William F. Herrin, and Robert Y. Hayne, for Appellant.

as

Cashman v. Root, 89 Cal. 373, 23 Am. St. Rep. 482, seems to be based upon the "spirit of the constitution," which is an uncertain guide for the courts. (Pattison v. Supervisors, 13 Cal. 182; Stockton etc. R. R. v. Stockton, 41 Cal. 162.) The debates on the constitution show that the provision respecting sales of stock on margin was designed to prevent what were known "bucket shops," or swindling sales, where the seller had no stock in possession, but the parties were merely betting upon the rise or fall of the price of stocks within a given number of days. (2 Debates on the Constitution 807-09.) The writer of the opinion in Cashman v. Root, appears to have confused the American rule as to gaming contracts with the constitutional provision which he was construing. The question in cases as to gaming contracts turns on the intentions of the parties. (Irwin v. Williar, 110 U. S. 499; Kirkpatrick v. Bonsall, 72 Pa. St. 158; Cockrell v. Thompson, 85 Mo. 510; Williams v. Carr, 80 N. C. 298.) The case at bar is distinguishable from Cashman v. Root, 89 Cal. 373, 23 Am. St. Rep. 482, in that it shows a genuine transaction of purchase of stock, for which part of the price was paid by the broker and the stock held as security. When a contract for future delivery was bona fide and valid in its inception, and not tainted with any gambling intent, subsequent default of one of the parties, and a settlement upon the basis of difference between the contract price and the market value, will not render the contract void. (Wall v. Schneider, 59 Wis. 352; 48 Am. Rep. 520; Clarke v. Foos, 7 Biss. 558; Sawyer v. Taggart, 14 Bush, 734; Conner v. Robertson, 37 La. Ann. 814; 55 Am. Rep. 521; Roundtree v. Smith, 108 U. S. 275, 276.)

John P. O'Brien, for Respondent.

The case of Cashman v. Root, 89 Cal. 373, 23 Am. St. Rep. 482, is conclusive of this case.

BEATTY, C. J.-This is an action founded upon the following clause of section 26 of article IV of the constitution of 1879:

"All contracts for the sale of shares of the capital stock of any corporation or association, on margin, or to be delivered at a future day, shall be void, and any money paid on such contracts may be recovered by the party paying it by suit in any court of competent jurisdiction."

The plaintiff sues to recover money alleged to have been paid to defendant upon contracts for the sale of stocks "on margin.' on margin." The cause was tried in the superior court without a jury, and on the facts found. judgment was given for the plaintiff for $648 and costs. From this judgment both parties appeal, the plaintiff contending that on the findings the judgment in her favor should have been for about $1,200, and the defendant insisting that the decision of the superior court is contrary to the evidence set out in his bill of exceptions, and also that the specific findings of fact are inconsistent with the general finding to the effect that the transactions between him and the plaintiff "were sales of stock of incorporated companies on margin, or to be delivered at a future day," upon which finding the judgment against him is based.

We are of the opinion that our decision in both appeals must depend wholly upon the proper construction of the findings of the superior court, and of the constitutional provision above quoted. The evidence contained in the defendant's bill of exceptions relates exclusively to the meaning of the terms on margin," "future delivery," etc., according to the usage of brokers and other dealers in stocks at San Francisco during the years immediately preceding the adoption of the new constitution, and, although it has been carefully read and considered, it can only be regarded as one, among various sources of information, to which the court may resort for the purpose of ascertaining a fact of purely judicial cognizance. Whatever may have been

the evidence in the superior court, and whatever effect it may have been allowed, this court must now decide, as matter of law, what the framers of the constitution intended by the terms they have employed; and this construction does not depend upon the evidence of the witnesses in a particular case, for if it did we should be compelled to affirm one construction in one case, and a different construction in another case an absurdity which can only be avoided by giving effect to the rule that courts take judicial notice of the true meaning of all legal expressions (Code Civ. Proc., sec. 1875), and this, of course, includes all the terms used in the constitution or in acts of the legislature.

Looking, therefore, to the evidence in this case only so far as we may find that it affords us some aid in, arriving at the actual intention of the framers of the constitution, we proceed to inquire what that intention

was.

For this purpose the language of the constitution is necessarily the first thing to be considered, and if its meaning is plain, there is no occasion to resort to extraneous aids. With respect to the clause under consideration, it does not seem to be very obscure in its terms or intent. It declares that certain contracts shall be void, and that any money paid in pursuance of them may be recovered back by the party paying it in any court of competent jurisdiction. The provision is evidently self-executing, needing no act of the legislature to give it its intended effect. Contracts of the class designated are rendered void by the constitution itself, and money paid in pursuance of them is recoverable by actions commenced in the superior or justice's courts, according as the amount claimed is greater or less than $300. The only question of construction which can possibly arise is upon the meaning of the phrase margin, or to be delivered at a future day," but even as to this there is little difficulty so far as the present case is concerned. There are some transactions which are clearly and plainly within the designated class, although there are others with respect to which it may be doubt

on

ful whether they are included or not. The meaning of the word "margin," as ordinarily used in connection with stock sales, has long been well understood. As most frequently employed in this state at the time of, and for many years prior to, the adoption of the constitution, it meant the sum deposited by a purchaser of stock with his broker, being a certain percentage of the purchase price of the stock, the broker agreeing to advance the balance of the purchase price upon condition that he should hold the stock as security for his advances, with the right to sell it in case of depreciation in value and failure of the purchaser to keep the margin good. This, we say, was the sense in which the word was most frequently employed, but it was also employed to describe deposits made by sellers and purchasers of stock for future delivery upon a variety of conditions, and in various ways which need not be considered here. It is enough for all the purposes of this case to say that whenever the purchaser of stock paid to the vendor of the stock, or to his broker, a percentage of the purchase price upon an agreement that the stock should be held as security for the balance, the amount so paid was "margin" in the sense in which the term was used by the framers of the new constitution. If the mere language of the instrument did not make this sufficiently manifest, it is made so by reference to the arguments of both the advocates and opponents of the provision in the constitutional convention (2 Debates on the Constitution, 806-10) and by the evidence in this record.

This being so, it follows that an agreement between vendor and vendee, for the sale of stock upon payment of a part of the agreed price, the stock to be retained by the vendor as security for the balance, and only to be delivered upon full payment, with the right in the vendor to sell it at any time, without notice to the vendee, if it should so depreciate in the market as to be worth less than three times the unpaid balance, is a sale of stock on margin and for future delivery.

That such was the agreement between the plaintiff

and defendant in this case, and that he, the defendant, though nominally a mere broker for the plaintiff, was in reality her vendor, is, in effect, the finding of the superior court as a conclusion, not of law, but of fact, and upon this fact the judgment is based. Unless, therefore, the more specific findings of fact are inconsistent with this general finding, the right of the plaintiff to recover the amount paid by her upon such margin sales cannot be denied. To determine whether there is any such inconsistency it will be convenient to quote the more material portions of the findings in full. They are as follows:

"Between the first day of April, 1890, and the first day of July, 1891, the defendant was a stock broker, engaged in business as such, in the purchase and sale for customers at the city and county of San Francisco, of the stocks of incorporated companies. That on the tenth day of April, 1890, the plaintiff opened an account with the defendant as such broker, and from that time onward until about July 1, 1891, continued said account with him and to transact business with him as such broker, having him purchase and sell for her account with him stocks of incorporated companies, as such broker.

"That on each occasion that the plaintiff ordered defendant to buy or sell any of such stock, as aforesaid, she made, signed, and delivered to him a written order therefor in the following form:

"Howard H. Shinn, Member S. F. Stock Exchange Board, "Stock Broker, No. 318 Pine Street.

"Will buy and sell stocks for cash, with the express understanding that all stocks purchased, or which are held by him as collateral, may be sold by him in his discretion at any time, without any demand upon the customer for the payment of the balance of account then due, or without any demand whatever, or without any notice of the time or place of said sale, and without any notice whatever, at the "San Francisco Stock and Exchange Board," at any regular or informal session