Benton v. Singleton

• Decision Date: 04 February 1902
• Parties: BENTON et al. v. SINGLETON. SINGLETON v. BENTON et al.
• Court: Georgia Supreme Court

40 S.E. 811

114 Ga. 548

BENTON et al. v. SINGLETON.

SINGLETON v. BENTON et al.

Supreme Court of Georgia

February 4, 1902

Syllabus by the Court.

1. A claim arising out of an illegal transaction is not a legitimate subject-matter for submission to arbitrators, and an award founded thereon is a mere nullity.

2. The doctrine of comity of states cannot be invoked in aid of such an award.

3. The only legal remedy open to one who seeks to compel an agent to account for funds furnished him for an illegal purpose is an action in assumpsit to recover so much of the money as was not actually used by him in carrying such purpose into effect.

4. In no case will the supreme court undertake to pass upon questions presented by a bill of exceptions, when an adjudication of them, even though favorable to the plaintiff in error, could not possibly result in any practical benefit to him.

Error from superior court, Jasper county; Jno. C. Hart, Judge.

Action by T. W. Singleton against L. G. Benton & Bro. From the judgment both parties bring error. Judgment in the one case reversed. Writ of error in the other dismissed.

J. D Kilpatrick and Greene F. Johnson, for Benton & Bro. Turner F Johnson, contra.

LUMPKIN P.J.

An action was brought by T. W. Singleton against the firm of L G. Benton & Bro., the purpose of which was to enforce a common-law award, which, the plaintiff alleged, was the outcome of a voluntary submission to arbitration of "certain differences growing out of a transaction had between" himself and that firm with regard to the purchase, for his benefit, of "certain cotton in the city of New York." Attached as an exhibit to his petition was what purported to be a copy of a submission in writing covering the matters in controversy, and signed by himself and Benton & Bro. It disclosed the following state of facts: In February, 1899, Singleton placed in the hands of Benton & Bro. $265, with instructions to buy for his "account, through Latham, Alexander & Co., 100 bales of October cotton, as per contract of the New York Cotton Exchange." A purchase of 100 bales "at 6.11" was accordingly made. "To protect this contract, the $265 deposited with Benton & Bro. was to be used." Certain correspondence passed between Singleton and his brokers with regard to his placing in their hands an additional "margin" to meet a contemplated decline in the market price of cotton for October delivery, and he eventually sent them "thirty-five dollars, to be used as margins." This correspondence showed on its face that, acting through them, he was simply undertaking to speculate in "cotton futures." He gave them certain instructions with regard to conducting the speculation in his behalf, and the point in controversy was whether or not, in view of these instructions, they were authorized to have his "contract closed out at 5.54 on stop order," as they reported to him had been done. They agreed with Singleton to submit this controversy to Latham, Alexander & Co., of New York City, and to abide by such decision as that firm might render in the premises. There was also attached as an exhibit to the plaintiff's petition a copy of the award which he alleged had been rendered in his favor by Latham, Alexander & Co. The conclusion therein announced was "that Benton & Bro. had no right to sell out Singleton's cotton, because the price never declined to the stop-order limit, 5.54," and consequently they were liable to account to him not only for the $300 deposited with them as "margins," but also for the sum of $280, the amount of profits which he would have realized had not his brokers violated his instructions to them, inasmuch as "the average price of October contracts on September 26th (notice day) was 6.69," and Singleton "would probably have sold [his cotton] out, rather than take it and pay for it." A demurrer was filed by Benton & Bro., in which the point was made that "it appears from said petition and the exhibits made a part thereof that the matters submitted to arbitration" grew out of certain illegal transactions connected with the purchase and sale "of what is commonly called 'cotton futures"'; and, this being so, the alleged rights and equities of the parties with respect thereto could "not be legally made the subject of a submission, the award itself is void, and plaintiff cannot maintain his action thereon." The defendants also filed an answer, in which the illegality of the transactions referred to was alleged, and in which the defense was set up that for the reasons just stated the award sued upon was a nullity. To this answer the plaintiff demurred on the ground that the plea therein made came too late, the same not having "been submitted to the arbitrators before the award was made and published," and consequently the defendants were "estopped by the award from setting up this defense." After argument had upon the questions thus presented for determination, the trial judge ruled as follows: "The demurrer of the defendants to the petition of the plaintiff, as far as the cause relates to the collection by suit on award of profits on the cotton contract, is sustained, and overruled as to the collection of the margins awarded, viz., three hundred dollars. The demurrer of plaintiff to defendants' plea, setting up the illegality of the contract, and of the submission to arbitration, and of the award itself, so far as same relates to the collection of profits on the contract, is overruled, and sustained as to the margins awarded, viz., three hundred dollars." The court thereupon directed a verdict in favor of the plaintiff for the principal sum of $300, besides interest. The case is here for review upon two bills of exceptions,--one sued out by Benton & Bro., in which complaint is made that their demurrer was not sustained in toto; and the other by Singleton, wherein error is assigned upon the refusal of the court "to strike all of the plea of defendants," and upon the direction of a verdict for only $300 principal, instead of $580, the full amount of principal, for which suit was brought.

1. Upon the hearing before this court, counsel for Singleton insisted that Benton & Bro. were concluded by the award made against them, inasmuch as it had all the binding force and effect of a judgment rendered by a court of competent jurisdiction. In this connection the case of Owens v. Machinery Co., 96 Ga. 408, 23 S.E. 416, 31 L.R.A. 767, was cited and relied on in support of the proposition that a judgment rendered in a suit upon a promissory note was conclusive upon parties and privies, even though such note may have been "founded upon a gaming consideration." We recognize as sound the doctrine upon which the decision in that case was based. As was pointed out by Mr. Justice Atkinson, who delivered the opinion of the court: "In this state we have no statute which renders void judgments founded on debts based upon a gaming consideration, and, if that defense be relied upon to defeat an action, it must be pleaded as any other at common law; and, if the defendant suffer judgment to go against him the debt of the plaintiff stands purged of its impurity, and the defendant is thereafter concluded." As our courts are charged with the duty of determining whether contracts which they are called upon to enforce do or do not contravene the declared public policy of this state, it could not, in a given case, however erroneous might have been a decision in this regard therein rendered, be seriously urged that the court was without jurisdiction in the premises. But it by no means follows that any conclusion which a board of arbitrators may reach with respect to such matters is likewise final and conclusive. On the contrary, while the law favors the submission to arbitration of disputes arising between individuals over private matters as to which they alone are concerned, the submission to arbitrators of questions in which the public at large is interested is not only discountenanced, but positively forbidden. Thus "parties cannot submit to arbitration the question of the liability of a person to a criminal prosecution, or matters of an illegal nature, or a claim which is absolutely forbidden by statute." 6 Lawson, Rights, Rem. & Prac. § 3306. To the same effect, see Morse, Arb. 53, and 2 Am. & Eng. Enc. Law (2d Ed.) 557, 558. "When the subject-matter is clearly illegal, no binding award can be made." Russ. Arb. (Law Lib.) 6. That is to say, "where the matters submitted are clearly illegal in their character, or such as cannot properly be the subject of a submission, the award itself is void, and no proceedings can be taken on it." 2 Am. & Eng. Enc. Law (2d Ed.) 558, note 1, citing Steers v. Lashley, 6 Term R. 61, and Thorp v. Cole, 4 Dowl. 457, 2 Cromp. M. & R. 367, 1 Mees. & W. 531. Both of these cases sustain the proposition in support of which they are cited. In the former of them the following facts appeared: "A., being employed as a broker for B. in stock-jobbing transactions, paid the differences for him. A dispute arising between them respecting the amount of A.'s demand, the matter was referred to C., who awarded pounds sterling360 to be due, on which A. drew on B. for pounds sterling>>>100, part of the above, and indorsed the bill to C. after B. had accepted it." In view of these facts the court treated the award as a nullity, and "held that C. could not recover on the bill," he knowing of the illegality of the transactions between B. and his broker, "for he was the arbitrator to settle their accounts." Another case precisely in point is that of Aubert v. Maze, 2 Bos. & P. 371. There it appeared that a partnership was formed for the purpose of carrying on an insurance business in a manner forbidden by statute, and one of the members of the firm...