Summary
In Texas Certified Cottonseed Breeders' Ass'n v. Aldridge, 1933, 122 Tex. 464, pages 473-474, 61 S.W.2d 79, page 82; the Texas Supreme Court stated, "The farmers as a group form the association, and appoint it to act as their selling agent.
Summary of this case from Farmers Cooperative Co. v. BirminghamOpinion
No. 4431.
March 8, 1933. Rehearing Denied March 16, 1933.
Appeal from District Court, Hunt County; L. L. Bowman, Judge.
Suit by the Texas Certified Cottonseed Breeders' Association against C. C. Aldridge, trading as the Aldridge Cottonseed Farms. From a judgment for defendant, plaintiff appeals.
Affirmed.
The Texas Certified Cottonseed Breeders' Association, incorporated under the Texas law (Rev.St. 1925, art. 5737 et seq.), brought the suit in general assumpsit against C. C. Aldridge to recover alleged excess advancement or overpayment on certified cottonseed sold and delivered by C. C. Aldridge to the association pursuant to certain written marketing agreement executed by them. The defendant made answer to the suit in defense against liability to the association. The case was submitted to the court upon an agreed statement of facts, and judgment was entered by the court in favor of the defendant. The association excepted to the judgment, and has appealed to this court seeking to have same revised.
The plaintiff association is a nonstock, nonprofit, co-operative marketing corporation organized under the Texas law by certain state-certified cottonseed breeders or growers on March 4, 1930. The defendant, C. C. Aldridge, is a producer and breeder of state-certified cottonseed. Following the incorporation, C. C. Aldridge, along with other cottonseed breeders, executed what is known as standard marketing contract covering the marketing of cottonseed, and whereby he became a member of the association. At the time the marketing contract was executed, C. C. Aldridge had 11,916 bushels of 1930 certified cottonseed, and in due course delivered the same to the association by turning it over to a bonded warehouse located at his residence and taking a receipt covering the same and forwarding the receipt to the association. Thereafter on March 6, 1931, a renewal or extension of the marketing contract was entered into which merely included certain changes respecting the right of withdrawal of members. The contract, as far as material to set out, reads:
"Renewal Marketing Contract of the Texas Certified Cottonseed Breeders' Association."Texas Certified Cottonseed Breeders' Association, nonprofit cooperative marketing association with its principal office at Dallas, Texas, hereinafter referred to as the "Association" and the undersigned, hereinafter referred to as the "Breeder" agree as a renewal to, and in modification of, their Marketing Contract, as follows:
"1. The Association buys and the Breeder sells and agrees to deliver to the Association all the Texas State Certified Cottonseed now on hand or produced by or for him or acquired by him as landlord or lessee during the period of ten years following the date of this contract, unless this contract is terminated as hereinafter provided. * * *
"2. All Texas State Certified Cottonseed shall be delivered to the Association as soon as practicable after the gathering thereof at such warehouse as may be approved and designated by the Association. On the delivery of said Texas State Certified Cottonseed to such a warehouse, negotiable warehouse receipts covering the same shall be issued in favor of the Association and promptly delivered thereto, which warehouse receipts shall in and of themselves pass title thereto to the Association.
"3a. The Association shall resell, on such terms and conditions and by such ways as the Board of Directors of the Association may deem advisable, all Texas State Certified Cottonseed delivered to it by the Breeder and by other Breeders under similar contracts as the best prices obtainable by it under market conditions and will pay over to the Breeder the net amount received therefrom, less freight, insurance and interest and after deducting the cost of maintaining and operating the Association, the cost of advertising such seed and all costs and expenses incident to the handling, storing and marketing thereof, including a deduction of not to exceed ten per cent of its gross resale price for reserves which may be used by the Board of Directors of the Association for any Association purpose; provided, however, such reserves shall remain the property of the Breeder and shall be refunded, at book value, at such times as the Board of Directors in its conclusive discretion shall determine. It is specifically agreed, however, that in no event shall more than fifty (50%) per cent of any such reserves be invested in physical properties.
"b. Any deduction or allowance or loss that the Association may make or suffer on account of inferior grade, quality or condition of said cottonseed at delivery shall be charged against the Breeder individually.
"4. The Association may, in the conclusive discretion of the Board of Directors, establish pools on a daily, monthly and/or seasonal basis and/or with respect to the varieties and grades of Texas State Certified Cottonseed delivered by its members and may make such rules and regulations in connection therewith as may be deemed advisable. The proceeds from the sale of all Texas State Certified Cottonseed in any pool, less the deductions and expenses set forth in paragraph 3a hereof, shall be divided ratably among the "Breeders," in proportion to the amount of such cottonseed delivered by them which is sold in any such pool. Payments to Breeders shall be made from time to time until all of the accounts are settled in full. If said cottonseed is not sold during the season in which it is delivered to the Association it may, in the discretion of the Board of Directors of the Association be carried over to the following season or seasons.
"5. The Breeder agrees that the Association in its name may borrow money on any or all said Texas State Certified Cottonseed in its possession through drafts, acceptances, notes, or otherwise, or on any warehouse receipts or bills of lading, or upon any accounts for the sale thereof, or upon commercial paper delivered therefor; and that, in addition, the Association may pledge the same as security for any of its obligations. Association shall distribute the money so borrowed, as advances or partial payments, equitably among the Breeders in proportion to their deliveries to the Association, or may use any part thereof in the proper operation of its business, as the Board of Directors thereof may determine in its conclusive discretion."
The agreed facts follow:
"That pursuant to said membership and the execution of the above and foregoing marketing agreements, the Defendant and the other members of Plaintiff Association, delivered to Plaintiff Association, 297,358 bushels of State Certified Cottonseed, which included 11,916 bushels delivered by the Defendant, C. C, Aldridge, all of which cottonseed was produced during the year 1930 and which was delivered to the Association in bonded warehouses located near the residence of each of said breeders, and uniform bonded warehouse receipts issued and delivered to Plaintiff Association therefor in the name of the Association; and that said cottonseed was culled and treated with a chemical known as `Ceresan' to preserve the germinating qualities thereof, and sacked preparatory for shipment to cotton producers over the State for planting purposes all as directed by the Association.
"That the Plaintiff Association, on or about the 1st day of January, A.D.1931, in pursuance to said written Marketing Agreement made application to and secured a loan from the Federal Intermediate Credit Bank of Houston, Houston, Texas, in the sum of $307,128.80 on the basis of $1.10 per bushel; and that out of the proceeds of said loan $1.00 per bushel thereof was advanced to all of said members pro rata on said cottonseed delivered by them to Plaintiff Association, save and except 18,150 bushels delivered by the member E. K. Russell of Annona, Texas, which said seed delivered by E. K. Russell was not pledged to said bank nor did said member receive any advance payment thereon.
"That the Defendant, C. C. Aldridge, was paid $11,916.00 as an advancement out of said proceeds on the 11,916 bushels of cottonseed delivered by him to Plaintiff Association, as evidenced by a voucher of Plaintiff Association issued January 30, 1931, which was endorsed and cashed by Defendant.
"That all of the cottonseed delivered by the members of the Plaintiff Association, including this Defendant, was handled, sold and accounted for in one general pool, where all sales proceeds were averaged, after deductions were made in accordance with said written marketing contracts whereby the average net sale price of said cottonseed due each member, including defendant, was $.20737 per bushel. That Plaintiff Association in selling said cottonseed sold 123,613 bushels thereof for planting purposes to cotton farmers during the 1931 and 1932 crop years. That there were 26,506 bushels destroyed by fire, of which 11,601 bushels were cottonseed delivered to the Association by Defendant and 14,905 bushels delivered to it by the said E. K. Russell. That in the summer of 1932 it sold the remaining cottonseed on hand, to wit: 147,239 bushels, to commercial oil mills in Texas at the current oil mill prices.
"Plaintiff Association was not able to sell and dispose of all of said cottonseed for planting purposes, notwithstanding all of the efforts put forth to induce the farmers to buy the same, which inability was largely due to the financial inability of cotton farmers to purchase the same on account of the great stress of economic conditions throughout the country, and that Plaintiff Association, its agents, servants and representatives, used all due diligence to sell said cottonseed and that its failure to sell the same was not due to any negligence on its part; that Plaintiff was unable to sell all of said cottonseed for planting purposes for the 1931 and 1932 planting seasons, and that the remainder thereof could not be carried over for the 1933 planting season due to the fact that the germinating quality of the same had decreased to the extent that the same would not be suitable for planting purposes.
"That the cottonseed of the Defendant and all other members of Plaintiff Association was insured and that on, to-wit: June 24, 1931, 11,601 bushels of the cottonseed which was by the defendant turned over to the bonded warehouse at Plano, Texas, and the receipt therefor delivered to the Association, was burned, and that Plaintiff Association collected insurance thereon in the sum of $20,301.75, being on the basis of $1.75 per bushel, the agreed insurance value, and that said proceeds were placed by Plaintiff Association with the proceeds realized by it from the sales proceeds of the other members' cottonseed in the general, or common pool.
"That Plaintiff Association has made demand upon Defendant to refund to it the sum of $9,444.23, being the amount of overpayment on said cottonseed, but that, although often requested, Defendant has failed and refused and still fails and refuses to pay the same, or any part thereof."
C. K. Bullard, of Dallas, for appellant.
Clark, Harrell Clark, of Greenville, for appellee.
The point arising in the facts of the case and presented on the appeal for decision is that of whether or not the appellant association can resort to the personal responsibility of the appellee for the $1 per bushel advanced on his cottonseed on January 30, 1931. In order to properly measure the liabilities of the parties, it is necessary, first, to determine their relationship, whether it be that of seller and buyer or of sales agency. The marketing contract in evidence has apt words of sale and of a present transfer of exclusive possession and absolute title of the cottonseed, for the price stated, after the deductions named are made. It is believed that it is in operation and effect a contract of purchase and sale, and not of agency. Texas Farm Bureau Cotton Ass'n v. Stovall, 113 Tex. 273, 253 S.W. 1101. In this conclusion the 11,916 bushels of certified cottonseed which the appellee constructively delivered by warehouse receipt to the association must be regarded as legally belonging to the association in exclusive ownership.
The marketing contract expressly provides that, after delivery of the cottonseed to the association, the association might pledge the interests of each breeder as security for the money to be borrowed for "advances or partial payments" which might be made by the association upon the cottonseed so delivered. The contract does not specify that the advance when made shall be deducted or repaid from the receipts on resale of the cottonseed by the association. Consequently, if the advance so made should be deemed as intended as an absolute partial payment of that proportion of the price of the cottonseed, then, as is evident, the association, suing in assumpsit, could not predicate a liability against the breeder for a deficiency if the property proves insufficient to reimburse the association for its advances. And neither could the breeder as a member of the association be held personally liable to make good any deficiency or balance of the debt for money borrowed and owing the bank at Houston by the association, although the association be a co-operative association of nonprofit and without capital stock. The promise of the association to pay the bank of Houston is the personal covenant of the association only. Article 5750 of the Revised Statutes expressly provides that no member of the association "Shall be liable for the debts of the association" except in the special instances enumerated. But it is thought properly construing the terms of the contract it may not be reasonably determined that the parties contemplated that the advance so made by the association was to be regarded as an absolute and unconditional partial payment off the purchase price without expectation of reimbursement for any deficiency or balance if the property proves insufficient. The purchase price payable by the association was not in the nature of a fixed and determined debt at the time of the advance. The contract provision had the sole object in view to allow the breeder to realize in advance of the resale some portion of the price of his cottonseed. The term "advance" in its ordinary use indicates money paid before or in advance of the proper time of payment. It may be taken therefore as reasonable to suppose that it was in the contemplation of the parties that the association was to be reimbursed out of the resale of the cottonseed upon which the advances were made. The situation is similar to advances made by factors and commission merchants. 19 Tex.Jur. § 14, p. 533.
The advance having been made primarily against the money which will be due to the breeder upon the resale of his cottonseed in pool, the association must first have recourse to the fund derived from the resale. But the association's claim to reimbursement does not depend entirely upon the proceeds of the resale of the cottonseed, there being no special contract to that effect. So that, if the money from the resale of the cottonseed in pool should prove insufficient to fully reimburse the association for its advances, the law, in the absence of any agreement to the contrary, would imply an undertaking on the part of each breeder, severally but not jointly, to make up the deficiency as to him. "Assumpsit," 5 Tex.Jur. p. 151; 5 C.J. p. 1380; 2 Elliott on Contracts, § 1374, p. 622.
The particular circumstances appearing in the case have the effect, it is believed, of a complete defense against a deficiency judgment on the advance made by the association to the appellee. After the delivery of the cottonseed to the association and before the resale in any pool, the appellee's cottonseed was destroyed by fire. At the time of the fire the cottonseed was in a separate warehouse and had not lost identity by being commingled with the cottonseed of the other breeders. The association carried fire insurance on the cottonseed and collected the insurance money on appellee's cottonseed, "on the basis Of $1.75 per bushel, the agreed insurance value." It clearly appears that the amount realized as indemnity for the loss of the property against which the advance was made is a sum largely in excess of such advance. It would follow, therefore, that, if the association must first have recourse for reimbursement out of the insurance money, then the evidence furnishes no foundation for the present action of the association. The loss of the cottonseed by fire made it impossible for the association to make resale of it in pools and to pay over to appellee his proportion of the net proceeds. The loss by fire entirely eliminated such cottonseed from the pool. A pooling of the cottonseed of each breeder with those of the other breeders with actual sale was the requirement under the contract in order for each breeder to be beneficially interested in the fund derived through the average price per pound paid for all cottonseed delivered to the association for resale. The breeder whose cottonseed might be destroyed by fire and consequently eliminated from the sale in pool could have no expectancy or interest in the net proceeds of sale in pool. Each breeder was liable for advances severally and not jointly. The loss by fire, though, would not operate to relieve the association of paying the purchase price of the cottonseed, whether measured by the market value at time of loss by fire or at time they might have been sold in pools. It is a settled rule that, in the absence of agreement, the risk of loss as between buyer and seller must be borne by the party who has title to the property at the time the loss occurs. 55 C.J. § 608, p. 597. The insurance money representing the value of the cottonseed at the time of the fire, as appears in the facts, the appellee would as against the association and as against the other breeders have a beneficial interest therein. While the overhead charges and premium for insurance were proportionally charged against the different breeders, yet the marketing contract does not provide for the pooling of the insurance collected from the loss of any lot of the cottonseed. The insurance was taken out by the association as owner of the cottonseed in protection of its liability to the particular breeder in case the association has disabled itself through loss by fire from pooling the particular cottonseed and paying over the proceeds of the sale, as contracted to do. It strongly appears that the association must first have recourse for reimbursement to the insurance fund in its hands before being entitled to a deficiency judgment.
The judgment is affirmed.