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In re Appeals of Port Murray Dairy Co.

Decided: February 3, 1950.


Jacobs, Donges and Bigelow. The opinion of the court was delivered by Bigelow, J.A.D.


[6 NJSuper Page 290] This case and Como Farms v. Foran , 6 N.J. Super. 306, both of which are concerned with State regulation of the milk industry, were argued together. The opinion of Judge Jacobs in the Como Farms case affirms the constitutionality of the Milk Control Act of 1941 and the Department of Agriculture Act of 1948. The present opinion considers certain actions of the Director of the Office of Milk Industry. From 1933 until 1949, milk sales at all levels of the industry were subject to minimum prices fixed by the Director. But toward the end of the period, considerable dissatisfaction arose among the consumers of milk because the retail price in New Jersey was two or three cents higher a quart than in neighboring states. On December 28, 1948, the Director issued an order effective January 1, 1949, in which

he recited that the Governor desired, as an experiment, that all resale pricing of milk be eliminated for an indefinite period. The order continued:

"Under the authority granted me by the law I am hereby suspending all minimum prices to be charged by dealers to consumers, dealers to stores, stores to consumers, processors to sub-dealers, processors and dealers to other processors and milk dealers for all milk and cream in the marketing areas of the State of New Jersey."

This is the first action that is under attack. It left in effect the minimum prices governing sales by dairy farmers to processors or others. By order dated March 17, 1949, the minimum price to be paid to producers for Class I milk was reduced from $5.60 per hundredweight to $5.15. That order is not attacked. I should mention that the term "Class I milk" has no reference to the quality of the milk but only to the purpose for which the milk is to be used. It is milk that is marketed to the consumer as fluid milk, while Class II milk is that which is used for making cheese, ice cream, butter, etc.; it is the dairyman's surplus that he is unable to sell as Class I milk, and for which he receives a price much lower than for Class I. This litigation relates directly only to Class I milk.

Always more milk is produced in May and June than in other times of the year; the June average is about 30% above November. But due to fine pasturage and other conditions in the spring of 1949, the June production rose to 50% in excess of the preceding November, and of course prices tended to fall. During the winter, retail milk prices in this part of the country had already declined about two cents a quart, but while the New Jersey price declined, it still remained higher than the price in New York and Pennsylvania. On May 23rd, one of the three largest milk dealers in the State announced a reduction of three cents per quart in the retail price. That company bought almost all of its milk outside of New Jersey at a figure that was much less than the New Jersey producers' price set by the Director, even after the reduction permitted by the order of March 17th. Other

dealers, to preserve their competitive position, lowered their retail prices and looked around outside of the State for a cheaper supply of milk. The dairyman's milk is usually disposed of under an annual contract that is subject to cancellation on two weeks' notice. At the end of May, 1949, a few farmers received notices of the cancellation of their contracts, and a general feeling of uncertainty developed among the producers. The Director responded to the situation by calling a public meeting to be held on June 6th. After the hearing, on June 24th, the Director issued six orders and regulations which he hoped might meet the situation. These, together with the order of December 28, 1948, are the subject of the appeal. The first of the orders of June 24th, No. 49-5, abolished a sub-classification, namely Class II-a, that the Director had established a few months earlier. Order 49-6 fixed the minimum price of Class I milk at $5.45, that is, 30 cents above the price set the preceding March. Regulations 13 and 17 set up the norm and excess plan. Regulation 15 requires that prices be posted monthly. Regulation 16 deals with milk from outside the State.

Appellants attack Order 48-8 suspending minimum prices because of the recital of the wishes of the Governor, the absence of findings of fact, and the lack of a hearing upon notice before the order was made. Under our present Constitution, the Governor has a more active and responsible role as chief executive than under our former constitutions. Every principal department of the government is "under the supervision of the Governor." Article V, Section IV, paragraph 2. Although the Director is not the head of one of the principal departments, yet it was entirely proper for him to consult with the Governor and to obtain his views and advice. Of course, ultimate responsibility for making the order rests on the Director himself, and we must assume, in the absence of proof to the contrary, that the Director did not surrender his judgment but became convinced that the course which the Governor recommended was the wise one. His decision to adopt that course was not unlawful, arbitrary or beyond the scope of his discretion.

The statute R.S. 4:12A-1 et seq. contains several provisions relating to findings of fact. Section 22 provides, "The Director may ascertain, determine and may fix or refix by investigation and proof, as the emergency permits, the minimum prices to be paid," etc. Section 23 reads:

"Before fixing or refixing any price, the director shall give a notice by public advertisement inserted in at least three daily newspapers of this State that he is considering the fixing or refixing of such price and that a public hearing will be held thereon on the day, time and place set forth in such notice, which day shall not be less than five days after the day of insertion. After such public hearing, if the director fixes or refixes any price, such fixed or refixed price shall be effective upon the fifteenth day after such rule or order fixing or refixing the price and the findings of fact upon which it is based have been filed in the office of the Secretary of State."

A decision not to fix prices or the repeal or suspension of price-fixing regulations and orders is not a fixing of prices and does not come within the operation of Sections 22 or 23.

Section 20 gives the Director authority to "adopt, promulgate and enforce all rules, regulations and orders necessary to carry out the provisions of this act. An order applying only to a person named therein shall be served," etc. * * * "All orders and determinations of the Director shall include the findings of fact upon which such orders or determinations are based." Evidently the Legislature did not use the word "orders" as synonymous with rules and regulations, and did not intend to require findings of fact to support the rules and regulations. Although it is difficult to draw the dividing line, rules and regulations may be said to comprise those actions of the Director in which the legislative element predominates, which establish a pattern thereafter to be followed in a certain group of matters. Orders and determinations are actions in which there is more of the judicial function, -- which deal with a particular, present situation. In the absence of a statutory requirement, an administrative agency generally need not grant a hearing or make findings to support the regulations that it adopts. Pacific States Box & Basket Co. v. White , 296 U.S. 176; 56 S. Ct. 159; 101 A.L.R. 853 (1935). While the action of the Director, which is under consideration,

is entitled Determination of Fact and Order No. 48-8, it is, in fact, a repealer, or suspension for an indefinite period, of certain regulations; it was an exercise of the Director's legislative function. Furthermore, it only puts into effect the Director's decision no longer to employ his power over prices, except on sales by producers. No findings of fact were required as the basis of the action.

The appellants, who are processors or milk dealers and not producers, object on sundry grounds to Order 49-6 that increased the minimum price of Class I milk to $5.45 per hundredweight. First that the notice of the hearing was insufficient to make the parties in interest aware that orders and regulations of the type appealed from were under consideration. The notice called a hearing to consider "measures to be taken to stabilize and assure orderly marketing," "proposals to effectuate a more level production of milk in this State," "prices to be paid to producers for Class I milk and Class II milk and the prices for sales of milk and cream by and between all persons in respect to whom, by law, the price may be regulated." Testimony was requested as to costs of production, processing and distribution and as to available supplies and demand. The notice did not indicate at all the actions contemplated by the Director and so did not give interested parties proposals that they might criticize or support with proofs and argument. But we may assume that the Director had no plan in mind when he called the hearing; he looked to the hearing for guidance in meeting the situation caused by the reduction in the retail price of milk. The notice did, however, state comprehensively the several subjects on which the Director sought enlightenment. In our opinion, the notice was sufficient. Tagg Bros. & Moorhead v. U.S. , 280 U.S. 420, 50 S. Ct. 220 (1930). We think that Morgan v. U.S. , 304 U.S. 1, 58 S. Ct. 773 (1937), does not apply. It was in that case that the Supreme Court held that "Those who are brought into contest with the Government in a quasi -judicial proceeding aimed at the control of their activities, are entitled to be fairly advised of what the Government proposes and to be heard upon its proposals before it issues its

final command." There the Secretary of Agriculture ordered an inquiry with respect to the reasonableness of the charges of the market agencies at the Kansas City Stockyards, found them unreasonable and prescribed lower maximum charges to be observed in the future. "The proceeding had all the essential elements of contested litigation." By contrast, the hearing in the matter now before us was a typical legislative hearing and not quasi -judicial. Norwegian Nitrogen Products Co. v. U.S. , 288 U.S. 294, 53 S. Ct. 350 (1933).

At the time of the hearing, the Director was sick and unable to attend. The Deputy Director conducted the hearing and afterwards submitted a report thereon to the Director, together with a stenographic transcript of the evidence, and the Director himself then took the action of which complaint is now made. These circumstances make another ground for appeal.

The statute of 1941, R.S. 4:12A-4, expressly authorizes the appointment of a deputy director but does not define his duties or authority. The word deputy , whether used as a noun or adjective, has, however, a well-known meaning. A deputy is one appointed to act for another or in another's right, and who is usually invested with the powers and authority of his principal. Willis v. Melvin , 53 Mo. Car. 62 (1860); Saxby v. Soonemann , 149 N.E. 526 (Ill. 1925); Byrnes v. Windels , 193 N.E. 248 (N.Y. 1934); State v. Guckenberger , 3 N.E. 2d 502 (Ohio 1936). The Legislature's choice of the term deputy director gives by implication to the director power to conduct the hearing through the agency of his deputy. The order, as we have noted, was made by the Director himself. Not even in a strictly judicial proceeding is it essential that the testimony be taken before the same officer who makes the decision. Among the many examples that come to mind are the trials in the County Court on evidence taken in the Labor Department ...

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