Eaton v. Brock

O’DONNELL, J. pro tem.

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This is an action for declaratory relief brought by plaintiffs Emery Eaton, doing business as Toy on Creamery, and Consumers’ Cooperative Society of Palo Alto, Inc., a corporation (hereinafter called “Co-op”), against the State Director of Agriculture as defendant (hereinafter sometimes called the “Director”) wherein plaintiffs seek to have the validity of a certain contract between Eaton and Co-op judicially decreed.

Plaintiff Eaton is a licensed retail milk distributor. The Co-op is a cooperative corporation organized under sections 12200-12956 of the Corporations Code. It operates a supermarket, drugstore, dry cleaning establishment, frozen food locker, service station, and a complete insurance service. The Co-op’s customers participate in the profits of its enterprises which are paid to them in the form of patronage dividends at the close of each fiscal year. Of Eaton’s 4,500-odd customers some 700 are members of Co-op.

On February 16, 1949, Eaton and the Co-op entered into the written contract which is the subject of the instant action. By the terms of that contract the Co-op undertook to collect and to guarantee payment of all accounts of Eaton’s cus

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toraers who were members of the Co-op, and further agreed to solicit new customers for Eaton. In consideration therefor Eaton agreed to pay Co-op the sum of $1.20 per month per customer.

In 1935 the Legislature adopted the so-called “Milk Control Act.” (Agr. Code., div. 4, ch. 13, §§ 735-738.) In 1953 and after the trial of the instant case, the Milk Control Act was transferred to chapter 17 of division 6 (§§ 4200-4416) of the Agricultural Code. The declared purpose of the legislation is to stabilize the production and distribution of milk throughout the state. To that end it authorizes the State Director of Agriculture to prescribe marketing areas within the state and to establish within such areas minimum wholesale and retail prices for milk. The Director has established one such marketing area which is comprised of San Mateo County and parts of the city of Palo Alto and has set therein a minimum retail price for milk of 19% cents per quart and a minimum wholesale price of 16% cents per quart. Eaton’s business is conducted in this marketing area. Section 4361 (formerly part of § 736.13) of the Agricultural Code provides : “No distributor shall sell to any retail store, restaurant, confectionery or other place for consumption on the premises, or to any consumer, and no retail store, restaurant, confectionery or other place for consumption on the premises, shall purchase from any distributor or sell to any consumer, any fluid milk or fluid cream, or either of them, at less than the prices as established by the director under the provisions of this article, and the use or attempted use of any method, device or transaction whereby any distributor sells or offers or agrees to sell to any retail store, restaurant, confectionery or other place for consumption on the premises, or consumer or any retail store, restaurant, confectionery or other place for consumption on the premises, buys or offers or agrees to buy from any distributor, or sells or offers or agrees to sell to any consumer fluid milk or fluid cream, or either, at a price less than that established by the director, under the provisions of this article, whether by discount, rebate, free service, advertising allowance, lease of refrigeration or other equipment, or gift, or otherwise and whether any such discount, rebate, free service, advertising allowance, lease of refrigeration or other equipment, or gift applies directly to fluid milk or fluid cream or is allowed upon or in connection with the sale or handling of any other commodity or product, is hereby prohibited.”