the trustee could establish damages in spite a reasonable time whether to accept the conthereof. 7. SALES 152-CONSTRUCTION. Under contract for sale and purchase of cotton oil, giving the seller ten days before expiration to wire for shipping instructions, and requiring ten days' notice (Sundays and holidays not included) that he would buy through a broker, the parenthetical clause did not limit the ten-day clause, since it would make a November contract impossible of performance by the buyer, one Sunday and one holiday falling within the period when the seller could act, leaving but eight days for the buyer to act. 8. CONTRACTS 147(2)-CONSTRUCTION. If a contract is susceptible of two constructions, one of which would render it illegal and the other legal, that construction which will conform it to the evident purpose of the parties must be adopted. tract, since, had he not so elected, the bankrupt itself could have enforced the contract. 16. BANKRUPTCY 254-VOLUNTARY BANKRUPTCY EFFECT. Where a corporation purchased oil for future delivery, and later went into voluntary bankruptcy, the mere fact that the trustee waited until he could ascertain whether there was a profit in the contract before accepting it would not be dilatory, since it was his duty to do so. 17. BANKRUPTCY RUPTCY EFFECT. 280- VOLUNTARY BANK Although under Bankr. Act, § 63 (U. S. Comp. St. 1916, § 9647), voluntary bankruptcy is an anticipatory breach of a contract so far claim against the bankrupt, it is not such a concerns the establishment of a provable breach as concerns the trustee's right to enforce the contract. as 9. SALES 418(2)-BREACH OF CONTRACT-18. SALES 418(14)—BREACH OF CONTRACT— MEASURE OF DAMAGES. Where a corporation contracted to buy oil, which the seller failed to deliver, the trustee in bankruptcy of the buyer having notified the seller that he would purchase oil on the market, could recover his actual damages based on the continued breach to the end of the time of performance, though he elected to declare the breach more than five days before expiration of the contract, which required the damages for breach to be ascertained on a basis of the market price within five days from such declaration. 10. SALES 418(3)-BREACH OF CONTRACTMEASURE OF DAMAGES. Compensation for breach of a contract to sell goods as a general rule is fixed at the difference between the contract price and the market value at the time and place of delivery. 11. SALES 127 BREACH OF CONTRACT DECLARATION OF BREACH. Where defendant sold oil to a corporation for future delivery, and the trustee in bankruptcy of such corporation demanded, ten days before expiration of the contract, notice of shipping instructions, notifying the defendant that otherwise he would purchase on the market, such notice was not a declaration of breach, where he further allowed defendant until two days before expiration to deliver the oil through a broker. 12. SALES BREACH OF CONTRACT MEASURE OF DAMAGES-EVIDENCE. In action for damages by breach of contract to deliver cotton oil, evidence held to show that the price paid by the trustee in bankruptcy of the buyer for oil on the market was the market value. 13. SALES 420 BREACH OF CONTRACT QUESTIONS FOR JURY. In action for damages for breach of contract to deliver oil, where the facts were undisputed, peremptory instruction was proper. 14. BANKRUPTCY ✪~280 — VOLUNTARY BANKRUPTCY EFFECT UPON CONTRACTS. Since under section 70 of the Bankruptcy Act (U. S. Comp. St. 1916, § 9654) title and possession of contracts and rights thereunder vested in the receiver and trustee upon adjudication of bankruptcy, a trustee appointed for a buyer of oil could accept and enforce previous contracts cum onere, and the voluntary character of the bankruptcy was not an anticipatory breach by the buyer. MEASURE OF DAMAGES. chase oil for future delivery, and was later deWhere corporation made contract to purclared bankrupt, and the trustee, learning that the seller would not deliver, ordered a broker to purchase on the market, and when the broker ascertained the market price pretended to sell such oil to the broker for the bankrupt, so as to establish his damages, he was not entitled to the sale, since in fact there was not a sale. allowance of the broker's commission on the 19. APPEAL AND ERROR ~1052(5) LESS ERROR. HARM If evidence received was inadmissible, the error, if any, became harmless, where the court took the case from the jury by instructing a verdict which would have been necessary regardless of whether such evidence was admitted. Appeal from District Court, Grayson County; C. T. Freeman, Judge. Suit by O. S. Gresham, trustee in bankruptcy of the Sherman Cotton Oil Provision Company, against the Planters' Oil Company and others, wherein the Magnolia Cotton Oil Company intervened. Judgment for plaintiff, and defendants appeal. Reformed and affirmed. Fiset, McClendon & Shelley, of Austin, for appellants. Wood, Jones & Hassell, of Sherman, for appellee. HUFF, C. J. The appellee accepts the statement of the case as made by appellants in their briefs, except to supplement the same by the statement that appellee in his petition not only alleged that there was a contract measure of damage, but also alleged the common-law measure of damage for the ment so made by appellants we shall adopt, breach of the contract. The following statein connection with the above statement made by appellee: referred to for convenience as trustee), in his "The appellee, O. S. Gresham (who will be capacity as trustee in bankruptcy of the Sherman Cotton Oil Provision Company (which will hereafter be referred to as the Sherman Company), a private corporation, which had been adjudged a bankrupt in the United States District Court for the Northern District of Texas, sitting at Sherman, brought this suit against the appellant Planters' Oil Company (which will hereafter be called the Planters' Company), in the district court, fifteenth judicial district, of Grayson county, Tex., for alleged damages for and it was thereupon agreed in open court by all the parties that the exceptions addressed to the answer of the Planters' Company, asserting the right of set-off and the right to have the Magnolia Company impleaded, should be also considered as addressed to the answer and plea of intervention of the Magnolia Company. Upon hearing said exceptions, the court sustained same, both as to said pleading of the Planters' Company and that of the Magnolia Company, and the Magnolia Company was thereupon dismissed out of the suit, having declined to amend. This action was excepted to by both the Planters' and Magnolia Companies. "The cause thereupon proceeded to trial before a jury, and, after all the evidence was introduced, the court peremptorily instructed the jury to return a verdict in favor of the plaintiff for the amount of the difference between the contract price and the price for which the trustee had purchased other oil, with interest thereon, and for brokerage charges, and the jury under said instructions returned a verdict for $14,046.46. Judgment was accordingly entered by the court for the amount of said verdict, with interest thereon from the 31st day of January, 1917, at the rate of 6 per cent., and for all costs of suit. Both the Planters' and Magnolia Companies seasonably moved for a new trial, and, with leave of the court, filed an amended motion for new trial. This motion was overruled on the 26th day of March, 1917, to which action both the Planters' and Magnolia Companies excepted, and gave notice of appeal, and seasonably perfected said appeal." the Magnolia Cotton Oil Company, and in rendering judgment sustaining the exception and striking out that portion of the Planters' answer, and dismissing the intervention of the Magnolia Cotton Oil Company. "The Planters' Company answered by general demurrer and general denial, and by special answer, setting up: (a) Waiver on the part of the receiver and trustee of the Sherman Company of any rights under the contracts by reason of Assignments from 1 to 11, inclusive, are failure on their part to elect within a reasonable based on the action of the court in sustaining time to affirm the same. (b) A denial of the exception C, presented by the appellee, to right to recover commissions and expenses on the ground that no oil was actually bought by subdivision C, paragraph 3, of the Planters' the trustee as alleged. (c) That the Magnolia Oil Company's answer, and in also sustainCotton Oil Company (which will hereafter being exception D to paragraph 4, impleading called the Magnolia Company) had purchased under two like contracts the same amount and character of oil for delivery in the same territory and during the same months at 371⁄2 cents per gallon, said contracts being made subject to the rules of the Interstate Cotton Seed Crushers' Association, which were in all respects substantially the same as those of the Texas Asso- By the fourth paragraph of the answer the ciation; that the Sherman Company, the Plant- defendant impleaded the Magnolia Company, ers' Company, and the Magnolia Company were all members of both associations; that, under and for cross-action against said company rethe customs existing among members of said ferred to subdivision C of paragraph 3 of associations and dealers in said product, gener- the answer of appellant Planters' Company. ally throughout the state, the Magnolia Com- It was agreed in the court below that the expany and the Planters' Company had always been regarded and treated as one concern, hav- ception contained in the supplemental petiing the same president and practically the same tion of the Sherman Company should be constockholders, and that, under said customs and sidered as addressed to the plea of intervenusages, wherever purchases and sales had been made in such a way as not to require actual de- tion by the Magnolia Company. Exception livery of the product in order to carry out the C was to the effect that subdivision C in terms of the contracts, no delivery was made, paragraph 3 of the answer constituted no under a system of what was called 'washing defense to plaintiff's cause of action, in that out,' or 'matching out'; that these customs were a part of said contracts, and thereunder the the custom or agreement of "washing out" right existed to offset the Magnolia purchase is not alleged to have been part of the confrom the Sherman Company against the Sher: tract or that the plaintiff had agreed to such man Company's purchase from the Planters' Company. The Planters' Company also asked method; that the Planters' and Magnolia leave to make the Magnolia Company a party Companies were alleged and shown to be sepdefendant, and to have the said contracts offset arate corporations, and, under the statute one against the other. The Magnolia Company voluntarily appeared, asked leave to intervene governing bankruptcy, there could be no setas a party defendant, and adopted that portion off made as a defense to the cause of action of the Planters' Company's answer claiming on account of indebtedness to the Magnolia said right of set-offs. The trustee excepted to that portion of the answer of the Planters' Company; that such answer shows that they Company claiming the right of offset and pray- were not mutual debts and credits and not in ing to have the Magnolia Company impleaded, the same right, and were forbidden by the and objected to the Magnolia Company being law to be set off, one against the other; that allowed to make itself a party to the suit. The court granted leave to the Magnolia Company defendant can urge no defense against the to file said answer and plea of intervention, bankrupt estate by alleging that it is indebt ed to another corporation. Exception D was | Tram Co. v. Bancroft, 16 Tex. Civ. App. 170, urged against paragraph 4 of the answer, 40 S. W. 837; White v. Pecos Land & Water wherein it was sought to implead the Mag- Co., 18 Tex. Civ. App. 634, 45 S. W. 207; nolia Company, for the reason that the alle- Murray Ginning System Co. v. Exchange Nagations do not show that the Magnolia Com- tional Bank, 61 S. W. 508. pany had any interest in the subject-matter of the suit, or that the defendant had any claim against the Magnolia Company by reason of the suit. The two contracts sued on are set out in the petition and are identical in form and terms except one is for delivery in November and the other for December, and are to the tenor and effect following: "Houston, Texas, Sept. 14, 1915. "Contract No. S-30-a. "Loose in buyer's tanks (to be loaded to capacity) f. o. b. your station; seller guaranteeing weights and quality at destination. "Terms: Demand draft on the buyer with bill of lading attached, full amount of invoice, seller paying commissions 10c per bbl. of 50 gallons. "Subject to the rules of the Texas C. S. Crushers' Ass'n. "Copy. Internal revenue stamp affixed on file in this office. "Shipment: November, 1915. "This memorandum of sale is made in triplicate, the original being duly stamped and sent to the seller, one copy sent to the buyer, and one copy retained in this office as record. "Yours very truly, J. G. Leavell Co., "Per H. Leavell, as Broker Only." The propositions under the assignments assert that the right of set-off existed under the customs alleged and the universal custom of treating the Planters' and Magnolia Companies as a single entity, which were known to the association of oil dealers, and particularly to the Sherman Company, in which it participated, and for that reason were parts of the contract; that the pleadings establish the right of set-off of said contracts under the bankruptcy law as well as under the general law. A custom, however, acted upon, or known as to these two corporations, could not make them one corporation when the law created them two, and as distinct and separate parties, with the right to contract, sue, and be sued by their respective names. It is fundamental that a custom cannot countervene a rule of law or a plain statute. It is plain, under the law, that a contract by the Planters' Company to deliver oil to the Sherman Company did not obligate the Magnolia Company; neither did the contract by the Sherman Company to deliver oil to the Magnolia Company inure to the benefit of the Planters' Company. [2] The custom pleaded in this case was repugnant to the plain obligation of the two contracts alleged. Custom should not be allowed to vary or contradict a plain and unambiguous contract, either expressly or by implication. Incidents sought to be imported into a contract by custom must not be inconsistent with its express terms or any necessary implication from those terms. [3] The contract, as set out in the petition, and practically admitted in the answer, stipulated for the specific delivery of oil in a given way and place. The sale was made through a broker, who notified the appellant that the contract was subject to the rules of the Texas Cotton Seed Crushers' Association, and an examination of those rules reveals the fact that the oil so purchased and sold was to be actually delivered. Both appellant and appellee allege that the sale was made subject to such rules, and nowhere in the contract or rules is it shown that the sale was subject to the custom of "washing out" or "matching out." The custom sought to be incorporated into the contract would make a different contract and one not requir[1] The allegations in the answer strickening delivery. In other words, the custom out on exception show that the Magnolia would render the contract one in which deCompany and the Planters' Company were separate corporations. They each had their existence by virtue of the law authorizing their incorporation, and as such under the law were separate entities and liable alone for their separate contracts and acts. The fact that they had a common president, or in certain transactions acted one for the other, did not in law make them one and the same. We do not understand that corporations can, [4] The courts will enforce contracts and by agreement, custom, or otherwise, form a give relief for their breach according to the partnership, unless by some provision of rules of law, and not by the custom of any their charter. To have formed such a part-association. R. R. Co. v. Fagan, 72 Tex. 127, nership would have been illegal. They could 9 S. W. 749, 2 L. R. A. 75, 13 Am. St. Rep. only act as given power by their charter or the law authorizing their creation. There is no allegation of such charter powers or any lawful right alleged so to act. Southern, etc., livery was not contemplated—a mere speculating arrangement between the members of the association and in effect a gambling contract. The custom alleged would further make members of the association parties to the contract, thereby contradicting the terms of its obligation, and requiring the court in its enforcement to resort to "washing out" or "matching out." 776; American Warehouse Co. v. Ray, 150 10 Wall. 383, 19 L. Ed. 987; Grace v. Ameri- | petition for adjudication in bankruptcy, Nocan Insurance Co., 109 U. S. 278, 3 Sup. Ct. 207. 27 L. Ed. 932. vember 19, 1915, an order was entered adjudicating the company a bankrupt, and further ordering that its matters be referred to Hon. Charles Batsell, the referee of said court, and at the same time the court entered an order appointing O. S. Gresham receiver of the bankrupt estate, with power to take possession of the assets and property of the bankrupt, and was therein further directed and empowered immediately to examine into the purchase and sale contracts made by the bankrupt respecting deliveries of cotton oil, and report to the court such contracts as should be accepted and execut [5] It follows, therefore, that there were no such mutual debts or credits, or in the same right, shown by the answer which could be set off against the claim sued on by the trustee in bankruptcy, under section 68a and b of the Bankruptcy Act. In re Howe Mfg. Co. (D. C.) 193 Fed. 524; In re Lesher (D. C.) 176 Fed. 650; Sawyer v. Hoag, 17 Wall. 610, 21 L. Ed. 731; Cumberland Glass Mfg. Co. v. De Witt, 237 U. S. 447, 35 Sup. Ct. 636, 59 L. Ed. 1042. We therefore believe the trial court ruled correctly in sustaining the exceptions and in dismissing the Magnolia Com-ed by him on behalf of the estate, and such of pany's plea of intervention. On November 20, 1915, the receiver filed in court his report, stating that he had examined into purchase and sale contracts, and expressed the opinion that certain contracts named should be adopted and executed by him on behalf of the estate; and the con such reports as ought to be disaffirmed and The appellants present a number of as- abandoned by him in behalf of the estate, signments based on the action of the court to the end that the court may make such orin peremptorily instructing a verdict for the ders in the premises as may seem to the best appellee, and in refusing to instruct a ver- interest of the estate. On said 19th day of dict for the Planters' Oil, and on certain | November, 1915, O. S. Gresham, as receiver, exceptions filed to the charge of the court. duly qualified as such, of the estate, giving The Sherman Company contracted to the required bond, which was duly approved. purchase the oil alleged through a broker acting for the Planters' Company. The terms of the contracts are set out heretofore in our consideration of assignments 1 to 11, inclusive. The two contracts are dated September 14, 1915, and call for delivery, respectively, November and December follow-tract with the Planters' Company, dated Seping. After entering into the contracts, the Sherman Company was declared a bankrupt on the petition of certain creditors of the Sherman Company, filed November 19, 1915. On the same day the petitioning creditors in the bankruptcy court made an application for the appointment of a receiver of the estate of the bankrupt, wherein it was stated that the bankrupt had entered into a great number of contracts for the purchase and sale of crude and refined oil; that among the profitable contracts are several which call for delivery in November, 1915, and unless completed in November the estate of the bankrupt will lose the profits in same, and also contracts for future delivery upon which there might be losses to the estate, etc.; that to delay action upon those contracts which ought to be affirmed and those which ought to be abandoned by the estate until a trustee in bankruptcy is selected will lose the opportunity which the estate now has of completing the advantageous contracts, and of declaring abandonment of the disadvantageous contracts, in advance of further loss therein. The Sherman Company waived time, notice, and service of process, and entered its appearance, and made no objection to an adjudication in bankruptcy being made immediately, nor to the appointment of a receiver. The day previous to filing the petition and the entry of the orders, to wit, on November 18, 1915, the Sherman Company admitted, in an instrument duly executed, its inability to pay its debts and its willingness to be adjudged tember 14, 1915, for November delivery, at 38 cents per gallon, one of the contracts sued on herein, was among the number. In connection with the above report on the contract mentioned and others, he stated that all matured in the month of November, and that it was essential that said contracts be taken actively in charge by the receiver, and that he be empowered to do those things necessary to carry the contracts into effect. He further represented that there were other executory contracts, but he had not had time or opportunity to complete his examination, and that he did not recommend said contracts to be adopted or rejected; that he would complete his investigation, and report further to the court. On November 20, 1915, the court entered in its order reciting that the preliminary report was heard, and he approved the recommendation of the receiver, and granted his prayer, and that the specifically enumerated contracts in the report should be adopted and taken over and completed for the benefit of the estate, and his power and authority theretofore granted should be enlarged and extended so that he was thereby authorized and directed to take all such steps as may be necessary and appropriate to carry said contracts into effect. On the same day, November 20th, the referee of the court entered upon said report an order with like terms as the one entered by the judge of said court, reciting, further, that such action was acquiesced in by the petitioning creditors. On November 22d the re "By order of the referee in bankruptcy, I am instructed to perform contract between you and bankrupt, whereby you sold bankrupt eight hundred barrels of crude oil for December shipment. Please wire immediately where you desire tanks forwarded to take delivery of this oil." On December 18, 1915, appellee wrote confirming the telegram, and on December 22, 1915, the appellee wired the Planters' Company: "Unless advised to-day that you will deliver instant, shall proceed to buy in for your acoil on contract referred to in my wire of 17th count, holding you for all costs, expenses, and damages. This my official notice of my intent to so proceed." cember delivery that were for the purchase | contract. Also on that date the trustee wirof oil by the bankrupt, that the value of said ed the Planters' Company, referring to the products depended on the market for the above telegram, that he must have answer same for such month, and its value fluctuat- in his hand not later than 6 o'clock p. m. of ed from day to day, and depended largely up- that date or that he would buy oil for the on the question of railroad traffic; that there Planters' Company account. Again, on Nowas a great amount of detail work, and for vember 23, 1915, he wired: "Unless forwardthat reason and that first stated he was un- ing instructions received for empty tanks toable at that time to intelligently recommend day, will buy oil for your account. Answer." action on such contracts, and asked for ad- The Planters' Company did not answer any ditional time. On that day the referee ap- of these communications. With reference to proved such report and the recommendation the December delivery contract, appellee wirand granted further time. The receiver also ed the Planters' Company, December 17, filed a like report for January, February, 1915: and March, 1916, contracts, which was substantially the same as for December contracts, and like action was had thereon. The bankrupt on November 30th, in compliance with the first order appointing a receiver, and adjudging the corporation a bankrupt, filed with the referee its schedules, setting forth a full list of all of its assets and liabilities, which also contained a full list of all November and December contracts, including the two set up in this suit. On the 9th day of December, Gresham, the appellee, was duly appointed trustee by the referee, and he duly qualified as such, executing his bond as required, which was approved on that day. On the 12th day of December, Gresham, as trustee, filed with the referee a report, which recited that in compliance with the direction of the court to select and to report to the court a list of contracts of the bankrupt, which in his judgment should be carried into execution and completed, that he found the contract sued on, which is for December delivery, as one which showed to be a substantial asset. The referee set down the report for hearing on December 17th, and on that day the trustee filed a supplemental report, recommending that the December contract sued on should be carried out and enforced, and also in the supplemental report recommended the rejection of certain other contracts; and on the 17th day of De-vance (Sundays and legal holidays not included) cember the referee entered an order approving the report and the supplemental report, also approving the recommendation of the trustee as to the December contract herein sued on, together with others, and also the P. G. Claiborne testified he was a broker, rejection of certain other contracts, includ- residing in Dallas, Texas, and engaged in ing the Magnolia Company's contract. that business in November and December, August 21, 1916, the trustee, upon his appli- 1915, and was at that time and since a memcation, was granted authority to file this ber of the Texas Cotton Seed Crushers' Assosuit, which order was granted before the ciation, and otherwise qualified himself as filing of the suit. November 20, 1915, the to experience and knowledge as to market trustee wired the Planters' Company, refer- prices; that the trustee herein instructed him ring to contract of September 14, 1915, for on November 29, 1915, as broker, to buy, for five tanks of oil, November, asking for ship- the account of whom it may concern, five ping instructions immediately for empty tank cars of prime crude cotton seed oil, the tanks. This wire was confirmed by letter Planters' Oil Company of Texas as an inof that date, stating also that he then await- terested party. In accordance with the rules ed the company's reply designating shipping of the association, he notified the Planters' points for tank cars, in order that tanks Oil Company on that day that the trustee On On the same day this wire was confirmed by letter. The contract as made recited therein that it was made "subject to the rules of the Texas C. S. Ass'n." The briefs of the parties herein refer to section 9, rule 28, of the association, as relating to the stipulation in the contract. That rule reads: "Sec. 9. In case of contracts for oil for specific shipments, it shall be the duty of the seller to notify buyer at least ten days previous to the expiration of the period in which tank cars might be forwarded in time to reach seller, in time to admit of shipment of the oil within contract period. In case seller does not give such instructions within the period specified, it shall be the duty of the buyer to ask by wire for such instructions, confirming by letter, and then, failing to receive them at least ten days before the last day of the contract time of shipment, may, upon wire notice, given 48 hours in adthrough any recognized cotton seed products broker a member of this association in good standing, buy the oil contracted for, holding the seller for any loss and expense incurred in such repurchase, and accounting to him for any profits earned in it over the contract price." |