Moulton v. Williams Fruit Corp.

This appeal arises from a judgment entered November 23, 1931, for $5,000 in favor of plaintiff and against defendants, based upon a written stipulation of facts, having certain exemplars thereto attached.

Plaintiff is the Director of Agriculture of the State of California and acts in the premises in behalf of five certain grape growers of the state who claim to be creditors of defendant fruit corporation. This corporation defaulted and defendant surety corporation alone questions the judgment.

The facts are that defendant fruit corporation, during the grape season of 1928, entered into separate written contracts with each of said growers to handle on consignment all their grape crops for said season. The contracts were of the same general form, an illustration of a portion of one of them being as follows: "Contract. Parties: Williams Fruit Corporation, Shipper, Vida M. Martin, Grower. It is mutually agreed: The Grower hereby places on consignment with shipper the entire crop of muscats (season of 1928) consisting of 16 acres, more or less, grown . . . at or near Selma . . . delivery point, shippers' packing house . . . Selma . . . $15.00 per ton guarantee. . . ."

The fruit corporation in due course received the grape crops and marketed them admittedly to the best advantage but it failed to realize a net return sufficient to cover the guaranty specified and, in so doing, it is admitted that the fruit corporation was guilty of no negligence, deceit or bad faith in the matter but on the contrary secured the best price the market afforded and did not even deduct its commissions but returned the full avails to the growers. The growers, however, standing on their above-mentioned guaranty, claimed to be creditors in an amount aggregating more than $5,000; they complained to the Director of Agriculture, who made unsuccessful demands upon defendants and this suit followed.

The action arises under the Statutes of 1927, chapter 860 (p. 1812 et seq.), in effect July 21, 1927. Under this act defendant fruit corporation applied for and obtained a license as a "produce dealer" and gave its bond in the sum of $5,000 as required by the act. Appellant became the surety thereon. The obligation of the bond followed the language of the act and so far as here material reads: "Now, Therefore, If said principal shall well and truly comply with the provisions of the act and shall faithfully and honestly handle farm products as such licensed produce dealer, until January 1, 1929, in accordance with the terms of said act and any and all amendments thereto, then this obligation is to be void; otherwise to remain in full force and effect. . . ."

[1] The question we must solve is: Does the bond cover the cause of action here set forth? Plaintiff contends that the act expressly covers it in that the growers became creditors of the fruit corporation to the extent of $15 per ton for their grapes and, by not returning this sum to them, the corporation expressly violated the provisions of the act which required it to faithfully account to them for the net proceeds of sale of the crops. Plaintiff relies specifically on the provisions of section 5 of said act, that "said bond shall be conditioned upon compliance with the provisions of the act and upon the faithful and honest handling of farm products in accordance with the terms of this act. . . . In case of failure by a produce dealer to pay consignor creditors for farm produce received from said consignors to be sold, the state Director of Agriculture shall proceed forthwith to ascertain the names . . . of all consignor creditors . . ., together with the amounts due and owing to them . . . and shall request all such consiguor creditors to file a verified statement of their respective claims. . . . Thereupon the state Director of Agriculture is hereby authorized to and shall proceed forthwith to bring an action on the bond in behalf of said consignor creditors which has been filed in the department by said produce dealer. . . ." Plaintiff also relies on certain provisions found in sections 8, 9, 12 and elsewhere in said act, all of which by clear implication make it a violation thereof for a dealer to fail to account to a grower for the proceeds of the sale of produce received and marketed by such dealer.

Appellant contends that under the statement of facts here shown, however, neither deceit, fraud, wilful negligence nor any breach of the provisions of the act appear; that the transaction was, in effect, a sale by the grower to the dealer and the surety is not liable for the purchase price; that the grower, by accepting the guarantee over his signature and allowing a sale to be made thereunder, in effect extended credit to the produce dealer and the bond does not cover credit insurance; that by insertion of said guaranty, the contracts became in effect private contracts between the grower and the produce dealer for breaches of which the surety is not liable; lastly, that the provisions of the act providing for a suit by the Director of Agriculture are procedural only and do not fix the liability of the surety.

We are unable to come to any other conclusion than that the failure of the corporation to account to the growers to the extent of $15 per ton for their grapes was a clear violation of the terms of the act. The contract was one of consignment and not of sale. The presence of the guaranty did not alter its essential features. Title to the goods did not pass until sale was made by the factor (Pugh v. Porter Bros., 118 Cal. 628 [50 P. 772]). The guaranty was but an inducement to the grower to enter into the contract.

The provisions of the act defining a produce dealer are very comprehensive and cover "one who shall receive produce for sale on commission or contract with the producer thereof for farm products to be sold by him on commission or accept in trust from the producer thereof for the purpose of resale . . . or who shall in any way handle for the account of or as an agent of the producer thereof any kind of farm products." (Stats. 1927, pp. 1812, 1813.) This definition seems clearly to be broad enough to authorize the contracts in suit.

If the fruit corporation had sold the grapes for $20 per ton, it would have been required to return to the grower the net amount based on such a selling price; if they had been sold for exactly $15 per ton, the corporation would have been required to do the same thing; if sold for $10 a ton, the corporation would have been obliged to make up the deficiency. Such situations could easily be visualized by the surety as a result of the plain provisions of the act.

[2] We attach no importance whatsoever to the contention that fraud, deceit or wilful negligence must be shown before a cause of action may arise under the act. It is true that such conduct authorizes a cause of action in any injured party but the act is much broader in its terms and expressly authorizes a suit by the Director of Agriculture in all cases where a dealer has failed to account to a consignor for the proceeds of produce sold and disposed of by him, thus violating the act.

The judgment is affirmed.

Langdon, J., Curtis, J., Shenk, J., Seawell, J., and Waste, C.J., concurred.