Potter v. Dark Tobacco Growers' Co-op. Ass'n

• Decision Date: 21 December 1923
• Citation: 201 Ky. 441,257 S.W. 33
• Parties: POTTER v. DARK TOBACCO GROWERS' CO-OP. ASS'N.
• Court: Kentucky Court of Appeals

257 S.W. 33

201 Ky. 441

POTTER v. DARK TOBACCO GROWERS' CO-OP. ASS'N.

Court of Appeals of Kentucky.

December 21, 1923

Appeal from Circuit Court, McCracken County.

Suit by the Dark Tobacco Growers' Co-operative Association against Lee D. Potter. Judgment for plaintiff, and defendant appeals. Affirmed.

Andrew M. Nichols, of Paducah, for appellant.

Aaron Sapiro, of San Francisco, Cal., Robert W. Bingham, of Louisville, Abe D. Waldauer, of Memphis, Tenn., and Bradshaw & MacDonald, of Paducah, for appellee.

CLARKE J.

Appellee was organized and incorporated under and pursuant to the provisions of chapter 1 of the 1922 Acts of the Kentucky General Assembly, which is known as the "Bingham Co-operative Marketing Act." Appellant became a member of the association, and by written contract agreed to deliver to it his crops of tobacco for the years 1922 to 1926 inclusive, as did 75 per cent. of the growers of dark tobacco in Kentucky, Indiana, and Tennessee.

Questioning the validity of the act and his contract, he was threatening and about to deliver his 1923 crop of tobacco elsewhere when this action was instituted against him by appellee under our Declaratory Judgment Law (chapter 83 of the 1922 Acts) for decision of seven legal questions arising out of the contract and in dispute between the parties. There was no issue of fact, and, the judgment being adverse to him on each question, he has appealed.

For a statement of the questions involved, we quote the judgment:

"(1) That the Bingham Co-operative Marketing Act, being chapter 1 of the Acts of the Legislature of Kentucky of 1922, p. 1 is not in conflict with or violative of section 1, art. 14, of the Constitution of the United States, and that said Bingham Co-operative Marketing Act is not improper class legislation within the meaning of the Fourteenth Amendment to the Constitution of the United States.

(2) That the contract between plaintiff and defendant, fully set out in the petition, is not violative of the statute of frauds of this Commonwealth, that is, paragraph 7 of section 470 of Carroll's Kentucky Statutes.

(3) That said contract between the parties does not create or tend to create or develop a monopoly or combination in restraint of trade in any way, or is it in violation of the Sherman Anti-Trust Act, passed by the Congress of the United States, being the Act of July 2, 1890, and subsequent acts of Congress amendatory thereof, or in violation of the act of Congress of the United States enacted August 27, 1894, or any subsequent act or acts amendatory thereof.

(4) That there is mutuality in said contract, and that it is not defective or invalid or unenforceable because of want of mutuality.

(5) That the plaintiff is entitled to equitable relief, and is entitled to an injunction to prevent a continuing or a threatened breach of said contract, and that the agreement in said contract providing for said relief is valid and enforceable, and said provision is not harsh, inequitable, or unreasonable.

(6) That the provision in said contract for the payment of an attorney's fee in the event of a breach or threatened breach and the successful termination of any action against defendant arising out of such breach or threatened breach, is legal, valid, and enforceable.

(7) That the clause in said contract providing for the payment by the defendant of the sum of 5 cents per pound on each pound of tobacco sold to persons or corporations other than the plaintiff, said 5 cents per pound being liquidated damages, is a valid provision, and is enforceable as such, the same providing for the payment of liquidated damages, and is not a penalty."

The Bingham Co-operative Marketing Act is of the type now familiar in most, if not all, agricultural sections of the Union, and identical in its essential features with acts that have been enacted quite recently in about 30 states, and upheld so far by the courts of last resort in North Carolina, Oregon, Mississippi, Texas, Kansas, and Wisconsin. Tob. Growers Co-op. Ass'n v. Jones, 185 N. Car. 265, 117 S.E. 174; Oregon Growers' Ass'n v. Lentz (Or.) 212 P. 811; Brown v. Staple Cotton Ass'n (Miss.) 96 So. 849; Texas Cotton Ass'n v. Stovall (Tex.) 253 S.W. 1101; Kansas Wheat Growers' Ass'n v. Shulte, 113 Kan. 672, 216 P. 311; N.W. Wisconsin Pool v. Bekkedal, 197 N.W. ___.

As the provisions of these acts are either quoted in full or summarized in these cases, we deem it unnecessary to state them here. Indeed, in view of the settled rule in this state and elsewhere, that if there is doubt as to the validity of a statute it will be upheld (Chesapeake Stone Co. v. Moreland, 126 Ky. 656, 104 S.W. 762, 16 L.R.A. (N. S.) 479; Dwiggins Wire Fence Co. v. Patterson, 166 Ky. 278. 179 S.W. 224; Clay v. Dixie Fire Ins. Co., 168 Ky. 315, 181 S.W. 1123), we probably would be justified in declaring the Bingham Act constitutional without further discussion, upon the persuasive authority of the above cases, since there is no contrary decision, nor even a dissenting opinion, in any of the cases in which these acts have been considered in relation to section 1 of article 14 of the federal Constitution, and such unanimity of opinion could hardly prevail if the constitutionality of such acts were less than plain.

Not only so, but every other objection now raised to the act, the contract and the remedies prescribed in both the act and contract, is likewise disposed of in some or all of those cases. We prefer, however, to state briefly our own reasons for like conclusions upon each of these questions, except that we will not notice the second and sixth as numbered in the lower court's judgment supra, since they are expressly abandoned by appellant as being untenable.

The first and third contentions are somewhat related, and will be considered together. It is upon the hypothesis that the act permits, through an improper classification of citizens, and the appellee accomplishes, through its contracts with appellant and other tobacco growers, a monopoly or unreasonable restraint of trade, that it is insisted the act offends the Fourteenth Amendment, and the contract violates the Sherman Anti-Trust Act of Congress (U. S. Comp. St. §§ 8820-8823, 8827-8830).

There is, however, neither allegation nor proof that a monopoly actually has been created, or that trade has been restrained by appellee; hence it is clear the contract cannot be annulled as violative of the anti-trust provisions of either the Sherman Act or the common law now in force in this state. United States v. U.S. Steel Corp., 251 U.S. 417, 40 S.Ct. 293, 64 L.Ed. 343, 8 A.L.R. 1121; International Harvester Co. v. Kentucky, 234 U.S. 216, 34 S.Ct. 853, 58 L.Ed. 1284; Standard Oil Co. v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619, 34 L.R.A. (N. S.) 834, Ann.Cas. 1912D, 734; United States v. Am. Tob. Co., 221 U.S. 106, 31 S.Ct. 632, 55 L.Ed. 663; Collins v. Commonwealth, 234 U.S. 634, 34 S.Ct. 924, 58 L.Ed. 1510; Owen County Society v. Brumback, 128 Ky. 137, 107 S.W. 710; Commonwealth v. International Harvester Co., 131 Ky. 551, 115 S.W. 703, 133 Am.St.Rep. 256; Commonwealth v. Hodges, 137 Ky. 233, 125 S.W. 689; Collins v. Commonwealth, 141 Ky. 564, 133 S.W. 233; International Harvester Co. v. Commonwealth, 144 Ky. 403, 138 S.W. 248; L. & N. R. Co. v. Burley Tob. Soc., 147 Ky. 22, 143 S.W. 1040. Indeed, since the Clayton Amendment of the Sherman Act (U. S. Comp. St. § 8835f) expressly exempts agricultural and horticultural organizations instituted for the purpose of mutual help, and not having capital stock or conducted for profit from anti-trust provisions, it recognizes as reasonable a classification based upon such pursuits. Hence the Sherman Act as amended is itself expressive of a change in the public attitude and policy toward agricultural and horticultural pursuits in relation to other business activities, and a recognition of a necessity for the public welfare of permitting organization among such citizens to enable them to meet justly and without undue advantage the conditions they encounter in necessary trade relations with other citizens, or rather groups.

Nor are the Clayton Act and the many other recent acts of Congress treating farmers as a distinct class the only expressions of such a change in public opinion and the public policy of our nation with reference to them and their economic problems. The enactment by the Legislatures of 30 or more of the states of enabling acts precisely like the Bingham Co-operative Marketing Act is further evidence of the present state of public opinion on the matter, as is the attitude of every other agency through which an enlightened public policy may be declared, including the most recent résumé of the state of the Union by the President of the United States.

The basis of this change in public opinion toward combination and classification is not in any sense political, but economic rather, and, in our judgment, it is because of basic economic conditions, affecting vitally not only the farmers, but also the public weal, that the classification based upon agricultural pursuits is reasonable, just, and imperative for the good of the entire nation and every citizen thereof. If this be true, the Bingham Act is based upon a classification that is not offensive to the...