Court Opinion

ID: 8811624
Source: CourtListenerOpinion
Date Created: 2022-11-26 15:05:00.841992+00
Date Added: 2024-06-11T17:04:18.810227
License: Public Domain

CARLAND, Circuit Judge
(dissenting). I cannot concur in the views of the majority. The plain case as shown by the record appears to me as follows:
Thorn & Maginnis sued Browne to recover the amount paid out by them at the request of defendant and for his use in and about the purchase and sale of 2,000 bales of cotton on the New Orleans Cotton Exchange and commissions for their services in buying and selling such cotton. The case, after issue joined, came on for trial, and the plaintiffs offered to show: That upon the telegraphic request and
upon the account and risk of the defendant they purchased cotton on the New Orleans Cotton Exchange for May delivery as follows:
January 25, 1917 200 bales at 16.83 cents per pound
400 16.84
27 200 17.06
29 400 17.08
800 16.88
30 200 16.93
31 300 17.13
That on February 1, 1917, at the telegraphic request of defendant, they sold for his account and risk 2,000 hales of cotton on the New Orleans Cotton Exchange for May delivery at the price of 14 cents per pound. That in the purchase and sale of said cotton plaintiffs paid out and advanced for the defendant the sum of $29,675, and earned in commissions the sum of $300. That no part of the same had been paid, except the sum of $6,760. Plaintiffs further offered to show that, at the time of the purchase of the cotton above mentioned, each vendor executed and delivered to plaintiffs a memorandum in writing, of which the following is a sample:
“New Orleans, La., Jan. 25, 1917.
“O. P. Ellis & Oo., Cotton Exchange Building, sold to Thorn & Maginnis, of New Orleans, La., and agreed to deliver them subject to the by-laws, rules and conditions of the New Orleans Cotton Exchange and subject to the United States Cotton Futures Act, § 5.
At Cents per Pound
Bales Cotton. Delivery. for Middling.
One hundred May 16.70
Three “ “ 16.83
Two “ ' “ 16.S3
One “ “ 16.90
Two “ “ 16.81
One “ “ 16.84
“C. P. Ellis & Co., of New Orleans, La.”
*530That at the time the 2,000 hales of cotton were sold the purchasers executed and delivered to plaintiffs a memorandum in writing, of which the following is a copy:
“Office of Thorn & Maginnis, 209 Varieties Place.
“New Orleans, La., Feb. 1, 1917.
“Bought from Messrs. Thorn & Maginnis, of New Orleans, La., and. agreed to receive from them subject to the by-laws, rules and conditions of the New Orleans Exchange and subject to the United States Cotton Futures Act, § 5:
At Cents per Pound
Bales Cotton. for Middling. Delivery.
Twenty hundred 14. cts. May
One 14.20
One 14.25
One 16.10 July
One 14.45 May
Three 16.10 July
One 16.10
One May 14.80
One May 14.50
“Airey & Stouse, of New Orleans, La.”
The trial court excluded all evidence relating to the purchase and sale of the cotton for the reason that the purchases and sales were made imviolation of the Cotton Futures Act (39 Stat. 476). This ruling resulted in a directed verdict for the defendant. Counsel for plaintiffs claim that the exclusion of the evidence offered and resulting verdict was error. Counsel for defendant contends that the ruling of the trial court was right for the following reasons:
That the contracts of purchase and sale were made in violation of the Cotton Futures Act, in the following particulars: (a) The memorandums offered were only a memorandum signed by the vendee in the sale of the cotton, and memorandums signed by the vendors in the purchase of the cotton, there being no signature of the vendor in the sale of the cotton or by the vendees in the purchase of the cotton. (b) That if the memorandums offered can be held to be the contract referred to in section 3 of the Cotton Futures Act (Comp. St. § 6309c), they did not specify the time of delivery, (c) They were not signed by the party to be charged, or by his agent in his behalf, (d) The námes and addresses of the seller and buyer were not mentioned. (e) The memorandums were in violation of the regulations of the Treasury Department, (f) The purchase and sale of cotton under the facts offered to be shown were criminal offenses in which the plaintiff participated as aiders and abettors, and for that reason they cannot recover for disbursements made or commissions earned.
The following sections of the Cotton Futures Act • are relied on by the counsel for defendant:
“Sec. 3. That upon each contract of sale of any cotton for future delivery made at, on, or in any exchange, board of trade, or similar institution or. place of business, there is hereby levied a tax in the nature of an excise of two cents for each pound of the cotton involved in any such contract.
“Sec. 4. That each contract of sale of cotton for future delivery mentioned in section 3 of this act shall be in writing plainly stating, or evidenced by written memorandum showing, the terms of such contract, including the quantity. of the cotton involved' and the names and addresses of the seller and *531buyer in such contract, and shall he signed by the party to be charged, or by his agent in his behalf. If the contract or memorandum specify in bales the quantity of the cotton involved, without giving the weight, each bale shall, for the purposes of this act, be deemed to weigh five hundred pounds.
“Sec. 5. That no tax shall be levied under this act on any contract of sale mentioned in section 3 hereof if the contract comply with each of the following conditions:
“First. Conform to the requirements of section 4 of, and the rules and regulations made pursuant to, this act.
“Second. Specify the basis grade for the cotton involved in the contract, which shall be one of the grades for which standards are established by the Secretary of Agriculture, except grades prohibited from being delivered on a contract made under this section by the fifth subdivision of this section, the price per pound at which the cotton of such basis grade is contracted to bo bought or sold, the date when the purchase or sale was made, and the month or months in which the contract is to be fulfilled or settled: Provided, that middling shall he deemed the basis grade incorporated into the contract if no other basis grade be specified either in the contract or in the memorandum evidencing the same.”
Subdivision 7 of section 5 provides as follows:
“The provisions of the third, fourth, fifth, sixth, and seventh subdivisions of this section shall he deemed fully incorporated into any such contract if there be written or printed thereon, or on the memorandum evidencing the same, at or prior to the time the same is signed, the phrase ‘Subject to United States Cotton Futures Act, Section 5.’ ”
“Sec. 11. That the tax imposed by section 3 of this act shall be paid by the seller of the cotton involved in the contract of sale, by means of stamps which shall be affixed to such contracts, or to the memoranda evidencing the same, and canceled in compliance with the rules and regulations which shall he prescribed by the Secretary of the Treasury.” Comp. St. § 63091.
“Sec. 12. That no contract of sale of cotton for future delivery mentioned in section 3 of this act which does not conform to the requirements of section 4 hereof, and has not the necessary stamps affixed thereto, as required by section 11 hereof shall be enforceable in any court of the United States by, or on behalf of, any party to such contract or his privies.” Comp. St. § 6309m.
“Sec. 14. That any i>erson liable to the payment of any tax imposed by this act who fails to pay, or evades or attempts to evade the payment of such tax, and any person who otherwise violates any provision of this act, or any rule or regulation made in pursuance hereof, shall he deemed guilty of a misdemeanor, and,' upon conviction thereof, shall be fined not less than $100 nor more than $20,000, in the discretion of the court; and, in case of natural persons, may, in addition, be punished by imprisonment for not less than sixty davs nor more than three years, in the discretion of the court.” Comp. St. § 6309o.
The contention that the trial court was right, in directing a verdict on the ground that the evidence offered showed a gambling transaction will not be considered, as the trial court made no ruling in relation thereto. The defendant, it is true, pleaded this defense, but none of the objections to the introduction of evidence were based on this ground, and the trial court made no reference thereto in any of its rulings, but, on the contrary, ruled in the exclusion of evidence with reference to the Cotton Futures Act.
Coming to the Cotton Futures Act, I may say that, as the present action is not one to enforce the contracts for the purchase and sale of cotton, section 12 of that act above quoted has no application. The serious question presented by the record is this: Faying aside the ques*532tion of gambling, did the evidence offered show that the plaintiffs knowingly engaged in an illegal business or transaction in the purchase and sale of the cotton? If so, plaintiffs cannot recover, and the exclusion of the evidence was not error. Irwin v. Williar, 110 U. S. 499, 4 Sup. Ct. 160, 28 L. Ed. 225; Bibb v. Allen, 149 U. S. 481, 13 Sup. Ct. 950, 37 L. Ed. 819, supra; In re Green, 7 Biss. 338, Fed. Cas. No. 5,751; Melchert v. Tel. Co. (C. C.) 3 McCrary, 521, 11 Fed. 193; Bartlett v. Smith (C. C.) 13 Fed. 263; Raymond v. Leavitt, 46 Mich. 447, 9 N. W. 525, 41 Am. Rep. 170; Cobb v. Prell (C. C.) 15 Fed. 774; Steers v. Lashley, 6 T. R. 61; Everingham v. Meighan, 55 Wis. 354, 13 N. W. 269; Fareira v. Gabell, 89 Pa. 89; North v. Phillips, 89 Pa. 250; Ruchizky v. De Haven, 97 Pa. 202; Dickson’s Ex’r v. Thomas, 97 Pa. 278; Sampson v. Shaw, 101 Mass. 145, 3 Am. Rep. 327; Tenney v. Foote, 95 Ill. 99; Phelps v. Holderness, 56 Ark. 300, 19 S. W. 921.
Whether the business was illegal depends upon the fact as to whether it was conducted in violation of the Cotton Futures Act, as section 14 of that act, above quoted, makes it a crime punishable by fine and imprisonment for any person to violate any of its provisions. There is no pretense that the tax imposed by section 3 was paid. Section 5, how- . ever, provides that the tax need not be paid on any contract of sale, if the contract comply with the conditions named in said section. Assuming that the memorandums offered in evidence constituted the contract mentioned in the Cotton Futures Act, it appears that they contain this indorsement: “Subject to the United States Cotton Futures Act, Section 5.” Under the law, this incorporated into the contract all of the provisions of section 5, except subdivisions first and second. The weight of the cotton not being mentioned, each bale was deemed under the law to weigh 500 pounds. The memorandums of purchase and sale offered in evidence were signed only by the brokers who sold the cotton and by the vendee who bought the same. This being so, counsel for defendant contends that the memorandums were not signed by the party to be charged or by his agent in his behalf. I see no merit in this contention, as the Cotton Futures Act does not make it necessary for the agent to say, when he signs the contract or memorandum, that he signed it in behalf of his principal, meaning him. To hold otherwise would be to abolish the law in regard to the acts of an agent for an undisclosed principal. The plaintiffs show they were the agents of the defendant, and acted as such in the purchase and sale of the cotton; and this either party could do, even in cases where the law requires the contract to be in writing (Briggs v. Partridge, 64 N. Y. 357, 21 Am. Rep. 617; Ford v. Williams, 21 How. 287, 16 L. Ed. 36); the only exceptions being instruments under seal and promissory notes (21 R. C. L. 891). The contention that the memorandums did not specify the time of delivery has no merit. The memorandums all bore dates in January and February, 1917, and specified May as the time of delivery. This could only mean May, 1917. The contention that the names and addresses of the seller and buyer are not mentioned is based upon the fact that the names and addresses of the brokers alone were mentioned. Under the rules of the Cotton Exchange, only members thereof may *533buy or sell cotton on the Exchange. The brokers, so far as the Exchange is concerned, are the buyers and sellers.
Congress, in legislating as to the sale of cotton for future delivery on the Cotton Exchange, must have been familiar with the manner of transacting business thereon, and as to who are called sellers and buyers. It is claimed that the written memorandums are in violation of the regulations of the Treasury prescribed under the Cotton Futures Act in this: That the memorandums refer to the rules of the Cotton Exchange which permit verbal contracts, but to refer in a written contract to the provision in the rules mentioned would not violate the Treasury regulation if the verbal contract could not be substituted fear the written one.
I am satisfied that, if thfe memorandums offered could be held to be the contracts referred to in the Cotton Futures Act, then they comply substantially with the provisions of section 5; but, conceding they do comply with the provisions of section 5, it still remains to be determined: Are they evidence of a contract? Are they, standing alone, evidence of a written contract ? The difficult question in the case is: What did Congress mean by the following language found in section 4: ‘‘And shall be signed by the party to be charged, or by his agent in his behalf.” An instrument in writing, not signed by both seller and buyer, would not constitute a contract in writing. It is provided by rule 47 of the New Orleans Cotton Exchange as follows :
“It shall he the duty of the seller, on the day on widen transactions in contracts take place, or at not later than 9 a. in. on the following day, to furnish a contract or slip, and deliver his own already signed, and the opposite one in blank to the buyer; the latter shall then sign his contract, or slip, and return it to On; seller.”
Notice may be taken that this is the manner of doing business on the great exchanges of the country. Sometimes the instruments executed are called buyers’ slips or sellers’ slips; sometimes bought and sold notes. Nicol v. Ames, 173 U. S. 509, 19 Sup. Ct. 522, 43 L. Ed. 786. The language used by Congress, above quoted, would seem to be unfortunate, as Congress could not make an instrument signed by one party only a contract.
Some courts, in deciding questions under the statute of frauds, have decided that a party to a contract which the law required to be in writing, who did not sign the same, may enforce the contract against the party who did, and the language used by Congress might have come from this source; but, as the language, if literally interpreted, would be meaningless, because both the seller and the buyer are to be charged in any contract for the purchase or sale of cotton, I think it must be held that the language means that any party to the contract who is to be charged thereby must sign it, either himself or by his agent. Moreover, this is not a suit to charge either party to the contracts of purchase and sale.
Counsel for plaintiff at the trial offered oral evidence to show that Thorn & Maginnis signed contracts agreeing to purchase cotton from the brokers who signed the memorandums which were offered in evidence similar in all respects to the contracts offered, except that they *534read “bought from,” instead of “sold to,” and that each of them contained the exact wording of ones offered with that exception, and were delivered to the brokers signing the memorandums offered: that these other brokers were all residents and citizens of the state of Louisiana, and that said instruments were in the state of Louisiana, and outside of the jurisdiction of the court. The trial court denied this offer, for the reason that the evidence offered was not the best evidence, and there had been no sufficient effort made to obtain the originals or copies thereof to allow the introduction of secondary evidence as to their contents. T think the court was right in this ruling. Burton v. Driggs, 20 Wall. 125, 22 L. Ed. 299, and Stebbins v. Duncan, 108 U. S. 32, 2 Sup. Ct. 313, 27 L. Ed. 641, decide nothing to the contrary. It is not clear whether any such offer was made with respect to the sale of the 2,000 bales of cotton. It is contended that, the present suit not being on the contracts, the evidence offered was collateral to the main issue, and therefore it was not necessary to produce the original contracts or copies. I cannot agree that the evidence was offered on a collateral issue. It stood without contradiction in the case that the tax provided by law on the purchase and sale of cotton at the New Orleans Cotton Exchange had not been paid. The purchase or sale without such payment was a crime under the Cotton Futures Act. The plaintiff participating in such offense could not recover for their disbursements and commissions unless they showed they complied with those provisions of the Cotton Futures Act, which would relieve them from the payment of the tax. It was consequently one of the important issues for the plaintiffs to meet. The law is that the agent must know that he is committing an illegal act, but in this instance the plaintiffs were bound to know the law, and, as they knew the facts, they must be held to have knowingly transacted the business. Whatever offense was committed, the plaintiffs were aiders and abettors therein, and under section 332 of the Penal Code (Act March 4, 1909, c. 321, 35 Stat. 1152 [Comp. St. § 10506]) were principals.
It thus appears on the face of the record that Browne or his agents, Thorn & Maginnis, did not sign the memorandums offered in evidence, and if there were buyer and seller slips signed and executed by Thorn & Maginnis in connection with the purchase and sale of the cotton in controversy, they have not been produced, and for all the purposes of this case, must be treated as not having been executed. With the case in this position, I am of the opinion that, so far as the present record is concerned, the Cotton Futures Act was violated in this: That no tax was paid as provided by law on the purchase and sale of the cotton on the New Orleans Cotton Exchange, nor has there been ■ shown such a compliance with the Cotton Futures Act as would relieve the sellers from the payment of the tax. The transaction in regard to ■the purchase and sale of the stock was therefore illegal.
In such cases, the law will leave the parties where it finds them, not lending its aid to either. The plaintiffs therefore may not recover.