Penn Dairies, Inc. v. Milk Control Commission , 148 Pa. Super. 261 ( 1941 )

I would reverse the order of the court below. Penn Dairies, Inc., the appellant, at the invitation of the Quartermaster of the United States Army, submitted a bid for furnishing bottled milk to the army at Indiantown Gap, Pa., for the months of March, April, and May, 1941. As low bidder appellant was awarded the contract to supply by daily deliveries, during such period, 540,000 half-pint bottles, and 135,000 quart bottles of milk. The only ground for this action was the alleged violation of the commission's minimum price schedules in its general order No. A-14. There is a stipulation as to facts and evidence. Paragraphs 1, 2, and 3 of the stipulation relate to admitted facts, and paragraphs 4, 5, 6, 7, 8, and 9 state what shall be considered as evidence of respondent (appellant here). In my opinion, this distinction is not especially material in this proceeding. There was no contradictory evidence. It seems too manifest to admit of any argument that if the commission's minimum price order applies in this case there could have been, as a matter of fact, no real competitive bidding. That was required in this case by acts of Congress. 41 U.S.C.A. § 5; 10 U.S.C.A. §§ 1191-1225. It does not appear to have been within any exception to the requirement. Paragraphs 8 and 9 of the stipulation read:

"8. The profit which respondent [appellant here] would realize from the sale of the quantities covered by said contract, if sold at prices fixed by said order, would be a profit materially in excess of any margin of profit necessary to maintain stability in the milk industry.

"9. The margin of profit which the respondent [appellant here] will realize under the said contract is adequate for respondent's purposes and to maintain stability in the industry."

A minimum price materially in excess of that necessary to afford stability to the milk industry and to give a reasonable margin of profit to the dealer would certainly eliminate competitive bidding. No one will believe that any responsible dealer who was capable of complying with the contract would bid, as a practical matter, above the fixed minimum. All responsible bids would be at the fixed minimum, and consequently the effect of the commission's minimum price order would be to prevent the free competition which the market would warrant for such a quantity of milk.

For the disposition of this appeal, I do not consider it necessary to decide the constitutional questions which have been raised, or determine the power of the commission as applied to the facts in this case. It is sufficient to refer to the conclusion, which I think is erroneous, in the majority opinion that the commission, on February 15, 1941, had issued an order which applied to this sale to the United States Government. I agree with appellant's argument that the commission's general order contains no schedule which can properly be applied to this contract; that such a contract was not contemplated when the general order was formulated; and that the effort of the commission to apply schedules intended for widely different situations is arbitrary, unreasonable, and unjustified. The stipulation entered into between the parties recited in considerable detail the saving to appellant in performing its contract with the United States Government made possible by the quantity of milk to be delivered.¹ The majority opinion attacks this stipulation on the ground that it is indefinite, and finds difficulty in interpreting the terms, "ordinary circumstances," and "ordinary conditions." I think the meaning is clear for the purposes of this controversy; and what was meant does not appear to be disputed by the commission. The terms were intended to designate the usual course of appellant's business with reference to all its other sales of milk. It was agreed in the stipulation that this was "the largest quantity of milk to be delivered by a single seller to a single purchaser, or for delivery in quantity lots, known to the respondent or to the commission." The suggestion in the majority opinion that under the circumstances a more useful comparison could have been made with "the cost of servicing otherlarge consumers, such as hotels, restaurants, hospitals and other large institutions" is not convincing, and I think it is inapplicable. No milk contract of this magnitude has been known in Pennsylvania before. Appellant therefore drew a comparison with all of the remainder of its business, the subject matter of the commission's ordinary exercise of its authority, to demonstrate the conclusion which the commission in the stipulation conceded thus: "The profit which respondent would realize from the sale of the quantities covered by said contract, if sold at prices fixed by said order, would be a profit materially in excess of any margin of profit necessary to maintain stability in the milk industry." No producer would benefit from such excessive profits to the dealer. In my opinion, the commission's general order No. A-14 does not cover this contract,² and was not intended to apply to the situation involved in this case, and the proper construction of that order makes it inapplicable to the facts which have been stipulated.

The commission's argument that if its order did not apply to the present transaction because the transaction was not described in the order then appellant should have applied to the commission as to applicable prices raises a matter which is not here involved. If there was no applicable schedule, there was no violation by appellant of the order as charged.

I would therefore reverse the order of the court below in sustaining the commission's refusal of the application for renewal of appellant's license.

¹ See stipulated and admitted facts (28a, 29a).

² This sale and purchase of milk by the Government of the United States for consumption by the army is not within the commission's order No. A-14 establishing minimum wholesale prices "to bakeries, hotels, restaurants, hospitals, and institutions for consumption on the premises," and to schools.