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exemptions are valid.43 On the other hand, where the statutes do not exempt such associations or are not drawn in such a way as to be inapplicable to cooperatives, the associations are subject thereto. The exemption of motor vehicles used exclusively in the transportation of agricultural or dairy products from the operation of a statute requiring private carriers for hire to obtain licenses has been upheld, regardless of whether the trucks are the property of the producer of such products or of another.45 It has been held that a person employed by a cooperative to haul by motor carrier only the products of its members may not, by statute, be converted into a common carrier.46

The Federal Motor Carrier Act, 1935, as amended 47 provides:

SEC. 203. (b) Nothing in this part, except the provisions of section 204 relative to qualifications and maximum hours of service of employees and safety of operation or standards of equipment shall be construed to include *** (4a) motor vehicles controlled and operated by any farmer, and used in the transportation of his agricultural commodities and products thereof, or in the transportation of supplies to his farm; or (4b) motor vehicles controlled and operated by a cooperative association as defined in the Agricultural Marketing Act, approved June 15, 1929, as amended * **

Although a cooperative as defined in the Agricultural Marketing Act as amended, by reason of the language just quoted, is relieved of the necessity for obtaining a certificate of public convenience and necessity,48 permit or a license, other provisions relative to qualifications and maximum hours of service of employees and safety of operation and standards of equipment are applicable to cooperatives operating motor vehicles in interstate or foreign commerce as defined in section 203 (a) (10) and (11), respectively, of that act.

Since the Civil Aeronautics Act 49 contains no exemption similar to the one quoted above from the Motor Carrier Act, it was held that a flower growers' shipping cooperative was subject to the former act's certification requirement and the Civil Aeronautics Board's freight forwarder regulations.5 50

It should be noted that the Supreme Court of the United States has held 51 that the jurisdiction of the Interstate Commerce Commission over employees, as that term is used in section 204 (a) (1) and (2) of that act, "is limited to those employees whose activities affect the safety of opera

43 Baker v. Glenn, 2 F. Supp. 880.

Parlett Cooperative, Inc. v. Tidewater Lines, Inc., 164 Md. 405, 165 A. 313; North Shore Fish and Freight Co. v. North Shore Business Men's Trucking Association, 195 Minn. 336, 263 N. W. 98.

45

Aero Mayflower Transit Co. v. Georgia Public Service Commission, 295 U. S. 285, 55 S. Ct. 709, 79 L. Ed. 1439. But see Smith v. Cahoon, 283 U. S. 553, 51 S. Ct. 582, 75 L. Ed. 1264.

46

Dairymen's Coop. Sales Association v. Public Service Commission, 318 Pa. 381, 177 A. 770, 98 A. L. R. 218. See also Michigan Public Utilities Commission v. Duke, 266 U. S. 570, 45 S. Ct. 191, 69 L. Ed. 445, 36 A. L. R. 1105. But see Affiliated Service Corporation v. Public Utilities Commission of Ohio, 127 Ohio St. 47, 186 N. E. 703, 103 A. L. R. 264; Davis v. People, 79 Colo. 642, 247 P. 801. 4749 Stat. 545, 49 U. S. C. A. 301, 303.

18 Interstate Commerce Commission v. Jamestown Farmers Union Federated Coop. Transp. Association, 151 F. 2d 403, affirming 57 F. Supp. 749. Cf. United States v. Pacific Coast Wholesalers' Association, 338 U. S. 689, 70 S. Ct. 411, 94 L. Ed. 474. 49 52 Stat. 973; 49 U. S. C. A. 401 et seq.

50 Consolidated Flower Shipments, Inc.-Bay Area v. Civil Aeronautics Board, 213 F.2d 814.

51 United States v. American Trucking Associations, 310 U. S. 534, 60 S. Ct. 1059, 84 L. Ed. 1345.

tion. The Commission has no jurisdiction to regulate the qualifications or hours of service of any other." In other words, the Fair Labor Standards Act 52 in proper cases is applicable to all employees other than "those employees whose activities affect the safety of operation."

Farmers engaged in the hauling of their own products appear either to be exempt from the various statutes regulating motor carriers, or such statutes by their terms are not applicable to them. In view of this fact, it is sometimes urged that inasmuch as individual farmers are not subject to a motor carrier act, an association of such farmers engaged in the hauling of their products collectively should not be subject thereto, but no case is known in which this argument has prevailed.53 It is generally held that one employed by a cooperative to haul only the products of its members. is not a common carrier; 54 but it has been held otherwise.55

Any cooperative, before it engages in the motor carrier business, should ascertain its status with respect to the Federal Motor Carrier Act and to like applicable State statutes. An organization should not assume that it is exempt, because the assumption may prove incorrect. Again, even if it is found that the Federal Motor Carrier Act does not apply to motor vehicles controlled and operated by a cooperative as defined in the Agricultural Marketing Act, as amended, an association should ascertain and carefully observe the rules and regulations which the Interstate Commerce Commission has adopted to "permit safety of operation" and any conditions which it may have prescribed relative to "qualifications and maximum hours of service of employees and standards of equipment." Correspondence regarding the Federal Motor Carrier Act and requests for copies of such rules and regulations may be addressed to the Interstate Commerce Commission, Washington, D. C., or one of its branch offices.

A fair trade act of Wisconsin, which permitted the manufacturers of trade-marked goods to enter into contracts specifying what the resale price of such products would be, contained a provision specifying that the act "shall not apply to any cooperative society or association not organized for profit," and this exception was held to be unconstitutional, although the statute was otherwise held constitutional. The court said:

That exemption is not confined to merely transactions between such an association or society and its members. It is equally applicable to sales made by such associations or societies in competition with other retail dealers to the public at large, but as to which such exempted associations or societies would be permitted to sell at less than minimum resale prices stipulated under the Fair Trade Act. Thus there would be defeated its "primary aim to protect the property, namely, the good will, of the producer."

It should be noted that if the exception had been upheld it would have barred cooperatives from obtaining the advantage of the statute in connection with the sale of their trade-marked goods.56

52

52 Stat. 1060, 29 U. S. C. A. 201.

53

Rutledge Coop. Association, Inc. v. Baughman, 153 Md. 297, 138 A. 29, 56 A. L. R. 1042; Madonna & Shawsville Cooperative Co. of Harford County, Inc. v. West, 168 Md. 95, 176 A. 611.

54

Dairymen's Coop. Sales Association v. Public Service Commission, 318 Pa. 381, 177 A. 770, 98 A. L. R. 218, and cases therein cited.

55 Public Service Commission v. Western Maryland Dairy, 150 Md. 641, 135 A. 136, writ of error dismissed in 274 U. S. 765, 47 S. Ct. 763, 71 L. Ed. 1334; West v. Tidewater Express Lines, 168 Md. 581, 179 A. 176; Public Utilities Commission of Ohio v. Boughtonville Farmers' Exchange Co., 40 Ohio App. 395, 178 N. E. 859; Davis v. People, 79 Colo. 642, 247 P. 801.

56 Weco Products Company v. Reed Drug Company, 225 Wis. 474, 274 N. W. 426, 433.

In holding the Growers Cost Guarantee Law of Florida relative to Citrus fruit unconstitutional, the court said: 57

The testimony also showed that many of the growers had organized cooperative corporations to process their grapefruit. The cooperative did not pay cash for their fruit to these growers, but credited them with the amount of the price of the fruit and were not expected to pay for it unless the market prices enabled them to pay it, and the Commissioner did not enforce payment while requiring payment of the regular canners.

This certainly was discrimination against the canners, and the Commissioner must have construed the act so as to authorize him to do this.

A Texas statute authorized the Commissioner of Agriculture of the State to limit or provide methods for limiting the amount of citrus fruit which might be marketed in intrastate commerce, but it was held that this did not authorize him to fix minimum prices for citrus fruit. 58

Of course, the State has the inherent power to enact legislation to promote the public welfare, and associations handling agricultural products are frequently called upon to comply with various health regulations. Of recent years, this power has been extended to comprehend various control programs on the part of the Federal and State governments in connection with agricultural products. In California, it has been held that an agricultural pro rate statute was constitutional.5

59

Federal Statutes Mentioning Cooperatives

HIS section has been prepared for the purpose of referring briefly to all the important Federal statutes that specifically mention cooperatives. For convenience, the material will be presented under topical headings.

Tax Statutes

It is believed that the first Federal statute 60 to refer to farmer cooperatives was the War Revenue Act of 1898,61 which had a section providing for stamp taxes, which section contained the following exception:

Provided further, that the provisions of this section shall not apply to any fraternal, beneficiary society, or order, or farmers' purely local cooperative company or association, or employees' relief associations operated on the lodge system, or local cooperation plan, organized and conducted solely by the members thereof for the exclusive benefit of its members and not for profit.

The next Federal statute to mention agricultural organizations was the Corporation Tax Statute of 1909.62 Section 38 of that statute, which placed a tax on corporations, joint stock companies or associations, had a proviso stating:

*** that nothing in this section contained shall apply to labor, agricultural or horticultural organizations, or to fraternal beneficiary societies, orders, or associations operating under the lodge system, and providing for the payment of life, sick, accident, and other benefits to the members of such societies, orders, or associations, and

57

Lakeland Highlands Canning Company, Inc. v. Nathan Mayo, as Commissioner of Agriculture of the State of Florida, 28 F. Supp. 44, 47.

58

McDonald v. American Fruit Growers, 126 S. W. 2d 83 (Tex. Civ. App.), appeal dismissed, 127 S. W. 2d 291. See also Van Winkle v. Fred Meyer, Inc., 151 Ore. 455, 49 P. 2d 1140.

59

60

Agricultural Pro Rate Commission v. Superior Court, 5 Cal. 2d 550, 55 P. 2d 495. In enacting the Sherman Antitrust Act in 1890 Congress rejected an amendment to exempt agricultural associations. See Monopoly and Restraint of Trade, p. 156.

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dependents of such members, nor to domestic building and loan associations, organized and operated exclusively for the mutual benefit of their members * The Supreme Court, in discussing the constitutionality of the Corporation Tax Statute, said:

As to the objections that certain organizations, labor, agricultural and horticultural, fraternal and benevolent societies, loan and building associations, and those for religious, charitable or educational purposes, are excepted from_the operation of the law, we find nothing in them to invalidate the tax. As we have had frequent occasion to say, the decisions of this court from an early date to the present time have emphasized the right of Congress to select the objects of excise taxation, and within this power to tax some and leave others untaxed, must be included the right to make exemptions such as are found in this act.6

Section G (a) of the Income Tax Statute of 1913 64 contained the following proviso:

Provided, however, That nothing in this section shall apply to labor, agricultural, or horticultural organizations, or to mutual savings banks not having a capital stock represented by shares.

In discussing these exemptions, the Supreme Court said: 65

The statute provides that the tax should not apply to enumerated organizations or corporations, such as labor, agricultural or horticultural organizations, mutual savings banks, etc., and the argument is that as the amendment authorized a tax on incomes "from whatever source derived," by implication it excluded the power to make these exemptions. But this is only a form of expressing the erroneous contention as to the meaning of the amendment, which we have already disposed of. And so far as this alleged illegality is based on other provisions of the Constitution, the contention is also not open, since it was expressly considered and disposed of in Flint v. Stone Tracy Co.

Subsequent provisions of the income tax statutes of the United States as they pertain to farmer cooperatives are cited and discussed in the part on Federal Income Taxes, at page 195.

In 1926, the following provision was added to the statute under which dealers in leaf tobacco were required to register and render various reports and accounts to the Collector of Internal Revenue of their districts regarding the sale of leaf tobacco:

*** a farmer or grower of tobacco or a tobacco growers' cooperative association shall not be regarded as a dealer in leaf tobacco in respect to the leaf tobacco produced by him or handled by such association: Provided, That such cooperative associations shall be required to keep available records of all purchases and sales of tobacco, such records to be open to inspection by the agents of the Government. As used in this subsection the term "tobacco growers' cooperative association" means an association of farmers or growers of tobacco organized and operated as sales agent for the purpose of marketing the tobacco produced by its members and turning back to them the proceeds of sales, less the necessary selling expenses, on the basis of the quantity and quality of tobacco furnished by them."

66

Statutes Providing Credit Facilities

The War Finance Corporation Act was enacted in 1918.67 In an amendment of 1921,68 there was the following reference to cooperatives:

63 Flint v. Stone Tracy Co., 220 U. S. 107, 173, 31 S. Ct. 342, 55 L. Ed. 389. 64 38 Stat. 114, 172.

65 Brushaber v. Union Pacific Railroad Co., 240 U. S. 1, 21, 36 S. Ct. 236, 60 L. Ed. 493, L. R. A. 1917D 414, Ann. Cas. 1917B 713.

66

44 Stat. 91, 26 U. Š. C. A. 2050 (b). For subsequent statutes see 55 Stat. 225 and sec. 5702 of the Internal Revenue Code of 1954; 26 U. S. C. A. 5702.

67

40 Stat. 506. For history see note to 15 U. S. C. A. 331–374. The corporation was abolished in 1939 and liquidated by the Secretary of the Treasury, 45 Stat. 1442. 68 42 Stat. 181, 182.

SEC. 24. Whenever in the opinion of the Board of Directors of the Corporation the public interest may require it, the Corporation shall be authorized and empowered to make advances upon such terms not inconsistent with this Act as it may determine to any bank, banker, or trust company in the United States or to any cooperative association of producers in the United States which may have made advances for agricultural purposes, including the breeding, raising, fattening, and marketing of livestock, or may have discounted or rediscounted notes, drafts, bills of exchange or other negotiable instruments issued for such purposes. Such advance or advances may be made upon promissory note or notes, or other instrument or instruments, in such form as to impose on the borrowing bank, banker, trust company, or cooperative association a primary and unconditional obligation to repay the advance at maturity with interest as stipulated therein, and shall be fully and adequately secured in each instance by indorsement, guaranty, pledge, or otherwise. Such advances may be made for a period not exceeding one year and the Corporation may from time to time extend the time of payment of any such advance through renewals, substitution of new obligations or otherwise, but the time for the payment of any such advance shall not be extended beyond three years from the date upon which such advance was originally made. The aggregate of advances made to any bank, banker, trust company, or cooperative association shall not exceed the amount remaining unpaid of the advances made by such bank, banker, trust company, or cooperative association for purposes herein described.

The Federal Reserve Act, as originally enacted in 1913, in section 13 authorized any Federal reserve bank, subject to certain conditions, to discount "notes, drafts, and bills of exchange issued or drawn for agricultural * * * purposes."

In 1923 70 the provisions with reference to agricultural paper were amended, and there was added a further amendment (sec. 13a) which provided that:

Notes, drafts, bills of exchange or acceptances issued or drawn by cooperative marketing associations composed of producers of agricultural products shall be deemed to have been issued or drawn for an agricultural purpose, within the meaning of this section, if the proceeds thereof have been or are to be advanced by such association to any members thereof for an agricultural purpose, or have been or are to be used by such association in making payments to any members thereof on account of agricultural products delivered by such members to the association, or if such proceeds have been or are to be used by such association to meet expenditures incurred or to be incurred by the association in connection with the grading, processing, packing, preparation for market or marketing of any agricultural product handled by such association for any of its members: Provided, That the express enumeration in this paragraph of certain classes of paper of cooperative marketing associations as eligible for rediscount shall not be construed as rendering ineligible any other class of paper of such associations which is now eligible for rediscount.

Congress also enacted in 1923 a statute providing for the incorporation of 12 institutions to be known as the "Federal Intermediate Credit Banks." 71 These banks were authorized to make loans, subject to certain conditions and restrictions, on staple agricultural products and on livestock, to cooperatives.

The Agricultural Marketing Act was passed in 1929.72 It created the Federal Farm Board and authorized that board to make loans to associations of farmers. Section 1 of that act provides:

That it is hereby declared to be the policy of Congress to promote the effective merchandising of agricultural commodities in interstate and foreign commerce, so that the industry of agriculture will be placed on a basis of economic equality with other industries, and to that end to protect, control, and stabilize the currents of interstate and foreign commerce in the marketing of agricultural commodities and their food products *

* *

69 38 Stat. 251, 12 U. S. C. A. 221 et seq.
70 42 Stat. 1479, 1480, 12 U. S. C. A. 351.
71 42 Stat. 1454, 12 U. S. C. A. 1021.
12 46 Stat. 11, 12 U. S. C. A. 1141.

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