Marengo Abstract Co. v. C.W. Hooper & Co.

• Decision Date: 21 November 1911
• Citation: 56 So. 580,174 Ala. 497
• Parties: MARENGO ABSTRACT CO. v. C. W. HOOPER & CO.
• Court: Alabama Supreme Court

56 So. 580

174 Ala. 497

MARENGO ABSTRACT CO. v. C. W. HOOPER & CO.

Supreme Court of Alabama

November 21, 1911

Appeal from Law and Equity Court, Marengo County; Edward J. Gilder Judge.

Action by the firm of C. W. Hooper & Co. against the Marengo Abstract Company for breach of contract. Judgment for plaintiff, and defendant appeals. Reversed and remanded.

McClellan J., dissenting in part.

The contract set out in the complaint is as follows: "Selma Ala., May 25, 1909. We hereby confirm sale made for our account by C. W. Hooper & Co., of Selma, Ala., of 100 square bales of cotton, to average between 500 pounds and 525 pounds per bale at 10 1/2 cents per pound, basis middling; Selma Cotton Exchange difference prevailing at time of delivery. We hereby agree and bind ourselves to deliver this cotton at Selma, Ala., in warehouse, during months of September October, November, and December, 1909, and not less than 25 per cent. monthly, until contract has been completed; but we have the option of completing this contract in September and October, 1909, as we should desire. It is understood that no water packed, damaged, seedys, sandys, false packed, sample bales, or light weights will be delivered on this contract. Given under our hands and seals this 25th day of May, 1909. Marengo Abstract Company, by E. E. Taylor, President and General Manager. Attest: Garland Kirvan, Secretary and Treasurer." The substance of the counts of the complaint is set out in the opinion of the court.

The following are the pleas noted in the opinion: (3) "That the defendant is a corporation, as alleged in the complaint; that at the time of making the alleged contract with the plaintiff defendant did not have on hand any of the cotton alleged in said contract to have been sold, nor was the defendant, at the time of such alleged sale, cultivating any land upon which it could raise said 200 bales of cotton, during said year, and said alleged sale and contract was ultra vires the corporation." (4) "That the defendant is a corporation, as alleged in the complaint, and the contract alleged to have been made by it was for the future delivery of cotton, and said corporation did not have or own, at the time of making said contract, any cotton, and was not, at such time, cultivating lands from which it could raise said cotton, and said contract was made for the purpose of speculating upon the price of cotton at the time of its delivery, and said contract was ultra vires the charter of said corporation."

Pleas 3 and 4 were amended by subsequently adding at the end of each the following words: "For that the defendant averred that the defendant was incorporated on the 12th day of January, 1905, and the object for which the corporation was formed was only for the purpose of engaging in the business of making and furnishing abstracts of title to real estate, to make a complete abstract of title to all lands in Marengo county, to buy, sell, hold, or mortgage real or personal property, to own and conduct an insurance business, to act as agent for fire, life, and other insurance companies, to solicit and write insurance of any form, and to collect premiums for same, to lend money upon personal security, stocks, and other negotiable instruments, and to take and receive security by mortgage and otherwise on property, real or personal, to have and enjoy all the rights, powers, and privileges conferred upon business corporations, organized under the laws of Alabama under the act approved October 20, 1903, and that defendant had no other and further powers than were conferred upon it by said act of October 20, 1903, and that the business of engaging in farming operations and buying and selling cotton for future delivery, for speculative purposes, was not within the scope or power or purpose of said defendant organization." Plea 6, before amendment, was as follows: "That at the time of making the alleged contract the defendant did not own or have in possession said cotton agreed to be delivered, and none of said cotton was actually delivered at the time of making said contract, and the defendant had no intention of actually delivering said cotton, but only intended to pay the difference between the selling price and the market price of said cotton at the time agreed on for its delivery, or to collect the difference between the selling price and the market price of same at the time for its delivery, as it might be at the time of delivery agreed upon, greater or less than the price at which it was agreed to be sold." The plea was later amended by adding the amendment added to pleas 3 and 4 as above set out. (7) "That at the time of making said alleged contract for the sale and delivery of said cotton the defendant was not a person, firm, or corporation, or was his or its or their agent engaged in the business of manufacturing or wholesale merchandise, in the purchase or sale of the necessary commodities required in the ordinary course of its business." There were two contracts, both as set out above, except of different dates.

Pettus, Jeffries, Pettus & Fuller, and Abrahams & Tayloe, for appellant.

Chambliss Keith, for appellee.

McCLELLAN J.

It is doubtless well at this time to note that this appeal is from a judgment expressing rulings on demurrers to pleadings in an action at law, and that the appeal is justified by the act creating the law and equity court of Marengo county. Acts Sp. Sess. 1909, pp. 339, 356, § 26.

The presumption is that contracts are valid. Courts will not presume that parties to a contract intended to violate the law; and the legal intendment is to construe contracts to uphold, not to defeat them, if that may be done consistently with the expressed intent of the parties. Culver v. Caldwell, 137 Ala. 125, 34 So. 13; Perryman v. Wolffe, 93 Ala. 290, 9 So. 148; Nelson v. Manning, 53 Ala. 549; 9 Cyc. p. 586; Curtis v. Gokey, 68 N.Y. 300; Ormes v. Dauchy, 82 N.Y. 443, 37 Am. Rep. 583.

Intention, at the time of contracting, is the factor that does and will determine whether a contract for future delivery of a commodity is legal, and hence binding, or void, because of being a wager upon market fluctuations, and therefore unenforceable. Hawley v. Bibb, 69 Ala. 52; Perryman v. Wolffe, 93 Ala. 290, 9 So. 148; Allen v. Caldwell, 149 Ala. 293, 42 So. 855; Code 1907, § 3349. If the intention of both the parties, at the time of contracting, be that no property in the commodity shall pass, or that no delivery in kind shall be made, the engagement is illegal, for it is a wager upon the fluctuations of the market. Authorities supra.

Intention, that will control in this regard, is not the "secret design which may dwell in a party's mind and as to whose existence he alone can speak." Bank v. North, 160 Pa. 303, 308, 313, 28 A. 694, 696; 9 Cyc. p. 578. It is the purpose "implied and manifested by his act." Authorities supra. At common law or under statute, if the contract manifests an unmistakable intention by the parties, to constitute an illegal contract for the future delivery of commodities, it is void upon its face. No evidence aliunde can be received to turn the purpose and intent toward a lawful object.

At common law and under the statute (Code, § 3349), that the form and terms of the contract for future delivery of commodities are free from indicia of illegality did not--does not--conclude the inquiry of illegality vel non, for the real intention of the parties may be found by recourse to proper evidence tending to show the "nature of the true transaction and the circumstances attending it." Hawley v. Bibb, supra; Code, § 3349.

If a contract for the future delivery of commodities is fair on its face--without indicia of illegality refuting the presumption that parties do not intend to make an illegal contract of that character--obviously (omitting, at this stage, consideration of our statute [Code, § 3349]) the assertion of such a contract, with a view to the enforcement of its obligations would not require the pleader thereof to affirm that the intention of the parties in the premises was to deal in the property, and not to wager upon market fluctuations. To conclude otherwise would be to initially impose upon a party to a contract, fair upon its face, the duty of allegation of his innocence and of the validity of his contract, when and as he engaged, and, in consequence, to lay upon him the onus of sustaining the allegations. The presumptions stated refute any such conclusion.

Has our cited statute altered this matter as respects the assertion in pleading of such contracts? We think not. There is nothing in the statutes on this subject, which are a codification of the act approved March 7, 1907 (Gen. Acts 1907, pp. 448, 452), whereupon it could be contended that the legislative intention was to deny the application of the mentioned presumptions to contracts free from illegality on their faces. Indeed, from the provision made in section 2 of the act (Code, § 3351) with respect to the effect, prima facie, of evidence of certain, defined character, the necessary implication is that the Legislature did not intend to impose the burden of allegation and proof upon a party asserting, with a view to its enforcement, a contract for future delivery.

A very different statutory status was involved in Gist v. W. U Tel. Co., 45 S.E. 344, 23 S.E. 143, 55 Am. St. Rep. 763. There the statutes expressly laid the burden of proof upon any one seeking to enforce a right or obligation arising out of a contract for future delivery; and, besides, the major statute of the system of laws there considered condemned every future delivery contract "unless" the engagement possessed the elements requisite to make a valid contract of that character under that system. It was...