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Inter-State Milk Producers'' Cooperative v. Hoffman

Decided: May 23, 1963.


Goldmann, Freund and Foley. The opinion of the court was delivered by Goldmann, S.j.a.d.


Inter-State Milk Producers' Cooperative (Cooperative) appeals from a determination of the Director of the Office of Milk Industry (Director) that Cooperative is a milk dealer within the meaning of section 1 of the Milk Control Act, L. 1941, c. 274, as amended; N.J.S.A. 4:12A-1 et seq. , and therefore should be licensed, as required by section 28 (N.J.S.A. 4:12A-28). The matter comes before us on an agreed statement of facts.


Cooperative is a Pennsylvania cooperative corporation, organized in 1936 under the Cooperative Agricultural Association Act of Pennsylvania, 1929 P.L. 885, as amended; 14 Purdon's Pa. Stat. Ann. , ยง 81 et seq. Cooperative was recognized to be a bona fide cooperative under our Agricultural Cooperative Association Act, L. 1924, c. 12, as amended, and in January 1937 was issued a certificate pursuant to N.J.S.A. 4:13-15 authorizing it to transact business in New Jersey. Cooperative is also a producer cooperative corporation approved by the Director under section 31 of the Milk Control Act, N.J.S.A. 4:12A-31.

One of Cooperative's principal functions has been and is to appear at price hearings before governmental producer price-fixing agencies, including the Office of Milk Industry of this State; to present evidence in support of a proper producer price -- generally in opposition to the position of many milk dealers; and otherwise to act for and on behalf and in place of its producer-stockholders (members). In effect, Cooperative

operates as the alter ego of all producer-members involved, acting together in their own interest.

From 1937 until October 5, 1962, the date of the Director's letter determination, Cooperative has had several hundred milk producers of Pennsylvania and New Jersey as its stockholders and members, under producer's marketing agreements with it, and has acted as bargaining agent for the disposition of their milk to dealers distributing milk in southern New Jersey. These agreements are referred to hereinafter. During that period most of the New Jersey dealers receiving milk from Cooperative's producer-members paid them directly, after first deducting Cooperative's dues, designated in the producer's marketing agreements as commissions. The dealers sent these dues directly to Cooperative. However, there were a few agreements with dealers whereby they paid Cooperative, rather than the producer, for the milk. In those instances Cooperative, in turn, made payment to the producers after deducting the dues, as provided in the marketing agreements.

On September 1, 1962 Cooperative, as agent for its members, entered into an agreement with Borden-Castanea Dairy of Trenton, N.J. (Dairy), a division of the Borden Company. Dairy agreed to purchase all milk received from producers, unless prior arrangements to divert the milk for Cooperative's account had been made between Dairy and Cooperative; and further agreed to pay Cooperative for any milk so received the prices fixed by applicable Federal Government orders. The producers referred to in the agreement are Cooperative stockholders, some 82 in number, about two-fifths being residents of Pennsylvania and the remainder of New Jersey.

It is stipulated that the purpose of the Cooperative-Dairy agreement was to enable Cooperative, as agent for its members, to collect for the milk Dairy received from them and to pay the money over to the producers. If Dairy did not buy some of the milk of the Pennsylvania producers, Cooperative could sell this milk outside of New Jersey and blend the proceeds

with the amounts it collected from Dairy for the milk of those producers received within New Jersey under Office of Milk Industry pricing. In the latter case Cooperative would pay a blend price to the producers. (See N.J.S.A. 4:12A-31 permitting an approved producer cooperative association or corporation to blend the proceeds of all net sales either within or without the State, and to pay the proceeds to its members.) Cooperative does not intend to divert any New Jersey milk for sale to other than those dairies with whom it has long-term contracts similar to Dairy's. At such time as it does so divert, Cooperative represents that it will notify the Director so that he may proceed according to law.

All monies received by Cooperative have been and are kept in a separate "agent for members milk" account, and not mingled with regular funds accumulated from dues. Monies due Cooperative members for milk are paid to them in full on a semimonthly basis, as provided by the producer's marketing agreements.

Producer-members deliver their milk at their farms to bulk tank trucks owned by certain haulers. These trucks are not leased, owned or controlled by Cooperative, and the hauling charges are paid through a deduction taken by Dairy and paid by it to the haulers on behalf of the respective producers.

The parties further agree that Cooperative never has possession of or title to the milk received by Dairy under the September 1, 1962 agreement, but acts only as provided by the producer's marketing agreements. Under the regulations of the Office of Milk Industry, Order No. 57-1, as amended, Dairy is deemed to take title to milk received in New Jersey once it is measured, sampled and removed from the New Jersey producer's holding tank into the tank truck serving Dairy.

Prior to September 1, 1962 the Director knew that Cooperative was representing its members at milk control hearings, acting as their bargaining agent and receiving dues (commissions) from them. He did not become aware of the fact that Cooperative was receiving payments for milk and distributing

the proceeds until after that date, when he learned of the Dairy contract and a similar agreement between Cooperative and Abbotts Dairies. There followed a conference with the manager and representatives of Cooperative, who insisted that it was unnecessary for Cooperative to be licensed. The Director reserved decision and, on October 5, 1962, wrote Cooperative that after studying the statute involved he had decided not to reverse "my long-standing interpretation of the Milk Control Act to the effect that all cooperatives marketing milk must be licensed." In so ruling, he relied upon the definition of "milk dealer" in N.J.S.A. 4:12A-1, mentioned hereafter.

Cooperative's representatives had indicated at the conference that there would be an appeal if a license were required, and some question was raised as to the necessity of a formal hearing before such action could be taken. In his October 5 letter the Director stated it would be unnecessary to put Cooperative and the State to the expense of a hearing. He agreed that should Cooperative appeal, he would not raise the procedural defenses of ripeness for review, exhaustion of administrative remedies, or any similar defense which would preclude Cooperative from obtaining a decision on the merits.

We note that in his determination of October 5, 1962 the Director failed to make any findings of fact, as required by N.J.S.A. 4:12A-20. The agreed statement of facts now presented to us alleges that the Director's determination that Cooperative is a ...

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