Kraftco Corp. v. Walkley

• Decision Date: 20 January 1977
• Citation: 390 N.Y.S.2d 672,55 A.D.2d 417
• Parties: In the Matter of KRAFTCO CORPORATION, Petitioner, v. Frank WALKLEY, as Commissioner of the Department of Agriculture and Markets of the State of New York, Respondent.
• Court: New York Supreme Court — Appellate Division

Page 672

390 N.Y.S.2d 672

55 A.D.2d 417

In the Matter of KRAFTCO CORPORATION, Petitioner, v. Frank WALKLEY, as Commissioner of the Department of Agriculture and Markets of the State of New York Respondent.

Supreme Court, Appellate Division, Third Department.

Jan. 20, 1977.

Bouck, Holloway & Kiernan, Albany (Warner M. Bouck, Albany, of counsel), for petitioner.

Thomas G. Conway, Albany (Dennis P. Buckley, Albany, of counsel), for Dept. of Agriculture and Markets.

Before KOREMAN, P.J., and SWEENEY, MAIN, LARKIN and HERLIHY, JJ.

MAIN, Justice.

Petitioner, Kraftco Corporation (hereinafter, Kraftco), is a milk dealer, and in the determination challenged herein respondent concluded that Kraftco had exceeded the authorization of its milk dealer's license by arranging the sale and delivery of its milk and milk products in areas where, by the terms of its license, it was not authorized to carry on such business. Consequently, respondent denied Kraftco's application to renew its license with the proviso that the denial was to be rescinded should Kraftco agree within 30 days to: cease and desist from its activities found to be unauthorized; discontinue its sales deemed to be improper; comply with the terms and limitations of its license, and pay a civil penalty of $6,000. Finding this result unacceptable and arguing that the determination is contrary to law and the evidence and arbitrary and capricious, Kraftco instituted the present proceeding which was transferred to this court by Special Term.

In this dispute respondent has ruled that Kraftco's operations at its plants in Schenectady, New York (plant closed and ceased production as of April 30, 1974) and Homer, New York have been improper insofar as they have resulted in the sale of its milk and milk products to supermarket chains and other wholesale accounts for resale in counties in which it is not licensed to do such business. While conceding that these sales have occurred, Kraftco argues that they were proper because they were made F.O.B. either the Schenectady or Homer plant and the wholesale customers paid the costs to transport their purchases to their places of business.

Upon our review of this matter, we conclude that we must reject Kraftco's rationale submitted in justification of its challenged mode of operation. Were we to hold otherwise, we would be placing our stamp of approval upon a milk dealer's selling its products in every county and area of this State, whether licensed therein or not, merely by devising a scheme whereby the purchases of said products are made at a location where the dealer is licensed and then transported at the cost of the purchaser to the ultimate destination for resale. Such an arrangement, as established by Kraftco here, has as its obvious purpose the avoidance of the licensing requirements of the Agriculture and Markets Law (cf. Matter of Sealtest Foods Div. of Nat. Dairy Prods. Corp. v. Wickham, 33 A.D.2d 51, 304 N.Y.S.2d 832) and would subvert the plain intent of the Legislature '* * * to stabilize the entire distribution structure of the milk industry' (Matter of Friendship Dairies v. Du Mond, 284 App.Div. 147, 153, 131 N.Y.S.2d 51, 56). Moreover, the proliferation of such sales schemes would lead inexorably to a network of unregulated delivery routes and, ultimately, to destructive competition and the derogation of the public interest, consequences which the Legislature has expressly endeavored to avoid (Agriculture and Markets Law, § 258--c; Matter of Dairylea Coop. v. Walkley, 38 N.Y.2d 6, 377 N.Y.S.2d 451, 339 N.E.2d 865). Such being the case, respondent's finding under the circumstances here that Kraftco was violating the Agriculture and Markets Law ( § 257, subd. 1) by arranging and engaging in sales beyond its licensed authorization is substantiated by the record, and, therefore, its conditional denial of Kraftco's license renewal application was proper (Agriculture and Markets Law, § 258--c, subd. (k)).

In so ruling, we are not unmindful of language cited by Kraftco from Matter of Perky Milk Corp. v. Wickham, 15 A.D.2d 624, 222 N.Y.S.2d 612, which seems to be supportive of its present position. However, said language was merely Obiter dictum and has not been deemed controlling in subsequent comparable situations (cf. Matter of Sealtest Foods Div. of Nat. Dairy Prods. Corp. v. Wickham, supra; Matter of Glen Mohawk Milk Assn. v. Wickham, 28 A.D.2d 764, 280 N.Y.S.2d 839, affd. 24 N.Y.2d 963, 302 N.Y.S.2d 593, 250 N.E.2d 77, cert. den. 396 U.S. 1004, 90 S.Ct. 556, 24 L.Ed.2d 496), and we find it unpersuasive here. Similarly, Kraftco's reliance upon the exemption from the licensing requirements for stores (Agriculture and Markets Law, § 257, subd. 3, amd. by L.1976, ch. 247, § 3) in seeking to establish the propriety of its questioned dealings with supermarket chains and independent markets is also misplaced. That statutory provision clearly serves only to relieve retail outlets from the necessity of obtaining a license in order to sell milk and milk products to the general public (see Agriculture and Markets Law, § 253, subd. 10, as amended by L.1976, ch. 247, § 2) and is inapplicable to Kraftco's dealings with its wholesale customers.

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