852

nDlilBAL' BlCPORTlIlB,

vol. 87.

LEHMAN

el al.

tI. FELD.

(Cl'rcuit Court, B. D. Mi88i88ippi. January tIS, 1889.)
1.

GUlmo-CONTRACTS FOR FUTURE DELIVERy-CONFLICT OF LAws.

t.

. Contracts for the future delivery of cotton, made by a commission merchant in New Orleans, to be performed there, for his principal, residing in the state of Mississippi, are governed by the laws of the state of Louisiana, and, if valid in that state, will be enforced by the circuit court of the United States in the state of Mississippi. A cl)ntract for the future. delivery of cotton is valid and binding unless shown by those challenging its validity that it was mutually agreed and understood by the parties to the contract when it was made that there was to be no delivery of the property, but that only the differences in the price were to be paid at the time the contract by its terms required delivery should be made. The rules and regulations adopted by the New Orleans Cotton Exchange in the settlement and substitution of contracts for the future delivery of cotton, when not used to promote a gambling transaction, are valid and legal. and are binding upon all persons familiar with such rules and regulations, or charge· able with knowledge thereof, when they employ members of said' exchange to buy or sellon the floor of said exchange cotton fOr' future deli very, and who in good faith so buy and sell in' accordance with the said rUles and regulations. . A commission merchant, who in g'ood faith buys and sells cotton for future delivery under the directions of his principal, without knowledge or reason to believe that said principal had no intention to deliver or receive said cotton, but only expected to pay the differences in the price at the maturity of the contracts of purchase or sale, may recover from said principal compensation for services performed. and money advanced at his request, notwithstanding the existence of such Illegal intent on the part of the principal. When, under the rules and regulations of the New OrleansCotton Exchange, a commission merchant becomes the guarantor for the performan'ce of the contract entered into by him for his principal; he has the right to demand margins from said principal to secure him against loss on account of said contract, and to close out said contract in the event the principal fails to remit saidmar$'ins on demand; and said commission merchant may, upon the default of his prlDcipal in the remittance of said margin when so demanded, close out .aid contract, and recover the losses sustained hy him, although the party' with whom the commission merchant dealtfor his said principal has made no demand for any margin. . Where the agent,at the of making a contract, discloses the name of his principal, he is not personally liable or bound to those who are thus tied that he acts as agent, for the default of the principal.' '

SA.ME-.lNTENT-BURDEN OF PROOF.

8.

SAME-CUSTOMS AND USAGE-VALIDITY.

.. SAME-FACTORS AND BROKERS-RIGHT TO COMMISSION.

G. SAME-RIGHT TO DEMAND MARGINS.

6.

PRINCIPAL AND AGENT-LIABILITY OF AGENT.

(811Zlabua btl the Oourt.)

At Law.

.J!cGhbe

Miller. Smith

Hir8h, for plaintiffs· Anderaon, for defendants.

HILL, J. The questions for decisiOnllte presentedbyamotion for a peremptory instruction to the jury to fina filr'the plaintiff's, and 'il. motion for a similar iWltruction to tind for This action is brought

!.EHMAN ". FELD.

853

by the plaintiffs to recover from the defendant the indebtedness stated in the declaration, alleged to be due them for commissions in making the purchase of contracts for cotton to be delivered at a future time, and for money expended by them on their guaranty that defendant would comply with the contracts. To the charges made in the declaration the defimdant has pleaded the general issue, and given notice in writing of special defenses. The correspondence between the parties and the other written and uncontradicted evidence adduced establish the following
faets:

The plaintiffs are, and have been for a number of years past, cotton factors and commission merchants doing business in the city of New Orleans, and are members of the New Orleans Cotton Exchange, and are engaged, as such cotton factors and commission merchants, in making purchases and sales of cotton to be delivered at a future time, on behalf of and for the interest of their principals or customers, under the rules and regulatioDs prescribed by that institution, to be compensated by the com- . missions thereby allowed . These rules and regulations do not require the members' purchasing or selling on the floor of the exchange to disclose the names of those for whom they sell or purchase, but each member or firm making such sales or purchases must guaranty and become personally bound for, the performance of all contracts so made, as though each was a principal, instead of an agent. The members' of the exchange may at stated times, or whenever it is agreed upon between themselves, J'ring out" or "close out" the said contracts of purchases or sales, by striking a balance, or setting off one contract against another, so as to substitute one for the other; the seller being still prepared and liable to deliver, and the purchaser to receive and pay for the same quantity of of the grade and at the price stipulated in the original contracts at the time stated for delivery; each being bound to the other upon the guaranty assumed, but on behalf of the unknown principals. These rules .and regulations further provide that, to secure the performance of the con,tracts by each individual or firm so contracting a margin of one dollar per' bale shall be deposited at the time of the contract, and shall be renewed' from time to time, as the rise or fall in price may require, according to the conditions prescribed in these rules and regulations, by which all the members are governed. The defendant had for some years previous to the dealings with the plaintiffs stated in the pleadings made contracts for the purchase and sale of cotton for future delivery through other cotton factors and commission merchants belonging to and doing business in the Cotton Exchange of New Orleans, and was required by them to put up the necessary margins, or furnish the money for said purchases or sales, and that, when sales were made at a loss, he was required to pay said loss. He was a member of the Vicksburg Cotton Exchange, had visited the New Orleans Cotton Exchange several times,and was well informed as to all the technical terms and phrases used by the members of tl;1e said New Orleans Cotton Exchange in making these contracts, and in transacting, business under the rules and regulations thereof, by. which these purchases and sales were made, and therefore must be presumed to
I

lI'EDERAIl ;BEPORTER,

vol. 37.

baveunderstdod them, and the duties, rights, and obligations of the members of said New Orleans Cotton Exchange to each other in relation to the contracts made by them for their principals, and of the obligations of the principals to them. On the23d day of November, 1887, defendant, by letter, applied to the plaintiffs to ascertain the commissions charged by them for making purchases or sales of cotton futures, to which plaintiffs responded stating the commissions they would charge; aiter which defendant from time to time directed the plaintiffs to make purchases of cotton for future delivery at the stated prices per pound, to be delivered 800 bales in April, 300 bales in May, and 800 bales in June, 1888, in all 1,900 bales, on behalf of himself and others, but did not state the names of the other persons for whom purchases were requested to be made, except the name of Philip Feld; and he was therefore liable for the contracts of those whose names were not given, as well as for those purchased on his own account. Plaintiffs, in compliance with said instructions, made contracts of purchase at different times for the 1,900 bales, to be delivered at the time and for the price directed by defendant. The defendant advanced the money for the deposits of the margins required when these contracts were made, and continued to advance the money for that purpose, when called for, until the 2d day of March, 1888. On that date a further decline in the price of cotton occurred, and thereplaintiffs wrote- to defendant, notifying him of the decline and requiring a further advance of $2,000 to make the margins good. The letter was received by defendant on Saturday, the day after it was written. To this demand no response was n1ade. At the call on Monday morning a further decline took place, and plaintiffs telegraphed defendant to know if he. had made the remittance called for in the letter, to which defendant made no reply. On the call of the same da,y the price was still tending downward, and the plaintiffs again wired defendant that; unless the margin called for was immediately forwarded, they would be compelled to close out the contracts to save themselves. Defendant declined to make the advance called for, and the plaintiffs testified that thE>y , closed out the contracts held by them for defendant at a loss of the amount stated in the declaration. Plaintiffs had closed out the original contracts with other parties, according to the rules and regulations of the cotton exchange, some time before this last margin was called for. The testimony of the plaintiffs is that they had purchased, or obtained upon adjustment of balances, as provided by the rules and regulations, other cotton contracts of the same grade, in the same quantity, to be delivered at ;the same time, and to be paid for at the same price, and held the same to replace those originally purchased, and it is these substituted contraGts which were sold or closed·out, resulting in the loss to recover which this suit iB brought. It. is insisted' on the part of the defendant that the proof does not show the plaintiffs Bet off on their books and appropriated these substituted in place of the original contracts, so as to 'render those making them liable to the defendant; and hence, at the time of the alleged sale, producing the loss for which .theaction is instituted, plaintifis held no