R & R Farm Enterprises, Inc. v. Federal Crop Ins. Corp., Dept. of Agriculture

• Decision Date: 09 May 1986
• Docket Number: No. 85-4248,85-4248
• Citation: 788 F.2d 1148
• Parties: R & R FARM ENTERPRISES, INC., Plaintiff-Appellee, v. FEDERAL CROP INSURANCE CORPORATION, DEPARTMENT OF AGRICULTURE, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1148

788 F.2d 1148

R & R FARM ENTERPRISES, INC., Plaintiff-Appellee, v. FEDERAL CROP INSURANCE CORPORATION, DEPARTMENT OF AGRICULTURE, Defendant-Appellant.

No. 85-4248.

United States Court of Appeals Fifth Circuit.

May 9, 1986.

Joseph S. Cage, Jr., U.S. Atty., D.H. Perkins, Jr, Asst. U.S. Atty., Shreveport, La., Russell Caplan, Appellate Staff, Civ. Div., Dept. of Justice, Aaron B. Kahn, Raymond W. Fullerton, Attys., U.S. Dept. of Agriculture, Office of General Counsel, Washington, D.C., for defendant-appellant.

Jones, Jones & Alexander, J.B. Jones, Jr., Jennifer J. Bercier, Cameron, La., for plaintiff-appellee.

Appeal from the United States District Court for the Western District of Louisiana.

Before POLITZ, HIGGINBOTHAM, and JONES, Circuit Judges.

EDITH HOLLAN JONES, Circuit Judge:

R & R Farm Enterprises, Inc., (R & R) seeks to recover the proceeds of two rice crop insurance policies. The district court found in its favor and entered judgment against the Federal Crop Insurance Corporation (FCIC) for $214,928.82 plus interest from the date of judicial demand. Finding that the district court erred both in its allocation of the burden of proof and in charging the FCIC with interest, we VACATE and REMAND.

I.

R & R, a Louisiana corporation organized by Ralph Braswell and Raymond Natali, planted rice on three farms for which it obtained 1982 rice crop insurance policies from the FCIC. The policies insured against acts of God and nature but expressly disclaimed any liability for losses attributable to man. ¹

In June of 1982, R & R advised the FCIC that it expected a partial crop failure. The harvest was completed in October and R & R filed claims totaling nearly $400,000 for 3,053,165 pounds of crop lost from its farms. The FCIC determined, after several inspections, that R & R's total insurable loss was $64,826.08 and sent R & R a check for this amount. The inspector reported to the FCIC's District Director that R & R's remaining losses were the result of several "poor farming practices." R & R filed suit pursuant to 7 U.S.C. Sec. 1508(c) asserting that the FCIC had improperly refused to pay the full amount of its claim.

The district court placed on the FCIC the burden of proving that R & R's losses resulted from poor farming practices, relying on Calcasieu-Marine Nat. Bank of Lake Charles v. American Employers' Ins. Co., 533 F.2d 290, 295 (5th Cir.), cert. denied, 429 U.S. 922, 97 S.Ct. 319, 50 L.Ed.2d 289 (1976), and Standard Life Ins. Co. of Indiana v. Hughes, 240 F.2d 859, 861-62 (5th Cir.1957), both diversity cases applying Louisiana law. After a two-day bench trial, the court found that the FCIC failed to show that poor farming practices were the causes of R & R's losses, primarily because it failed to send an adjuster to inspect R & R's premises promptly. The court held, in the alternative, that even if the FCIC could have shown that poor farming practices caused R & R's losses, the FCIC would still have been liable for R & R's entire claim because the FCIC failed to present evidence at trial which would support its calculation of R & R's insured losses.

After calculating R & R's damages, the district court awarded both prejudgment and postjudgment interest, finding that the FCIC was not clothed with the government's sovereign immunity from interest on unpaid claims because its transactions were akin to those of a private enterprise. In this court, the FCIC challenges both the allocation of the burden of proof and resulting judgment in favor of R & R and the award of interest from the date of judicial demand.

II.

The FCIC, a wholly government-owned entity, was created by the Federal Crop Insurance Act of 1938. 7 U.S.C. Sec. 1503. See Fed. Crop Ins. Corp. v. Merrill, 332 U.S. 380, 381, 68 S.Ct. 1, 2, 92 L.Ed. 10, 13 (1947). Its founding was intended "to promote the national welfare by improving the economic stability of agriculture through a sound system of crop insurance." 7 U.S.C. Sec. 1502. The government pioneered this program, in part because "[p]rivate insurance companies apparently deemed all-risk crop insurance too great a commercial hazard." Merrill, 332 U.S. at 383 n. 1, 68 S.Ct. at 3 n. 1, 92 L.Ed. at 14 n. 1.

Congress conferred on the FCIC all powers customary to corporations in general, including the ability to enter into and carry out contracts or agreements. The statute further provides that:

State and local laws or rules shall not apply to contracts or agreements of the Corporation or the parties thereto to the extent that such contracts or agreements provide that such laws or rules shall not apply, or to the extent that such laws or rules are inconsistent with such contracts or agreements.

7 U.S.C. Sec. 1506(k). R & R's 1982 rice crop insurance contract makes no provision for state or local law. Accordingly, to the extent that such laws are inconsistent with R & R's 1982 contract, they are not applicable.

The Secretary of Agriculture and the FCIC are authorized to and have issued regulations necessary to carry out the provisions of the Federal Crop Insurance Act. 7 U.S.C. Sec. 1516(b); 7 C.F.R. Secs. 424.1-.7 & App. B (1983). ² These regulations set forth the terms and conditions of rice crop insurance contracts, see 7 C.F.R. Sec. 424.7 (1983), which bind the insureds. See Merrill, 332 U.S. at 384-85, 68 S.Ct. at 3, 92 L.Ed. at 15-16; Berry v. Fed. Crop Ins. Corp., 766 F.2d 886, 889 (5th Cir.1985).

The 1982 rice crop insurance policies make the following provision for claims for indemnity:

(a) It shall be a condition precedent to the payment of any indemnity that the insured (1) establish the total production of rice on the unit and that any loss of production was directly caused by one or more of the insured causes during the insurance period for the crop year for which the indemnity is claimed and (2) furnish any other information regarding the manner and extent of loss as may be required by the Corporation.

7 C.F.R. Sec. 424.7(d)(8)(a) (1983) (emphasis added). This provision placed on R & R the burden of establishing that its losses were directly caused by one or more of the perils insured against. See Royalty v. Fed. Crop Ins. Corp., 618 F.Supp. 650, 652 (W.D.Ky.1985). Cf. Berry, 766 F.2d at 890 (burden of proof is on the plaintiff to show that loss of production occurred during the policy period); Felder v. Fed. Crop Ins. Corp., 146 F.2d 638, 639-40 (4th Cir.1944) (burden of proof is on the plaintiff to show timely filing of proof of loss claim). R & R's assertions to the contrary are meritless. Because Louisiana law is inconsistent with the contract's unequivocal allocation of the burden of proof, the district court erred in applying it.

R & R argues that the district court properly turned to well-recognized principles of insurance law in interpreting the policy. Where the contract is not ambiguous, however, the court is bound by the contract terms as written. See, e.g., Ideal Mut. Ins. Co. v. Last Days Evangelical Ass'n, Inc., 783 F.2d 1234, 1238 (5th Cir.1986) (applying Texas law); Foreman v. Continental Cas. Co., 770 F.2d 487, 489 (5th Cir.1985) (applying Mississippi law); Hanover Bldg. Materials, Inc. v. Guiffrida 748 F.2d 1011, 1013 (5th Cir.1984) (when federal law governs the construction of insurance contracts, disputes are resolved by drawing upon standard insurance law principles); Smith v. Mobil Corp., 719 F.2d 1313, 1317 (5th Cir.1983) (applying Louisiana law). R & R also asserts that the district court's alternate holding entitles it to full indemnification regardless of who bore the burden of proof. Under the proper burden of proof, however, R & R must show, by a preponderance of the evidence, that all loss of production was directly caused by one or more of the insured causes. If R & R cannot show that all of its losses resulted from an insured cause, it would still be incumbent upon R & R to show that, for that portion of its loss for which it seeks indemnification, the loss was directly caused by one or more of the perils insured against.

R & R finally contends that the district court's improper allocation of the burden of proof was harmless in view of the court's finding that none of R & R's losses was attributable to uninsured perils. While improper allocation of the burden of proof might, in some instances, be considered harmless, ³ such is not the case here. We have no quarrel with the findings of fact by the district court. However, it is necessary to vacate those findings and remand for the court's application of the proper burden of proof. ⁴ If the court deems it appropriate, further hearings and findings of fact may be made.

III.

Concerning the district court's award to R & R of pre- and postjudgment interest, it is well established that, subject to constitutional limitations, interest on claims against the United States cannot be recovered in the absence of a specific provision to the contrary in a contract or statute or express consent of Congress. United States v. Louisiana, 446 U.S. 253, 264-65, 100 S.Ct. 1618, 1626, 64 L.Ed.2d 196, 208 (1980); United States v. Alcea Band of Tillamooks, 341 U.S. 48, 49, 71 S.Ct. 552, 95 L.Ed. 738, 739 (1951); United States v. N.Y. Rayon Importing Co., 329 U.S. 654, 658-59, 67 S.Ct. 601, 603-604, 91 L.Ed. 577, 581 (1947).

Nevertheless, when Congress has created agencies of the federal government with the power "to sue and be sued," this authority has almost invariably been construed as a waiver of sovereign immunity for certain purposes. See Franchise Tax Bd. of Cal. v. U.S. Postal Serv., 467 U.S. 512, 516-20, 104 S.Ct. 2549, 2552-55, 81 L.Ed.2d 446, 451-54 (1984) (garnishment); Reconstruction Finance Corp. v. J.G. Menihan Corp., 312 U.S. 81, 83-86, 61 S.Ct. 485, 486-87, 85 L.Ed. 595, 597-98 (1941) (waiver extends to costs of suit); Federal Housing Administration v. Burr, 309 U.S. 242, 245, 60 S.Ct. 488, 490, 84 L.Ed. 724, 728-29 (1940) (garnishment); Keifer & Keifer v. Reconstruction...