There is no disagreement about the facts of this case as found and filed by the trial court. We differ only as to the character of contract evidenced by those facts and the construction that should be placed upon it.
The question is, Do the facts establish a contract by which the parties wagered something? A wager contract is thus defined by the author of 20 Cyc. p. 921:
"A wager is a contract by which two or more parties agree that a certain sum of money or other thing of value shall be paid or delivered to one of them upon the happening of an uncertain event; it implies that each of the parties shall jeopardize something and have a chance to gain something, or to recover the stakes or thing bet or wagered upon the determining of the contingent or uncertain event in his favor; hence is a form of gambling."
Keeping that definition in view, did the buyers and the seller in this instance hazard something? In other words, did each take a chance of losing something for which he was to get no equivalent, or of gaining something for which he was to give no return? If they did, then this contract cannot be enforced. But if the facts show a contract for the sale of cotton at a price to be determined by the *Page 614 state of the market on some future date and providing for an advancement of what the parties contemplated might be only a part of the purchase price, then this agreement is not a wager contract. This discussion can be abbreviated by first distinguishing the facts before us from those involved in the cases cited in the majority opinion as sustaining the judgment of reversal.
In Burney v. Blanks the contract was in writing and contained this provision:
"The said James G. Blanks has this day bought from the said J. G. Burney et al., about 200 bales of cotton to be delivered at Lockhart, Texas, not later than the _____ day of March, 1908, by said Burney et al., for which said cotton said Blanks agrees and binds himself to paythe sum of 10.81 cents per pound straight." (Italics mine.)
Then followed other provisions of the contract, giving to the parties the right to call for additional settlements based upon the fluctuations of the market thereafter. The provisions which followed the extract quoted clearly indicated that the parties were intending to gamble on the market price of cotton. Chief Justice Key, who wrote the opinion in that case, held that by the terms of that written agreement there was a sale of the cotton at the price stated — 10.81 cents per pound; that this was the real and the only consideration to be paid by the buyer for the transfer of the title; and that the additional settlements provided for in subsequent portions of the contract which the suit attempted to enforce were independent of the purchase price. Those stipulations, while incorporated in the same writing with the contract of sale, formed no part of the consideration for the sale. At the time of the sale there was a full settlement as to the purchase price, and the additional settlements called for based upon subsequent fluctuations of the market were without consideration and evidenced a purely speculative enterprise. I fully concur in the conclusion that those provisions were illegal.
In Wolfe v. Andrews the contract was evidenced by a letter, which is as follows:
"Mr. R. G. Andrews, Winnsboro, Texas — Dear Sir: We confirm purchase from you this day through Mr. Will Rash, Sulphur Springs, Texas, of the following cotton: Sixteen hundred (1,600) bales of cotton at 14.39¢, basis middling, based on March New Orleans at 15.14¢, your option of fixing the price during market hours at any time between now and March 1, 1911, by giving notice to us of the time you select to fix the price. It is understood that at the time you select to fix the price if March New Orleans is above 15.14¢ we will pay you the difference, but if March New Orleans is below 15.14¢ you will pay the difference. Please confirm the sale by signing and returning the attached copy of this letter. Yours very truly."
Here, as in the other case, it is expressly stated that the buyer purchased 1,600 bales of cotton at a fixed price, 14.39 cents, basis middling. By the terms of that contract the purchase price, the sole consideration for the transfer of the title, was definitely named. Chief Justice Rainey, who rendered the opinion in that case, properly, I think, placed it in the same class with Burney v. Blanks, and his ruling was governed by the same principles of law. In this case the facts are materially different. Here the seller, Moore, was unwilling to take the then prevailing market price for his cotton, and no price was agreed upon. They agreed, as they had a legal right to do, that the price, the true consideration for the sale, should be determined by the market on a date to be selected by the seller between the delivery of the cotton and February 20 following. At that time neither party, of course, knew what that price would be, but agreed that whatever it was should constitute the purchase price to be paid for the 300 bales of cotton actually delivered. Moore believed the price would advance, and he wanted the benefit of the increase. Seay Co. might have been indifferent as to whether there was an advance or not, because they could protect themselves against an advance by holding the cotton till the time Moore elected to fix the price and then sell on that market, or they might continue to hold it for a better market. The cotton was theirs to dispose of as they saw proper. Moore, however, wanted a part payment equal to the value of the cotton at the time of delivery. Seay Co. were willing to make that advance payment provided they were protected against a possible decline which would render the cotton delivered an insufficient security for reimbursement for an overpayment. While they did not contract to hold the cotton as security for a debt, they had a right to hold it for their own benefit. In the event of a decline in the market below the sum advanced to Moore, their only protection against losing the excess would be Moore's personal liability. Seay Go. were unwilling to rely upon that liability alone. They required Moore to return upon demand any sums advanced in excess of the market price on a given date, and also required the bank to guarantee that Moore would perform that agreement. I see nothing illegal in that transaction. That stipulation should be treated as a protection against an excessive advance payment, and not as a gamble on the market.
The fact that Seay Co. advanced to Moore on the dates of delivery the then market value of the cotton is of no importance, except as a circumstance to be considered in determining whether or not the sum then advanced was the real and only consideration for the sale. If the facts show that it was the only consideration for the sale, then this case cannot be distinguished from Wolfe v. Andrews and Burney v. Blanks, and should be disposed of in the same manner. But if *Page 615 that sum did not represent the true and full consideration which Moore might thereafter have a right to demand for the sale, this case is distinguishable from those above referred to. The trial judge expressly finds that this was not the full consideration, and his finding has been approved and adopted by this court. Let us suppose that only half of the market price had been paid over to Moore at the time this delivery was made, with the same agreement as to the ultimate sale price and the same stipulations for the protection of Seay Co. against a decline; could it be said that the contract would then be within the same legal class with the cases just referred to? The term "advance," used by the trial judge in that connection, imports an incomplete settlement as to the consideration for the sale; it implies that there is something to follow which must be considered in determining the price to be paid for the cotton. If at the time of delivery Seay Co. had advanced on the purchase price a sum in excess of what the cotton was worth according to the market price on the final day of settlement, then clearly they would have a right to claim from Moore reimbursement to the extent of the overpayment. This right could be asserted even without any express agreement to that effect. The law would imply a promise on the part of Moore to return what he had received in excess of what he had agreed to take for the cotton. If the findings of the trial court are to be given their proper construction, the parties did not fix the sale price, and there was no agreement that this advancement should determine the price. If upon the terms of this sale the law would imply a promise to reimburse the buyers for an excessive advancement, then it cannot be contended that the contract was tainted by incorporating an express promise to that effect.
In the cases above referred to the contracts of sale were such that no refund could have been claimed by the buyers in the event of a decline in the market price, without an agreement to that effect. The actual sale price had been definitely fixed and paid, and there could be no other legal grounds for demanding a refund. It is that feature which should be considered in distinguishing this case from those upon the facts. Let us concede that the ultimate loss or gain of the parties to this contract in profits was to be determined by the fluctuations in the market price of the cotton. That alone is not decisive of the legality of the contract. In a contract to sell cotton at a fixed price for actual delivery in the future, or in one to sell cotton actually delivered at a price to be fixed by the market on some future date, the loss or gain is determined by the same contingencies — the fluctuations in the market price; yet such agreements are not gambling contracts. The legality of a contract is not to be tested by the pecuniary consequences to the parties, but by the character of the obligations created and the consideration upon which those obligations rest. It may be said that in the last illustration just used, where the price is to be fixed by the future state of the market, the buyer would take no chance of losing, and for that reason the contract would not subject him to any hazard. In this case Seay Co. took no chance of losing by an advance in the price of cotton. They had a right, under the terms of this contract, to hold it; and I recall nothing in this record which indicates that they did not hold it. Had they done so and cotton had advanced to a price named by Moore, they would pay him only what the cotton they then had on hand was actually worth. The hazard of having to pay a price higher than at the time of purchase would arise only from their voluntary conduct in disposing of the cotton upon a different market.
In my judgment this case falls within the rule applied by the Supreme Court in Heidenheimer v. Cleveland, and by the Commission of Appeals in Smith v. Duncan, both of which are referred to in the opinion of Chief Justice Willson. In the case of Heidenheimer v. Cleveland the facts are admitted to be practically the same as those here under consideration. In the trial court a peremptory instruction told the jury:
"That the contract was void upon its face as contrary to public policy, and that the latter clause thereof gave the right to either party to close the transaction by sight draft on the other," etc., "and consequently that they would return a verdict for the defendant"
— which the jury did. The objection to that contract, that it was contrary to public policy because it was a mere gamble on the market, was broad enough to include all forms of gambling agreements, and was specific enough to draw the attention of the court to any form of gambling disclosed on the face of the contract itself. In reversing the judgment the Supreme Court held, in effect, that if the parties contemplated an actual delivery of the subject-matter of the contract it was not illegal. The fact that the Supreme Court discussed only the question of delivery may be justified as easily upon the ground that it considered that issue the only debatable one as upon the ground that the writer of the opinion overlooked another equally serious vice in the contract. It is also held in that case that a contract susceptible of two constructions will not by preference be given the construction which will make it illegal.
My conclusion is that the judgment in this case should have been affirmed. *Page 616