Short Stop, Inc. v. Fielder

Among the specific purposes set forth in section 61875 are: “. . . (b) Authorize and enable the director to prescribe marketing areas and to determine prices to producers for fluid milk or fluid cream, or both, which are necessary due to varying factors of costs of production, health regulations, transportation and other factors in such marketing areas of this state. The cost to distributors within any marketing area, for fluid milk or fluid cream shall be uniform with all other distributors purchasing fluid milk and fluid cream of similar grade or quality under like terms and conditions.

“(c) Authorize and enable the director to formulate stabilization and marketing plans subject to the limitations which are prescribed in this chapter with respect to the contents of such stabilization and marketing plans and to declare such plans in effect for any qiarketing area.

“(d) Enable the dairy industry, with the aid of the state, to correct existing evils, develop and maintain satisfactory marketing conditions, and bring about and maintain a reasonable amount of stability and prosperity in the production and marketing of fluid milk and fluid cream and provide means for carrying on essential educational activities.”

Section 61876 recites: “It is the intent of the Legislature that the powers which are conferred in this chapter shall be liberally construed.”

Section 61877 states: “Nothing in this chapter permits or authorizes the development of conditions of monopoly in the production or distribution of fluid milk or fluid cream. In the establishment of the terms and conditions under which fluid milk and fluid cream shall be purchased from producers, and under which distributors and retail stores shall sell and distribute fluid milk or fluid cream, such terms and conditions' shall be those which will, in the several localities and markets of the state, and under the varying conditions of production and distribution, insure an adequate and continuous supply of pure fresh wholesome fluid milk and

The general price fixing power is conferred by section 62471 which states, “Pursuant to the declaration and statements of facts, policy, and purposes which are set forth in this chapter, the director may prescribe and enforce minimum wholesale and minimum retail prices for fluid milk, or fluid cream, or both, as set forth in this article, and enforce the provisions of this article.” Factors to be considered in price fixing are set forth in sections 62479, 62480 and 62481. Sections 62482, 62483 and 62484 deal with quantity discounts for wholesale prices, retail prices for home delivery, and retail prices for retail stores respectively. The general standard set forth in section 62487 (see fn. 2 above) reads, “The minimum wholesale and minimum retail prices shall be sufficient, but not more than reasonably sufficient, to cover costs . . . and reasonable return upon necessary capital investment” unless the director makes the findings required by the last two paragraphs of that section.

The content of the foregoing provisions has been summarized as follows: “The purpose of the Milk Stabilization Act ... is to eliminate unfair, unjust, destructive and demoralizing trade practices in the producing, marketing, sale, processing or distribution of milk, which tend to undermine regulations and standards of the content and purity. . . . The director is authorized to prescribe marketing areas . . . and to determine prices which are necessary to the varying factors in the cost of production and distribution, provided that the cost to distributors within any marketing area shall be uniform with all other distributors purchasing fluid milk and fluid cream of similar grade or quality under like terms and conditions. . . . The act is to bring about a reasonable amount of stability and prosperity in the marketing of milk, but nothing in the statute shall be construed as permitting or authorizing the development of conditions or monopoly in the production or distribution of milk. The terms and conditions governing the production and distribution of milk shall be such as will insure in the several localities and markets of the state, under the varying conditions of production and distribution, an adequate and continuous supply of pure, fresh, wholesome fluid milk and fluid cream to consumers thereof at fair and reasonable prices. . . .” (Paul v. Wadler, supra, 209 Cal.App.2d 615 , 619. See also Misasi v. Jacobsen (1961) 55 Cal.2d 303 , 309 [ 10 Cal.Rptr. 850 , 359 P.2d 282 ]; Knudsen Creamery Co. 1. Brock (1951) 37 Cal.2d 485 , 490 [ 234 P.2d 26 ]; Challenge Cream etc. Assn. v. Parker (1943) 23 Cal.2d 137 , 141-142 [ 142 P.2d 737 , 149 A.L.R. 1203 ]; Coke v. Reliance Ins. Co. (1968) 262 Cal.App.2d 406 , 408 [ 68 Cal.Rptr. 741 ]; and United Milk Producers v. Cecil (1941) 47 Cal.App.2d 758 , 764 [ 118 P.2d 830 ].)

“The director’s authority to set minimum prices within methods of distribution at higher or lower than the cost plus return on investment standard in order to achieve stability has been repeatedly upheld by the courts . . . one of the primary purposes of price setting under the Act is to insure a sufficient supply of milk (Agr. Code, §§ 4205, 4360 [present §§ 61876, 61877 and 62487]).” (Emby Foods, Inc. v. Paul, supra, 230 Cal.App.2d 687 , 698-699. See also Misasi v. Jacobsen, supra, 55 Cal.2d 303 , 309; and Sentell v. Jacobsen (1958) 163 Cal.App.2d 748 , 754-755 [ 329 P.2d 932 ].)

In this case the director made a finding that the attacked order “is proper and necessary to accomplish the aforesaid purposes [of Chapter 2], and that each and every part of said amended Order conforms with the standard therefor; . . .” He expressly found that prices for sales in containers of designated sizes by one distributor to another, or for retail sales at a producer’s ranch are higher than those sufficient to cover costs; that prices for other sales, including fluid milk sold wholesale in designated containers, are lower than those sufficient to cover costs; and that prices established for certain milk sold at retail stores are higher than overall cost of doing business. He then found with respect to the prices above and below cost in accordance with the recitals in paragraphs (a) and (b) of section 62487 (see fn. 2 above).

The director asserts that any variation from cost differences in the quantity discounts is warranted because of the above findings, and that the evidence sustains the findings with respect to that discrepancy, because the record shows that unless quantity discounts in excess of cost differences are given to chain stores, any chain store may vertically integrate by establishing or purchasing its own producing and distributing facility, and that thereupon producers and distributors who now serve both chain and individual retail outlets will be driven out of business and will leave the individual retailers without a source of supply.

The director contends that his administrative construction of the act, as well as the facts, should be upheld because of the presumption of administrative regularity recognized in Ralphs Grocery Co. v. Reimel,

On the other hand the following principle is well established: “An administrative officer may not make a rule or regulation that alters or enlarges the terms of a legislative enactment. [Citations.]” (Whitcomb Hotel, Inc. v. Cal. Emp. Com., supra, 24 Cal.2d 753 , 757. See also Knudsen Creamery Co. v. Brock, supra, 37 Cal.2d 485 , 492-493; Zuber v. Allen (1969) 396 U.S. 168 , 183 [ 24 L.Ed.2d 345 , 354, 90 S.Ct. 314 ]; and Green v. Milk Control Com. (1940) 340 Pa. 1 , 3 [ 16 A.2d 9 ].)

The language of section 62482 should be interpreted in its natural and ordinary meaning. (See Oakland Paving Co. v. Hilton (1886) 69 Cal. 479 , 491-492 [ 11 P. 3 ]; City of El Monte v. City of Industry (1961) 188 Cal.App.2d 774 , 780 [ 10 Cal..Rptr. 802 ]; Malone v. State Emp. Retirement System (1957) 151 Cal.App.2d 562 , 564-565 [ 312 P.2d 296 ]; and Pacific Gas & E. Co. v. Shasta Dam etc. Dist. (1955) 135 Cal.App.2d 463 , 468 [ 287 P.2d 841 ].) In the case last cited the court said, “. . . we believe that the better and more modern rule of construction is to construe a legislative enactment in accordance with the ordinary meaning of the language used and to assume that the Legislature knew what it was saying and meant what it said.” (135 Cal.App.2d at p. 468.)

“It is well settled, also, that a general provision is controlled by one that is special, the latter being treated as an exception to the former. A specific provision relating to a particular subject will govern in respect to that subject, as against a general provision, although the latter, standing alone, would be broad enough to include the subject to which the more particular provision relates.” (Rose v. State of California (1942) 19 Cal.2d 713 , 723-724 [ 123 P.2d 505 ].)

In Ralphs Grocery Co. v. Reimel, supra, 69 Cal.2d 172 , the court ruled thatr the authority to promulgate rules that “foster and encourage the orderly wholesale marketing and wholesale distribution of beer” (Bus. & Prof. Code, § 25006) embraced a rule which prohibited manufacturers, importers and wholesalers from granting- discounts for quantity purchases (69 Cal.2d at pp. 174-180). The court pointed out the following evils

It may be assumed that the Legislature had these evils in mind in expressly prescribing a limitation on quantity discounts when it first authorized. the granting of quantity discounts by amendment of former section 4357 in 1955 (Stats. 1955, ch. 1310, § 9, p. 2378; and cf. Stats. 1953, ch. 324, § 4, p. 1563). It also may be noted that these amendments, now found in sections 62482, 62483 and 62484, were adopted contemporaneously with the authority and criteria, now'found in section 62487 (former § 4360), for establishing minimum wholesale or retail prices which are higher or lower than those sufficient to cover costs (Stats. 1955, ch. 1310, § 12, pp. 2379-2380; and cf. Stats. 1953, ch. 324, § 4, pp. 1587-1588). It cannot be assumed that the latter provisions were intended to control the former since they were both adopted at the same time.

It has been determined that the provisions authorizing quantity discounts are permissive and not mandatory so that retail store owners cannot insist that they be allowed to grant such discounts (see § 62484). In Emby Foods, Inc. v. Paul, supra, 230 Cal.App.2d 687 , the court stated, in response to the retailer’s contention, “In fact, the construction urged by plaintiffs would result in the unreasonable subservience of the broad principles governing the setting of minimum prices and stabilizing the milk industry to the statute authorizing discounts.” (230 Cal.App.2d at p. 698.) This is not to say, however, that when the director elects to authorize quantity discounts he can avoid the definite standards prescribed for the discount’s application by reference to those broad principles. The same opinion notes, “The cost justification alluded to by plaintiffs could not be the obvious one that it is cheaper to sell in larger quantities, as section 4357 itself recognizes this saving, clearly defining the director’s authority in permissive terms only and prescribing a definite standard for the discount’s application.’’ (Id., second italics added.) Similarly in Ralphs Grocery Co. v. Reimel, supra, 69 Cal.2d 172 the court, in ruling that the rules governing the sale of beer could deal with the subject of quantity

In Zuber v. Allen, supra, the court stated, “Congress has spoken with particularity and provided specifically enumerated differentials, . . .”(396 U.S. at p. 183 [24 L.Ed.2d at p. 354].) It found that the permissible adjustments were limited to compensation for rendering an economic service, and invalidated an attempted adjustment which purported to protect the competitive position of distant milk producers by giving those closer to the market a higher price (id., at p. 188 [24 L.Ed.2d at pp: 357-358]). So here the proposed quantity discounts are particularly unauthorized by the statutory scheme insofar as they exceed cost differences.

Ralphs Grocery Co. v. Reimel, supra, also distinguishes between price fixing and quantity discounts. It pointed out that the prohibition of the rule “only operates to prevent variations in the price established by the manufacturer or wholesaler.” (69 Cal.2d at p. 180.) So here the legislative limitation in sections 62482, 62483 and 62484 does not affect the director’s power to fix the basic prices higher or lower than the general standard fixed by section 62487 upon making the required findings of the necessity for such prices. The provisions merely limit the scope of the discounts which may be allowed on the basic price whether it be higher than cost, cost, or lower than cost.

If the limitations specifically imposed by section 62482 interfere with the fulfillment of the general purposes of the act, the remedy lies with the Legislature.

The judgment is affirmed.

Molinari, P. J., and Elkington, J., concurred.