Rathke v. Yakima Valley Grape Growers Ass'n

• Decision Date: 08 April 1948
• Docket Number: 30441.
• Citation: 192 P.2d 349,30 Wn.2d 486
• Court: Washington Supreme Court
• Parties: RATHKE et al. v. YAKIMA VALLEY GRAPE GROWERS ASS'N et al.

192 P.2d 349

30 Wn.2d 486

RATHKE et al. v. YAKIMA VALLEY GRAPE GROWERS ASS'N et al.

No. 30441.

Supreme Court of Washington

April 8, 1948

Department 2

Rehearing Denied May 24, 1948.

Action by Clark E. Rathke, doing business as Rathke & Company, and another, against Yakima Valley Grape Growers Association and others, to recover damages for alleged breach of two contracts and to enforce specific performance of both contracts. From judgment dismissing the action without prejudice, the plaintiffs appeal.

Affirmed.

Appeal from Superior Court, Yakima County; Dolph Barnett, judge.

Cheney & Hutcheson, of Yakima, for appellants.

Oscar L. Boose, of Sunnyside, and Grady & Grady, of Yakima, for Yakima Valley Grape Growers Ass'n, respondent.

Barker & Day and Wm. J. Walsh, Jr., all of Seattle, for Yakima County Processors, Inc., et al., respondents.

JEFFERS, Justice.

This action was instituted by Clark E. Rathke, doing business as Rathke & Company, and Clarke-Donelson Company, a corporation against Yakima Valley Grape Growers Association, a corporation, Yakima County Processors, Inc., a corporation Goebel-Pratt Company, a corporation, and the principal stockholders of the latter two corporations, Randall S. Pratt and G. Franklin Jones, to recover damages for an alleged breach of two contracts and to enforce specific performance of both contracts.

One contract was between Yakima Valley Grape Growers Association as first party, and Clark E. Rathke, doing business as Rathke & Company, of Seattle, as second party. By the terms of this contract, denominated 'Purchase Agreement,' first party agreed to purchase from second party all the machinery equipment, materials and supplies to be used in producing grape juice or other products at first party's plant at Grandview, Washington, for a period of ten years.

The other contract, called 'Sales Agreement,' was entered into between Yakima Valley Grape Growers Association, as first party, and Clarke-Donelson Company, as second party, and under its terms first party, for a period of ten years, agreed to sell to second party so much of first party's output of grape juice or other products as second party might from time to time require or order, subject to certain restrictions contained in the contract, among which was the right of the Association to sell fifty per cent of its own output.

Yakima Valley Grape Growers Association (which will be hereinafter referred to as the Association) appeared separately and filed an answer to the amended and supplemental complaint of plaintiffs, wherein it admitted entering into the above contracts, and subsequently entering into other contracts and a lease to Yakima County Processors, Inc., whereby the latter leased the plant of the Association at Grandview, and controlled the sale of its output, thereby interfering with plaintiffs' contractual relationship with the Association. Defendant Association denied the other material allegations of the complaint, and by way of an affirmative defense, pleaded certain acts and conduct on the part of plaintiffs in justification of any alleged breach of such sales and purchase agreements.

The remaining defendants, represented by separate counsel, entered a general denial to the material allegations of the complaint.

The cause came on for trial Before the court on December 17, 1946. At the close of the taking of testimony, defendants contended and argued that plaintiffs should not prevail in the action, for three reasons: (1) That the Clarke-Donelson contract (sales agreement) was illegal and void under the provisions of the Robinson-Patman Act, 15 U.S.C.A. § 13, subds. (a, c, d), and § 13a, 49 Stat. 1526 et seq.; (2) that the two contracts sued upon were unenforceable under the facts; and (3) that plaintiffs failed to prove any damages or any legal measure or standard by which damages could be determined.

The illegality of the contracts under the Robinson-Patman Act was not pleaded by defendants, but was raised for the first time after the conclusion of the testimony. The trial court concluded that the sales contract sued upon was in violation of the Robinson-Patman Act, and therefore illegal and void; that the purchase agreement was unenforceable, for reasons hereinafter shown; and that an action would not lie to enforce such contracts. The court therefore dismissed the action with prejudice, without deciding any of the other questions presented.

Plaintiffs' motion for judgment notwithstanding the decision, or, in the alternative, for a new trial, was denied, and this appeal by plaintiffs followed.

Appellants' assignments of error are that the trial court erred (1) in holding that the Robinson-Patman Act applies to these contracts and this action, and requires dismissal of the action; (2) in failing and refusing to enter judgment in favor of appellants; (3) in entering judgment dismissing the action with prejudice; (4) in denying appellants' motion for judgment notwithstanding the decision; and (5) in denying appellants' motion for a new trial.

If the Clarke-Donelson contract violated the Robinson-Patman Act, rendering that contract illegal, void and unenforceable, then, in our opinion, the purchase agreement contract would also be unenforceable, as the two contracts are dependent on each other, and the other questions presented would become immaterial.

In deciding whether or not the trial court was justified in concluding that the Robinson-Patman Act was violated in the instant case, the following factual situation should be considered.

Respondent Association is a Washington corporation, organized in 1934 as a cooperative association of independent grape growers, to act as a marketing agency to sell the growers' grapes in their natural form. The Association has been managed by Homer E. Evans since its inception. In 1938, due to an increased production of grapes, the Association began to realize that there was going to be a surplus of grapes for sale on the fresh grape market, their principal outlet. As long as the grape growers had to depend on the wineries alone to take the bulk of the late surplus grapes, there was a tendency to 'ride the price down.' The Association perceived that they would have to have some other outlet, such as a grape juice factory, to take the surplus Concords, if they were to maintain the price.

With funds contributed by the members, the Association purchased the Wright Winery, at Grandview, in the summer of 1940. Shortly thereafter, the Association's manager, Mr. Evans, was approached by L. M. Donelson, a machinery and food salesman for Rathke & Company (hereinafter referred to as Rathke Co.).

We think it might be well to here explain the nature of the business of Rathke Co., and its relationship to the Clarke-Donelson Company. Rathke Co., owned solely by Clark E. Rathke, is engaged in the business of selling food processing equipment, machinery and supplies, and since about 1939 it has engaged in the food brokerage business. At about that time, Rathke Co. had a contract with Pomona Products Company, for the sale of cider manufactured by it. Apparently Mr. Donelson was put in charge of the sale of the cider, on a brokerage basis, and the Clarke-Donelson Company was set up so that Mr.

Donelson would have more of a financial interest in his sales. The Clarke-Donelson Company (hereinafter referred to as Donelson Co.) was incorporated on October 9, 1940, with its principal place of business located at Yakima, Washington.

In 1941, Clark E. Rathke was the president and majority stockholder of Donelson Co., the balance of the stock being owned by Donelson, who was manager, and Mrs. Ayers, the office manager of Rathke Co., its secretary. Donelson Co. finances and processes food packs, and sells and acts as broker for the sale of food products.

During his examination, Mr. Rathke was asked the following question:

'A. Clarke-Donelson Company and Rathke and Company are actually you, aren't they? A. Well, I imagine, to a certain extent.'

Shortly after the Association had purchased the Wright Winery at Grandview, in the summer of 1940, Mr. Donelson, as machinery salesman for Rathke Co., approached Mr. Evans and attempted to sell him machinery for the winery. The Association at this time was without working capital, having spent the amount raised by contribution on the purchase of the winery. After several unsuccessful attempts to sell the Association, Mr. Donelson told Evans about a man named Carl Weisbrod, who had knowledge of a European process for making grape juice at a much cheaper cost than the method ordinarily employed. Donelson introduced Weisbrod to Evans, and Weisbrod explained his process, whereby the grape juice is processed in the regular manner, except that the means by which it is stored for sixty to ninety days to let the cream of tartar settle out is different. Instead of storing the grape juice in expensive five-gallon glass carboys under the orthodox system, Weisbrod claimed it could be stored in large wooden tanks. Weisbrod was confident that his system would work, and he persuaded the Association's board of directors to undertake the manufacture of grape juice by his process. Neither the board nor the Association's manager, Evans, had the technical knowledge required to make commercial grape juice, so Weisbrod was hired to proceed with the new undertaking. A contract was entered into between Weisbrod and the Association, under which Weisbrod was to install and put into operation the entire grape juice plant.

Weisbrod specified the equipment he needed, and on July 10, 1941, the Association, as first party, and Rathke Co., as second party entered into the written contract hereinBefore referred to as 'Purchase Agreement.' This contract...