Mountain View Walnut Growers Ass'n v. California Walnut Growers Ass'n

WOOD, J. In the complaint plaintiff asked judgment for the sum of $12,724.12, the amount claimed to have been re[228]tained by defendant from the proceeds of sales of walnuts made by defendant for plaintiff during the years 1921 to 1932. Defendant appeals from a judgment in plaintiff’s favor in the sum of $3,761.03.

The defendant California Walnut Growers Association, referred to herein as “Central”, is and since prior to 1920 has been a cooperative, nonprofit, noncapital stock corporation organized under the laws of California, acting as a marketing agency for growers of walnuts. Its members are local cooperative associations of walnut growers, herein called “locals”, there being forty-two such members, including plaintiff. Bach local takes the walnuts from its grower members, prepares them for market and delivers them to Central, which in turn mingles them with walnuts of like grade from other locals and markets them through its sales organization. Plaintiff became a member of Central in 1920 and marketed through Central the nuts produced by its grower members until 1932, when, because of dwindling production, plaintiff ceased to handle the walnuts of its members. Plaintiff has maintained its corporate existence and is still a member of defendant, but those of plaintiff’s members who have continued to produce walnuts have marketed them through other locals.

During the years in which Central was' marketing plaintiff’s walnuts it was the practice for Central to sell the bulk of the year’s crop, estimate the probable net return from the unsold balance of walnuts then on hand and distribute in cash to the locals the estimated total net return. The actual sales of the walnuts on hand at the time the estimate was made would not be consummated until later and the amount of the proceeds of such sales was naturally uncertain. In most of the years the estimates proved too low and a cash excess resulted. Instead of remitting the excess to the locals for distribution to their grower members Central retained it as a reserve fund to carry on its future operations. When this practice was commenced the contract between plaintiff and defendant did not provide for the reserve fund, but defendant made annual reports to plaintiff and its other members covering the sums retained and no objection was made to the practice. In 1925 a new contract was executed by plaintiff and defendant which according to its terms is to re