Gulf Coast Farmers Co-op. v. Valley Co-op Oil Mill
| Decision Date | 29 August 1978 |
| Docket Number | No. 1252,CO-OP,1252 |
| Parties | GULF COAST FARMERS COOPERATIVE, Appellant, v. VALLEYOIL MILL, a Cooperative Corporation, Appellee. |
| Court | Texas Court of Appeals |
This is a suit for damages resulting from an alleged conversion of "stock" in a corporation and from an alleged breach of contract to sell and deliver fertilizer.
Gulf Coast Farmers Cooperative, hereinafter referred to as "Gulf Coast", filed suit against Valley Co-op Oil Mill, hereinafter called "Valco", to recover damages for the alleged conversion of certain shares of Series II and Series IV stock of Mississippi Chemical Corporation, hereinafter designated as "Miscoa", and for damages allegedly sustained by reason of Valco's refusal to deliver fertilizer to it under an allocation previously made by Valco to it. Following a jury trial, Gulf Coast moved for judgment on the verdict and Valco filed a motion for judgment non obstante veredicto. Valco's motion with respect to the action for conversion of the Series II stock was sustained. Judgment was rendered which was favorable to Gulf Coast in the action for conversion insofar as the Series IV stock is concerned, and concerning the Series IV stock and its claims for damages in the action for breach of contract. Gulf Coast and Valco have each perfected an appeal to this Court from those portions of the judgment which were unfavorable to each of them.
This lawsuit involves a dispute as to whether or not Gulf Coast owned certain stock in Miscoa (which was allegedly converted by Valco on March 3, 1975), and as to whether Valco's refusal to deliver agricultural fertilizer to Gulf Coast after March 3, 1975 constituted a breach of a pre-existing contract to sell and deliver certain quantities of fertilizer to Gulf Coast. The precise nature of the "stock" is not made clear by either the pleadings or the evidence. Whatever the true nature of the "stock" in dispute in this lawsuit may be, the issues presented are: 1) did the several letters (hereinafter discussed) between Gulf Coast and Valco, when construed together, constitute an agreement whereby Valco agreed to sell certain Miscoa stock to Gulf Coast?; 2) If so, how many shares of Series II stock, and how many shares of Series IV stock were sold?; 3) Assuming that Gulf Coast did purchase Miscoa stock, after the number of shares of each series is determined, what was the market value of each share of the two series of stock on the day of its conversion, if there was a conversion thereof?; and 4) Was there a breach of a pre-existing contract to sell and deliver fertilizer?
Gulf Coast began purchasing fertilizer from Valco in early May, 1972. Fertilizer was in short supply in later September, 1973. At that time, Valco was purchasing fertilizer from Miscoa, and Gulf Coast was purchasing it from Valco. Both Gulf Coast and Valco became concerned over the effect that the fertilizer shortage would have upon the existing distribution chain between Valco and Miscoa, which would, of necessity, have a pronounced effect upon Gulf Coast and its patrons under its then existing arrangement with Valco. A number of letters passed between Valco and Gulf Coast in an attempt to negotiate the precise allocation of Nitrogen fertilizer, designated by the parties and referred to herein as "Series II" stock, and Mixed Grade fertilizer, designated by the parties and referred to herein as "Series IV" stock.
Gulf Coast contends that the letters formed a contract between it and Valco, whereby it (Gulf Coast) became the owner of certain shares of Miscoa Series II and Series IV stock. It further contends that the contract also gave it the right to purchase certain amounts of fertilizer for the period July 1, 1974 to June 30, 1975. Valco disputed those claims and asserts that all Gulf Coast acquired was an equity in Valco.
As has been noted, judgment was rendered which was favorable to Gulf Coast with respect to its action for conversion of Miscoa Series IV stock, but the trial judge, concerning the action for conversion of Miscoa Series II stock, granted Valco's motion for judgment non obstante veredicto. The evidence concerning whether or not Gulf Coast purchased Miscoa Series II stock, in all material aspects, is the same as to whether it purchased Miscoa Series IV stock. In that state of the record, we believe that the trial court erred in rendering judgment on the verdict for Gulf Coast as to its action for conversion of Series IV stock and in granting Valco's motion for judgment non obstante veredicto concerning the action for conversion of Series II stock. The judgment further awarded Gulf Coast certain monies for breach of contract, caused by Valco's refusal to sell Gulf Coast its unused portion of the fertilizer allocation for the period of time in question. In this respect, we believe the trial court was correct. We, therefore, will sever the action for damages for conversion from the action for damages for breach of contract; we will reverse the judgment of the trial court with respect to the action for conversion and will remand that cause to the trial court, but we will affirm such judgment with regard to the action for breach of contract.
Both Gulf Coast and Valco are farmers' cooperative associations established under Tex.Rev.Civ.Stat.Ann. arts. 5737 et seq. Among other things, they furnished fertilizers and chemicals, to both members and non-members, to be used ultimately by farmers. Besides being subject to State statutes, both operate as tax-exempt cooperatives and must comply with federal tax rules and regulations in order to maintain their federal income tax exemption. After deduction of reasonable expenses of operations, cooperatives refund to their patrons all profits in the form of patronage refunds. Patrons usually receive refunds at the end of each of the cooperative's fiscal years either in cash or allocation, giving the patrons equity ownership in the fund allocated. A tax-exempt cooperative may do business with non-members to a limited extent provided both members and non-members are dealt with equally. Here, Valco furnished fertilizer and chemicals to Gulf Coast, a non-member of Valco.
Miscoa is a manufacturer of agricultural fertilizers. Under its charter and by-laws, its stockholders have certain preferred patronage rights which give them the option to purchase fertilizers from it, and in order to obtain an efficient distribution of such products, Miscoa appoints Distributors and Agents to serve such stockholders. It was required that all stockholders of Miscoa be served "alike". On May 9, 1972, a three-party contract was made whereby Miscoa (the "Company") agreed to supply certain agricultural fertilizers to Valco (its "Distributor"), and Gulf Coast (its "Agent"). The fertilizers to be delivered by Miscoa to Valco would be distributed to the stockholders of Miscoa in accordance with "a list of certain holders" of Miscoa stock to be prepared by Miscoa and attached as exhibits to the contract. It was further provided by the contract that "each exhibit shall contain a statement of the amount of each class of stock owned by each person (hereinafter called 'stockholders') who are to be served by the Agent and Distributor", subject, among other provisions, to the following:
"Should any stockholder purchase additional stock o (sic) transfer his stock in accordance with the Charter and Bylaws of the Company, or assign his patronage rights in writing and notify th (sic) Company of such purchase, transfer or assignment, or should the Company change the preferred patronage rights of the Stockholders then in either of such events, the Company shall notify the Agent and the Distributor in writing who shall maintain such notice as a supplement to said exhibit and not as a part thereof."
Neither the exhibits, lists, statements, charter or by-laws of Miscoa, referred to in the contract appear in the record. There is no indication that the contract was ever revoked, rescinded or changed in any way.
Gulf Coast apparently contends that its rights to purchase Miscoa stock became fixed by the contract. This is disputed by Valco, which asserts that the said three-party contract, by its terms, only covers a situation where the ultimate consumer of the fertilizer is himself a Miscoa stockholder. Valco further claims that it simply distributed Miscoa products to Gulf Coast. Valco also insists that it was a Miscoa stockholder who sold the fertilizers allocated to it by Miscoa to its (Valco's) members and non-member cooperatives and that it (Valco) purchased the fertilizers from Miscoa, paid Miscoa for it, and charged its members and non-member cooperatives a sufficient price for such fertilizers to make a profit thereon (referred to as "profit margin"), which would eventually be paid to its patrons (members and non-members) by way of cash refunds and allocations to various reserve accounts held by it (Valco) for operating capital.
At all times pertinent to this appeal, Valco served as a distributor of fertilizers for Miscoa. Gulf Coast, who purchased such products from Valco, would pay Valco for the Miscoa products invoiced to them and would then invoice its farmer-patrons, the ultimate consumer of the fertilizers, in accordance with the appropriate allocations. Valco would pay Miscoa for all fertilizers shipped to it by Miscoa. In early May, 1972, Valco commenced selling fertilizers to Gulf Coast as a non-member cooperative. The business continued until March 3, 1975, when Valco informed Gulf Coast that it would no longer furnish fertilizers to it; a settlement statement was furnished, which did not meet with Gulf Coast's approval.
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