Article 1. Gaming Contracts.
§ 16-1. Gaming and betting contracts void.
All wagers, bets or stakes made to depend upon any race, or upon any gaming by lot or chance, or upon any lot, chance, casualty or unknown or contingent event whatever, shall be unlawful; and all contracts, judgments, conveyances and assurances for and on account of any money or property, or thing in action, so wagered, bet or staked, or to repay, or to secure any money, or property, or thing in action, lent or advanced for the purpose of such wagering, betting, or staking as aforesaid, shall be void.
History. 1810, c. 796, P.R; R.C., c. 51, ss. 1, 2; Code, ss. 2841, 2842; Rev., s. 1687; C.S., s. 2142.
As to criminal laws regarding gambling, see G.S. 14-289 et seq.
For article, “Sports Betting has an Equal Sovereignty Problem,” see 67 Duke L.J. Online 1 (2017).
Liberal Construction. —
This section is construed liberally. Turner v. Peacock, 13 N.C. 303 , 1830 N.C. LEXIS 44 (1830).
Judgments in Invitum Not Included. —
This section does not include judgments taken in invitum, but only such as are confessed or taken by consent. Teague v. Perry, 64 N.C. 39 , 1870 N.C. LEXIS 8 (1870).
Gambling contracts are void, because they are so declared by this section. Morehead Banking Co. v. Tate, 122 N.C. 313 , 30 S.E. 341, 1898 N.C. LEXIS 253 (1898).
Gaming debts incurred in this State are not enforceable in the courts of this State. MGM Desert Inn, Inc. v. Holz, 104 N.C. App. 717, 411 S.E.2d 399, 1991 N.C. App. LEXIS 1100 (1991).
No Recovery Where Game Fair. —
Money, or a horse, or a judgment, won at cards and actually paid and delivered, cannot be recovered back, the game being fairly played. Hodges v. Pitman, 4 N.C. 276 , 1816 N.C. LEXIS 2 (1816); Hudspeth v. Wilson, 13 N.C. 372 , 1830 N.C. LEXIS 62 (1830), overruled in part, Cobb v. Cornegay, 28 N.C. 358 , 1846 N.C. LEXIS 63 (1846); Warden v. Plummer, 49 N.C. 524 , 1857 N.C. LEXIS 148 (1857); Teague v. Perry, 64 N.C. 39 , 1870 N.C. LEXIS 8 (1870).
Recovery Where Gaming Unfair. —
Unfair gaming was not only illegal by force of the statute against gaming, but was unlawful at common law, so that the money, or thing won, if it had been paid, might be recovered back in an action at law. Webb v. Fulchire, 25 N.C. 485 , 1843 N.C. LEXIS 49 (1843); Warden v. Plummer, 49 N.C. 524 , 1857 N.C. LEXIS 148 (1857).
Where a man is cheated out of his money, though it is in playing at a game forbidden by law, he may recover back what he has paid from the person who practiced the fraud upon him. Webb v. Fulchire, 25 N.C. 485 , 1843 N.C. LEXIS 49 (1843).
No Recovery on Bond Unfairly Won. —
Where A., at a game of cards unfairly played, won a justice’s judgment from B., and took from the defendants in the judgment a bond payable to himself for the amount, on which he brought suit, to which the statute against gaming was pleaded, it was held that he could not recover. Warden v. Plummer, 49 N.C. 524 , 1857 N.C. LEXIS 148 (1857).
Money Lent for Gaming. —
Money lent to play with at gaming, or to play at the time of loss, is not recoverable. Mooring v. Stanton, 1 N.C. 70 (1795).
Note given for a gambling debt is void and no action thereon can be maintained. Bullard v. Johnson, 264 N.C. 371 , 141 S.E.2d 472, 1965 N.C. LEXIS 1193 (1965).
Rights of Innocent Holder of Gambling Note. —
This section, applicable to a note originally given for a gambling debt, renders this and all notes and contracts in like cases void. This being true, no action thereon can be sustained. The position as stated is undoubtedly the law in this jurisdiction, and is in accord with well-considered authorities elsewhere. This principle, however, is allowed to prevail only where the action is on the note to enforce its obligations, and does not affect or extend to suits by an innocent endorsee for value, and holder in due course, against the endorser on his contract of endorsement. Wachovia Bank & Trust Co. v. Crafton, 181 N.C. 404 , 107 S.E. 316, 1921 N.C. LEXIS 88 (1921).
Note Given for Item Won at Cards. —
A note given subsequently, in purchase of a magistrate’s judgment which had been won at cards by the payee from the maker, is not void under this section against gaming. Teague v. Perry, 64 N.C. 39 , 1870 N.C. LEXIS 8 (1870).
Note Given in Foreign State in Consideration of Bet. —
A note given in consideration of a bet won on a horse race cannot be enforced in this State although given in a state where wagering contracts are not invalid. Gooch v. Faucett, 122 N.C. 270 , 29 S.E. 362, 1898 N.C. LEXIS 242 (1898); Burrus v. Witcover, 158 N.C. 384 , 74 S.E. 11, 1912 N.C. LEXIS 54 (1912).
When Stakeholder Liable. —
Where money is deposited with a stakeholder, to be delivered to the winner, and the stakeholder pays over the money, after notice from the loser not to do so, the loser may recover the money from the stakeholder. Wood v. Wood, 7 N.C. 172 , 1819 N.C. LEXIS 37 (1819); Forrest v. Hart, 7 N.C. 458 , 1819 N.C. LEXIS 80 (1819).
Cards a Game of Chance. —
It is a matter of common knowledge that a game of cards is a game of chance. State v. Taylor, 111 N.C. 680 , 16 S.E. 168, 1892 N.C. LEXIS 240 (1892).
Betting on Horse Race. —
It was the intention of this section to make betting on horse races a criminal offense, since such wagering contracts had already been outlawed and the denouncement of the wager as unlawful came in by amendment at a later time. State v. Brown, 221 N.C. 301 , 20 S.E.2d 286, 1942 N.C. LEXIS 457 (1942); State v. Felton, 239 N.C. 575 , 80 S.E.2d 625, 1954 N.C. LEXIS 614 (1954).
Betting on dog races under a pari-mutuel system, having no other purpose than that of providing the facilities by means of tickets, machines, etc., for placing bets, calculating odds, determining winnings, if any, constitutes gambling within the meaning of the statutes presently codified as this section and G.S. 16-2 and 14-292. State ex rel. Taylor v. Carolina Racing Ass'n, 241 N.C. 80 , 84 S.E.2d 390, 1954 N.C. LEXIS 559 (1954).
The game of tenpins is not a game of chance. State v. Gupton, 30 N.C. 271 , 1848 N.C. LEXIS 67 (1848); State v. King, 113 N.C. 631 , 18 S.E. 169, 1893 N.C. LEXIS 135 (1893).
The keeping of a gaming table called “a shuffleboard” is not indictable, as the game is not one of chance, but of skill. State v. Bishop, 30 N.C. 266 , 1848 N.C. LEXIS 65 (1848).
“Shooting for beef” and other similar trials of skill, for which the participants pay for the “chance” or privilege of shooting, is not a game of chance, there being no “chance” in the sense of the acts against gambling. State v. DeBoy, 117 N.C. 702 , 23 S.E. 167, 1895 N.C. LEXIS 132 (1895).
Agreement to Purchase Out-of-State Lottery Tickets. —
Where the parties entered into an agreement to purchase Virginia lottery tickets and purchased such tickets over a period of time the agreement was void as against North Carolina public policy, violated this section and was unenforceable in North Carolina. Cole v. Hughes, 114 N.C. App. 424, 442 S.E.2d 86, 1994 N.C. App. LEXIS 396 (1994).
Loan Agreement Based on Personal Injury Claim was not an Illegal Gaming Contract. —
Injured driver’s claim that a loan agreement based on the driver’s personal injury claim was void as an illegal gaming contract under G.S. 16-1 was properly dismissed since the parties desired the same outcome in the litigation and thus, the agreement was not a bet, and the driver had an independent interest in the litigation’s outcome as it defined her rights and obligations under the agreement, and thus, it was not a wager. Odell v. Legal Bucks, LLC, 192 N.C. App. 298, 665 S.E.2d 767, 2008 N.C. App. LEXIS 1619 (2008).
§ 16-2. Players and betters competent witnesses.
No person shall be excused or incapacitated from confessing or testifying touching any money or property, or thing in action, so wagered, bet or staked, or lent for such purpose, by reason of his having won, played, bet or staked upon any game, lot or chance, casualty, or unknown or contingent event aforesaid; but the confession or testimony of such person shall not be used against him, in any criminal prosecution, on account of such betting, wagering or staking.
History. R.C., c. 51, s. 3; Code, s. 2843; Rev., s. 1688; C.S., s. 2143.
As to rule of evidence generally that defendant is not compellable to testify, see G.S. 8-54 .
As to exception with reference to testimony as to gambling, etc., see also G.S. 8-55 .
Article 2. Contracts for “Futures”.
§ 16-3. Certain contracts as to “futures” void.
Every contract, whether in writing or not, whereby any person shall agree to sell and deliver any cotton, Indian corn, wheat, rye, oats, tobacco, meal, lard, bacon, salt pork, salt fish, beef, cattle, sugar, coffee, stocks, bonds, and chooses in action, at a place and at a time specified and agreed upon therein, to any other person, whether the person to whom such article is so agreed to be sold and delivered shall be a party to such contract or not, when, in fact, and notwithstanding the terms expressed of such contract, it is not intended by the parties thereto that the articles or things so agreed to be sold and delivered shall be actually delivered, or the value thereof paid, but it is intended and understood by them that money or other thing of value shall be paid to the one party by the other, or to a third party, the party to whom such payment of money or other thing of value shall be made to depend, and the amount of such money or other thing of value so to be paid to depend upon whether the market price or value of the article so agreed to be sold and delivered is greater or less at the time and place so specified than the price stipulated to be paid and received for the articles so to be sold and delivered, and every contract commonly called “futures” as to the several articles and things hereinbefore specified, or any of them, by whatever other name called, and every contract as to the said several articles and things, or any of them, whereby the parties thereto contemplate and intend no real transaction as to the article or thing agreed to be delivered, but only the payment of a sum of money or other thing of value, such payment and the amount thereof and the person to whom the same is to be paid to depend on whether or not the market price or value is greater or less than the price so agreed to be paid for the said article or thing at the time and place specified in such contract, shall be utterly null and void; and no action shall be maintained in any court to enforce any such contract, whether the same was made in or out of the State, or partly in and partly out of this State, and whether made by the parties thereto by themselves or by or through their agents, immediately or mediately; nor shall any party to any such contract, or any agent of any such party, directly or remotely connected with any such contract in any way whatever, have or maintain any action or cause of action on account of any money or other thing of value paid or advanced or hypothecated by him or them in connection with or on account of such contract and agency; nor shall the courts of this State have any jurisdiction to entertain any suit or action brought upon a judgment based upon any such contract. This section shall not be construed so as to apply to any person, firm or corporation, or his or their agents, engaged in the business of manufacturing or wholesale merchandising in the purchase and/or sale of the necessary commodities required in the ordinary course of their business; nor shall this section be construed so as to apply to any contract with respect to the purchase and/or sale for future delivery of any of the articles or things mentioned and referred to in this section, where such purchase and/or sale is made on any exchange on which any such article or things are regularly bought and sold, or contracts therefor regularly entered into, and the rules and regulations of such exchange are such that either party to such contract may require delivery thereof: Provided, such contract is made in accordance with such rules and regulations.
In addition, this Article shall not apply to any person, firm, corporation, or other entity, either as principal or agent, or to any contract, that is excluded or exempted under the Commodity Exchange Act, as provided in section 16(e)(2) of the Commodity Exchange Act, 7 U.S.C. § 16(e)(2), and, accordingly, each section of this Article shall be considered a “law that regulates or prohibits the operation of bucket shops” within the meaning of section 16(e)(2) of the Commodity Exchange Act.
History. 1889, c. 221, s. 1; 1905, c. 538, s. 7; Rev., s. 1689; 1909, c. 853, s. 1; C.S., s. 2144; 1931, c. 236, s. 1; 2001-110, s. 1.
For note on Cody v. Hovey, 217 N.C. 407 , 8 S.E.2d 479 (1940), see 18 N.C.L. Rev. 224 (1940).
Section Constitutional. —
This section is in furtherance of the declared public policy of North Carolina, and is constitutional and valid. Garseed v. Sternberger, 135 N.C. 501 , 47 S.E. 603, 1904 N.C. LEXIS 59 (1904); State v. McGinnis, 138 N.C. 724 , 51 S.E. 50, 1905 N.C. LEXIS 320 (1905); State v. Clayton, 138 N.C. 732 , 60 S.E. 866 (1905); Rankin v. Mitchem, 141 N.C. 277 , 53 S.E. 854, 1906 N.C. LEXIS 100 (1906); Randolph v. Heath, 171 N.C. 383 , 88 S.E. 731, 1916 N.C. LEXIS 90 (1916).
The legislature can, in the exercise of the police power, prescribe when and under what circumstances and as to what offenses a certain act shall be prima facie evidence. Therefore, a provision that the purchase of commodities upon margin under certain circumstances shall raise a prima facie case that such purchases were void, and other circumstances shall not constitute such prima facie evidence, is not a discrimination forbidden by U.S. Const., Amend. 14. State v. McGinnis, 138 N.C. 724 , 51 S.E. 50, 1905 N.C. LEXIS 320 (1905) (decided under former § 2145 of the Consolidated Statutes).
Not Contrary to Federal Constitution. —
When, in an action pending in the courts of this State to recover on a judgment in a sister state, the legislature amended this section by adding thereto: “nor shall the courts of this State have any jurisdiction to entertain any suit or action brought upon a judgment based upon any such contract,” there can be no valid objection to such legislation on the ground that it impairs the obligation of contracts, and it would seem that no such objection can be made under U.S. Const., Art. IV, § 1 and 2, “the full faith and credit clause,” if it is admitted or clearly appears that the judgment sued on was rendered on a transaction expressly forbidden by the statute on gaming, and that the question was not raised, investigated, or determined in the courts of the state in which the judgment was originally rendered. Mottu v. Davis, 151 N.C. 237 , 65 S.E. 969, 1909 N.C. LEXIS 239 (1909).
The North Carolina statutes prohibiting gambling in futures and denying jurisdiction of the courts to suits on judgments based upon such contracts have been upheld as constituting an exception to the application of the full faith and credit clause of the Constitution, on the ground that the State had not provided a court with jurisdiction to entertain suit on such a judgment though properly rendered in another state. Lockman v. Lockman, 220 N.C. 95 , 16 S.E.2d 670, 1941 N.C. LEXIS 483 (1941).
Section within Police Power. —
This section, forbidding the business of running a “bucket shop,” is clearly within the police power of the State. State v. McGinnis, 138 N.C. 724 , 51 S.E. 50, 1905 N.C. LEXIS 320 (1905).
History of Section. —
The act defining and declaring contracts in “futures” unlawful was passed in 1889, Chapter 221. In 1905, Chapter 538, the legislature enacted a law to suppress what is known, in popular phrase, as “bucket shops,” and, having provided for this in G.S. 1 and 2, the statute contains several additional sections relating to the statute of 1889, all of them having reference to the mode or quantum of proof which should be required in enforcement of that act. The law of 1905 then, in its closing section, provided: “This act shall not be construed so as to apply to any person, firm, or corporation, etc.” This is the first time these words appear in legislation of the State on this subject, and, so far as they had reference to the law of 1889, it is clear the legislature, in the original statutes, only intended that they should affect questions of proof. See Rodgers, McCabe & Co. v. Bell, 156 N.C. 378 , 72 S.E. 817, 1911 N.C. LEXIS 190 (1911).
Intent of last sentence of present first paragraph. —
The last sentence of the present first paragraph was inserted “unnecessarily and out of abundance of caution” — and it does not confer any exclusive right or privilege upon manufacturers or wholesale merchants; nor does it authorize them to engage in any business prohibited by the section. It simply provides that the courts shall not construe the section to have the effect of preventing them from buying and selling for future delivery the necessary commodities required in their ordinary business. See State v. McGinnis, 138 N.C. 724 , 51 S.E. 50, 1905 N.C. LEXIS 320 (1905); State v. Clayton, 138 N.C. 732 , 50 S.E. 866, 1905 N.C. LEXIS 321 (1905); Rodgers, McCabe & Co. v. Bell, 156 N.C. 378 , 72 S.E. 817, 1911 N.C. LEXIS 190 (1911).
The 1931 act amended the “Bucket Shop Act” of 1889, now this section, so as to exempt contracts with respect to purchase or sale where they are made in accordance with the regulations of any exchange, and where the rules of the exchange permit either party to require delivery. It was intended to remove the ban of illegality from transactions on legitimate exchanges, as distinguished from “an establishment nominally for the transaction of a stock exchange business, or business of a similar character, but really for the registration of lots or wagers, usually for small amounts, on the rise or fall of stock, grain, etc., there being no transfer or delivery of the stocks or things dealt with.” Gatewood v. North Carolina, 203 U.S. 531, 27 S. Ct. 167, 51 L. Ed. 305, 1906 U.S. LEXIS 1619 (1906).
This section clearly defines what is an illegal contract where there is no real sale, but merely an agreement for an adjustment upon the basis of differences in the prices of the commodity at the time fixed. Orvis Bros. & Co. v. Holt-Morgan Mills, 173 N.C. 231 , 91 S.E. 948, 1917 N.C. LEXIS 280 (1917).
Example of “Margin”. —
A payment made on account by a customer to a stockbroker, under an agreement between the customer and the stockbroker in which the stockbroker agreed either to sell or to buy from the customer a certain number of shares of stock, but under which, in fact, no delivery or transfer of shares was contemplated, is known in stockbroker’s parlance as a “margin.” West v. Satterfield, 190 N.C. 89 , 129 S.E. 177, 1925 N.C. LEXIS 14 (1925); McClain v. Fleshman, 106 F. 880, 1901 U.S. App. LEXIS 3632 (3d Cir. 1901) (decided under former § 2145 of the Consolidated Statutes).
“Bucket Shop” Defined. —
A “bucket shop” has been defined as “an establishment nominally for the transaction of a stock exchange business, or business of a similar character, but really for the registration of lots or wagers, usually for small amounts, on the rise or fall of stock, grain, etc., there being no transfer or delivery of the stocks or things dealt with.” Gatewood v. North Carolina, 203 U.S. 531, 27 S. Ct. 167, 51 L. Ed. 305, 1906 U.S. LEXIS 1619 (1906).
For other definitions, see State v. McGinnis, 138 N.C. 724 , 51 S.E. 50, 1905 N.C. LEXIS 320 (1905).
Test of Validity under Section. —
The test of the validity of a contract for “futures” which this section requires is the “intention not to actually deliver” the articles bought or sold for future delivery. No matter how explicit the words in any contract which may require a delivery, if in fact there is no intention to deliver, but the real understanding is that on the stipulated date the losing party shall pay to the other the difference between the market price and the contract price, this is a gambling contract. State v. Clayton, 138 N.C. 732 , 50 S.E. 866, 1905 N.C. LEXIS 321 (1905); Rodgers, McCabe & Co. v. Bell, 156 N.C. 378 , 72 S.E. 817, 1911 N.C. LEXIS 190 (1911).
When there is no real transaction, no real contract for purchase or sale, but only a wager upon the rise or fall of the price of stock, or an article of merchandise in the exchange or market, one party agreeing to pay, if there is a rise, and the other party agreeing to pay if there is a fall in price, the agreement is a pure wager. No business is done — nothing is bought or sold or contracted for, there is only a bet. Orvis Bros. & Co. v. Holt-Morgan Mills, 173 N.C. 231 , 91 S.E. 948, 1917 N.C. LEXIS 280 (1917).
Purchase and Sale on Margin. —
This section does not render void a contract for the purchase and sale of stocks on margin when actual delivery of the stocks is made to the purchaser or to his agent, and the stocks are paid for in whole or in part. Cody v. Hovey, 216 N.C. 391 , 5 S.E.2d 165, 1939 N.C. LEXIS 175 (1939).
Intention of Parties. —
The true test of validity of a contract for future delivery is whether it can be settled only in money and in no other way, or whether the party selling can tender and compel acceptance of the particular commodity sold or the party buying can 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. Williams v. Carr, 80 N.C. 294 , 80 N.C. 295 , 1879 N.C. LEXIS 75 (1879); State v. McGinnis, 138 N.C. 724 , 51 S.E. 50, 1905 N.C. LEXIS 320 (1905); State v. Clayton, 138 N.C. 732 , 50 S.E. 866, 1905 N.C. LEXIS 321 (1905); West v. Satterfield, 190 N.C. 89 , 129 S.E. 177, 1925 N.C. LEXIS 14 (1925).
The contract, by its terms, not disclosing any gambling element, the matter is to be settled by ascertaining the true underlying purpose of the parties. Was it in the intention of both parties that the cotton should not be delivered, and did they conceal in the deceptive terms of a fair and lawful contract, a gambling agreement, by which they contemplated no real transaction as to the article contracted to be delivered? Rankin v. Mitchem, 141 N.C. 277 , 53 S.E. 854, 1906 N.C. LEXIS 100 (1906); Burns v. Tomlinson, 147 N.C. 645 , 61 S.E. 614, 1908 N.C. LEXIS 118 (1908); G.G. Edgerton & Son v. J.T. Edgerton & Bros., 153 N.C. 167 , 69 S.E. 53, 1910 N.C. LEXIS 43 (1910); Harvey v. Pettaway, 156 N.C. 375 , 72 S.E. 364, 1911 N.C. LEXIS 189 (1911); Rodgers, McCabe & Co. v. Bell, 156 N.C. 378 , 72 S.E. 817, 1911 N.C. LEXIS 190 (1911); Hold v. Wellons, 163 N.C. 124 , 79 S.E. 450, 1913 N.C. LEXIS 132 (1913).
The intent of the parties that the merchandise contracted for should not be actually delivered is the cardinal element of a “futures” contract made illegal by this section and the courts will disregard the form and ascertain whether the intent of the parties was to speculate in the rise and fall of the price of the commodity. Fenner v. Tucker, 213 N.C. 419 , 196 S.E. 357, 1938 N.C. LEXIS 104 (1938).
Both Parties Must Have Intent. —
It was never held that when an innocent party had made a contract valid in its terms, his rights acquired thereunder should be denied him by reason of an undisclosed purpose or intent of the other. To avoid the contract the vitiating purpose or understanding must be shared in by both. Rodgers, McCabe & Co. v. Bell, 156 N.C. 378 , 72 S.E. 817, 1911 N.C. LEXIS 190 (1911).
Parties to Contract. —
The owner of a draft which he knows to have been given in the unlawful purchase of cotton futures, or in maintaining or purchasing margins in contracts of that character, is a party to the prohibited contract, the consideration is illegal and he cannot recover from the payee in his action on the draft. Burrus v. Witcover, 158 N.C. 384 , 74 S.E. 11, 1912 N.C. LEXIS 54 (1912).
Unauthorized Act of Agent. —
A bona fide wholesale dealer who sues upon a contract for the future delivery of cotton, which is resisted on the ground that the contract was a wagering one and void under the provisions of this section, is bound by the acts and statements of his agent in negotiating and closing the trade, to the effect that actual delivery was not contemplated or required; and the plaintiff may not recover on the contract merely because he was a bona fide wholesale dealer in cotton and only authorized his agent to make a contract for actual delivery, if the agent at the time entered into a contract with the vendor which was condemned by the statute as being a wagering one. Alex. Sprunt & Sons v. May, 156 N.C. 388 , 72 S.E. 821, 1911 N.C. LEXIS 191 (1911).
Agent’s Right to Recover. —
An agent for a principal to a contract made in violation of this section, as to “futures,” cannot recover for any loss he may have sustained on account thereof, as such act of agency would be in violation of G.S. 16-4 , making it a misdemeanor. Burns v. Tomlinson, 147 N.C. 645 , 61 S.E. 614, 1908 N.C. LEXIS 118 (1908).
Effect of Contract Made in Foreign State. —
An action upon a wagering or “future contract” in cotton cannot be maintained in this State, though entered into in another state where it is lawful. Burrus v. Witcover, 158 N.C. 384 , 74 S.E. 11, 1912 N.C. LEXIS 54 (1912).
Action upon judgment obtained in foreign state. See Cody v. Hovey, 217 N.C. 407 , 8 S.E.2d 479, 1940 N.C. LEXIS 251 (1940).
Subsequent Promise to Repay Is Void. —
A subsequent promise made by one of the contracting parties to the other to repay him for loss arising from a contract for “futures” is void. Burns v. Tomlinson, 147 N.C. 645 , 61 S.E. 614, 1908 N.C. LEXIS 118 (1908).
Contracts Held Void. —
Where the defendant has induced the plaintiff to purchase certain shares of stock, through himself, from his own broker, upon margin, the broker to carry the stock upon its hypothecation with him as collateral, and thereafter the defendant has his broker, unknown to the plaintiff, to sell the stock and place the proceeds to his own account, and uses the same and other moneys upon margin advanced from time to time by the plaintiff upon his representation that the price of this stock had decreased, it was held that the plaintiff may recover of the defendant in his action the moneys the defendant had thus converted to his own use; and this section, relating to gambling, etc., is not available to the defendant as a defense. Gladstone v. Swain, 187 N.C. 712 , 122 S.E. 755, 1924 N.C. LEXIS 384 (1924).
A note given for margins upon an illegal contract for cotton futures, without intention of delivery of the cotton, cannot be collected by suit in the courts of North Carolina and the promisor’s repeated promise to pay it cannot impart any validity to it. Garseed v. Sternberger, 135 N.C. 501 , 47 S.E. 603, 1904 N.C. LEXIS 59 (1904); Burns v. Tomlinson, 147 N.C. 645 , 61 S.E. 614, 1908 N.C. LEXIS 118 (1908); Burrus v. Witcover, 158 N.C. 384 , 74 S.E. 11, 1912 N.C. LEXIS 54 (1912); Cobb Bros. & Co. v. Guthrie, 160 N.C. 313 , 76 S.E. 81, 1912 N.C. LEXIS 161 (1912); Orvis Bros. & Co. v. Holt-Morgan Mills, 173 N.C. 231 , 91 S.E. 948, 1917 N.C. LEXIS 280 (1917).
Where there is evidence that contracts set up by certain defendants in an action by the receiver of a brokerage business were founded upon speculation and based upon “margins,” and that no actual delivery of the stock was intended by the parties, the evidence is sufficient to support a finding that the contracts were void under this section and the finding is as conclusive as the verdict of a jury, and the judgment that such contracts were absolutely void will be sustained. Martin v. Bush, 199 N.C. 93 , 154 S.E. 43, 1930 N.C. LEXIS 63 (1930).
A contract for “cotton futures” in which no actual delivery is intended or contemplated is void and no action may be maintained thereon. Bodie v. Horn, 211 N.C. 397 , 190 S.E. 236, 1937 N.C. LEXIS 105 (1937).
II.Practice and Procedure
Burden of Proof. —
Where in an action by an assignee and trustee under G.S. 23-1 , et seq., it is alleged that one of the defendants was a partner in the business of the assignor and liable for the debts of the firm, and the other defendants admit this allegation and set up and seek to recover of the plaintiff and the alleged partner on contract with the assignor, the alleged partner is a defendant in the action on the contracts and her answer setting up the defense that the contracts were void under this section, as gambling contracts, places the burden on the other defendants to prove that the contracts were lawful. Martin v. Bush, 199 N.C. 93 , 154 S.E. 43, 1930 N.C. LEXIS 63 (1930).
When the defendant pleads in a verified answer that a contract, the subject of suit, for buying and selling cotton was void for being one for “futures,” the burden of proof is upon the plaintiff to show that it was a lawful one, i.e., that actual delivery was intended by the parties, and not merely that either had the privilege of calling therefor. Burns v. Tomlinson, 147 N.C. 645 , 61 S.E. 614, 1908 N.C. LEXIS 118 (1908) (decided under former § 2146 of the Consolidated Statutes).
Burden Not upon Administrator. —
Where an administrator paid certain notes and it was later alleged by the legatees that the notes were given for a gambling contract which should not have been paid, the burden of proving that the notes were given for a valid contract was not upon the administrator. Overman v. Lanier, 157 N.C. 544 , 73 S.E. 192, 1911 N.C. LEXIS 87 (1911) (decided under former § 2146 of the Consolidated Statutes).
Parol Evidence. —
The section, rendering void and unenforceable a contract for the sale of futures upon margin covered by the purchaser, that does not contemplate the delivery of the thing bargained for, but only a payment to be made for the loss incurred or a profit to be received in accordance with the fall or rise of the market, looks to the substance of the contract and not to its form, and parol evidence is competent to show the intention of the parties entering therein. West v. Satterfield, 190 N.C. 89 , 129 S.E. 177, 1925 N.C. LEXIS 14 (1925).
Evidence Sufficient. —
The purchaser makes out a prima facie case upon evidence that the contract was founded upon a gambling or wagering consideration in violation of this section. West v. Satterfield, 190 N.C. 89 , 129 S.E. 177, 1925 N.C. LEXIS 14 (1925) (decided under former § 2145 of the Consolidated Statutes).
Where the plaintiff himself testified that he did not buy certain cotton in the ordinary course of his business as a cotton manufacturer for use in his mill, this was prima facie a “future contract.” Burns v. Tomlinson, 147 N.C. 634 , 61 S.E. 615, 1908 N.C. LEXIS 114 (1908) (decided under former § 2145 of the Consolidated Statutes).
When Jury Question Presented. —
Where the contract is not a gambling one on its face the underlying purpose and intent of the parties should be left to the jury. Harvey v. Pettaway, 156 N.C. 375 , 72 S.E. 364, 1911 N.C. LEXIS 189 (1911).
Where there was evidence offered by the plaintiffs tending to show that they were wholesale dealers in cotton as a commodity, and that they purchased certain cotton as a commodity and sold it to manufacturers and exporters, and dealt in actual spot cotton and were in no wise dealers in futures, they were entitled to have this issue submitted to a jury. Eure v. Sabiston, 195 F. 721, 1912 U.S. App. LEXIS 1424 (4th Cir. 1912).
Upon conflicting evidence as to whether or not the contract is a gambling contract, it becomes a question for the jury under proper instructions from the court. West v. Satterfield, 190 N.C. 89 , 129 S.E. 177, 1925 N.C. LEXIS 14 (1925) (decided under former § 2146 of the Consolidated Statutes).
Judgment by Default Void. —
A judgment rendered by default of an answer upon notes regular and valid upon their face, but growing out of transactions in cotton futures made void by this section which also declares that actions thereon may not be maintained in the courts of this State, will be set aside as utterly void, irrespective of whether it was obtained through excusable neglect, etc. Randolph v. Heath, 171 N.C. 383 , 88 S.E. 731, 1916 N.C. LEXIS 90 (1916).
§ 16-4. Entering into or aiding contract for “futures” misdemeanor.
If any person shall become a party to any contract declared void in this Article; or if any person shall be the agent, directly or indirectly, of any party in making or furthering or effectuating the same; or if any agent or officer of a corporation shall in any manner knowingly aid in making or furthering any such contract to which the corporation is a party, he shall be guilty of a Class 1 misdemeanor.
If any person shall, while in this State, consent to become a party to any such contract made in another state, and if any person shall, as agent of any person or corporation, become a party to any such contract made in another state, or in this State do any act or in any way aid in the making or furthering of any such contract so made in another state, he shall be guilty of a Class 1 misdemeanor.
History. 1889, c. 221, ss. 3, 4; Rev., ss. 3823, 3824; C.S., s. 2147; 1993, c. 539, s. 304; 1994, Ex. Sess., c. 24, s. 14(c).
This Section Is Constitutional. —
Garseed v. Sternberger, 135 N.C. 501 , 47 S.E. 603, 1904 N.C. LEXIS 59 (1904); State v. McGinnis, 138 N.C. 724 , 51 S.E. 50, 1905 N.C. LEXIS 320 (1905); State v. Clayton, 138 N.C. 732 , 50 S.E. 866, 1905 N.C. LEXIS 321 (1905); Rankin v. Mitchem, 141 N.C. 277 , 53 S.E. 854, 1906 N.C. LEXIS 100 (1906); Randolph v. Heath, 171 N.C. 383 , 88 S.E. 731, 1916 N.C. LEXIS 90 (1916).
§ 16-5. Opening office for sales of “futures” misdemeanor.
If any person, corporation or other association of persons, either as principal or agent, shall establish or open an office or place of business in this State for the purpose of carrying on or engaging in making such contracts as are forbidden in this Article, he shall be guilty of a Class 1 misdemeanor.
History. 1905, c. 538, ss. 1, 2; Rev., s. 3825; C.S., s. 2148; 1993, c. 539, s. 305; 1994, Ex. Sess., c. 24, s. 14(c).
§ 16-6. Evidence in prosecutions under this Article.
No person shall be excused on any prosecution under the provisions of this Article from testifying touching anything done by himself or others contrary to the provisions thereof, but no discovery made by the witness upon such examination shall be used against him in any penal or criminal prosecution, and he shall be altogether pardoned of the offense so done or participated in by him. In all such prosecutions proof that the defendant was a party to a contract, as agent or principal, to sell and deliver any article, thing or property specified or named in this Article, or that he was the agent, directly or indirectly, of any party in making, furthering or effectuating the same, or that he was the agent or officer of any corporation or association or person in making, furthering or effectuating the same, and that the article, thing or property agreed to be sold and delivered was not actually delivered, and that settlement was made or agreed to be made upon the difference in value of said article, thing or property, shall constitute against such defendant prima facie evidence of guilt. Proof that any person, corporation or other association of persons, either as principal or agent, has established an office or place where are posted or published from information received the fluctuating prices of grain, cotton, provisions, stocks, bonds and other commodities, or of any one or more of the same, shall constitute prima facie evidence of being guilty of violating the provisions of this Article.
History. 1905, c. 538, ss. 3, 4, 5; Rev., s. 3826; C.S., s. 2149.