Case v. Kadota Fig Ass'n of Producers

• Decision Date: 27 July 1950
• Citation: Case v. Kadota Fig Ass'n of Producers, 220 P.2d 912, 35 Cal.2d 596 (Cal. 1950)
• Parties: CASE et al. v. KADOTA FIG ASS'N OF PRODUCERS et al. S. F. 17753.
• Court: California Supreme Court

Page 912

220 P.2d 912

35 Cal.2d 596

CASE et al. v.KADOTA FIG ASS'N OF PRODUCERS et al.

S. F. 17753.

Supreme Court of California, in Bank.

July 27, 1950.

Rehearing Denied Aug. 24, 1950.

Johnson, Harmon, Stirrat & Henderson, San Francisco, Adams & Griswold, Merced and W. G. Harmon, San Francisco, for appellants.

Pillsbury, Madison & Sutro, Eugene D. Bennett, Samuel L. Wright, all of San Francisco, Preston, Braucht & George, V. G. Preston, C. Ray Robinson and Margaret A. Flynn, all of Merced, for respondents.

EDMONDS, Justice.

At the time this litigation commenced, Case and Swayne were copartners doing business as the Case-Swayne Company, Kadota Fig Association, an unincorporated association of fig growers and Yosemite Growers, a similar organization of peach growers.Case-Swayne sued the fig growers for breach of contract, and the peach growers for assertedly conspiring and inducing a breach of contract by the fig growers.The appeal is from a judgment adverse to Case-Swayne on their complaint and awarding damages to each association on its cross-complaint.The judgment has been fully satisfied by execution.

The appeal from the judgment presents for decision the following questions upon the merits: (1) Whether there was substantial evidence to support the trial court's conclusionthat Case-Swayne, rather than the association, first breached the contract; (2) Whether Kadota's affirmative pleading designated 'cross-complaint' was fatally defective because it failed to name as cross-complainants any of its members or trustees; (3) Whether the Yosemite Growers were obligated to resort to arbitration under their contract as a condition precedent to any right to cross-complain; and (4) Whether, in the event the judgment for Kadota upon its cross-complaint is reversed, an order of restitution should be directed against certain of its 'withdrawing members' as well as against those who were members of the association at the time execution was levied.

Case-Swayne contracted to supervise, repair, and operate a cannery built and provided by Kadota and also to market the figs grown by the association's members.The contract further provided that the operators were free to pack other fruit and vegetables during seasons not normally devoted to fig packing, and even during fig packing when the canning of the association's product would not be hampered by the independent operations.Kadota retained the right to use the cannery under specified conditions.The association was to receive a percentage of the gross profit realized by plaintiffs in the packing of fruit other than figs.The term of the contract was at least three years.

Case and Swayne undertook to maintain certain standards of cleanliness.They also agreed to repair and maintain the canning machinery owned by the association.Although there is some conflict, the evidence supports the conclusion that they were to install new machinery.

Subsequently, Case-Swayne entered into a contract with Yosemite Growers for the packing of its 1944 peach crop under what was, in effect, a profit sharing arrangement.Both contracts called for accountings and for prompt payments by Case-Swayne to the respective growers' groups of amounts collected in the marketing of the products.The Yosemite contract provided that 'Should the parties be unable to agree upon any matter involving the computation or allocation of the costs under this agreement, then they should select an accountant to make such determination.'

Large scale freezing, packing and canning activities were undertaken by Case-Swayne under both contracts.Production continued under gradually deteriorating business relations for approximately one year.Toward the end of this period, the fig growers complained several times of conditions in the packing plant, and demanded that certain repairs and new machinery installations be effected by Case-Swayne.It appears that Case-Swayne canned extensively for other producers, as was provided in the contract, and also processed all of the fig growers' fruit.Substantially all of the frozen and packed figs met government specifications and conformed to the grades intended by the fig growers.

After about one year undr their contract, representatives of the fig growers suddenly removed some machinery from the plant, and otherwise interfered with the operation of the property.Finally, they shut off the steam which propelled the machinery and locked the engine room.Figs were not then in season, and Case-Swayne were packing asparagus.

The complaint of Case-Swayne charged the fig growers with breach of contract, and Yosemite Growers with conspiring and inducing the breach of contract by the figgrowers.Both of the defendants filed cross-complaints.That of the fig association was filed simply in the name of the Kadota Fig Association of Producers.It alleged misconduct on the part of Case-Swayne, including failure to repair and replace machinery, which constituted a breach of its contract.The cross-complaint of Yosemite asked for an accounting and was based upon a conflict as to the amount of money due under its contract with Case-Swayne.

Upon substantial evidence, the trial court found that the association contract was one of employment, and Case-Swayne were guilty of certain misconduct.Aside from isolated instances, such as permitting a conveyor belt to stick at one time, the misconduct consisted of failure to repair and replace machinery.The evidence also tends to show that the plant gutters were permitted to become fouled, the fig jam line was in disrepair and would not function; three coolers were so run down that they could not be operated continuously, and general repairs and replacements after Case-Swayne left required 40 days to complete.

As conclusions of law drawn from these facts, the court decided that the fig association was entitled to treat the contract as breached, and was justified in taking possession of its plant.Furthermore, since Case-Swayne first violated the fig contract, no cause of action was established against Yosemite for allegedly inducing breach of contract.

Judgment was rendered for both defendants upon the complaint.The sum of $73,600 plus interest was awarded the fig growers under their cross-complaint and $20,500 plus interest to Yosemite.Under writ of execution, Kadota and Yosemite have collected $80,550 and $24,333, respectively.

Case-Swayne, in urging this court to reverse the judgment against them upon their complaint, challenge the evidence as being insufficient to justify the trial court's conclusion that they first breached the fig packing contract, and assert that they should have been given an opportunity to rectify and claimed breaches by them.They also maintain that the contract was a lease of the plant.As grounds for a reversal of the judgment for Kadota upon its cross-complaint, Case-Swayne declare that Kadota, an unincorporated association, is not a legal entity competent to sue, and the failure to enumerate the individual members as cross-complainants is a fatal defect in the pleading.Another attack is made upon the judgment because, it is said, the court was not justified in awarding Kadota certain special damages, including the equivalent of Swayne's salary; damage to plant and machinery; and a balance due on account.These special items are questioned upon the ground that the evidence does not sustain either award.

Other points are relied upon in demanding relief against the judgment for Yosemite upon its cross-complaint.It is argued that Yosemite failed to submit the dispute to arbitration, as required by the contract, prior to initiating its action, and that the court erred in construing the contract to include certain costs as being chargeable to Case-Swayne.An order of restitution from both Kadota and Yosemite is also sought.

The two associations declare that none of Case-Swayne's points is well taken.According to them, the evidence justifies the conclusion that Case-Swayne were guilty of flagrant misconduct, culpable neglignece and wilful disregard for the terms of the fig-packing contract.The record also supports the conclusion, they declare, that Case-Swayne breached the terms of the peach-packing contract with Yosemite Growers by wrongfully withholding money due under that contract.

In regard to the asserted deficiency in pleading, Kadota says it was justified in filing its counteraction under its business name because it was entitled to defend under that name, and was obliged to set up its claim or else waive it.Its compliance with the fictitious name statute entitled it to sue under its business name; and Case-Swayne are estopped to question capacity.Finally, says Kadota, its 'cross-complaint' was also a counterclaim, and, as such, not a separate action.Yosemite answers the charge of an obligation to submit its claim to arbitration by saying that the contract provided for arbitration, if at all, only as to accounting matters, and this controversy concerns only the allocation of costs.The complaint:

According to the findings of the trial court, Case and Swayne were employed by Kadota in a confidential relation and the contract gave Case-Swayne Company a license to process fruit in the cannery.The record shows that Case-Swayne did not have exclusive possession of the plant, and Case testified that he followed all directions or instructions of Kadota.The contract provided for the '* * * services of an experienced production man and a Western sales manager * * *' and stated, 'The rendering by each of said individuals of their personal services shall be deemed to be a material consideration. * * *' The agreement also contained a provision that '* * * said Amos Swayne shall also direct and supervise the current maintenance and repair of the Association machinery and equipment and...