Sawyer, Wallace & Co. v. Taggart
| Decision Date | 01 May 1879 |
| Parties | Sawyer, Wallace & Co. v. Taggart. |
| Court | Kentucky Court of Appeals |
Hamilton & Brothers & Co. were pork-packers and commission merchants doing business in the city of Louisville, and the appellants, Sawyer, Wallace & Co., were commission merchants doing business in the city of New York, and members of the New York Cotton Exchange and of the New York Produce Exchange.
Commencing in December, 1875, Hamiltons, from time to time, directed Sawyer, Wallace & Co. to buy for their account, for future delivery, certain specified quantities of cotton, pork, and lard.
Hamiltons knew that Sawyer, Wallace & Co. were members of the cotton and produce exchanges, and expected the purchases to be made on' change, subject to the rules and regulations of trade in New York, and were notified, from time to time, that purchases had been made as directed. As the time approached when, according to the terms of the contracts of purchase, the goods were deliverable, Hamilton & Brothers & Co. directed the purchases to be "transferred" to subsequent months. This, as the evidence shows, was intended and understood to be a direction to sell the goods and purchase a like quantity for delivery in the months designated.
The regulations of the exchanges require that all contracts made on 'change shall be made in the names of members, and Hamiltons not being members, the purchases made for them were made in the name of appellants, who became liable on the contracts as principals. When they made sales at less than the purchase-price, being bound on the contracts as principals, they advanced the amount necessary to cover the loss and advances so made, and brokerage and other expenses growing out of these transactions make up the greater part of their claim asserted in this action.
The appellees resisted this part of the claim, and it was rejected in the court below on the ground that the transactions were mere illegal wagers on the market-prices of cotton, pork, and lard; "that it was contemplated by Sawyer, Wallace & Co., Hamilton & Brothers & Co., and all connected with said transactions, that when the time came for the delivery of said cotton, pork, and lard, the same should not be delivered to the party so pretending to purchase, but that said party should pay or receive, as the case might be, the difference between the market price in New York city at the time of such pretended purchase, and the time fixed for the delivery of such article;" i. e. the difference between the contract-price and the market-price on the day of delivery.
Whether those transactions were of that character is the sole question in this case which we deem it necessary to discuss.
The evidence shows that Sawyer, Wallace & Co., in each instance when directed to buy, went upon the exchange and there entered into agreements, with third persons, which on their face constituted valid and enforcible contracts for the delivery of the goods directed to be purchased. Many of the contracts thus entered into are exhibited in the record, and the names of all persons with whom contracts were made are given.
All the witnesses for Sawyer, Wallace & Co., who testify from their personal knowledge of the transactions, testify that there was no agreement or understanding between Sawyer, Wallace & Co. and Hamiltons, or between Sawyer, Wallace & Co. and those with whom they made contracts, that the goods contracted for should not be delivered and paid for according to the terms of the written contracts, or that the contracts should be settled by the payment of differences. One of the members of the firm of Hamilton & Brothers & Co. testified that his firm never intended to receive the goods they directed Sawyer, Wallace & Co. to buy, but that they desired to have made on their account contracts which they could enforce if they chose to do so; that their intention was to resell the goods before the time arrived for delivery, and this latter intention was, we think, known to Sawyer, Wallace & Co.
The evidence also showed that before the maturity of each contract, Hamiltons directed the goods contracted for on their account to be sold, and that Sawyer, Wallace & Co. went on 'change and made contracts for the sale, for account of Hamiltons, of goods corresponding in quality and kind with those they had purchased for them, deliverable at corresponding dates; and the names of the persons to whom these sales were made are given in the record.
Rules of the exchanges, made part of the contracts, respectively provide that deliveries of goods sold for future delivery shall be made in the following manner:
The seller shall give written notice to the buyer that he will deliver on a named day. If the seller has resold the goods, he passes the notice to his vendee, and so on until it reaches a vendee who has not sold. The seller must then deliver to the buyer a transferable order, or an order on a warehouse or place of delivery before 12 M. of the day preceding that on which the delivery is due. If the buyer has not resold, he is bound to present the order and receive and pay for the goods. If he has sold he passes the order to his vendee, and so on until it reaches a vendee who has not sold, and he is bound to receive and pay for the goods at the original contract-price, the difference between that price and the price of each subsequent sale being settled between the immediate parties to such sales. The rules also provide that delivery-orders shall be received by any member of the exchange to whom goods of the kind called for in it are due from another member.
The evidence shows that in every instance notice of delivery and the usual delivery-orders were received by Sawyer, Wallace & Co. from the seller, and were passed by them to those to whom they had sold for account of Hamiltons.
Having shown that they entered into contracts valid on their face for the purchase of the goods they were directed to buy for Hamiltons, and that, pursuant to directions, they resold the goods and delivered to the purchasers from them delivery-orders which they had received, and that on such resales there were losses, which they paid, they have made out a clear prima facie right to recover, and unless it has been shown that, on account of something not appearing on the face of the transactions, they were in some way illegal, the judgment of the court below must be reversed.
No direct evidence was offered to prove the presence, in any of the transactions, of any element of illegality.
An effort was made to prove — and, for the purposes of this case, we assume that it was successful — that none of the persons with whom Sawyer, Wallace & Co. made contracts for purchases had the goods contracted for on hand at the times of entering into the contracts, and that they had no reasonable expectation of acquiring them except by purchasing in the market. But that fact did not render the contract unenforcible, much less vicious. (Whitehead v. Root, 2 Met. 587; Hibblewhite v. McMorine, 5 Mess. & Webb, 462; Grizewood v. Blane, 73 Eng. Com. Law, 536; Stanton v. Small, 3 Sand. 230.)
And we may here remark that there is no evidence that the sellers did not in fact make delivery upon each of these contracts to those to whom sales had been made, or that any of the contracts were settled by the payment of differences. But it is immaterial how they may have been settled.
If they were entered into without any mutual agreement, tacit or express, that they were not to be performed by delivery of the goods and payment of the price, they were valid, and no subsequent agreement to settle them by the payment of differences could render them invalid.
There is not only no direct evidence that any such agreement was made at the time the contracts were entered into, but there is the direct and positive statement of each of the partners composing the firm of Sawyer, Wallace & Co. that there was not; and the names of those with whom the contracts were made having been furnished, ample opportunity was afforded the other side to contradict this evidence. In view of this state of the record there is no pretense for saying that there was any such express agreement, and counsel do not claim that there was. But they do claim that there is evidence to show that it was tacitly understood by all the parties that delivery and payment were not to be made, and that the transactions would be closed by the simple payment of differences. The only evidence tending to establish such an understanding is, of course, circumstantial.
It is contended that it has been proved, and it may be conceded, that a large proportion of similar contracts is in fact so settled. But it is equally proved that a very large business is done on similar contracts by dealers, manufacturers, and shippers who receive and pay for the goods. Nearly the entire business in what are called futures is carried on on the exchanges, of which nearly all large dealers are members. The exchanges are corporations created and recognized by the laws of the state of New York. It is not even claimed that there is not much legitimate business done on' change. The transactions for Hamiltons were conducted in the same manner in which all legitimate transactions there are conducted, and the fact that they were entered into there has no greater tendency to prove that they were illegal than the same fact has to prove all other transactions there are also illegal.
That there is much most mischievous gambling carried on on exchanges and boards of trade no one can doubt, and that the New York cotton and produce exchanges are no exception in this respect, we think, is shown by the evidence in this case; but as there is also much legitimate business done there, the only effect which...
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