Original jurisdiction in case of Commonwealth of Pennsylvania v. Ohio Casualty Insurance Company.
Howard D. Brooks, Assistant Attorney General, with him Walter J. Sullivan, Chief Counsel, for plaintiff.
Robert J. Stewart, with him Thompson J. McCullough, and Liverant, Senft and Cohen, for defendants.
Carroll F. Purdy, with him Metzger, Hafer, Keefer, Thomas and Wood, for Milk, Inc., amicus curiae.
President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. Opinion by Judge Blatt. Judge Kramer did not participate in the decision in this case.
[ 25 Pa. Commw. Page 373]
This is an action in assumpsit brought by the Commonwealth of Pennsylvania upon relation of the Milk Marketing Board (Commonwealth) against The Ohio Casualty Insurance Company (Ohio Casualty) as surety on a milk dealer's corporate surety bond (Keystone Bond). The Keystone Dairy Company (Keystone) is the promisor on the bond and the Commonwealth is the promisee. The Commonwealth avers that $200,000 plus interest is due under the Keystone Bond as payment of amounts owed by Keystone under the Milk Marketing Law*fn1 (Act) for the license year July 1, 1973 to June 30, 1974 during which year Keystone had purchased milk products from Milk Inc. Well over $200,000 remained unpaid on this purchase after June 30, 1974.*fn2 The Act provides as follows: "It shall be unlawful for a milk dealer or handler to
[ 25 Pa. Commw. Page 374]
purchase, acquire or receive on consignment or otherwise milk from producers unless the milk dealer or handler shall file with the board a corporate surety, individual surety or collateral bond, supported by United States or Pennsylvania securities, approved by the board . . . . The bond shall be upon a form prescribed by the board, conditioned for the payment by the milk dealer or handler of all amounts due, including amounts due under this act and the orders of the board, for milk purchased or otherwise acquired from producers by the milk dealer or handler during the license year, upon such terms and conditions as the board may prescribe." Section 501 of the Act, 31 P.S. § 700j-501. The Act further provides: "The board shall have the power, in its discretion, to sue on the bond on behalf of producers. Suit may be brought in the name of the Commonwealth upon relation of the board, or of the Attorney General, in such manner as debts are now by law recoverable." Section 509 of the Act, 31 P.S. § 700j-509. Because of Keystone's failure to pay the amounts due Milk Inc. the Commonwealth instituted this action in assumpsit to recover the $200,000 penalty under the Keystone Bond along with interest running from the date of demand upon the surety, Ohio Casualty. Ohio Casualty answered the complaint and as new matter averred that no payments are due on the Keystone Bond because the time for payment was allegedly extended by the stipulation of Keystone and Milk Inc. in resolution of an action under the jurisdiction of the United States District Court for the Western District of Pennsylvania.*fn3 The Commonwealth replied to the new matter
[ 25 Pa. Commw. Page 375]
asserting that the stipulation in satisfaction of Keystone's obligations under federal law does not bar the instant action under the state law. The Commonwealth, believing that the critical facts as established by the pleadings are not in dispute, has now moved for judgment on the pleadings.
The bonding provisions of the Act demonstrate the clear purpose to protect milk producers in the sale of their products to milk dealers. Commonwealth ex rel. Duff v. Eichmann, 353 Pa. 301, 45 A.2d 38 (1946). This purpose is evidenced by the fact that the proceeds recovered by the Commonwealth under the required bond are disbursed to the producers who have not been paid in full by the individual dealers. Section 511 of the Act, 31 P.S. § 700j-511. The sole producer protected here by the Keystone Bond is Milk Inc., and, of course, the Commonwealth would disburse any proceeds recovered under the bond to Milk Inc. Such being the case, Ohio Casualty argues that Milk Inc. is a donee beneficiary ...