Rowell v. State Board of Agriculture ( 1940 )

This cause is before us on an application for a Writ of Prohibition. On April 13, 1939, The State Board of Agriculture under the provisions of Chapter 7, Laws of Utah, 1937, issued an order establishing the "Salt Lake Milk Marketing Area." It also issued an "Order on Fair Trade Practices within the Area." Under the terms of this order all distributors of market milk within the Area were required to procure a license from the Board of Agriculture, to comply with certain other rules and regulations, and to pay each month to the Administrative Agency the differential between the price of milk to the consumer as fixed by the Board and the price to be paid the producer as fixed by the Board. Plaintiffs, having refused to make the payments, were cited by the Agency to show cause why their license as a distributor of market milk should not be revoked, and seek prohibition from this court assailing the legality of the orders of the Board and the constitutionality of the Milk Control Act. For convenience, the Defendant David F. Smith will hereafter be referred to as the "Commissioner"; Defendants Hansen, Jensen, Richards, Johnson, Egans, Danzie and Bues constitute the State Board of Agriculture and will be referred to as the "Board"; the other defendants, constituting the Administrative Agency of the Salt Lake Milk Marketing Area, will be referred to as the "Agency."

By Chapter 7, Laws of Utah 1937, the legislature declared "the production, processing, and distribution of fluid milk for consumption in its natural * * * state" to be vested with a public interest, that "the general welfare requires a continuous and adequate supply of pure wholesome milk," section 2, and in the interest of assuring such supply it is recognized that the market must be stabilized and a fair price for market milk maintained. The Act vested the State Board of Agriculture with certain broad powers with relation to the distribution and sale of market milk. Section 4 of the Act. By Section 3, market milk is defined as "fluid milk and cream sold for consumption as such and shall not include milk used for manufacturing purposes." The statute authorizes the Board, upon certain conditions, (a) to establish market areas, with provision for selection of an administrative agency by producers and distributors; (b) to provide for fair trade practices within a market area; (c) to provide for control of surplus milk; (d) to provide, fix, and regulate a minimum price for market milk; (e) to license producers and distributors within a market area; (f) to collect fees from producers and distributors for the expenses of the agency.

The Board issued orders establishing the Salt Lake Milk Marketing Area with an administrative agency to govern the same; fixed a uniform price of market milk to be paid to producers by distributors, a price to be paid by stores to distributors, and a price to be charged all consumers. It provided that all milk coming into the Area, while bought by distributors from producers, and sold by the distributors to consumers, shall be considered as bought by the Agency from producers and sold by the Agency to the distributors. The distributors were required to charge the consumer at the rate of 58 1/2c per pound butterfat; to pay their producers only 44c per pound butterfat; take 4c per pound for handling, and pay the Agency 10c per pound, of which 3/4 of 1% were to be used for advertising and administrative expenses, and the balance to be paid to other distributors, and their producers, whose milk was sold not as market milk but for manufacturing purposes and therefore at a price lower than that fixed for market milk.

Prior to the establishment of the district, plaintiffs had entered into contracts with their producers, whereby they agreed to pay the producers, 48c per pound butterfat. The Board ordered those contracts abrogated, cancelled and disregarded, and forbade payment to the producers of more than 44c although the cost of milk to the distributor was raised to 54c. Plaintiffs refused to remit to the Board the 10c per pound butterfat on milk handled by them. The Board sought to revoke their license and prohibit them from doing business. This action followed.

Plaintiffs assail the right of the Agency to cite them before it or to cancel their license upon both statutory and constitutional grounds. They contend:

(First) That the Act and particularly the provisions with reference to control of surplus milk and price fixing are unconstitutional for the reason that they violate Article I, Section 7 of the Constitution of the State of Utah and the 14th Amendment to the Constitution of the United States, U.S.C.A., by depriving the plaintiffs of their property without due process of law, and that it makes an unlawful delegation of legislative and judicial powers to the State Department of Agriculture and the Administrative Agency for the Salt Lake Milk Marketing Area.

(Second) That the Act and the particular provisions respecting fixing of prices and control of surplus milk by the milk pooling arrangement are unconstitutional in that they are in violation of Section 10, Article I of the Constitution of the United States of America which provides that no State shall pass a law impairing the obligations of contracts.

(Third) That the Area was not lawfully established because the petition was not signed by the requisite number of qualified signers.

(Fourth) That the Rules and Regulations issued by the Board are null and void because the petition therefor was filed and hearing thereon had before the Area was created and established.

We shall consider them in order as far as necessary to a determination of this cause.

Are the provisions with respect to fixing prices of milk void as a delegation of legislative powers? Or in other words, has the legislature fixed the prices of milk, or declared a necessity for fixing of milk prices and provided the proper measure, standards, and guides for determination and fixing of prices? The procedure set up by the Board seems to have been copied from that provided by the New York statute, Chapter 383, Laws of 1937 (New York), but our statute apparently was modeled with modifications after that of Virginia, Acts Va. 1934, c. 357.

Our statute vests in the Board the power to fix and regulate a minimum market price for market milk, and such price shall include the price paid to producers, price paid by stores or others who buy from distributors for resale, and the price paid by consumers, both wholesale and retail. Section 4, Chapter 7, Laws of Utah 1937. No procedure for price fixing is provided by the statute except that there must be a petition filed by a producer, a distributor, or a consumer, or any combination of them, asking that prices be fixed, and the payment of fifty dollars as a filing fee. As far as the statute is concerned the petition need contain nothing except a written request that a minimum price of milk be fixed by the Board. Two weeks notice is given by publication in a newspaper and a hearing is had. Section 6. Violation of any order promulgated by the Board is made a misdemeanor. There is nothing provided in the Act as to what conditions must be found to justify price fixing. Nothing is said as to what constitutes a fair price. No limits are set as to how high or how low the price may be and nothing is said as to what objectives, purposes, standards, measures, or gauges shall guide the Board in determining either whether prices should be fixed or the amount of the price that is fixed. There is nothing requiring any proportion or relationship between the price fixed to producers and to consumers. We have noted these various missing parts to show the utter barrenness of the statute. The legislature made no finding or declaration of any relationship between price and continuous supply. The legislature made no finding that the regulation of prices offers any solution to any undesirable conditions which might be in the industry, or that any conditions existing in the industry are to be remedied by price fixing, and no declaration or statement of policy that regulation by price fixing is in the public interest.

That the legislature may not surrender or delegate its legislative power is elemental.

It may however, provide for the execution through administrative agencies of its legislative policy, and may confer upon such administrative officers certain powers and the duty of determining the question of the existence 1 of certain facts upon which the effect or execution of its legislative policy may be dependent. McGrew v. IndustrialCommission, 96 Utah 203, 85 P.2d 608; Morgan v. UnitedStates, 304 U.S. 1, 58 S. Ct. 773, 999, 82 L. Ed. 1129. Said the New York Court in Elite Dairy Products v. Ten Eyck, 271 N.Y. 488,3 N.E.2d 606, 609:

"The Legislature may properly authorize an administrative officer to * * * determine questions of fact. Any discretion there left to the administrative officer is confined to a designated field, and within that field rests, not upon unfettered choice, but upon the application of rules of reason to facts proven or found."

In Thompson v. Smith, 155 Va. 367, 154 S.E. 579, 584, 71 A.L.R. 604, the court said:

"It is a fundamental principle of our system of government that the rights of men are to be determined by the law itself, and not by the let or leave of administrative officers or bureaus. This principle ought not to be surrendered for convenience or in effect nullified for the sake of expediency. It is the prerogative and function of the legislative branch of the government, whether state or municipal, to determine and declare what the law shall be, and the legislative branch of the government may not divest itself of this function or delegate it to executive or administrative officers."

The court further said:

"The majority of the cases lay down the rule that statutes or ordinances vesting discretion in administrative officers and bureaus must lay down rules and tests to guide and control them in the exercise of the discretion granted in order to be valid * * *."

And in Mutual Film Corp. v. Industrial Commission of Ohio,236 U.S. 230, 239, 35 S. Ct. 387, 392, 59 L. Ed. 552, Ann. Cas. 1916C, 296, it is said:

"The legislature must declare the policy of the law and fix the legal principles which are to control in given cases; but an administrative body may be invested with the power to ascertain the facts and conditions to which the policy and principles apply."

But in the delegation of such authority the legislature must clearly mark the course to be pursued, and the principles, facts, and purposes to serve as guide posts to enable the officer to carry out, not his own will or judgment but that of the legislature. Seignious v. Rice, 273 N.Y. 44, 6 2,3 N.E.2d 91; Darweger v. Staats, 267 N.Y. 290,196 N.E. 61; Noyes v. Erie Wyoming Farmers Co-op Corp.,170 Misc. 42, 10 N.Y.S.2d 114; Van Winkle v. Fred Meyer, 151 Or. 455,49 P.2d 1140. The New York court under a similar state of facts, and with a statute much fuller and more definite than ours, answered the question with such definite and concise language that we quote it, not only with approval but as an exact reflection of our views. In Noyes v. Erie Wyoming FarmersCo-op Corp., cited supra, the court said [170 Misc. 42,10 N.Y.S.2d 122]:

"Here the fixing of minimum prices to producers of milk has not expressly been found by the Legislature to be a solution for the evils found to exist within the dairy industry, or been expressly incorporated within the declared public policy in relation to those evils. In the absence of such express finding or declaration, the grant of power to the Commissioner to determine that the fixing of prices should be undertaken in the public interest under a declared policy silent in respect of price fixing, is a naked delegation of legislative power. It is he who makes the determination, essentially legislative in every respect from which it may be viewed, whether price fixing is a desirable public policy."

We find no cases upholding such a statute as this against a charge that it is a delegation of legislative power.

Is the provision for control of surplus milk void as a delegation of legislative power? Or in other words, has the legislature declared the control of surplus milk is 4 a matter of public policy, provided for its control, and fixed the standards or purposes which are to control in regulating surplus milk? Has it authorized the establishment of a control plan or equalization fund such as is attempted in the orders of the Board here assailed? We shall discuss these two questions conjointly, because the question only becomes important when the Board attempts to control surplus milk, and then primarialy only to the extent it attempts to exercise the legislative power. The attempt to set up and enforce the control plan or equalization fund is a more flagrant assumption and exercise of legislative power than the price fixing orders. There is no provision, no authorization in the statute for an equalization fund; no provision requiring or authorizing a demand that one distributor contribute for the benefit of another, or that any consumer be required to pay for his milk an added price for the benefit of producers or distributors who do not contribute to milk he buys or the service of delivering it to him. There is no provision or authorization for the creation of a milk pool or requiring any one to participate therein. There is no declaration that the purposes of the act will be subserved by such control, or that it is the policy of the state to control it. There are no standards fixed for determination of when or what control should be exercised over surplus milk. The only provision as to control orders is that they must not prohibit anyone meeting other requirements of law from producing or distributing. The New York Act, Chapter 383, Laws of 1937, (not the one involved in the Nebbia case, infra which was by its terms an emergency measure in force only for a short time), empowered the Commissioner (the administrative agent) to equalize the payments to all producers in the area by compelling dealers who collect moneys in excess of the average price in the area to deposit such excess in a fund to be paid to dealers who owe producers less than the average price, to be in turn paid to such producers. (Our statute contains no such provision.) It further provided that the price fixed was controlling on all when approved by seventy-five per cent of the producers. (Our statute doesn't even require approval by anyone except the majority of the Board.) Nebbia v. People of Stateof New York, 291 U.S. 502, 54 S. Ct. 505, 78 L. Ed. 940, 89 A.L.R. 1469.

What the New York Court had to say about this provision of their statute applies, for the reasons stated above, with double force to our set-up. That court said in Noyes v. Erie Wyoming Farmers Co-op Corp., 170 Misc. 42, 10 N.Y.S.2d 114, 119:

"It is significant that the equalization provisions of the statute are not based upon any finding by the Commissioner, with or without evidence, that public interest requires that the policy declared by the Legislature shall be made effective by such equalization or upon any express declaration by the Legislature itself that such equalization of prices has any relation to the public policies elsewhere declared in the statute. * * * The only prerequisite to the promulgation of an order by the Commissioner setting up an equalization plan is the approval by seventy-five per cent of the producers affected. * * *

"All that seems necessary for the establishment of the equalization plan, under which dealers are compelled to pay their money or the money of their producers, to other dealers and other producers, is the mere arbitrary determination of the Commissioner and the arbitrary assent of the seventy-five per cent of the producers. The power to establish the equalization fund and to compel contributions to it is again a naked delegation of legislative power to the Commissioner and to the assenting percentage of producers who concur with him in the promulgation of the order, without any standard whatever, and without express legislative declaration of finding or policy. A delegation of legislative power to a majority of producers constitutes as well an invalid delegation as one to an administrative officer. Carter v. Carter Coal Co.,298 U.S. 238, 311, 312, 56 S. Ct. 855, 80 L. Ed. 1160. See also discussion in Highland Farms Dairy v. Agnew, 300 U.S. 608, 614,57 S. Ct. 549, 81 L. Ed. 835. A declared legislative policy, a standard for administrative action and a definite finding in the exercise of the authority conferred are each the necessary requisites for vesting of federal officers with the power to carry out the legislative policies of Congress. Panama Refining Co. v.Ryan, 293 U.S. 388, 415, 55 S. Ct. 241, 79 L. Ed. 446 [466]."

Again we say we have found no authority upholding any statute, authority, or rule like that here challenged. In these respects it must seem to follow that the statute and 5 the orders and regulations of which complaint is made must yield to the paramount authority of the constitution.

The New Jersey court, in construing an act by its terms an emergency act and expiring by express limitation two months after the decision was rendered, pointed out that their act prescribed the purposes to be accomplished, the things to be remedied, fixed standards, defined policy, expressed the legislative objective to be arrived at in the prices fixed and which must govern the price. State Board of Milk Control v. Newark Milk Co.,118 N.J. Eq. 504, 179 A. 116. So too the Pennsylvania court inRohrer v. Milk Control Board, 322 Pa. 257, 186 A. 336, recognized the principle here laid down, pointing out that the Pennsylvania Act did contain and set forth the elements wholly missing in our law relative to fixing prices, and definitely declared that prices should be fixed according to standards and purposes therein laid down.

The Virginia Court in Reynolds v. Milk Commission ofVirginia, 163 Va. 957, 179 S.E. 507, pointed out that the Virginia act expressly founded its fixing and control action and rules upon the interest and protection of the general public, and such interest and welfare and protection were measuring rods in fixing the prices and other control regulations.

What we have said disposes of the point with reference to impairing obligations of contracts. If the Board cannot regulate prices or control surplus milk in the ways it has attempted to do, it must follow as of course that the order cancelling and voiding the contracts distributors had with producers is null and void.

The alternative writ heretofore issued is made permanent. Each side to pay their own costs.

MOFFAT, C.J., and PRATT, J., concur.

McDONOUGH, J., concurs in the result.