Case Name: In the Matter of the Application of New York State Guernsey Breeders Co-operative, Inc., Petitioner, for an Order under Article 78 of the Civil Practice Act Directed against Holton V. Noyes, Commissioner of Agriculture and Markets of the State of New York, Respondent. Buffalo Milk Producers Co-operative Association, Inc., and Hugh Scott, Interveners, Respondents
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1940-07-02
Citations: 260 A.D. 240
Docket Number: 
Parties: In the Matter of the Application of New York State Guernsey Breeders Co-operative, Inc., Petitioner, for an Order under Article 78 of the Civil Practice Act Directed against Holton V. Noyes, Commissioner of Agriculture and Markets of the State of New York, Respondent. Buffalo Milk Producers Co-operative Association, Inc., and Hugh Scott, Interveners, Respondents.
Judges: 
Reporter: Appellate Division Reports
Volume: 260
Pages: 240–253

Head Matter:
In the Matter of the Application of New York State Guernsey Breeders Co-operative, Inc., Petitioner, for an Order under Article 78 of the Civil Practice Act Directed against Holton V. Noyes, Commissioner of Agriculture and Markets of the State of New York, Respondent. Buffalo Milk Producers Co-operative Association, Inc., and Hugh Scott, Interveners, Respondents.
Third Department,
July 2, 1940.
Henry S. Manley, for the petitioner.
Milo R. Kniffen, Counsel to Department of Agriculture and Markets of the State of New York [Robert G. Blabey, Assistant Counsel, of counsel], for the respondent.
Harry D. Suitor of counsel, for Hugh Scott, individually and as president of Niagara Frontier Co-operative Milk Producers Bargaining Agency, Inc., and for Buffalo Milk Producers Co-operative Association, Inc., intervenors, respondents.
Francis L. McElroy, counsel, for the Metropolitan Co-operative Milk Producers Bargaining Agency, Inc., amicus curicœ.

Opinion:
Crapser, J.
This is a review, under article 78 of the Civil Practice Act, of official Order No. 127 made by respondent under authority given by the Rogers-Alien Law (Laws of 1937, chap. 383, adding to Agriculture and Markets Law, § 258-k-258-m, and § 258-n), to regulate and fix prices for milk produced and sold in the Niagara Frontier Milk Marketing Area.
On defendants' oral motion in the Appellate Division on May 13, 1940, in the appeals in Noyes v. Arthur E. Landel, d/b /a Williams-ville Dairy, and Noyes v. Sterling Amherst Farms Dairy, Inc., with the New York State Guernsey Breeders Co-operative, Inc., as an added defendant in both actions, the appeals in such actions were directed to be perfected at once and argument directed to be heard with that of New York State Guernsey Breeders Co-operative, Inc., v. Noyes, a proceeding under article 78 of the Civil Practice Act, which seeks to raise the same issues. (See, also, 259 App. Div. 1108.)
The petitioner is a co-operative association of Guernsey dairy farmers organized under .the law of the State of New York and according to the certified statement it had forty-five members in the area subject to the order. The petitioner asserts that there should have been a separate vote on the equalization and that the findings made by the Commissioner were insufficient.
The provisions for equalization for Guernsey milk are not those intended by the statute; moreover, the provisions for classification of Guernsey milk are so unfair as to be unconstitutional.
The order in question is known as order No. 127 and was made by the Commissioner of Agriculture and Markets on September 19, 1938, to become effective October 1, 1938. It was designed to regulate the price to be paid to producers of milk sold in the Niagara Frontier Milk Marketing Area, which comprises the cities of Buffalo, Tonawanda, Lackawanna, Niagara Falls, Lockport and North Tonawanda, and certain contiguous towns in Erie and Niagara counties.
On or about July 25, 1938, a petition for a public hearing on a proposed milk marketing order of the Niagara Frontier Milk Marketing Area was presented to the Commissioner by the Niagara Frontier Co-operative Milk Producers Bargaining Agency, Inc. At the same time and with the petition there was submitted a draft of a proposed order which had been unanimously approved by the bargaining agency's delegates. ;
The New York State Guernsey Breeders Co-operative, Inc., was a member of the bargaining agency, its delegate was its business manager and assistant treasurer, Mr. B. J. H. Bikert. The New York State Guernsey Breeders Co-operative, Inc., the petitioner herein, through Mr. Bikert, was one of the incorporators of the Niagara Frontier Bargaining Agency and Mr. Bikert's name was the first one subscribed to the certificate of incorporation. The petitioner filed with the bargaining agency a certificate of incorporation, a copy of its by-laws, a copy of the form of contract with its producers and a statement of the number of contracts in force.
The hearing requested by the bargaining agency was held at Buffalo, N. Y., on August 8, 1938. The petitioner herein appeared and was represented by Mr. Bikert who was asked if he desired to object to the order and he replied that he did not. He said, " those of you who have shared in the work of preparing this proposed order and bringing it up to the point of this public hearing know that my Association and I have tried to do our share in that work." He stated that he and his association were " for this order," were not opposed to it, and more than that he said he was not opposed " to any principle involved in it."
The order was submitted to a producer referendum on September 17, 1938, and was duly approved and on September 19, 1938, it was officially announced that an order was made for it to become effective on October 1, 1938.
The petitioner through the defendants Landel and Sterling Amherst Farms Dairy, Inc., to whom it sold milk, moved to dismiss the Commissioner's complaint in suits to restrain the order's violation instituted in the Supreme Court, Albany county, in December, 1938. In January of 1939 the petition in this proceeding was returnable at the Ulster County Special Term. Mr. Justice Bergan declared sections 258-k and 258-m of the Agriculture and Markets Law unconstitutional and directed the Commissioner to answer the petition in this proceeding. (See 257 App. Div. 877.)
An interlocutory appeal was taken to this court where the question of estoppel which had not been decided by Justice Bergan was seriously urged. It was urged by the Commissioner that the merits of the proceeding should not be argued in this court until the Court of Appeals had passed upon the constitutionality of the Rogers-Allen Law in the four cases wherein the Commissioner's complaints had been dismissed. In May, 1939, this court, without passing upon the estoppel, affirmed the order below directing the Commissioner to answer but held that it was improper to discuss the case on the merits until the Court of Appeals had answered the question of the constitutionality of the statute. (257 App. Div. 877.)
In July, 1939, the Court of Appeals unanimously reversed the Special Term in the four injunction suits (Noyes v. Erie & Wyoming Farmers Co-op. Corp., 170 Misc. 42; 281 N. Y. 187). The Court of Appeals said: " ' The guaranty of due process, as has often been held, demands only that the law shall not be unreasonable, arbitrary or capricious, and that the means selected shall have a real and substantial relation to the object sought to be attained.' " (Citing Nebbia v. New York, 291 U. S. 502, 525.)
Neither the act nor the order promulgating it is arbitrary, capricious or unreasonable under the facts set up in the complaints.
The petitioner herein then moved before Mr. Justice Bergan to be joined as a party defendant in the Landed and Sterling^ cases. This request was granted over the objections of the Commissioner.
The Rogers-Alien Law (Laws of 1937, chap. 383) is a price-fixing statute, it fixed minimum prices to producers only, and no resale or consumer prices are fixed, it is co-operative. It authorized the creation of producers' bargaining agencies, of distributors' bargaining agencies. Having organized for bargaining purposes, these groups, subject to the approval of the Commissioner, may agree among themselves upon a marketing contract. Failing to agree, the producers' agency may apply to the Commissioner to call a public hearing upon a proposed order to fix and determine for the marketing area minimum prices to be paid producers. (Agriculture and Markets Law, §, 258-m.) This may be done by a producers' bargaining agency representing at least thirty-five per cent of the producers of milk in the production area. The petitioner herein conceded that more than thirty-five per cent of the producers in the production area were represented by the bargaining agency. The statutory procedure contemplates public hearings, approval of a proposed order and promulgation by the Commissioner.
The plan of fixing a price to the producers only is founded upon a legislative declaration of policy as set forth in section 258-k of the Agriculture and Markets Law.
The notice of the hearing recites that " a Producers' Bargaining Agency representing at least thirty-five per centum of the producers supplying milk to the Niagara Frontier Milk Marketing Area " submitted a petition to the Commissioner alleging " the existence of conditions so affecting the orderly marketing of milk " that the public interest requires the regulation of prices to be paid producers. The time and place are set forth. The purpose is described to be the receiving of " factual evidence " as to whether the conditions alleged really exist. The announcement is made that the evidence will determine whether provisions should be incorporated in the order for (a) classification of milk, (b) minimum prices, (c) reports of dealers, (d) payments to producers through the use of a market-wide equalization pool, and (e) deductions for administration. Finally, the notice recites that copies of the proposed order as submitted could be inspected at or procured from the Commissioner's Albany office.
The hearing was held and testimony was taken under oath. All who wished had a reasonable opportunity to appear and express their views in regard to the proposed order. The petitioner stated through Mr. Rikert that they were in favor of this order. As the result of the public hearing and relying upon the testimony, statements and declarations there given, the Commissioner called a referendum on the question of the adoption of the milk marketing order thus petitioned for and thus considered and a referendum was held in due course on the 15th of September, 1938, and after the referendum the Commissioner found from the votes cast that more than seventy-five per cent of the producers of the area desired the order then advertised and voted for and now known and promulgated as No. 127. He found that the public interest as declared by the Legislature by section 258-k of the Agriculture and Markets Law required the regulation of milk prices in the Niagara Frontier Area and on September nineteenth he officially directed that Order No. 127, so voted, to become effective on and after twelve-one a. m. Eastern Standard time, on October 1, 1938.
Many more than a majority of those subject to the order fully complied with it. The petitioner was one of the few exceptions although it publicly stated that it was " for this order."
The order provides that all milk received from producers shall be classified, the classification is based upon utilization, being four in number, and minimum prices are established for each class. It provides for the filing of verified monthly reports of prescribed information. It explains the computation of the net pool obligation of the marketer and the uniform price. It authorizes differentials for butter fat, for direct delivery of milk by the farmer to the city dealer's plant. It directs the manner of making payments to producers. It creates an equalization fund and authorizes the appointment of a fiscal agent and provides for payments by marketers into the fund. For the purpose of administering the order it provided that each marketer should deduct from the price paid to the producer an amount to be fixed by the Commissioner but in no event to exceed two cents per hundred weight.
The Commissioner by virtue of his official position was empowered by the Agriculture and Markets Law to enforce the order. He may, from time to time, upon petition and public hearing amend it.
The determination by Mr. Justice Bergan in the Erie and Wyoming group of cases rendered inoperative official Order No. 127. (170 Misc. 42.) The Legislature then passed the NunanAllen Bill (Laws of 1939, chap. 760) which became operative on June 7, 1939. The Nunan-Allen Law authorized the Commissioner to repromulgate official Order No. 127. In compliance with the legislative permission the Commissioner on June 28, 1939, repromulgated official Order No. 127, the effective date of which was July 1, 1939. On July 11, 1939, the Court of Appeals held the Rogers-Alien Law constitutional. (281 N. Y. 187.)
This petitioner asserts a grievance because a separate vote on the order of equalization provisions was not taken. Section 258-m of the Agriculture and Markets Law does not require a separate vote on equalization. It provides that the Commissioner must find that seventy-five per cent of the producers affected must approve equalization. It does not matter in what subdivision of the section equalization is first mentioned.
The act was passed for the purpose of enabling all producers within a certain designated area to receive the same base price for their milk and equalization naturally has to be a part of the price-fixing arrangement in order to give every producer the same base price. There is nothing mysterious or unusual about equalization. Dealers pay a different price for milk that they use in different classes. If the value of the milk_ purchased by the dealer to be used in such classes as he may use it exceeds the amount computed as due the producer the dealer pays the difference into the fund. If the value of his milk is less than the amount due to the producers he receives from the fund a sum for payment to the producers. There are certain differentials which are well understood, when direct delivery differentials are allowed dealers are permitted to deduct the amount from their own pool obligation and to pay it to the producers. The direct delivery differential is borne by the whole market and it is justified by the reason of the fact of the service for which it is given. The butter fat differential com pensates the producer for milk having a rich butter fat content. There are deductions for expenses and reserves set aside for market services and other contingencies.
The Commissioner did not depend upon the examinations at the hearing, which was well advertised and where the whole matter was discussed and where the petitioner's officer stated that he was fully in favor of the order but only after the referendum did he make his findings.
It was necessary for the Commissioner only to determine the necessity for the order. The petitioner and the other members of the bargaining agency had set forth their approval in their petition to him. The evidence given in the hearing added further weight for the necessity for it and all he had to do was to determine that there was a necessity for such an order and this he did in the proper way.
Equalization was provided for in the order. The Commissioner has found:
" 3. That upon the basis of a referendum conducted by me, Official Order No. 127 regulating the handling of milk produced in the production area for the said Niagara Frontier Milk Marketing Area is favored by more than seventy-five per centum of the producers of milk produced in such production area."
The finding is proper in all particulars and was based upon sufficient evidence, information and knowledge. (Matter of Elite Dairy Products v. Ten Eyck, 271 N. Y. 488.)
Section 1296 of the Civil Practice Act provides:
" Where the determination under review was made as the result of a hearing held, and at which evidence was taken, pursuant to statutory direction, the following questions shall also be determined .
" 6. Whether there was any competent proof of all the facts necessary to be proved in order to authorize the making of the determination.
"7. If there was such proof, whether, upon all the evidence, there was such a preponderance of proof against the existence of any of those facts that the verdict of a jury, affirming the existence thereof, rendered in an action in the supreme court triable by a jury, would be set aside by the court as against the weight of evidence."
Equalization as a means of price fixing has been held constitutional in both State and Federal courts. (Noyes v. Erie & Wyoming Farmers Co-op. Corp., 281 N. Y. 187; United States v. Rock Royal Co-op., 307 U. S. 533; Hood & Sons v. United States, Id. 588.)
The evidence in the record shows that the petitioner received benefits from the order, that the adoption of the order strengthened the Buffalo milk price structure and that members of the petitioner benefited by the order's increased returns.
The order provides for a differential for butterfat over 3.5 and upon the uncontradicted evidence the petitioner's members received by reason of the test of their milk a higher price than lower testing breeds.
There is nothing in the order that prohibits the dealers from charging any price they desire for milk. The dealers handling Guernsey milk under this order are not prohibited from charging more for it and it is to be presumed that an article will bring what it is worth. The evidence fails to show that the provisions for equalization for Guernsey milk under this order are unfair or unreasonable or arbritary or capricious. They were contained in the order when it was up for the hearing and the petitioner's managing officer said that they were entirely in favor of it. It was no new or untried experiment. The petitioner by this proceeding is simply trying to gain an advantage for its members which is not justified and if permitted will probably destroy all milk orders and return the milk situation into the chaos that it was before the promulgation of any orders either Federal or State.
The Agriculture and Markets Law provides the method for amending or revoking this order and the petitioner did not avail itself of the methods provided for its amendment or repeal but accepted without comment the benefits of butter fat differentials and other differentials provided by the order and of the increased price paid by reason of the order and then by this proceeding seeks to get its members a little more and obtain further advantage by reason of the color of their milk.
The law defines what milk is and there is no proof in this record that that is not what Guernsey cows produce. There is plenty of debate in periodicals and among medical men as to whether milk from a particular breed of cows is better for babies and young children than others and it would be fully as reasonable for the owners of Holstein cows to ask for a special treatment under this order for their milk because the Holstein cow produces a greater amount of Vitamin A activity from carotin than does the Guernsey cow. The reason that the milk from the Guernsey cows is more yellow is because the Guernsey cow does not function and is insufficient in the carotin activity in Vitamin A.
Mr. Justice Cardozo, when in 1934 the United States Supreme Court heard a similar complaint regarding price orders of the former Milk Control Board, said that the Constitution does not protect a business from the hazards of competition and, said he, particularly where it is from the hazards of the order, and not from restraints of law capriciously imposed, that appellant seeks relief. (Hegeman Farms Corp. v. Baldwin, 293 U. S. 163, at pp. 170, 171.)
The New York State Guernsey Breeders Co-Operative, Inc., was and is a member of the bargaining agency which petitioned and sponsored the order in question. The draft submitted to the Commissioner was unanimously approved by the agency's delegates, at that time the petitioner's delegate was Mr. B. J. H. Rikert who appeared at the hearing and approved the order.
The respondent alleges that the petitioner is estopped to question the validity of Order No. 127 or its application to the New York State Guernsey Breeders Co-Operative, Inc.
" The essential elements of an equitable estoppel as related to the party estopped are: (1) Conduct which amounts to a false representation or concealment of material facts, or, at least, which is calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (2) intention, or at least expectation, that such conduct shall be acted upon by the other party; (3) knowledge, actual or constructive, of the real facts. As related to the party claiming the estoppel, they are: (1) Lack of knowledge and of the means of knowledge of the truth as to the facts in question; (2) reliance upon the conduct of the party estopped; and (3) action based thereon of such a character as to change his position prejudicially." (19 Am. Jim., Estoppel, § 42, 642; Crary v. Dye, 208 U. S. 515.)
Equitable estoppel forecloses one from denying his own expressed or implied admission which has in good faith and in pursuance of its purpose been accepted and acted upon by another. (State ex rel. Shartel v. Missouri Utilities Co., 331 Mo. 337; 53 S. W. [2d] 394; 89 A. L. R. 607; State ex rel. McKittrick v. Missouri Utilities Co., 339 Mo. 385; 96 S. W. [2d] 607; 106 A. L. R. 1169; City of Glendale v. Coquat, 46 Ariz. 478; 52 P. [2d] 1178; 102 A. L. R. 837.)
No constitutional question is involved here which has not already been resolved in the Commissioner's favor. The reasonableness and fairness of the order are shown by the way in which it has worked and by the benefits which the petitioner has received under it. The attitude taken by the petitioner upon the hearing and the signing of the petitioner in promulgating the order had some influence upon the Commissioner's mind in adopting the order and the petitioner is equitably estopped from questioning the order at this time. (Matter of N. Y. State Guernsey Breeders Co-op., Inc., v. Noyes, 257 App. Div. 877; Matter of N. Y. S. Guernsey Breeders' . Co-op. v. Noyes, 260 id. 139.)
The petition should be dismissed and the order confirmed, with costs.
Bliss and Foster, JJ., concur; Hill, P. J., and Heffernan, J., dissent; Hill, P. J., in an opinion in which Heffernan, J., concurs.