Farm Security Administration v. Herren

Decision Date12 January 1948
Docket NumberNo. 13518.,13518.
Citation165 F.2d 554
CourtU.S. Court of Appeals — Eighth Circuit


Melvin Richter, Atty., Department of Justice, of Washington, D. C. (Peyton Ford, Asst. Atty. Gen., R. S. Wilson, U. S. Atty., and Charles A. Beasley, Asst. U. S. Atty., both of Fort Smith, Ark., J. Francis Hayden, Sp. Asst. to Atty. Gen., and Hubert H. Margolies, Atty., Department of Justice, of Washington, D. C., on the brief), for appellant.

Du Val L. Purkins, for appellee.

Before SANBORN, WOODROUGH, and COLLET, Circuit Judges.

WOODROUGH, Circuit Judge.

It is stated that altogether Farm Security Administration aided in forming 52 land leasing associations, including Ashley Homestead Association, Inc., here involved, leasing 136,386 acres by groups composed of 2,000 small farmers, and as this case presents the first reported case brought on the theory that the lease executed to the leasing association should be deemed to be a lease to the United States which obligates the United States to make the payments which the lessee named in the lease agreed to make, the questions presented by the claim and the judgment here supporting it have been extensively briefed for the Government. The findings of fact filed in the trial court with the judgment do not attempt to reflect the gist or substance of the whole evidence received on the trial but only certain of the circumstances of the transactions shown in evidence and all requests of the Government for findings upon the evidence offered and received in its behalf were refused. Consequently it has been necessary to consider the case actually presented by the evidence, according to the findings the weight to which they are entitled under the rules. Although the record shows that the statutes, Executive Orders, Regulations, Administrative and Directive Order establishing and defining the functions, powers and duties of Farm Security Administration and its agents acting in Arkansas relative to the transactions involved were properly brought to the Court's notice and recognized by it on the trial, it is not clear that all Executive Orders and Hearings before Congressional Committees called to our notice in the brief were also there produced. Possibly a wider perspective of the rehabilitation program of Farm Security has been accorded, but the evidence and documents brought up on the appeal have controlled our decision.

It appears that the rural rehabilitation program of the Farm Security Administration was instituted by the Government in order to alleviate the effects of the economic depression and great drought of the early 1930's. Congress in the Emergency Relief Appropriation Act of 1935, 49 Stat. 115, authorized the President to expend monies for rural rehabilitation and relief in stricken agricultural areas, and as part of that program, to make loans to finance in whole or in part the purchase of farm lands and necessary equipment by farmers, farm tenants, croppers, and farm laborers, Sec. 1, 49 Stat. 115, 117.3

Executive Order 7143, dated August 19, 1935, as amended by subsequent Executive Orders and codified in the Code of Federal Regulations, at Section 301.3, Title VI, Chapter III, provided:

"(a) Loans may be made by the Farm Security Administration

"(1) for the purpose of financing, in whole or in part, the purchase of farm lands and necessary equipment by farmers, farm tenants, croppers, or farm laborers, and

"(2) for such other purposes as may be necessary in the administration of approved projects involving rural rehabilitation or relief in stricken agricultural areas.

"(b) Loans for the purposes mentioned in paragraph (a) (2) may be made by the Farm Security Administration either to individuals or to such bona fide agencies or cooperative associations as the Administrator shall approve: Provided, however, that such loans shall be made to such agencies or associations only upon condition (1) that they impose no inequitable restrictions upon membership or participation therein, and (2) that they be so conducted under the supervision of the Farm Security Administration as to protect adequately the interests of the members or participants therein."

Pursuant to this authority, the Administrator of the Resettlement Administration issued Administration Order 40 (Revision 2), dated September 26, 1936, prescribing the rules and regulations governing his agency with respect to the classes of loans which it would make in connection with bona fide cooperative associations, the procedure to be followed, the purpose thereof, eligibility requirements and general policies.4

It was brought out at the Hearings before the Select Committee of the House Committee on Agriculture to Investigate the Activities of the Farm Security Administration, 78 Cong. 1st Sess., pursuant to H.Res. 119, pp. 982, 984, that in the course of the administration of the program of the above administration order, it became obvious to the Farm Security Administration that what the stricken farmer needed was assistance in planning his operations and the necessary credit to carry out his plans rather than advances of funds simply to meet the emergencies with which his family was faced. Accordingly, Farm Security undertook as part of the rural rehabilitation loan program to render the assistance and supervision the farmers needed. The Farm Security Administration sought to enable a low income farmer to obtain not only the information and methods developed by the college of agriculture experiment station and the Department of Agriculture, and to obtain assistance in relating this information and experience to his problems and at the same time funds were loaned with which to put such solution in operation.

Executive Order 7143 authorized loans of two general categories: (1) loans to individuals and (2) loans to associations. As to the loans to associations, Farm Security found that frequently the rehabilitation of individual farmers in certain areas was impossible because adequate land resources were not available. One of the main reasons was that the land was owned and operated in fairly large tracts and the landowners were unwilling to break up the tracts piece by piece and make individual units available to several different small farmers. To overcome this obstacle, Farm Security developed the "land-leasing program," the purpose of which was to make it possible to assist a large number of low-income farmers. This program was to aid small farmers in obtaining access to such farm land under a secure lease by helping them establish an association which could lease the entire large tract and then sublease individual family-type farms to the members. See Hearings 1001-1002; Herren v. Farm Security Administration, etc., 8 Cir., 153 F.2d 76, 79, fn. 3. This was done by helping the landowner and the farmers draw up a lease containing protective provisions for both parties and usually running for a period of 5 to 10 years. Farm Security then made a loan to the association to enable it to pay a year's rent in advance and aided the association in subleasing to individual low-income farmers. Local supervisors helped the farmers draw up their individual farm plans, and where necessary, made regulation rehabilitation loans to each farmer. They also assisted the group in handling the limited business of the association. The land-leasing associations attempted to make it possible for these farmers to operate an adequate family type farm for a number of years continuously so that they could build up livestock enterprises, work out crop rotation plans, grow sizeable gardens, and get into a diversified type of agriculture. It was in this manner that Farm Security sought to discharge its task of rehabilitating low-income farmers, a task which it had recognized as being in many instances as much of an educational task as financial. But there was no evidence that the Secretary of Agriculture ever authorized the creation of land-leasing corporations by government officials or by Farm Security. That was no part of the rehabilitation plan, though such officials did advise and assist the farmers themselves to organize such corporations. The several officers of Farm Security who testified in this case reflected their understanding of this plan of operation in the territory where they worked, including Arkansas, and their adherence to it.

The court is not called on here to pass on whether the program of Farm Security so adopted and carried on over the course of years was as intended by Congress or not, but the existence of it as fully established must be recognized in order to get at the actual intention in particular transactions that were part of the operation of the program.

Ashley Homestead Association, Inc., the named lessee of the Herren property, was one of the land-leasing associations which Farm Security helped small farmers to incorporate and establish. It was incorporated on January 20, 1939, almost a year prior to the signing of the lease here involved, as a benevolent corporation under Secs. 2252-2261 of the Statutes of Arkansas, Pope's Digest 1937. It was a corporate entity, separate and distinct from Farm Security. Its purpose, as stated in Articles of Association, was "to rehabilitate and render self-supporting the families of its members (rural families of low income) by assisting or participating in the establishment, leasing, development and maintenance of farms, homes and other facilities, including necessary or appropriate cooperative and community facilities and enterprises, for such families on the lands now or hereafter leased or owned by this Association; * * *." No employee of Farm Security was among the incorporators of the Association. The Articles of Association and the bylaws, in addition to the usual provisions, provided that the members of the board of directors need not be members of the...

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