Parks v. Federal Crop Insurance Corporation

• Decision Date: 24 September 1969
• Docket Number: No. 17321.,17321.
• Citation: 416 F.2d 833
• Parties: Emery L. PARKS et al., Plaintiffs-Appellants, v. FEDERAL CROP INSURANCE CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

416 F.2d 833 (1969)

Emery L. PARKS et al., Plaintiffs-Appellants, v. FEDERAL CROP INSURANCE CORPORATION, Defendant-Appellee.

No. 17321.

United States Court of Appeals Seventh Circuit.

September 24, 1969.

Alan H. Lobley, Indianapolis, Ind., for plaintiffs-appellants; Ice, Miller, Donadio & Ryan, Indianapolis, Ind., of counsel.

Alan S. Rosenthal, Judith S. Seplowitz, U. S. Dept. of Justice, Washington, D. C., William D. Ruckelshaus, Asst. Atty. Gen., K. Edwin Applegate, U. S. Atty., Attys., Dept. of Justice, Washington, D. C., for defendant-appellee.

Before CASTLE, Chief Judge, SWYGERT, Circuit Judge, and GRANT, District Judge.

CASTLE, Chief Judge.

Plaintiffs are six Indiana farmers to whom defendant, Federal Crop Insurance Corporation (FCIC), issued substantially identical insurance policies covering their corn crops for the 1965 crop year. The crops in question suffered losses due to drought and plaintiffs sought to recover on the policies. FCIC denied coverage, refunded the premiums, and plaintiffs instituted this suit in the district court under 7 U.S.C. §§ 1506(d) and 1508(c). After the complaint and answer were filed, both parties moved for summary judgment and filed briefs in support thereof. The district court granted defendant's motion on the ground that the insurance was void due to material misrepresentations of fact made by plaintiffs in reporting their respective interests in the insured crops to FCIC. This appeal followed.

The controversy involves plaintiff's individual, identical contracts with the DeKalb Agricultural Association, under which the Association, "desirous of engaging the land and services of the grower to raise corn suitable for feed," agreed to furnish: parent hybrid seed corn to be planted on plaintiffs' farms; a man to supervise the planting of the seed; and labor for detasseling the resulting "female" corn plants to prevent self-pollination.¹ The Association also agreed to compensate the grower at the rate of $100 per acre plus a premium of $1.25 per bushel for each bushel of seed corn produced on the female acres in excess of 20 bushels per acre.

In return, the grower agreed to satisfactorily plant and harvest the crop, and not to allow any person to acquire or obtain "even as much as one kernel" of the seed corn. The contract provided that the seed furnished and the seed corn raised therefrom, as well as the corn produced from the male parent rows, remained at all times the property of the Association. The contract further provided:

"The agreed per acre payment will be reduced for a poor crop year as follows: When the 1965 plant average female yield for adapted varieties is reduced 40% below the 3-year plant average female yield for adapted varieties then the agreed payment per acre will be reduced 25%. When the 1965 plant average female yield for adapted varieties is reduced 75% below the 3-year plant average female yield for adapted varieties then the agreed payment per acre will be reduced 50%."

During the early part of 1965, an FCIC fieldman obtained plaintiffs' names from DeKalb and was informed that plaintiffs had growing contracts with the Association. The fieldman obtained crop insurance applications from plaintiffs and substantially identical policies of insurance² were issued to them by FCIC between February and June 1965. These policies covered plaintiffs' 1965 corn crops "to the extent of their interest therein,"³ against "unavoidable loss of production of the insured crops due to the causes specified, * * *" including drought. The policy also provided:

"The insured acreage for a crop for each crop year shall be that acreage in the county planted to the crop on land for which a premium rate is shown on the county actuarial table and in which crop the insured had an interest at the time of planting as reported by the insured or as determined by the Corporation, whichever the Corporation shall elect. * * * The interest insured shall be the interest of the insured at the time of planting in the insured crop grown on insured acreage as reported by the insured or as determined by the Corporation, whichever the Corporation shall elect. * * *

"2. RESPONSIBILITY OF THE INSURED TO REPORT ACREAGE AND INTEREST

"Promptly after planting the insured crops each year the insured shall submit to the county office, on a form prescribed by the Corporation, a report showing all acreage in the county planted to each insured crop (including a designation of any acreage of an insurable crop covered by the contract to which insurance does not attach) in which he has an interest and his interest therein at the time of planting.

* * * * * *

"13. AVOIDANCE OF CONTRACT

"The Corporation may void the contract with respect to any crop without affecting the insured\'s liability for premiums or waiving any right or remedy including the right to collect any unpaid premiums if at any time, either before or after any loss, the insured has concealed or misrepresented any material fact or committed any fraud relating to the contract, with respect to such crop, and such voidance shall be effective as of the beginning of the crop year with respect to which any such act or omission occurred."

The policy further provided that the bushel guarantee and the price at which the indemnities were to be computed were to be those established by the FCIC and shown on the county actuarial table. Additionally, "the bushel guarantee per acre shown on the county actuarial table shall be increased by three bushels for any harvested acreage on which the amount harvested is three or more bushels per acre." The county actuarial tables showed 38 guaranteed bushels per acre for all plaintiffs except for 128.6 acres (Unit 1) of Clifford Mooday and all acres of Leon Ayers, for whom there were 52 guaranteed bushels per acre.

After planting their crops, plaintiffs filed their acreage reports with FCIC, as required by the policies, on forms provided by FCIC. These reports disclosed the following information:

                                         Total
                                        Acres in
                                       Which You
                                      Have an Your        Name of Other
                Producer          Crop Interest Share    Person Sharing
                ______________________________________________________________
                Emery L. Parks
                  Unit 1 —      Corn   255   All
                  Unit 2 —      Corn   100   ½           Chancy Finfrock
                Leon Ayers
                                Corn   175   All
                Roy Threlkeld
                  Unit 1 —      Corn    21   ½           Florence Ilgenfritz
                  Unit 2 —      Corn   122   ½           Chas. Doubet
                Clifford Mooday
                  Unit 1 —      Corn    80   ½           Chas. Doubet
                  Unit 2 —      Corn   130   ½           Chas. Doubet
                Chancy Finfrock
                                Corn   100   ½           Emery L. Parks
                Darlington Conservation Club
                                Corn    55   All
                

After plaintiff's crops suffered damage due to drought, they filed claims with defendant for the loss on the female acres for the following amounts:

                Plaintiff                            Amount
                Emery L. Parks                    $4,081.80
                Leon Ayers                         7,323.50
                Roy Threlkeld                        531.22
                Clifford Mooday                    2,825.10
                H. Ivan Sadler, Trustee of
                  the Estate of Chancy
                  Finfrock                         1,154.26
                Darlington Conservation Club         660.35
                

FCIC's state director for Indiana rejected plaintiffs' claims on the ground that, under the growing contracts, all interest in the corn was allegedly owned by the DeKalb Agricultural Association, and none by the plaintiffs. Defendant subsequently refunded all premiums paid by plaintiffs for insurance coverage on the crops in question.

The district court, in holding for FCIC, concluded:

"The plaintiffs made misrepresentations of material facts in the acreage reports that they filed with defendant in that they represented that their share of the corn on the insured acres was `all\' or `½,\' whereas the true facts were as follows:

a. Plaintiffs had no interest whatsoever in the corn grown on that part of the reported acreage that was commonly known as `male acreage\' and `male parent rows,\' since the entire interest in such corn was in the Association. Since two rows out of every eight were `male parent rows,\' this misrepresentation affected one-fourth of the reported acreage.

b. Plaintiffs had no interest whatsoever in the first twenty bushels of seed corn produced on the female rows (the remaining ¾ths of the reported acreage). The entire interest in such seed corn was in the Association.

c. Plaintiffs had no property interest in the corn grown in the female rows in excess of 20 bushels per acre, the entire property interest therein being in the Association. Plaintiffs\' only interest in such `bonus bushels\' was a financial one — the right to bonus payment of $1.25 per bushel. This potential financial interest in such `bonus bushels\' amounts to only a minute fractional share of the full value thereof, since the market value of the seed corn that plaintiffs produced in the fall of 1965 was $26 per bushel."

This appeal presents two issues for review: (1) whether plaintiffs had insurable interests in the corn crops; (2) whether plaintiffs misrepresented a material fact in reporting their acreage to FCIC.

I

To determine whether or not plaintiffs had insurable interest in the crops,⁴ we must look to the statutes governing the defendant agency. Section 508(a) of the Federal Crop Insurance Act (7 U.S.C. § 1508(a)) authorizes FCIC "* * * to insure * * * producers of * * * agricultural commodities under any plan or plans of insurance determined by the Board to be adapted to any such commodity." We must, therefore, determine whether plaintiffs are "producers" under the Act.

Defendant argues that, although one may be a producer even if he lacks technical title to a crop, plaintiffs are not producers since they allegedly undertook no risk of production. Rather, defendant contends, plaintiffs are being paid a flat rate...