Vt. Farm Mach. Co. v. De Sota Co-Operative Creamery Co.

• Decision Date: 27 October 1909
• Citation: 122 N.W. 930
• Parties: VERMONT FARM MACHINERY CO. v. DE SOTA CO-OPERATIVE CREAMERY CO.
• Court: Iowa Supreme Court

122 N.W. 930

VERMONT FARM MACHINERY CO.

v.DE SOTA CO-OPERATIVE CREAMERY CO.

Supreme Court of Iowa.

Oct. 27, 1909.

Appeal from District Court, Dallas County; J. H. Applegate, Judge.

Action to recover the purchase price of certain cream separators sold by plaintiff to defendant. Defendant admitted the purchase of the separators, but pleaded that the contract therefor was ultra vires and void. The case was tried to a jury, and, at the conclusion of the testimony, the trial court on motion directed a verdict for defendant. Plaintiff appeals. Reversed.Burton Russell, for appellant.

White & Clark, for appellee.

DEEMER, J.

Defendant is a local corporation; its articles reciting the nature of its business to be as follows: “Article 3. The object of the corporation or the business to be transacted is the manufacture of butter and milk products for the stockholders of said corporation and the patrons thereof upon equal terms in such a manner as will conduce to the mutual and equal advantage of all such stockholders and patrons.”

Plaintiff, through its salesman, made a contract with defendant through its secretary, one H. G. Smith, whereby it sold to defendant five cream separators for the aggregate price of $390. The separators were delivered to defendant pursuant to this sale, and some of them used by it down to the time of the commencement of this action. One it sold to a customer, and for this it remitted $64 to plaintiff on account. As the others were not paid for, plaintiff brought suit to recover the balance of the purchase price. The defense made was that the contract was ultra vires and beyond the power of the corporation. It also pleaded that, before the commencement of the suit, it had offered to return the machines to plaintiff and had made a tender thereof, which plaintiff refused to accept. Plaintiff admitted that it refused to accept the tender, and pleaded an estoppel on defendant's part, due to its acceptance and receipt of the goods. The testimony shows, as we have already said, that the defendant company sold one of the machines, and that it used another in the progress of its work. True, it claims to have paid for the one it used, but there is no showing that this was the full price of the machine or that payment was accepted by plaintiff on any other basis than as being made on general account.

Smith, who gave the order, said that the separators were not purchased for use in the creamery, but for defendant's patrons and stockholders for use in separating the cream from the milk which they were to deliver to the creamery. The contract for the machines fixed a gross price for the five. It was not separable in character, nor was it so treated by the parties at any time. This is the entire record upon which the case was decided, and constitutes the basis for the ruling directing the verdict for defendant.

There is considerable doubt in our minds regarding the claim that the contract was and is ultra vires. Such contracts are those which do not in any manner serve the accomplishment of the purposes for which the corporation is organized. They are contracts, not positively forbidden, but impliedly prohibited because not expressly or impliedly authorized. Now defendant seems to be organized as a mutual or co-operative concern for the purpose of manufacturing butter and milk products for...