Saunders v. A. C. Phelps Co.

• Decision Date: 16 September 1898
• Citation: Saunders v. A. C. Phelps Co., 53 S.C. 173, 31 S.E. 54 (S.C. 1898)
• Parties: SAUNDERS v. A. C. PHELPS CO.
• Court: South Carolina Supreme Court

31 S.E. 54

53 S.C. 173

SAUNDERS v. A. C. PHELPS CO.

Supreme Court of South Carolina

September 16, 1898

Appeal from common pleas circuit court of Sumter county; Ernest Gary, Judge.

Action by George M. Saunders against the A. C. Phelps Company. From an order sustaining a demurrer and dismissing the complaint plaintiff appeals. Reversed.

McIver C.J., dissenting.

A. B Stuckey, for appellant.

Lee & Moise, for appellee.

GARY A. J.

The action herein was brought upon the following complaint, which alleges: "(1) That the defendant is a corporation duly chartered under the laws of the state of South Carolina. (2) That on the 21st day of July, 1897, the plaintiff contracted with the defendant to make a sale for him of cotton, for future delivery, to wit, in November, 1897, and, to cover the loss that might be sustained in such sale, paid over to the defendant as a margin the sum of one hundred and fifty dollars, and took its receipt for the same. That the said contract was made between the plaintiff and the defendant without intention on the part of either that the said cotton should be actually delivered in kind by the plaintiff or received in kind by the defendant or the person to whom they might sell, and it was in fact no more nor less than an act of gambling in cotton futures. (3) That the defendant failed to carry out its contract with the plaintiff, and on demand has refused to repay him the said sum of one hundred and fifty dollars, and has become liable to pay him the said sum, under the provision of section 1861 of the Revised Statutes, plaintiff having brought this action within three months from the payment to the defendant of the said sum." The defendant demurred to the complaint, on the ground that it does not state facts sufficient to constitute a cause of action, in that it does not allege that the plaintiff has paid to the defendant any sum or sums of money for and on account of a loss sustained by reason of the alleged contract, and on the further ground that the plaintiff cannot recover the amount sued for, because said transaction was void and illegal by the common law and by statute. The demurrer was sustained, and the plaintiff appealed.

Section 1859 of the Revised Statutes provides that all contracts for the future delivery of cotton, etc., shall be null and void unless it was the intention of the parties that there should be an actual delivery in kind. Section 1860 provides that in all actions brought to enforce such contracts, or to collect any note or other evidence of indebtedness, etc., the burden of proof shall be on the plaintiff to show that an actual delivery in kind was intended. Section 1861 is as follows: "Section 1861. Any person or persons so contracting, bargaining, or agreeing for the sale or transfer of any of the aforesaid commodities, in violation of the provisions of this article, who shall pay over to any person or persons any sum or sums of money for and on account of a loss sustained by reason of such contract, bargain or agreement shall be at liberty, within three months next ensuing after such payment, to sue and recover the amount so lost and paid, or any part thereof, from the person or persons to whom he or they shall have paid the same, with costs of suit, by action, to be prosecuted in any court of competent jurisdiction; and the oath of the loser that he has actually paid over the money to the party against whom the action is brought shall be regarded as prima facie establishing the case against such party; and any person who shall act as agent or middleman in the making or execution of any such contract, or who shall accept or receive and forward any moneys, drafts or bills of exchange in furtherance thereof, shall be held liable in an action by the party to recover the amount or value of the money so received, or the value of the draft or bill of exchange so accepted or forwarded. " The allegations of the complaint show that the defendant was the agent of the plaintiff for the purpose of making the sale therein mentioned. Section 1861 may properly be divided into two parts: First, that which refers to the parties to the contract for future delivery; and, second, that which relates to agents and middlemen (which we have italicised). In this way alone can full force and effect be given to the entire section. The first part was amply sufficient to embrace agents and middlemen, and there would have been no necessity for the second part if it had not been intended that the provisions of the two parts should be regarded as separate and distinct. The italicised words "any such contract" refer to section 1859, and not to the first part of section 1861. It was therefore not necessary for the plaintiff to have sustained a loss before his cause of action accrued. This construction is in harmony with the statute which was intended to break up the practice of gambling in cotton futures, which has caused so much ruin throughout the land. But, even if the complaint did not state facts sufficient to constitute a cause of action under the statute, it was not demurrable if it stated a cause of action at common law. This ruling is in harmony with the case of Cartin v. Railroad Co., 43 S.C. 221, 20 S.E. 979, in which the court says: "If two causes of action were set forth in the complaint, without being separately stated, the defendant, it is true, had the right to make a motion that the complaint be made more definite and certain, or if allegations were made which were unnecessary to sustain the cause of action stated in the complaint, to make a motion to strike out such allegations as irrelevant and as surplusage. Pom. Rem. & Rem. Rights, §§ 447, 451. If the defendant waived such objections by failing to make such motions, then the plaintiff had the right to the relief to which all the allegations showed he was entitled. The plaintiff, when the allegations of the complaint are appropriate to either of two causes of action, may be required, upon motion of the defendant, to make his election as to the cause of action upon which he will proceed to trial. Westlake v. Farrow, 34 S.C. 270, 13 S.E. 469; Hammond v. Railroad Co., 15 S.C. 10; Hellams v. Switzer, 24 S.C. 39." Also with the case of Conner v. Ashley, 49 S.C. 478, 27 S.E. 473, in which the court uses this language: "A complaint is not demurrable when its allegations show that the plaintiff is entitled to some relief, although he is not entitled to the relief for which he prays."

The allegations of the complaint, as we have said are to the effect that the defendant was the agent of the plaintiff, and that it refused to comply with the requirements of its contract, or, after demand, to refund to the plaintiff his money which he had intrusted to it for the purpose of making the sale therein mentioned. The case of Bernard v. Taylor (Or.) 31 P. 968, was an action against a stakeholder to recover money which had been deposited with him as a wager on a foot race, but, before the race was run, a demand was made upon the stakeholder by the plaintiff for a return of the money which he had deposited with him. In that case the court uses the following language: "The general rule is that the law will not interfere in favor of either party in pari delicto, but will leave them in the condition in which they are found, from motives of public policy. There is no doubt, where money has been paid on an illegal contract, which has been executed, and both parties are in pari delicto, the courts will not compel the return of the money so paid. But the cases show that an important distinction is made between executory and executed illegal contracts. While the contract is executory, the law will neither enforce it, nor award damages; but, if it is already executed, nothing paid or delivered can be recovered back. So that, while the contract is executory, the party paying the money or putting up the property may rescind the contract, and recover back his money. This arises out of a distinction between an action in affirmance of an illegal contract and one in disaffirmance of it. In the former such an action cannot be maintained, but in the latter an action may be maintained for money had and received. The reason is that the plaintiff's claim is not to enforce, but to repudiate, an illegal agreement. Whart. Cont.§ 354. In such case there is a locus penitentiæ. The wrong is not consummated, and the contract may be rescinded by either party. In Edgar v. Fowler, 3 East, 225, Lord Ellenborough said: 'In illegal transactions the money has always been stopped while it is in transitu to the person entitled to receive it.' As Lord Justice Mellish said: 'To hold that the plaintiff is entitled to recover does not carry out the illegal transaction, but the effect is to put everybody in the same situation as they were before the illegal transaction was determined upon, and before the parties took any steps. If money is paid or goods delivered for an illegal purpose, the person who has so paid the money or delivered the goods may recover them back before the illegal purpose is carried out; but if he waits till the illegal purpose is carried out, or if he seeks to enforce the illegal transaction, in neither can he maintain an action."'

The rule is thus stated in 8 Am. & Eng. Enc. Law, p. 1014 "Although it has been the policy of the law to leave parties to an illegal transaction where it found them, by refusing relief to either in respect thereof, it has, on the other hand, never regarded...