Beane v. Calhoun
| Decision Date | 04 December 1937 |
| Docket Number | No. 26367.,26367. |
| Citation | 194 S.E. 51,56 Ga.App. 823 |
| Parties | FENNER & BEANE. v. CALHOUN. |
| Court | Georgia Court of Appeals |
Syllabus by the Court.
The verdict in favor of the plaintiff was demanded by the evidence. The special grounds of the motion for new trial were without merit. Therefore the grant of a new trial, although the first grant, was error.
Error from Superior Court, Tift County; R. Eve, Judge.
Suit by Fenner & Beane against B. R. Calhoun. A verdict was directed for plaintiff, defendant's motion for a new trial was granted, and plaintiff brings error.
Reversed.
R. D. Smith, of Tifton, and Johnston & Jones, and Jones, Russell & Sparks, all of Macon; for plaintiff in error.
Steve F. Mitchell, of Tifton, for defendant in error.
Fenner & Beane, cotton brokers, sued B. R. Calhoun, on an open account, for the principal sum of $444.94, besides interest at the rate of 7 per cent. per annum from March 11, 1935, and a sworn itemized statement of the account was attached to the petition. The defendant pleaded that the suit was based on a "cotton-future" contract entered into by him and the plaintiff, upon margins, and that there was no bona fide intention of either of the parties that such cotton should actually be delivered, but the intention was that, at the time of settlement of such contract, settlement was to be made according to the market price of the cotton in question; and that such contract wasa gaming contract, unlawful under the laws of Georgia, and that plaintiff is not entitled to recover the amount sued for. Defendant further pleaded "that on two previous occasions, to wit: July 19, 1934, and September 20, 1934, contracts of this defendant, the former contract of 100 bales, having been bought at 13.22¢ per pound, was sold August 8, 1934, for 13.75¢ leaving this defendant a credit of $232.93; and, on the latter occasion above-mentioned, the contract was bought for 10.28¢ and sold for 10.07¢, a net loss of this defendant of $137.55, and there never was any delivery of cotton actually made or intended to be made." After the introduction of evidence by both parties, the court, on motion of the plaintiff, directed a verdict in favor of the plaintiff for the sum of $381.58 as principal, and $46.70 as interest. Subsequently, the defendant's motion for a new trial was granted, and the plaintiff excepted. There is no issue as to the amount of the directed verdict, the sole question (except as to the admissibility of certain evidence introduced by the plaintiff) being: Was a verdict for the plaintiff demanded by the evidence? This case involves a marginal contract for the future delivery of cotton. Under the act of 1929, p. 245 (), such a contract is valid and enforceable, if made in accordance with the rules of any board of trade, exchange, or similar institution, and actually executed on the floor of such institution according to its rules, and where the contract is placed with or through a regular member in good standing of a cotton exchange, or similar institution, organized under the laws of this state or any other state; provided, that a contract of sale for future delivery of cotton must also be made subject to the provisions of the United States Cotton Futures Act approved August 11, 1916, and any amendments thereto (26 U.S.C.A. §§ 1090-1106, 1699). Under the act, such a contract becomes unlawful only where the parties thereto do not contemplate' an actual delivery of the cotton sold or bought, but intend to settle upon the basis of the public market quotations made on any exchange, without having any actual bona fide delivery, and without the carrying out of such contract on the floor of such exchange.
Prior to the passage of the act of 1929 (page 245), the statute (act of 1906, p. 95) merely declared that any contract for the purchase or sale of any commodity on mar gin, when in fact it was not in good faith intended that an actual delivery be made, was unlawful. As before stated, the statute now in force was passed in 1929, and we have been unable to find any decision of the Supreme Court or of this court construing it. However, the statute in force prior to that act has been interpreted by both of our appellate courts, and the two statutes are sufficiently similar to make the hereinafter stated interpretations of the prior statute applicable to the construction of the latter one. Both of our appellate courts have held that, under the provisions of the act of 1906, the party pleading the invalidity of the contract has the burden of proving its invalidity, and must show that it was the intention of both parties to the contract that the goods were not to be actually delivered. Forsyth Mfg. Co. v. Cast-len, 112 Ga. 199(2), 37 S.E. 485, 81 Am. St.Rep. 28; Robson v. Weil & Co., 142 Ga. 429(2), 83 S.E. 207; Anderson v. Cava-naugh & Bearden, 16 Ga.App. 446(7), 85 S.E. 606.
The foregoing rulings as to the burden of proof being cast upon the party pleading the invalidity of the contract, and that he must show that it was the intention of both parties not to have any actual delivery of the goods, are applicable to the act of 1929, and are controlling in the instant case. There are also decisions to the same effect from other states, and from the federal courts, construing substantially similar statutes and contracts. Bibb v. Allen, 149 U.S. 481, 492, 13 S.Ct. 950, 954, 37 L.Ed. 819; Irwin v. Williar, 110 U.S. 499, 4 S.Ct. 160, 28 L.Ed. 225; Gettys v. Newburger 272 F. 209, 211 (7, 8); Jacobs v. Hy-man (CCA.) 286 F. 346(2).
The case of James v. Clement (CCA.) 223 F. 385, cited by counsel for Calhoun, while a Georgia case, was decided before the passage of the act of 1929. Furthermore, the customer in that case testified that he did not intend to accept delivery of the cotton, and so told the broker. The broker denied that he had been so told. That conflict in the evidence raised an issue of fact, and the question was properly submitted to the jury. In the instant case there was no such conflict in the evidence and no issueof fact for the jury to determine. Also, in that case, the evidence showed that the cotton was not sold for the customer's account by an actual sale to a third person on the floor of an organized exchange.
The case of Arthur v. State, 146 Ga. 827, 92 S.E. 637, cited by Calhoun's counsel, was a criminal action against a broker for the violation of section 403 of the Penal Code (1910), which made it unlawful, under the act of 1906, for any one to engage in the business commonly called "dealing in futures on margins."
Under the act of 1929, such dealing is not unlawful. In Fenner & Beane v. Holt (C. C.A.) 2 F.2d 253, also cited by counsel for Calhoun, the customer testified, in effect, that he had no intention of accepting a delivery of the cotton and that the broker knew of that intention. In addition, there was other evidence of an understanding by both parties that the contract was to be settled before the delivery date on the difference in the market price; and, moreover, the case originated in Georgia and was decided before the passage of the act of 1929.
In the instant case the undisputed evidence showed the following facts: On November 24, 1934, Calhoun had a pending contract with Fenner & Beane for the purchase of 100 bales of cotton for December delivery. On the same day Calhoun orally notified the Macon, Ga., office of Fenner & Beane to sell the cotton and buy for him 200 bales of cotton for July delivery. Nothing was said at the time by either of the parties as to whether actual delivery of the cotton was contemplated. On the same date Fenner & Beane, through its New York agent, a member in good standing of the New York Cotton Exchange, sold the 100 bales which Calhoun had bought for December delivery, and purchased 200 bales for July delivery from Anderson, Clayton & Fleming, the cotton being bought on the floor of the New York Cotton Exchange, and subject to the by-laws, rules, and conditions of said exchange and to the United States Cotton Futures Act. On the same day Fenner & Beane, through its New Orleans office, mailed a statement of said purchase to Calhoun at Macon, Ga., which was received and kept by him. The statement informed Calhoun of the purchase of the 200 bales of cotton for July delivery, subject to the rules, etc., as above stated. The statement also contained the following provision: "All orders for the purchase and sale of cotton are received and executed with the distinct understanding that actual delivery is contemplated in accordance with the requirements of the United States Cotton Futures Act (section 5 [26 U.S.C.A. § 1092 (a, b)]), and that the party giving the order so understands and agrees." Calhoun was also notified in the statement that, on all marginal trades, Fenner & Beane reserved the right to sell, without notice, contracts when the margins were exhausted. Calhoun did not protest any of the provisions in the statement received by him, and was silent as to any contrary intention on his part.
On March 11, 1935, prior to the delivery date, Calhoun's margin was exhausted, and Fenner & Beane sold the cotton at a loss to Calhoun of $444.94, the sale being made by the New York agent of Fenner & Beane on the floor of the New York Cotton Exchange and subject to the by-laws, rules, and conditions of said exchange and of the United States Cotton Futures Act. The rule of the New York Cotton Exchange which governed the purchase and sale of this cotton is as follows: ...
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