Rio Grande Valley Sugar Growers, Inc. v. Campesi

• Decision Date: 31 December 1979
• Docket Number: No. B-8470,B-8470
• Citation: 592 S.W.2d 340
• Parties: RIO GRANDE VALLEY SUGAR GROWERS, INC., Petitioner, v. Ross CAMPESI, Respondent.
• Court: Texas Supreme Court

Page 340

592 S.W.2d 340

RIO GRANDE VALLEY SUGAR GROWERS, INC., Petitioner, v. Ross CAMPESI, Respondent.

No. B-8470.

Supreme Court of Texas.

Dec. 31, 1979.

Rehearing Denied Feb. 6, 1980.

Ewers, Toothaker, Ewers, Abbott, Talbot, Hamilton & Jarvis, Neil E. Norquest, McAllen, for petitioner.

Atlas, Hall, Schwarz, Mills, Gurwitz & Bland, Morris Atlas, Gary R. Gurwitz and Charles C. Murray, McAllen, for respondent.

BARROW, Justice.

The determinative question presented by this appeal is the validity of a provision for liquidated damages contained in a marketing agreement agreed to by respondent, Ross Campesi, and petitioner, a co-operative marketing association. The trial court concluded that the provision was invalid and sustained Campesi's motion for partial summary judgment. It entered a final judgment after a jury trial of the remaining issue in the cause. The court of civil appeals affirmed. 580 S.W.2d 850. We conclude that the provision is valid and, therefore, the partial summary judgment was erroneously granted. We reverse the judgments of the lower courts and remand the cause to the trial court.

In 1971 a group of farmers, including Campesi, formed petitioner for the purpose of establishing a sugarcane industry in the Rio Grande Valley. Petitioner, hereinafter referred to as Association, is a nonprofit stock co-operative marketing association formed pursuant to the Texas Co-Operative Marketing Act, Article 5737, Et seq., ¹ whose function is to harvest, mill and process sugarcane into raw sugar and its by-products and to market same. The total cost to the Association of setting up the sugar industry was approximately $42,000,000, of which $21,000,000 was borrowed. To secure repayment of these loans, the Association entered into ten-year marketing agreements with its members requiring them to produce a specified tonnage of sugarcane or pay damages in the event the specified tonnage was not produced. The marketing agreement, hereinafter sometimes referred to as the contract, provided that the Association would pay the net proceeds due each member after deducting, among other items, a sum to cover the Association's fixed overhead costs and expenses for each year's operations.

Campesi, an experienced sugarcane grower, was involved from the outset in the scheme to set up a sugarcane industry in the Valley; and he became a member of the Association at its inception. He executed a ten-year marketing agreement whereby he agreed to raise and to deliver to the Association 26,121.9 tons of sugarcane on 625 acres. However, due to a failure of his seed cane, he produced only 252 tons during the grinding season of October 1973 through April 1974. Because of this failure, the Association in May of 1975, deducted $129,349.50 as liquidated damages from the amount due Campesi for the sugarcane he produced in the 1974-1975 grinding season.

Campesi brought this suit seeking to recover this sum which he alleged was being wrongfully withheld from him. The Association defended on the basis that this deduction was authorized by a liquidated damage provision in the marketing agreement signed by Campesi. The Association filed a counterclaim whereby it sought to recover its actual damages in the event that the trial court found it was not entitled to recover the contractual liquidated damages. Thereafter, Campesi filed a motion for partial summary judgment whereby he asserted that paragraph 15(a) of the marketing agreement, which authorized recovery of liquidated damages, was void and unenforceable. The Association contested Campesi's motion for summary judgment, but did not file a motion for summary judgment seeking any affirmative relief of its own. The trial court entered an order granting Campesi's motion for partial summary judgment and declared paragraph 15(a) of the marketing agreement void. The case then proceeded to trial before a jury on the Association's alternative claim for actual damages. The jury found in response to the only issue submitted to it that the Association had sustained actual damages in the amount of $87,692.80 because of Campesi's failure to plant his sugarcane in the 1973-1974 grinding season. Judgment was entered whereby Campesi recovered the difference between the sum withheld by the Association and its actual damages as found by the jury.

Paragraph 15(a) of the marketing agreement entered into by Campesi and the Association provides in part:

"Inasmuch as the remedy at law would be inadequate and inasmuch as it is now and ever will be impractical and extremely difficult to determine the actual damage resulting to Association should Grower Fail or refuse to grow and deliver sugar cane as herein provided, Grower hereby agrees to pay Association for each ton of such sugar cane delivered, sold, consigned, withheld or marketed by or for him, or which he fails or refuses to grow or deliver, other than in accordance with the terms hereof, the sum of Five Dollars ($5.00) per ton as liquidated damages for the breach of this contract. . . ." (Emphasis Ours)

The trial court, in sustaining Campesi's motion for partial summary judgment, held this provision to be void. The court of civil appeals agreed for two reasons: (1) Article 5753 is construed to require authorization for a liquidated damage provision to be in the Association's by-laws as well as in the marketing agreement signed by the grower. (2) Article 5753 does not authorize liquidated damages for a Failure to grow as distinguished from a Failure to deliver sugarcane to the Association.

Article 5753 provides in part:

"The association and its members may make and execute marketing contracts, requiring the members to sell, for a period of time, not over ten years, all or any specified part of their agricultural products or specified commodities exclusively to or through the association or any facilities to be created by the association. . . . The by-laws and the marketing contract may fix, as liquidated damages, specific sums to be paid by the member or stockholder to the association upon the breach by him of any provisions of the marketing contract regarding the sale or delivery or withholding of products; and may further provide that the member will pay all costs, premiums for bonds, expenses and fees in case any action is brought upon the contract by...