Johnson v. Staple Cotton Co-Op. Ass'n

107 So. 2, 142 Miss. 312, 1926 Miss. LEXIS 53

• Court: Mississippi Supreme Court
• Decided: January 4, 1926
• Docket: No. 25111.
• Status: Published

Opinion

McGowen, J.,

delivered the opinion of the court.

Appellant, J. N. Johnson, filed his bill against appellees, Staple Cotton Co-operative Association and Globe Rutgers Fire Insurance Company, seeking to recover from defendants the sum of twelve thousand seven hundred sixty-eight dollars and forty-five cents for the loss by fire of eighty-two bales of cotton located on his gin yard. The bill alleges that Johnson was a member of the association organized under the laws of the state of Tennessee, a nonstock corporation, organized for the purpose of buying and selling cotton; an association of cotton farmers operating mainly in the Mississippi Delta and delta portions of other states; that all the members of said association had entered into a contract, which was in force during’ the year 1922 while the plaintiff was a member of said association; and that the eightv-two bales of cotton totally destroyed on the 17th day of September, 1922, by fire, were of the market value of fifteen thousand eight hundred sixty-five dollars and fifty cents, which the association had agreed to buy and the complainant had agreed to sell and deliver in accordance with the terms of the contract. He further averred that he performed all of his agreements under the contract; that he had grown the cotton on his plantation, had the “same ginned and baled and placed on a gin platform at Holly Eidge, Sunflower county, subject to orders and instructions from the association; that the said cotton was association cotton, and when grown, ginned', and baled, belonged to the association; and that by virtue of the marketing agreement, or contract, when so ginned and baled the association became the equitable owners and obligated to pay the complainant the purchase price which the association received for said cotton, less freight, insurance, and less two per cent, of the gross proceeds of the sale of the cotton levied to create an advance fund for the grower members of the association.

Plaintiff further alleged damage to four bales of cotton not totally destroyed, and that these four bales of cotton were taken over by the Staple Cotton Co-operative Association. In furtherance of its co-operative scheme and for the protection of its grower members, a blanket or floating policy of insurance was alleged to have been issued covering the actual cash value of all the cotton in the possession or under the control of the association under any of the contracts which the association had with its grower members; that said insurance policy covered cotton in bales owned by the Staple Cotton Co-operative Association, or its members, or was at their risk while located in gins, on gin yards, or on platforms adjacent to gins in the states of Mississippi, Arkansas, and Tennessee. A copy of the insurance policy was made an exhibit to the declaration, which was in full force and effect from the 1st day of September, 1922, to the 1st day of September, 1923, and it was charged that the policy was in effect at the time the cotton above mentioned was destroyed by fire and that the policy was intended to and did cover said cotton. It was alleged that the association had advertised that all of its members who agreed to grow cotton for its benefit would be protected against loss or damage by fire, and that this insurance was an inducement for joining said association.

The bill further charged that several policies .of insurance had been taken by . him on this cotton in his name and for his separate protection and benefit; but that same had been declared by the courts to be legally void, though he had collected about three thousand dollars on a compromise with one of the companies. The bill further stated that the association had acknowledged its knowledge of the fire and of the loss; that its agent was present during the fire; that at the request of the association he delivered samples of the cotton to the office of defendant; that he was advised by the general attorney to demand payment from the insurance companies of the policies issued to him separately; and that it was then and there represented to him and promised to him that the association would protect him against loss. It is further alleged that there was some kind of understanding between the two defendants, the association and the fire insurance company, the terms of which were not known to the complainant; nor was it known whether he had collected the insurance or not, but that it was the duty of the association to report said loss and demand payment of the insurance and to collect same for the account and benefit of the complainant, as a cotton grower member of said association.

The bill charged that the complainant was entitled to a discovery from the defendants as to whether there had been an adjustment of the loss,- and as to whether anything had been collected, and that the information was within the peculiar knowledge of the defendants; that it was the duty of the defendant association to demand of the defendant fire insurance company the payment of his loss by fire on this cotton, and that if the association had not so collected said insurance that the association had been guilty of gross negligence to the extent of the total sum of the damage. The bill further charged that the association held the proceeds, if collected, as trustees, and that the proceeds should be so accounted for; further charging that he was the beneficiary under the policy of insurance, in effect that it was the duty of the association, as his trustee, to take all steps necessary to the administration of the fund under the contract between the grower member and the association, and under the terms of the fire insurance policy. The bill further charged that the insurance, together with other expenses for handling cotton, was charged against the members, and was a part of the general scheme of co-operation; that also the association had recognized its liability and ratified its obligation to take his entire crop even if it had been destroyed or damaged by fire, by its acceptance of the four damaged bales of cotton. The bill further charged that if the defendant association had negligently failed or refused to make proof of the loss, or had in any manner placed itself in an attitude where recovery cannot be had of and from the insurance company, then that the association should be held in equity to account for the true value; that whatever delay in making proofs had been occasioned, if any, was not the fault of the complainant but was the fault of the association.

After praying -for process, the prayer of the bill is as follows:

“ (2) That the defendant association in its answer be required to disclose whether notice and proof of loss has been given or made to the Globe & Rutgers Fire Insurance Company, and whether any insurance has been collected for the loss or damage to the cotton, which your complainant produced for the association, as outlined in the foregoing bill.

“(3) That if the defendant association has collected any proceeds of said insurance covering the cotton produced by your complainant as aforesaid, then the said association be made to account to your complainant for the amount of said insurance.

“ (4) That in event the association has not collected any insurance for the account of your complainant, or if said association has not collected the full amount of the damage or loss sustained by your complainant in said fire, your complainant be awarded a personal decree ag’ainst the defendant the Globe & Eutgers Fire Insurance Company for the actual cash value of all cotton lost or destroyed by said fire, and the actual amount of its damage to that partially damaged by fire.

“ (5) That the defendant association be held personally liable to your complainant for the true market value of all cotton produced by your complainant for the association as charged in the bill, regardless of whether your complainant is entitled to recover from the Globe & Eutgers Fire Insurance Company or not.

“(6) That complainant be awarded a personal decree against the defendants jointly and severally for the actual value of his cotton and damage thereto, as aforesaid.

“If complainant has not prayed for the right relief, or if complainant has prayed for the right relief in the wrong way, or if complainant has prayed for insufficient relief, then your complainant prays for general relief in the premises, and as in duty bound he will ever pray,” etc.

As a part of the declaration we quote excerpts from the Staple Cotton Co-operative Association’s marketing agreement, the first clause of which is as follows:

“The grower is a member of the association and is helping to carry out the express aims of the association for co-operative marketing, for minimizing speculation and waste and for stabilizing cotton in the interests of the grower and the public, through this and similar obligations undertaken by other growers.”

Section 2 of the agreement is an agreement of the association to buy and the grower to sell and deliver all cotton produced or acquired by the grower, Johnson, during the years 1920 to 1924, inclusive.

“Section 3. The grower expressly warrants that he has not heretofore contracted to sell, market or deliver any of his said cotton to any person, firm or corporation, except as noted at the end of this agreement. Any cotton covered by such existing contracts or crop mortgage shall be excluded from the terms hereof for the period and to the extent noted.

“Section 4. (a) All cotton shall be delivered at the earliest reasonable time' after picking or ginning, to the order of the association, at the warehouse controlled by the association; or at the nearest public warehouse, if the association controls no warehouse in that district; or by shipment as directed to the association, and by delivery of the endorsed warehouse receipts or bills of lading properly directed.

“ (b) Any deduction or allowance or loss that the association may make or suffer on account of inferior grade, quality or condition at delivery, shall be charged against the grower individually.

“(c) The association shall make rules and regulations and provide inspectors or graders, or classifiers to standardize, grade and class the quality and method and manner of handling, pressing and shipping such cotton, and the grower agrees to observe and perform any such rules and regulations and to accept the grading established by the state and federal authorities and the association. ’ ’

Sections 5 and 6 provide for the “pooling” of the cotton and for the payment of the net ..amount received, to the growers, less freight, insurance and interest, and for the payment of two per cent, into a general fund for the use of the growers.

Section 7 provides that, although the grower may mortgage his crop, still the right to handle under this contract is vested in the association.

The agreement further provides that it is one of a series generally similar in terms, one single contract between the association and the growers mutually and individually obligated under the same terms; and that under its own name the association shall be deemed to be acting for all such growers in any actual legal proceedings on or arising out of this contract.

Exhibit B gives the numbers and weights of the bales of cotton; Exhibit C is a copy of the insurance contract issued by the Globe Rutgers Fire Insurance Company, what is known in the insurance world as an “open or floating policy, ’ ’ and recites a consideration of five thousand dollars for the term of one year from the 1st day of September, 1922, to the 1st day of September, 1923, at noon. And the printed form attached is as follows:

“Staple Cotton Co-operative Association, Memphis, Tenn.

“Floater Policy Covering Cotton at Gins.

“1. This insurance covers cotton in bales owned bj the Staple Cotton Co-operative Association and/or its members or at their risk while located in gins, on gin yards and platforms adjacent to gins, in the states of Mississippi, Arkansas and Tennessee.

“2. Liability under this policy to commence from the moment cotton has been ginned and baled and is legally at the assured’s risk.”

“4. It is agreed that this Company shall not be liable for more than fifty thousand dollars loss by any one fire or conflagration.”

We do not deem it neccessary to set out the many pages contained in the bill and in the exhibits, but we have tried fairly to call attention to the essential statements therein in order that this decision may be understood.

To this the defendants filed separate demurrers.

The Staple Cotton Co-operative Association assigned twelve grounds, which may be grouped as follows: That the claim is asserted in the alternative, and that the prayers for relief are diametrically opposed, containing inconsistent, repugnant allegations, and the main ground alleged by appellee is that the bill is multifarious.

The insurance company filed a demurrer on three grounds: First, that there is no equity on the face of the bill; second, that the bill shows on its face that there is no privity of contract between complainant and the defendant; third, that the bill shows on its face that the policy of insurance upon which complainant bases his right of action is void as against this defendant for the reason that complainant has violated the provisions thereof.

We think the chancellor was in error in sustaining the demurrer to this bill. As we view the bill, it is one for an accounting for the value of eighty-two bales of cotton destroyed by fire, on a policy^ issued by defendant insurance company procured by the cotton association as trustee and sales agency for the use and benefit of itself and its grower members, and the form of insurance issued by the fire insurance company to the Cotton Growers’ Association and to its members covered by its terms the cotton of the complainant situated at the gin of the complainant and subject to the orders of the association. The fact that the bill prays for alternative relief and alleges alternative liability as to the same cotton and as to the same fire in which, by contract, all the parties were interested, would not destroy the bill on account of multifariousness. On the allegations of the bill the subject-matter was the insurance on the cotton, in which complainant alleged that he was the principal owning an equity in the cotton, the cotton association being the sales agency under a contract absolute, unconditional, unreserved, and irrevocable, and the contract of insurance named the members of the association as being protected from loss or damage to cotton by fire in express terms.

A bill is not multifarious where an accounting is sought between the parties complainant and defendant, having a common interest therein. This court has held that this association is a sales agency operating for the benefit of its members. Brown v. Staple Cotton Co-operative Ass’n, 132 Miss. 859, 96 So. 849; Cole-McIntyre-Norfleet Co. v. Du Bard, 135 Miss. 20, 99 So. 474. It is true that Johnson was not named in direct terms in the floater policy of insurance issued by the defendant insurance company, but he was unquestionably one of a class named in said policy as. being a member at the time; and the cotton destroyed' by fire was on the gin yard, in the state of Mississippi, baled and ginned, and the assured is named in section 1 as the Staple Cotton Co-operative Association, or its members. But under the allegations of this bill this cotton was in the possession strictly and legally of the Staple Cotton Co-operative Association; and under the allegations of this bill Johnson had no defense to its right to place this cotton in its “pool.”

The complainant Johnson had an insurable interest in this cotton. The association had an insurable interest in this cotton, “for the benefit of the pool” formed by it, and the insurance company wrote it into the contract that the status of the members of the association was recognized, and the consideration recited in the policy was certainly a valuable one; and to say that it would not operate for the benefit of the members would be to charge the association with a waste of the funds of the members who had contracted to pay the insurance if it were procured. An agent or a factor or a trustee has a right to insure the property of his principal, and if he does insure it the principal is entitled to recover.

In 14 B. C. L., p. 1366, the rule is stated:

“Where an agent in possession of personal property insures it against fire, the money due upon the policy after the loss belongs to his principal who may recover it directly from the insurance company and if it is paid to the agent the latter holds it in trust merely for the benefit of the party ultimately entitled.”

The case of Bradley v. Brown, 78 Neb. 836, 112 N. W. 331, 13 L. R. A. (N. S.) 152, 126 Am. St. Rep. 647, holds that:

“Where a policy is issued on property ‘held in trust’ parol evidence is admissible to show who are the true owners.”

This policy clearly showed that the association and its members were the protected parties; and the language of the policy shows that the insurance company understood this trust relationship. So that the contract itself shows that there is privity of contract between the parties to this litigation because the Cotton Growers’ Association had the same right to deal with this cotton as a part of the pool of the year 1922, and take therefrom its share of costs, insurance, and two per cent, just the same as if the cotton had been in its own main warehouse, and should be dealt with in the same manner and under the same conditions subject to the same charges, and the fact that this cotton belonged to the pool of the association 'makes this case peculiarly one for the intervention of equity in order that an. accounting may be had between the association and its member, the complainant, and in order, in view of the language of, the policy, that the fire insurance company, if held to be liable, may have an acquittance of all liability by the payment of one fund at one time upon the decree of the chancery court, and that the rights of all parties may be adjudicated in one lawsuit.

Where a principal alleges his claim in a bill in equity against his sales agency and the insurance company, and this insurance is the subject-matter of the bill and' divergent interests are alleged therein, so far as the defendants are concerned, though the rights of the defendants may be alternative or may be different, the bill is not multifarious. And in such a case every one having a right or interest in the subject-matter is a.proper party to the bill.

We do not think the allegations of this hill are inconsistent when viewed, as we view it, as a bill for an accounting’ filed by the principal ag’ainst his factor or sales agency and against the insurance company who has undertaken by contract to indemnify against loss by fire the agent and all his principals. The real theory of appellees and the court below seems to be predicated upon the idea that the bill is multifarious.

It is clear that there is a common interest in the common subject-matter, and this court has so frequently announced that a demurrer would not be sustained on this ground in such a case that it seems unnecessary to cite the long line of decisions from the early history of this court down to this term, but we cite as aptly fitting the case Roberts v. Burwell, 117 Miss. 451, 78 So. 357, in which Chief Justice Smith said:

“Where the failure of each of the devisees to deliver to [Louis Roberts], which he or she was obligated by the will to do, constitutes a separate cause of action, nevertheless they may be joined in equity in one suit, for the reason that where the interest and liability of the defendants, though separate, flow from the same fountain, or radiate from the same center, or have a common connecting link, the joinder of such defendants and matters in the same suit is admissible. ’ ’

See, also, Gibson’s Suit in Chancery (2 Ed.), section 149; Tribette v. Ill. Cent. R. R. Co., 70 Miss. 182, 12 So. 32, 19 L. R. A. 660, 35 Am. St. Rep. 642; Cumberland Telephone Co. v. Williamson, 101 Miss. 1, 57 So. 559.

In Griffith’s Chancery Practice, section 206, the author quotes from Gibson’s Chancery Practice eight characteristics, all of which a bill must contain to render a demurrer effectual. This summary can also be found in Beach’s Modern Equity Practice and in footnotes fourteen Enc. PL & Pr., p. 199, which we commend and approve.

So that we conclude that the bill is not multifarious, being a bill fo.r an accounting with a prayer for discovery as an incident thereto; that there is privity of con tract between all tbe parties as shown by the pleadings and contracts; that equity is properly invoked in order that an accounting may be had along the lines agreed upon in the contract between Johnson and the association, and if the association and insurance company are held liable then the funds should be decreed to be handled as though this cotton had been “pooled” by the association along with the other cotton of its grower members. The fact that we have held this to be a bill for an accounting with discovery as an incident thereto answers the other objections raised by counsel for appellee in their brief in this case, except the third ground of demurrer by the insurance company which is not mentioned in their brief.

The chancellor erred in sustaining the demurrers to the bill herein, and this cause is reversed and remanded, the demurrers are overruled, and the defendants are allowed thirty days in which to file answer.

Reversed and remanded.