110 U.S. 499 (1884), Irwin v. Williar

Citation:110 U.S. 499, 4 S.Ct. 160, 28 L.Ed. 225
Party Name:IRWIN v. WILLIAR and another.
Case Date:March 03, 1884
Court:United States Supreme Court
 
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Page 499

110 U.S. 499 (1884)

4 S.Ct. 160, 28 L.Ed. 225

IRWIN

v.

WILLIAR and another.

United States Supreme Court.

March 3, 1884

In Error to the Circuit Court of the United States for the District of Indiana.

COUNSEL

[4 S.Ct. 160] John M. Butler, for plaintiff in error.

W. D. Davidge, T. A. Hendricks, and C. Baker, for defendants in error.

OPINION

MATTHEWS, J.

The defendants in error were plaintiffs below, and brought this action against the plaintiff in error, as surviving partner of the firm of Irwin & Davis, to recover a balance alleged to be due, growing out of certain sales of wheat for future delivery, claimed to have been made by the defendants [4 S.Ct. 161] in error for the firm of Irwin & Davis upon their order. The liability of the plaintiff in error was denied on two grounds: (1) That the transactions

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were made by Davis, the deceased partner, without the knowledge, assent, or authority of the plaintiff in error, and were not within the scope of the partnership business; and (2) that the sales were wagering contracts and void.

It appears from the bill of exceptions that there was evidence on the trial tending to prove the following state of fact: Irwin, the plaintiff in error, and Davis, who died in October, 1877, became partners in 1872 in the ownership and operation of a flouring-mill and appurtenances at Brazil, Clay county, Indiana. Their contract of partnership contemplated the buying of grain--both wheat and corn--and its manufacture into flour and meal, and the sale of such grain as might accumulate in excess of that required for manufacturing; and did not contemplate, as between themselves, the buying and selling of grain in large quantities for speculation. The capacity of the mill did not exceed 60 barrels of flour per day; its average manufacture was 30. The working capital of the firm varied from $2,000 to $4,000. Irwin resided at Butler, in Pennsylvania, and visited Brazil rarely. Appurtenant to the mill was a warehouse for the storage of grain, equipped with appliances for loading and unloading grain, in bulk, into and from railroad cars. Soon after the formation of the partnership, and as part of its business, Davis, in its name, began and continued to ship corn and oats to Indianapolis, and corn and flour to Baltimore, for sale and immediate delivery, in consignments not exceeding $1,000 each in value, and in the year 1875 several such consignments had been made to the defendants in error at Baltimore for sale on account of the firm by Davis. In all their business correspondence, including that with the defendants in error, who were commission merchants and grain brokers in Baltimore, the cards and letter-heads were as follows: 'Brazil Flouring-Mills; Irwin & Davis, millers and dealers in grain, Brazil, Ind.' This letter-head was used with the knowledge of Irwin, who, however, had no knowledge of any transaction by Davis, on account of the firm, in the purchase or sale of grain for future delivery. Prior to 1877, in point of fact, Davis had given no orders for the purchase of grain in Baltimore, or any eastern market, and during that year, in the

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months of July, August, and September, he shipped to defendants in error 31 car-loads of wheat, of about 380 bushels each, for sale, which was accounted for.

The transactions which form the subject of this suit were as follows: On July 12, 1877, Davis, by cipher telegrams and letters, gave an order to defendants in error to sell 20,000 bushels of wheat for delivery in August, and followed that up with similar orders until the last, on September 3d, a period of 53 days, making an aggregate of 30,000 bushels for delivery in August, 105,000 bushels in September, and 30,000 bushels in October,--in all, 165,000 bushels. These orders were reported by the defendants in error as executed at the prices named, amounting in gross to $251,794.84. At or before maturity these contracts of sale were settled by defendants in error on account of Davis & Irwin according to the custom of the corn and flour exchange in Baltimore, of which the former were members, at and through the members of which substantially all the business of buying and selling grain at that city was done. In these settlements the differences between the prices at which the wheat had been sold and those which the brokers would have been compelled to pay, or did pay, as the market prices, at the time of settlement, for wheat to deliver, or in fact delivered, in execution of the sales, amounted to $17,217.95, which was the balance sued for and recovered in this action. Davis did not consign or deliver to defendants in error any of the wheat so contracted to be sold on their account, although he had during the same period consigned other wheat to defendants in error, as above stated, but which, pursuant to orders given at the time, had been sold on arrival, but not applied [4 S.Ct. 162] on contracts of sale for future delivery. The defendants in error actually delivered on account of Davis & Irwin about 40,000 bushels of wheat on their contracts, which they purchased in open market for that purpose, but as to the rest, settled by paying the differences between the contract and market prices.

There was evidence tending to show that among the general usages and customs obtaining at Baltimore among grain commission merchants were the following, which were well known,

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and which had long existed and been uniformaly observed among the members of said corn and flour exchange and others engaged in the buying and selling of grain on commission at said city, viz.:

(1) That a commission merchant buying or selling grain upon the order of a customer for future delivery entered into such contract in his own name, thereby becoming personally responsible to the party with whom he contracted for the performance of the contract, the name of his principal being never, or but rarely, disclosed.

(2) That such commission merchant held himself and stood responsible to his principal or customer for the performance by the other party with whom he entered into such contract of purchase or sale of such contract, and for making good the contract to his principal in case of the insolvency or default from any cause of such other party.

(3) That purchases or sales to fill orders of customers are usually made on the floor of the corn and flour exchange, by open public offer to the members of the board there assembled. That when it so occurs as that a commission merchant, who upon the order of one customer has sold to (or vice versa purchased from) another commission merchant grain for a certain future delivery, and afterwards, upon the order of another customer, buys (or vice versa sells) a like amount of like grain for the same future delivery, from (or to) the same commission merchant, the two commission merchants, as between themselves, set off one contract against the other and mutually surrender or cancel them, settling between them the difference in price, each substituting on his books in the place and stead of the other the new or second customer, upon whose order he made the second purchase or sale. Thus, if commission merchant A., upon the order of his customer X., has sold grain for a designated future delivery to commission merchant B., and afterwards, upon the order of customer Y., buys like grain for like delivery from B., A. and B. adjust the difference, cancel their contracts, and surrender any margins that may have been put up by them, and in such case A. substitutes his second customer, Y., in placy of B., so that the grain he had sold on the

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order of X. would be delivered to Y. instead of to B.; A., standing as guarantor to Y. that X. will deliver the grain, and to X. that Y. will receive and pay for it, and that X. shall receive the full price at which the grain had been contracted to B.

(4) That where such second transaction is not with the same commission merchant with whom the first had occurred, but a different one, and it is found that a circuit of like contracts exists, by which commission merchant A. has sold grain to merchant B., who has sold like grain to C., who has made like sale to A., the commission merchants settle as among themselves by what is called a 'ring.' The parties in such case do not make successive deliveries until the grain comes round again to the commission merchant from whom it started, nor does each buyer pay the full amount of his purchase money...

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