Motions to suppress depositions for irregularities should be
made before the case is called for trial, so that opportunity may
be afforded to correct the defects or to retake the testimony.
A variance between the notice and the commission to take
depositions such as misspelling the commissioner's name in the
latter, affords no valid ground for the suppression of the
depositions.
Where a principal sends an order to a broker doing business in
an established market or trade for a deal in that trade, he thereby
confers upon the broker authority to deal according to any well
settled usage in such trade or market, especially when such usage
is known to the principal, and is fair in itself, and does not
change any essential particular of the contract between the
principal and the broker, or involve any departure from the
principal's instructions, provided the transaction for which the
broker is employed be lawful in character and is not violative of
good morals or public policy.
In an action by A., a cotton broker doing business on the New
York Cotton Exchange, against B. for moneys claimed to be due for
advances and commissions on account of various transactions for B.
in selling as his agent cotton for future delivery, it was not
error to admit in evidence the statutes of New York under which the
said Cotton Exchange was organized, together with the rules and
regulations of that body in pursuance of which the transactions in
question were conducted, it appearing that B. knew that A. when
acting as his agent, would transact the business through that
Exchange, and in accordance with its rules and regulations.
By the agreed use of Shepperson's code, which provided that,
"unless otherwise stated as agreed, it is distinctly understood
that all orders sent by this chapter are to be subject in every
respect to the bylaws and rules of the market where executed,"
and further, that
"with every telegram sent by this table, the following sentence
will be read as a part of the message,
viz., 'this sale
has been made subject to all the bylaws and rules of our Cotton
Exchange in reference to contracts for the future delivery of
cotton,'"
the rules and regulations which were authorized to be made by
the statutes of New York, under which the exchange was
incorporated, entered into and formed a part of the transactions in
this case. Contracts for the future delivery of personal property
which the vendor does not own or possess, but expects to obtain by
purchase or otherwise,
Page 149 U. S. 482
are valid if at the time of making the contract, an actual
transfer of the property is contemplated by at least one of the
parties to the transaction.
Slip contracts, in the form prescribed by the rules and
regulations of the Cotton Exchange, constitute bought and sold
notes, which, taken together, as they should be, afford a
sufficient memorandum in writing between the brokers, or their
principal, and the vendee of the cotton to satisfy the requirements
of the statute of frauds.
The defense of the statute of frauds cannot be set up against an
executed contract.
The employment of a broker to sell property for future delivery
implies not only an undertaking to indemnify the broker in respect
to the execution of his agency, but also implies a promise on the
part of the principal to repay or reimburse him for such losses or
expenditures as may become necessary or result from the performance
of the agency.
B. and H. being sued as partners, and it appearing from the
proof that H. was not a partner but merely a clerk, no objection to
the misjoinder having been made by either of the defendants,
judgment for the whole amount was properly entered against B., a
substantial cause of action having been established.
The case of
Irwin v. Williar, 110
U. S. 449, distinguished.
The defendants in error, citizens of the States of New York and
Tennessee and doing business in the City of New York as brokers,
commission merchants, and cotton factors under the firm name and
style of Richard H. Allen & Co., brought this action of
assumpsit in February, 1887, against the plaintiff in error and one
Hopkins, citizens of Alabama, as partners under the name of B. S.
Bibb & Company, to recover the sum of $20,023.50 with interest,
which was claimed as commissions for services rendered, and money
paid and advanced by them for and at the request of the defendants
in selling, for their account, and as their agents, cotton for
future delivery according to the rules and regulations of the New
York Cotton Exchange, in the City of New York.
The declaration or complaint was in the usual form, and
contained but a single count for work and labor done, services
rendered, and money paid out and expended by the plaintiffs during
the month of December, 1886, at the instance and request of the
defendants, to the amount of $20,023.50, which, with interest
thereon, was averred to be past due and unpaid. The defendants
answered separately. Neither of them denied
Page 149 U. S. 483
the existence of a partnership between them, but both defended
upon the merits. The answer of the defendant Hopkins consisted of
two pleas: (1) nonassumpsit; (2) that the plaintiffs did not do the
work and labor or pay the money mentioned in the complaint at his
instance or request. The defendant Bibb filed an answer containing
five pleas, the first two of which were the same as those
interposed by Hopkins. His third plea was a general denial of the
allegations of the complaint, while the fourth and fifth averred
that the work and labor performed by the plaintiffs, as set forth
in their declaration, was the making of eleven wagers for him on
the price of cotton, and that the money paid by the plaintiffs for
him was in the settlement of the losses of those wagers, and in
each of these pleas the statute of the State of New York against
wagers, bets, and gambling transactions was set out.
After issue joined on the pleas, the defendant Bibb, by leave of
the court, filed a sixth plea, setting up that on November 10,
1886, the plaintiffs, as special agents for him, sold 10,000 bales
of cotton by various contracts, as a speculation, and for future
delivery in New York, and averred that the plaintiffs, by their
gross negligence and unskillfulness, made said contracts in such
forms that all of said contracts, under the laws of the State of
New York, were unlawful and void, and not binding on any one of the
parties to said contracts, or either of them, in this: that in and
by the statute law of New York in force at the time said contracts
were made, it is declared that
"every contract for the sale of any goods, chattels, or things
in action, for the price of $50 or more, shall be void unless (1) a
note or memorandum of such contract be made in writing, and be
subscribed by the parties to be charged thereby; or (2) unless the
buyer shall accept and receive a part of such goods, or the
evidences, or some of them, of such things in action; or (3) unless
the buyer shall at the time pay some part of the purchase
money."
It was further averred that no note or memorandum of any of the
contracts of sale made by plaintiffs for defendant was made in
writing and signed by the parties to be charged thereby; that no
part of said
Page 149 U. S. 484
cotton was accepted by the buyer, and no part of the purchase
money was paid therefor. The plea further alleged that on December
30, 1886, the plaintiffs, without the request of the defendants,
but voluntarily, settled said void contracts, and paid to the
buyers of the cotton under such contracts large sums of money, and
concluded with the averment that, without this, the plaintiffs
never did any work, or paid any money, for the defendant.
Upon the trial of the cause before the court and a jury, the
court, after stating to the jury that there was no evidence in the
case upon which a verdict for the defendant Bibb could rest, on the
ground that the contract sued on was a gambling contract, and
therefore void, further instructed them that
"the defendant Bibb did not in his testimony deny the
correctness of the account sued on, but did say that the plaintiffs
were liable to him for their failure to execute his subsequent
orders to them to sell, for future delivery, some twenty-two
thousand bales of cotton, as shown in the evidence in this cause,
but, there being no claims by him in this suit against the
plaintiffs on account of such failure to execute such orders,"
"I charge you that if you believe the evidence, you should find
a verdict for the plaintiffs against the defendant Bibb for the
amount of the account and interest."
The court further charged the jury: "This case is made out as to
defendant B. S. Bibb, and it is your duty to find a verdict against
him for the account sued on and interest."
To the instruction that if they believed the evidence, they
should find a verdict for the plaintiffs against him for the
account sued on and interest, the defendant Bibb excepted. The jury
returned the following verdict:
"We, the jury, find for the plaintiffs against the defendant
Bibb, and assess the damages at $22,476.38, and we find for the
defendant T. H. Hopkins on the ground that we find he was not a
partner of B. S. Bibb."
Upon a return of this verdict, the defendant Bibb objected to a
judgment's being rendered against him thereon for the reason that
the complaint and pleadings and said verdict did not authorize a
judgment against him. No other ground of objection was stated or
interposed. The court overruled
Page 149 U. S. 485
his objection and entered judgment against him for the amount
found by the jury, to which Bibb excepted. The present writ of
error is prosecuted by him to reverse that judgment.
Page 149 U. S. 486
MR. JUSTICE JACKSON delivered the opinion of the Court.
The plaintiff in error has filed nineteen assignments of error,
which may be grouped under five heads or propositions,
viz.: (1) that the court erred in overruling the motion to
suppress the deposition of the witness Richard H. Allen; (2) that
the court erred in admitting as evidence the statutes of New York
under which the New York Cotton Exchange was incorporated, and the
rules and regulations of the exchange, together with the parol
testimony that the transactions in
Page 149 U. S. 487
question between the parties were conducted in accordance with
those rules and regulations; (3) that the contracts for the sale of
cotton for future delivery were gambling contracts within the
meaning of the New York statute against wagers, bets, etc.; (4)
that said contracts were invalid under the statute of frauds of the
State of New York, and (5) that under the pleadings, no judgment
could be rendered against the defendant Bibb alone.
The questions thus presented may be properly considered in the
order stated under the facts disclosed by the bill of exceptions.
The motion to suppress the deposition of the witness Richard H.
Allen was based on the ground that no commission was issued out of
the court, or by the clerk thereof, authorizing George H. Corey, as
commissioner, to take the deposition; and, secondly that neither of
the defendants or their attorneys received any notice of the time
and place of taking the deposition, or of the residence of either
the witness or the commissioner by whom the deposition was taken.
These objections to the deposition are clearly not well taken, for
several reasons: it is shown by the record that on April 7, 1888, a
notice was issued and served on the defendants that plaintiffs
would take the deposition of the witness Allen, whose place of
business was stated in the notice to be 31 and 33 Broad Street, New
York City, and that George H. Corey, whose place of business was 60
Wall Street, in that city, would be suggested as commissioner to
take such deposition, and that a copy of the interrogatories to be
propounded to the witness was attached to the notice. It further
appears that at that time the defendant Bibb objected to a
commission's being issued to take the deposition on the
interrogatories to be propounded by the plaintiffs, basing his
objection on the ground that the notice did not give the residence
of the witness and of the commissioner, and on the further ground
that no sufficient affidavit for the taking of the deposition had
been filed, which objections were manifestly insufficient inasmuch
as the place of business of both the witness and the commissioner
was stated, and an affidavit was filed by the attorney for the
plaintiffs which showed
Page 149 U. S. 488
proper ground for taking the deposition. Without invoking the
action of the court upon these objections, the defendant Bibb filed
cross-interrogatories to those propounded by the plaintiffs, and on
April 18, 1888, a commission was regularly issued to said George H.
Corey, as commissioner, to take the deposition on the
interrogatories and cross-interrogatories filed in accordance with
the terms of the notice served upon the defendants. The record
further shows that the deposition was actually taken in pursuance
of the commission thus issued, and was in all respects regular and
in proper legal form. The clerk of the court, in issuing the
commission, addressed it, however, to George H. Carey, Esq., 60
Wall Street, New York City, instead of to George H. Corey, but that
was purely a clerical mistake in making out the commission, and in
no way misled the defendant or affected his rights. He had been
notified of the place of taking the deposition, and had been given
the true name of the commissioner, and the slight variance in the
commission which issued was not material, and furnished no valid
ground for the suppression of the deposition.
Keene v.
Meade, 3 Pet. 1,
28 U. S. 6.
But aside from this, the motion to suppress the deposition came
too late. As already said, the commission to take the deposition of
said Allen was issued April 18, 1888. The deposition was taken
before the proper commissioner on May 17, 1888, and, after
transmission to the clerk of the court, was by him published, under
a general order of the court, May 29, 1888. The May term of the
court was then in session, and continued in session until July 8,
1888. The November term commenced on the first Monday of that
month. During all that time, the defendant Bibb made no objection
to the deposition, and gave no notice that he would move to
suppress it, but waited until January 10, 1889, the day set for the
trial of the cause, when, after a motion for a continuance, then
made, had been overruled, he for the first time moved to suppress
the deposition. If the deposition was in any respect open to
irregularities, the motion to suppress it, under the circumstances,
came too late. Such motions should be made before the case is
called for trial, so as to afford opportunity to retake
Page 149 U. S. 489
the testimony or correct defects in the taking of the
deposition.
Howard v. Stillwell & Bierce Mfg. Co.,
139 U. S. 199,
139 U. S. 205,
and cases cited. The same rule of practice prevails in Alabama.
De Vendal v. Malone, 25 Ala. 272, 278;
Birmingham
& Union Ry. Co. v. Alexander, 93 Ala. 133. This assignment
of error is therefore without merit.
The next assignment of error relied on is in the action of the
court admitting in evidence the statutes of New York under which
the New York Cotton Exchange was organized, together with the rules
and regulations of that body under and in pursuance of which the
transactions in question were conducted. This evidence was clearly
competent and relevant, because the contracts entered into between
Bibb & Company and the plaintiffs contemplated that the
business which the plaintiffs would transact for their principals
would be under and in accordance with the rules and regulations of
the New York Cotton Exchange. It was proper, therefore, to show
that this Cotton Exchange was a lawful body, organized for lawful
business purposes, and had power to make such rules and regulations
as might be deemed necessary and proper to carry out the purpose of
its organization. It is clearly shown that B. S. Bibb & Company
knew that the plaintiffs did business as cotton factors in that
exchange, and in accordance with those rules and regulations, and
that, in acting as their agents in the sale of cotton for future
delivery, they would transact the business through that exchange,
and in accordance with its rules and regulations. It was therefore
germane to the issues in the case, and was both competent and
relevant to prove that the contract between the parties had been
carried out on the part of the plaintiffs in the mode and according
to the methods contemplated by the parties.
Peabody v.
Speyers, 56 N.Y. 230, 236;
Nickalls v. Merry, L.R. 7
H.L. 530, 542.
It is settled by the weight of authority that where a principal
sends an order to a broker engaged in an established market or
trade for a deal in that trade, he confers authority upon the
broker to deal according to any well established usage in such
market or trade, especially when such usage is known
Page 149 U. S. 490
to the principal, and is fair in itself, and does not change in
any essential particular the contract between the principal and
agent, or involves no departure from the instructions of the
principal, provided the transaction for which the broker is
employed is legal in its character and does not violate any rule of
law, good morals, or public policy. We are of opinion, therefore,
that the assignment of error based upon the admission of this
testimony is not well taken.
Upon the third assignment of error, which presents the question
whether the transactions in which the parties were engaged were
illegal because they were wagering contracts under the New York
statute against wagers, bets, etc., the evidence in the case
clearly fails to make out such a defense. In entering into their
arrangement, it is shown by the correspondence and by other
testimony in the case that there was no agreement or understanding
between the plaintiffs and defendants that the cotton sold for
future delivery was not in fact to be actually delivered. In their
correspondence as to the terms on which the agency was to be
undertaken the plaintiffs were distinctly informed that the
defendants did a large business for the best and most reliable
people of their locality; that they would hold themselves
personally responsible for all orders sent, and hold their
correspondents responsible for all orders executed as to margins;
that they handled sometimes from 3,000 to 5,000 bales of cotton a
day, and that their customers dealt in orders for from 500 to 1,000
bales at a time, and were entirely responsible. It was also
testified by both the plaintiffs and defendant Bibb that there was
no understanding or agreement, either express or implied, between
them at the time of entering upon the transactions or during their
progress, that the cotton sold for account of the principals was
not to be delivered at the time stipulated in the contracts of sale
made for their account. It is not questioned that, if the
transactions in which the parties are engaged are illegal, the
agent cannot recover either commission for services rendered
therein or for advances and disbursements by him for his principal,
Story on Agency, §§ 330, 344, and authorities cited, the reason for
this rule being that in such illegal transactions
Page 149 U. S. 491
of which the agent has knowledge he is regarded as
particeps
criminis, which precludes him from the recovery of either
commissions or advances.
Irwin v. Williar, 110 U.
S. 499,
110 U. S.
510.
But the facts of this case do not bring the transactions in
question within the operation of that principle, for the evidence
set out in the bill of exceptions fails to show that either party
to the transactions intended the same as wagering or gambling
speculations. On the contrary, the undisputed testimony establishes
that the sales were not wagers, but that the cotton was to be
actually delivered at the time agreed upon. Bibb's own statement of
the transactions does not disclose the fact that they were
intended, even on his part, as gambling or wagering speculations.
He certainly never disclosed to the plaintiffs, as his brokers,
either in their correspondence or in their verbal communications,
that he did not intend to deliver the cotton sold through them for
future delivery. In addition to this, it is shown that the rules
and regulations of the New York Cotton Exchange recognized no
contracts except for the sale and purchase of cotton to be actually
delivered. These rules and regulations impose upon the seller the
obligation to deliver the cotton sold, and upon the purchaser the
obligation to receive it, except in certain specified cases which
have no application to the present case.
These rules, which were authorized to be made by the statute of
the State of New York under which the exchange was incorporated,
enter into and form part of the contracts of sale in this case. The
defendants, in one of their earliest communications to the
plaintiffs, informed them that they would use in their telegraphic
correspondence what was known as "Shepperson's Code," which
provided that,
"unless otherwise stated as agreed, it is distinctly understood
that all orders sent by this chapter are to be subject in every
respect to the bylaws and rules of the market where executed,"
and further that
"with every telegram sent by this table, the following sentence
will be read as a part of the message,
viz.: 'This sale
has been made subject to all the bylaws and rules of
Page 149 U. S. 492
our Cotton Exchange in reference to contracts for the future
delivery of cotton.'"
It is well settled that contracts for the future delivery of
merchandise or tangible property are not void, whether such
property is in existence in the hands of the seller or to be
subsequently acquired. 2 Kent's Com. 468, and authorities cited in
notes; Benjamin on Sales, Amer. ed., §§ 81, 82. It is further well
settled that the burden of proof is upon the party who seeks to
impeach such transactions by showing affirmatively their
illegality.
Roundtree v. Smith, 108 U.
S. 269;
Dykers v. Townsend, 24 N.Y. 57;
Irwin v. Williar, 110 U. S. 499,
110 U. S.
507-508. In this latter case, the trial court charged
the jury that the burden of showing that the parties were carrying
on a wagering business, and were not engaged in legitimate trade or
speculation, rests upon the defendant. On their face, these
transactions are legal, and the law does not, in the absence of
proof, presume that the parties are gambling.
"A person may make a contract for the sale of personal property
for future delivery which he has not got. Merchants and traders
often do this. A contract for the sale of personal property which
the vendor does not own or possess, but expects to obtain by
purchase or otherwise, is binding if an actual transfer of property
is contemplated. A transaction which on its face is legitimate
cannot be held void as a wagering contract by showing that one
party only so understood and meant it to be. The proof must go
further and show that this understanding was mutual -- that both
parties so understood the transaction. If, however, at the time of
entering into a contract for the sale of personal property for
future delivery it be contemplated by both parties that at the time
fixed for delivery the purchaser shall merely receive or pay the
difference between the contract and the market price, the
transaction is a wager, and nothing more. . . . It is not
sufficient for the defendant to prove that Irwin & Davis never
understood that they were to deliver wheat in fulfillment of the
sales made for them by the plaintiffs. The presumption is that the
plaintiffs expected Irwin & Davis to execute their contracts --
expected them to
Page 149 U. S. 493
deliver the amount of grain sold, and before you can find that
the sales were gambling transactions, and void, you must find from
the proof that the plaintiffs knew or had reason to believe that
Irwin & Davis contemplated nothing but a wagering transaction,
and acted for them accordingly. If the plaintiffs made sales of
wheat for Irwin & Davis for future delivery understanding that
these contracts would be filled by the delivery of grain at the
time agreed upon, Irwin & Davis were liable to the plaintiffs,
even though they meant to gamble, and nothing more."
This Court approved that charge as a correct statement of the
law upon the subject of what constitutes a wagering contract. It is
directly in point here, for the evidence fails to show not only
that Bibb & Company intended it as a wagering contract, but it
fails to show also that the plaintiffs so understood it. The
testimony establishes that the plaintiffs did not, in fact so
understand it.
It further appears that in the memorandum or "slip contracts" of
sale actually made by the plaintiffs for the account of Bibb &
Company, the sales were described as made "subject to the rules and
regulations of the New York Cotton Exchange." Under these
circumstances, we are of opinion that the testimony fails to
establish that the contracts in question were wagering transactions
and therefore void. The testimony is so clear to the contrary that
the court below, under the settled rules of this Court, was
certainly justifiable in not submitting that question to the jury,
for if it had been submitted, and the jury had found that the
contracts were wagers, it would have been the duty of the court to
set aside their verdict. There is no merit in this assignment of
error.
It is next urged on behalf of the plaintiff in error that the
contracts for the sale of the cotton were void under the statute of
frauds of the State of New York because there was no sufficient
note or memorandum in writing of the transactions, signed by the
parties to be charged thereby. We are of opinion that this
contention cannot be sustained under the facts of the case.
Page 149 U. S. 494
After agreeing upon the terms in which the business should be
transacted, and the use of Shepperson's code of cipher, B. S. Bibb
& Company, on November 9, 10, and 11, 1886, telegraphed orders
to the plaintiffs to sell for them in the aggregate 10,000 bales of
cotton for January and February delivery. These dispatches were
sent according to the form of Shepperson's code, and directed the
sales for delivery for account of designated names such as
"Albert," "Alfred," "Alexander," "Amanda," "Andrew," "Winston,"
etc., which names were intended and understood to represent the
firm name of B. S. Bibb & Company. Thus, under date of November
9, 1886, B. S. Bibb & Company telegraphed to plaintiffs:
"If bureau report is considered favorable tomorrow, sell for
January delivery 1,000 bales cotton account Albert. Sell for
February delivery 1,000 bales account Alfred. Sell for January
delivery 1,000 bales account Alexander. Sell for January delivery
500 bales cotton account Andrew. Act promptly if favorable."
So, under date of November 10, 1886, they telegraphed: "If
market opens as high or higher tomorrow, sell for January delivery
1,500 bales cotton account Winston. Keep us thoroughly posted."
These dispatches, as well as others of a similar character of
later dates, meant "sell for January or February delivery the
designated number of bales on account of B. S. Bibb & Company,"
and had attached to them, by the express terms of Shepperson's
code, the understanding and agreement, already quoted, that the
orders were to be subject in every respect to the bylaws and rules
of the Cotton Exchange of New York, with the additional terms read
into the telegrams, and as a part thereof, the stipulation that the
sales were to be subject to said bylaws and rules in reference to
the future delivery of cotton.
The plaintiffs executed these orders promptly as they were
received. In the execution of the orders, they made what are called
"slip contracts" in duplicate, one copy, signed by the purchaser,
being delivered to the plaintiffs, and the other, signed by the
plaintiffs as brokers, being given to the purchaser. There were
nineteen sales of cotton to various persons
Page 149 U. S. 495
named in these "slip contracts," which were in the following
form:
"New York, Nov. 10, 1886."
"B 10 ac. Albert."
"10 ' Alexander."
"5 ' Andrew."
"Seller, _____ _____."
"Buyer, Zerega & White."
"On contract, subject to rules and regulations"
"of New York Cotton Exchange."
"Twenty-five hundred bales cotton."
"Jan. 1 delivery."
"Price, 8.99."
"x Per Z. & White, seventy-five."
These contracts differed only in date, in the name of the
purchaser, in the quantity of cotton sold, and the price thereof.
As each sale was thus made, it was reported promptly by the
plaintiffs to the defendants, both by letter and by telegram,
giving price and stating that the orders to sell were executed. So
that the defendants were kept accurately advised of each
transaction made in pursuance of their order.
In addition to the "slip contracts" in the form described above
delivered by the plaintiffs to the purchasers of the cotton sold,
and received by them from the buyers of cotton, the sales were
entered upon the books of the plaintiffs in conformity with such
contracts. These "slip contracts" show upon their face that the
purchaser named therein bought cotton, sold for account of the name
adopted to represent B. S. Bibb & Company. They gave the price,
and the number of bales, and the time of delivery. They were in the
form prescribed by the rules and regulations of the Cotton
Exchange, and constitute bought and sold notes, which, taken
together, as they should be, constitute a sufficient memorandum in
writing of the contract between the brokers, or their principal,
and the purchasers of the cotton, to meet the requirements
Page 149 U. S. 496
of the statute of frauds.
Peabody v. Speyers, 56 N.Y.
230, 236-237;
Newberry v. Wall, 84 N.Y. 576, 580;
Butler v. Thomson, 92 U. S. 412;
Beckwith v. Talbot, 95 U. S. 289;
Ryan v. United States, 136 U. S. 68,
136 U. S. 83;
Bayne v. Wiggins, 139 U. S. 210.
In this latter case this Court, speaking by MR. JUSTICE HARLAN,
said:
"The principle is well established that a complete contract,
binding under the statute of frauds, may be gathered from letters,
writings, and telegrams between the parties relating to the subject
matter of the contract, and so connected with each other that they
may be fairly said to constitute one paper relating to the
contract."
So in Benjamin on Sales, Amer. ed. § 296, after a review of the
authorities, both English and American, it is stated:
"The bought and sold notes, when they correspond and state all
of the terms of the bargain, are complete and sufficient evidence
to satisfy the statute, even though there be no entry in the
broker's books, or, what is equivalent, only an unsigned
entry."
Goom v. Aflalo, 6 B. & C. 117;
Sievewright v.
Archibald, 17 Q.B. 115;
Thompson v. Gardiner, 1
C.P.D. 777. Such too is the rule in New York, as shown by the
earlier cases of
Peltier v. Collins, 3 Wend. 459;
Davis v. Shields, 26 Wend. 341.
The bought and sold notes in question in this case, called "slip
contracts," when read in the light of the rules and regulations of
the Cotton Exchange, and considered in connection with the letters
and telegrams between the parties, constitute a sufficient note or
memorandum in writing of the transactions to satisfy the
requirements of the statute of frauds. It is no valid objection to
these "slip contracts," executed in duplicate, that the sales
purported to be made on account of "Albert," "Alfred," "Alexander,"
"Amanda," and "Winston," etc., which names were adopted by the
defendants, and which represented them and their account. Parol
evidence was clearly competent to show that these fictitious names,
which defendants had adopted, represented them as the parties for
whose account the sales were made.
But, aside from this, and independent of the question whether
the bought and sold notes, called the "slip contracts,"
constitute
Page 149 U. S. 497
a compliance with the statute of frauds, the contracts were
fully executed, and the transactions closed, before the plaintiffs
commenced the present suit. It is well settled by the authorities
that the defense of the statute of frauds cannot be set up against
an executed contract.
Dodge v. Crandall, 30 N.Y. 304;
Brown v. Farmers' Loan & Trust Co., 117 N.Y. 273;
Madden v. Floyd, 69 Ala. 221, 225;
Gordon v.
Tweedy, 71 Ala. 202, 214;
Huntley v. Huntley,
114 U. S. 394,
114 U. S. 400;
Browne on Stat. of Frauds § 116. This rule proceeds and rests upon
the principle that there is
"no rule of law which prevents a party from performing a promise
which could not be legally enforced, or which will permit a party
morally but not legally bound to do a certain act or thing, upon
the act's or thing's being done, to recall it to the prejudice of
the promisee on the plea that the promise, while still executory,
could not, by reason of some technical rule of law, have been
enforced by action."
Newman v. Nellis, 97 N.Y. 285, 291.
We know of no principle on which the agent can be deprived of a
right to his commissions and advances in the execution of his
agency for a principal on the ground that he has not avoided a
contract which was not in strict conformity with the statute of
frauds, in the absence of any instruction or instructions from the
principal not to comply therewith. Contracts not in conformity with
the statute are only voidable, and not illegal, and an agent may
therefore execute such voidable contracts without being chargeable
with either fraud, misconduct, or disregard of the principal's
rights. If the statute of frauds was not complied with in making
the sale contracts in the present case, we do not see that the
defendant was in a position to take advantage thereof, or that such
want of compliance with the statute, after the contracts were
executed, would constitute any defense to the action. The suit was
not brought on these contracts of sale, which the plaintiff in
error claims were voidable under the New York statute of frauds. It
is an action by the agents against their principal to recover for
work and labor performed, and money paid out at the principal's
instance and request, and in the settlement
Page 149 U. S. 498
of the principal's business, in which the agent had authority to
make disbursements for him. In the present case, the plaintiffs
had, by their contract, rendered themselves personally responsible
for the losses which might and did occur under the contracts of
sale made for account of the defendant, and as such agents, they
are entitled to recover against their principal the full amount
expended by them for him in the transactions. If, in closing out
the contracts of sale, profits had been realized on the
transactions, whether by reason of decline in the price of cotton
or by the purchases "to cover" the cotton sold, the brokers would,
upon well settled principles, have been liable to their principal
for the same. They could not have set up or interposed as a valid
defense to such liability that the contracts of sale out of which
the profits were realized were not enforceable under the statute of
frauds or were voidable by the agents or the purchaser with whom
they contracted. Neither can the principal interpose such an
objection as against the agent's right to commission or to
reimbursement for his outlays after the execution of contracts
merely voidable for want of writing.
Coward v. Clanton, 79
Cal. 23;
Morrill v. Colehour, 82 Ill. 619. It is a well
established principle which pervades the whole law of principal and
agent that the principal is bound to indemnify the agent the
consequences of all acts done by him in the execution of his agency
or in pursuance of the authority conferred upon him when the
actions or transactions are not illegal. Speaking generally, the
agent has the right to be reimbursed for all his advances expenses
and disbursements incurred in the course of the agency made on
account of or for the benefit of his principal when such advances,
expenses, and disbursements are reasonable and have been properly
incurred and paid without misconduct on the part of the agent. If,
in obeying the instructions or orders of the principal, the agent
does acts which he does not know at the time to be illegal, the
principal is bound to indemnify him not only for expenses incurred,
but also for damages which he may be compelled to pay to third
parties. The exception to this rule is where the transaction for
which
Page 149 U. S. 499
the agent is employed is illegal or contrary to good morals and
public policy. Addison on Contracts § 636; Story on Agency §§ 339,
340, and cases cited in notes. Thus, in
Beach v. Branch,
57 Ga. 362, where an agent had sold cotton for account of another
and was obliged to refund the purchase money to the purchaser on
account of false packing by the principal, he was allowed to
recover the amount so paid from the principal.
It is another general proposition in respect to the relation
between principal and agent that a request to undertake an agency
or employment, the proper execution of which does or may involve
the loss or expenditure of money on the part of the agent, operates
as an implied request on the part of the principal not only to
incur such expenditure, but also as a promise to repay it. So that
the employment of a broker to sell property for future delivery
implies not only an undertaking to indemnify the broker in respect
to the execution of his agency, but likewise implies a promise on
the part of the principal to repay or reimburse him for such losses
or expenditures as may become necessary or may result from the
performance of his agency.
Bayley v. Wilkins, 7 C. B. 886;
Smith v. Lindo, 5 C.B. (N.S.) 587. Where a special
contract remains executory, the plaintiff must sue upon it. When it
has been fully executed according to its terms, and nothing remains
to be done but the payment of the price, he may sue upon the
contract or in
indebitatus assumpsit and rely upon the
common counts. In either case, the contract will determine the
rights of the parties.
Dermont v.
Jones, 2 Wall. 9. These general principles have a
direct application to the case under consideration upon the facts
disclosed by the record.
The decision in
Irwin v. Williar, 110 U.
S. 499, cited by plaintiff in error, is not in conflict
with the views above expressed, nor does that decision properly
apply to the facts in this case. The judgment of the court below in
that case was reversed for error in the charge of the court upon
the point that the act of one partner in buying and selling grain
for future delivery was binding upon the other partner, who had not
authorized, sanctioned, or known of the transactions,
Page 149 U. S. 500
and for the further reason that the court permitted. proof of
the custom of the Chicago Exchange when there was no evidence that
the defendant below had knowledge of it. In the present case, it is
shown that the plaintiff in error had full knowledge of the rules
and regulations of the New York Cotton Exchange, and of the course
of business that had to be and would be adopted by the defendants
in error in executing his orders to sell. It is further shown by
the testimony that it was expressly understood and agreed in
writing, under date of November 3, 1886, between the parties at the
commencement of these transactions that
"if a call for margins (which the plaintiff in error was to put
up) is not responded to promptly, there is to be no carrying on our
part (Richard H. Allen & Co.), but that the cotton is to be
closed out at our discretion,"
to which agreement the plaintiff in error assented. When the
cotton advanced beyond the price at which it was sold for delivery,
the plaintiffs below, in pursuance of the terms of the contract
with Bibb & Company, called upon the latter to put up margins
covering the advance in price. This Bibb & Company failed to
do, and the demand was repeated on several occasions. While they
were in default in putting up margins, Bibb & Company gave
orders to sell about 22,000 bales of cotton for future delivery.
These orders R. H. Allen & Co. declined to execute until proper
margins were put up on the past transactions and on the orders to
sell, and so notified Bibb & Company. That firm continued in
default in putting up margins, and a member of the firm of R. H.
Allen & Co., on December 29, 1886, asked the defendant below
for instructions about the contracts made with his firm by the
plaintiffs, but Bibb refused to give any instructions or to put up
margins. He was then informed that the plaintiffs below would close
out the contracts they had made for Bibb & Company, to which he
made no objection or dissent, and in pursuance of this notice, R.
H. Allen & Co., on December 30, 1886, went into the market, and
bought cotton "to cover" that which they had sold for account of B.
S. Bibb & Company, and to make good their contracts. This they
were required to do both by the terms
Page 149 U. S. 501
of their contracts with the parties to whom the cotton had been
sold and by the rules and regulations of the exchange, of which
they were members. If they had failed "to cover" or to comply with
such contracts, they would have been liable to expulsion from the
Exchange. The cotton which they bought "to cover" these contracts
was purchased at the market price, and the difference between that
price and the price of 10,000 bales previously sold for Bibb &
Company amounted to $19,273.50, which, with the plaintiff's
commissions of $750, constituted their claim against B. S. Bibb
& Company, for the recovery of which the suit was brought.
Under these facts, which are uncontroverted, it is clear that the
rule laid down in
Irwin v. Williar has no application to
this case.
In the case of
Perin v. Parker, 126 Ill. 201, 211,
where the transactions were similar to those in question here, it
was said by the Supreme Court of Illinois:
"Parker, as agent for Perin and acting under his orders, sold
the corn for Perin and, under the rules of the Board of Trade and
the custom of the Chicago market, he was personally bound to the
purchasers on these contracts of sale. Parker and Perin were
dealing with reference to such rules and such custom, with which
they were both perfectly familiar. The rules of the Board of Trade
provided that on time contracts purchasers should have the right to
require of sellers ten percent margins, based upon the contract
price of the property bought, and further security, from time to
time, to the extent of any advance in the market value above said
price. The price of corn had been rapidly advancing since the date
of the sales. Parker either had deposited margins upon the
contracts or was liable to be called on for the ten percent and the
additional margins by the persons to whom he had sold the corn. The
evidence does not seem to disclose whether or not the purchasers
had either received or called for margins. Even if they had not,
yet there was an existing legal right in them to call on Parker for
margins, and a legal liability upon the latter, within the next
banking hour thereafter, to deposit the margins called for, and
also, within that time, deposit
Page 149 U. S. 502
with the secretary of the Board, or the parties calling for such
deposits, duplicate certificates of deposit, signed by the
treasurer of the Board, or an authorized bank."
This brings us to the consideration of the last assignment of
error,
viz., whether, under the pleadings and proofs, a
judgment was properly rendered against the defendant Bibb alone,
after a verdict had been given finding that Hopkins was not a
partner. On this question we entertain no doubt whatever. The
action was against the partnership carried on under the name of B.
S. Bibb & Company, the complaint alleging that B. S. Bibb and
Thomas H. Hopkins were the partners composing that firm. The proof
showed, however, that Hopkins was not a partner, but only a clerk,
and that the business done in the name of the firm of B. S. Bibb
& Company was that of B. S. Bibb alone. In support of this
objection to the judgment against him, counsel for Bibb rely upon
the case of
Walker v. Mobile Marine Dock & Mutual Ins.
Co., 31 Ala. 529, 531. That was an action against three
defendants as the joint owners of a steamboat. They made no
objection to the complaint, but interposed a plea of the general
issue. On the trial, the proof showed that but two of the
defendants were owners of the boat, and a verdict and judgment was
accordingly rendered against those two and in favor of the other
defendant. On a writ of error, the two defendants against whom the
judgment was rendered sought a reversal on the ground that, under
the pleadings, no judgment could be rendered against only two of
them, and that inasmuch as the proof disclosed a liability on the
part of only two, when the complaint was made against three, the
action should have been discontinued; but the supreme court ruled
otherwise and held, as stated in the headnote or syllabus of the
case, that
"when the complaint shows a substantial cause of action, and no
objection was interposed to it in the primary court, a misjoinder
of causes of action is not available on error."
It is true that in the opinion of the court in that case
reference is made to § 2156 of the then code of the state, which
allowed plaintiff to recover against one or more defendants, and it
was stated that that section should not be so construed as to
authorize
Page 149 U. S. 503
a recovery upon a cause of action not embraced in the pleadings
or which was inconsistent with the complaint, but that it
authorized a judgment in favor of some of the defendants where the
proof did not show the absence of a right to recover against the
remaining defendants upon the pleadings.
In the present case, there is no variance because of the fact
that Hopkins was not a member of the firm against whom the
plaintiffs below were seeking relief, especially when no objection
was made to any misjoinder and in the objection to the entry of
judgment upon the verdict which he interposed, Bibb did not state
any ground on which he rested the objection. But whatever may be
said of the case of
Walker v. Mobile Dock Co., which was
decided in 1858, since that time, new codes have been adopted (1876
and 1886) under the provisions of which, as construed by the later
decisions of the Supreme Court of Alabama, it admits of little or
no question that in a suit like the present against an alleged
partnership, in respect to which the liability is both joint and
several, the failure to recover against one of the alleged partners
cannot defeat a right to recover against the other, who did
business alone in the firm name.
In the case of
Clark v. Jones, 87 Ala. 474, 482, it was
said by the supreme court of the state:
"It is further objected that proof of demand against a
partnership of which defendant is a member does not authorize
recovery on a complaint which counts on an account stated between
plaintiffs and defendant individually and for goods sold to him
alone. This question should be regarded as
res adjudicata
in this state. Under the statute, which declares 'any one of the
associates, or his legal representatives, may also be sued for the
obligations of all,' it has been uniformly held that a partnership
creditor may sue one of the members of a firm for a debt contracted
in the partnership name, whether by account or otherwise, and
declare upon the demand as his individual liability,"
citing Code 1886, § 2605;
Duramus v. Harrison, 26 Ala.
326;
Hall v. Cook, 69 Ala. 87.
In
Smith v. Straub, 41 Kan. 7, 10, the Supreme Court
of
Page 149 U. S. 504
Kansas sustained a judgment in a case almost identical with the
present. That was a suit for the price of merchandise against three
persons as partners under the firm name of D. I. Ross & Co.
They denied the partnership on oath, and on the trial of the case
it was found as a fact that there was no partnership, but that only
one of the defendants was the owner of the business -- that one of
the others was an agent, and the other only a clerk in the store.
It was contended that no judgment could be rendered in the action
against the one who purchased the goods and owned the store, as it
was brought against her only as a partner, but the court ruled
otherwise, and said:
"It may be true under the common law practice that in a suit
against a partnership firm, no judgment could be rendered against
an individual member of that firm, but our statute provides that
all contracts shall be construed as joint and several, and it also
provides that in all cases of joint obligations and joint
assumptions of copartners or others, suits may be brought or
prosecuted against any one or more who are so liable. This action
was instituted under the theory that there was a partnership. The
plaintiff in error filed her answer under oath denying the
partnership, and if the proof fixed a liability on any one of the
parties, judgment could be rendered against such party
individually."
In
Rutenberg v. Main, 47 Cal. 213, it was held, in an
action against several partners where the complaint averred a joint
contract made by all the defendants and the answer denied the
contract, but did not set up a misjoinder of parties defendant,
that the plaintiff should not fail as against all of the
defendants, but should have judgment against those who the proof
showed had joined in the contract, while the others should have
judgment in their favor.
Gillam v. Sigman, 29 Cal. 637;
Gruhn v. Stanley, 92 Cal. 86; Pomeroy on Remedies and
Remedial Rights §§ 433, 434.
At common law, the objection for misjoinder should be made by
answer or plea in a way so as to give the plaintiff a better writ,
but at common law, where two or more parties are sued as partners,
and there is no denial of the partnership,
Page 149 U. S. 505
and no plea alleging a misjoinder, it is doubtful whether, after
verdict, such an objection could be taken. But however that may be,
under the modern codes, including that of Alabama, no such
objection can be made after verdict. In this case, the plaintiff in
error did business under the name of B. S. Bibb & Company, and
he should not be heard, when sued as a partner of that firm, to say
that he alone composed the firm, and was therefore not liable
because joined with another defendant who was not a member.
The several errors assigned for reversal of the judgment below
are, in our opinion, not well taken, and that judgment is
accordingly
Affirmed.