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District Court of Appeal, First District, Division 2, California.


Civ. 11978.

Decided: May 12, 1942

Earl Warren, Atty. Gen., W. T. Sweigert, Asst. Atty. Gen., and W. R. Augustine, Deputy Atty. Gen., for appellant. Webb, Webb & Olds, of San Francisco, for respondent.

This is an appeal by defendant, Director of Agriculture, from a judgment in an action for injunctive relief in favor of the plaintiff.

The action presents a question regarding the proper construction of the milk control law. Ch. 10, div. 4, art. 2a, Agr. Code, §§ 735–738, St.1935, p. 922, St.1937, pp. 42, 1372, St.1939, p. 2641. It arose out of the following facts. By a general regulation effective April 28, 1937, the Director of Agriculture designated among others Alameda County Marketing Area. On April 25, 1939, the plaintiff commenced the business of distributing fluid milk in said area to retail stores, hotels, and restaurants, using glass containers only. The plaintiff is a non–profit cooperative marketing association having approximately 32,000 members. It has a large business handling each year butter fat in excess of 2,000,000 pounds and whole milk in an amount of 2,300,000 pounds. On May 27, 1939, it commenced the use of fiber containers. In August of that year it discontinued the use of glass containers entirely. Pursuant to the provisions of the Agricultural Code in 1940 the defendant issued Order No. 79 and later Order No. 80. The effective date of the latter order was June 9, 1940. Said order contained twenty–three schedules, among others those known as Parts A, C, and D. To each of those schedules was annexed a provision as follows: “If fluid milk is sold or delivered in containers for which a deposit is not required, which milk is sold for consumption off the premises, the prices for such fluid milk shall be one–half cent (1/2¢) above the minimum wholesale prices established in Parts A, C, and D of this schedule. If fluid milk is sold or delivered in fiber containers, which milk is sold for consumption on the premises, the prices for such fluid milk shall be one–half cent (1/2¢) above the minimum wholesale prices established in Parts A and D of this schedule.” If the plaintiff sells milk for less than such prices it commits a misdemeanor. If it offers its milk in fiber containers at the prices mentioned it is handicapped because the other distributors using glass containers are authorized to sell at 1/2–cent less. It was stipulated that if the subject of damage is material the fact is that the damages of the plaintiff were in such amount as to be actionable. Contending that Order No. 80, as quoted above, was made without any authority of law and was void, the plaintiff commenced this action. Under the judgment the defendant is perpetually enjoined from enforcing the part of the order complained of in the Alameda County Marketing Area.

On the first page of his brief the defendant states two questions are involved. It states the first question is: “Does the Milk Control Law (chap. X, div. IV, art. IIa, Agr.Code, §§ 736.10–736.12) empower the Director of Agriculture to fix a minimum wholesale price for milk sold and distributed in a paper or fiber (single service) container different from the minimum wholesale price fixed for milk sold and distributed in a glass (multiple service) container * * *?” The answer involves the correct construction of section 736.12 Agricultural Code which provides:

“736.12. In determining minimum wholesale prices and minimum retail prices in any marketing area, the director shall first make an investigation in such marketing area to establish such facts as shall be necessary to permit him to carry out the intent of this article within the standards herein prescribed. In making such investigation, the director may examine the books and records of distributors and retail stores in such marketing area and shall hold one or more public hearings, take testimony and may subpœna witnesses. All testimony received at such hearings shall be under oath. Notice of any hearing held by the director, pursuant to this article, shall be given by the director to every distributor and retail store in such marketing area whose name appears upon the records of the Department of Agriculture or who files a request for the same with the department, by mail or by publication for the time and in the manner prescribed in section 736.1 of this chapter. A record of any and all hearings held by the director, pursuant to this article, shall be made and filed in the office of the director and shall, at all times, be available to inspection by any interested person.

“In determining minimum wholesale and minimum retail prices for any marketing area, the director shall take into consideration the following economic factors operative in such marketing area:

“(1) The quantities of fluid milk or fluid cream, or both, distributed in such marketing area.

“(2) The quantities of fluid milk or fluid cream, or both, normally required by consumers in such marketing area.

“(3) The cost of fluid milk or fluid cream, or both, in such marketing area to distributors and retail stores, which in all cases shall be, respectively, the prices paid by distributors to producers and the minimum wholesale prices, as established pursuant to this chapter.

“(4) The reasonable cost of handling fluid milk or fluid cream, or both, incurred by distributors and retail stores, respectively, including all costs of hauling, processing, selling and delivering by the several methods used in such marketing area in accomplishing such hauling, processing, selling and delivery, as such costs are determined by impartial audits, of the books and records, or surveys, or both, of all, or such portion of the distributors and retail stores, respectively, of each type or class in such marketing area as are reasonably determined by the director to be sufficiently representative to indicate the costs of all distributors and retail stores, respectively, in such marketing area.

“In determining the cost of handling and distributing fluid milk or fluid cream, or both, by retail stores handling commodities in addition to fluid milk or fluid cream, or both, the director shall determine the cost of doing business for each such representative retail store and for such purpose shall consider all costs and expenses of doing business including depreciation on inventory and equipment. In the absence of satisfactory evidence to the contrary, the cost of handling such fluid milk or fluid cream, or both, shall be presumed to be the same percentage as the cost of doing business of such retail store in conducting its entire business.

“(4a) The reasonable cost of handling fluid milk or fluid cream, or both, incurred by distributors in hauling, processing, selling and delivering to restaurants, confectioneries or other places for consumption on the premises wherein it is required by law that service to customers be made from the original container. In fixing the minimum wholesale price to be paid distributors by such persons, the director shall take into consideration such legal requirements and other factors and distribution costs peculiarly affecting service to such persons, and if the director reasonably determines that such factors and costs require that the minimum wholesale prices to be paid distributors by such persons vary from the minimum prices established for other wholesale customers, the prices established to be paid by such persons may vary accordingly.

“(5) The amount of the available capacity for processing and distributing fluid milk, or fluid cream, or both, of all distributors in such marketing area and the estimated extent to which such available capacity is being used by such distributors.

“(6) The purchasing power of consumers in such marketing area.” St.1939, p. 2647.

That provision was so written for the obvious reason that the cost to each distributor “hauling, processing, selling and delivering” will, in all probability, be different from the cost to each and every other distributor although the total cost to each may be approximately the same––depending on the length of the haul, the nature of the road, the mode of haul (by train, or by truck, or otherwise), the mode of processing, selling, and delivering. But in no event may minimum wholesale price be based on nor be determined on any one single factor. Otherwise there must necessarily be as many prices as distributors. But the statute clearly contemplates the prices will be based on all of the factors enumerated in section 736.12 of the Agricultural Code and will apply to all distributors similarly engaged in any one marketing area as fixed and determined under and by the terms of section 736 of said code. That that is so is indicated by other provisions of the statute. By its title (Stats.1935, p. 922) the statute is one “relating to the stabilization and marketing of fluid milk and fluid cream.” We find no section at variance with, but all in accord with “stabilization.” But to hold that a separate price may be formulated and based on each change is to unstabilize rather than to stabilize. Furthermore the statute does not frown on new machinery, new processes, or new methods. It is written to encourage not to obstruct such matters. § 735.1. But the statute does frown on “up–charges.” Every passage that has been called to our attention shows that the statute was written in the public interest, that is, in the interest of the consumer. The latter is to be supplied with good, pure, wholesome milk and cream. All other things being equal he is to be supplied at the lowest cost the traffic will permit. § 736.12, subs. (6), (3). Again it is expressly provided that waste will be duly guarded against. § 735, sub. (b).

The defendant notes the use of the word “cost” as it is used in several places in the statute and contends that “* * * whenever the director finds upon adequate evidence that different cost factors exist between various methods or types of distribution of milk and that such differences are substantial and reasonably recognizable and separable * * * he may establish differential prices. He does not contend such power is expressly granted in any part of the statute. The sum total of his contention is that such power is implied. We find no merit in the contention. Instead of such power being implied we think different provisions in the statute negative the granting of such power. As the number of prices is increased and varied, the degree of stabilization is decreased. By the provisions of section 736 the director is commanded to designate marketing areas in which he finds the conditions are “reasonably uniform.” Then by the provisions of section 736.11 he is given power to fix the minimum prices, both wholesale and retail, for which the distributors may make sales in each area. There is no place in the statute containing any expression to the effect that in fixing prices he will act within a sound “discretion” or “reasonably.” But the statute (§ 736.12) is quite long and contains an extended list of specifications which must be followed by him in fixing said prices. To grant the contention of the defendant is to fail to give any force or effect to any of said specifications.

If a variance in the cost between glass containers and fiber containers, constitutes a “* * * substantial and reasonably recognizable and separable * * *” difference which will justify the creation of a different class, it is clear that many classes must be created for similar reasons, and following the practice there will be no “stabilization” and the very reason for the enactment of the statute will be set aside.

The defendant notes that the statute in several places uses the expression “types or methods” and he argues that expression refers to “fiber or glass” containers. We think that is not a correct construction. The expression was inserted in the statute when it was amended. Stats.1937, p. 1373. At that time fiber containers for milk were not known to the trade. But at that time deliveries to dwellings, hotels, restaurants, and stores were commonly practiced and were different “methods and types” of distribution. In the latter sense the words should now be construed.

From what has been said it is apparent that the defendant claims the power to make the order under attack. Being a public official his powers flow from the statute. As stated in 21 Cal.Jur. 874, “A public officer or board has not only the powers expressly enumerated by law, but also those implied powers which are necessary to the exercise of the powers expressly granted * * *.” Crawford v. Imperial Irrigation Dist., 200 Cal. 318, 334, 253 P. 726. In this case it is not claimed that the defendant has been given the express power to make the said order. His power, if any, must rest on his implied powers. But there is nothing whatever in the record showing that power to make the order complained of is or was necessary for the defendant to exercise any express power granted to him. It follows that the power is not implied. Merriam v. Barnum, 116 Cal. 619, 624, 48 P. 727. If conditions in the Alameda County Marketing Area are such that different prices must be set, the director shall have the power to establish additional areas or to modify areas heretofore established. § 736. But if one distributor uses bottles for containers and another uses fiber containers, if one uses gasoline trucks and another uses distillate trucks, or if one ships by rail and another ships by truck or horse drawn vehicles, the variation in costs will not warrant numerous sales prices instead of the stabilized price which the statute authorizes the director to determine and enforce. That, in different localities, different prices did heretofore prevail, was directly announced by the legislature. §§ 735 and 736. But to cope with that condition the legislature authorized areas to be formed and classified. The law to that effect has not been repealed but to give force and effect to the contention of the defendant is to hold that both areas and persons may be classified. As shown above we think his contention may not be sustained.

After a full and complete hearing the trial court ruled against the defendant. Before the trial court was a complete record of the hearing held by the defendant and which was the basis for defendant's order. The construction placed on the statutes by the trial court in the light of all the facts before it was a reasonable one. The most that can be said is that possibly there were inferences sustaining the contention of the defendant and inferences sustaining the contention of the plaintiff. Under such circumstances the judgment of the trial court may not be reversed. In Silva v. Gustine Creamery, 217 Cal. 146, at page 149, 17 P.2d 699, at page 700, the court said: “If the inferences fairly deducible from the evidence are such that different conclusions might rationally be drawn therefrom by men equally sensible and impartial, the conclusion reached by the trial court should be deemed final and not disturbed on appeal for want of sufficient evidence to justify the findings.”

As we have come to the conclusion that the portion of Order No. 80 which is under attack was not authorized by the statute, it is unnecessary to discuss the claim of the plaintiff that said statute is unconstitutional. Therefore we do not express any opinion on that point.

We find no error in the record. The judgment appealed from is affirmed.


NOURSE, P. J., and SPENCE, J., concurred.