Dark Tobacco Growers' Co-Operative Association v. Robertson

• Decision Date: 06 January 1926
• Docket Number: 12,214
• Citation: 150 N.E. 106,84 Ind.App. 51
• Parties: DARK TOBACCO GROWERS' CO-OPERATIVE ASSOCIATION v. ROBERTSON
• Court: Indiana Appellate Court

150 N.E. 106

84 Ind.App. 51

DARK TOBACCO GROWERS' CO-OPERATIVE ASSOCIATION v. ROBERTSON

No. 12,214

Court of Appeals of Indiana

January 6, 1926

From Warrick Circuit Court; Caleb J. Lindsey, Judge.

Action by the Dark Tobacco Growers' Association against Baxter T. Robertson. From a judgment for defendant, the plaintiff appeals.

Reversed.

Elbert M. Swan and Roy G. Garrison, for appellant.

Roscoe Kiper, for appellee.

OPINION

MCMAHAN, J.

Complaint by appellant against appellee, one of its members, for the recovery of liquidated damages for breach of a marketing agreement signed by appellee. A demurrer to the complaint was sustained; hence this appeal.

The complaint alleges: That appellant is a nonprofit corporation without capital stock, organized November 20, 1922, under the provisions of the act of the General Assembly of the State of Kentucky approved January 10, 1922, and known as, "The Bingham Co-operative Marketing Act." That in February 1923, it filed a certified copy of its articles of incorporation in the office of the secretary of state of Indiana and made application for authority to do business in this state in accordance with the provisions of, "An act to regulate the admission of foreign corporations not for profit to do business in the State of Indiana," approved March 1, 1921, and that the secretary of state granted and issued to it license and authority to do, transact, and engage in business in this state in accordance with the objects and purposes of its articles of incorporation, and that it has been "doing business" in this state since that time. That appellee became and was a member of appellant corporation by virtue of his agreement and the acceptance thereof by appellant. That appellee by this written agreement, a copy of which is made a part of the complaint, sold to appellant all tobacco raised by him in 1923, and certain other years, and agreed to deliver the same to appellant. That said contract was signed by appellee in this state and thereafter submitted to and accepted by appellant in the State of Kentucky, and by its terms was subject to interpretation and enforcement according to the laws of Kentucky, the consideration of said agreement being the mutual promises of the parties thereto as set out in such agreement. That appellee raised 5,000 pounds of tobacco in 1923, but failed to deliver the same or any part thereof to appellant, but had sold and delivered the same to other parties in violation of his said agreement.

A copy of "The Bingham Co-operative Market Act" of Kentucky was copied in and made a part of the complaint. This act authorized the incorporation of a nonprofit co-operative association with or without capital stock "to engage in any activity in connection with the marketing or selling of the agricultural products of its members, or with the harvesting, preserving, drying, processing, canning, packing, grading, storing, handling, shipping, or utilization thereof, or the manufacturing or marketing of the by-products thereof; or in connection with the manufacturing, selling, or supplying to its members of machinery, equipment or supplies; or in the financing of the above activities; or any one or more of the activities specified herein."

An association organized under that act was given the power to engage: (a) In any of the activities above named; (b) to borrow money without limitation as to the amount and make advances to members; (c) to act as agent for any member in any of said activities; (d) to acquire, hold, sell, pledge, or guarantee payment of dividends or interest on, or the retirement of shares of capital stock or bonds of any corporation engaged in any related activity, or in the warehousing, handling or marketing of any product handled by the association; (e) to establish reserves and invest same; (f) to buy and hold personal and real property necessary for conducting the business of the association; and (g) to do each and everything necessary, suitable, or proper to accomplish any one of the purposes or attainments named, or expedient for the interest of the association and to contract accordingly.

Section 17 of the act authorized the association and its members to make and execute marketing contracts requiring the members to sell, for any period of time, not to exceed ten years, all or any part of their agricultural products and that such contract should pass title of the products to the association. Section 18 provided that the by-laws or marketing contract might fix as liquidated damages specific sums to be paid by the member to the association upon a breach by him of his marketing contract.

The material provisions of the marketing agreement which is the foundation of this action read as follows:

"1. The grower is a member of the association and is helping to carry out the express aims of the association for co-operative marketing, for minimizing speculation and waste and stabilizing tobacco markets in the interest of the grower and the public, through this and similar obligations undertaken by other growers.

"2. The association agrees to buy and the grower agrees to sell and deliver to the association all of the tobacco produced by him or for him or acquired by him as landlord or lessor during the years 1923, 1924, 1925, and 1926. * * *

"4. (a) All tobacco shall be delivered at the earliest reasonable time after cutting or curing, drying, or firing when customary, to the order of the association, at the warehouse or plant controlled or specified by the association; or at the nearest warehouse, if the association controls or specifies no warehouse or plant in that immediate district; or by shipment, as directed, to the association; and by delivery to the association of the indorsed warehouse or other receipts or bills of lading, properly directed. (b) Any deduction or allowance or loss that the association may make or suffer on account of inferior grade, quality or condition at delivery shall be charged against the grower individually. (c) The association shall make rules and regulations and provide inspectors or graders to standardize and grade the quality and method and manner of handling, curing and shipping such tobacco; and the grower agrees to observe any such rules and regulations and to adopt the grading established by the state and federal authorities and the association.

"5. The association shall pool or mingle the tobacco of the grower with the tobacco of a like type, grade and quality delivered in the same crop year by other growers. The association shall classify the tobacco and its classification shall be conclusive. The tobacco delivered in any crop year to any point at the order of the association shall be handled in one major pool; and the minor pools shall first be by type and then by grade and quality within each type.

"6. The association agrees to resell such tobacco, together with tobacco of like type, grade and quality delivered by other growers under similar contracts, at the best prices obtainable by it under market conditions; and to pay over the net amount received therefrom (less the freight, insurance and interest), as payment in full to the grower and growers named in contracts, similar hereto, according to the tobacco delivered by each of them after deducting therefrom, within the discretion of the association, the costs of maintaining the association and of handling, grading and marketing such tobacco; and of creating funds for credits and other general commercial purposes (said funds not to exceed one per cent. of the gross resale price). The annual surplus from such deductions must be prorated among the growers delivering tobacco in that year on the basis of deliveries.

"7. The grower agrees that the association may handle, in its discretion, some of the tobacco in one way and some in another; may sell some upon delivery, may cure or process or manufacture all or any portion thereof, but the net proceeds of all tobacco, or tobacco products of like type, quality and grade, less charges, costs and advances, shall be divided ratably among the growers in proportion to their deliveries to each pool, payments to be made from time to time until all the accounts of each pool are settled. The association may contract with the owners of redrying plants and to redry and store tobacco delivered by the members of the association.

"8. The association may sell the said tobacco, within or without the United States, directly to manufacturers or exporters or otherwise, at such time and in such form and upon such conditions and terms as it may deem profitable, fair and advantageous to the grower; and it may sell all or any part of the tobacco with or through any other agency established for the co-operative marketing of the tobacco of other growers, under such conditions as will serve the joint interest of the growers and the public; and any proportionate expenses connected therewith shall be deemed marketing costs under paragraph six.

"9. The grower agrees that the association shall have absolute title to the tobacco upon delivery thereof, and that the association shall borrow money in its name on the tobacco through drafts, acceptances, notes or otherwise, or on any warehouse receipts or bills of lading or upon any accounts for the sale of tobacco or on any commercial paper delivered therefor. The association shall prorate the money so received among the growers equitably, as it may determine, for each district and period of delivery. The association agrees to accept drafts, drawn against it by the growers for any amount specified and determined by it upon delivery of tobacco hereunder; and to assist the grower to discount such drafts, secured by the warehouse receipts, through the most advantageous banking system. *...