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HAUBEIN FARMS, INC. v. DEPARTMENT OF AGRIC.

April 29, 1993

HAUBEIN FARMS, INC., Plaintiff,
v.
DEPARTMENT OF AGRICULTURE, Defendant.



The opinion of the court was delivered by: HAROLD H. GREENE

 This case arises out of Haubein Farm's ("plaintiff") loss of a cucumber crop. In October 1989, Mr. and Mrs. Clovis Haubein, the owners of Haubein Farms, submitted a claim for disaster relief in the amount of $ 29,041. After reviewing the application, the Dade County (Missouri) Director of the Department of Agriculture, Agriculture Stabilization and Conservation Service ("ASCS"), the Missouri State ASCS and, finally, the Deputy Administrator, State and County Operations, U.S. Department of Agriculture ("Agriculture" or "defendant") rejected the claim on the ground that the Haubein's farm and implement dealership constituted a single "person" with qualifying gross revenues in excess of $ 2 million. Consequently, pursuant to the Disaster Assistance Act of 1989, 7 U.S.C. § 1421(a) note and the implementing regulations, the Haubeins were ineligible for disaster relief.

 Haubein Farms seeks review of the Agriculture's denial of their application for disaster assistance. The Court now resolves the pending cross motions for summary judgment.

 I

 The facts of this case are undisputed. Mr. and Mrs. Haubein are farmers owning 100 percent of Haubein Farms. During 1988, the year relevant for disaster relief, the gross income of the Haubeins individually and added with that of their farm totalled approximately $ 700,000. In addition to running the farm, the Haubeins own 100 percent of Haubein Implement Company, a farm implement dealership. Plaintiff concedes that in 1988 the total gross income of the implement company exceeded $ 1.3 million.... Therefore, the 1988 total gross income of the Haubeins individually, their farm, and the implement company exceeded $ 2 million.

 The crux of the present dispute is whether the implementing regulations developed by the Department of Agriculture are contrary to Congress' intent in adopting the Disaster Assistance Act of 1989. In making this determination, the Court must view the agency's action through the lens of Chevron v. NRDC, 467 U.S. 837, 842-844, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984). As stated in Chevron, the reviewing court looks first to see whether Congress has "spoken to the precise question at issue." Id. at 842. If Congress has addressed the issue, the inquiry is at an end, and Congressional intent controls. If the statute is silent or ambiguous, however, the administrative interpretation controls if it is not arbitrary, capricious or manifestly contrary to the statute. Id. Below is a description of the regulatory scheme as presently constructed.

 Under the Disaster Assistance Act of 1989, section 151, 7 U.S.C. § 1421 note, certain crop losses may be reimbursed by the federal government.... Eligibility for disaster assistance is limited to "persons" who have annual "qualifying gross revenues" of $ 2 million or less. As required, the Secretary of Agriculture promulgated regulations implementing the Act at 7 C.F.R. Part 1477 (1990).

 As defined in section 1497.9(b), a "person" may encompass more than just the Haubeins and their farm.... In fact, a corporation may be considered the same "person" as an individual if that individual owns more than 50 percent of the corporation. Id. It is undisputed that the Haubeins own 100 percent of the Haubein Implement Company. Therefore, in determining whether to award disaster assistance, the Department of Agriculture considered the Haubeins, their farm, and their farm implement company to be one "person."

 Having determined the identity of a "person" for purposes of eligibility, the next issue is whether the "person" has "qualifying gross revenues" of over two million. If so, that person is ineligible for disaster relief. 7 C.F.R. § 1477.4. There are two methods of computing "qualifying gross revenues." First, "if a majority of the person's annual income is received from farming," qualifying gross revenues are "the gross revenues from the person's farming . . . operations." 7 U.S.C. § 1421 note. Alternatively, "if less than a majority of the person's annual income is received from farming" qualifying gross revenues equals "the person's gross revenues from all sources." Id.

 The regulation promulgated by the Department of Agriculture is structured similarly. If a "person receives more than 50 percent of her gross income from farming", qualified gross revenue equals "the annual gross income" solely from the farming operation. 7 C.F.R. § 1477.3(i). However, if the "person receives 50 percent or less of her gross income from farming," qualified gross revenue includes "the person's total gross income from all sources." Id.

 In applying this regulation, Agriculture first calculated whether less than 50 percent of the Haubein's gross income was derived from farming. Because $ 700,000 came from farming and at least $ 1.3 million was earned by the farm implement business, Agriculture determined that the Haubein's qualifying gross revenues must be calculated by adding together their gross income from all sources. Combined, the gross income from the farm and the farm implement company exceeded $ 2 million. Accordingly, their claim was denied.

 II

 The Haubeins make two challenges to Agriculture's calculation. First, they contend that Agriculture erred in including the farm implement dealership within the definition of "person" for disaster relief eligibility.... If the implement dealership is not a "person", the gross revenue of Mr. and Mrs. Haubein does not exceed the $ 2 million limit.

 The essence of the Haubein's argument is that a corporation must be actively involved in farming to be considered a "person." Because the farm implement corporation was not actively involved in farming, it is not a "person" for purposes of the Act. In support of this position, plaintiff cites a law review article, Christopher R. Kelley & Alan R. Malasky, Federal Farm Program Payment Limitations Law: A Lawyer's Guide, 17 Wm. Mitchell L. Rev. 199, 203 (1991), and points to ...


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