Butler v. Bunge Corporation

• Citation: 329 F. Supp. 47
• Decision Date: 22 June 1971
• Docket Number: No. DC 6948-K.,DC 6948-K.
• Parties: William R. BUTLER, Jr., d/b/a Butler Planting Company, Plaintiff, v. BUNGE CORPORATION, Third-Party-Plaintiff, v. Harold BAYLES, d/b/a Coahoma Grain Elevator, Third-Party-Defendant.
• Court: United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Northern District of Mississippi

329 F. Supp. 47

William R. BUTLER, Jr., d/b/a Butler Planting Company, Plaintiff, v. BUNGE CORPORATION, Third-Party-Plaintiff, v. Harold BAYLES, d/b/a Coahoma Grain Elevator, Third-Party-Defendant.

No. DC 6948-K.

United States District Court, N. D. Mississippi, Delta Division.

June 22, 1971.

Pat D. Holcomb, William O. Luckett, Shed Hill Roberson, Clarksdale, Miss., Charles C. Jacobs, Jr., Cleveland, Miss., for plaintiff.

C. S. Tindall, Jr., Greenville, Miss., for defendant.

MEMORANDUM OPINION

KEADY, Chief Judge.

In this diversity action the plaintiff is William R. Butler, Jr. (Butler), a Mississippi citizen conducting a farming operation in Bolivar County, Mississippi, and the defendant, Bunge Corporation (Bunge), is a New York corporation engaged in buying and storage of grain in Mississippi under the trade name of River Grain Company. The suit seeks the recovery of $38,265.30, plus interest, claimed by Butler as the unpaid purchase price for his 1968 soybean crop sold and delivered in February 1969 to Coahoma Grain Elevator, a facility which Butler contends was a part of Bunge's business entity and managed by Bunge's agent, Harold Bayles (Bayles). Bunge denies that Coahoma Grain Elevator was a part of its operation or that Bayles was its agent, and asserts that it has no legal responsibility to Butler for the soybeans in suit. Bunge also entered a third-party complaint seeking recovery from Bayles of any judgment awarded against Bunge. Bayles, who was duly summoned, failed to answer or otherwise contest the issue.

The case was tried to the court without a jury in a three-day evidentiary hearing, and following submission of briefs, is ripe for decision on the merits. This Memorandum Opinion shall suffice for findings of fact and conclusions of law required by Rule 52 of F.R.Civ.P.

I.

Bunge, one of the world's largest grain exporters, has for several years extensively engaged in the business of buying, handling, storing and shipping soybeans, wheat and other grains grown in the Mississippi Delta. Bunge's main business office for its Greenville division of the River Grain Company is located at Greenville, where Floyd H. Blundell is general manager, John L. Everitt is office manager, and also where the company's records and bank accounts are maintained. At Greenville, Bunge has constructed on the east bank of the Mississippi River large grain-storage facilities having a capacity exceeding 1,000,000 bushels. In Bolivar County, 50 miles north of Greenville and also located on the Mississippi River, is another large Bunge-owned and operated grain facility known as Hurricane Point. This facility has a storage capacity of 1,250,000 bushels. From these riverside elevators Bunge ships grain by barge for export to foreign markets. Bunge's supervisory employees, Jimmy Battles and Ed Battles, are in charge of the Hurricane Point facility and, like other Bunge representatives subject to Blundell's direction and control, they regularly purchase grain for Bunge's account from farmers and independent small elevators in the region.

In 1963, while the Hurricane Point facility was being constructed, Bunge also erected a small elevator at Lula, in Coahoma County, as a receiving station for grain to be transferred to Hurricane Point. This 20,000-bushel elevator, which was known as the Lula Grain Elevator, was operated by Bunge's personnel until September 1, 1966. During the summer of 1965, Bunge purchased a tract of land at Roundaway, in Coahoma County near Clarksdale, and built thereon a 24,000-bushell grain facility at a cost of $54,350.45 for land, building and equipment, for the stated purpose of increasing Bunge's purchases of grain grown in that area within convenient reach of the Hurricane Point facility. On September 1, 1965, Bayles began business operations as Coahoma Grain Elevator at the Roundaway facility under a written agreement with Bunge; a year later, on September 1, 1966, under an identical agreement with Bunge, Bayles also became the operator of the Lula Grain Elevator. Bayles was operating both grain elevators under these agreements at the time of the purchase of Butler's soybeans. The operator's agreement between Bunge and Bayles¹ relating to Coahoma Grain Elevator concerned three different aspects:

(1) Bunge's purchase from Bayles of grain received at the Roundaway elevator and manner of arriving at prices; (2) Bayles' operation of the Roundaway elevator and the charges payable by him to Bunge for the facility's use based upon the quantity of grain received at that elevator; and (3) Bunge's furnishing storage at one of its river elevators for farmer-owned grain handled by Bayles which the grower preferred to store rather than to sell and Bayles' compensation for soliciting such storage.

In January 1966 Bunge obtained an exemption from ad valorem taxation on the Roundaway facility by stating in an application addressed to the Coahoma County Board of Supervisors that it "is now engaged in the operation of a grain elevator at Roundaway * * * which facilities are in addition to applicant's other facilities" and "constitute a part of applicant's business and new enterprise." This application was prepared and filed by Bunge's attorneys, notwithstanding the fact that Blundell had advised them, by handwritten note, "this plant is leased to an independent operator."

The activity in the several areas contemplated by the operator's agreement is shown by evidence establishing the following facts:

(a) Grain dealings between Bunge and Bayles.

Bayles, at the inception of the agreement, was already experienced in the grain elevator business, and he operated the Coahoma Grain Elevator continuously for 3½ years prior to the events leading to the present controversy. During active seasons, Bayles checked regularly, very often several times daily, with Bunge personnel, chiefly at its Greenville office, to determine price quotations, f. o. b. Hurricane Point, on the basis of which he made purchase offers to farmers solicited by him. The transactions between Bayles and the customers always provided for the cost of transporting the grain to Coahoma Grain Elevator or to Hurricane Point, as might be agreed, an expense borne sometimes by the seller and at other times by Bayles. Bayles' margin of gross profit, or compensation, on any quantity of grain handled was the difference between Bunge's price to him and his price to the farmer. This margin was not fixed but varied with individual trades.

Bayles selected the farmers he would solicit, and entered into grain transactions, on spot basis or booking contract, at prices and on terms agreed upon between him and the farmer. Bunge's personnel, however, consulted regularly with Bayles about the price to be offered farmers and were aware of market prices available to farmers in the area.

Bunge customarily settled with Bayles immediately upon delivery of grain at Hurricane Point, thereby supplying Bayles with funds to pay his customers. Bunge imposed no control whatever upon the application of these proceeds which Bayles placed in an account in a bank at Clarksdale in the name of Coahoma Grain Elevator. Bayles alone had authority to draw upon this account, and Bunge had no connection therewith. Bayles settled with the grain growers always by issuing to them checks signed by him and drawn against the Coahoma Grain Elevator account. In the general course of its dealings, Bunge was aware that Bayles had to receive payment for the grain before he could settle with the farmers.

During the period under review, Bayles delivered to Bunge 97% of the soybeans and other grain acquired by him from farmers; these transactions, which represented large values, accounted for no less than one-third of the total annual volume handled by Bunge at the Hurricane Point facility. The remaining 3% of the grain Bayles sold to three other large buyers, Planters Manufacturing Company, Cargill Grain Company and Archer-Daniels-Midland, but only after he obtained permission from Blundell, Bunge's general manager, to do so. On these occasions Bunge was either not buying grain or not offering prices competitive with the domestic market. Bayles paid Bunge no part of the proceeds derived from such sales.

In trading with the public, Bunge purchased grain either on a "spot" basis calling for payment of the daily quoted price upon immediate delivery, or on contracts calling for delivery at a later date at a fixed price, or on basis contracts providing for delivery with price to be fixed by seller at a later date. These modes of purchase are customary in the grain buying business, and Bunge made them available to Bayles. Bunge had a dual price policy whereby one price was quoted farmers directly trading with it and another was extended to Bunge's small elevator customers. Bayles was quoted the better price given only to the elevator customers. Also, as per custom, Bunge made advances to its sellers against grain in storage and, in the case of accounts it deemed more reliable, against grain under contract for future delivery.

Bunge frequently made sizeable advances to Bayles, not only on grain stored in his name at Hurricane Point but also against contracts made for future delivery. For example, Bayles' account was quite active through the period of February 1-March 24, 1969, with Bunge's advances reaching a high of $55,000 on February 27. During this critical period Bayles executed three soybean contracts with Bunge, i. e., 5,000 bushels on February 4 at $2.625, 35,000 bushels on February 7 at $2.625 and 16,000 bushels on February 26 at $2.6275, each specifying "prompt" delivery at Hurricane Point. Against these contracts Bayles delivered an aggregate of 54,795.35 bushels, from the value of which Bunge recovered current advances totaling $90,750 and paid Bayles the balance or $52,333.51. Bunge never received from Bayles all the grain needed to complete his contracts. In its prior dealings, Bunge had...