Opinion ID: 1784238
Heading Depth: 1
Heading Rank: 4

Heading: the difficult question

Text: There is a more difficult question arising from the facts of this case as related to us, one not specifically asked by the Court of Appeals, but raised by the Pucketts in their brief, and which presents this Court with a dilemma as to whether we should answer it or not. The question is, conceding the general rule of law that a commodities broker in a non-discretionary account only owes his customer the duty to properly carry out his instructions, would a custom or standard of the commodities brokers to warn customers who in their professional judgment are making imprudent and foolish futures trades increase the legal duty owed the Pucketts in this case? Conceding the accuracy of the affidavits of Jordan, Cullen and Giacona filed by the Pucketts, there is such a custom or standard recognized by the commodities brokers. Our considered judgment is that we will not have rendered all the assistance we should give in this case without answering the question as applied to the facts related to us in this in this case. To begin with, there is nothing in the related facts which suggests that the Pucketts knew of any such custom or standard, and therefore did not enter into any of their futures contracts under any assumption of its existence. The Pucketts never understood or believed RB & H had any such contractual or fiduciary obligation resulting from such a custom or standard, because there is nothing in the related facts to suggest they even knew of it. When Dr. Puckett began his course of trading through RB & H, there is nothing to suggest that in his mind he knew or believed this brokerage house had some duty under some in trade custom or standard to warn him as to his improvidence. RB & H did nothing to lead the Pucketts to believe there was such a custom. Had the Pucketts in directing the many futures trades and RB & H in carrying out their directions recognized the existence of such a custom or standard and relied upon it, we could of course have had an entirely different contractual relationship between the parties than that which they understood to exist. See, Dixon, Irmaos & CIA v. Chase Nat. Bank, 144 F.2d 759 (2nd Cir.1944), cert. denied Chase Nat. Bank of City of New York v. Dixon, 324 U.S. 850, 65 S.Ct. 687, 89 L.Ed. 1410 (1945). In Postal Telegraph Co. v. Willis, 93 Miss. 540, 47 So. 380 (1908), a Jackson cotton buyer, Willis, by telegram made an offer to sell cotton, in turn accepted by telegram of the cotton merchant buyer in Mobile. The Jackson Postal Telegraph Office delayed delivery of the wire for several hours. In the interim, the Mobile merchant called the Jackson buyer, asked him if he had received the wire, and was told it had not been received. The Mobile buyer then withdrew his acceptance of the offer, to which Willis agreed. Willis later in the day sold the cotton at a reduced price, and sued Postal Telegraph for the difference. This Court first noted the settled law that when the Mobile buyer delivered the telegram of acceptance to the telegraph office in Mobile, the contract was complete. It was argued by Willis that while this might ordinarily be the law, there was a custom in the cotton trade, recognized and acted upon by cotton buyers, that an acceptance was not binding until the telegram was actually received by the offeror. We responded: The contract made by the parties by virtue of these telegrams is clear, unambiguous, and valid, unless the so-called usage or custom can be invoked to relieve the parties from the legal effect of their acts. There is no such uncertainty about this contract as makes it necessary, because of indeterminate terms, to resort to custom or usage in order to understand exactly what was meant; but the contract is express in its terms, unambiguous, and became binding on the parties when the telegram of acceptance was delivered to the telegraph company in Mobile. It would be in the highest degree impolitic, and be the cause of introducing interminable confusion into the contracts, if, when the terms of a contract are express, clear, and valid under the law, its legal effect could be controlled by some local or trade custom. Our court has long since been committed to this wise doctrine. Shackleford v. N.O., J. & Great Northern Ry., 37 Miss. 202. In the case of Hopper v. Sage, 112 N.Y. 530, 20 N.E. 350, 8 Am.St.Rep. 771, citing many authorities, the court says: Usage and custom cannot be proven to contravene a rule of law, or to alter or contradict the express or implied terms of a contract free from ambiguity, or to make the legal rights or liabilities of the parties to a contract other than they are by the terms thereof. When the terms of a contract are clear, unambiguous, and valid, they must prevail, and no evidence of custom can be permitted to change them. In the case of Shackleford v. New Orleans, Jackson & Great Northern Railroad Company, 37 Miss. 202, the court has said: These usages, many judges are of the opinion, should be sparingly adopted, by the courts as rules of law, as they are often founded on mere mistake, or on the want of enlarged and comprehensive views of the full bearings of principles. Their true office is to interpret the otherwise indeterminate intentions of parties, and to ascertain the nature and extent of the contracts, arising, not from express stipulations, but from mere implications and presumptions and acts of a doubtful and equivocal character, and to fix and explain the meaning of words and expressions of doubtful or various senses. On this principle the usage or habit of trade, or conduct of an individual, which is known to the person who deals with him, may be given in evidence to prove what was the contract between them. 2 Greenleaf's Ev. § 251, and note 5. And the court further says that, where a custom or usage is resorted to, such customs must be certain, uniform, reasonable, and not contrary to law. To the same effect is 2 Page on Contracts, p. 928: The true and appropriate office of a usage or custom is to interpret the otherwise indeterminate intention of parties, and to ascertain the nature and extent of their contracts, arising, not from express stipulations, but from mere implications, assumptions, and acts of a doubtful or equivocal character. 47 So. at 381. Also, D.S. Pate Lumber Co. v. Weathers, 167 Miss. 228, 146 So. 433 (1933); O.J. Stanton & Co. v. Miss. State Highway Commission, 370 So.2d 909, 915 (1979), The law of usage and custom and the courts cannot make contracts for parties. Courts from other jurisdictions have rejected claims similar to the Pucketts seeking damages based solely upon a brokerage firm's in-house rules or a trade custom to warn customer investors of imprudent investments. Such rules were never intended to protect him [the investor] from his own greed, as plaintiff seems to suggest. Instead, they are designed to protect the broker from being saddled with losses which the investor is not able to cover, as was ultimately the case here. J.E. Hoetger & Co. v. Ascencio, 572 F. Supp. 814, 822 (D.C.Mich. 1983); Carras v. Burns, 516 F.2d 251 (4th Cir.1975); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Goldman, 593 F.2d 129 (8th Cir.1979); Farmland Industries v. Frazier-Parrott Commodities, 871 F.2d 1402 (8th Cir.1989). If the violation of the in-house rule or custom were accompanied by fraud, the rule would be otherwise. Goldman, 593 F.2d at 134. Compare, Thropp v. Bache Halsey Stuart Shields, Inc., 650 F.2d 817, 820 (1981), a case holding stockbrokers' own custom and standards of care may be used in establishing breach of proper legal standard in a discretionary account. The Pucketts argue our recent case of Gilmore v. Garrett, 582 So.2d 387 (Miss. 1991), as authority for a legal duty on the part of RB & H to exercise some supervision. That case is distinguishable. Generally, prospective home owners place some reliance in the builder contractor for some guidance in the construction of their residences. Keyes v. Guy Bailey Homes, Inc., 439 So.2d 670, 671-672, 673 (Miss. 1983). In that case there was a certain, specific danger in the subsoil of which the contractor builder was aware, yet he gave no warning of its danger. Had Mr. Gilmore given the prospective home owner the equivalent advance warning of the danger inherent in constructing a home on this site that was given the Pucketts before they engaged in futures trading, he would have had escaped legal liability as well. We therefore conclude that the trade custom and standard of care elucidated in the Jordan, Cullen and Giacona affidavits, did not increase the duty RB & H owed the Pucketts in this case. CERTIFIED QUESTIONS ANSWERED. ROY NOBLE LEE, C.J., DAN M. LEE, P.J., and PRATHER, ROBERTSON, SULLIVAN and BANKS, JJ., concur. PITTMAN, J., dissents, opinion to follow. McRAE, J., dissents without written opinion.