Coke v. Reliance Insurance

California Court of Appeal May 23, 1968 No. Civ. 24845Published

Before: Draper

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Holding. The court held that the statutory bond required under the Agricultural Code for milk distributors is not subject to general suretyship rules regarding extensions of time for payment, as such rules would defeat the legislative purpose of protecting milk producers.

Issues

Whether producer-creditors' agreements to accept promissory notes for milk payments release the surety from liability under Civil Code sections 2819 and 2820.
Whether the Director of Agriculture had a duty to disclose the distributor's financial problems to the surety.

Disposition. affirmed

Quotations verified verbatim against the opinion

“Rather, this statutory bond had a special characteristic which, under the statute authorizing and requiring its filing, renders these civil code sections inapplicable.”

“Application of the civil code sections relied upon by appellant would defeat this core purpose of the quoted provision of the Agricultural Code.”

DRAPER, P. J.

Defendant is surety upon a bond filed by the principal, Creamerest Dairy Products Company, to secure its license as a milk distributor for portions of the calendar years 1960 and 1961, in the sum of $5,000 for each period. Creamerest has been adjudged a bankrupt. Plaintiff brought this action on behalf of milk producers who were not paid by Creamerest during these periods, and recovered judgment for $10,000. Defendant surety appeals.

Creamerest entered into agreements with the producers to pay them for their milk partly in cash and in part by promissory notes payable several years after delivery of the milk to Creamerest. Appellant now argues that these extensions of time, granted by the producer-creditors, relieve it of liability under the established rule of suretyship law (Civ. Code, §§ 2819, 2820). But we do not deal with the usual type of surety bond. Rather, this statutory bond had a special characteristic which, under the statute authorizing and requiring its filing, renders these civil code sections inapplicable.

The condition of the bond, as required by statute (former Agr. Code, § 4376) is the payment by Creamerest “in the manner required by this chapter, of all amounts due to producers’’ for milk purchased by it. This emphasis upon manner of payment is underlined by the provision mandating action by the director. ‘1 In ease of failure by a distributor to pay any producer . . . for fluid milk ... in the manner required by this chapter,” the director shall ascertain the names of producer-creditors and institute action in their behalf. The code specifies that payment for approximately one-half of the milk delivered to a distributor in any month shall be made not later than the first day of the following month, “and .the remainder not later than the fifteenth day of said month” (former Agr. Code, § 4280, subd. (e)). It is unquestioned that all producer-creditors here concerned were “large” sellers within the meaning of this subdivision, and thus required to have contracts with Creamerest containing these provisions.

[408]

In light of the announced legislative purpose in enacting the Milk Control Act (see former Agr. Code, §§ 4200-4205, now Agr. Code, §§ 61871-61877), it is clear that the producer is not free to reduce his price at will (see

Coke v. Reliance Insurance

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DRAPER, P. J.

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