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
LEHMAN t1. FELD.
,.-.:
'855
contracts on behalf of defendant or those for whom he acted. I am' of the opinion that, if the plaintiffs then held them for the purpose of meeting contracts of purchases made for the benefit of the defendant, it was not necessary to place them on- their books, to enable them to dispose of the same to protect themselves against the losses incurred by reason of their guaranty of the performance of these contracts of purchase. But it was necessary that the plaintiffs should have had contracts fpr the delivery of cotton of the same quantity, at the same price, and at the same time, provided in the original contracts of purchase,-contractscorresponding in all respects with the original contracts had they remained uncanceled and in force; in other words, contracts to be substituted for the original contracts. The contracts were all made in, and were to be performed in, New Orleans, and consequently must be governed by the laws of the state of Louisiana then in force. Story, Confl. Laws, (8th Ed.) §§ 283, 285; Ward v. Voaburgh, 31 Fed. Rep. 12. The supreme court of the state of Louisiana has held valid the contracts made by the members of the New -Orleans Cotton Exchange, acting as factors and commission merchants ·for their principals, according to the rules and· regulations of the said cotton exchange, and not in violation of the laws of the state; Oonner v. Robe'ftson, 37 La. Ann. 815. These rules and regulations rec.' ognize the right and duty of the members to settle balances with each other, as before stated, so that the cancellation of the original contracts was not a violation of the autyand obligation of the plaintiffs towards those for whom they dealt. But this suit is not brought to enforce any of these contracts, or for damages for non-performance of them. It is a suit by the factors and the commission merchants against their principal, to recover commiBBions and money alleged to have· been paid out for their principal, and necessarily expended to protect themselves against loss upon their guaranty of the performance of the contract made by them on behalf of the defendant; 80 that only the obligations andliabilities existing between them as such.need be considered. The plaintiffs, being guarantors for the receipt of the cotton and the payment of the purchase money at the price fixed by the contracts, had a right· to call upon the defendant from time to time for sufficient amount of money to make good the margins prescribed by the rules and regulations of the exchange, as well as for their own protection, and this right existed whether the other parties to the contract called for them or not, as they were authorized to do under the guaranty of the plaintiffs, and the plaintiffs would not have been relieved or discharged from the obligations of said guaranty by the failure to demand margins. So that, when defendant waS notified to make the advances demanded, and failed a.nd refused to do so, the plaintiffs were authorized to sell the contracts held by them for defendant, to protect themselves against further loss and liability upon their guaranty; and, if the sale resulted in a loss not covered by the lformer advances, they have a right io recover the amount from the deftmdant, whether the loss was paid in actual money. or by a settlement of balances with those holding the contracts. Therefore, upon this ques-
856
J'EDERAL REPORTER,
tion, the only fact to be ascertained is whether or not at the time of the alleged sale or closing out of these substituted contracts the plaintiffs held such contracts for the delivery of cotton of the quality and quantity, and at the price and time provided in the original contracts, and, if so, whether these contracts were sold or closed out at a loss not covered by the former advances, and which was paid in cash or by a settlement of 'l'hese are questions of fact proper to be determined by the jury from the evidence produced before them. Bnt it is urged as a complete defense to this action that it was a gambling transaction, and, whatever liability might otherwise exist, these contracts are void against public policy, and not enforceable in this or any other court. As before stated, this is not a suit to enforce any of these contracts, but for services performed and money paid out for the defendant. But if the contracts were gambling contracts, and the plaintiffs knew it, or-which is the same thing---had reason when the contracts were made to know or to believe that they were gambling contracts, and with this knowledge aided in making them, they would not be entitled to recover anything out of them, nor would the defendant be entitled to recover anything from them on account of said contracts, but they would be left where 'they stand, all being equally guilty. Under the law as settled by the supreme court of the United States, with few exceptions, these contracts for the future delivery of personal property are valid and binding, unless shown by those challenging their validity to be gambling and illegal contracts. Irwin v. Williur, 110 U. S. 499, 4 Sup. Ct. Rep. 160; Clay v. Allen, 63 Miss. 426; OnmeT v. Robertsan, 8upra. To establish that they are gambling and invalid contracts, the proof must show that it was mutually agreed and understood by the parties to the contracts when they were made that there was to be no delivery of the property, but only the differences in the price were to be paid at the time the contracts by their terms required that delivery should be made. This agreement and understanding of the parties may be shown by any sufficient competent evidence; but,jf only one party intends that no delivery of the property shall be made and only the differences paid, the contract will still be valid , and may be enforced by the other party to it, unless the party intending that the delivery shall be made knows at the time, or has sufficient reasons to believe, that the other party does not intend to comply with his part of the contract. But this knowledge must be satisfactorily established by the proof, and cannoL be presumed or implied from slight circumstances. The defendant, in his testimony, states that he did not inform the plaintiffs that he had no intention of delivering the cotton contracted for, or to be contracted for; and one of the plaintiffs testified that the plaintiffs had no knowledge or reason to believe that the defendant, or those for whom he acted, did not intend to receive the cotton and pay for it, according to the terms of said contracts made and to be made. The fact that a large quantity of cotton is being constantly contracted for to be delivered in the future. and of which no delivery is made, but only the differences in price paid, is not competent evidence that such was the understanding between the parties
;mILLARD ". JdAGONE.
857
to these contracts. Roundtree v. Smith, 108 U. S. 269, 2 Sup. Ct. "Rep. 630. This being so, the jury will be instructed that there is no evidence in the case to establish that the contracts between the parties were gambling and invalid contracts. It is insisted u pon part of the defendant that the plaintiffs should have notified the defendant of the decline in price, and demanded the advance by telegraph on Saturday; but the defendant had personally instructed them not to telegraph, but to write, when more advances were required. and plaintiffs were therefore acting in accordance with the express directiom, of dehmdant, and this defense cannot prevail. It is also insisted that plaintiffs should have notified defendant of each sale and exchange of contracts. This, under the rules and regulations of the exchange, was not necessary; and for the reasons already stated defendant was put upon notice, and charged with knowledge of the said rules and regulations and the manner and mode of conducting business thereunder, and is bound by them in the transactions made by the plaintiffs in accordance with said rules and 'l.'egulations. The result is that both motions must be overruled, and the questions of fact must be submitted to the jury on the issues as above stated, under instructions to be given them.·
JUILLARD t1.
MAaoNE, Collector.
(Circuit Court, S. D. N6'llJ York. February 5, 1889.)
1.
CUSTOMS DUTJES-WOOL-Tops.
Schedule K, tariff act of March 3. 1883, (Heyl, Imp. D. 356,) impOfling a double duty upon "wool of the sheep * * * imported in any other than ordinary condition, as now and heretofore practiced." etc., !teld not to be restricted to wool changed in its character or condition for the purpose of evading the duty, nor to wool reduced in value by the admixture of dirt or any other foreign substance, but to cover also wo.ol advanced or improved beyond such "ordinary condition." "Wool-tops," which are wool advanced to an improved condition over orand winddinary "scoured wool, "by the further processes of combing, ing into balls. found to be "wool imported in other than ordmary condition," and liable to the double duty under Schedule K, (Heyl, Imp. D. 856b.)
:2.
SAME.
At Law. Action to recover customs duties. The plaintiff's firm of A. D. Juillard & Co., of the city of New York, 'On the 5th day of June, 1886, imported into the port of New York from Liverpool, by the steamer Republic, three cases of "scoured wool-tops," .as described in their entry and invoice. The wool in suit belonged to class 2, the value whereof at the last port or place whence exported to the United States, excluding charges in such port, was less than 30 cents per pound. The duty upon wools of the second class, of the value of less than 30 cents per pound, is 10 cents per pound, under Schedule K
