Doane v. Espy, 91-C-852-C.
| Decision Date | 20 July 1993 |
| Docket Number | 91-C-852-C. |
| Citation | 873 F. Supp. 1266 |
| Parties | Russell C. DOANE, Plaintiff, v. Michael ESPY, Secretary, United States Department of Agriculture, Defendant. |
| Court | U.S. District Court — Western District of Wisconsin |
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Alan R. Malasky, Arent, Fox, Kintner, Plotkin & Kahn, Washington, DC, for plaintiff.
Christa A. Reisterer, Asst. U.S. Atty., Madison, WI, for defendant.
This is a civil action for declaratory relief in which plaintiff seeks judicial review of defendant's decision to deny him benefits under the Disaster Assistance Act of 1988, 7 U.S.C. § 1421 note, §§ 201-224. Plaintiff contends that defendant acted arbitrarily, capriciously and contrary to law when he promulgated regulations that consider an applicant's gross income rather than net income to determine eligibility for financial relief under the Act. Additionally, plaintiff contends that defendant acted contrary to law when he included in plaintiff's gross income calculation certain revenues received by the Chippewa Valley Bean Company, a company in which plaintiff has a majority ownership interest. Defendant disputes plaintiff's contentions and has counterclaimed for disaster overpayments made to plaintiff prior to the finding that he was ineligible for assistance under the Act. Jurisdiction exists pursuant to 28 U.S.C. § 1331.
The case is before the court on the parties' cross-motions for summary judgment. I conclude that defendant's decision to base eligibility for disaster benefits on a concept of gross income rather than net income is reasonable and that defendant did not act in an arbitrary and capricious manner when he included in plaintiff's gross revenues all revenues earned by the Chippewa Valley Bean Company. Accordingly, summary judgment will be denied to plaintiff and granted to defendant.
To succeed on a motion for summary judgment, the moving party must show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Indiana Grocery, Inc. v. Super Valu Stores, Inc., 864 F.2d 1409, 1412 (7th Cir. 1989). When the moving party succeeds in showing the absence of a genuine issue as to any material fact, the opposing party must set forth specific facts showing that there is a genuine issue for trial. Fed.R.Civ.P. 56(e); Matsushita Electric Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1355-56, 89 L.Ed.2d 538 (1986); Bank Leumi Le-Israel, B.M. v. Lee, 928 F.2d 232, 236 (7th Cir.1991). The opposing party cannot rest on the pleadings alone, but must designate specific facts in affidavits, depositions, answers to interrogatories or admissions that establish the existence of a genuine issue for trial. Celotex, 477 U.S. at 324, 106 S.Ct. at 2548, 2553. Also, if a party fails to make a showing sufficient to establish the existence of an essential element on which that party will bear the burden of proof at trial, summary judgment for the opposing party is proper. Celotex, 477 U.S. at 322, 106 S.Ct. at 2552.
For the purpose of deciding this motion only, I find from the parties' proposed findings of fact that the following facts are undisputed.
Plaintiff Russell C. Doane resides in Menomonie, Wisconsin and owns Doane Farms in Dunn County, Wisconsin. Doane Farms raises dark red kidney beans and corn. In 1987, plaintiff was an authorized Bidwell combine dealer and sold farm machinery, including Bidwell combines.1 In addition to operating Doane Farms and selling farm machinery, plaintiff owned a sixty percent interest in the Chippewa Valley Bean Company in Menomonie, Wisconsin.
Defendant Michael Espy is the Secretary of the United States Department of Agriculture. As such, he is the official responsible for the administration of the Disaster Assistance Act of 1988 and for the determinations made under the Act by the Agriculture Stabilization and Conservation Service, including the Deputy Administrator's determinations of December 18, 1992 and January 22, 1993 that plaintiff was not eligible for benefits under the Act for crop losses sustained in 1988.
In 1987, plaintiff's corn and kidney bean farming operations had gross revenues of $1,962,154.03 and produced a net taxable annual income in excess of $100,000. Under the Act, plaintiff is treated as one "person" with the Chippewa Valley Bean Company, which is a licensed public warehouse for the storage and handling of kidney beans and which acts as a marketing agent for producers who wish to sell their kidney beans. As a marketing agent, the Chippewa Valley Bean Company negotiates a sales price with a potential buyer that is then communicated to the beans' owner for the producer's acceptance or rejection. If the producer accepts the price offered by the buyer, the Chippewa Valley Bean Company ships the beans to the buyer, who sends the purchase price to the company, which deducts its selling commission and expenses and remits the balance to the producer. Whenever the company acts as a marketing agent for a producer of kidney beans, the producer maintains title to the beans until they are sold.
In 1987, the Chippewa Valley Bean Company collected over $2.8 million on behalf of its clients in its role as a marketing agent. In addition, the company sold its own kidney beans and received $550,413.31 from those sales. In total, the Chippewa Valley Bean Company collected $3,382,995.13 in proceeds of bean sales in 1987. Of that amount, the company earned $749,481.93 from (1) sales of company-owned beans ($550,413.31) and (2) commissions from sales of other producer's beans ($199,068.67). For tax purposes, the company had an overall loss of $131,762.78 in 1987.
In plaintiff's capacity as an authorized dealer for Bidwell combines, plaintiff had gross revenues in 1987 of $48,000 and a net income of $14,479.10. In sum, plaintiff's 1987 gross revenue from farming operations was $1,962,154.04 and his net income from farming operations was over $100,000. Plaintiff's 1987 gross revenues from non-farming operations (all proceeds from the Chippewa Valley Bean Company and the Bidwell dealership combined) were $3,382,995.13. His gross income from the sale of company-owned beans and commissions alone was $749,481.93. Plaintiff sustained a net loss of $117,283.68 from non-farming operations.
Plaintiff applied for benefits under the Disaster Assistance Act of 1988, claiming losses to his 1988 crop of kidney beans and corn. As part of his application, plaintiff certified that his 1987 "qualifying gross income," as defined in 7 C.F.R. § 1477, did not exceed $2 million. On this basis, plaintiff received disaster benefits in the amount of $99,558 from the Commodity Credit Corporation.
In opinions dated December 18, 1992 and January 22, 1993, the Deputy Administrator for State and County Operations determined that plaintiff's gross revenues from farming were $1,962,154.03 and that plaintiff's gross revenues from nonfarming operations were $3,431,975.10. The deputy administrator included all $3,382,995.13 (revenues of Chippewa Valley Bean Company) in plaintiff's non-farm gross revenues, even though the deputy administrator recognized that of the $3,382,995.13, all but $550,413.31 was derived from sales of kidney beans not owned by the Company and for which the Company was acting only as an agent for producers.
In making his computations, the deputy administrator did not distinguish between "annual income" and "gross revenue," and he included funds collected by the Chippewa Valley Bean Company as a marketing agent that never belonged to plaintiff or the Company. On that basis, the deputy administrator determined that a majority of plaintiff's total gross income was from plaintiff's non-farm operations as shown:
1. Farm gross revenue (income) — $1,962,154.03
2. Nonfarm gross revenue (income)
—
a. CVB's total bean sales — $3,382,995.13
b. Sale of Bidwell Combine — $ 48,800.00
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TOTAL: $5,393,949.16
From this computation, the deputy administrator calculated plaintiff's "qualifying gross revenue" for purposes of the Act as the sum of his gross revenues from his farming operations and nonfarming operations, or $5,393,949.16. Because the deputy administrator determined that plaintiff's qualifying gross revenues exceeded $2 million, he adjudged plaintiff ineligible for disaster benefits and directed him to repay all funds he had received from the Commodity Credit Corporation. Defendant has recovered part of the overpayments in offsets and has filed a counterclaim in this action for the remaining sum. Plaintiff has appealed the deputy director's determination through all administrative levels and seeks a return of the offsets.
OPINIONThis case raises two discrete questions of law: (1) whether it was arbitrary, capricious or otherwise contrary to law for defendant to adopt the concept of "gross income" rather than "net income" or "profits" for purpose of the majority-of-income test in § 231; and (2) whether it was error to include in plaintiff's nonfarm gross income the proceeds from sales collected by the Chippewa Valley Bean Company as a marketing agent on behalf of bean producers.
"Gross Income" versus "Net Income" or "Profits"
In Title I of the Disaster Assistance Act of 1988, 7 U.S.C. § 1421 note, §§ 201-241, Congress directed the Secretary of the Department of Agriculture to provide financial assistance to eligible producers who suffered losses of production during the 1988 crop year as a result of drought, hail, excessive moisture and related conditions. § 1421 note, §§ 201(a), 202(a). Congress set out financial eligibility criteria for benefits in § 231 of the Act:
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