Warren v. Alabama Farm Bureau Cotton Ass'n , 213 Ala. 61 ( 1925 )

The bill alleges that on May 8, 1923. "the defendant made and entered into a contract with complainant in the form in general use by complainant." This sufficiently shows a completed contract between the parties. This allegation is not contradicted by Exhibit A to the bill, which is referred to merely as a substantial copy of the form of the contract used by complainant in this instance and generally.

Unquestionably the contract is mutual in its operation and in its benefits, since the promise of one party is always a sufficient consideration for the promise of the other.

As for the objection that the contract is unjust and unreasonable, there is nothing in the apparent purpose, or the stated terms, or the indicated operation of the contract, which can support such a charge. Manifestly, it looks to the mutual advantage of all of the members of the association in the disposition of the cotton raised by them, by sale in the open market. The proceeds of the cotton sold by the association on account of its members during each year must be "prorated among the growers delivering cotton in that year on the basis of deliveries," subject to certain expenses in the operation of the association and the handling of the cotton. When the association borrows money on its cotton deliveries, as authorized by section 9 of the contract, for the benefit of the members, "the association shall prorate the money so received among the growers equally, as it may conclusively determine." The last clause in this provision certainly is not intended to give to the association any arbitrary power in the apportionment of that fund, and it will not be so construed.

The fund must be apportioned equally, according to the amount of cotton thus pooled, and for breach of that obligation the association would be liable to a member.

It may be conceded, for the argument merely, that the character and terms of this contract, and the extent and duration of its mutual obligations, would ordinarily deter a court of equity from undertaking the specific enforcement of its several requirements by direct affirmative action. Electric, etc., Co. v. Mobile, etc., Ry. Co., 109 Ala. 190,19 So. 723, 55 Am. St. Rep. 927; Am. Laundry Co. v. Dry Cleaning Co., 199 Ala. 154, 74 So. 58; Iron Age Pub. Co. v. W. U. T. Co., 83 Ala. 498, 510, 511, 3 So. 449, 3 Am. St. Rep. 758.

But the statute in this case gives the remedy by injunction to prevent threatened breaches of the contract by association members in the disposition of their cotton, and by their contract they have expressly assented thereto. We can see no practical difficulty in the specific enforcement of this single feature of the contract for a single season; and the objections based upon the want of mutuality or remedy, and the adequacy of the remedy at law, are eliminated by the terms of the statute and the contract made thereunder.

The undertakings and obligations of the association and of its members are clear and certain, and the remedies in question can be easily applied.

So far as public policy is concerned, it is primarily determined in every state by the acts of its Legislature; no provision of its constitution forbidding. Denson v. Ala. F. I. Co., 198 Ala. 383, 391, 73 So. 525. When the Legislature thus speaks, whether it be governed by age-old principle or by merely ephemeral expediency, it eliminates the question of public policy from the cognizance of courts in their administration of the legislative act. As a matter of fact, while some of the fundamentals of public policy will probably remain unchanged through all the ages, public policy is generally affected by the changing values of expediency; and hence a public policy which in one age prescribes certain conduct as injurious to the public welfare may in a later age, under changed economic and social condition, wisely and justly tolerate, if not encourage as beneficial, the identical conduct.

The objections to the validity of this contract must therefore be narrowed to a single inquiry: Does the legislative act which authorizes the contract offend any inhibitory provision of the Alabama Constitution?

The only provision which is pertinent to the inquiry is to be found in Const. 1901, § 103:

"The Legislature shall provide by law for the regulation, prohibition, or reasonable restraint of common carriers, partnerships, associations, trusts, monopolies, and combinations of capital, so as to prevent them or any of them from making scarce articles of necessity, trade, or commerce, or from increasing unreasonably the cost thereof to the consumer, or preventing reasonable competition in any calling, trade, or business."

The obvious effect of this provision is to deny to the Legislature the power to enact laws which would authorize this, or any other of the associations or combinations named, to bring about an artificial scarcity of articles of necessity, or commodities of trade, or to reasonably increase their cost to the consumer. There is no question here as to "preventing reasonable competition in any calling, trade or business." Manifestly, also, the operation of this association, for the purpose and within the lines prescribed by the act, has no tendency to create any scarcity of cotton, either by discouraging its production, or unreasonably withholding it from the market.

The only remaining question, therefore, is whether it tends to unreasonably increase the cost of cotton to the customer by restraining the several members of the association from marketing their crops by independent individual action.

Co-operative marketing associations, composed of the growers of agricultural or fructicultural products, are now to be found in many of the states, and in every section of the country. Their origin and growth are unquestionably founded upon a pressing economic necessity. The whole subject was clearly and soundly reviewed by the late Chief Justice Clark of North Carolina, in Tobacco Growers' Co-op. Ass'n v. Jones,185 N.C. 265, 117 S.E. 174, 33 A.L.R. 231, in which that association had filed its bill for specific performance and for the assessment of liquidated damages against nonconforming members under a co-operative contract practically identical in its form and in its provisions with the contract here exhibited, and authorized by a similar legislative act.

In that case it was said of the complainant association:

"Its sole purpose is by an orderly marketing of the crop to make a large saving, and to secure to the producers a fair and reasonable price therefor, without increasing the price the customer will pay for the manufactured article. The sole object of the association is to protect the producer of the raw article from depression in the price by the combination of the large manufacturing corporations, controlled by a few men, who can at the same time not only decrease the price to the producer, but can increase it at will to the customer, and thereby accumulate in a few hands sums beyond computation. The co-operative association purposes to eliminate unnecessary expense in selling and to prevent artificially forced reduction in the price paid to the producers. Instead of creating a monopoly, the object is by a rational method of putting the raw product on the market from time to time as there is a legitimate demand for its manufacture, and by the extension of credit to farmers to enable this to be done, to prevent a monopoly of the tobacco industry by those who manufacture it."

The learned Chief Justice, in discussing the ethical and economical aspects of the question, commented further as follows:

"The co-operative marketing system was forced into existence to guarantee fair prices to the producer, a fair wage for labor, and to prevent extortion upon the consumer. It increased consumption, by furnishing the consumer a regular supply at less price, and at the same time enabled the laborer and the farmer to obtain a remunerative return. In addition, the co-operative system eliminated unnecessary expenses and costs, as well as the enormous speculative profits realized by combinations which had taken control of the entire process between the producer and the consumer. For instance, when the cotton crop began to be marketed in October, the price dropped and the farmer was forced to sell to meet the bills he had incurred for fertilizers and the money borrowed for the payment of labor, and as it dropped there was a progressive pressure for further reduction in price, and the returns to the farmer were pitifully inadequate; but, when the cotton had thus been forced from the hands of the farmer upon the market, the great combinations, which had bought up the crop at the low prices, realized enormous profits by the sale of the cotton at high prices during the seasons when there was no longer cotton in the hands of the farmer. * * * In fact, the co-operative system is the most hopeful movement ever inaugurated to obtain justice for, and improve the financial condition of, farmers and laborers. The producers are paying all the costs and assuming all the responsibilities of these co-operative associations. They are taking all the risks. They are asking no assistance from the public treasury. They are forcing no one to join, and they are exacting no inordinate prices for their product. They are associating themselves as authorized by the statute, like other persons, and they have signed mutual and fair agreements among themselves, which will be futile unless those who have signed such agreements can be held to abide by the terms of their contracts."

In that case the court held that the contract was not an unreasonable restraint upon trade, and was not obnoxious to the constitutional inhibition of monopolies; and the right to specific performance was upheld.

In a recent case (Brown v. Staple Cotton Co-op. Ass'n,132 Miss. 859, 96 So. 849) the Supreme Court of Mississippi had before it a co-operative contract substantially like the one here involved, and authorized by a similar act of the Legislature. Upon a full consideration of the subject it was held that the contract did not impose an unreasonable restraint upon trade, and was not detrimental to the public interest; and that the complaining association was entitled to the remedy of specific performance. Said the court:

"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 construing the federal statute against monopolies, as have also the courts of other states in passing on cooperative 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. * * * The Legislature must be given credit, if the language of the statute in question will permit, 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 even 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."

We do not overlook the fact that the constitutional provisions inhibiting trusts and monopolies, in the states of North Carolina and Mississippi, are not identical with ours; but very clearly neither of the decisions above referred to is grounded upon that distinction, but very clearly upon the principle that reasonable restraint of trade, looking to the reasonable protection of individual interests, and not unduly detrimental to the public interest, is not obnoxious to the law as it is now written and understood. That this is the consensus of modern judicial opinion is fully established by the authorities cited in those two opinions.

In Arnold v. Jones' Cotton Co., 152 Ala. 501, 504,44 So. 662, 663 (12 L.R.A. [N. S.] 150), it was pertinently said:

"The test of reasonableness and the necessities of the interests to be protected, adopted in the modern decisions, necessarily refers to the court the peculiar circumstances of each case, in order to determine whether or not it is violative of the public policy of the country."

In that and, perhaps, other cases decided by this court, language is used in the characterization of contracts in restraint of trade, or in the prevention of fair competition, which may seem condemnatory of contracts such as the one before us. But the scope and purpose of the contract there considered, and the circumstances of the parties, were radically different from here; and, of quite decisive importance, the contract was not authorized by any act of the Legislature.

So far as we are advised, no American court has condemned a co-operative marketing contract of the character of this complainant association as injurious to the public interest, or in any way violative of public policy. On the contrary, such contracts have been everywhere upheld as valid, if not positively beneficial to the public interest Hollingsworth v. Texas Hay Ass'n (Tex.Civ.App.) 246 S.W. 1068: Anaheim Citrus Fruit Ass'n v. Yeoman, 51 Cal.App. 759, 197 P. 959 (hearing by Supreme Court denied); Tobacco Growers' Co-op. Ass'n v. Jones,185 N.C. 265, 117 S.E. 174, 33 A.L.R. 231; Poultry Producers v. Barlow, 189 Cal. 278, 208 P. 93; Ore. Growers' Co-op. Ass'n v. Lentz, 107 Or. 561, 212 P. 811; Washington Cranberry Growers' Ass'n v. Moore, 117 Wn. 430, 201 P. 773, 204 P. 811, 25 A.L.R. 1077; Burley Tobacco Soc. v. Gillaspy,51 Ind. App. 583, 100 N.E. 89; Castorland Milk Cheese Co. v. Shentz (Sup.) 179 N.Y. S. 131; Bullville Milk Ass'n v. Armstrong, 108 Misc Rep. 582, 178 N.Y. S. 612; Burley Tobacco Growers v. Turner (Circuit Court of Kentucky).

Our case of Ex parte Baldwin County Producers' Corporation,203 Ala. 345, 83 So. 69, though offering favorable analogy, is not an apt authority, for the reason that the contract there involved permitted members to sell their crops independently of the corporation. And, it may be observed, the corporation was organized under the general laws and not under a statute specially authorizing such a contract, as here.

Our conclusion is that the contract here exhibited is authorized by the act referred to, and that the act itself is not offensive to section 103 of the Constitution; and that therefore the demurrer to the bill was properly overruled.

If it should in future appear, upon a proper bill of complaint, that this association is being used for unlawful purposes to the injury of the public interest, by creating a scarcity of cotton, or by unreasonably enhancing its market price, it will be the proper function of a court of equity to grant relief accordingly.

Affirmed.

ANDERSON, C. J., and THOMAS and BOULDIN, JJ., concur.