Brown v. Staple Cotton Co-operative Ass'n

96 So. 849, 132 Miss. 859, 1923 Miss. LEXIS 85

• Court: Mississippi Supreme Court
• Decided: June 11, 1923
• Docket: No. 23291
• Status: Published

Opinion

Anderson, J.,

after stating the facts as above, delivered the opinion of the court.

Appellant contends that the contract in question violates, those provisions of our statute defining unlawful trusts and combines in restraint of trade which declare in substance all contracts, expressed or implied, void and unenforceable in the courts — “between two or more persons, corporations or firms or associations of persons, or between one or more of either with one or moré of the others” in restraint of trade, or to increase the price of a commodity, or to hinder competition in the sale or purchase of a commodity, or to engross or forestall a commodity, or place the control to any extent “of business or the products and earnings thereof in the power of a trustee or trustees by whatever name called,” or by the terms of which any other person or persons than the parties to such contract, or their proper agents and officers, shall be given the power to dictate or control thé management of the business of said parties, or to unite or pool interest in the price of a commodity. Code of 1906, sections 5002 to 5003, inclusive; Hemingway’s Code, sections 3281 to 3285, inclusive.

In considering this question it should be borne in mind that the case before the court is to be found in the allegations of appellee’s bill well pleaded in connection with the bald provisions of the contract involved, and whatever reasonable inferences that may be drawn therefrom. The intent and purpose of the contract is not aided by any pleading on the part of appellant. If our anti-trust statute is to be applied literally, perhaps this marketing contract comes within its provisions. Every member of the appellee association by this contract (which is not only a contract with the association but with each member thereof) has placed the control to some extent of the staple cotton produced or controlled by them in the hands of appellee. Therefore the question is whether our anti-trust statute should be construed according to its literal terms regardless of the results, or whether it is to be construed in the light of reason and with the view of promoting the public welfare.

Section 19S, Constitution 1890, commanded the legislature to “enact laws to prevent all trusts, combinations, contracts, and agreements inimical to the púb lie welfare.” (Italics ours.) In obedience to that command we have chapter 145, Code of 1906, sections 5002 to 5021, inclusive, as amended being chapter 69 Heiningway’s Code, sections 3281 to 3285, inclusive. Putting the question differently, is this contract to be condemned even though it be not inimical to the public welfare? We think this question is answered in the negative by the following decisions of this court: Insurance Co. v. State, 75 Miss. 24, 22 So. 99; Y. & M. V. R. R. Co. v. Searles, 85 Miss. 520, 37 So. 939, 68 L. R. A. 715; Tel. Co. v. State, 100 Miss. 102, 54 So. 670, 39 L. R. A. (N. S.) 277; Standard Oil Co. v. State, 104 Miss. 886, 61 So. 981; Sivley v. Cramer, 105 Miss. 13, 61 So. 653-654; Railroad Co. v. Crawford, 107 Miss. 355, 65 So. 462, L. R. A. 1915C, 250; Standard Oil Co. v. State, 107 Miss. 377, 65 So. 468; Id., 104 Miss. 886, 61 So. 981.

Insurance Company v. State, supra, was an indictment under section 1007, Code of 1892, charging the insurance company with a violation of the anti-trust statute, section 4437, Code of 1892, chapter 56, Laws 1896, defining an insurance monopoly. The court held that the indictment was bad because it failed to charge that the effect of the trust was injurious either to some person or the public.

In discussing this question in the Searles case, supra, the court said that all combinations or contracts without regard to their purpose, intent, or effect by which the control of business is placed within the power of trustees or other persons than the contracting parties, were not trusts in the meaning of section 4437, Code of 1892, chapter 88, Laws 1900, defining trusts and prohibiting contracts in restraint of trade; that the test of a trust and the essential of its existence is that the contract or combination be, on ac count of its actual results, obnoxious to the public policy, or be in itself and its necessary effect inimical to the public welfare.

We think it would be well in this connection to reiterate what was said in part in Telephone Co. v. State, supra.

“When this statute was enacted, it introduced into the law no new definition of what constituted a ‘restraint of trade’ or ‘a monopoly.’ It did not attempt to define either. These are questions to be determined in the light of the facts of each case and under the law relating to same as it stood before the statute was passed; otherwise there is no guide for the persons charged with the enforcement to be governed by. What does the statute mean when it prohibits contracts ‘in restraint of trade?’ Does it mean that any contract which in any way restrains trade shall be illegal? If so broad a meaning should be given to the statute as this, it would involve a destruction and disaster to the commercial world never dreamed of by its authors, and not comprehended within the evil intended to be rectified. The statute only intended to include within its provisions those contracts in restraint of trade, those monopolies, and attempts to monopolize that were invalid as agaiAst public policy before the enactment of the statute, and under such contracts in relation thereto could not be enforced as between the parties. A contract in reasonable restraint of trade was valid before the enactment of the statute, where its design and purpose is not to create a monopoly, and such contract is valid' now. . . . The law as to what it now takes to make a contract in restraint of trade to monopolize or attempt to monopolize any business remains the same, but the parties who may sue and the penalties have been broadened. As to what does or does not constitute a monopoly within the meaning of the statute is not always easy to decide. The courts must be left to determine these questions when they arise. The question is one of mixed law and fact of necessity.”

And also what was said, in part, in Railroad v. Searles, supra:

“It is contended that all combinations or contracts, without regard to purpose, intent, or effect, by which the control, to any extent, of business, or of the products and earnings thereof, is placed within the power of trustees, or by which other persons than the contracting parties or their proper officers, agents, or employees are given the power to dictate or control the management of business, are prohibited by the terms of the act. ■ If this narrow construction is in fact the legislative intent, the entire law would be open to the just criticism of being a wholly unnecessary, if not an unwarranted, invasion of the inherent right of the citizen to deal with his own as he pleases, if without injury to others. Gage v. State, 24 Ohio Cir. Ct. R. 724. Carried to its logical conclusion, this argument would prevent any two or more individuals engaged ,in business from employing the same agents or representatives, or from placing in the hands of the same individual the right to control their separate businesses.”

It was held in the first Standard Oil Case, 104 Miss. 886, 61 So. 981, that where a bill was filed in the chancery court to recover the penalties imposed for a violation of the antitrust act, if was necessary for the pleader to charge as a matter of fact that the sales alleged to have been made in violation of chapter 119, Laws of 1908, amending the anti-trust statutes, were for the purpose of destroying competition, and a failure to so allege rendered the bill demurrable. In Railroad Co. v. Crawford, supra, it was held that our anti-trust statute was only intended to embrace within its provisions those contracts in restraint of trade which were invalid as against public policy before the enactment of said statute. And in the second Standard Oil. Case, 107 Miss. 377, 65 So. 468, the court held that it was necessary for the state to allege that the sales there involve*} as constituting a violation of a provision of the anti-trust statute were made for the purpose of destroying competition. Is appellee’s scheme as embodied in its articles of incorporation and its association and marketing contracts inimical to the public interest?

Contracts of co-operative marketing associations with their members similar to the one under consideration, the purposes and corporate powers of which associations were in all substantial respects the same as those of appellee association, have been upheld as not being in restraint of trade in the following cases: Hollingsworth v. Texas Hay Co. (Tex. Civ. App.), 246 S. W. 1068; Anaheim Citrus Fruit Ass’n v. Yeoman, 51 Cal. App. 759, 197 Pac. 959 (hearing by supreme court denied) ; Tobacco Growers’ Co-operative Ass’n v. Jones (N. C.), 117 S. E. 174; Poultry Producers v. Barlow (Cal. Sup.), 208 Pac. 93; Ore. Growers’ Co-operative Ass’n v. Lentz (Or.), 212 Pac. 811; Ex parte Baldwin County Producers’ Corporation, 203 Ala. 345, 83 So. 69; Washington Cranberry Growers’ Ass’n v. Moore, 117 Wash. 430, 201 Pac. 773, 204 Pac. 811; Burley Tobacco Soc. v. Gillaspy, 51 Ind. App. 583, 100 N. E. 89 ; Castorland Milk & Cheese Co. v. Shantz (Sup.), 179 N. Y. Supp. 131; Bullville Milk Ass’n v. Armstrong, 108 Misc. Rep. 582, 178 N. Y. Supp. 612; Burley Tobacco Growers v. Turner (Circuit Court of Kentucky).

Appellant to sustain his contention relies principally upon Kosciusko Oil Mill Co. v. Wilson, 90 Miss. 551, 43 So. 435, 8 L. R. A. (N. S.) 1053; State v. Jackson Cotton Oil Co., 95 Miss. 6, 48 So. 300; Retail Lumber Dealers’ Ass’n v. State, 95 Miss. 337, 48 So. 1021, 35 L. R. A. (N. S.) 1054; Security Co. v. State, 91 Miss. 195, 44 So. 785, 124 Am. St. Rep. 638; Reeves v. Farmers’ Ass’n, 160 Iowa, 194, 140 N. W. 844, 44 L. R. A. (N. S.) 1104; Ludewese v Farmers’ Ass’n, 164 Iowa, 197, 145 N. W. 475; Ga. Fruit Exchange v. Turnipseed, 9 Ala. App. 123, 62 So. 542; Cummings v. Union Blue Stone Co., 164 N. Y. 401, 58 N. E. 525, 52 L. R. A. 262, 79 Am. St. Rep. 655; Pocahontas v. Powhatan Coal Co., 60 W. Va. 508, 56 S. E. 264, 10 L. R. A. (N. S.) 268, 116 Am. St. Rep. 901, 9 Ann. Cas. 667; Whitridge v. Mt. Vernon Co. (D. C.), 210 Fed. 302; People v. Milk Exchange, 145 N. Y. 267, 39 N. E. 1062. 27 L. R. A. 437, 45 Am. St. Rep. 609; Ford v. Chicago Milk Ass’n, 155 Ill. 166, 39 N. E. 651, 27 L. R. A. 298; Gang v. Brent, 166 Ky. 833, 179 S. W. 1051. An analysis of these cases, we believe, will show that they do not sustain appellant’s contention.

Kosciusko Co. v. Wilson and State v. Jackson, supra, are companion eases. In each there was an attempt to create a complete monopoly of the business of buying cotton seed in a fixed territory. The court held that such an arrangement was inimical to the public welfare and violative of the anti-trust statute. Retail Lumber Dealers v. State, supra, involved an agreement to suppress competition. All those who competed with members of the association were sought to be put out of business. Security Co. v. State, supra, involved a holding company which was to be utilized to control competing railroad corporations and thereby fix the fares to be charged the public without regard to their reasonableness. Reeves v. Farmers’ Ass’n, supra, involved a marketing association entirely different from that ci appellee. The principal differences are as follows: The association there was an ordinary corporation organized for pecuniary profit in which voting was allowed by the members on the basis of stock ownership instead of limiting each member to one vote as is done by appellee association. That association bought from and sold to both members and nonmembers; it operated an open market; both growers and non-growers were stockholders. The by-laws of the association provided that a stockholder should be penalized if-he sold his produce to a competitor of the society. The difference between that case and the case at bar was well stated by Iowa court in its opinion in that case, is this language:

“This society was something more than a mere selling agency. It not only acted as a seller, but also purchased, in the open market, from members and nonmembers, alike, save as heretofore stated. ... Of course, a mere selling agency is not a monopoly, and neither the common law nor the anU-trust statute applied to a genuine sales' agency.” (Italics ours.)

Ga. Fruit Exchange v. Turnipseed, supra, was decided by an intermediate court of appeal of Alabama, therefore Ex parte Baldwin County Producers’ Ass’n, supra, holding to the contrary, which was decided by the supreme court of Alabama, is controlling. Cummings v. Union Blue Stone Co., supra, involved a corporation which controlled ninety per cent, of all marketable Hudson blue stone. It was organized for the purpose of fixing prices. The court held that since the association was able to fix arbitrary and unreasonable prices it was illegal. Pocahontas v. Powhatan Coal Co., supra, involved a combination of twenty coke manufacturing corporations which had the exclusive power to fix prices and prescribe other essentials of the business. All competition with others engaged in the same business was destroyed. The court held the combination illegal. In Whitridge v. Mt. Vernon Co., the contract considered was held void because a corporation holding a majority of the stock in a second corporation was making contracts for its own benefit between the second corporation and a third corporation in which it owned all the stock. This was held to be a violation of a trust relationship. The question of the restraint of trade was not'involved nor discussed. People v. Milk Exchange, supra, involved a combination of milk distributors to fix the prices to the consuming public. Prices were actually fixed and the milk market of New York was controlled. The court said that the logical effect of so fixing the prices was to paralyze the production and limit the supply and thus leave dealers in a position to control the market. Ford v. Chicago Milk Ass’n, supra, was organized as a price-fixing association without regard to market conditions and was held illegal. Gay v. Brent, 166 Ky. 833, 179 S. W. 1051, so much relied on by appellant, involved an agreement or understanding by which the parties to the contract sought to absolutely control the price of blue grass seed in Kentucky, which state produced ninety per cent, of the blue grass seed of the world. Clearly such a scheme was illegal.

It will be seen that this court in construing our statute prohibiting monopolies has applied the rule of reason, as has the supreme court of the United States in con-also the courts of other states in passing on co-operative marketing contracts substantially the same as the one here involved. There must be an unreasonable or undue restraint of trade. It must be such a restraint of trade as is detrimental to the public interest. A statute will not be construed so as to lead to unreasonable or absurd results if that can be avoided. The legislature must be given credit, if the language of the statute in question will permit it, of legislating in the public interest. It is inconceivable that it was intended by our anti-trust statute to condemn any and all contracts between two or more persons which might have the effect to hinder the freedom of trade to the very smallest extent. Such a construction, as it will be seen at once, would lead to absurd results. It would destroy to a large extent the public welfare instead of promote it. The plan of appellee association considered in connection with the marketing and association, contracts between appellee and its members does not undertake to fix prices of long staple cotton. The outstanding purpose is to promote intelligent warehousing and marketing of such cotton. Appellee association goes out in the open market and hunts purchasers who compete against each other. It is simply a sales agency or a plan struing the federal statute for group marketing. It is true it has large powers, but not even all the power fit one end of the bargain. One of the main purposes is to prevent long staple cotton growers from being forced on account of their financial necessities to dump their cotton on the market during the three or four months of harvesting time. A steady market and a reasonable price are central ideas in the plan, a continuous market for the producer the year found, instead of for only three or four months. Another object is to save expense to the producer by means of having large quantities of long staple cotton stored, classed, and marketed by appellee association instead of by thousands of producers, who know nothing about classing cotton. Appellee association under the arrangement is able to sell direct to the mills as well as to others. Mississippi is almost exclusively an agricultural state. Its chief product for market has always been, and probably always will be, cotton. It would be hard to conceive of how a steady market and a reasonable and profitable price for cotton to the producers would be inimical to the public welfare in this state. On the contrary, it would appear that not only every cotton producer in the state would be benefited thereby, but also every other person engaged in any kind of business whatsoever.

Although the Co-operative Marketing Act (chapter 179, Laws of 1922) does not and could not declare what the public policy of the state was before its adoption, still it ought to be persuasive on the courts as to what was inimical to the public welfare at that time. It embodies the judgment of the legislature recently after the making of the contract involved. By .it all such contracts for the future are declared legal; they are authorized in order to promote what the legislature thought was the public welfare. Was the public interest one thing in September, 1921, when this contract was made, and another thing in the early part of 1922, when this statute was passed? We think not.

Appellant contends that appellee must fail in this cause because there is no mutuality of the remedy between the parties; that appellee is not entitled to the remedies of specific performance, injunction, and. liquidated damages for a breach of the contract in question by appellant because appellant would not under the- law be entitled to like remedies in case of a breach of said contract by appellee. Without going into the question of how the law stood on this subject in its application to the case at bar prior to the adoption of the Co-operative Marketing Act, chapter 179, Laws of 1922, we find that by that act the exact remedy here adopted by appellee is provided for. In-section 17(b) and section 24 of said act, which sections are copied above in the statement of the case, it is expressly provided that any co-operative marketing association organized under the laws of any other state coming into this state, whose purposes and plans are substantially the same as those provided for in said act, shall be entitled to the remedies of liquidated damages, injunction, and specific performance. It is true that said Co-operative Marketing Act having been adopted after the contract here considered was entered into, does not and could not. undertake to control the substantive rights of the parties to this cause. It is not true, however, that the remedies therein provided are not applicable to past as well as future transactions. It is too well settled to merit discussion that a remedy afforded by a statute passed subsequent to the date of the contract in question may be invoked by a party to the contract who has been wronged by its nonperformance. Such legislation does not impair the obligation of a contract. The obligation of a contract has reference alone to the rights of the parties arising thereunder and not to any remedy for their enforcement. A law creating a remedy applies to prior as well as future contracts and is constitutional. McMillan v. Sprague, 4 How. 647, 35 Am. Dec. 412; Woods v. Buie, 5 How. 285; Coffman v. Bank of Kentucky, 40 Miss. 29, 90 Am. Dec. 311.

Appellant contends further that the provisions in this contract stipulating for the payment of ten cents per pound by appellant to appellee on all cotton not delivered by the former to the latter as liquidated damages for the breach of said contract growing out of such failure to deliver is a penalty and not liquidated damages, and therefore is unenforceable. Anaheim Citrus Fruit Ass’n v. Yoeman, supra; Burley Tobacco Ass’n v. Gillaspy, supra; Castorland v. Shantz, supra; Bullville Milk Ass’n v. Armstrong, supra; Ex parte Baldwin County Ass’n, supra — all hold squarely to the contrary. The principles governing a determination of whether a stipulation in a contract provides for a penalty or liquidated damages are discussed in Shields v. Earley (Miss.), 95 So. 839, and Jones v. Miss. Farms Co., 116 Miss. 295, 76 So. 888. On account of the difficulty of ascertaining anything like an accurate estimate of the damages which appellee association would suffer on account of a breach of contract by a member, a sum agreed upon, if reasonable, will be upheld as liquidated damages. The sum provided here by contract is ten oénts per pound. It is a matter of common knowledge that staple cotton has fluctuated during one season as much as ten cents a pound. We are of opinion therefore that this ten cents per pound is what the contract says it is— liquidated damages — and is recoverable. We do not consider that any other of appellant’s contentions is of sufficient seriousness to merit discussion.

Affirmed.