111 F. 470 | U.S. Circuit Court for the District of South Carolina | 1901
Counsel have requested that the court put in writing the reasons governing' it in ordering a nonsuit in this case.
The plaintiffs are cotton brokers in the city of New York, both of them being members of the New York Cotton Exchange. The defendant, a small farmer in Spartanburg, S. C,, employed them in the purchase of cotton futures for him. This relation began about a seat before the first of the transactions which are the subject-matter of this suit, and during that period the defendant made money out of them. The transactions sued upon here resulted in a loss. It seems from the evidence that, when a person instructs his broker to buy or sell futures for him under the rules of the Cotton Exchange of New York, such purchases or sales must be made in the name of the broker making them, his principal not being disclosed. The purchases or sales are always made on putting up a certain sum of money as a margin, and that margin must be kept up to meet the fluctuation of the cotton market. Under the rule of the New York Colton Exchange, the broker who made the transaction must protect the margin. He does so to protect his principal. Whenever the defendant gave his orders to plaintiffs, in executing them they notified him that they had done so, and that the whole transaction was governed by the rules and by-laws of the New York Cotton Exchange. He received every such notice in writing*, and did not reply one way or another. He first put some money in their hands himself. This was exhausted, and plaintiffs repeatedly made margins good, notifying the defendant each time of this fact, and requesting* repayment. When he failed to do this at their reiterated requests, they closed out the transactions, and now bring their action for recovery of these advances. There is no doubt that the money was advanced by plaintiffs for the use of defendant, and at his special instance and request; and under ordinary circumstances, ex aequo et bono, he should repay them. He sets up his defense that the money so advanced for him was used in a gaming transaction, and that under the law of South Carolina such a transaction is immoral, illegal, and void.
The statute law of South Carolina (Rev. St. 1893, § 1859 and those following) declares void every contract, bargain, or agreement, whether verbal or written, tor the sale or transfer at any future time of certain articles enumerated, including cotton, unless the party contracting to sell or transfer the same at the time of making the contract be the owner thereof, or the authorized agent of such owner, or unless it is the bona fide intention of both parties to the contract at the time of making the same that the said article (in this
This statute of the state of South Carolina above referred to has been construed by the supreme court of that state in Harvey v. Doty, 54 S. C. 382, 32 S. E. 501. .In that case, dealing with a contract for future delivery, the court held that when an agent contracts in good faith in his own name with other parties for the sale of property for future delivery, and there is a bona fide intention on the part of the agent and the other contracting parties at the time of making the contract to actually deliver on the one hand, and actually receive on the other, at the period mentioned in the contract, such agent cannot recover from his principal losses or advances made on such contracts, unless he can show that it was the bona fide intention of his principal at the time of the making of the contract to ac
There was a point strongly presented to the court, which greatly impressed itself. At the time the plaintiffs made each contract for the defendant and reported that fact to him, they gave formal notice in writing that it had been made under and subject to the rules and by-laws of the New York Cotton Exchange. The receipt of each notice was not denied. Upon such receipt, defendant did not reply, but his silence evidenced his assent. This, it was contended, estopped him from resorting to the defense now set up. But even under the rules of the New York Cotton Exchange, although the parties to the contract have the right the one to demand and the other to insist upon the acceptance of the subject-matter of the contract in kind, yet they may, without violation of this rule, forego this right, and intend not to exercise it, and to settle their difference in money. Besides this, the act goes behind the contract. Notwithstanding the contract, it makes the validity of the transaction depend on the bona fide intention of both parties. In the present case the defendant has sworn as to his intention,—that he at no time intended to deliver in kind; had no intention to deal in spot cotton, but speculated entirely on the profits of his contract. The counsel for the plaintiffs also insisted that all that this South Carolina statute effected wras the adoption of a rule of evidence for the state of South Carolina, and for cases in her courts. But the courts of the United States, in actions at law, administer the rules of evidence as they find them in the courts of the state in which they are situate. Thompson v. Railroad Co., 6 Wall. 138, 18 L. Ed. 765. Section 721, Rev. St. U. S. (being the reproduction of section 34 of the judiciary act of 1789), has been uniformly construed as requiring the courts of the Union, in the trial of civil cases at'common law, to observe as rules for decision the rules of evidence prescribed by the laws of the state in which such courts are held (Connecticut Mut. Life Ins. Co. v. Union Trust Co., 112 U. S. 254, 255, 5 Sup. Ct. 119, 28 L. Ed. 708); the only exception being cases provided for by the statutes of the United States (Potter v. Bank, 102 U. S. 165, 26 L. Ed. 111). See Vance v. Campbell, 1 Black, 430, 17 L. Ed. 168.
For these reasons, the nonsuit was ordered.