one, but will leave them where

te

— oacms =

25

they place themselves; yet, the question remains whether

these principles are applicable here. We think they are

not.

As to the substantive rights of the parties in this case,

there can be no question but that the state laws are the

controlling rules of decision. It has been so held, Huddles-

ton v. Dwyer, 322 U.S. 232, and wherever those laws have

been authoritatively declared by the State, whether its -

voice be the legislature or its highest court, such laws

ought to govern in litigation founded on them, whether

the forum of application is a State or a federal court

and whether the remedies be sought at law or may

be had in equity, Guaranty Trust Co. v. York, 326 U.S.

99. And we know that the public policy of a State is

to be found in its constitution and statutes, Electrical

Contractors’ Ass’n v. A. S. Schulman Electric Co., 391

Til. 333. We, therefore, seek to ascertain what the public

policy of Illinois is upon the question at hand.

Section 329, chap. 38 Ill. Rev. Stat. 1945, provides that

‘‘All * * * agreements, * * * mortgages, or * * * convey-

ances * * * where the whole or any part of the considera-

tion thereof, shall be for any money * * * won by * * *

wager or bet upon any race, * * * or for the reimbursing

or paying any money or property knowingly lent or ad-

vanced at the time and place of such play or bet, to any

person or persons, so gaming or betting * * * shall be void

and of no effect,’’ and § 333 provides that ‘‘All * * *

mortgages, * * * agreements, * * * or conveyances, given,

granted, drawn or executed, contrary to the provisions of

this act, may be set aside and vacated by any court of

equity, upon bill filed for that purpose, by the person so

granting, giving, entering into, or executing the same * * *.”’

Under these statutes the declared yolicy of the State

is that all agreements, mortgages or conveyances, where

the whole or any part of the consideration thereof shall

be for any money won by wager or bet upon any race, shall

be void and of no effect, and the statutes clearly authorize

the filing of a bill in equity to set aside such mortgage or

conveyance. In the case of West v. Carter, 129 Ill. 249,

254, the court, in construing the statute here involved,

said: ‘‘ ‘It was the intention of the legislature to make all

* * * eontracts * * * absolutely void,—of no vitality,—

nienethebmeiatiedemdinenen tilt }

26

and they can not be vitalized by the action of any court.’ ”’

And the court held that relief may be granted in a court

of equity to vacate and set aside contracts obtained in

violation of these statutes. See also Pearce v. Rice, 142

U. S. 28; Harris v. McDonald, 194 Tl. 75; and Mulcahey v.

Vehon, 229 Ill. App. 454. To us it is plain that to deny

plaintiff the right to seek to set aside the mortgage and

bill of sale would vitalize the instruments mentioned.

The judgment appealed from is reversed and the cause

is remanded to the District Court.

On Petition ror REHEARING.

Before Sparks and Kerner, Circuit Judges, and Briccte,

District Judge.

Kerner, Circuit Judge. In his petition defendant be-

lieves he has uncovered an omission in the opinion in that

it is not decisive of all the questions presented.

It is claimed that we took the position that the applicable

Tllinois statute requires that the chattel mortgage, bill of

sale, and option to repurchase be set aside in accordance

with the prayer of Count 1, but that the sufficiency of the

eause of action in Count 2, which sought, damages for

conversion of the property, was not reached by the District

Court and, while raised here initially, was not considered

by this court. It is true we were content to consider, only

the allegations in Count 1, but, as will be shown, no error

was committed.

The defendants’ motion to dismiss the complaint which

was sustained by the trial court stated in part: ‘*The com-

plaint herein fails to state a claim upon which relief can

be granted.’’ The District Court thereby rejected the

allegations in Count 2 as specifically as the allegations in

Count 1, and it is incorrect for the defendants to say as

they do that the point of Count 2 arose for the first time

in this court. Upon appeal both counts were before this

court just as they were before the District Court. More-

over, an examination of the complaint discloses that an

identical cause of action is set out in the two counts due

to an incorporation in Count 2 of the principal allegations

of Count 1. They are distinguished only by the remedies

sought. Count 1 prays that the documents in question be

27

set aside, and Count 2 prays that, the property having

been illegally appropriated, a judgment against defendants

for its value be entered.

It is logical that the District Court in emphasizing its

rejection of the allegations of Count 1 necessarily did not

repeat itself in rejecting the allegations of Count 2. The

opinion of this court likewise confined itself to a considera-

tion of the allegations of Count 1. It is clear, however,

that the allegations of Count 2 were held sufficient by this

court and an order will be so entered.

The petition for rehearing is denied.