Alex Hyman & Co. v. Hay

• Decision Date: 13 January 1922
• Docket Number: 3788.
• Citation: 277 F. 898
• Parties: ALEX HYMAN & CO. v. HAY.
• Court: U.S. Court of Appeals — Fifth Circuit

277 F. 898

ALEX HYMAN & CO. v. HAY.

No. 3788.

United States Court of Appeals, Fifth Circuit.

January 13, 1922

L. C Going, of Memphis, Tenn., for plaintiffs in error.

H. P Farish, of Greenville, Miss., for defendant in error.

Before WALKER, BRYAN, and KING, Circuit Judges.

BRYAN Circuit Judge.

This suit arose out of alleged purchases and sales of cotton for future delivery. Plaintiffs, who are plaintiffs in error here, are partners and members of the New Orleans Cotton Exchange. The declaration alleges that the defendant is indebted to the plaintiffs--

'in the sum of $4,665, being the balance he owes them for money which they expended and services which they performed for him and at his request in and about the purchase and sale of six hundred (600) bales of cotton, which they purchased and sold for him and at his instance and request upon the New Orleans Cotton Exchange and in accordance with its rules and regulations,' etc.

Defendant pleaded the general issue, and also interposed special pleas alleging that plaintiffs were seeking to recover for losses incurred by them on contracts for the purchase and sale of cotton for future delivery; that plaintiffs and defendant did not intend that cotton should be delivered and paid for, but intended only that one party should pay to the other the difference between the contract price and the market price when the time fixed for delivery arrived.

The constitution of the New Orleans Cotton Exchange, filed in evidence, among other things, provides that no contract shall be enforced by the Exchange except between members thereof that no contract shall be entered into between members with the stipulation or understanding that it is not to be fulfilled, and the cotton received or delivered, but contracts, alike except as to price, held by members of the Exchange against each other, are required to be closed out and canceled upon notice at any time before delivery; and that prior to or at the time of the signing of a contract either party thereto may be required to put up an original margin of from $1 to $5 for each bale of cotton bought or sold.

There was evidence that plaintiffs purchased cotton for defendant, to be delivered on the following dates and in the following quantities: December 9, 1916, 200 bales for March delivery; December 19, 1916, 200 bales for May delivery; February 21, 1917, 200 bales for July delivery; and May 18, 1917, 200 bales for July delivery-- and that they sold cotton for defendant, to be delivered on the following dates and in the following quantities; February 3, 1917, 400 bales for July delivery; February 21, 1917, 200 bales for March delivery; and May 18, 1917, 200 bales for May delivery.

Plaintiffs exchanged with other members of the Cotton Exchange bought and sold slips, according to which the purchases and sales just above mentioned were made, the obligation to receive or deliver cotton being 'subject to the by-laws, rules and conditions of the New Orleans Cotton Exchange,' etc. Such members are not represented to be acting as agents or brokers. No other names appear thereon, and it is not stated that the members are acting for undisclosed principals.

The purchases and sales in question were made by plaintiffs upon telegraphic requests from Kellner & Vincent, who also represented themselves to be agents or brokers for the purchase and sale of cotton for future delivery, at Greenville, Miss., near which place defendant resided. Telegrams, purporting to have been signed by defendant and authorizing purchases of cotton, were filed in evidence; but they were actually prepared and sent by Kellner & Vincent. In letters of the same date to defendant, plaintiffs acknowledged receipt of the orders through Kellner & Vincent.

It does not appear that all the sales were made upon orders given by defendant. As to the first order, that of February 3, 1917, plaintiffs offered in evidence a telegram, purporting to be from defendant, to sell 400 bales. In a letter of that date plaintiffs state:

'We beg to confirm telegrams exchanged to-day, resulting in transactions made for your account as per confirmation inclosed, for which we thank you, and have placed same through account of Messrs. Kellner & Vincent. Inasmuch as this hedges your contract, we presume that you desire the open orders which you have entered, to sell 200 May at 18.30 and 200 March at the same time, to be canceled, and have accordingly done so. If, however, this is not in accordance with your wishes, kindly advise us, and we will reinstate the order.'

The second sale was authorized by telegram from Kellner & Vincent reading:

'Sell two March and buy 2 July hedge account Hay.'

The manner in which the last sale was made is shown by a letter from plaintiffs, in which they state:

'We wrote Messrs. Kellner & Vincent regarding the 200 May long and 200 July short several days ago, so that they could see you and advise the taking out of this straddle. * * * We received a letter from them, in which they stated for us to use our own discretion in the covering of these contracts, and we accordingly covered this morning at a difference of 37 points, as per confirmation inclosed; after this they narrowed as low as 23, and close to-night at approximately 28 points,' etc.

After the transactions were over, plaintiffs wrote to defendant in an effort to secure the payment of their claim. In a letter of April 1, 1919, they stated:

'Referring to past correspondence in regard to the visit which our Mr. Hyman paid you some time ago, wherein it was his understanding that when you disposed of some of your spot cotton that you would make us some payments against your indebtedness, and you having further advised that you would take the matter up with Messrs. Kellner & Vincent, at Greenville, we understand that there has been some better demand of late, and no doubt you had some opportunities of disposing of some of your spot cotton, and will be in a position to make us substantial payments against your account. * * * As we have not heard from our mutual friends, Messrs. Kellner & Vincent, of late in regard to this matter, we are sending them a copy of this letter.'

And again, on June 3, 1919, plaintiffs wrote defendant a letter in which they state:

'You will no doubt recall that it was the understanding of our Mr. Hyman, when he saw you in person, that when you disposed of some of your spot cotton that you would make us some payments against your indebtedness, and you further advised that you would take the matter up with Messrs. Kellner & Vincent at Greenville, Miss.'

One of the plaintiffs testified that Kellner & Vincent were entitled to a share of the commissions, but that they were the agents of defendant, while defendant testified that Kellner & Vincent were the agents of plaintiffs. Vincent did not testify, but Kellner testified upon this point that he expected to be paid for his services by the plaintiffs. Defendant denied that he ordered any sales to be made, and claimed that the sales, if any, were made because of his failure to put up margins.

Plaintiffs reported on form letters to defendant, in which they gave accounts of the various transactions, merely stating the number of bales bought or sold, the month of delivery, and the price. Each of the letters contained the following paragraph:

'It is further understood that on all marginal business the right is reserved to close transactions when margins are running out, without further notice, and to settle contracts in accordance with the requirements of the United States Cotton Futures Act (section 5) and the rules and customs of the Exchange where orders are executed.'

Defendant was never informed who the parties were with whom it is claimed the contracts of purchase and sale were made. It is admitted that in the month of December, 1916, defendant in error made five payments, aggregating $4,000, on account of margins, and did not make any payments thereafter. March 26, 1917, plaintiffs wrote to defendant a letter which stated their claim as of that date, as follows:

'Inasmuch as March contracts expired before noon to-day, and you being 200 long and 200 short, we are compelled to render account sale of this transaction, and inclose you sale of 200 March, showing a loss of $2,610, which has been debited accordingly.'

The transactions between the parties were completed on May 18, 1917. In a letter of that date plaintiffs stated:

'We also inclose account sale covering 200 July which you were long and 200 short; this leaves your account a net debit of $4,665.'

In letters written from time to time, usually when they had occasion to acknowledge payments made to Kellner & Vincent plaintiffs advised defendant of market conditions. A letter of December 12, 1916, contained...