Gist v. Telegraph Co.

The opinion of the Court was delivered by Mr. Chief Justice McIver. This was an action to recover damages for loss sustained by plaintiff by reason of the negligence of the defendant company.in the delivery of a telegram sent to him by Roddy & Watts, of New York. Inasmuch as the questions presented by this appeal arise upon a demurrer to the complaint, upon the ground that the allegations therein contained are not sufficient to constitute a cause of action, it will be necessary to state, substantially, such allegations, though a copy of the complaint should be embraced in a report of the case. Omitting the formal allegations of the corporate character of the defendant company, and as to the nature of the business in which it was engaged, the material allegations may be substantially stated as follows: First. That plaintiff, on the 15th of January, 1894, employed defendant to transmit by telegraph a message to Roddy & Watts, in New York, instructing them to buy for him 300 bales of cotton to be delivered in April, 1894, and 200 bales of cotton to be delivered in March, 1894, in the city of New York, “these purchases being made to protect himself from loss by reason of other transactions in cotton.” Second. That said order was executed by said Roddy & Watts on the same day by the purchase of the March cotton at $8.24 per 100 pounds and the April cotton at $8.32 per 100 pounds. Third. That on the same day, to wit: the 15th January, 1894, the said Roddy & Watts delivered to the defendant company a message to be transmitted by telegraph to the plaintiff, informing him of said purchase on his account, which message was not delivered to the plaintiff by defendant company until after the close of business hours on the 18th January, 1894, although it could and should have been delivered to the plaintiff at Newberry, S. C.. during business hours, on the 15th of January, 1894; and that defendant well knew that said Rodd}? & Watts were cotton brokers in the city of New York, engaged in buying and selling cotton for parties desirous of speculating in the same on the New York Cotton Exchange, and also knew that -plaintiff was engaged in buying and selling cotton, — 362 — through cotton brokers, subject to the rules governing said cotton exchange. Fourth. That the failure to deliver said telegraphic message to the plaintiff on the day of its date, as it"was the duty of defendant company to have done, was due to the “utter negligence and carelessness of the defendant company.” Fifth. That immediately after said purchases were made for the plaintiff by said Roddy & Watts, cotton began to decline in price, and the plaintiff, “in order to protect himself against loss from other purchases made by him in the same manner, sold an equal amount of cotton to be delivered in the said city of New York, thereby indemnifying himself against any loss, and would have pursued the same course in reference to said purchase had the defendant promptly delivered the said last mentioned message.” Sixth. That by reason of the said negligence of the defendant company the plaintiff has been damaged in the sum of $1,520, “in that said cotton continued to decline until the months of March and April, 1894, and after the 19th day of January, 1894, to wit: on the 22d day of January, 1894, 500 bales of cotton was sold for the plaintiff to protect said loss, which amounted on said last mentioned day to $1,520, * * * and if the sales had been made after the 22d day of January, 1894, for said months, the loss would have been still greater, and that even if the said 500 bales of cotton had been sold on the 19th day of January, 1894, the,said loss would have amounted to $1,520, which was the earliest day that the plaintiff could have protected himself after receiving the said message of Roddy & Watts.” Seventh That within sixty days after the said 15th of January, 1894, the plaintiff demanded payment of said loss by defendant, which demand was refused. The defendant bases its demurrer upon the following specifications: 1st. That the alleged loss arising under a contract-for the future delivery of cotton, the complaint was defective in failing to allege that the plaintiff was the actual owner of the cotton, or that at the time of making the contract it was the bona fide intention of both parties that the cotton should be actually delivered and re — 363 — ceived in kind. 2d. That it appears upon the face of the complaint that the parties did not intend an actual delivery, but that the transaction was a gambling one — a wager as to the rise or fall of the price of cotton — and as such could form no basis for an action for damage. 3d. That the damages alleged are remote, speculative and uncertain, and are not the proximate consequences of defendant’s negligence. 4th. That no facts are stated in the complaint from which the damages claimed can be inferred, inasmuch as it is not stated what disposition was made by plaintiff of the cotton bought on the 15th of January, 1894, or of that sold on 22d January, 1894. 5th. That the action being for special damages, the complaint fails to state that the defendant company had any notice of the damages which would result from the failure to deliver the message promptly. Upon this demurrer, the case came on to be heard by his Honor, Judge Aldrich, who rendered judgment overruling the demurrer, upon grounds which need not be stated here, as they are fully set forth in the Circuit decree, which should be incorporated in the report of the case. From this judgment defendant appeals, upon the several grounds set out in the record, which should likewise be incorporated in the report of the case. 1 The first question which presents itself is, whether it appears from the complaint that the contract upon which the plaintiff’s claim for damages rests was such a contract for the future delivery of cotton as our statute declares to be void. By the act of 1883,18 Stat., 454, now incorporated in the Rev. Stat. of 1893 as section 1859, the General Assembly has declared that “Every contract, bargain or agreement, whether verbal or in writing, for the sale or transfer at any future time of * * * any cotton, * * * shall be void, unless the party contracting, bargaining or agreeing to sell or transfer the same is, at the time of making such contract, bargain or agreement, the owner or assignee thereof, or is at the time authorized by the owner or assignee thereof, or his duly authorized agent, to make — 364 — and enter into such contract, bargain or agreement, or unless it is the bona fide intention of both the parties to the said contract, bargain or agreement, at the time of making the same, that the said * * * cotton * * * shall be actually delivered in kind by the party contracting to sell and deliver the same, and shall be actually received in kind by the party contracting to receive the same at the period in the future mentioned and specified in the said contract, bargain or agreement;” and by the next section (1860) it is provided that ‘‘In any and all actions brought in any court to enforce such contracts, bargains or agreements, or to collect any note or other evidence of indebtedness, or any claim or demand whatever found upon any such contract, bargain or agreement, the burden of proof shall be upon the plaintiff to establish that, at the time of making such contract, bargain or agreement, the party making the same was the owner or assignee of the * * * cotton * * * so agreed to be sold and transferred, or was at the time authorized by the owner or assignee thereof, or his duly authorized agent, to make and enter into such contract, bargain or agreement, or that, at the time of making such contract, bargain or agreement, it was the bona fide intention of both parties thereto that the said * * * cotton * * * so agreed to be sold and transferred shall be actually delivered and received in kind by the said parties at the future period mentioned therein.” Now, it is clear, upon the plainest principles of pleading, that if an action should be brought to enforce the performance of a contract for the future delivery of cotton, or to recover damages for the breach of such contract, it would be necessary to state all the material elements constituting such contract. For example, it is well settled that in an action of assumpsit for the breach of a simple contract, it is necessary to allege and prove the consideration of the contract, except in cases falling under the statute of Ann, promissory notes, &c.; and this for the reason that the consideration is an essential element of the contract. If, therefore, in an action — 365 — based upon a contract for the future delivery of cotton, the complaint should simply state, as it does in this case, the making of the contract, without alleging that the plaintiff was the owner or assignee of the cotton at the time the contract was made, or was at the time authorized by the owner or assignee, or his duly authorized agent, to enter into such contract, or that it was the bona fide intention of both parties, at the time of making said contract, that the cotton should be actually delivered and received in kind at the futnre period mentioned, it is clear that such complaint would not state facts sufficient to constitute a cause of action, because it omitted these allegations material to the validity of the contract, which constituted the basis of the action. Indeed, such a complaint would state nothing more than a contract expressly declared by statute to be void. Again, sec. 1860 of the Rev. Stat., above quoted, throws upon a plaintiff-in an action based upon a contract for the future delivery of cotton the burden of proving that he was the owner or assignee of the cotton, or that he was authorized by such owner or assignee, or by his duly authorized agent, to make such contract, or that it was the bona fide intention of both parties that the cotton should be actually delivered and received in kind at the future period designated in the contract; and the rule of Code pleading is, that what must be proved must be alleged. As is said in State ex rel. Slay v. Williams, 19 S. C., at page 65: “For a complaint to be thus defective, something must be omitted which the plaintiff is required to prove in order to maintain his suit.” And, as is said in Lilly v. Railroad Company, 32 S. C., at page 144: “A good rule by which to test the sufficiency of a complaint, when assailed by a demurrer like that interposed here, is to inquire what facts are necessary to constitute a cause of action,, and. then to examine whether such facts are alleged, the plaintiff, in his evidence, being confined to such alleged facts.” Under this rule, it is clear that the plaintiff could not be permitted to make the proof of such facts as the statute requir.es-.him — 366 — to prove, because such facts are not alleged in the complaint, and hence it is amenable to the demurrer interposed. It is contended, however, that while this may be true where the action is brought to enforce a contract for the future delivery of cotton, or to recover damages for the breach of such a contract, yet it does not apply to the present case, which is not of that character. The next question, therefore, presented is, whether the principles above set forth can be applied to the case under consideration. While it is true that the action is not brought to enforce the performance of a contract for the future delivery of cotton, nor to recover damages for the breach of such a contract, yet it is equally true that one of the essential elements of the plaintiff’s claim for damages is that, being under contract — of course, meaning a valid contract — for the purchase and sale of cotton for future delivery, he has been damaged by the negligence of defendant company in delivering a message relative to such contract. If the plaintiff saw fit to voluntarily stand to and abide by a contract which he was under no legal obligation to fulfill, it is difficult to understand what claim he can have to recover, at the hands of a court of justice, damages which he has sustained while engaged in the violation of a law passed by the State in which such court is held. It is, therefore, necessary, in this case, to inquire into the validity of the contract as set forth in the plaintiff’s complaint giving rise to his claim of damages against the defendant, and without which he would have no such claim; and if it is found that such contract was illegal, as we have seen that it' was, then the plaintiff has no foundation for his claim. As is said in 25 Am. & Eng. Enc. of Eaw, 814: “The better rule seems to be that where the message relates to a gambling or similar illegal transaction, neither the sender nor receiver can maintain an action for damages on the ground that the company refused- to transmit the message. If, while attempting to transmit such message, the company failed to exercise proper care, whereby an erroneous message was — 367 — sent, the sender may recover the price paid for transmission; but neither he nor the receiver can invoke the illegal contract, or the gain or loss resulting from it, to measure the damages sustained by him in consequence of an erroneous transmission.” Of course, the same principle would apply to the case of a message delayed through the negligence of the company. The doctrine above quoted from the Encyclopsedia is fully sustained by Melchert v. Telegraph Co., 11 Fed. Rep., 194, and Cothran v. Telegraph Co., 83 Ga., 25, found in 9 S. E. Rep., 836. In that case, Bleckley, C. J., in delivering the opinion of the Court, says that the previous case of Telegraph v. Co. Blanchard, 68 Ga., 299 (reported, also, in 45 Am. Rep., 480, holding otherwise), was decided at a time when it was held that dealings in futures “were regarded as legal and obligatory; but that since that time such dealings had been declared illegal, and hence the case of Telegraph Co. v. Blanchard stands as overruled.” It is trne, that in the subsequent case of Gray v. Telegraph Co., 87 Ga., 350 (found in 13 S. E. Rep., 562, and reported, also, in 27 Am. St. Rep., 259), it was held that in an action against a telegraph company to recover the statutory penalty incurred by a failure to deliver with due promptness a message which it had received for transmission, and accepted payment for the same, cannot defend the action upon the 'ground that the message related to a transaction in futures, and, consequently, to an illegal transaction. But Chief Justice Bleckley, in delivering the opinion of the Court, rests the decision upon the terms of the statute imposing the penalty, and draws a distinction between that case and the previous case of Cothran v. Telegraph Co., which is recognized and affirmed. But, in addition to this, our statute, sec. 1860, Rev. Stat., supra, expressly declares not only that in any action upon a contract for the future delivery of cotton, or to collect any note or other evidence of indebtedness growing out of such contract, the burden of proof shall be upon the plaintiff to prove the conditions set forth in the preceding section, upon which alone such — 368 — contract can be regarded as legal, but it also imposes a like burden of proof upon the plaintiff in any action on '•'•any claim or demand whatever founded itpon any such contract, bargain or agreement.’''1 Now, if the claim or demand of the plaintiff in this action is not founded upon a transaction in “futures,” then it has no foundation at all. The ground upon which transactions in “futures,” as they are ordinarily conducted, are held to be illegal is, that they amount to nothing but gambling. As is said by Mr. Justice Mathews, in Irwin v. Willard., 110 U. S., at page 508: “The generally accepted doctrine in this country is, as stated by Mr. Benjamin, that a contract for the sale of goods to be delivered at a future day is valid, even though the seller has not the goods, nor any other means of getting them than to go into the market and buy them; but such contract is only valid when the parties really intend and agree that the goods are to be delivered by the seller and the price to be paid by the buyer; and if, under the guise of such a contract, the real interest be merely to speculate in the rise or fall of prices, and the goods are not to be delivered, but one party is to páy the other the difference between the contract price and the market price of the goods at the date fixed for executing the contract, then the whole transaction constitutes nothing more than a wager, and is null and void.” And as is further well said by the same Justice, in the same case, at page 511, borrowing the language of the Circuit Judge: “It makes no difference that a bet or wager is made to assume the form of a contract. Gambling is none the less such because it is carried on in the form or guise of legitimate trade.” These views have /been recognized and approved in the subsequent cases of Embrey v. Jemison, 131 U. S., 336, and Bibb v. Allen, 149 U. S., 481. While it is true, that formerly the burden of proof was upon the party seeking to impeach such a transaction by showing affirmatively its illegality, as was held in Roundtree v. Smith, 108 U. S., 269, Irwin v. Willard, and Bibb — 369 — v. Allen, supra, as well as in onr own case of Williams v. Connor, 14 S. C., 621, decided in 1881, yet since that time the act of 1883, above referred to, has been passed, which places the burden of proof upon the plaintiff. 2 It is said, however, that this contract was made in New York, and was to be performed there, and hence the question of its illegality must be tested by the law of New York. The general rule undoubtedly is, that a contract, which is valid where it is made and is to be performed, is to be treated as valid everywhere; but this rule is subject- to certain well established exceptions, one of which is a contract declared invalid by the law of one State, even where it is valid by the law of the State where it is made or where it is to be performed, will not be treated as valid by the Courts of the State in which said contract has been declared by statute invalid. As is said in 2 Kent Com., 458: “It is, however, a necessary exception to the universality of the rule, that no people are bound, or ought to enforce, or hold valid in their courts of justice, any contract which is injurious to their public rights, or offends their morals, or contravenes their policy, or violates a public law.” See to same effect, Clark on Contracts, p. 502, et seqn and 3 Am. & Eng. Ency. of Kaw, p. 554, et seq., where, in a note, it is said: “The enforcement by one nation of contracts made under the laws of another, rests on the principle of comity, which cannot be so far extended as to violate the positive legislation of the nation called on to enforce such contracts.” In Flagg v. Baldwin, 38 N. J. Eq., 219, we have a case in which the foregoing principles were recognized and applied, and there it was held that a contract for speculating in stocks upon margins made in another State, where they are presumed to be lawful, will not be enforced in New Jersey, where they are unlawful under the statute of that State to prevent gaming. That case presents quite a full review of the authorities upon the subject, and is well worthy of attention. If, therefore, it had appeared (as it does not in this case) that there is no — 370 — statute in New York similar to ours, declaring contracts like the one set forth in the complaint, to be invalid, yet that would not affect the question. 3 Again, it has been held in this State, in the case of Allen v. Watson, 2 Hill, 319, that the legality or illegality of a transaction depends on the law of the place where it transpires; but it is incumbent on those who would avail themselves of it, to show what that law is; and until that is done, onr Courts must decide that question according to the laws of this State. The same doctrine seems to have been held in Thatcher v. Morris, 11 N. Y., 437, which is represented in the New Jersey case above cited, as holding that: “Where contracts of a particular kind are forbidden by the law of the State in which they are sought to be enforced, and the party seeking to enforce them relies upon the fact that they were made in a foreign State, and are valid contracts by the lex loci contractus, it has been held elsewhere that he is bound to aver and prove those facts.” Now, as there is no allegation in the complaint that the law in New York is otherwise than what it is in this State, the plaintiff cannot, in the absence of any such allegation, derive any benefit from the fact that the contract was made and was to be performed in New York. 4 But, in addition to this, it may now, since the cases of Rice v. Gist, 1 Strob., 82, and Mordecai v. Dawkins, 9 Rich., 262, be regarded as settled, in this State at least, that all wagers are unlawful, on account of their immoral tendency; and if contracts for the sale of “futures” are denounced, as we have seen, as gambling contracts, where there is no bona fide intention that the article contracted to be sold shall be actually delivered and received in kind at the time appointed for the contract, it matters nothing what the law of New York may be, as it is quite clear that no principle of comity requires the Courts of this State to recognize a contract which is regarded here as contra bonos mores. The Circuit Judge says, in his decree: “The defendant, — 371 — at most an agent, cannot interpose the defense of dealing in futures. That defense has reference to the parties huyan d selling;” and cites 8 Am. & Eng. Encycl. of Eaw, 1014. It is difficult to perceive the application of the authority cited to the case in hand. The law, as there laid down in the text, simply established the doctrine that where an agent employed to carry out a gambling transaction receives money accruing from such business really belonging to his principal, is sued for such money, he cannot defend himself from liability to account for such money by showing that the business was unlawful; and the case cited from Ohio decides no more. It is true, that the following language is used in that case, “the rule which denies civil remedies in such cases applies only to the parties to the illegal transaction;” but that was nothing more than a mere dicüim, not called for by anything in that case — for the only point in that case was, whether an agent sued for certain profits which were in hands belonging to the plaintiff could set up as a defense for such action that the contract from which such profits were derived was a gambling transaction, and it was held that he could not; just as in our case of Tate v. Pegues, 28 S. C., 463, where the defendant was sued for money received by him for the plaintiffs on sales of fertilizers made by him as agent, and for the value of such of the fertilizers as he had appropriated to his own use, could not relieve himself from liability to account to the plaintiffs for the money and property of the plaintiffs by showing that the sacks containing the fertilizer were not tagged as required by law. This was upon the obvious ground that one who receives the money or property of another must, when called upon, account for the same. As is said in the Ohio case, above referred to, as cited in the Am. & Eng. Encycl. of Eaw, “it is contrary to public policy and good morals to permit employees, agents or servants to seize or retain the property of their principal, although it may be employed in illegal business and under their control. No consideration of public policy can justify a low — 372 — ering of the standard of moral honesty required by persons in these relations.” Indeed, the true theory in such cases is, that the illegal business out of which the money received by the agent arises is no part of the cause of action, and is not necessarily connected therewith — the real cause of action being money had and received by the agent for the use of his principal. This is a principle upon which the cases of Anderson v. Moncrief, 3 DeS. Eq., 125, and Owen v. Davis, 1 Bail., 315, cited in support of the decision in Tate v. Pegues, supra, rest; for, as said by O’Neall, J., in Owen v. Davis, “One who receives money to the use of another on an illegal contract cannot retain it to his own use on the ground of the illegality of the contract.” The distinction between those cases and the one now under consideration is obvious. Here the defendant is not sued for any money received by it for the use of the plaintiff, and could not be so sued, for the reason that defendant has not received any money belonging to the plaintiff. The action here is to recover damages alleged to have been sustained by reason of the negligence of the defendant in delivering a telegraphic message relating to a void contract with which the plaintiff was under no obligation to comply; and, as is said in Armstrong v. Toler, 11 Wheat, at page 258, “Where the contract grows immediately out of, and is connected with, an illegal or immoral act, a court of justice will not lend its aid to enforce it. And if the contract be in pact only connected with the illegal transaction and growing immediately out of it, thoitgh it be in fact a new contract, it is equally tainted by if' (italics mine). Now, it is obvious that the contract with the telegraph company, though in fact a new contract, obviously grew out of the illegal transaction in “futures;” indeed, but for that, the plaintiff would have no cause of action whatever, except possibly to recover back the sum paid for the transmission of the message. But no such cause of action is stated in the complaint — indeed, it does not appear that anything was paid for the transmission of the message, and certainly — 373 — what amount was so paid is not stated, and hence the plaintiff is not entitled to judgment even for that sum. Under the foregoing views, the other questions presented by the demurrer cannot arise, and need not, therefore, be considered. The judgment of this Court is, that the judgment of the Circuit Court be reversed, and that the demurrer be sustained.