Greene Cnty. Rural Elec. Coop. v. Nelson, 46409.

• Court: United States State Supreme Court of Iowa
• Writing for the Court: MILLER
• Citation: 234 Iowa 362,12 N.W.2d 886
• Parties: GREENE COUNTY RURAL ELECTRIC COOPERATIVE et al. v. NELSON et al.
• Docket Number: No. 46409.,46409.
• Decision Date: 08 February 1944

234 Iowa 362
12 N.W.2d 886

GREENE COUNTY RURAL ELECTRIC COOPERATIVE et al.
v.
NELSON et al.

No. 46409.

Supreme Court of Iowa.

Feb. 8, 1944.

Appeal from District Court, Polk County; Loy Ladd, Judge.

Action in equity by rural electric cooperative associations to enjoin the state tax commission from attempting to assess their property under Chapter 340, Code 1939. The court granted the injunction. The tax commission appeals.

Affirmed.

[12 N.W.2d 887]

John M. Rankin, Atty. Gen., and Jens Grothe, Asst. Atty. Gen., for appellants.

Wisdom & Wisdom and Stephens & Buckingham, all of Des Moines, for appellees.

Thompson & Weible, of Forest City, and Glenn D. Kelly, of Davenport, for interveners-appellees.

MILLER, Justice.

Plaintiffs' petition asserts that they are rural electric cooperatives, organized under Chapter 390.1, Code 1939, engaged in operating electric transmission lines upon the cooperative plan and not for profit and that defendants are threatening to assess their lines under Chapter 340, Code 1939; that defendants are without right, jurisdiction or authority to so proceed; the prayer was for a permanent injunction. Two interveners adopted the allegations of the petition and asked for similar relief. Defendants' answer denied that plaintiffs were in law or in fact organized or operated on a non profit basis, asserted that Chapter 340 applies to plaintiffs and alleged further that, if plaintiffs are nonprofit associations, the exemption in their favor, appearing in Section 7089, was repealed by implication by Chapter 248, Acts of the 49th G.A.

At the trial most of the evidence consisted of stipulations and exhibits. The facts are not disputed. The court determined that plaintiffs are in law and in fact organized and operated on a non profit basis, that Chapter 248, Acts of the 49th G.A., did not repeal the exemption contained in Section 7089, and, accordingly, enjoined defendants from assessing plaintiffs under Chapter 340 of the Code. The defendants appeal to this court, asserting five propositions for reversal.

I. The commission's first two propositions challenge the trial court's finding that plaintiffs are in law and in fact organized and operated on a non profit basis. They will be considered together.

Prior to 1935 cooperatives were organized under what is now known as Chapter 390, Code 1939. By Chapter 94, Acts of the 46th G.A. (1935), it was provided that cooperatives previously organized under Chapter 390 should continue to operate thereunder but any new cooperative should be organized under said Chapter 94, now codified as Chapter 390.1, Code 1939. Plaintiffs were organized in 1937 under said Chapter 390.1. This chapter permits the organization of cooperatives

[12 N.W.2d 888]

for profit as well as those not for profit.

Plaintiffs' articles of incorporation are in evidence. The parties stipulated regarding their operations as follows:

“It is further stipulated and agreed by the parties hereto that the facts are, which shall be considered as the evidence in this case, that in the operation of the business of the plaintiffs in this case, and cooperative associations similarly situated, each member holds one membership only, that is by a certificate of membership, has only one vote in the management of the business of the plaintiffs, and cooperative associations similarly situated; that all members are required to be patrons and business is done with the members only; that no dividends or interest has ever been paid by the plaintiffs or other cooperative associations similarly situated to members on the membership or the issuing price thereof; that the earnings or excess charges are distributable to the members only on a patronage basis in proportion to the business done by the members through the cooperative corporation and other corporations similarly situated.”

The articles of incorporation are consistent with the method of operation above set forth. We are satisfied that plaintiffs are not organized or operated for profit. There is no return on capital invested and can be none. The membership fee of $2.50 is nominal and nothing more than a deposit to establish credit, such as many public utilities require of their patrons. The income is that received for business done with members. Only members are dealt with. Any net earnings are returned on the basis, not of membership or investment, but of business...