Mountain States Beet Growers' Marketing Ass'n v. Monroe

• Decision Date: 09 July 1928
• Docket Number: 12118.
• Parties: MOUNTAIN STATES BEET GROWERS' MARKETING ASS'N v. MONROE.
• Court: Colorado Supreme Court

269 P. 886

84 Colo. 300

MOUNTAIN STATES BEET GROWERS' MARKETING ASS'N v. MONROE.

No. 12118.

Supreme Court of Colorado, En Banc.

July 9, 1928

Error to District Court, Logan County.

Suit by Charles T. Monroe against the Mountain States Beet Growers' Marketing Association. Decree for plaintiff, and defendant brings error.

Affirmed.

Walker and Butler, JJ., and Denison, C.J., dissenting.

Lindsey & Larwill and D. K. Wolfe, all of Denver and Thomas A. Nixon, of Greeley, for plaintiff in error.

Coen &amp Sauter and McConley & McConley, all of Sterling, for defendant in error.

Caldwell Martin, of Denver, amicus cusiae.

CAMPBELL J.

The plaintiff is a grower of sugar beets upon his own lands in Logan county. The defendant is a corporation organized under our Co-operative Marketing Act (S. L. 1923, p. 420), of which incorporated association the plaintiff is a member. This statute, among other things, provides that 11 or more persons, a majority of whom are residents of Colorado, may form a nonprofit co-operative association, with or without capital stock, to engage in the marketing or selling of the agricultural products of its members. The defendant association was organized without capital stock, and the plaintiff was thereafter admitted as a member, in accordance with the statute and the rules and regulations of its board of directors. After the expiration of the term of its first board, named in the certificate of incorporation, directors are to be elected by its members. Such an association has the power to engage in any activity in connection with, and incidental to, the marketing of agricultural products. The affairs of the association are managed by this board, which has power to make appropriate by-laws. The by-laws of this association provide for a recovery as liquidated damages of a definite sum, to be paid by a member upon the breach by him of any provision of the by-laws or marketing contract regarding the sale or delivery or withholding of products, and such provision for liquidated damages shall be enforceable as such, and is not to be regarded as a penalty. Section 29 of the statute declares that associations organized thereunder shall not be deemed in restraint of trade or a monopoly, or an attempt arbitrarily to fix prices, nor shall authorized marketing contracts between the association and its members be considered illegal as such, or as in restraint of trade. These provisions of the statute are involved in this case.

The working plan adopted by the sugar company, purchaser, the defendant association, and its members may thus be stated Defendant association enters into a separate agreement with each of its members, by which he constitutes it his sole agent for the purpose of marketing and contracting for sale all sugar beets to be grown by him or for him within the state during each year, and from year to year thereafter, subject to the right of either party to the contract, at the end of any year, by written notice delivered to the other party on or before November 1 of each year, to terminate the same. In legal effect it is a one-year contract at the option of either party. The association agrees to endeavor to market for the grower the beets which he produces, whenever and wherever a market may be found, which, in its judgment, shall justify such marketing, with a view to obtain for the grower a fair and profitable price for his beets, with the express aim of obtaining not less than a fifty-fifty contract, and that the association shall not be liable for any damages that the grower may sustain, provided no sale of beets is made, if in the judgment of the association the price offered is not satisfactory. The contract further provides that the same shall not be held to deprive the grower of full control over his acreage and production, but that all sugar beets which he shall harvest, in whatever amount, shall be subject to the contract.

One of the promises of the grower is that he will not 'sell or grow, or contract to grow,' any sugar beets, except under the terms of the contract, and at a price approved by the association. There is another provision in which the grower is required to declare his intention to grow a given number of acres during each season, provided a marketing contract shall have been procured by the association prior to planting time. When such a contract is entered into between the defendant association and a grower, he is then permitted, and not before, to enter into a contract with the Great Western Sugar Company, which is the only purchaser of sugar beets in Northern Colorado, and the only buyer to whom sales can be made. Attached to the form of the contract between the grower and the Great Western Sugar Company, which the company has adopted and uses, is a rider which provides that the contract in question is subject to the rights of any co-operative marketing association of which the grower is a member, to contract for the grower for the sale of beets, and, if the grower is thus qualified, i. e., by virtue of his contract with the association, to enter into a marketing contract with the sugar company, the contract is binding upon both parties; but, if a grower is not thus qualified to execute the contract with the sugar company, the latter, on or before the time of the harvesting of the beet crop, has the power to purchase or contract to purchase the beets from or through those legally qualified to market or contract for the sale thereof--that is, with the association. It seems to be conceded here that, under this plan, recognized by the three parties concerned, the sugar company will not purchase or contract to purchase of a grower until a contract of purchase for the given year has first been secured or offered, that is acceptable to and approved by the association.

During the current year of 1928 the association and the sugar company have not been able to agree upon the terms of a contract for marketing of the 1928 crop to be produced by the members of the association. The plaintiff in this action, Monroe, a member of the association, when planting time arrived, which is about April 10, having ascertained that no such contract had been made or secured, or would be tendered, asked to be released by the association for the year 1928 from the obligations of the association contract resting upon him, so that he might be free to enter into a contract himself with the purchaser for the sale of his beets; but the association refused to release him. Thereupon he brought this action, which, in form, is in the nature of a suit in equity to enjoin the defendant association from enforcing against him the terms and provisions of their contract, and to compel the defendant to refrain from all attempts to enforce against him the penalties therein provided, and to release him from its obligations for this year.

Defendant's answer alleges that for months previous to the beginning of the month of April, 1928, it had been negotiating with the sugar company in attempts to secure a fair and satisfactory price for beets to be grown during the year 1928 on the plaintiff's lands and the lands of its other members; that the sugar company, during the negotiations, has only submitted to it one form of contract; that this form was not at a fair and profitable price, satisfactory in its judgment, and its refusal to accept such contract was duly approved by a majority of its members; that, although such negotiations with the sugar company for a contract have continued for months, up to the time of filing of the answer they have not resulted in providing any market for beets to be grown in 1928 by the plaintiff, which would, in its judgment, justify marketing of them. In a replication, plaintiff denied affirmative matters of the answer.

Upon issues thus joined there was a trial to the court without a jury. An application for a preliminary injunction was made, and most of the evidence that is embodied in the transcript here was taken on that application. The court at the close of the hearing upon this application, granted the temporary writ, whereupon, by agreement of the parties, the evidence taken upon the preliminary hearing was to be considered by the court upon the final hearing and at the final hearing additional testimony was taken. The court made findings of fact, and entered a decree in favor of the plaintiff, which, in substance, released and discharged him from his obligations under the 1928 contract relating to the growing or marketing of the sugar beet crop during that year, and enjoined the threatened acts of the defendant to restrain and prevent plaintiff from planting, growing, harvesting, or selling, or contracting to that end, a crop of sugar beets, in 1928, and restrained the association from imposing any of the penalties prescribed by the contract. The court specifically found, among other things, that the defendant association is unable to perform the terms of its contract with the plaintiff, and that its refusal, either to market plaintiff's crop or to release him from the contract and permit him on his own behalf to market his crop, is arbitrary, unreasonable, willful, and without just grounds or excuse, is not the exercise of any discretion vested in the defendant, but constitutes a breach of its contract with, and a wrongful oppression of, the plaintiff. The court further found that the particular contract between the plaintiff and the association, which is one of a series of many contracts with its members, must be construed together and in connection with all other contracts of other growers in the same field or district, and also with the contract which the growers make with the sugar company. The court also found that the contract was in restraint of trade, and, as...