Brown v. Staple Cotton Co-Operative Ass'n

• Decision Date: 11 June 1923
• Docket Number: 23291
• Citation: 96 So. 849,132 Miss. 859
• Parties: BROWN v. STAPLE COTTON CO-OPERATIVE ASS'N
• Court: Mississippi Supreme Court

96 So. 849

132 Miss. 859

BROWN v. STAPLE COTTON CO-OPERATIVE ASS'N

No. 23291

Supreme Court of Mississippi

June 11, 1923

(Division A.) January 1, 1920 [Copyrighted Material Omitted]

1 MONOPOLIES. Law prohibiting contracts in restraint of trade held applicable only to those which in their effect are inimical to public welfare.

Sections 5002 and 5003, Code of 1906, as amended, sections 3281 to 3285, inclusive, Hemingway's Code, defining unlawful trusts and combinations in restraint of trade and declaring all contracts made in furtherance thereof, whether expressed or implied, void and unenforceable, does not prohibit any and all contracts in restraint of trade, but only those which in their effect are inimical to the public welfare. The rule of reason will be applied. There must be an undue and unreasonable restraint of trade.

2 MONOPOLIES. Contracts between nonprofit co-operative corporation and its members to systematically market long staple cotton held not invalid as inimical to public service.

There was organized under the law of the state of Tennessee a corporation without capital stock, being a nonprofit co-operative association of producers of long staple cotton in Tennessee, Arkansas, and Mississippi, the purposes of the association being, to promote, foster, and encourage the business of marketing staple cotton intelligently, reducing speculation and stabilizing the market for such cotton, and co-operatively handling the problems of the growers thereof. The members of the association by contract with the association and with each other agreed to sell to the association for five years all the long staple cotton produced by them during that period, which cotton the association undertook by an elaborate system of warehousing classifying, pooling the various grades, borrowing money thereon and advancing same to its members and marketing the cotton systematically and intelligently according to the market demands therefor, and accounting to each member for his proportionate share of sales when made. Held, such contracts are not inimical to the public welfare and are therefore not violative of said sections 5002 and 5003, Code of 1906, as amended, Hemingway's Code, sections 3281 to 3285, inclusive.

3. STATUTES. Co-operative Marketing Act held persuasive as to what contracts not inimical to public welfare before adoption.

Although the Co-operative Marketing Act, chapter 179, Laws of 1922. does not undertake to, nor could it, declare what the public policy of the state was prior to its adoption, still said statute is persuasive on the courts as to what contracts and combinations were not inimical to the public welfare recently before its adoption.

4. AGRICULTURE. Constitutional law. Contracts between foreign co-operative marketing association and member subject to law existent before Co-operative Marketing Act as to contracts both prior and subsequent thereto; new remedy applicable to pre-existing contracts.

Section 17(b) and section 24 of the Co-operative Marketing Act (chapter 179, Laws of 1922) provide that any co-operative marketing association organized under the laws of any other state coming into this state whose purposes and plans are substantially the same as those provided for in said act shall be entitled to the remedies of liquidated damages, injunction, and specific performance given by said act. The plans, purposes, and contracts provided for by a Tennessee corporation doing business in Mississippi are substantially the same as those provided for in said Co-operative Marketing Act. In a suit by such Tennessee corporation against a member for breach of his contract entered into before the adoption of said Co-operative Marketing Act, although the substantive rights of the parties are governed by the law as it stood before the adoption of said act,' nevertheless such association is entitled to the remedies provided in said act, which are applicable to past as well as future contracts, under the principle that a remedy afforded by a statute passed subsequent to the date of a contract may be invoked by a party to such contract who has been wronged by its nonperformance.

5. DAMAGES. Liquidated damages of ten cents per pound for long staple cotton undelivered by members of co-operative marketing association held reasonable.

On account of the difficulty of ascertaining onything like an accurate estimate of the damages which such a co-operative marketing association would suffer on account of the breach of contract by a member in failing to make delivery as agreed, a stipulation in such contract fixing a sum as liquidated damages to be paid by such member will be upheld, provided the sum fixed is not so large as to be out of proportion to any loss which the association may have suffered. Under this principle and the facts of this case, the sum stipulated between the associatoin and its members of ten cents per pound to be paid by the latter for all cotton undelivered is reasonable.

Division A

APPEAL from chancery court of Holmes county, HON. T. P. GUYTON, Chancellor.

Suit by the Staple Cotton Co-operative Association against J. A. Brown. From a decree for plaintiff, defendant appeals. Affirmed.

Appellee, Staple Cotton Co-operative Association, filed its bill in the chancery court of Holmes county against appellant, J. A. Brown, for the specific performance of and to enjoin appellant from further breaching a contract theretofore entered into by said parties and to recover damages for the breach thereof to the extent said breach had already taken place. There was a final decree for appellee according to the prayer of the bill, from which appellant prosecutes this appeal.

The cause was tried alone on the pleadings--original bill, demurrer thereto, and motion to dissolve the injunction which had been issued on the filing of the bill. Appellee made the following case by its bill and exhibits:

On September 1, 1921, appellant entered into a contract with appellee, a corporation organized under the laws of the state of Tennessee, being a nonprofit co-operative association of producers of Staple cotton in Mississippi, Arkansas, and Tennessee. Appellant agreed to sell and deliver to appellee all the cotton produced by him during the years 1921 to 1925, inclusive. He violated his contract by selling a portion of his 1922 crop to other parties than appellee, and threatened further breach of said contract by disposing of the remainder of his 1922 crop to other parties. In its bill appellee sought to avail itself of the remedies afforded by the Cooperative Marketing Act of this state. Chapter 179, Laws of 1922. Appellee was organized under the laws of Tennessee on May 23, 1921, and thereafter was domesticated in this state according to the laws thereof. Appellee association was formed under an enabling act of the legislature of Tennessee (Tennessee Code, sections 2188b1-2188b30; Shannon's Ann. Code, 1918, vol. 5, p. 6561), providing for the organization of co-operative agricultural associations. A copy of appellee's articles of association was attached to the bill and made an exhibit thereto. They state, among other things, that the incorporators were authorized to organize a co-operative association without capital stock to be known as Staple Cotton Co-operative Association for the purpose of promoting, fostering, and encouraging the business of producing and marketing staple cotton co-operatively, reducing speculation in cotton, stabilizing the local cotton markets, co-operatively and collectively handling the problems of cotton growers, said association to be organized and operated for the mutual help of its members and not for profit. Among the corporate powers of appellee as enumerated in its articles of association are the following:

"This association may not enter into any combination or agreement with any person, firm or corporation, or association, to regulate or fix the price of any article or commodity; or to maintain any price so regulated or fixed or otherwise, or to limit the amount of any commodity. This association shall not restrain or attempt to restrain the freedom of trade or production, or monopolize or attempt to monopolize the production, control or sale of any commodity or the prosecution, management or control of any kind of business or engross or forestall or attempt to engross or forestall any commodities; or destroy or attempt to destroy competition in the manufacture or sale of a commodity in any way whatsoever; but on the contrary, all the activities of this association shall be nonprofit and co-operative in character, for the mutual benefit of its members, and shall be limited to the activities arising out of the financing of its members or the grading, storing, warehousing and marketing of the cotton of its members only.

"The association shall encourage, foster, and promote the production of cotton and do everything possible to eliminate and minimize speculation and manipulation by speculators in marketing of cotton and shall do everything within its power to secure the planting of the most desirable and profitable varieties of cotton, and to secure the largest quantity of production thereof; and to market the cotton as directly as possible to the spinners throughout the world, and to extend the distribution thereof to the manufacturing spinners in the world markets under conditions that will tend toward the economic manufacture of cotton and will enable the ultimate consumers of cotton and cotton products to secure cotton and cotton products with the least possible waste, due to extravagant or manipulative channels of trade; and the association shall make every effort to secure for its members the best current prices for the particular variety, grade and quality of...