Rifle Potato Growers Co-Operative Ass'n v. Smith

THE plaintiff in error was plaintiff below and was defeated on trial to the court in a suit to enjoin Smith from disposing of his potatoes in violation of a marketing contract executed by plaintiff and defendant under the act of 1923, S. L. 1923, C. 142, and the case comes here on error.

Smith was a potato grower; he joined the plaintiff company and signed the standard marketing contract by which he agreed to sell his potatoes to plaintiff only. He sold to others and threatened to continue to do so, whereupon plaintiff brought this suit.

His first defense is that the contract is unilateral, and so void or voidable or unenforceable. He is twice wrong: (1) because a unilateral contract is as good as any. A unilateral contract is an agreement supported by an executed consideration. 13 C. J. 247. (2) This contract is not unilateral but bilateral, a promise for a promise. Id. We think he means that there was no consideration; but the contract of the company to buy, resell, and, on certain conditions, give him something out of the proceeds, is a good consideration. That the contract is unfair to him, that it gives the company too much advantage and power, and that, as it turns out, Smith really gets no benefit from the contract, even if true, are irrelevant. Such matters were for his consideration before he entered it. But perhaps he means that the contract ought not to be enforced by injunction because its obligations are not mutual. The mutuality is between the several members and the contract is for their benefit. The contract expressly and impliedly shows this. Section 16, reads: "This agreement is one of a series generally similar in terms, comprising with all such agreements, signed by individual growers, or otherwise, one single contract between the Association and the said Growers, mutually and individually and annually obligated under all of the terms thereof. The association shall be deemed to be acting in its own name for all such Growers, in any action or legal proceedings on or arising out of this contract." And section 19: "It is expressly agreed that this instrument is one of a series substantially identical in terms. All such instruments shall be deemed one contract for the purpose of binding the subscriber, to the same extent as if all the subscribers had signed only one such contract."

Every member is subject to the same remedy in favor of all the others and without some such remedy the contract would be ineffectual.

Second, he claims that the contract is against public policy. In Burns v. Wray Co., 65 Colo. 425, 176 P. 487, 11 A.L.R. 1179, and Atkinson v. Colo. Wheatgrowers'Association, 77 Colo. 559, 238 P. 1117, we held such contracts were against public policy, but the Act of 1923 changes the public policy of this state and the contract in this case follows the act. It is unnecessary to cite authority for the power of the legislature over questions of public policy, but see Denver v. Tihen, 77 Colo. 212, 235 P. 777;No. Wis. Co-op. Tobacco Pool v. Bekkedal, 182 Wis. 571,197 N.W. 936; Pulpwood Co. v. Green Bay, etc., Co.,168 Wis. 400, 170 N.W. 230; Dark Tobacco etc., Ass'n v.Mason, 150 Tenn. 228, 263 S.W. 60.

It is objected that the contract is in restraint of trade and so void under the Colorado Anti-trust Law (C. L. 1921, §§ 4036-4043), but the act of 1923, being the later act, controls the earlier.

It is claimed that the act of 1923 is unconstitutional, and many of its provisions are cited to show that it is so; but most of them are irrelevant to any question now before us; and the fact, if it be a fact, that they are unconstitutional, will not affect the constitutionality of the sections upon which this case depends. The only provisions of the act in question here are that authorizing the combination agreement to sell to one purchaser, and section 19, par. (b), which authorizes the remedies of injunction and specific performance for breach of such contract. It hardly needs to be said that the act is not constitutional because it changes the rule of public policy; that would be to set public policy upon the throne of the Constitution, and though it is urged with great seriousness and earnestness that the provision for an injunction is unconstitutional, or, at least, unenforceable, because it permits an injunction where there is no equity, yet that argument, upon examination, has no more force in it than the one concerning public policy, because the legislature has as complete power over the rules of equity as it has over those of law. So of the provision for specific performance. It is a rule of equity that specific performance will not be granted in favor of one party unless it could have been granted in favor of the other. But that is a rule made by the courts which the legislature has a right to change; and, moreover, as we have shown above, there is mutuality in this contract since it is a contract among the members, and injunction and specific performance are to be enforced against any member who violates it in favor of all those who do not. As to the validity of this paragraph see Washington Cranberries Ass'n v. Moore,117 Wash. 430, 201 P. 773, 204 P. 811, 25 A.L.R. 1077;Phez Co. v. Salem Fruit Union, 103 Or. 514, 201 P. 222, 205 P. 970, 25 A.L.R. 1090, and cases there cited. Indeed we agree with these cases that equity is necessary to adequately enforce these contracts; specific performance, where possible, or injunction to the same end.

It is claimed that the Act of 1923 is unconstitutional because it is "class legislation." The term "class legislation" is too indefinite for consideration. What is meant is that the act is in violation of article V, section 25, of the Colorado Constitution because it gives to agriculturists what is denied to other citizens — the right to make a contract for cooperative marketing.

In support of the act the plaintiff in error has citedOregon Growers Co-op. Ass'n v. Lentz, 107 Or. 561,212 P. 811. That case, however, is not in point, because the Oregon act applied to all persons, not to agriculturists alone, nor to any specified class. The question, therefore, under our act, becomes a serious one, because by sections 1 and 3 the above privilege is conferred only upon persons "engaged in the production of agricultural products" and is applied to "agricultural products" alone.

It is conceded that the legislature may reasonably classify, and it is held that "a law is not local or special when it is general and uniform in its operation upon all in like situation." People v. Earl, 42 Colo. 238, 264 and 265. There must be some distinguishing peculiarity which makes reasonable the exception of the designated class from the general law. The reason for such exception existing, the classification adopted is a matter to be determined by the legislature. Id. This law is general and uniform upon all in like situation. The question, then, for us to determine is whether there was a reason for the exception of the designated class. We think that, unless the classification clearly appears to be unreasonable, we must yield to the judgment of the legislature upon that point, and we think it not clearly unreasonable to say that there are reasons for maintaining stability of the markets of agricultural products beyond like reasons in case of other products, and that we must, therefore, acquiesce in this classification. The legislature in such classifications must have a wide range of discretion. Owen County, etc., Ass'n v.Brumback, 128 Ky. 137, 152, 107 S.W. 710. It follows that we cannot say that the act in question is a violation of article V, section 25. This reasoning, substantially as we have stated it, has been followed in other jurisdictions.Farrell v. Port of Columbia, 50 Or. 169, 91 P. 548, 93 P. 254; Owen County etc., Ass'n v. Brumback, supra;Oregon Growers v. Lentz, supra.

It is urged that the act in question and the contract under it are in violation of the so-called Sherman Anti-trust Law, 26 U.S. Stat. 209. That act was finally construed inStandard Oil Co. v. U.S., 221 U.S. 1, as prohibiting only contracts which amount to an unreasonable or undue restraint of trade in interstate commerce. See also PhezCo. v. Salem Fruit Union, supra. If what we have previously said is right, this act and contract cannot be classed as in undue or unreasonable restraint of trade, and it has uniformly been so held in the various states where these contracts have been considered. Washington CranberriesAss'n v. Moore, supra; Phez Co. v. Salem Fruit Union,supra; Tobacco Growers Co-op. Ass'n v. Jones, 185 N.C. 265, 117 5. E. 174, 33 A.L.R. 231; Brown v. Staple CottonCo-op. Ass'n, 132 Miss. 859, 9G So. 849, and other case in North Carolina, Indiana, Kansas, Alabama and United States courts.

It is claimed that the defendant was entitled to rescind the contract by reason of the breach on the part of the company, in that, having agreed to resell by itself or by an exchange to be formed in the interest of itself and similar companies, yet the exchange turned over the sales to brokers. That is not a breach of the contract because paragraph 8 of the contract reads as follows: "The Association may sell the said potatoes within or without this state directly to dealers or shippers, or otherwise, at such times and upon such conditions and terms as it may deem profitable, fair and advantageous to the growers in any condition or form * * *"

The judgment is reversed.

MR. JUSTICE SHEAFOR not participating.