Court Opinion

ID: 3887118
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:16:32.290749+00
Date Added: 2024-06-11T13:46:58.107464
License: Public Domain

I dissent. This is an action by the plaintiff against the defendant for failure to pay losses on various contracts for future delivery of cotton. The plaintiff alleges that on the 24th day of August, 1911, he (plaintiff), on the order of the defendant, bought, in his own name on the New York Exchange, one hundred bales of cotton for delivery in January, 1912. That thereafter, on the 5th day of September, 1911, the defendant, by telegram, directed the plaintiff to close out said transaction by selling one hundred bales of cotton for said January delivery. That on the 8th of September, 1911, plaintiffclosed out said transaction by selling one hundred bales of cotton. That in the same manner, on 25th of August, 1911, he bought one hundred bales of cotton, in his own name, for the defendant, for delivery in October, 1911, and on the 28th of August, 1911, he bought another one hundred bales for the defendant for October delivery, and on the 5th September, 1911, by the defendant's direction, the plaintiff closed out said transaction by a sale of two hundred bales of cotton for October, 1911, delivery.
There is no use to go through all the transactions set out, they are of the same nature. The plan is to buy one hundred bales of cotton and then before the time for delivery, one hundred bales are sold. If it is the same cotton or the same parties, the complaint does not say so. When the plaintiff buys or sells for the defendant, the name of the other principal is not given. When a merchant in legitimate *Page 165 
business makes a contract to buy goods and then makes a contract to sell goods, he is doing business, not closing out his business. Here, when the defendant buys 100 bales of cotton and then sells 100 bales of cotton, the transaction is closed. The defendant has made two contracts to do two things and therefore he is not required to do either. According to the complaint, the contract to deliver in January was "closed out" by the contract to receive in January. What possible connection in real business can there be unless there is an agreement to offset the sale against the purchase? There is no such obligation here. The statutes of this State make all contracts for future delivery void with three exceptions:
1. Where the seller is the owner of the cotton, or
2. Authorized by the owner to sell, or
3. It was the bona fide intention of both parties, at the time of making the contract, that the cotton should be sold and delivered in kind at the future time specified in the contract.
The plaintiff seeks to recover under No. 3. The allegations, however, reiterated time and again, are, that the second contract closed out the first contract. The effect of the making of the second contract in every series was to annul the first and relieve the defendant of all obligation except to pay or receive the differences. This complaint alleges a demand for the differences and not a demand for delivery or receipt of the cotton. If the plaintiff had bona fide contracts to deliver and receive cotton, then the failure to deliver and receive the cotton is the breach of the contract and there is no allegation of a failure to deliver or receive cotton. Even if the allegation of a bona fide intention to deliver and receive is a sufficient allegation of a legal contract, no breach of it has been alleged, and, therefore, no cause of action has been stated.
It will be observed further that the allegation of bona fides
is not made as to all the purchases and sales. Paragraphs *Page 166 
34 and 36 constitute one group. The complaint unites these two transactions as one and makes the allegation of bona fides only as to the purchase. The allegation of loss is as to the combined contracts and there is no allegation of loss as to the purchase alone. Even supposing that the allegation of bona fides is sufficient to sustain an action for loss on the purchase, yet there is no allegation of bona fides
as to the contract of sale, and the contract of sale is illegal (see Code, 1912, section 3425), and when the complaint bases the right to recover on the result of two contracts, one legal and the other illegal, then the result is bound to be tainted with illegality and unenforceable, i. e., the complaint has not stated a cause of action. Indeed the allegation as to a bona fide intention, to receive and deliver, could not have been made as to the sale because the contract of sale is alleged to have "closed out the transaction." There could therefore have been no intention to deliver or receive on the second contract of this series. It will be observed that in the first and second causes of action the allegation of bona fides is alleged as to only one part of one series of purchase and sale. Each cause of action must be complete in itself.
The third cause of action is for an account stated. The separate causes of action are not mentioned and not relied upon. The allegation as to bona fides, therefore, must be confined to the account stated. That transaction dealt with the payment of money only, and in that transaction no cotton was to have been delivered or received. Even if the defendant had gone further than merely giving his consent to the result of the stated account and promise to pay it, and had given his most solemn note, bill, bond, judgment, mortgage or other security in whole or in part for the balance of the account, the security so given would have been utterly void, frustrate and of noneffect to all intents and purposes whatsoever. Civil Code, 1912, section 3425. *Page 167 
Even if the third cause of action could borrow allegations from the first and second causes of action, we have seen they cannot stand because each of them is based in part on illegal transactions.
It seems to me that this complaint not only states no cause of action, but states contracts that the statutes have expressly declared illegal.
The purchases and sales are said to have been made subject to the rules of the New York Exchange. What are those rules? It may be that no reference to the rules need be made, but the reference is made, and if the rules required the delivery and receipt in every contract, it would have been a useful allegation. The complaint does allege that exhibit II was made in accordance with those rules, and exhibit II shows that the failure to deliver and receive was unworthy of mention. Exhibit II shows that the differences, in money only, constituted the breach of the contract. Exhibit II does not show that receipt and delivery in kind could not be had, but that is not the question. If the rules are pertinent at all, they must require receipt and delivery in kind, and exhibit II (if in accordance with the rules as alleged) shows that differences only were required. The statutes require a bona fide
intention to deliver and receive in kind. The defendant was both buyer and seller in each series. The statute requires that both buyer and seller in each contract shall intend to deliver and receive in kind. It may be said that the allegation of a bona fide intention does not apply to all the transaction, but it does apply to those in which the defendant lost out. If the defendant wants to disregard those items in which he won, the Court is at liberty to do so. The statute does not permit the Courts to separate the good from the bad, but declares that if the illegal feature enters at all, the whole shall be utterly void, *Page 168 frustrate and of noneffect to all intents and purposes whatsoever.
For these reasons I dissent.
MR. JUSTICE GAGE did not sit in this case.