Chandler v. David, 21117.

• Decision Date: 28 July 1965
• Docket Number: No. 21117.,21117.
• Parties: Fred CHANDLER, Sr., et al., Appellants, v. W. Lewis DAVID et al., Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

350 F.2d 669 (1965)

Fred CHANDLER, Sr., et al., Appellants, v. W. Lewis DAVID et al., Appellees.

No. 21117.

United States Court of Appeals Fifth Circuit.

July 28, 1965.

Leon Jaworski, Houston, Tex., amicus curiae, Fulbright, Crooker, Freeman, Bates & Jaworski, Houston, Tex., of counsel.

Maurice R. Bullock, Fort Stockton, Tex., Ashley Sellers, Washington, D. C., Thomas R. Scott, Fort Stockton, Tex., John D. Conner, Washington, D. C., for appellants.

Edward Berlin, Atty., Dept. of Justice, Washington, D. C., Fred J. Morton, Asst. U. S. Atty., El Paso, Tex., Alan S. Rosenthal, Pauline B. Heller, Attys., John W. Douglas, Asst. Atty. Gen., Ernest Morgan, U. S. Atty., Dept. of Justice, Washington, D. C., for appellees.

Before GEWIN and BELL, Circuit Judges, and McRAE, District Judge.

GEWIN, Circuit Judge:

This appeal raises difficult questions of administrative authority in the context of the Agricultural Adjustment Act's intricate statutory scheme for regulating the production of certain agricultural commodities. 7 U.S.C.A. §§ 1281-1393.¹ More specifically, it relates to the propriety of the administrative cancellation of certain cotton allotments that had previously been transferred from an Oklahoma eminent domain pool to land in Texas pursuant to section 378 of the Act, 7 U.S.C.A. § 1378.

As a general principle, the Act does not sanction the sale or transfer of commodity allotments apart from the land to which they are attached.² In 1958, Congress enacted section 378 to permit the transfer of agricultural commodity allotments which had been lost as a result of eminent domain proceedings to condemn the land for which they had originally been authorized. Pursuant to this section, when farm land is condemned under the power of eminent domain, the allotment is placed in a pool "and shall be available only for use in providing allotments for other farms owned by the owner so displaced." The following procedure is prescribed for a farmer who desires to obtain a transfer to other farm land:

"Upon application to the county committee, within three years after the date of such displacement, or three years after the enactment of this section, whichever period is longer, any owner so displaced shall be entitled to have established for other farms owned by him allotments which are comparable with allotments determined for other farms in the same area * * *." (emphasis added)

On February 14, 1961, the Administrator of the Commodity Stabilization Service, pursuant to the general authority granted the Secretary to issue rules necessary to implement the Act,³ promulgated Amendment 11 to 7 C.F.R. § 719.12. That regulation conditions the right of a displaced farmer to transfer an allotment on a showing that the acquisition of the new farm to which the allotment is sought to be transferred is "for the purpose of reestablishing farming operations" and is not a scheme for the purpose of obtaining the allotment for the benefit of some other person.⁴ The Administrator's stated purpose in promulgating the amendment was "to make the procedures for the transfer of allotment sic from the pool under 7 U.S. C. 1378 more effective in preventing the sale of allotments from the pool or the transfer of allotments from the pool for the benefit of some person other than the displaced owner."

The Chandlers are cotton farmers who in 1960 owned certain large tracts of land in Culberson County, Texas, for which they had no cotton acreage allotments. Desirous of planting cotton on this land, the Chandlers went to Custer County, Oklahoma, where they arranged, through the services of certain employees of the County ASCS Committee, to meet local farmers who had cotton allotments in the eminent domain pool. As a result of their negotiations, the Chandlers gave to each of fifteen displaced farmers warranty deeds to enough of the land they owned in Culberson County, Texas, to support each farmer's available cotton allotments. The farmer in turn assumed an indebtedness of $35 per acre which the Chandlers owed to their grantors and agreed to pay the Chandlers clearing costs of $20 per acre. The land so transferred was then leased back to the Chandlers for a twenty-year term at a rental of $100 to $125 per acre.

The Oklahoma farmers, pursuant to section 378, applied to the Culberson County ASCS Committee for approval of the transfer of their allotments to the land which the Chandlers had deeded to them. They appeared before the committee on February 17 and April 22, 1961, either in person or by affidavit, and executed the required forms, including requested information as to the nature of the transactions by which they acquired the land to which transfer of the allotments was sought. Copies of the deeds and leases were made available for County Committee's inspection. The farmers also executed Form CSS-178, which contained the following certification: "I have made no side agreement with any person for the purpose of obtaining an allotment from the pool for a person other than myself." All of the transfers were approved by both the County and State Committees, and the requisite allotment notices for 1961 were sent to the displaced farmers as owners and the Chandlers as operators. A crop of cotton was planted, harvested, and marketed by the Chandlers on the lands during both 1961 and 1962.

In the summer of 1961, the Department of Agriculture commenced an investigation of all allotments transferred from eminent domain pools. The Department found indications of irregularities in the transactions surrounding the transfer of the Oklahoma farmers' atlotments and suggested that all the details of the transaction may not have been fully disclosed to the County Committee at the time the applications for transfer were made. Therefore, the Department of Agriculture requested the Chandlers to furnish information about the transfers on prescribed government forms entitled "Seller's Certificate of Bona Fide Sale of Land," as a prerequisite to a determination of the 1962 acreage allotment for the Culberson County lands. In this form the Chandlers certified that the displaced owners had made the initial payment for the farm to which the pooled acreage allotments had been transferred.

On April 26, 1962, after the Department had completed its investigation, a representative of the State ASCS office met with members of the County Committee and discussed the Chandler transfers. The Committee subsequently entered the following notation in its minutes with respect to the acreage involved in those transfers:

"At the direction of the Administrator ASCS, revised farm allotment notices are being furnished the following farm operators and owners for the reason that investigation has disclosed irregularities in certification that no side agreements exist relating to the sale and lease back of the land involved. It has been concluded that failure to furnish all documents and side agreements (oral or written) was a misrepresentation of the facts when coupled with the applicants\' certification on Form CSS-178 that there were no side agreements for the purpose of obtaining an allotment for a person other than the applicant:"

On the following day, the County Committee issued formal notices retroactively cancelling the allotments in question. Overproduction penalties were later assessed for cotton marketed from the tracts in 1961 and 1962.

Pursuant to the provisions of 7 U.S. C.A. § 1363, timely appeals were perfected to a Review Committee composed of three local farmers appointed by the Secretary. Meanwhile, the Chandlers and the displaced farmers instituted a civil action in the district court against the Culberson County Committee, the State ASCS Director, and the State ASCS Committee, in which they sought to restrain the refusal to issue allotments for 1962 and to enjoin the collection of penalties for 1961 and 1962. This suit also challenged the jurisdiction of the Review Committee to hear the appeal, alleging that review was available only under section 10 of the Administrative Procedure Act, 5 U.S.C.A. § 1009. Before the merits of this suit could be considered, the Review Committee, one member dissenting, affirmed the cancellation of the transfers after a three-day hearing at which the Chandlers and two of the displaced Oklahoma farmers testified. The Chandlers and the displaced farmers then instituted this suit in the district court pursuant to 7 U.S.C.A. §§ 1365-1366 to obtain a review of the Review Committee's decision. The two federal court proceedings were consolidated, and in a lengthy opinion the district court held that the Review Committee had jurisdiction to hear the appeal, that Amendment 11 was a valid exercise of regulatory power by the Department of Agriculture, and that the findings of fact by the Review Committee were supported by substantial evidence. Accordingly, it affirmed the action of the Review Committee in all respects. Kephart v. Wilson (W.D.Tex. 1963) 219 F.Supp. 801.

The appellants make a frontal attack on the Department's authority to promulgate the standards set forth in Amendment 11 as guidelines for the County Committee's determination whether a farm is owned by the displaced farmer. They argue that section 378 gives the farmer whose land is condemned a right to have the allotment he loses transferred to any other land he owns, regardless of the purpose behind the transfer or the use to which the farmer intends to put the land. To be entitled to a transfer, all the farmer must show is that he (1) previously owned land for which an allotment had been issued; (2) had been displaced from that land by governmental action; (3) applied for an allotment transfer within three years of such displacement; and (4) owns the land to which the transfer is sought. According to the appellants, the regulation places impermissible limitations on this right of transfer by introducing the additional contingencies that the farmer must intend to...