Bond v. Hume, 243 U.S. 15 (1917)
Bond v. Hume
No. 119
Argued February 2, 1917
Decided March 6, 1917
243 U.S. 15
CERTIFICATE FROM THE CIRCUIT COURT OF APPEALS
FOR THE FIFTH CIRCUIT
Syllabus
An independent sovereignty will not lend the aid of its courts to enforce a foreign contract where such action would be repugnant to good morals, lead to disturbance or disorganization of its municipal laws, or otherwise violate its public policy.
The courts of one sovereignty, however, will not refuse effect to the principle of comity by declining to enforce contracts which are valid under the laws of another sovereignty unless constrained thereto by clear conviction of the existence of the conditions justifying that course.
Since the definition of public policy lies peculiarly with the lawmaking power, the policy indicated by its enactments must control comity in the enforcement of foreign contracts.
The foregoing principles apply to the several states, under the common obligations of the Constitution, more strongly than to sovereignties which are independent of one another.
Contracts between citizens of New York and a citizen of Texas, executed in New York, for the purchase and sale of cotton for future delivery upon the New York Cotton Exchange, pursuant to its rules, etc., held valid under the New York law and under the common law.
Contracts with brokers for the purchase and sale of cotton for future delivery, under and subject to the rules of a cotton exchange, which rules permit the substitution in delivery of grades other than that upon which the contract price is based and provide that, in such case, the price shall be readjusted according to the rates of the exchange "existing on the day previous to the date of the transferable notice of delivery," are not necessarily to be regarded as violating the policy evinced by the Texas "Bucket Shop Law," Rev.Crim.Stats. 1911, c. 3, Arts. 538, 539, when it is alleged and admitted that actual delivery of the goods was bona fide intended by the parties;
Nor are they repugnant to the public policy of Texas as manifested by other statutes of the state or by decisions of its courts.
The general provisions contained in Arts. 545 and 546 of the Texas statute, supra, and which shift the burden of proof in particular criminal prosecutions under it, afford no ground, in a civil case brought to enforce a contract, for holding that the averments of the petition must be taken to be untrue.
Whether the mere existence of a state statute punishing those who contract for the sale or purchase of goods or securities to be delivered in the future, not intending in good faith that delivery shall be made, could constitutionally justify the courts of that state, or, in any event, the courts of the United States exercising jurisdiction therein, in declining to enforce like contracts when made under like circumstances in another state and valid where made, are questions upon which the court expresses no opinion.
This action was instituted in the United States Circuit Court for the Western District of Texas at Austin, on the 23rd day of February, 1910, by Allen Bond and William J. Buttfield, plaintiffs, against J. L. Hume, defendant, to recover the balance due upon an open account for money advanced to defendant, and paid, laid out, and expended for his account, and for services rendered and performed for defendant at his special instance and request at divers times between the first day of July, 1907, and the first day of June, 1908, at the City, County, and State of New York in connection with the purchase and sale for defendant’s account of cotton for future delivery upon the New York Cotton Exchange, pursuant to the rules, regulations, customs and usages of said Exchange, and for the amount due upon a certain promissory note executed by defendant payable to the order of J. W. Buttfield, and by the latter assigned to the firm of Bond and Buttfield.
The plaintiff’s first amended original petition contains the following allegations:
The plaintiffs, at the special instance and request of the defendant at the City, County, and State of New York, advanced to the defendant and paid, laid out, and expended for his account divers sums of money, and did and performed for said defendant at the City, County and State of New York divers services in and about the purchase and sale of the defendant account cotton upon the New York Cotton Exchange, and, in pursuance of the rules, regulations, customs, and usage of the said New York Cotton Exchange, a copy of the rules and bylaws and regulations being hereto attached and marked Exhibit A, and asked to be made, etc.
That the said services were rendered and said money paid out by them to said defendant for and at his request in buying and selling for his said account as his agent cotton for future delivery according to the rules and regulations of the New York Cotton Exchange in the City of New York, a copy of said rules and regulations being hereto attached and marked Exhibit, etc.
Said orders for the purchase and sale of cotton for future delivery were received by plaintiffs and executed with the understanding and agreement between the parties that actual delivery for this account was contemplated, subject to the rules and bylaws of the said New York Cotton Exchange, as hereto attached and marked said Exhibit A.
Plaintiffs allege further that they made said purchase and sales of the cotton for and at the request of the said defendant at the prices respectively authorized by him, and at his instance and request entered into binding contracts of purchase and sale for future delivery in accordance with the said rules and bylaws of the said New York Cotton Exchange, a copy of said rules and bylaws being hereto attached and marked Exhibit A, and made a part of this petition.
Plaintiffs further allege that, at the several times they made said purchases and sales for the defendant, he well knew that actual delivery was contemplated, and well knew that plaintiffs were to make and did make said purchases and sales under and subject to the rules and bylaws of the New York Cotton Exchange, and were held personally bound for carrying out said contract, as will more fully appear by reference to said rules and bylaws hereto attached and marked Exhibit A, and plaintiffs allege that they promptly advised the defendant of the said several purchases and sales, and that said purchases and sales were made in accordance and with his instruction, subject to the rules and bylaws of the New York Cotton Exchange, and that said orders for the purchase and sale of cotton for future delivery were received and executed with the distinct understanding that actual delivery was contemplated, as provided by the bylaws and rules of said Exchange, as will more fully appear by reference to said Exhibit A.
The bylaws of the New York Cotton Exchange pleaded by the plaintiffs contain the following provision:
The cotton to be of any grade from Good Ordinary to Fair, inclusive, and if tinged or stained not below Low Middling Stained (New York Cotton Exchange inspection and classification) at the price of ___ cents per pound for middling, with additions or deductions for other grades according to the rates of the New York Cotton Exchange existing on the day previous to the date of the transferable notice of delivery.
To this pleading the defendant, in the lower court, interposed the following exceptions:
I. Now comes the defendant in the above-entitled cause by his attorney, and excepts to plaintiffs’ petition herein and says that the same is not sufficient in law to require him to answer, and should be dismissed.
II. And for special cause of exception, defendant shows the following:
1. It is apparent from the face of plaintiffs’ petition that the balance due upon the alleged account sued on arose out of a gaming transaction in cotton futures on the New York Cotton Exchange, that none of the cotton alleged to have been bought and sold was delivered, but the account sued on simply represents the difference in the rise and fall of the market on said Cotton Exchange, and were alleged to have been settled by plaintiffs by paying or receiving a margin or profit on each contract, as shown in said account, and that the alleged balance claimed by plaintiff to be due from defendant consists of said alleged margin or profit.
2. It appears from plaintiffs’ petition that said alleged account sued on arose out of transactions on the New York Cotton Exchange, and pursuant to the rules, regulations, customs, and usages of said Exchange, and does not show or set forth that in the settlement or closing out of said transaction sued on by delivery or tender of any grade or grades of cotton other than the grade upon which the prices were based in the transaction sued on, that the same were settled or closed out at the actual price for spot delivery of such other grade or grades at the time and place of delivery or tender.
Upon this record, the court below entered the following order:
Thereupon came on to be heard the demurrers and exceptions of defendant to plaintiffs’ amended petition, and the same having been heard and duly considered, it is the opinion of the court that said demurrers and exceptions should be sustained, and it is accordingly so ordered, and, the plaintiffs declining to amend, it is further ordered that said cause be and the same is hereby dismissed at the cost of plaintiffs, to which order of the court sustaining said demurrers and exceptions, and dismissing said cause, the plaintiffs in open court excepted.