Milk Marketing Board v. Johnson

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] Plaintiff Johnson was granted a writ of certiorari to review Orders 3 and 4 of the Michigan milk marketing board, which determined the existence of an emergency and fixed wholesale and retail prices of milk within the Detroit milk marketing area.

After the entry of order No. 3, the board filed a bill of complaint in Wayne circuit seeking to restrain Johnson and his agents from violating amended order No. 2. During the hearing on the chancery matter, Johnson agreed to submit to the licensing provisions of the milk marketing act, Act No. 146, Pub. Acts 1939 (Comp. Laws Supp. 1940, § 5394-41 et seq., Stat. Ann. 1940 Cum. Supp. § 12.805 [1] et seq.), and that question is eliminated from the case.

For a number of years, many of the milk producers in Michigan have been organized as the Michigan Milk Producers Association, with market sales committees in various counties. This association has current and invested assets of over $200,000, and trust assets of $135,000. The trust assets are to guarantee payments to producers and provide for a quarantine fund, et cetera. The amount of milk sold in the Detroit marketing area is about 2,000,000 pounds daily, some 80 per cent. of which is supplied by members of the association. Formerly, the association was financed by dues from its members. Under the act, the board authorized a check-off of four cents per hundredweight on milk handled in the area, which is used in part to finance the association.

Johnson is the fourth largest milk distributor in the Detroit area. He purchases milk from producers and distributes at retail through a chain of milk depots on a cash and carry plan. He claims to be able to pay more for milk, sell it for substantially less than others, and still make a profit. However, he ignores the factors of base and surplus and does not carry his share of the burden of this claimed necessary element of cost of milk.

After the publication of notice and informal hearings without the swearing of witnesses, certain orders were issued by the board. Order No. 1, made July 17, 1939, designated the extent of the Detroit milk marketing area. Order No. 2, entered August 8, 1939, is quite inclusive and regulatory. Its main purpose is to establish minimum prices to be paid producers by distributors. The minimum price on Class I milk was established at $1.90 per hundredweight. This order was amended in considerable detail on August 28th, the minimum on Class 1 being fixed at $2.08.

Following publication of notice and hearings at which all witnesses were sworn, order No. 3 was entered on September 29, 1939. This order fixed in detail the minimum prices at which milk of various grades could be sold to the consumer, setting the retail price of 3 1/2 to 4 per cent. milk from vehicles at 11 cents per quart in containers, and from retail stores at 9 cents. Other prices were fixed for varying grades and quantities.

Order No. 4, dated March 27, 1940, amended order No. 3 in certain respects, without changing the differential of 2 cents between the price of milk sold from stores and that retailed through wagon deliveries.

The trial judge filed a comprehensive opinion in the chancery cause, denied Johnson's claim of unconstitutionality of the act, and authorized a decree granting the relief prayed for in plaintiff's bill of complaint.

The constitutional objections raised by Johnson in the chancery cause were summarized by the trial judge as follows:

"(1) The Michigan milk marketing board (hereafter referred to as the board) is prohibited by reason of the personal interest of its members in its orders and regulations from acting lawfully.

"(2) The check-off provisions of the statute (section 24, subd. [b]) violate the due process of law provisions of the Federal and State constitutions, and the price-fixing orders based thereon constitute a fraud against producers and distributors.

"(3) The notice of hearing provided by section 19 is so inadequate, both as to content and time, as to amount to a violation of the due process of law provision.

"(4) The limitation upon judicial review prescribed in section 53 violates the due process of law provisions of the Constitution.

"(5) The delegation of the power to fix price of milk by the use of base and surplus plan constitutes an unlawful delegation of legislative power."

These objections are renewed on appeal, with enough change to conform to the joint review of the orders, by certiorari, and of the decree, by appeal. It is also claimed that the title of the act is insufficient. Appellant urges that we should declare the statute unconstitutional and, if such determination is not available, that orders Nos. 2, 3, and 4, as amended, should be held invalid.

Milk marketing acts have been considered by several courts of last resort. The acts of Connecticut, Maryland, New Hampshire, and Utah have been declared unconstitutional, and the acts of Alabama, California, Florida, Georgia, Indiana, Iowa, New Jersey, New York, Oregon, Pennsylvania, Virginia, and Wisconsin have been held good. The authorities may be found collected in 101 A.L.R. 64, 110 A.L.R. 644, 119 A.L.R. 243, and 122 A.L.R. 1062. The more recently decided cases are Savage v.Martin, 161 Ore. 660 (91 Pac. [2d] 273); Jersey Maid MilkProducts Co. v. Brock, 13 Cal. (2d) 620 (91 Pac. [2d] 577);Rowell v. State Board of Agriculture, 98 Utah, 353 (99 Pac. [2d] 1); and State v. Stoddard, 126 Conn. 623 (13 Atl. [2d] 586).

The leading case is Nebbia v. New York, 291 U.S. 502 (54 Sup. Ct. 505, 89 A.L.R. 1469), an appeal from People v. Nebbia, 262 N.Y. 259 (186 N.E. 694). It is the basis on which various milk marketing acts have been held constitutional. We refrain from repeating what Mr. Justice Roberts there said regarding the importance of an adequate supply of milk and the need for regulation of prices so as to insure a continous flow to the congested centers of population.

Although determination of the constitutionality of our act will be made upon the single question of the composition of the board as tested by the principle of due process, we deem it advisable to discuss other phases in the event that reenactment is sought.

Is the act constitutional and did the board comply with it in issuing its orders?

The argument is advanced that the legislature could not delegate its authority to fix prices. Where this same argument was made in other States a complete answer was found in theNebbia Case. Within proper limits, legislative power may be delegated, as was the power of altering and fixing rates for public service corporations in City of Traverse City v.Railroad Commission, 202 Mich. 575 (P. U. R. 1918 F, 752). See, also, Argo Oil Corporation v. Atwood, 274 Mich. 47; Smith v.Wayne County Sheriff, 278 Mich. 91; and Warmshuis v.State Board of Registration in Medicine, 285 Mich. 699. As stated in the Argo Oil Case:

"It is too well settled to need the citation of supporting authorities that the legislature, within limits defined in the law, may confer authority on an administrative officer or board to make rules as to details, to find facts, and to exercise some discretion, in the administration of a statute. The difficulty is in determining whether the limits are sufficiently defined to avoid delegation of legislative powers. Exhaustive annotations of the general subject will be found in 12 A.L.R. 1435; 54 A.L.R. 1104; 92 A.L.R. 400."

The act under consideration sets up sufficiently definite standards for the guidance of the board. In this respect, it can be distinguished from the Connecticut and New Hampshire acts, discussed in State v. Stoddard, supra, decided May 1, 1940.

The title of the act reads:

"An act relative to the production and distribution of milk; to create a milk marketing board, and define its powers and duties; to provide for the licensing of milk dealers; to prescribe penalties for the violation of the provisions of this act; and to declare the effect of this act."

Appellant contends that this title is inadequate because it fails to indicate the provision for an assessment upon milk production. The court has spoken many times on this subject, the general rule being recently stated:

"The title to an enactment is required to be expressive of the purpose and scope of the enactment. If the enactment comes fairly within and is reasonably a component part of the purpose expressed in the title it is not an interloper but a part thereof and so proper as to be expected therein." In re Lewis'Estate, 287 Mich. 179, 183.

In City of Bay City v. State Board of Tax Administration,292 Mich. 241, 249, the court said:

"In numerous decisions of this court it has been held in substance that the title to an act is good if it fairly indicates the general subject matter covered by the act; and that the constitutional provision (Const. 1908, art. 5, § 21) does not require a title sufficient in detail to constitute a table of contents or an index to the various provisions of the act."

The title to the act is sufficient.

Section 24, subd. (b), permits a check-off to be used for the necessary expenses of local milk marketing committees, et cetera. The board is given power to administer the funds so collected. The statute requires this check-off to be reasonable and limits the expenditures to the purposes of the act. The check-off provision was questioned in Reynolds v. MilkCommission, 163 Va. 957 (179 S.E. 507). We agree with the holding of that court that such assessment is not the levying of a tax, nor is the act a revenue measure. The provision is merely incident to regulation of the industry and is proper under the police power of the State.

Question is raised as to lack of notice of hearings. Section 19 requires publication in a newspaper or newspapers in general circulation through the marketing area at least a week before the date set for hearing, and this is sufficient notice.

It is argued that Section 53 imposes limitations upon judicial review. This section provides in part:

"(g) The findings of fact made by said board acting within its powers shall, in the absence of fraud, be conclusive, but the Supreme Court shall have power to review questions of law involved in any final decision or determination of said board."

Then follows a provision for application by the aggrieved party within 30 days by certiorari, mandamus, et cetera. This is almost identical with section 12 of part 3 of the workmen's compensation law (2 Comp. Laws 1929, § 8451 [Stat. Ann. § 17.186]). In Hughson v. City of Kalamazoo, 271 Mich. 36, 40, the court said:

"Though the proceedings before the department labor and industry are not strictly judicial * * * they may be attacked only in the manner provided by law."

Such limitation upon review is in keeping with the accepted law of this State and provides ample redress to the aggrieved party. We have always held, under the workmen's compensation law, that the court will examine the record to determine whether there is any evidence to sustain the findings of fact made by the department of labor and industry. As was said inHighland Farms Dairy v. Agnew, 16 Fed. Supp. 575, 585, affirmed300 U.S. 608 (57 Sup. Ct. 548):

"It is true that if a legislature attempts to make the findings of fact of its agencies conclusive, even though the findings are wrong and constitutional rights have been invaded, the legislative action is invalid, for the judicial power of the courts cannot thus be circumscribed."

See authorities therein cited. The court said further in construing the Virginia milk statute:

"But the statute under consideration does not attempt to circumscribe the powers of a court, and it is not invalid simply because it does not provide for access to the courts. Such access always exists if there is any arbitrary action on the part of the legislature or of a legislative agency which deprives a citizen of his constitutional rights."

See Weimer v. Bunbury, 30 Mich. 201.

We are urged to hold that the board did not comply with the act in issuing its orders. Decision is unnecessary on this point, but, as a matter of guidance, it might be well to point out that the Pennsylvania act contains a provision for hearings similar to that found in the Michigan act. In construing this act, the court said, in Colteryahn Sanitary Dairy v. Milk Control Commission, 332 Pa. 15, 20 (1 Atl. [2d] 775,122 A.L.R. 1049):

"It is the general intent and purpose of the act that in the promulgation, revision or change of official orders fixing prices, a definite record should be made of all evidence produced before the commission, and all matters upon which it bases its orders. The production of proof before this administrative body is not subject to the strict rules of evidence and the commission may make its independent survey of the milk industry in the particular area to acquire a just and fair understanding of the problem before it. But the result of that survey should be placed on the record of the hearing before the commission, and the parties who made the survey should be subject to such cross-examination as is proper. Interested parties should be accorded opportunity to test the reliability of the commission's evidence before an order is promulgated, revised or changed."

The statutory limitation upon judicial review necessarily calls for a fair hearing before the board. Such is the implication of the following in St. Joseph Stockyards Co. v.United States, 298 U.S. 38, 51 (56 Sup. Ct. 720):

"When the legislature appoints an agent to act within that sphere of legislative authority, it may endow the agent with power to make findings of fact which are conclusive, provided the requirements of due process which are specially applicable to such an agency are met, as in according a fair hearing and acting upon evidence and not arbitrarily."

Although the milk marketing board performs a function legislative in nature, it may act only after a fair hearing in which the requirements of due process are satisfied.^*

The chief difficulty with the present act is in the composition of the board. Section 5 reads:

"There is hereby created a milk marketing board to consist of 5 members as follows: The commissioner of agriculture shall be a member and chairman of the board by virtue of his office and 4 other members to be appointed by the governor, by and with the advice and consent of the senate, as follows: 2 shall be milk producers not connected with the distribution of milk except by a bona fide producer cooperative marketing association, both of whom shall have as their principal occupation and earn their principal livelihood by the actual management of 1 or more dairy herds; 1 shall be a distributor, and I shall be a consumer not connected with the production or distribution of milk. The members of the board, other than the commissioner of agriculture, shall hold office for a term of 3 years: Provided, That a member shall hold office until his successor is appointed and qualified. A vacancy in any class of membership of the board, excepting the chairman, shall be filled within 30 days by appointment from the same class for the unexpired term by the governor. The governor may remove any member after due notice and hearing, for misfeasance, malfeasance, or nonfeasance in office. Each member of the board, except the commissioner of agriculture, shall receive for services actually rendered pursuant to this act not to exceed $10 per day plus actual and necessary expenses: Provided, That not more than $3,000 plus actual and necessary expenses, shall be paid to any member during any year."

The board as set up consists of E.A. Beamer, commissioner of agriculture, who is also a producer of milk; T.H. Lukins, a member of the Kalamazoo Milk Producers Association; Fred W. Meyer, who is president of the Michigan Milk Producers Association; Charles L. Wilson, a distributor and a member of the firm of Ira Wilson Sons Dairy Company, Inc., the third largest distributing concern in the area; and Mrs. C.L. Barber, a consumer.

No claim is made that any member of the present board has acted unfairly or arbitrarily, but the fact remains that the act requires the appointment of a board, a majority of whose members have a direct pecuniary interest in the matters submitted to them. Several States have provided for boards of like nature but examination of the authorities discloses that no question has been raised as to the composition of such boards.

In order that the administration of the milk industry may be conducted in a fair and impartial manner, it is essential that the board be impartial in its composition. The act is fatally defective in its provision for the appointment of the personnel of the board. We quote from Carter v. Carter Coal Co.,298 U.S. 238, 310 (56 Sup. Ct. 855), where the court, in discussing subdivision (g) of part 3 of section 4 of the bituminous coal conservation act of 1935 (49 Stat. 1002), said:

"That subdivision delegates the power to fix maximum hours of labor to a part of the producers and the miners — namely, 'the producers of more than two-thirds of the annual national tonnage production for the preceding calendar year' and 'more than one-half of the mine workers employed;' and to producers of more than two-thirds of the district annual tonnage during the preceding calendar year and a majority of the miners, there is delegated the power to fix minimum wages for the district or group of districts. The effect, in respect of wages and hours, is to subject the dissentient minority, either of producers or miners or both, to the will of the stated majority, since, by refusing to submit, the minority at once incurs the hazard of enforcement of the drastic compulsory provisions of the act to which we have referred. To 'accept,' in these circumstances, is not to exercise a choice, but to surrender to force.

"The power conferred upon the majority is, in effect, the power to regulate the affairs of an unwilling minority. This is legislative delegation in its most obnoxious form; for it is not even delegation to an official or an official body, presumptively disinterested, but to private persons whose interests may be, and often are, adverse to the interests of others in the same business. The record shows that the conditions of competition differ among the various localities. In some, coal dealers compete among themselves. In other localities, they also compete with the mechanical production of electrical energy and of natural gas. Some coal producers favor the code; others oppose it; and the record clearly indicates that this diversity of view arises from their conflicting and even antagonistic interests. The difference between producing coal and regulating its production is, of course, fundamental. The former is a private activity; the latter is necessarily a governmental function, since, in the very nature of things, one person may not be entrusted with the power to regulate the business of another, and especially of a competitor. And a statute which attempts to confer such power undertakes an intolerable and unconstitutional interference with personal liberty and private property. The delegation is so clearly arbitrary, and so clearly a denial of rights safeguarded by the due process clause of the Fifth Amendment, that it is unnecessary to do more than refer to decisions of this court which foreclose the question. Schechter Poultry Corp. v. UnitedStates, 295 U.S. 495, 537 (55 Sup. Ct. 837, 87 A.L.R. 947);Eubank v. Richmond, 226 U.S. 137, 143 (33 Sup. Ct. 76, 42 L.R.A. [N. S.] 1123, Ann. Cas. 1914B, 192); Washington, ex rel.Seattle Title Trust Co., v. Roberge, 278 U.S. 116, 121, 122 (49 Sup. Ct. 50, 86 A.L.R. 654)."

After decision in the Carter Coal Company Case, supra, Congress repealed the bituminous coal conservation act of 1935, and enacted the bituminous coal act of 1937 in its place. This act (50 Stat. at L. 72, chap. 127 [15 USCA, § 828]) sought to remedy the objections raised in the Carter opinion by creating a disinterested commission. Among the provisions of the new act is the following:

"Two members of the commission shall have been experienced bituminous coal mine workers, two shall have had previous experience as producers, but none of the members shall have any financial interest, direct or indirect, in the mining, transportation, or sale of, or manufacture of equipment for, coal (whether or not bituminous coal), oil, or gas, or in the generation, transmission, or sale of hydroelectric power, or in the manufacture of equipment for the use thereof, and shall not actively engage in any other business, vocation, or employment." 15 USCA, § 829 (a).

The act of 1937 was upheld in Sunshine Anthracite Coal Co. v.Adkins, 310 U.S. 381, 399 (60 Sup. Ct. 907). The court, in discussing the question of delegation of legislative power, recited the standards set up by Congress under which the commission might fix maximum prices, and, after approving these, said:

"Nor has Congress delegated its legislative authority to the industry. The members of the code function subordinately to the commission. It, not the code authorities, determines the prices. And it has authority and surveillance over the activities of these authorities. Since law-making is not entrusted to the industry, this statutory scheme is unquestionably valid." Currin v. Wallace, 306 U.S. 1 (59 Sup. Ct. 379), and cases cited.

In Currin v. Wallace, 306 U.S. 1, 15 (59 Sup. Ct. 379), where the tobacco inspection act of 1935 (49 Stat. at L. 731, chap. 623 [7 USCA, § 511 et seq.]) was held valid, the court said:

"This is not a case where a group of producers may make the law and force it upon a minority (see Carter v. Carter CoalCo., 298 U.S. 238, 310, 318 [56 Sup. Ct. 855]), or where a prohibition of an inoffensive and legitimate use of property is imposed not by the legislature but by other property owners (see Washington, ex rel. Seattle Title Trust Co., v. Roberge,278 U.S. 116, 122 [49 Sup. Ct. 50, 86 A.L.R. 654]). Here it is Congress that exercises its legislative authority in making the regulation and in prescribing the conditions of its application."

Johnson is the fourth largest distributor of milk in the Detroit area. His methods of doing business are somewhat different from those of his competitors. He is entitled to a fair and impartial hearing before the fixing of prices and regulation of his business. While the prices fixed by the board apply to all producers and distributors, the effect of the price scale is not the same upon all producers or all distributors.

No one should act as a judge in his own cause. The board, as constituted under the statute, is of such a nature that Johnson was not, and could not have been, accorded that impartial hearing which satisfies the requirements of due process. Section 5 of the act violates both the spirit and letter of the Constitution (Const. 1908, art. 2, § 16). The orders promulgated by a board so composed are invalid and void.

The decree appealed from is reversed and plaintiff's bill of complaint is dismissed. All orders of the board are vacated. Costs to appellant in both cases.

SHARPE, CHANDLER, WIEST, and BUTZEL, JJ., concurred with BUSHNELL, C.J.

^* See Const. 1908, art. 2, § 16. — REPORTER.