Volume 332 — Pennsylvania State Reports

<p>“The case of Townsend v. Yeomans, reported in the Advance Opinions of the Lawyers Edition of the United States Supreme Court Reports, Vol. 81, No. 16, page 840, is strongly relied upon by the plaintiff as authority for the proposition that where a matter admits of diversity of treatment according to the special requirements of local conditions, the states may act within their respective jurisdictions until Congress sees fit to act. This, however, does not permit a state to regulate or to place a burden upon interstate commerce, and the Court clearly indicated that the state statute there under consideration did not impose such burden. The Court said (page 847) : ‘We find no ground for concluding that the state requirements lay any actual burden upon interstate or foreign commerce. The Georgia Act does not attempt to fix the prices at auction sales or to regulate the activities of the purchasers. The fixing of reasonable maximum charges for the services of the ware-housemen in aid of the tobacco giwvers does not militate against any interest of those who buy. They pay the bid price, as accepted, and the warehouseman pays the seller, deducting from the purchase price the warehouse charges.’</p> <p>“This quotation clearly differentiates Townsend v. Yeomans, from the present case. Here, if the defendant is subject to the control of the plaintiff, it would be required to pay the milk producers not the agreed price, .but the price fixed by the plaintiff. It would also be required to post a bond to secure payment to the producers of the prices fixed by the plaintiff and Avould be required to pay license fees. The cost of the milk to it would be increased by tbe premium on tbe bond, by tbe license fee, and by the increase in price ordered by the plaintiff. The effect of such regulation and such price fixing would be exactly equivalent to the imposition of a tax on the export of milk.</p> <p>“The regulation here sought to be imposed is very similar to the regulation sought to be imposed in Lemke v. Farmers’ Grain Co., 258 U. S. 50, 66 L. Ed. 458 (1921), supra. There, after outlining the control to be exercised under the State Act the Court said: ‘That is, the state officer may fix and determine the price to be paid for grain which is bought, shipped and sold in interstate commerce. That this is a regulation of interstate commerce is obvious from its mere statement.’</p> <p>“Again, in Shafer v. Farmers Grain Co., 268 U. S. 189, 69 L. Ed. 909 (1924), supra, the state statute required every buyer to give to the state a bond securing payment for all wheat purchased on credit, to keep records of his transactions, and to furnish such data to the state authorities. It also required a state supervisor to investigate and supervise the marketing of grain for the purpose of preventing various things which were deemed unjust and fraudulent, and authorized him to make rules and regulations to carry out the provisions of the Act. The Court said (page 915) : ‘We think it plain that, in subjecting the buying for interstate shipment to the conditions and measure of control just shown, the act directly interferes with and burdens interstate commerce, and is an attempt by the state to prescribe rules under which an important part of such commerce shall be conducted. This no state can do consistently with the commerce clause.’</p> <p>“The plaintiff seeks to distinguish these North Dakota grain cases on the ground that in North Dakota 90% of the wheat produced was sold in other states whereas only 10% of the milk produced in Pennsylvania is so sold. Undoubtedly, the laws of Pennsylvania relating to milk control were not enacted for the primary purpose of regulating interstate commerce, but if they have that effect they are invalid as applied to such interstate commerce regardless of the proportion which such commerce bears to the total commerce of the state. Nor do we agree that these cases have been overruled by Townsend v. Yeomans, supra, as the Court in that case carefully distinguishes the North Dakota Grain cases.</p> <p>“The plaintiff further calls our attention to Section 808 of Act No. 105, approved April 28, 1937, wherein it is declared to be the legislative intent that the prices prescribed by the Commission for milk produced in this Commonwealth and sold in this Commonwealth for shipment into and sale in another state shall not be destructive of the price structure of producers in such other state. The effect of price fixing upon the price structure of producers in other states, however, is not the criterion. The test is whether the regulation and the price fixing amounts to a regulation of interstate commerce and places a burden upon it. If it does, it is beyond the power of the state and cannot be sustained. The effect of a state statute fixing prices as applied to a sale in interstate commerce is tersely stated by Justice Cardozo in Highland Farms Dairy, Inc., v. Agnew, 81 L. Ed. 514, 518 (1936), as follows: ‘Highland in Washington may sell to High in Virginia and High may buy from Highland, at any price they please.’</p> <p>“However desirable it may be for the Pennsylvania Milk Control Board to stabilize the dairy industry, and however necessary it may be for it to regulate the transactions of the defendant and other buyers of milk similarly engaged to effect this purpose, we conclude that the effect of the present statute would be to regulate and to place a burden upon interstate commerce.</p> <p>“In the opinion of the exceptions the court said: ‘In Townsend v. Yeomans, 81 L. Ed. (1937), the Supreme Court was considering an act of the Legislature of Georgia prescribing the maximum charges which could be made by warehousemen for the handling of tobacco. Under the method of handling tobacco in Georgia, the tobacco is brought to the warehouses by the seller and there sold to buyers who immediately ship the tobacco to other states. Payment for the tobacco is made to the warehouseman who deducts his charges and remits the balance to the sellers. The act had no relation whatever to the buying and selling of tobacco and was distinguished by the Supreme Court from the Farmers Grain Company cases by showing that the “Georgia Act lays no constraint upon purchases in interstate commerce, does not attempt to fix the prices or conditions of purchases, or the profit of the purchasers. It simply seeks to protect the tobacco growers from unreasonable charges of the warehousemen for their services to the growers in handling and selling the tobacco for their account. Whatever relation these transactions had to interstate and foreign commerce, the effect is merely incidental and imposes no direct burden upon that commerce.” ’</p> <p>“The distinction between Munn v. Illinois, Townsend v. Yeomans, and the other cases relied upon by the plaintiff, on the one hand, and the Farmers Grain Co. cases and the present case, on the other, lies in the fact that in the former the regulation was confined to warehouses, elevators, or other agencies through which interstate commerce might flow, but whose activities were entirely intrastate. In the latter cases the statutes sought to regulate the act of purchasing articles which were to be shipped in interstate commerce, and to prohibit such purchases unless made upon terms prescribed by the statute or by administrative agencies. It is not the milk-receiving plant operated by the defendant that the plaintiff seeks to regulate, but the business conducted by the defendant of buying and shipping milk. The very purpose of the Milk Control Law of Pennsylvania as stated in Section 101 of the Act is ‘regulating and controlling the milk industry in this Commonwealth, for the protection of the public health and welfare and for the prevention of fraud.’ ”</p>