Lucerne Cream & Butter Co. v. Milk Commission

Spratley, J.,

delivered the opinion of the court.

This appeal presents the specific question whether or not the Milk Commission has exceeded the power conferred upon it by chapter 357, Acts of 1934, page 558, as amended, Virginia Code, 1942 (Michie) sections 1211w to 1211mm, to fix the price of milk. The constitutionality of the Act creating the Commission and conferring upon it certain powers and duties is not involved. That was settled in Reynolds v. Milk Comm., 163 Va. 957, 179 S. E. 507.

The Lucerne Cream and Butter Company is a corporation duly organized to engage in the milk business in Virginia. It sells and distributes its milk in the Arlington-Alexandria area, in approved sanitary waterproof cardboard containers, exclusively through stores.

Prior to and after the appellant entered into business in Virginia, the Milk Commission conducted several public hearings and investigations for the purpose of fixing the price or prices for milk in the Arlington-Alexandria market. 'As a result of its investigation, it concluded that there was considerable loss to distributors of milk in glass, by reason of breakage, non-return of bottles, etc. To offset the loss to distributors in bottles, it adopted a rule requiring that a deposit of three cents per bottle be collected over and above the purchase price of the grade of milk sold in bottles, the deposit to be returned upon return of the bottle.

It found as a fact that the cost of delivery in glass under the bottle deposit requirement was less than the cost of delivery in paper containers. It then fixed the price of the several grades delivered in glass and added to that price one cent per quart for the same grades delivered in other than glass containers. The effect of this was to reduce the formerly established price of milk one cent per quart when sold in bottles without any reduction being allowed when it was sold in other than glass containers.

The Milk Commission accordingly adopted regulation number four for the Arlington-Alexandria Milk Market, which, so far as is material here, reads as follows:

“Retail and Wholesale Selling Prices

“The following schedule of minimum prices shall prevail in the Arlington-Alexandria Sales Area, exclusive of the salvage or redemption value of any container in which any milk, and/or cream, or other product listed herein is delivered to a purchaser:

Retail Wholesale

"A. * * #

“B. Milk 3.25-4.1% butterfat (sold through stores—cash and carry)

Quarts (delivered in glass containers) ........................$.13 |.n

Quarts (delivered in other than glass containers)...............14 .12

«c * # #

“D. Milk 4.11-5.25% butterfat (including Jersey and Guernsey

Milk sold through stores—cash and carry)

Quarts (delivered in glass containers) .....................$.15 $.13

Quarts (delivered in other than

glass containers)...............16 .14”

The appellant petitioned the Milk Commission to amend or set aside the requirement that milk sold in cardboard containers should be sold at a price of one cent more per quart than when sold in glass or bottle containers, on the ground that it was without authority to fix a pricé differential for milk based, not on the grade sold, but on the type of container in. which it was sold. It further contended that the regulation created a discriminatory classification in violation of the State and Federal Constitutions.

The Milk Commission refused to change its rule and regulation, and its holding was appealed to the Circuit Court of the city of Richmond. From an order upholding the validity of the regulation this appeal was taken. Relying for relief upon the grounds stated above, the appellant says in its brief, “All it asks is that it be permitted to sell its milk of the same grade and quality at the price fixed for its competitors.”

There is no inherent power in the Milk Commission to fix the price of milk. Whatever price-making power it has must be found in the statute.

The first seven subsections (a), (b), (c), (d), (e), (f), and (g) of section i2iiy, Code of Virginia, 1942, (Michie), (section 3 of chapter 357 of the Acts of Assembly, 1934), relate to the general powers and duties of the Commission. In this discussion it is unnecessary that .we refer to any of them except (b) and (c). Subsections (b) and (c) are plain and clear in language and meaning, and involve no contradiction or conflict whatever with any other section or subsection.

Subsection (b) provides that the Milk Commission shall have the power “to investigate all matters pertaining to the production, processing, storage, transportation, distribution, and sale of milk in the Commonwealth of Virginia.”' It confers no power upon the Commission to fix prices, but does give it power to make the investigation required by subsection (j).

Subsection (c) gives the Commission power “to supervise, regulate, and control the production, transportation, processing, storage, distribution, delivery, and sale of milk for consumption within the Commonwealth of Virginia.” There is nothing said about the power to fix the price at which milk may be sold.

Subsection (h) provides that “The operation and effect of any provision conferring a general power upon the Commission shall not be impaired or qualified by the granting to the Commission by this Act of a specific power or powers.” It does not add any authority to the above mentioned general powers, nor deal with the power to fix prices.

The only portion of the statute specifically relating to the price-fixing power is subsection (j), which, defining and limiting the power, provides as follows:

“(j) The commission, after public hearing and investigation, may fix the prices to be paid producers and/or associations of producers by distributors in any market or markets, may fix the minimum and maximum wholesale and retail prices to be charged for milk in any market, and may also fix different prices for different grades of milk. In determining the reasonableness of prices to be paid or charged in any market or markets for any grade, quantity, or class of milk, the commission shall be guided by the cost of production and distribution, including compliance with all sanitary regulations in force in such market or markets, necessary operation, processing, storage and delivery charges, the prices of other foods, and the welfare of the general public.” (Italics supplied.)

If the legislature had not intended that subsection (j) should provide the sole provision for fixing prices, it would have provided that power in subsection (c) and not added subsection (j) to the preceding sections.

Supervision, regulation, and control of the delivery and sale of milk does not necessarily include authority to fix the price. Subsection (j) is not in conflict with subsections (b), (c) and (h). It does not impair or qualify the general powers of the Commission, or interfere with investigation, supervision, regulation and control. It provides the policies, standards and methods which must guide the Commission in the exercise of its general powers in carrying out the declared policy of the statute.

It is a well established principle of statutory construction that when a specific power is granted by a statute and the limits of such power are therein marked out, the section granting the power and not general provisions in other sections of the statute must be looked to in ascertaining the effect and extent thereof.

The authority to fix prices, like the power to assess taxes, is the power to destroy. It is an extraordinary power and not lightly granted, and when granted is subject to the limitations of the grant.

The language of the statute is clear. The meaning of the words used is well settled. No interpretation is necessary or allowable. The Commission has the power and authority to fix different prices for different grades of milk. It has not been given the power to fix a different price for the same grade of milk. In fixing the different prices for different grades, it is mandatory that it take into consideration all of the factors and elements involved in its production, processing, storage, and distribution. Necessarily included in these factors is the cost of some form of container.

The Commission cannot set a price for milk which will yield exactly the same profit to each producer and distributor. It must be conceded that there is a variance in the cost of the several factors involved in the production and distribution of milk. Feed and labor may cost one producer or distributor less than another. Mechanical processes of one may involve less expense than another. The expenses of transportation may be greater or less, according to the delivery vehicle used and the length of the haul. One distributor may employ more effective methods in the care and salvage of the container. Another may use a different and less costly or attractive container. One producer may, by inventive genius or economic measures, cut down his expenses; while another may be unwilling to avail himself of the benefits and economies practiced by a competitor. •

A container is as essential as transportation and its cóst may be as variant; but its cost factor must be, considered just as the cost of transportation and the other elements mentioned in the statute must be considered. Having taken into consideration all of the factors, once a price of milk is fixed for a grade it must be the same for all milk of that grade, and that is not varied by the fact that it may be delivered in glass jars, tin cans, or paper cups, or by automobile or horse and wagon. Otherwise, the degree of stabilization purposed by the statute would be decreased as the number of prices based on factors of production and distribution is increased and varied. A price determined on any one cost factor, or the elimination, in part or whole, of any one or more factors, will result in as many different prices as there are distributors.

All that the Commission can hope to do, after giving consideration to all the factors of cost of production and distribution, is to stabilize the market by fixing a price which will encourage the producer and distributor of milk to continue in business upon a profitable basis, and to provide an ample supply of an essential commodity to the general public at a fair and reasonable charge.

It is not conducive to stabilization to set a different price for the same grade of milk based on separate factors. It is to cope with the variation in the cost of the essential factors, and to avoid different prices in-the same localities, that the legislature authorized milk areas to be formed within the State so as to localize the elements entering into costs.

The Act was not intended to discourage the installation of new machinery, the employment of new processes, or the practice of economical operation. Rather it was intended to encourage them, both as a benefit to the producer and the consumer, and thereby favor the public weal. •

If a producer and distributor, using fiber or paper containers, is satisfied to sell his milk at the same price as a competitor who uses glass containers, the consumer who prefers the fiber or paper type of container has no complaint. So long as the producer and distributor who uses bottles as containers makes a fair profit, he has no just grievance. There is nothing unfair, unjust, or demoralizing in either trade practice.

If a milk producer or distributor cannot use cardboard containers and make a sufficient profit to remain in business, when selling at the minimum price, he will, in all probability, discontinue marketing his product in such a container and return to delivery in bottles.

It cannot be for the welfare of the general public and for the best interest of the consumer that the consumer shall be required to pay one cent per quart more for the same grade of milk, when all that he is interested in is the milk and not the container in which it is delivered. The article sold is the'milk, not the container. The difference is merely in the packaging and the packaging is a matter' of choice to the consumer rather than a matter of value.

The Act creating the Commission and defining and providing for its functions, duties and powers must be viewed and considered in its entirety. Its language was evidently chosen with great care. It provides that the Commission may perform certain functions and duties; but in the performance thereof it must observe certain rules and standards of guidance. The Commission “may fix the minimum and maximum wholesale and retail prices for milk to be charged in any market, and may also fix different prices for different grades of milk;” but in the exercise of those important functions, it “shall be guided by,” that is, must be guided by, and take into consideration all of the elements of cost enumerated in subsection (j).

The Milk Commission, however, undertakes to reheve itself of the duty of giving effect to the policies and standards by which it must be guided by contending that subsection (h) of section i2iiy removes all restrictions upon the general powers conferred upon it and leaves it with practically unlimited power to fix prices. Then, despite the fact that it does not go so far as to claim that the statute gives it power to fix a different price for the same grade of milk, it relies upon an artifice, the omission of a factor of distribution, or the partial consideration of that factor (a factor required by the statute to be fully considered before any price is established) to allow it to effect a differential in price by basing a classification of milk upon the type of container in which it is sold.

The regulation and control of milk production and distribution, through’ delegated authority of the legislature, is comparatively new, and consequently there are few cases arising as to the price-fixing power of the delegated agency. We have been cited to no case which supports the contentions of the appellee.

In Supplee-Wills-Jones Milk Co. v. Duryee, 116 N. J. L. 75, 181 A. 908, (1935), the Supreme Court of New Jersey, in construing a statute conferring upon a milk control board the power “to supervise and regulate the entire milk industry of the State of New Jersey, including the production, importation, transportation, manufacture, storage, distribution, delivery, and sale of milk and milk products,” held that, “Supervision and regulation of the delivery and sale of an article do not necessarily include authority to fix the price.”

In Challenge Cream, etc., Ass'n v. Parker (Cal. App.), 125 P. (2d) 864, affirmed by the Supreme Court of California on October 29, 1943, 142 P. (2d) 737, a case involving the exercise of the price-making power under a milk control law where the maximum and minimum prices for different grades of milk were to be set after consideration of the costs of production and distribution, including the costs of processing, selling and delivery, it was held that there was no authority conferred whereby a differential of one-half a cent could be charged for milk sold and delivered in fiber containers rather than in containers for which a deposit was required. The classification was deemed to be arbitrary and capricious, not based on any difference in the grade of the product sold.

The paper containers having no inherent value, the obvious effect of the regulation here complained of was to fix a different price for the same grade of milk. Thus, the consumer who preferred the paper container, or was unable to purchase milk except in that type of container, was required to pay one cent more per quart than one who obtained it in bottles, provided the latter returned the bottles. The consumer who, through choice or necessity, purchased in bottles had to pay two cents more per quart than the one who purchased in other than glass, if the glass container was broken or not returned. Naturally, consumers purchase milk of the same grade and quality at the least possible cost. Consequently, a distributor using other than glass containers is handicapped in competition in a market where glass containers are used and are obtainable, if he is required to charge one cent more per quart for his milk.

To eliminate, in part or whole, an essential factor in the cost of distribution in the determination of the reasonableness of the price to be charged for a specific grade of milk in a designated area, and thereafter use that factor as a basis for a differential in price for the same grade of milk is violative of the letter and the spirit of the statute in form and in substance. It is productive of discrimination against producers and distributors using different containers, unjust and costly, to consumers who may be unable to purchase, for any reason, the lower priced milk of the grade desired, and contrary to the statutory plan of stabilization.

In the absence of any express legislative declaration to the contrary effect, the Milk Commission of Virginia, if it undertákes to fix the price or prices of milk, must fix the same price for the same grade, after giving full consideration to all of the cost factors of production and distribution enumerated in the statute. It cannot validly set up a classification based upon one of such factors for the purpose of establishing a differential in price for the same grade.

For the foregoing reasons, we are of opinion that the regulation under review is invalid insofar as it undertakes to establish a difference in price for the same grade of milk, based upon the type of the container in which it is sold. The conclusion which we have reached makes it unnecessary to consider the constitutional questions which were raised.

The order of the trial court is, therefore, reversed and a final order in accordance with our conclusion will be here entered.

Reversed and final order.