dealers were enjoined from interfering with the performance of the contracts. These cooperative cases were all decided under the general principles of equity and independent of statutory provisions. It was held in Iowa that a cooperative was entitled to an injunction against a third person for engaging in allegedly unfair trade practices with intent to injure the cooperative, even though the State statute made the acts complained of criminal offenses." In addition, many of the statutes providing for the formation of cooperatives make it a misdemeanor to knowingly induce the breach of a marketing contract and authorize associations to recover penalties of $500 for each such offense. They also authorize the recovery of a similar penalty for knowingly spreading false reports about the management or finances of an association.10 In a New York case, an association failed to recover the statutory penalty because the court was apparently of the opinion that the allegedly false reports were of a creditable nature, or were not false within the meaning of the statute.11 Sections 26 and 27 of the Bingham Cooperative Marketing Act of Kentucky were upheld by the Supreme Court of the United States in a case arising in Kentucky,12 in which the Burley Tobacco Growers' Cooperative Association recovered a penalty of $500 from a warehouse company that sold tobacco that was covered by a marketing contract of the association. "Before the sale the association notified the warehouse company of Kielman's membership and of his marketing contract, requested it not to sell his tobacco, and called attention to the prescribed penalties." Similar provisions in the cooperative acts of Colorado13 and Virginia14 were upheld in those States. In an Arkansas case, 15 it was held that before an association 'Farmers Cooperative Association v. Quaker Oats Co., 233 Iowa 701, 7 N. W. 2d 906 (1943). 10See Minn. Stats. Ann. § 308.78. 11 Dairymen's League Co-op Association, Inc. v. Brockway Company, 173 Misc. 183, 18 N.Y.S. 2d 551 (1940). 12 Liberty Warehouse Co. v. Burley Tobacco Growers' Co-op Marketing Association, 276 U.S. 71 (1928), affirming 208 Ky. 643, 271 S.W. 695 (1925). 13 Fort v. People ex rel. Co-op Farmers' Exchange, 81 Colo. 420, 256 P. 325 (1927); Rinnander v. Denver Milk Producers, Inc., 114 Colo. 506, 166 P. 2d 984 (1946). 14 Tobacco Growers' Co-op Association v. Danville Warehouse Co., Inc., 144 Va. 456, 132 S.E. 482 (1926). 15 Loewer v. Arkansas Rice Growers' Cooperative Association, 180 Ark. 484, 22 S. W. 2d 17 (1929). could recover the statutory penalty from a person who had purchased commodities from one of its members that were covered by its marketing contract, the association must show that the purchaser had actually induced the member to sell them. The Supreme Court of Minnesota held that a similar penalty section in one of the cooperative statutes of that State was unconstitutional because it violated the freedom-of-contract provisions in the State and Federal Constitutions. In reaching this conclusion, the court said: Of course, it is well settled that a malicous interference In a Colorado case," a competitor of a cooperative inserted advertisements in a local paper relative to the decline in the price of cabbage. As the statements in these advertisements apparently were considered to be simply an honest expression of opinion, it was held that they did not violate an injunction order which, among other things, forbade interference with "any of the business of the exchange." In other words, the court held that the injunction order quoted was too broad or that it should be confined to instances of illegal interference. In an Oregon case,18 in which the members of a cooperative had disabled the association from fulfilling a contract which it had 16 Minnesota Wheat Growers' Co-op Marketing Association v. Radke and Same v. Commander Elevator Co., 163 Minn. 403, 204 N. W. 314, 315 (1925). See also Schwartz v. Rice County Cooperative Egg and Poultry Association, 163 Minn. 515, 204 N.W. 316 (1925). 17 Fort v. People ex rel. Co-op Farmers' Exchange, 81 Colo. 420, 256 P. 325 (1927). See also Western Seed Co. v. Cooperative Farmers' Exchange, 81 Colo. 448, 256 P. 329 (1927). 18 Phez Co. v. Salem Fruit Union, 103 Ore. 514, 201 P. 222, 25 A.L.R. 1090 (1921), 205 P. 970 (1922). made with a buyer of loganberries by failing or refusing to deliver their loganberries to the association for marketing, the court held that the buyer had a cause of action against the association and against the members, because they had prevented the association from performing its contract. Virginia and Kentucky20 have enacted statutes, sometimes referred to as "True Name Laws," that require warehousemen to keep records showing the true names of the owners of tobacco they have for sale, and permitting the inspection of such records. It was claimed by opponents of this legislation that the purpose of the statutes was to enable cooperatives to ascertain if their members were disposing of tobacco to others. These statutes have been upheld.21 In a number of States, provision is made for the filing of record of marketing contracts for the purpose of giving constructive notice of the rights of the associations.22 Although a defendant in one case23 sought to avoid an injunction on the ground that the marketing contract in question had not been properly filed and indexed as required by law, the court found it unnecessary to consider this question. It said that the proven facts were such as to have put the defendant on actual notice of the contract. A cooperative may not unlawfully interfere with the right of third persons to contract, even though it is simply attempting to advance its interests.24 A legitimate end does not justify illegal means. 19Code of Virginia 1950, sec. 61.1-47 to 61.1-54, inclusive. 20 Kentucky Revised Statutes, 1969, sec. 248.430. 21 Reaves Warehouse Corporation v. Commonwealth, 141 Va. 194, 126 S.E. 87 (1925); Danville Warehouse Co., Inc. v. Tobacco Growers' Co-op Association, 143 Va. 741, 129 S.E. 739 (1925); Jewell Tobacco Warehouse Co. v. Kemper, 206 Ky. 667, 268 S. W. 324 (1925). 22 See discussion under "Marketing Contracts," supra, at footnotes 121-125, inclusive. 23 Neillsville Shipping Association v. Lastofka, 225 Wis. 350, 274 N. W. 280 (1937). 24 Hy-Grade Dairies v. Falls City Milk Producers' Association, 261 Ky. 25, 86 S.W. 2d 1046 (1935); Pure Milk Producers' Association of Greater Kansas City Territory v. Bridges, 146 Kan. 15, 68 P. 2d 658 (1937); Wesemann v. Watertown Milk Co-op Association, 222 Wis. 475, 269 N. W. 246 (1936); State v. Standard Oil Company, 130 Tex. 313, 107 S.W. 2d 550 (1937). Transfers In Attempts to Avoid Contracts Attempts have been made by members of cooperatives to "transfer" their farms and thus avoid their marketing contracts by conducting their farming operations in the names of their wives or other persons. The courts have repeatedly declared that marketing contracts may not be avoided in this way. The real test in cases of this type depends upon whether the transfer involved was one in fact, or one in form only. In other words, was the transfer simply a colorable transaction or a transfer in good faith? If subsequent to the alleged transfer, the farming operations were conducted in substantially the same manner as they were before the transfer, then the courts hold the transfer ineffective,' and the crops grown are subject to the marketing contract. On the other hand, if the farming operations subsequent to the transfer are in fact conducted by the wife of a member, as was done in a Virginia case, in which the wife leased a farm from a third person and supervised its operations, then the crops grown are not subject to a marketing contract signed by the husband.2 Because it was found that a former member of an association had in good faith transferred cows to his son, a nonmember, the association was enjoined from interfering with the marketing of the milk produced by such cows.3 In Kentucky, a transfer of land by a member of an association to his wife and son, although made for a valuable consideration, was held void under a State statute declaring fraudulent all con 1 Burley Tobacco Growers' Co-op Association v. Devine, 217 Ky. 320, 289 S.W. 253 (1926); Dark Tobacco Growers' Co-op Association v. Alexander, 208 Ky. 572, 271 S. W. 677 (1925); South Carolina Cotton Growers' Co-op Association v. English, 135 S.C. 19, 133 S.E. 542 (1926); Oregon Growers' Co-op Association v. Lentz, 107 Ore. 561, 212 P. 811 (1923); Kansas Wheat Growers' Association v. Lucas, 128 Kan. 350, 278 P. 6 (1929); Kansas Wheat Growers' Association v. Loehr, 125 Kan. 491, 264 P. 735 (1928); Rinnander v. Denver Milk Producers, Inc., 114 Colo. 506, 166 P. 2d 984 (1946). 2 Layne v. Tobacco Growers' Co-op Association, 147 Va. 878, 133 S.E. 358 (1926). See also Inland Empire Dairy Producers' Association v. Melander, 134 Wash. 145, 235 P. 12 (1925); Inland Empire Dairy Producers' Association v. Casberg, 134 Wash. 702, 235 P. 13 (1925); Burley Tobacco Growers Co-op Association v. Jewell, 213 Ky. 272, 280 S.W. 1105 (1926); Kansas Wheat Growers' Association v. Lucas, 128 Kan. 350, 278 P. 6 (1929); Kansas Wheat Growers' Association v. Garnett, 128 Kan. 337, 278 P. 5 (1929). 3 Wesemann v. Watertown Milk Co-op Association, 222 Wis. 475, 269 N. W. 246 (1936). veyances of real or personal property made to delay creditors and others, where the person to whom the transfer is made has notice of the fraudulent intent of the person making the transfer.4 In this case, the association recovered liquidated damages of 5 cents per pound for all tobacco grown on the farm in question and disposed of outside the association. Conclusive Presumption Some of the cooperative statutes contain a provision' stating that "it shall be conclusively presumed that a landowner or landlord or lessor is able to control the delivery of products produced on his land by tenants or others" whose tenancy is created after the execution of a marketing contract. These provisions have been upheld by the courts in Kentucky and Colorado.2 In Kentucky, the association recovered liquidated damages from the landlord for products grown on his land that were not marketed through the association. In Colorado, the association was entitled to enjoin the landlord and the tenant, and to recover damages from each of them. In the Colorado cases, the tenant knew that the landlord was a member of the association, and the court held that he was charged with notice of the conclusive-presumption provision in the cooperative act of Colorado. The conclusive-presumption provision in the cooperative act of Louisiana was held by the State Supreme Court to be in conflict with the 14th amendment to the Federal Constitution.3 It has since been deleted from the code. In the Clark case in Louisiana, the association sought to compel the specific performance of a contract and to recover liquidated damages for cotton sold outside the association. The "Coyle v. Dark Tobacco Growers' Co-op Association, 211 Ky. 162, 277 S. W. 318 (1925). 'See, for example, Minn. Stats. Ann. § 308.69. 2Feagain v. Dark Tobacco Growers' Co-op Association, 202 Ky. 801, 261 S.W. 607 (1924); Dark Tobacco Growers' Co-op Association v. Daniels, 215 Ky. 67, 284 S.W. 399 (1926); Monte Vista Potato Growers' Co-op Association v. Bond, 80 Colo. 516, 252 P. 813 (1927); Wilson v. Monte Vista Potato Growers' Co-op Association, 82 Colo. 428, 260 P. 1080 (1927). 3Louisiana Farm Bureau Cotton Growers' Co-op Association v. Clark, 160 La. 294, 107 So. 115 (1926); Louisiana Farm Bureau Cotton Growers' Co-op Association v. Bannister, 161 La. 957, 109 So. 776 (1926); Louisiana Farm Bureau Cotton Growers' Co-op Association v. Bacon, 164 La. 126, 113 So. 790 (1927). |