B-142279, AUG. 29, 1961

B-142279, AUG. 29, 1961

TO MCCUTCHEN, DOYLE, BROWN AND ENERSON:

REFERENCE IS MADE TO YOUR LETTER OF JUNE 6, 1961, ON BEHALF OF FILICE AND PERRELLI CANNING COMPANY, REQUESTING RECONSIDERATION OF OUR DETERMINATION OF MAY 9, 1961, AFFIRMING THE ACTION OF THE DEPARTMENT OF AGRICULTURE IN DENYING THE COMPANY'S APPLICATION FOR PAYMENT UNDER CRANBERRY PAYMENT PROGRAM AMM 181A.

YOU DISAGREE WITH OUR POSITION THAT THE PROGRAM, CONTRARY TO THE IMPLICATION RAISED BY SECTION 517.477 (F) OF THE PROGRAM TERMS AND CONDITIONS, AUTHORIZES RECOVERY ONLY BY GROWERS WHO SUFFERED LOSSES AND NOT BY GROWERS' REPRESENTATIVES WHO SUFFERED LOSSES AS A RESULT OF ADVANCES TO THEIR MEMBERS; AND YOU RESERVE THE RIGHT TO ASSERT A CLAIM FOR THE FULL AMOUNT FOR WHICH APPLICATION WAS MADE BY FILICE AND PERRELLI. THE BASIS FOR OUR POSITION WAS FULLY SET FORTH IN OUR LETTER OF MAY 9, AND, SINCE YOUR REQUEST FOR RECONSIDERATION IS BASED UPON ANOTHER ASPECT OF OUR DETERMINATION, THERE APPEARS TO BE NO NEED FOR REPEATING THE RATIONALE OF OUR CONCLUSIONS IN THIS REGARD.

QUOTING FROM YOUR LETTER, YOU STATE:

"IN THIS LETTER, HOWEVER, WE ARE DIRECTING ATTENTION ONLY TO THAT PORTION OF YOUR DETERMINATION IN WHICH YOU CONCLUDE THAT THE GROWERS SOLD THEIR CRANBERRIES TO FILICE AND PERRELLI AT A FIXED PRICE OF $12 PER BARREL.

AT THE OUTSET WE SHOULD LIKE TO POINT OUT THAT OUR DETERMINATION WAS NOT PREDICATED UPON THE CONCLUSION THAT THE GROWERS SOLD THEIR CRANBERRIES TO FILICE AND PERRELLI AT A FIXED PRICE OF $12 PER BARREL. STARTING AT THE BOTTOM OF PAGE 10 OF OUR LETTER, WE SAID:

"WHILE IT IS TRUE, AS STATED IN YOUR LETTER, THAT THE POOLING ARRANGEMENTS DID NOT FIX NET RETURNS FOR THE CRANBERRY GROWERS IN THAT THE GROWERS WERE LIABLE FOR ANY LOSSES WHICH MIGHT HAVE BEEN INCURRED, IT IS NEVERTHELESS CLEAR FROM THE QUOTED PROVISIONS THAT, HAVING MADE AN OVER- ALL PROFIT, FILICE AND PERRELLI WAS LIABLE TO CAL-CAN FOR THE REMAINDER OF "ESTABLISHED PRICES" AND THAT CAL-CAN IS NOT LEGALLY ENTITLED TO RECOUP ANY OF THE FUNDS ADVANCED TO THE GROWERS. WE CANNOT AGREE THAT THE ESTABLISHED VALUE OF 12 CENTS PER POUND IS SUBJECT TO CHANGE DURING THE 1959-1960 SEASON, SO FAR AS THE GROWERS AND THEIR INTEREST IN THE POOL ARE CONCERNED. SEE, PARTICULARLY THE PORTIONS OF THE ADDENDA TO THE CAL-CAN AND GROWERS CROP PURCHASE AND MEMBERSHIP AGREEMENT QUOTED ABOVE. THE WHOLE TENOR OF THE POOL ARRANGEMENT IS, AS THE ADMINISTRATIVE REPORT SHOWS, FOR ALL MEMBERS TO SHARE LOSSES AS WELL AS PROFITS. SINCE THE POOL AS A WHOLE EARNED A PROFIT NOTWITHSTANDING ITS LOSS ON CRANBERRIES, THERE DOES NOT APPEAR TO BE ANY BASIS UPON WHICH THE POOL MAY PROPERLY RECOUP ANY PORTION OF THE $10.50 PER BARREL ADVANCED TO CRANBERRY GROWERS. INDEED, IT WOULD APPEAR THAT ADDITIONAL PAYMENTS OR CREDITS ARE DUE THE GROWERS. AND SINCE THE MONEYS PAID BY CAL-CAN TO THE GROWERS INVOLVED WERE PAID UNDER AN OBLIGATION RELATING ONLY TO CRANBERRIES RECEIVED, IT CANNOT BE MAINTAINED, AS YOU SUGGEST, THAT THE INCOME TO THE GROWERS CONSTITUTES INCOME FROM OTHER COMMODITIES. ANY PAYMENT TO FILICE AND PERRELLI UNDER THE PROGRAM WOULD, THEREFORE, INURE PRIMARILY TO THE BENEFIT OF OTHERS THAN CRANBERRY GROWERS AND SUCH BENEFIT AS WOULD INURE TO THE GROWERS WOULD BE OVER AND ABOVE THE $10.34 PER BARREL LEVEL OF INCOME TO BE MET UNDER THE PROGRAM.'

IN OTHER WORDS, IT IS OUR VIEW THAT THE POOL ARRANGEMENTS, AS EVIDENCED BY THE AGREEMENTS AND BY-LAWS REFERRED TO IN OUR LETTER OF MAY 9, CONTEMPLATED THAT THE ESTABLISHED VALUE UNDER WHICH GROWERS DELIVERED COMMODITIES TO THE POOL DETERMINED THEIR EQUITY IN NET PROCEEDS OF THE POOL, WHICH EQUITY IS IN THE RATIO THAT THE ESTABLISHED VALUE OF THEIR COMMODITIES BORE TO THE AGGREGATE ESTABLISHED VALUE OF ALL COMMODITIES IN THE POOL; THAT A BASIC PURPOSE OF THE POOL ARRANGEMENTS WAS TO PROVIDE--- THROUGH THE COMMINGLING OF VARIOUS COMMODITIES--- INSURANCE AGAINST LOSS OR DETERIORATION OF MARKET FOR ANY PARTICULAR COMMODITY AFTER DELIVERY TO THE POOL; THAT SUBSEQUENT ADJUSTMENT OF THE ESTABLISHED VALUE STIPULATED UPON ACCEPTANCE OF A GROWER'S COMMODITY WOULD VIOLATE THIS FUNDAMENTAL INSURANCE CONCEPT; AND THAT THE ENTIRE POOL HAVING REALIZED A PROFIT NOTWITHSTANDING ITS LOSS ON CRANBERRIES, THE CRANBERRY GROWERS ARE LEGALLY ENTITLED TO SHARE IN THE NET PROCEEDS OF THE POOL. THE POOL HAVING MADE A PROFIT, IT FOLLOWS THAT THE CRANBERRY GROWERS' SHARE EXCEEDS THE ESTABLISHED VALUE OF $12 PER BARREL ASSIGNED TO THEIR CROPS. ACCORDINGLY, WE CONCLUDED THAT THE COOPERATIVE HAS NO LEGAL BASIS FOR DEMANDING RETURN FROM THE GROWERS OF ANY PORTION OF THE FUNDS ADVANCED THEM; AND SINCE THE AMOUNT OF SUCH ADVANCES EXCEEDED THE PRICE LEVEL TO BE MET UNDER THE PROGRAM, YOUR CLAIM WAS DENIED.

YOU CONTEND, HOWEVER, THAT UNDER THE BY-LAWS AND THE CROP PURCHASE AND MEMBERSHIP AGREEMENT, IT WAS INTENDED TO GIVE THE GROWER A LEGAL RIGHT TO RECEIVE ONLY ONE-HALF OF THE ESTABLISHED VALUE AND THAT PAYMENT OF ANY EXCESS OVER THIS AMOUNT LIES WITHIN THE DISCRETION OF THE BOARD OF DIRECTORS OF THE COOPERATIVE. IN SUPPORT OF YOUR CONTENTION YOU REFER TO SECTIONS 7.2, 7.3, AND 7.6 OF THE BY-LAWS OF CALIFORNIA CANNERS AND GROWERS (CAL-CAN); TO SECTION 5 OF THE CROP PURCHASE AND MEMBERSHIP AGREEMENT; TO EXCERPTS FROM THE MINUTES OF A MEETING OF THE BOARD OF DIRECTORS OF CAL-CAN AS INDICATING THAT THE BOARD HAS AUTHORITY TO ADJUST THE ESTABLISHED VALUE DURING THE EAR; AND TO VARIOUS COURT CASES HOLDING THAT A COOPERATIVE MAY RECOVER FOR ADVANCES MADE TO ITS MEMBERS IN EXCESS OF THE AMOUNTS RECOVERED FOR THE MEMBERS' PRODUCTS--- BOGARDUS V. SANTA ANA WALNUT GROWERS ASSOCIATION, 108 P.2D 52 (1940); CALIFORNIA AND HAWAIIAN SUGAR REFINING CORP. V. COMMISSIONER OF INTERNAL REVENUE, 163 F.2D 531 (1947); AND CALIFORNIA BEAN GROWERS ASSOCIATION V. WILLIAMS, 255 PAC. 751 (1927).

WE CANNOT AGREE WITH YOUR INTERPRETATION OF THE BY-LAWS AND THE CROP PURCHASE AND MEMBERSHIP AGREEMENT. WE REMAIN OF THE OPINION THAT THESE PROVISIONS PRECLUDE ADJUSTMENT OF THE ESTABLISHED VALUES UNDER WHICH THE CRANBERRY GROWERS INVOLVED DELIVERED THEIR CROPS TO THE COOPERATIVE.

THE BOARD OF DIRECTOR'S PROCEEDINGS REFERRED TO BY YOU ARE QUOTED, AS FOLLOWS:

"THE QUESTION OF WHETHER OR NOT THE BASE PRICE OF CLINGS FOR 1958 SHOULD BE INCREASED TO ABOVE $66.00 PER TON WAS DISCUSSED IN CONSIDERABLE DETAIL. REFERENCE WAS MADE DURING THE DISCUSSION TO THE MINUTES OF BOARD MEETINGS ON DECEMBER 19 AND MARCH 26. AS THE BOOKS HAD BEEN CLOSED AND AUDITED, IT WAS FINALLY DECIDED TO LET THE $66.00 BASE PRICE REMAIN AS ORIGINALLY DECIDED AT THE DECEMBER 19, 1958, MEETING.

"A MOTION WAS MADE, SECONDED, AND UNANIMOUSLY CARRIED APPROVING THE FOLLOWING TENTATIVE VALUES PER TON FOR THE 1959 SEASON: * * *

"A MOTION WAS MADE, SECONDED, AND CARRIED UNANIMOUSLY SETTING THE TENTATIVE VALUE FOR CLING PEACHES IN ACCORDANCE WITH THE CANNING PEACH ASSOCIATION SCHEDULE.

IT WAS UNDERSTOOD THAT THIS WAS SUBJECT TO REVIEW AFTER THE SEASON.'

IT IS NOT OUR POSITION THAT THE ESTABLISHED VALUE FOR A COMMODITY COULD NOT, UNDER ANY CIRCUMSTANCES, BE CHANGED. OUR POSITION IS ONLY THAT PROVISIONS OF THE CROP PURCHASE AND MEMBERSHIP AGREEMENT SUPPORTING THE CRANBERRY TRANSACTIONS, TOGETHER WITH THE COOPERATIVE BY-LAWS,REQUIRES THE CONCLUSION THAT THE ESTABLISHED VALUE MAY NOT BE VARIED IN THIS CASE. SEE THE UNDERSCORED PORTION AT PAGE 10 OF OUR PRIOR LETTER. MOREOVER, THE VERY USE OF THE WORD "TENTATIVE" AND THE UNDERSCORED PORTION OF THE MINUTES QUOTED IMPLIES A GENERAL UNDERSTANDING THAT BUT FOR AN EXPRESSED QUALIFICATION ESTABLISHED VALUES ARE NOT SUBJECT TO CHANGE. IN ANY EVENT, HOWEVER, WE CANNOT CONCEDE THAT PREVIOUS ACTION OF THE BOARD IN CHANGING ESTABLISHED VALUES CONFERS THE RIGHT ON THE BOARD TO MAKE SUCH CHANGE IN THE INSTANT CASE.

CONCERNING THE COURT CASES CITED, IT IS OUR OPINION THAT THEY ARE NOT APPLICABLE TO THE SITUATION HERE INVOLVED. EACH OF THE CASES DEALS WITH A SINGLE COMMODITY POOL AND--- IN THE CONTEXT FOR WHICH IT WAS CITED--- STANDS ESSENTIALLY FOR THE PROPOSITION THAT REGARDLESS OF PROVISIONS FOR PASSAGE OF TITLE AND TERMS OF PURCHASE AND SALE, THE REAL RELATIONSHIP BETWEEN A COOPERATIVE AND ITS GROWER MEMBERS IS ONE OF TRUST OR OF A FIDUCIARY CHARACTER SUCH AS REQUIRES THE GROWERS TO BEAR ANY LOSSES ON OPERATIONS. THE HOLDINGS IN THE CASES ARE NOT INCONSISTENT WITH OUR DECISION OF MAY 9, 1961. WE INSIST ONLY THAT THE CRANBERRY LOSS IN THE INSTANT CASE IS TO BE BORNE BY ALL MEMBERS RATHER THAN JUST CRANBERRY GROWERS. WE ARE NOT HERE INVOLVED WITH A SINGLE COMMODITY POOL OR WITH PROVISIONS OF PASSAGE OF TITLE OR TERMS OF PURCHASE AND SALE CONTRARY TO THE COOPERATIVE CONCEPT EXPLORED IN THOSE CASES. HERE, CRANBERRIES WERE DELIVERED TO A COOPERATIVE POOL WHICH INCLUDED OTHER COMMODITIES. AND THE TERMS UNDER WHICH THE BERRIES WERE DELIVERED WERE COMPATIBLE, ABSOLUTELY, WITH THE VERY PURPOSE FOR WHICH THE MULTI-COMMODITY COOPERATIVE POOL WAS ESTABLISHED. WE, THEREFORE, CANNOT AGREE THAT THE CASES CITED MAY PROPERLY BE RELIED UPON TO ALTER THE TERMS UNDER WHICH DELIVERY WAS MADE.

ACCORDINGLY, UPON THE RECONSIDERATION REQUESTED BY YOU, WE FIND NO BASIS FOR ALTERING OUR PRIOR DETERMINATION WHICH IS HEREBY SUSTAINED.