Mitchell-Huntley Cotton Co., Inc. v. Waldrep, Civ. A. No. 73-G-916-NW.

• Decision Date: 25 February 1974
• Docket Number: Civ. A. No. 73-G-916-NW.
• Parties: MITCHELL-HUNTLEY COTTON CO., INC., Plaintiff, v. Earl WALDREP et al., Defendants.
• Court: U.S. District Court — Northern District of Alabama

377 F. Supp. 1215

MITCHELL-HUNTLEY COTTON CO., INC., Plaintiff, v. Earl WALDREP et al., Defendants.

Civ. A. No. 73-G-916-NW.

United States District Court, N. D. Alabama, Northwestern Division.

February 25, 1974.

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Patrick W. Richardson, Bell, Richardson, Cleary & Tucker, Huntsville, Ala., for plaintiff.

Charles D. Rosser, Tuscumbia, Ala., for defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

GUIN, District Judge.

The court has subject matter jurisdiction under 28 U.S.C. § 1332 by reason of the amount in controversy and diversity of citizenship. Plaintiff is a Delaware corporation and has its principal office in the State of Tennessee. All Defendants reside in the State of Alabama. The amount in controversy exceeds $10,000, exclusive of interest and costs.

The several Defendants are properly joined pursuant to Rule 20(a), Federal Rules of Civil Procedure. Plaintiff asserts against the Defendants severally a right to relief arising out of the same series of transactions and questions of law and fact common to all Defendants are involved in this action.

Complaint was originally brought against Earl Waldrep, Charles Keeton, Bennie Worsham, Howard Keeton, M. E. Blacklidge, Tommy Waldrep, Ralph W. Rutland, C. O. Bishop, Bill Blackburn, W. H. Blackburn, Jr., Charles Bishop and Owen D. Foster, also known as Danny Foster. Defendants Ralph W. Rutland and Owen D. Foster were stricken on motion of Plaintiff. Final judgment has heretofore been entered against Defendants Earl Waldrep and Tommy Waldrep by agreement. The action came on for trial and final judgment as to the remaining Defendants: Charles Keeton, Bennie Worsham, Howard Keeton, M. E. Blacklidge, C. O. Bishop, Bill Blackburn, W. H. Blackburn, Jr. and Charles Bishop, hereinafter termed "Defendants", upon the issues raised by the Complaint of Plaintiff and Answer on behalf of all Defendants, as defined in the pretrial order.

This case arises out of identical contracts made by the several Defendants, separately, with Mitchell-Huntley Cotton Co., a joint venture, all dated February 15, 1973, whereby each Defendant agreed to sell to the said joint venture at a basic price of $.30 per pound (subject to specified deductions on account of grade, etc. as set out in the respective contracts) "all of the cotton planted and produced by seller during the crop year, 1973, on (a specified number of) acres, more or less, located in Colbert County, Alabama (identified by ASCS farm serial numbers) . . . and buyer (agreed to) accept and purchase all cotton produced hereunder that is ginned up to and including December 15, 1973." The contracts of Defendants Bennie Worsham, Howard Keeton, Bill Blackburn and W. H. Blackburn, Jr. were subsequently modified by identical supplementary agreements providing that they agreed to sell at a basic price of $.40 per pound and buyer agreed to purchase, cotton planted over the legal allotment on the same farms identified on their respective original contracts. The subject contracts, including the modifications referred to, were exhibited with the Complaint and introduced into evidence. All of the subject contracts were later transferred by the said joint venture to Plaintiff by written agreement under which Plaintiff assumed all obligations of the joint venture under the respective contracts.

Plaintiff is engaged in the business of buying cotton from producers and others and selling and delivering same to textile mills and others. Defendants are all farmers engaged in the growing and selling of cotton and other farm products.

Subsequent to February 15, 1973, the date of Plaintiff's first contracts with Defendants, a drastic shortage of cotton developed and the price for same on the open market had increased to an amount in excess of $.80 per pound by September 25, 1973, the date of the verification and filing of Plaintiff's Complaint, at which time cotton was maturing and in the process of being picked, ginned and delivered. When the cotton produced by Defendants was picked and ginned, it could be stored by them in places unknown to Plaintiff and disposed of so as to put it beyond the reach of Plaintiff. The cotton in question is unique and irreplaceable because of the scarcity of cotton described. An actual controversy exists as to the validity of Plaintiff's contracts with Defendants. Defendants jointly brought an action in the Circuit Court of Colbert County, Alabama, seeking to have their said contracts declared null, void and unenforceable and in the alternative that they may refrain from ginning their cotton until after December 15, 1973, and be no longer bound thereby.

Plaintiff sues herein for a Declaratory Judgment that its contracts with the respective Defendants are valid and enforceable; an injunction, pendente lite, enjoining Defendants from violating said contracts, aiding, abetting or encouraging others so to do, from delaying in the prompt harvesting, ginning and delivery to Plaintiff of the cotton subject thereto, promptly as same matures, and from removing, secreting or disposing of said cotton, other than to Plaintiff, and a Declaratory Judgment that each contract must be specifically performed.

It is the custom and usage in the trade to harvest and gin cotton promptly as same matures. Plaintiff stood ready, willing and able to perform said contracts. Plaintiff is obligated by contract to deliver to Riegel Fibre Corporation of Trion, Georgia, the cotton called for by its several contracts with the Defendants. The majority of all cotton to be produced in the United States in the 1973 crop year has been sold under contracts similar to those here at issue. There is no substantial carry-over of merchantable grades and classes of cotton from prior years in storage in the United States and there will be very little cotton available for purchase in the open market through the 1973 cotton season. Plaintiff's purchaser, Riegel Fibre Corporation, has obligated itself to produce and deliver goods at prices based upon the prices at which it bought the cotton at issue from Plaintiff. Plaintiff and Riegel Fibre Corporation are directly dependent upon Defendants to perform under Plaintiff's said contracts with them in order for Plaintiff to perform its contract with Riegel Fibre Corporation and the latter to perform its contracts to deliver goods. Unless Defendants were enjoined from delaying in the normal harvesting, ginning and delivery of the cotton which is the subject of this suit, Plaintiff would have suffered irreparable losses and damage specified in the Complaint.

Defendants denied diversity of citizenship; denied that they acted through one Nathaniel Reid, a cotton ginner, in entering into the subject contracts, as alleged by Plaintiff, but alleged that Reid was acting as agent for Mitchell-Huntley Cotton Co., the joint venture, denied the validity of the subject contracts and denied the necessity for injunction.

As to these contentions, the Court finds from the evidence first, as set forth at the outset hereof, that Plaintiff is a Delaware corporation and has its principal place of business in the State of Tennessee. Defendants offered no evidence to the contrary and, without dispute, themselves all reside in Alabama. The Court has considered the evidence touching the controversy as to the role of Nathaniel Reid and finds therefrom that he acted as mutual accommodation agent for the Defendants and the Plaintiff. As to the denial of validity of the subject contracts, the findings and conclusions of the Court will be fully stated hereinafter. On a separate earlier hearing of the application for temporary injunction the Court has already found the facts to be in support of the Plaintiff's position and concluded that the Plaintiff was entitled to an injunction pendente lite. Further evidence taken upon a later hearing on an order to several (but not all) of the Defendants to show cause why they should not be held in contempt for violation of the temporary injunction supports the prior finding of the Court that there was a necessity for the injunction.

By way of affirmative defenses, Defendants allege: FIRST, that they entered into the subject contracts in reliance upon information concerning Mitchell-Huntley Cotton Co. (the joint venture) given them by Nathaniel Reid that the said company and the members thereof were financially sound when in fact they were not and would not have been able to perform the subject contracts had the price of cotton decreased; SECOND, that they were led to believe by Reid that they had the absolute option under the contracts to refrain from ginning their cotton until after December 15, 1973, whereupon they would no longer be bound by the contracts; THIRD, that Reid led them to believe that they were dealing with two individuals, when in fact they were dealing with a corporation and a partnership or joint venture headed by R. E. Huntley who was then and thereafter insolvent and had they known the true and correct entity they were dealing with they would not have entered into the subject contracts; FOURTH, that the contracts lacked mutuality in that they give the buyer the right to be relieved thereunder after December 15, 1973, whereas they do not give the Defendants the same right; FIFTH, that the contracts were assigned by the buyer to Plaintiff corporation without knowledge of Defendants; whereas, the contracts were not assignable, being for personal services in the growing of cotton and for the sale of a commodity to be grown in the future; SIXTH, that Title 9, § 55, Code of Alabama 1940, prohibits specific enforcement of the subject contracts because they entail the obligation to render personal service in the growing, harvesting and ginning of cotton; SEVENTH, that Title 9, § 44, Code of Alabama 1940, renders the contracts void because founded in whole or part on a gambling consideration in the uncertainty of the price of...