This action is brought to collect $6,070.03 on a somewhat unusual written contract of indemnity. Plaintiff contends it is a simple and straightforward contract; defendant argues it is the embodiment of an illegal and unenforcible gambling arrangement.
The dispute arises out of the ill-fated efforts of the parties, gripped by speculative fever, to cash in on the elusive "sure thing," and to create iron-clad guarantees to firm up the slippery grip of chance. Plaintiff was a patron of a gymnasium where defendant was employed as a masseur. In the course of their conversation which turned to stocks and investments, defendant mentioned that he was the owner of a very "hot" stock that was sure to score an impressive rise. So sure was he of this that he was willing to guarantee that if plaintiff purchased the stock he would suffer no losses. In exchange for disclosing the name of the stock, he wanted half of plaintiff's net profits.
Plaintiff who was not inexperienced in the ways of business insisted on an agreement in writing which he drew up and both parties signed. The document is remarkable in its stark and ingenuous simplicity and reads as follows:
This contract covers a stock purchase agreement between Al Manuel and V. Mitchell Liss.
Mr. Al Manuel knows of a stock which is expected to make a rise above its present market price. As a part of this agreement, he will supply the name of this stock to Mr. Liss.
Mr. Liss agrees to buy at least 100 shares of the stock within one to two days after the disclosure of the name of the stock. The contract will not apply to the purchase of more than 300 shares of the said stock.
Mr. Al Manuel agrees to re-imburse Mr. Liss if the stock is sold below the purchase price or to cover all of the losses resulting from the transaction. In return for the stock information and the agreement on the losses, Mr. Manuel is to receive 50% of the net profit from the sale of the stock after taxes and commission.
Mr. Manuel will establish the time to sell the stock. Unless a future agreement is reached to extend the time of this contract, the stock must be sold within one year. Thus a settlement of the loss or gain must be made within the year of the date of a purchase of a block of the stock. Mr. Manuel states he has 200 shares of the same stock with a Market value of approx. $60.00 per share, and he guarantees the losses that might be incurred by this contract with an equivalent amount of this stock or cash.
/s/ V. Mitchell Liss L. S.
Upon the signing of the agreement, defendant disclosed that the name of the stock was Western Equities, Inc., later changed to Westec Corporation, traded on the American Stock Exchange. Plaintiff then placed an order for 100 shares of the stock for which he paid $6,070.03.
The stock, instead of rising sharply, began to plunge. Defendant did not instruct the sale of the stock and plaintiff sat tight. Then, eight months after it was purchased, the Securities and Exchange Commission suspended all trading in the stock, and shortly thereafter a petition in bankruptcy was filed by Westec. Since the suspension, the stock has ...