Jersey Creamery v. Brd. of Milk Con ( 1972 )

No. 12233
I N T E SUPREME C U T O THE STATE O M N A A
H OR F F OTN
1972
JERSEY CREAMERY, I N C . ,
a corpora t i o n ,
P l a i n t i f f and Respondent,
T E BOARD O MILK CONTROL O T E
H F F H
MONTANA DEPARTMENT O BUSINESS REGUTATION,
F
a n a d m i n i s t r a t i v e agency o f t h e S t a t e of
Montana,
Defendant and Appellant.
Appeal from: D i s t r i c t Court of t h e F i r s t J u d i c i a l D i s t r i c t ,
Honorable Gordon Bennett, Judge p r e s i d i n g .
Counsel of Record:
For Appellant :
Geoffrey L. B r a z i e r argued, Helena, Montana.
For Respondent:
Hughes, Bennett and Alan F. Cain, Helena, Montana.
George T. Bennett argued, Helena, Montana.
Submitted: September 26, 1972
Decided Qm1 7 1972
Mr. Justice Wesley Castles delivered the Opinion of the Court.
This is an appeal from a declaratory judgment entered for
plaintiff in the district court of the first judicial district,
county of Lewis and Clark.
Plaintiff is Jersey Creamery, Inc., a corporation, doing
business as a dairy. Defendant is the Board of Milk Control,
an administrative agency of the state of Montana. Hereinafter
plaintiff will be called "~ersey"and defendant "~oard".
Jersey operates what are known as "Quality Chekd" dairies,
and is a member of the Quality Chekd Dairy Products Association.
Jersey proposed a scholarship contest whereby the fact of the
contest would be advertised on its milk cartons and through
other advertising media throughout the state. Applicants for
the scholarship were not required to purchase anything from
Jersey, but merely to complete an application blank. These
blanks were found on the cartons, but any applicant could make
his own application form, as long as it contained the necessary
information. These applications were then to be given to an
independent agency to pick the winners by a drawing, All
applications except those of non-residents of the state or
employees of Jersey were eligible to win the contest. There was
no necessity for the purchase of any of Jersey's merchandise
to be eligible to win. Winners of the contest received funds
to be applied toward a college education, the funds to be paid
directly to the college of the winner's choice.
Jersey informed the Board of its proposed scholarship
contest as part of a national "Quality Chekd" program, The
Board informed Jersey this contest would violate the Montana
Milk Control Act and that the contest was prohibited. Jersey
then appealed to the full Board, thereby exhausting its adminis-
trative remedies.
The final ruling of the Board was that the scholarship
contest violated specific sections of the Milk Control Act and
regulations of the Board. A declaratory judgment action was
commenced in the district court, The facts being admitted
and there appearing to be no need for an evidentiary hearing,
the court concluded that the proposed scholarship contest was
not prohibited. The court stated the provisions of section
27-414.1 and section 27-414.2, R.C.M, 1947, are applicable only
to trade practices which would result in decreasing prices
actually paid for milk products below those fixed by the Board,
and that this contest would not result in such a lowering of
prices.
The pertinent issue here is whether the district court was
correct in ruling, as a matter of law, that the scholarship
contest was not in violation of the Milk Control Act of the
state of Montana as contained in Chapter 4, Title 27, R.C.M.
1947, and regulations promulgated thereunder.
The principal purpose of the Milk Control Act was to insure
an adequate supply of healthful milk. One of the methods to
insure such supply is to control the price of milk at the
various stages from producer to ultimate consumer. To aid the
Board to accomplish this the legislature has empowered the Board
to prohibit any practices, however disguised, which would allow
a member of the milk industry to reduce the price of milk below
that set by the Board. This Court has previously ruled that
the regulation of the milk industry was a proper exercise of
the state's police power and that the milk industry was an
industry affected with a public interest. Milk Control Board
v. Rehberg, 141 Mont. 149, 376 P.2d 508.
The Board contends that under case law, statutes, and
regulations this contest is barred; and specifically under
section 27-414 (b) ( ) , R,C.M, 1947, which reads :
c
I11naddition to the general and special powers
heretofore set forth, the board shall have the
power to make and formulate reasonable rules and
regulations governing fair trade practices as they
pertain to the transaction of business among
licensees under this act and among licensees and
the general public. Such reasonable rules and
regulations governing fair trade practices shall
contain, but shall not be limited to, provisions
regarding the following methods of doing business
which are hereby declared unfair, unlawful, and
not in the public interest:
"b
() The giving of any milk, cream, dairy products,
services, or articles of any kind, except to bona
fide charities: for the purpose of securing or re-
taining the fluid milk or fluid cream business of
any customer.
() The extension to certain customers of special
"c
prices or services not available to all customers
who purchase milk of like quantity under like terms
and conditions. I1
From the authority of the legislature, the Board is not
limited to this statute, but can make additional regulations
govern fair trade practices. The Board relies on the
following regulations:
"Regulation 30: The giving of any milk, cream, dairy
products, services, or articles of any kind, except to
bona fide charities, for the purpose of securing or
retaining the fluid milk or fluid cream business of
any customer,It
"Regulation 31: The extension to certain customers of
special prices or services not available to all customers
who purchase milk in like quantity under like terms and
conditions. It
"Regulation 35: The giving or agreeing to give, dis-
counts, whether in the form of money, merchandise,
coupons, stamps, prizes, bonuses or premiums in any
form or the buying or selling of any merchandise condi-
tional upon the sale of fluid milk products which would
directly or indirectly reduce the monetary value of
such products below the minimum price established by
Official Order of the Milk Control Board."
"Regulation 35: The using of such items as bottle caps,
cartons, stamps, coupons, or any other item distributed
with milk sold at retail or wholesale to qualify a person
to receive a prize, award, or any other thing of value,
which would d i r e c t l y o r i n d i r e c t l y reduce t h e
monetary value of f l u i d milk o r f l u i d milk pro-
ducts below t h e minimum r e t a i l o r wholesale p r i c e
e s t a b l i s h e d by O f f i c i a l Order of t h e Milk Control
Board. "
According t o t h e Board, Regulation 30 would r e q u i r e t h e
meeting of two c r i t e r i a before a t r a n s a c t i o n would a t t a i n
prohibited s t a t u s . There must be (1) t h e a c t of giving of
s e r v i c e s o r a r t i c l e s of any kind, and (2) t h e i n t e n t t o secure
o r r e t a i n f l u i d milk o r f l u i d cream business of any customer.
I n the view of t h e Board, t h e s c h o l a r s h i p c o n t e s t f a l l s w i t h i n
such p r o h i b i t e d a c t i v i t y . This Court cannot s u s t a i n such view
with r e s p e c t t o t h e c o n t e s t involved here.
Section 27-414, R.C.M, 1947, and Regulations 30 and 31 s t a t e
s p e c i f i c a l l y t h e n a t u r e of u n f a i r t r a d e p r a c t i c e s which a r e t o
be prohibited and r e g u l a t e d by t h e Board. It i s c l e a r from
t h e s e s t a t u t e s and r e g u l a t i o n s t h a t t h e only u n f a i r t r a d e
p r a c t i c e s which a r e t o be p r o h i b i t e d a r e those schemes and
devices t h a t r e s u l t i n e f f e c t i v e l y lowering t h e p r i c e of milk
below t h e minimum s e t by t h e Board, Such devices can be s e c r e t
r e b a t e s , refunds, unearned discounts, t h e giving away of pro-
ducts o r o t h e r valuable items t o customers, extension of s p e c i a l
p r i c e s o r s e r v i c e s , o r t h e giving of r e b a t e s o r discounts i n
t h e form of p r i z e s t o customers t o induce them t o buy and continue
t o buy milk.
Regulations 35 and 36 p r o h i b i t t r a d e p r a c t i c e s which would
reduce t h e p r i c e of milk below t h a t set by t h e Board. These
r e g u l a t i o n s p r o h i b i t t h e giving of discounts of any type, f o r
t h e buying of milk. They a l s o p r o h i b i t t h e use of b o t t l e caps,
c a r t o n s , stamps, e t c , t o q u a l i f y a person t o r e c e i v e a p r i z e ,
which would d i r e c t l y o r i n d i r e c t l y reduce t h e p r i c e of milk.
However, t h e r e i s nothing i n t h e a u t h o r i t y granted t h e
Board t o r e g u l a t e a d v e r t i s i n g o r promotional schemes, u n l e s s
they would c o n s t i t u t e such above mentioned a c t i v i t y . Clearly i n
t h i s case t h e scholarship c o n t e s t does n o t d i r e c t l y o r i n d i r e c t l y
a f f e c t t h e p r i c e of milk charged by J e r s e y o r paid by i t s customers.
A s h e r e t o f o r e mentioned, persons applying f o r t h e s c h o l a r s h i p
did n o t have t o buy anything t o e n t e r o r win. It i s t r u e t h a t
t h e i n t e n t of J e r s e y i s t o draw noncustomers i n t o purchasing
t h e i r milk products, however t h i s method of a d v e r t i s i n g i s n o t
p r o h i b i t e d by law. This type of a d v e r t i s i n g i n no way a f f e c t s
t h e p r i c e of milk paid by t h e customers, and t h e r e f o r e i s n o t
prohibited, I n no sense, i s such a c o n t e s t an "unfair t r a d e
p r a c t i c e " and t h e Board has no a u t h o r i t y t o c o n t r o l i t .
The s t a t u t e s allow t h e Board t o make o t h e r such reasonable
and necessary r e g u l a t i o n s a s i t deems necessary; b u t t h e r e i s
nothing i n t h e s t a t u t e s o r r e g u l a t i o n s now promulgated by t h e
Board, which would make t h e scholarship c o n t e s t p r o h i b i t i v e .
This does n o t answer t h e question of whether t h e Board could
make r e g u l a t i o n s t o p r o h i b i t t h i s type of a c t i v i t y , but t h a t
question i s not before t h i s Court.
The f i n a l argument presented by t h e Board i s t h a t t h e d i s -
t r i c t c o u r t e r r e d when i t concluded t h a t t h e circumstances of
t h e case r e l a t e d t o t h e provisions of s e c t i o n s 27-414.1 and
27-414.2, R.C.M. 1947. W cannot agree.
e
It i s t r u e t h e s e s e c t i o n s were not s p e c i f i c a l l y mentioned
i n t h e pleadings, however t h a t p o i n t does n o t s e t t l e t h e i s s u e .
The Board i t s e l f c i t e d s e c t i o n 27-414, R.C.M. 1947, i n denying
Jersey the r i g h t t o participate i n t h i s contest. It i s t h e duty
of t h e d i s t r i c t c o u r t i n making i t s determination upon t h e law
t o consider the e n t i r e Milk Control Act and a l l provisions t h e r e i n
bearing upon the question, and t o f u r t h e r consider a l l provisions
thereof c i t e d by counsel. The d i s t r i c t c o u r t i s n o t l i m i t e d t o
only those s t a t u t e s which a r e c i t e d i n t h e pleadings. There was
no e r r o r by t h e d i s t r i c t c o u r t when i t included t h e s e s e c t i o n s
i n i t s conclusions of law. These s e c t i o n s were p e r t i n e n t t o t h e
c a s e and were c o r r e c t l y considered.
The judgment o f t h e d i s t r i c t c o u r t i s affirmed.
~ s s o c i a t g ustice
J
...............................
Associate J u s t i c e s .
Mr. Justice John Conway Harrison dissenting:
1 dissent.
The ruling of the district court should be reversed.
Regulation 30 of Official Order 614-C, provided for by section
27-414, R.C.M. 1947, if liberally interpreted prohibits just
such a scheme as provided in this contest.In opening the corral
gate and allowing this cow out of the corral, it is safe to
predict that distributors will devise all types of contests
in the name of advertising which will ultimately affect the
sales price of a quart of milk. Such trade practices are not
within the "public interest" as declared by section 27-401,
R.C.M. 1947.