Russell v. Turner
| Decision Date | 27 January 1914 |
| Docket Number | 4661. |
| Citation | 80 S.E. 731,14 Ga.App. 344 |
| Parties | RUSSELL ET AL. v. TURNER. |
| Court | Georgia Court of Appeals |
Syllabus by the Court.
A contract apparently legal on its face will be presumed to be legal, and, where one of the parties to it denies its binding obligation upon him, the onus is upon him to show that it is illegal.
Where a contract for the sale of cotton for future delivery is entered into, and one of the contracting parties shows that it was not his intention to deliver the cotton, he must, in order to relieve himself of the obligation under the contract, show that such was the intention of both parties.
Where two parties enter into a contract, apparently legal on its face, for the sale of cotton for future delivery, and the buyer sells or transfers for value his rights under the contract to a person who takes the assignment for value before the date for delivery, and without notice, the seller may estop himself from setting up that it was a contract for cotton futures by acts in regard to the transfer to and purchase by such third party, and his rights under such transfer.
If the seller of cotton for future delivery himself prepares the contract, and knows that it has been transferred to another and that such other person has bought it, and gives to such person his note for the liquidated damages named in the contract, and says nothing about the invalidity of the contract, and thereupon the assignee cancels a debt owed to him by the purchaser of the cotton under the contract, and if, when the note becomes due, the maker of it seeks a renewal, and the time of payment is extended upon condition that the maker would give security, and if the maker still remains silent, and gives no notice of any illegality in the contract, and the transferee extends the time, and accepts the new note and security bona fide, and without notice, and the maker allows the note thus secured to run to maturity and never discloses his claimed defense until the note is in the hands of an attorney for collection, he will be held to be estopped.
Where under a contract for the sale of cotton, apparently legal on its face, which has been transferred to an innocent transferee, without notice and for value, before the time for delivery, and where the seller under that contract gives a note for liquidated damages agreed on in the contract, without disclosing anything to the transferee as to his claim that the contract was illegal, and where the transferee has paid the buyer under the contract the price agreed upon, and where the maker of the note, when it falls due, without disclosing his claim as to the invalidity of the contract, seeks to obtain an extension of time, and the transferee agrees to extend the time upon condition that the maker would give security, and the new note, with security, was given upon the terms sought and granted, this will be a novation of the contract; and a defense to a suit on such note, on the ground that the original contract was tainted with the illegal design between the original parties of dealing in cotton futures, would not avail.
Error from City Court of Jefferson; A. C. Stone, Judge.
Action by N. S. Turner against L. C. Russell and others. Judgment for plaintiff, and defendant brings error. Affirmed.
This case originated in a suit brought by the defendant in error, Turner, against the plaintiffs in error L. C. Russell, as maker, and W. H. Toole, as security, to recover on a promissory note as set out in the record. The defendants admitted giving the note, and that Turner was the owner of it, but denied that they owed it, and claimed that it was given in settlement of a contract entered into between Lyle & Co. and Russell for the sale of cotton futures. They contended that, the contract being illegal, without consideration, and of no binding force, the note sued on, having been given in settlement of the contract mentioned, was tainted with the same vice that rendered the original contract void, and was uncollectible, even if the holder took it for value, and without notice, and before due. Turner, the payee, replied by contending that the contract was not illegal; that Lyle & Co. intended to buy actual cotton; that Russell, to avoid the contract, must show that it was not only his intention not to deliver the actual cotton, but that such was also the intention of Lyle & Co. Turner contended, also, that Russell was estopped from pleading effectually the illegality of the contract, even if illegal, by his acts and doings in respect to the transaction, in so far as Turner was concerned. Turner claimed, also, that there was a novation of the contract which entitled him to collect the note, even if the contract between Russell and Lyle & Co. was illegal. The case went to trial, there was a verdict for the plaintiff, and the defendants brought the case to this court for review of the errors alleged to have been committed by the court below in overruling the motion for a new trial.
Little & Powell, of Atlanta, T. J. Shackelford, of Athens, and P. Cooley, of Jefferson, for plaintiffs in error.
H. C. Tuck and Cobb & Erwin, all of Athens, and J. S. Ayers, of Jefferson, for defendant in error.
ELLIS, J. (after stating the facts as above).
The contract set out in this case is for the sale of a specified number of bales of a certain grade of cotton to be delivered on the 1st to the 25th day of November, 1909, at a fixed price. The contract recited a mutual obligation to sell and to buy, and a consideration of $1 paid. If the contract stopped here, there could be no suspicion aroused by its perusal. If the seller failed to deliver, the buyer would have a cause of action against him, and the measure of his damages would be the difference between the market value of the cotton at the time of the breach of the contract and the price named in the contract. If the seller tendered the cotton, and the buyer failed or refused to take it, the seller would have a right to sell the cotton in the open market--that is, sell it for its market value--and sue and recover the difference, if any, between the agreed price and the proceeds of the sale. The contract, however, provides for the contingency of failure to deliver or to accept, and, instead of leaving the result of a breach of the contract to be settled as above stated, it is agreed that time is of the essence of the contract, and that, if the seller fails to deliver, or the buyer fails to accept, then the damages shall be liquidated, and the amount of damages is fixed at the difference between the market value of the grade of cotton named in the contract at Winder and at the contract price. Upon the face of the contract there appears nothing illegal. It appears to be a perfectly fair contract, and the method of adjustment proposed in case of a breach is not substantially different from what the law would have provided. The contract under consideration in this case is almost identical with that under review in the case of Luke v. Livingston, 9 Ga.App. 116, 70 S.E. 596; but there is a little earmark in that contract not in this, which might have induced the criticism of Judge Russell in the Luke Case. In this contract the time of delivery is fixed on the 1st to the 25th day of November, 1909. In the other contract the time of delivery is fixed "on or before September and October, the 15th day of November, 1909." The price in this contract is fixed at 11 1/8 cents per pound, and in the other at 10 5/16 cents any time in September or October, and 10 1/4 in November. These differences in the contract in the Luke Case, supra, at least might raise a suspicion of a contract where no actual delivery was contemplated.
The contract in this case is just such a one as honest men dealing in actual cotton, who desire to avoid controversy, might make, and it is just such a contract as shrewd people who did not expect or intend to actually deliver the cotton would make in order to conceal their real purpose, and at the same time escape that condemnation which the law imposes upon transactions entered into for speculating in cotton futures, sometimes denominated gaming contracts. Therefore the intention of the parties is a matter for a jury, and in the trial below the judge properly submitted that question to the jury.
If the contract was valid upon its face, it was incumbent upon Mr Russell to show that it was the intention of both parties, of himself and Lyle, that no actual cotton was to be delivered. In the case of Forsyth Manufacturing Co. v. Castlen, 112 Ga. 199, 37 S.E. 485, 81 Am.St.Rep. 28, it is held: "Where a contract is valid upon its face, or, when taken in the...
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