Lennox v. Texas Farm Bureau Cotton Ass'n

• Decision Date: 11 April 1929
• Docket Number: (No. 3603.)
• Citation: 16 S.W.2d 413
• Parties: LENNOX et al. v. TEXAS FARM BUREAU COTTON ASS'N.
• Court: Texas Court of Appeals

16 S.W.2d 413

LENNOX et al. v. TEXAS FARM BUREAU COTTON ASS'N.

(No. 3603.)

Court of Civil Appeals of Texas. Texarkana.

April 11, 1929.

Rehearing Denied April 18, 1929.

Appeal from District Court, Red River County; R. J. Williams, Judge.

Suit by H. H. Lennox and another against the Texas Farm Bureau Cotton Association, wherein defendant filed a cross-action. Judgment for defendant, and plaintiffs appeal. Reversed and remanded for a new trial.

See, also, 257 S. W. 935; 283 S. W. 619; 296 S. W. 325, 328; 297 S. W. 743.

King, Mahaffey & Wheeler, of Texarkana, and Lennox & Lennox, of Clarksville, for appellants.

Aaron Sapiro, of New York City, C. K. Bullard, of Dallas, Long & Wortham, of Paris, and Robbins & Bailey, of Clarksville, for appellee.

HODGES, J.

The appellants are partners engaged in the practice of law in Clarksville, Red River county, Tex., under the firm name of Lennox & Lennox, and were such before this controversy arose. They were also jointly interested in growing cotton through tenants on land which they jointly owned. On or about June 30, 1921, they signed a written agreement, then being circulated among the growers of agricultural products, for the purpose of forming a marketing association or corporation, under the provisions of an act of the Legislature adopted in 1921 and appearing as chapter 8, title 93, Revised Civil Statutes of 1925. The following are the material portions of that agreement:

"The undersigned propose to organize a nonprofit association, without capital stock, under the laws of the state of Texas for the purpose of promoting, fostering and encouraging the business of producing and marketing cotton co-operatively; for reducing speculation; for stabilizing the cotton markets; for co-operatively and collectively handling the problems of cotton growers; and for other pertinent purposes.

"We, the undersigned, in consideration of the premises and of our mutual undertakings and of the agreement of each and every other party hereto, do hereby agree as follows, each for himself and collectively for the express benefit of and as the association to be organized:

"1. We will become members of the Texas Farm Bureau Cotton Growers' Co-operative Marketing Association, a nonprofit association, without capital stock, to be organized under the laws of the state of Texas.

"2. The association may include in its membership any cotton grower in Texas, or the landlord or tenant or lessor or lessee of land in Texas on which cotton is grown, provided the landlord or lessor receive all or part of the rental in cotton.

"3. The affairs of the association shall be controlled by a board of twenty-three directors, and the office of the association shall be at Dallas.

"4. The members shall elect twenty directors from among the members actually residing and growing cotton in the districts here specified," etc.

"10. Every member shall pay an entrance or organization fee of ten ($10.00) dollars, except that all members of the Texas Farm Bureau Federation shall pay no entrance fee directly, but such fee shall be assumed to be paid for them by the Farm Bureau Federation in the work of organization.

"11. The association shall confine itself to the problems and marketing of cotton and cotton products only and for its members only. It shall have suitable articles of incorporation and by-laws stating the purposes and powers of the association; the rights and duties of members; manner of forfeiture of membership; value of property interests on withdrawal or expulsion from membership; value of property interest on withdrawal; and any other necessary, pertinent and important points of organization, as determined by the organization committee.

"12. The association shall be organized by the Texas Farm Bureau Federation, acting by and through an Organization Committee which shall take such steps as it may deem advisable to secure subscribers for this agreement and members of the association.

"Members of Organization Committee: J. T. Orr (Chairman), Dallas. S. A. Lindsay, Houston. D. E. Lyday, Austin. W. B. Bizzell, College Station. Walton Peteet, Dallas. H. E. Childs, Itasca. C. A. Doose, Ballinger. G. E. King, Taylor. J. B. Fortson, Rice. Joe Hirsch, Corpus Christi. Clarence Ousley, Fort Worth. Ed. C. Lasater, Falfurrias. Henry Coit, Renner. J. L. McConkey, Wichita Falls. Leslie Elliott, Belton. D. M. Jones, Paducah. Shirley Gregg, Manor. J. D. Rogers, Navasota.

"13. (a) If by July 1, 1921, signatures of cotton growers or persons eligible to membership covering at least 1,000,000 [bales] of cotton of the 1920 crop shall not have been secured for this agreement, the organization committee shall so notify every subscriber at his address noted below, prior to July 15, 1921; and the subscriber shall have the right to withdraw and to cancel his signature and the agreement signed by him, by written notice mailed to the Secretary of the organization committee between July 15 and August 1, 1921.

"(b) If all signatures are not then withdrawn, the organization committee may then proceed with the organization and with the marketing plans under the marketing agreement, provided signatures covering at least 500,000 bales remain uncanceled.

"If signatures covering less than 500,000 bales so remain, the committee shall cancel all contracts.

"(c) If signatures of the growers of 1,000,000 bales shall be secured by the said date, July 1, 1921, then this agreement shall be binding upon all of the subscribers in all of its terms and there shall be no right of withdrawal whatsoever.

"(d) For all matters of production or signatures and for all statements of fact in connection herewith, the written statement of the organization committee, provided for in paragraph twelve hereof, signed by its chairman, shall be absolutely conclusive, with or without notice to the subscriber.

"17. (a) The subscriber agrees (1) to execute, when requested by the association, a marketing agreement in terms substantially the same as those set forth in the agreement herewith embodied; or (2) at the option of the board of directors, to be bound by the terms of the following marketing agreement.

"For such purpose signature to this association contract shall be deemed to all effects the same as signature to this said marketing agreement and as acceptance of each and every provision thereof and herein, as of the date of the exercise of such option by the board of directors. Notice thereof shall be mailed to each subscriber at his address as noted below.

"(b) The subscriber here applies for membership in the association when organized and expressly agrees that his signature to the association contract and to the marketing agreement herewith embodied, and to this application for membership shall be irrevocable, except as provided in paragraph 13; and that he so agrees, in order to induce other growers to sign this agreement for his benefit as well as their own general benefit and public welfare.

"Acceptance of this application for membership and of the marketing agreement shall be deemed conclusive, upon the mailing of the notice by the association; and such mailing and notice shall be conclusively established by the affidavit of the secretary of the association."

The marketing agreement referred to provides, among other things, that the association agrees to buy and the grower to sell and deliver to the association all the cotton produced or acquired by or for him in Texas during the years 1921, 1922, 1923, 1924, and 1925. The association was to endeavor to sell the cotton gradually as the spinning industry required, and at the best possible prices. The marketing agreement further provided that since a remedy at law for its breach was inadequate, the grower became liable for five cents per pound, middling basis, as liquidated damages, "for all cotton delivered, sold, consigned, withheld or marketed by or for him, other than in accordance with the terms" thereof. It also provided that, in the event the grower threatens a breach "of any provision regarding delivery of cotton, the association shall be entitled to an injunction to prevent breach," and that, if the association brings an action for the breach, or a threatened breach, "the grower agrees to pay to the association all costs of court, costs for bonds," traveling expenses, and reasonable attorney's fees.

The committee in charge of the program for organizing the association failed to secure the signatures of persons eligible to membership covering as many as 1,000,000 bales of cotton of the 1920 crop by July 1, 1921, and decided to proceed under the provisions of subdivision (b) of section 13 of the agreement, which provided that an organization might be perfected if signatures covering at least 500,000 bales remained uncanceled by August 1. Appropriate notices were sent out to the signers of the organization contract, after which it was determined by the committee that signatures covering as many as 500,000 bales of cotton for the 1920 crop remained uncanceled, and the corporation was organized on July 27, 1921, to become effective on August 1 following.

Some time later appellants, becoming dissatisfied with the manner in which the association conducted its business, filed this suit in the district court of Red River county in October, 1922. In their original petition they stated two distinct causes of action. In one they sought a cancellation of their contract with the association on the ground of fraud and other conditions which need not be here stated. In the other they sought damages for the breach of a special contract under which they delivered to the association, for sale, 1,095 bales of cotton.

The first trial was upon a plea of privilege filed by the association, which was overruled, and that ruling affirmed on appeal. See (Tex. Civ. App.) 257 S. W. 935. Thereafter the association filed an amended answer and cross-action, in which the marketing agreement was pleaded...