Safeway Stores v. State Bd. of Agriculture

• Decision Date: 25 March 1953
• Parties: SAFEWAY STORES, Inc., v. STATE BOARD OF AGRICULTURE.
• Court: Oregon Supreme Court

Page 564

255 P.2d 564

198 Or. 43

SAFEWAY STORES, Inc., v. STATE BOARD OF AGRICULTURE.

Supreme Court of Oregon.

Argued and Submitted Sept. 24, 1952.

Decided March 25, 1953.

Herbert C. Hardy, of Portland, argued the cause for appellant. With him on the brief were Cake, Jaureguy & Tooze, of Portland.

Samuel B. Weinstein, Sp. Asst. Atty. Gen., argued the cause for respondent. With him on the brief was George Neuner, Atty. Gen., at the time this case was presented.

Before BRAND ^*, C. J., and ROSSMAN, LUSK, LATOURETTE ^** and WARNER, JJ.

ROSSMAN, Justice.

This is an appeal by the plaintiff from a judgment of the circuit court which quashed a writ of review issued by that court for the purpose of subjecting to its review an order (Administrative Order No. 2881) entered by the defendant, Thomas L. Ohlsen, Milk Marketing Administrator. The proceeding was instituted pursuant to § 34-1008, O.C.L.A., which is a part of legislation which was known as the Milk Control Act, §§ 34-1001 to and including 34-1018, O.C.L.A., as amended, until Oregon Laws, 1949, Chapter 547, Section 4, changed its name to Milk Marketing Act.

The plaintiff is Safeway Stores, Incorporated, which operates a chain of food stores, five of which are located in Salem. The defendant, when this proceeding was instituted, was the aforementioned Thomas L. Ohlsen, incumbent of the office of Milk Marketing Administrator. Oregon Laws, 1949, c. 547, § 1. The duties performed by the Milk Marketing Administrator were transferred by Oregon Laws, 1951, Chapter 637, § 1, to the State Board of Agriculture. The latter has been substituted as the party defendant (respondent). Hereafter, when we use the term 'the defendant' we shall mean the Milk Marketing Administrator, if the incident under scrutiny occurred prior to the time the 1951 enactment became effective; otherwise we shall mean the State Board of Agriculture. Two corporations which are engaged in the processing and distribution of milk in Salem, and to which the record refers as interveners, entered the proceeding while it was pending before the defendant. They are Curly's Dairy, Inc., and Dairy Cooperative Association. The Dairy Cooperative Association has a plant in Salem which is known by the trade name of its products. Mayflower. We shall hereafter refer to that intervener as Mayflower and to the other as Curly.

Administrative Order No. 2881 was entered by the defendant January 18, 1950. It denied the plaintiff, according to the order's recitals,

'a license to process fluid milk in a processing plant owned by it, located in the City of Portland, * * * for distribution of said processed milk to its stores located in the Salem, Marion County, Sales Area * * *. It is hereby considered and ordered that the application of the Lucerne Milk Company, a Division of Safeway Stores, Incorporated, for a processor-distributor license to distribute and sell fluid milk and cream in the Salem, Marion County, Sales Area, be and the same is hereby denied.'

The denial resulted from the defendant's view that Salem is adequately served by milk processors-distributors and that a grant to the plaintiff of its requested license would be prejudicial to the economic stability of the milk industry. Thus, it is seen that the defendant believes that he posesses economic control over milk processors. The latter pasteurize, bottle, etc. the raw milk which they obtain from producers (dairymen).

The validity of the order (No. 2881) from which we just quoted was the object of attack by the proceeding for a writ of review and is the object of attack by this appeal. The entry of the order was preceded by a hearing which the defendant conducted December 8, 1949. At the close of the hearing he entered findings of fact, and still later made the order. As we have indicated, the circuit court quashed the writ which challenged the order and thereby sustained its validity. The judgment which quashed the writ is contested by the appeal under consideration.

The fundamental principles which govern this appeal stem from our Milk Marketing Act which became a part of our laws by the enactment of Chapter 27, Oregon Laws, Second Special Session, 1933, with its subsequent amendments. The features of that legislation are set forth and analyzed in Savage v. Martin, 161 Or. 660, 91 P.2d 273; State ex rel. Peterson v. Martin, 180 Or. 459, 176 P.2d 636; and Sunshine Dairy v. Peterson, 183 Or. 305, 193 P.2d 543.

The plaintiff owns and operates in Portland a milk processing plant known as the Lucerne Milk Company. That name is merely the appellation which has become attached to the plant and does not denote a separate corporation nor any other form of entity. The product of the plant is called Lucerne milk. The Lucerne plant processes the milk which the plaintiff sells in its Portland stores. The defendant does not question any detail or feature of the plant such as cleanliness or suitability. Lucerne milk, the product of the plaintiff's plant, contains 3.8 per cent butterfat and is sold in paper cartons at the same price as others demand for 3.5 per cent milk contained in bottles. The plaintiff does not operate a delivery system and, hence, its customers carry away the items purchased, such as milk. Mayflower and Curly milk contains not less than 3.2 per cent and not more than 3.5 per cent butterfat. When it is sold in paper containers, an extra charge of one half cent per quart is exacted. Both of those concerns operate delivery systems.

The plaintiff has no processing plant in Salem and is prohibited, under the defendant's rulings, from supplying its Salem stores with milk processed in its Portland plant. The defendant promulgated a regulation, reading:

'No milk dealer or distributor who is licensed for a specific market and sales area may lawfully purchase milk from producers not qualified for the market in which the said milk dealer or distributor is licensed, nor may such distributor or milk dealer lawfully sell to any other person, distributor or milk dealer not licensed in said market any portion of said fluid milk and/or cream suitable for the bottle and can trade for resale, without first obtaining the written consent of the Department of Agriculture, Milk Control Section.'

In employing that rule, the defendant deems that the delivery of milk from the Lucerne plant to any of the plaintiff's stores is a sale. That construction has prevented the plaintiff from having milk purchased in the Salem production area processed in the Lucerne plant and then returned to Salem for sale in the plaintiff's Salem stores. Thus, its Salem stores cannot sell milk bearing the trade name Lucerne.

Since the plaintiff is prohibited by the defendant from bringing to Salem milk processed in its Portland plant, whether or not it was purchased in its raw condition in the Salem production area, it has been forced to supply its Salem stores with milk purchased from Salem processors. Curly supplies it with about 40 per cent of the milk it resells in its Salem stores and Mayflower with the remainder. Since no milk is available in Salem containing more than 3.5 per cent butterfat, the plaintiff cannot offer its trade milk containing the butterfat present in its Lucerne milk, that is, 3.8 per cent. We said that milk is not available in Salem containing more than 3.5 per cent butterfat. The defendant himself declared during the hearing, 'There is no 3.8 milk being sold in Salem.' More than one milk dealer offers to the trade in Portland milk containing 3.8 per cent butterfat, and the record shows that 'quite a little' 5 per cent milk is sold in that city.

November 28, 1949, the plaintiff requested of the defendant that 'permission be granted to Safeway Stores to sell Lucerne milk and cream in its Salem stores which has been processed and bottled in the Safeway Lucerne plant in Portland.

'In making this request, we wish it to be clearly understood by you that the amount of milk which will be sold in the Salem stores will be acquired from producers already holding a quota upon the Salem market.'

In ruling upon that request, the defendant declared:

'I consider this request to be an extension of your sales area to include the Salem sales area under your present processor-distributor license.

'In view of the fact that such a move would to some extent affect distributors presently licensed in the Salem sales area, I deem it advisable to hold a hearing upon your application. * * *'

As a result of that ruling, the hearing was held which we have mentioned. It occurred December 8, 1949.

To make matters clear, we add that what the plaintiff wished to do was (1) purchase from Salem producer quota holders its daily milk requirements; (2) transport the Salem-purchased milk to its Portland Lucerne plant; (3) process the milk in that plant; and (4) return the processed milk to Salem and deliver it to its Salem stores. The plaintiff's protest that no hearing was necessary was overruled. Its proposal to purchase the needed raw milk in the Salem production area was made in order to satisfy the situation resulting from the fact that the defendant has placed Portland and Salem in separate milk production areas.

All five of the plaintiff's Salem stores possess licenses issued by the defendant which authorize them to sell milk. The plaintiff's Portland processing plant [Lucerne] has a license issued by the defendant which authorizes it to process milk for sale in the Portland market area only. The latter includes all of Portland and the five-mile contiguous territory. The Salem market area includes, in addition to the city, the five-mile zone immediately adjacent to it.

We shall now consider the first assignment of error. It reads:

'The Court erred in quashing and dismissing the writ and sustaining the administrator's Order No. 2881, for the reason that the administrator had no power or jurisdiction under the Milk Control Act to prevent the appellant, a licensed milk dealer on...