Appeal from a judgment of the Superior Court of the City and County of San Francisco, and from an order refusing a new trial.
Wal. J. Tuska, for Appellants.
Cobb & Loefler, and Scrivner & Schell, for Respondent.
JUDGES: Harrison, J. Garoutte, J., and Van Fleet, J., concurred.
The questions involved in this appeal have been determined adversely to the contention of the appellant in the cases of Cashman v. Root , 89 Cal. 373; Wetmore v. Barrett , 103 Cal. 246; and Sheehy v. Shinn , 103 Cal. 325; and upon the authority of those cases the judgment and order appealed from must be affirmed. There is nothing in Kutz v. Fleisher , 67 Cal. 93, inconsistent with the above cases. That action involved a series of transactions extending over several years, most of which were had prior to January 1, 1880, and the provisions of the present constitution were, of course, inapplicable to them. In the account upon which the action was brought there were two purchases of stocks by the plaintiff for the defendant after that date, and the trial court was requested to hold, as a matter of law, that the mere fact that the plaintiff had purchased and paid for these stocks at the request of the defendant, and, instead of immediately delivering them, had retained them until he should be repaid the advances, was in violation of the statute of frauds, and in contravention of the provisions of article IV, section 26, of the constitution. The trial court refused so to hold or rule, and this court affirmed its action, and held that the statute of frauds and the above provision of the constitution had no application.
Whether a transaction or a series [38 P. 363] of transactions between a broker and his customer for the purchase of stocks that are not immediately delivered, or of which an immediate delivery is not contemplated, is in contravention of this provision of the constitution, is a question of fact to be determined in each particular case, and the circumstances under which the transaction is had, and the conduct of the parties in reference thereto, will naturally have great influence in determining this fact. Whether the transaction is a legitimate one or one which is within the inhibition of the constitution, is to be determined by the actual course of dealing and the evident purpose of the parties to such transaction, rather than by what they may have termed it, or by the form in which it may have been entered in their books, and is to be determined by the trial court from the evidence before it; and the finding of the court upon this question of fact is entitled to the same consideration upon an appeal as in any other finding of fact, and must be accepted here as conclusive if there was any evidence in support of it. If the stocks purchased are of a rapidly fluctuating character, and the money therefor is wholly advanced by the broker with whom the stocks are left, either with or without an agreement that they shall be held as security for his advances, and while in his hands are sold under the directions of the customer, and within a short time repurchased and again sold while their market value is fluctuating, and the only connection that the customer may have with them is to pay or receive the balance that the broker's account may show, there would be more reason for finding that such transactions were "on margin," within the meaning of the constitution, than in a case in which there was a single purchase of a stock of a fixed value yielding a regular income, and where the customer was seeking to find a suitable investment for his money. It is not the purpose of this provision of the constitution to interfere with legitimate business, or to make void all time contracts for the purchase of shares in incorporated companies. It was held in Cashman v. Root , 89 Cal. 373, that this court will take judicial knowledge that the object with which this provision was inserted in the constitution was to strike down a species of gambling in mining stocks which had been rife in this state, wherein individuals were wont to contract for the purchase of stocks to be delivered at a future day, upon the speculation that they would advance in price sufficiently to meet their agreements or purchases; and in Sheehy v. Shinn , 103 Cal. 325, it was said: "To give effect to the constitution it is as much the duty of the courts to see that it is not evaded as that it is not directly violated."
The court has found in the present case" that the object of the transactions, and of the agreement between the plaintiffs and the defendant, was that the defendant might realize a profit by speculating in the fluctuations of the market in such stock"; and as a conclusion therefrom that the said transactions were within the prohibition of the constitution, and therefore void. As there was evidence before the court from which it was authorized to make this finding, its conclusion thereon must be accepted as determinative of the point. The written agreement between the parties, under which it is contended the transactions were had, was not all of the evidence before the court, and cannot be invoked as determinative of their character. The transactions themselves are challenged as illegal, and they are to be judged by their intrinsic character rather than from the designation which the parties have given them. If they are within the prohibition of the constitution it is immaterial that the parties thereto have signed an agreement that they shall bear a different name, or be differently classified from what they were in fact and in legal contemplation, or from what a jury may determine them to be.
The judgment and order are affirmed.