Wells v. Neill

• Decision Date: 04 January 1932
• Docket Number: 29682
• Citation: 138 So. 569,162 Miss. 30
• Court: Mississippi Supreme Court
• Parties: WELLS et al. v. NEILL et al

138 So. 569

162 Miss. 30

WELLS et al. v. NEILL et al

No. 29682

Supreme Court of Mississippi

January 4, 1932

Division B

1 CORPORATIONS.

Corporate officers and directors engaging in ultra vires act are liable at suit of receivers for funds lost as result.

2 CORPORATIONS.

Bill by receivers of cotton corporation against officers and directors for loss through dealing in cotton futures, an ultra vires act, stated cause of suit.

HON. V J. STBICKER, Chancellor.

APPEAL from chancery court of Hinds county HON. V. J. STRICKER, Chancellor.

Suit by W. S. Wells and others, as receivers of the Mississippi Farm Bureau Cotton Association, against C. L. Neill and others. From the decree, complainants appeal. Reversed and remanded.

Reversed and remanded.

Howie & Howie, of Jackson, for appellants.

Unenforceable contracts for the sale of future delivery of cotton are those which are executed and dealt in without any actual bona-fide execution and the carrying out or discharge of such contracts upon the floor of such exchange.

Chapter 304, Laws of 1928, Section 1830, Code 1930.

Such actions on the part of the directors is not found to be authorized by any of the provisions of the charter of said corporation.

The contracts involved fall under the definition of "the kind commonly called 'futures.'"

S. M. Wald & Co. v. Austin, 107 Miss. 279, 65 So. 247; Ascher & Baxter v. Moyse & Co., 101 Miss. 36, 57 So. 299.

The association did not have title to the cotton grown by the members of the association and said association acted merely as an agent, and/or trustee, for said members for the purposes of handling said cotton and disposing of it to the best advantage. That such relationship was one partaking of a fiduciary nature. That the action of the directors in disposing of the proceeds of the cotton placed in their hands by the members of the association was a violation of their trust agreement, and because of such violation they are liable to the members thereof for their illegal acts and wrong doing.

Tobacco Cooperative Association v. L. Harvey & Son Co., 47 A. L. R. 928, 189 N.C. 494, 127 S.E. 545; Haarperinne v. Butter Hill Fruit Growers Association, 119 A. 116; Rhodes v. Little Falls Dairy Co., Inc., 245 N.Y.S. 432; Johnson v. Staple Cotton Co-op Ass'n, 142 Miss. 312, 107 So. 2; Brown v. Staple Cotton Cooperative Ass'n, 132 Miss. 859, 96 So. 849; Cole-McIntyre-Norfleet Co. v. DuBard, 135 Miss. 20, 99 So. 474.

Butler & Snow, of Jackson, for appellees.

The statutes in any way relating to the matter, in effect prior to April 26, 1928, are sections 977 and 978, Code of 1927, and Chapter 31 of the Code of 1927, and the contracts complained of so far as the allegations of the bill are concerned, were not condemned by any of these statutes.

The law now expressly authorizes contracts for the sale, for future delivery, of cotton and other commodities.

(1) When made in accordance with the rules of any board of trade.

(2) Actually executed on the floor of such board of trade and performed or discharged according to the rules thereof and

(3) When such contracts of sale are made through regular members of good standing of such exchange, provided the contracts conform to the United States Cotton Futures Act.

Chapter 32, Code of 1930.

All the cases show that the statutes in effect prior to April 26, 1928, condemned future contracts, where it was intended that the same should be settled by payment of the difference in price and where there was no intention of the parties to deliver the commodities covered by the contract.

Conn v. Brinson, 112 Miss. 348.

The intention of both parties must be that the commodities were not to be delivered.

Clay v. Allen, 63 Miss. 426; Western Union v. Littlejohn, 72 Miss. 1025; Asher v. Moyse, 101 Miss. 36; Faulk v. Anderson Mercantile Co., 138 Miss. 211.

There is not an allegalion in the bill of complaint which charges facts showing that the association had violated the laws of the state prohibiting the purchase and sale of futures.

It is not unlawful to buy or sell commodities to be delivered at a future day, even if at the time of the purchase the seller has none to deliver and no means of obtaining them, except to go into the market and buy them, if the parties really intend and agree that the goods are to be delivered and the price paid.

Clay v. Allen, 63 Miss. 426; Long v. Eaves, 99 Miss. 888; Bergeson & Co. v. Williams, 155 Miss. 351; Arkansas Coop. Cotton Ass'n. v. Brown, 168 Ark. 504; Edgar Coop. Assn. v. Speilzer, 20 A. L. R. 1417; Notes 25 A. L. R. 1113; 33 A. L. R. 247; 47 A. L. R. 936.

Even if the association in good faith sold cotton to be delivered in the future before it actually had the cotton in the warehouse, this would not constitute a violation of the law. The contract between the association and the members in so far as it dealt with a potential interest, was good both in law and equity, and was good in equity, even though the association had no actual or potential interest in the cotton to be grown.

Everman v. Robb, 52 Miss. 653; White v. Thomas, 52 Miss. 49; Russell v. Stephens, 70 Miss. 685; Fidelity & Deposit Co. v. Sturdivant, 86 Miss. 409; Bacot v. Varnado, 91 Miss. 825.

The bill alone can only be looked to, and the allegations thereof are not helped by a reference to the charter.

Griffith's Chancery Practice, Section 289.

Argued orally by W. B. Fontaine, for appellant, and by George Butler, for appellee.

OPINION

Griffith, J.

Appellants as receivers of the Mississippi Farm Bureau Cotton Association, an insolvent corporation, filed their bill against the officers and directors of said corporation in which it was alleged, to state the substance in brief,...