Reeves v. Decorah Farmers' Co-Operative Soc'y

• Decision Date: 10 April 1913
• Citation: 140 N.W. 844,160 Iowa 194
• Parties: REEVES v. DECORAH FARMERS' CO-OPERATIVE SOCIETY ET AL.
• Court: Iowa Supreme Court

160 Iowa 194

140 N.W. 844

REEVES

v.DECORAH FARMERS' CO-OPERATIVE SOCIETY ET AL.

Supreme Court of Iowa.

April 10, 1913.

Appeal from District Court, Winneshiek County; A. N. Hobson, Judge.

Suit in equity to enjoin and restrain defendants, their agents, servants, and employés, from demanding, collecting, or receiving any amount whatever under a contract or arrangement entered into between them, which contract, it is claimed, was and is monopolistic in character; invalid, because in restraint of trade; and unfair, because intended to drive all competitors from the market. The trial court granted part of the relief prayed, and defendants appeal. Affirmed.C. N. Houck, of Decorah, for appellants.

E. R. Acres, of Decorah, for appellee.

DEEMER, J.

The defendant society is an organization of farmers, incorporated under the general laws of the state for pecuniary profit. Its capital stock is $20,000, $4,000 of which has been subscribed and paid for in cash. The articles of incorporation are not set out in full, but we gather from the record that the society was organized for the purpose of buying, selling, and shipping hogs at the town of Decorah, Iowa. The stock was $10 per share, and at the time of trial there were 350 individual stockholders, composed of farmers living in the vicinity of said town of Decorah. At the time this action was commenced the society had been in business for two full years and had purchased 24,628 hogs, paying therefor the sum of $433,638.98. There had been no gains to speak of and no dividends declared, but on December 1, 1910, it had a net gain of $29.

We here quote, from the record, the following testimony, showing the nature and purposes of the society: “* * * In conducting the business of the defendant society there is no purpose on the part of its management to heap up a surplus nor any intention to make a profit in order to distribute a dividend among the stockholders. The directors authorized me at the time I began to buy stock to pay what I could, only just to pay my expenses as I go along and to pay for stock that they would sell after deducting my expenses. That is the policy upon which this society has been conducting its business during its business life. As a matter of fact I have just about met those expenses. The bulk of the stockholders of the defendant society are farmers, just a few who aren't farmers. I would say somewhere about 95 per cent. of them are farmers. It is pretty hard to tell as to the percentage, but in the neighborhood of that. Some of the stockholders haven't hogs to sell, but pretty near all of them are producers of hogs; none of the stockholders that I know of are hog buyers other than myself. The purpose of the incorporation of this society was to establish a market where the farmers would receive for their hogs what they were worth here in Decorah. The market at the time the company was incorporated was not considered a good hog market. The society was organized for selling their hogs and buying them, or any farmer who preferred to ship his own stuff could ship it through the company by paying five cents a hundred on hogs shipped or five dollars a car load. The fact of the matter is this society was formed primarily as a selling agency for the members of the society and for the bettering of the market conditions here in Decorah, and that has been its purpose during its entire business life and still is its purpose.”

Among other by-laws of the society were the following: “* * * In order to insure future success and prosperity of this society its members and shareholders are required to sell all their marketable produce and live stock to the society. Any member or stockholder who may prefer to sell his produce or live stock to a competitor in this market shall forfeit to the company and pay over to its treasurer, from the proceeds received for produce or live stock so sold to other firms or competitors, the amount as follows: Five cents for every one hundredweight sold to any competitor.”

Plaintiff, during the time in question and at the time of the commencement of this action, was a local hog buyer at the town of Decorah, buying for the Chicago market, and he claims that the defendant society was and is so organized as to drive him from the field; that the members of the society are bound to sell their hogs to the society under the penalty of paying it a forfeit; and that it was organized for the purpose of monopolizing the business at Decorah, and was so operated, not only by and with its members and stockholders, but with strangers, so as to force him to pay more than the market price or to get out of business at that place.

One Schoonmaker was plaintiff's agent at Decorah, and the society was represented by defendant Ellingson. Ellingson gave the following testimony with reference to the methods of the defendant society: “* * * Our society buys hogs from its members, and has done so ever since it commenced doing business. There are a large number of farmers in the vicinity of Decorah and adjoining townships who are not members of our association. These farmers are also raising hogs and selling them on the Decorah market. Our society buys hogs from farmers who are not members of the association. Q. And you buy them in competition with Henry Reeves and other buyers? A. I make a bid on the hogs, what I consider them worth. Q. Mr. Schoonmaker is there at the Milwaukee stockyards in Decorah as a representative of Mr. Reeves and is buying hogs in competition with you? A. Yes, sir. Q. You have bought hogs from farmers who are not members of your association at the time Mr. Schoonmaker was bidding on them, have you not? A. Yes, sir. At various times during the last year members of our society came to the market with hogs, and I made a certain bid on them, and Mr. Schoonmaker as representative for Mr. Reeves also bid on them. Q. How much was Schoonmaker compelled to bid for hogs that belonged to members of the society more than the society would bid before he could get them? A. No limit to it whatever. Q. Do you know of him paying 10 cents a hundred more for hogs than you had offered to members of your own society? A. Yes, sir. Q. What do those members do with a part of that money, the excess paid; do they refund to your company? A. Since the 14th day of December, 1909, they have paid me five cents a hundred for the company. Q. Whenever they sold hogs to a competitor in the market, then they paid to you as treasurer of the company five cents a hundred? A. Yes, sir. I am buying from outsiders as well as from members of the company. A double-deck car of hogs would weigh from 22,000 to 32,000 pounds; the minimum weight is 22,000 pounds. Where members of our society sold hogs to Mr. Reeves during the last year some sold for ten cents and some sold for five cents in excess of my highest bid. Q. In case Mr. Reeves was compelled to pay ten cents per hundred that would be one dollar on a thousand, wouldn't it? A. Yes, in case he was compelled to pay ten cents. In case of a 25,000-pound car it would be $25 on a car. Q. In case Henry Reeves bought a car load of hogs from your association and was compelled to pay ten cents a hundred more than you had bid for a like car load, he would have to pay $25 more for the car than you, would he not? A. Yes, if he was compelled to do that, it would be $25. From the bulk of the members of our association I could buy cheaper than Mr. Reeves could. He has bought them for the same price I was willing to pay and he has bid ten cents more than I bid in order to get them. It depends on the competition in buying whether I can make a profit of ten cents a hundred on hogs. Figuring one year with another I have never made a profit of ten cents a hundred on hogs I have bought. We do make ten cents a hundred lots of times; we don't make that right straight along. Q. Do you remember of any farmers who are members of your association coming to Decorah with hogs for sale where your competitor's representative bid five cents a hundred more than your highest bid and you notified the farmer that he couldn't sell hogs on a five-cent raise because he was a member of the society? A. I didn't notify him that he couldn't sell them on a five-cent raise; I notified him that he is supposed to pay five cents to the company; it would be an even thing if he sold to me or Reeves. Of course he does as he wants to, whether he wants to sell to me or Reeves, he is supposed to pay five cents a hundred to the company; a member of the society is supposed to pay providing he sells to Reeves to pay his share of the running expenses of the company. I have at times gone out and bid more for hogs of a farmer who is not a member of the company than Reeves bid and got the hogs. I bid more than Mr. Reeves bid and in that particular instance bid more than Mr. Reeves was willing to pay, and I sold such hogs, some in Chicago, some in Minnesota, and some in Wisconsin, on the same markets that I have sold hogs that were bought from farmers who were not members of the society.”

Ofttimes in buying hogs from strangers, the society, defendant, paid more for hogs than plaintiff was able to pay, but whether this was due to economies practiced by it, to the fact that it had a surplus, or to the fact that members were compelled to contribute, whether they sold to the society or not, does not appear. But it is shown that in some instances it paid more to strangers than to members, when in competition with plaintiff and his buyer. The net effect of the by-law in question was to compel all members to sell their hogs to the society, at such price as it might offer, or, in the event of sale to another, to forfeit and pay to the society five cents per hundredweight sold to any competitor. In order to be on an equality with defendant, in the purchase of the hogs belonging to members, plaintiff had to offer five cents per hundredweight more than defendant offered, and...