24 A.2d 717 | Pa. Super. Ct. | 1941
Lead Opinion
RHODES, J., filed a dissenting opinion.
Argued November 10, 1941. The questions are: (1) Whether the Milk Control Law1 authorizes the Milk Control Commission to fix minimum prices for the sale of milk to the United States; (2) whether there was, on February 15, 1941, any order of the Commission which, when properly construed, applied to such sales; and (3) if these questions are answered in the affirmative, whether the law, and the order issued pursuant to it, cast an unconstitutional burden upon the government.
The facts are virtually undisputed. On February 1, 1941, the government purchasing officer, at Indiantown Gap, sent to various milk dealers, including defendant,2 invitations to bid on the milk requirements for the army reservation located there. The requirements called for the delivery of 135,000 one-quart bottles and 540,000 half-pint bottles between March 1 and June 30, 1941. On February 4, 1941, the Milk Control Commission promulgated a notice "To All Milk Dealers Interested In Submitting Bids to Furnish Milk to the United States Government at Indiantown Gap," one of which went to defendant. Accompanying the notice, were copies of the orders which the Commission deemed applicable. The notice indicated the minimum price to be $0.095 per bottle for the milk sold in quarts and $0.025 for that sold in half-pints, and the notice closed with a warning that any sales at prices below the prescribed *264 minimums would be construed as violations of the law. The notice, except for the tabulation of specifications, is printed in the margin.3 On February 15, 1941, the bids were opened and the contract awarded defendant as the lowest bidder. Defendant's bid for both quantities — $0.079 for the quarts and $0.0215 for the half-pints — was below the minimums.
On March 5, 1941, the Commission issued a citation to defendant to show cause why its application for a milk dealer's license for the year May 1, 1941 to and including April 30, 1942, should not be refused. The sole ground alleged was the aforesaid violation of its Order. Defendant, by answer, raised the questions which are now before this court. The Commission, having refused the license in an order which, on appeal, was sustained by the court of common pleas, defendant took this appeal.
First. Does the Milk Control Law authorize the Commission to fix minimum prices for milk sold to the government?
The Act, Section 802, provides: "The Commission shall fix . . . . . . the minimum wholesale and retail *265
prices . . . . . . to be charged for milk sold within any milk marketing area of the Commonwealth wheresoever produced,including milk sold by: 1. Milk dealers to other milk dealers; 2. milk dealers to consumers; 3. milk dealers to stores . . . . . .; 4. stores to consumers. . . . . ." (Italics supplied.) Conceding, arguendo, that the government is not included in any of the enumerated classes, the question is whether "including" is a word of limitation — whether it means "including only". It is sometimes thus used; it is perhaps *266
more often used as a word of extension or enlargement.4 "To arrive at the real meaning, it is always necessary to take a broad general view of the act, so as to get an exact conception of its aim, scope and object." Keating v. White et al.,
Second. Had the Commission, on February 15, 1941, issued any order fixing the minimum price of sales to the government for consumption at an army camp?
The Commission contends that the price was fixed by official General Order No. A-6, as amended by A-14.6 The order provided wholesale prices for sales by "Milk dealers to other milk dealers and to stores for resale; *268 and to bakeries, hotels, restaurants, hospitals and institutions.. . . . ." (Italics supplied) The price fixed for Grade B milk, not exceeding 4% butterfat, is $0.095 for quarts and $0.025 for half-pints. But there is a special provision for sales to schools, fixing $0.0275 for half-pints. It is to be noted that, for the sales of half-pints, the Commission allowed the lowest price on the schedule. Defendant admits the Indiantown Gap Military Reservation is an institution.7 Defendant argues that, because of the unprecedented size of the contract — it was conceded to have been the largest single order for milk ever given in this Commonwealth — the cost to it of servicing the contract would be considerably reduced, that it could make a reasonable profit and maintain the price to the producers with a lower return, and that it is, therefore, unreasonable to suppose that the Commission intended the prices in Order A-14 to apply. The principal difficulty with this contention, as we see it, is that the evidence offered does not support it. Defendant offered, by stipulation,8 figures to show "its average bottle breakage and losses where milk is served under ordinary conditions" as compared to losses from similar causes under the contract, there being an alleged difference of 2%. In the same manner, it offered evidence to show that "under ordinary circumstances delivery *269 of the same quantity of milk would require a large number of trucks and drivers" and that, under the contract, there was a saving of delivery cost on each bottle of $0.0005. But there is nothing to indicate what the "ordinary circumstances" or the "ordinary conditions" were. Obviously, the difference in the cost of servicing a thousand customers is materially larger than the cost of servicing one. But the cost of servicing five or ten customers may not be. The schedule of prices fixed by the Commission for this contract, being the lowest possible, the cost must be compared, if the comparison is to be used as valid argument, with the cost of servicing other large customers, such as hotels, restaurants, hospitals and other large institutions. If the figure offered by defendant for comparison was weighted by the cost of servicing small, individual customers, the figure is of no value whatever. And there is no indication of what, exactly, the comparison means. We hold General Order A-1, as amended by A-14, covered the sale to the government.
Third. Does the Order impose an unconstitutional burden upon the government?
The extent to which, under our dual system of government, the states may burden the operations of the federal government has long been the subject of controversy. The Constitution does not expressly deal with it. From McCulloch v. Maryland,9 decided in 1824, down to James v. Dravo Contracting Co.,10 decided in 1937, Chief Justice MARSHALL'S dictum that the power to tax is the power to destroy was the prevailing doctrine. Under it, any law which imposed a demonstrable burden on the government was held to be unconstitutional.11 But, as Mr. Justice HOLMES pointed out in his *270 dissent in the Panhandle Oil Case,12 "In those days it was not recognized, as it is today, that most of the distinctions of the law are distinctions of degree," and, "The power to tax is not the power to destroy while this court sits."13 And the decision in Graves v. O'Keefe14 and Alabama v. King Boozer15 have swept the doctrine into oblivion. In its place, a new test has arisen. "Since two governments have authority within the same territory, neither, through its power to tax, can be allowed to cripple the operations of the other. Therefore, state and federal governments must avoid exactions which discriminate against each other orobviously interfere with one another's operations.16 (Italics supplied) Or, as Mr. Justice ROBERTS put it in his dissent inJames v. Dravo, supra, a tax is valid if it bears upon an independent contractor, does not discriminate, and is not so burdensome as seriously to interfere with governmental functions.17
The Milk Control Law is not directed against the Indiantown Gap Reservation. If the objects of the law are realized, the Reservation will benefit in common with the community in general. Conversely, as already pointed out, if dealers are to be free to ignore the law in dealing with the Reservation, the whole plan will suffer proportionately. The Reservation can buy milk as others buy milk and at any price which competition may *271
fix, not lower than the established minimum. There is no burden upon it which does not likewise fall upon all users of milk, including institutions of this Commonwealth. See Zeuger Milk Co.v. Pittsburgh School District, supra. No attempt is made in the law or in the Order of the Board to give any order or direction to the Reservation or its officers. The incidence of the law is upon dealers of milk. Although enforcement of the law against such dealers affects the price of milk to the Reservation as to others, yet that result is in its nature incidental. See MilkControl Board v. Gosselin's Dairy Co.,
That the test of constitutionality in cases involving police regulations is the same as in tax cases seems clear and is apparently conceded on all sides. Baltimore Annapolis R.R. v.Lichtenberg,
Nor do we think the law interferes with the government's policy of competitive bidding. Spahn v. Stewart,
In No. 311 October Term, 1941, the order of the court below affirming the order of the Milk Control *273 Commission is affirmed, the costs to be paid by appellant. In No. 3 October Term, 1942, the appeal of the United States, which intervened in the court below in the case represented by the appeal to No. 311 October Term, 1941, is dismissed.
"For your information and guidance, we are enclosing herewith a copy of our Official General Order A-14, applicable to Area No. 11, the Statewide Milk Marketing Area, in which area Indiantown Gap, Pennsylvania, is located, and direct your attention to sub-paragraph (b), Section 4, of said Order, setting forth the minimum wholesale prices to be charged by or paid to milk dealers for Grade A milk, either raw or pasteurized; for Grade B milk, either raw or pasteurized, not exceeding 4.0% butterfat content; and for Plain Buttermilk, sold in bottles or other containers, in said Area No. 11.
"The Commission construes the Government Facility at Indiantown Gap, Pennsylvania, as a training camp or reservation, and as such, where milk is required in half-pint bottles or half-pint fibre containers, would be entitled to the special wholesale half-pint school prices of said Order No. A-14.
"Where milk dealers propose to furnish Grade A milk, pasteurized Grade B milk, not exceeding 4.0% butterfat content, or Plain Buttermilk, meeting Federal Specifications, the following minimum unit prices should be considered in the preparation of their bids:
Unit Prices Product Half- Quarts Pints
Grade A Milk, either raw or pasteurized ................. $0.115 $0.035[*] Grade B Milk, either raw or pasteurized, not exceeding 4.0% Butterfat Content ....................... .095 .0275[*] Plain Buttermilk ............................ .07 ....
"The Commission suggests that milk dealers acquaint themselves with Federal Specifications for milk, particularly C-M-381B.
"Any purchases or sales of milk made or offers to buy or sell milk at prices below the prescribed minimum prices of effective Official General Orders of this Commission are construed as violations of the Milk Control Law.
"The Milk Control Commission expects compliance with its orders, rules, and regulations, and will appreciate your cooperation in this matter.
[*]"Includes service charges for ice, straws, or special boxes. If these services are not rendered, these prices may be reduced by $0.0025 per half-pint.
"COMMONWEALTH OF PENNSYLVANIA MILK CONTROL COMMISSION, EDWIN H. RIDGWAY,
Secretary."
Unit Price Product Half- Quart Pint Pint
Grade "A" Milk ...................... $0.115 $0.06 $0.035 Grade "B" Milk Exceeding 4.0% B.F. ............... .105 .06 .035 Not exceeding 4.0% B.F. ........... .095 .05 .035 Grade "B" Milk to Schools Not exceeding 4.0% B.F. ........... .... .... .0275 Cream Buttermilk, Chocolate Milk and other flavored Milk or Milk Drink con- taining more than 0.5% Butterfat
Same as Grade "B" Milk Exceeding 4.0% Butterfat
Skim Milk ........................... .06 .... .... Buttermilk — Plain ................. .07 .05 .03
(One Gallon, Single Container, Single Delivery, $0.25)"
Dissenting Opinion
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.
"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 *274 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." *275 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 *276 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.