B-149133, JUL. 30, 1962

B-149133: Jul 30, 1962

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WHICH WAS SET OFF AGAINST AN INDEBTEDNESS OWING TO THE FEDERAL HOUSING ADMINISTRATION SHOULD AND CAN BE REFUNDED BY THAT AGENCY TO THE AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE WHICH ADMINISTERS THE SOIL BANK PROGRAM. CRAWFORD WAS REQUIRED TO REDUCE THE WHEAT ACREAGE ON HIS FARM BELOW HIS FARM WHEAT ALLOTMENT BY 100 ACRES (BEING HIS TOTAL ALLOTMENT). TO DESIGNATE THE LAND WHICH WAS WITHDRAWN FROM THE PRODUCTION OF WHEAT. WAS REDUCED TO JUDGMENT IN FAVOR OF THE UNITED STATES ON JUNE 7. THE JUDGMENT INDEBTEDNESS OWING TO THE FEDERAL HOUSING ADMINISTRATION WAS LISTED ON THE REGISTER OF INDEBTEDNESS MAINTAINED IN THE OFFICE OF THE SAN JUAN COUNTY. IF ONLY WINTER WHEAT IS PLANTED ON THE FARM AND THE FARM DOES NOT HAVE AN ALLOTMENT FOR ANY OTHER COMMODITY.

B-149133, JUL. 30, 1962

TO THE SECRETARY OF AGRICULTURE:

BY LETTER OF JUNE 7, 1962, ASSISTANT SECRETARY OF AGRICULTURE JOHN P. DUNCAN, JR., REQUESTS A DECISION WHETHER, IN VIEW OF THE CIRCUMSTANCES SET FORTH BELOW, THE AMOUNT OF 1957 ACREAGE RESERVE PROGRAM COMPENSATION UNDER THE SOIL BANK ACT, 7 U.S.C. 1801, ET SEQ., WHICH WAS SET OFF AGAINST AN INDEBTEDNESS OWING TO THE FEDERAL HOUSING ADMINISTRATION SHOULD AND CAN BE REFUNDED BY THAT AGENCY TO THE AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE WHICH ADMINISTERS THE SOIL BANK PROGRAM.

ON OCTOBER 5, 1956, MR. J. C. CRAWFORD ENTERED INTO AN ACREAGE RESERVE AGREEMENT WITH RESPECT TO THE 1957 WINTER WHEAT CROP ON HIS FARM IN SAN JUAN COUNTY, UTAH, PURSUANT TO THE PROVISIONS OF THE SOIL BANK ACT AND REGULATIONS PRESCRIBED FOR THE ADMINISTRATION OF THE PROGRAM. THE ACREAGE RESERVE AGREEMENT PROVIDED FOR PAYMENT OF COMPENSATION IN THE AMOUNT OF $1,070 FOR COMPLIANCE THEREWITH. UNDER SECTION 103 (A) OF THE SOIL BANK ACT, 7 U.S.C. 1821 (A), AND THE REGULATIONS, TO BE ELIGIBLE TO RECEIVE PAYMENT OF SUCH COMPENSATION, MR. CRAWFORD WAS REQUIRED TO REDUCE THE WHEAT ACREAGE ON HIS FARM BELOW HIS FARM WHEAT ALLOTMENT BY 100 ACRES (BEING HIS TOTAL ALLOTMENT), TO DESIGNATE THE LAND WHICH WAS WITHDRAWN FROM THE PRODUCTION OF WHEAT, AND NOT TO HARVEST A CROP FROM, OR GRAZE SUCH DESIGNATED LAND DURING THE YEAR 1957.

A CLAIM BY THE FEDERAL HOUSING ADMINISTRATION AGAINST J. C. CRAWFORD AND MAXINE CRAWFORD, HIS WIFE, WAS REDUCED TO JUDGMENT IN FAVOR OF THE UNITED STATES ON JUNE 7, 1956, IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH IN THE AMOUNT OF $1,335.50, WITH INTEREST TO JUNE 5, 1956, IN THE AMOUNT OF $52.04, AND COSTS IN THE AMOUNT OF $103. UNDER DATE OF MARCH 20, 1957, THE UNITED STATES ATTORNEY FOR THE DISTRICT OF UTAH FILED WITH THE UTAH AGRICULTURAL STABILIZATION AND CONSERVATION STATE COMMITTEE A REQUEST FOR SET OFF OF PAYMENTS BECOMING DUE J. C. CRAWFORD AND MAXINE CRAWFORD AGAINST THIS JUDGMENT. PURSUANT TO THIS REQUEST AND THE INSTRUCTIONS OF THE STATE COMMITTEE, THE JUDGMENT INDEBTEDNESS OWING TO THE FEDERAL HOUSING ADMINISTRATION WAS LISTED ON THE REGISTER OF INDEBTEDNESS MAINTAINED IN THE OFFICE OF THE SAN JUAN COUNTY, UTAH, AGRICULTURAL STABILIZATION AND CONSERVATION COMMITTEE.

THE REGULATIONS GOVERNING THE 1957 ACREAGE RESERVE PROGRAM, SEC. 485.224, 21 FED.REG. 10499, AS AMENDED, PROVIDED AS FOLLOWS:

"TIME OF COMPENSATION. CERTIFICATES (IN PAYMENT OF COMPENSATION) SHALL BE ISSUED AS SOON AS PRACTICABLE AFTER DETERMINATION BY THE COUNTY COMMITTEE THAT THERE HAS BEEN COMPLIANCE WITH THE ACREAGE REDUCTION REQUIREMENTS OF THE PROGRAM AND THE REQUIREMENTS OF SEC. 485.215 RELATING TO COMPLIANCE WITH ALLOTMENTS. (IN THE CASE OF AN AGREEMENT FOR WHEAT ON FORM CSS-800-1, IF ONLY WINTER WHEAT IS PLANTED ON THE FARM AND THE FARM DOES NOT HAVE AN ALLOTMENT FOR ANY OTHER COMMODITY, IT IS ANTICIPATED THAT THE ISSUANCE OF CERTIFICATES WILL BEGIN ABOUT JUNE 1, 1957).'

THE REGULATIONS, SEC. 485.225, ALSO PROVIDED THAT THE COMPENSATION DUE ANY PRODUCER WHO WAS INDEBTED TO AN AGENCY OF THE GOVERNMENT (OTHER THAN THE DEPARTMENT OF AGRICULTURE) SHOULD BE SET OFF AGAINST SUCH INDEBTEDNESS IF LISTED ON THE COUNTY DEBT REGISTER.

THE ENTIRE AMOUNT OF THE COMPENSATION UNDER MR. CRAWFORD'S ACREAGE RESERVE AGREEMENT WAS SET OFF AGAINST THE JUDGMENT INDEBTEDNESS OWING TO THE FEDERAL HOUSING ADMINISTRATION IN AUGUST 1957, BY THE ISSUANCE AND DELIVERY OF A COMMODITY CREDIT CORPORATION NEGOTIABLE CERTIFICATE TO THE UNITED STATES ATTORNEY FOR THE DISTRICT OF UTAH WHICH WAS RECEIPTED FOR ON AUGUST 15, 1957. THE ASSISTANT SECRETARY STATES THAT ALTHOUGH PAYMENT OF COMPENSATION WAS AUTHORIZED IN ADVANCE OF THE DATE OF TERMINATION OF THE ACREAGE RESERVE AGREEMENT, DECEMBER 31, 1957, MR. CRAWFORD WAS NOT RELIEVED OF COMPLIANCE WITH THE CONDITIONS OF THE AGREEMENT WHICH PROHIBITED GRAZING AND HARVESTING FROM THE DESIGNATED LAND DURING THE REMAINDER OF THE YEAR. HE ALSO STATED THAT A VIOLATION OF THE AGREEMENT IN EITHER RESPECT WOULD REQUIRE A REFUND OF THE COMPENSATION. 6 CFR 485.285, 485.286.

ON SEPTEMBER 28, 1957, A COMPLIANCE CHECK OF MR. CRAWFORD'S FARM DISCLOSED THAT WHEAT HAD BEEN HARVESTED FROM THE DESIGNATED ACREAGE RESERVE LAND. UPON RECEIPT OF SUCH INFORMATION, THE STATE ASC COMMITTEE INITIATED THE ADMINISTRATIVE HEARINGS PROCEDURE APPLICABLE IN CASES OF CONTRACT VIOLATIONS, SEC. 107 (D) OF THE SOIL BANK ACT, 7 U.S.C. 1831 (D), AND 6 CFR 485.276 TO 485.279. THIS PROCEEDING CULMINATED IN A FINAL DETERMINATION BY THE STATE ASC COMMITTEE THAT MR. CRAWFORD'S ACREAGE RESERVE AGREEMENT HAD BEEN VIOLATED IN THAT THE ACREAGE RESERVE HAD BEEN HARVESTED AS A RESULT OF GROSS NEGLIGENCE. UNDER THE REGULATIONS, 6 CFR 485.285, SUCH DETERMINATION REQUIRED THE FORFEITURE OR REFUND OF THE ENTIRE AMOUNT OF THE COMPENSATION PAYABLE OR PAID UNDER THE AGREEMENT.

THE HEARING BEFORE THE SAN JUAN COUNTY ASC COMMITTEE IN THE MATTER OF THE CONTRACT VIOLATION DISCLOSED CIRCUMSTANCES WHICH MADE MR. CRAWFORD'S RIGHT TO ANY COMPENSATION VERY QUESTIONABLE IRRESPECTIVE OF WHETHER HIS AGREEMENT HAD BEEN VIOLATED. IT WAS DISCLOSED BY TESTIMONY BEFORE THE COMMITTEE THAT ON MAY 22, 1957, MR. CRAWFORD ENTERED INTO A CONTRACT FOR THE SALE OF HIS FARM TO RICHARD KELTON, LOS ANGELES, CALIFORNIA. THE CONTRACT OF SALE CONTAINED THE FOLLOWING PROVISION:

"BUYER SHALL HAVE THE RIGHT IMMEDIATELY ON DEPOSIT OF THE $4,000 WITH THE ESCROW AGENT TO PLANT CROPS ON SAID PROPERTY AND TO MAKE A LEASE THEREFOR WITH A TENANT FOR A PERIOD OF NOT TO EXCEED THE TIME OF PLANTING AND HARVESTING OF ANY CROPS THEREON BY GOOD AGRICULTURAL METHODS. IN THE EVENT THE SALE HEREIN PROVIDED FOR IS NOT CONSUMMATED FOR ANY REASON, BUYER SHALL HAVE THE RIGHT TO CARE FOR AND HARVEST ANY CROPS PLANTED THEREON BY HIMSELF OR HIS AGENTS, EMPLOYEES, LESSEES OR ASSIGNS, * * *.'

MR. CRAWFORD, THE SELLER, DID NOT RETAIN ANY INTEREST IN THE CROPS UNDER THE PROVISIONS OF THE CONTRACT FOR THE SALE OF HIS FARM. THE CONTRACT ENTITLED THE BUYER OR HIS LESSEE TO POSSESSION AND THE PLANTING AND HARVESTING OF CROPS. THE COUNTY COMMITTEE WAS NOT NOTIFIED OF THE SALE AND THE BUYER DID NOT BECOME A PARTY TO THE ACREAGE RESERVE AGREEMENT. THEREFORE, ACCORDING TO THE ASSISTANT SECRETARY UNDER THE PERTINENT ACREAGE RESERVE PROGRAM REGULATIONS NO COMPENSATION WAS PAYABLE UNDER MR. CRAWFORD'S AGREEMENT, EITHER TO HIM OR TO MR. KELTON, THE BUYER. 6 CFR 485.228 (B) (1) AND (3).

AFTER THE UTAH STATE ASC COMMITTEE HAD DETERMINED THAT MR. CRAWFORD'S AGREEMENT HAD BEEN VIOLATED, REQUIRING THE FORFEITURE OF COMPENSATION, THE UTAH ASC STATE ADMINISTRATIVE OFFICER, ON JULY 23, 1958, WROTE TO THE UNITED STATES ATTORNEY REQUESTING THE REFUND OF THE AMOUNT OF $1,070, WHICH HAD BEEN SET OFF AT HIS REQUEST AGAINST THE INDEBTEDNESS OWING TO THE FEDERAL HOUSING ADMINISTRATION. THE REQUEST WAS TRANSMITTED TO THAT ADMINISTRATION WHICH ASKED FOR A STATEMENT OF THE DETAILS AND A REFERENCE TO THE STATUTORY AND REGULATORY PROVISIONS UNDER WHICH IT HAD BEEN DETERMINED THAT MR. CRAWFORD WAS NOT ENTITLED TO THE COMPENSATION. THIS INFORMATION WAS SUPPLIED BY THE STATE ADMINISTRATIVE OFFICER IN A LETTER DATED SEPTEMBER 19, 1958, TO THE GENERAL COUNSEL, FEDERAL HOUSING ADMINISTRATION. BY LETTER DATED OCTOBER 8, 1958, THE GENERAL COUNSEL REPLIED, STATING THAT IN HIS OPINION THE REFUND OF THE COMPENSATION TO THE DEPARTMENT OF AGRICULTURE COULD NOT BE MADE IN THE ABSENCE OF A RULING BY THE COMPTROLLER GENERAL DIRECTING SUCH REFUND. THE ASSISTANT SECRETARY STATES THAT THE GENERAL COUNSEL OF THE FEDERAL HOUSING ADMINISTRATION AND THE OFFICE OF THE GENERAL COUNSEL OF YOUR DEPARTMENT, AFTER CONSIDERABLE CORRESPONDENCE, HAVE BEEN UNABLE TO REACH A MUTUALLY SATISFACTORY CONCLUSION IN THIS MATTER.

THE POSITION OF THE GENERAL COUNSEL OF THE FEDERAL HOUSING ADMINISTRATION IS STATED IN HIS LETTER DATED APRIL 28, 1959, AS FOLLOWS:

"IT IS OUR VIEW OF THIS MATTER THAT MAKING A SET OFF IS TANTAMOUNT TO PAYMENT TO THE CRAWFORDS. SET OFF IS A RIGHT CERTAIN CREDITORS HAVE AS A SUBSTITUTE FOR DIRECT PAYMENT FROM THE HANDS OF THE BORROWER. IF IT WAS LEGALLY PERMISSIBLE TO PAY THE CRAWFORDS UNDER THE SOIL BANK AGREEMENT AND YOUR REGULATIONS AT THE TIME THE SET OFF WAS MADE, I DO NOT UNDERSTAND WHY THERE WOULD BE ANY DIFFICULTY IN ESTABLISHING A RIGHT AGAINST THE CRAWFORDS FOR REIMBURSEMENT PROVIDING YOU HAVE ESTABLISHED THAT THE AGREEMENT WAS VIOLATED. THE TIME THAT THE SET OFF WAS MADE AND THE RIGHT THAT THE CRAWFORDS HAD TO THE AMOUNT SET OFF AT THAT TIME IS THE KEY TO THIS ADMINISTRATION'S CONTENTION. I BELIEVE THE CRAWFORDS COULD HAVE BEEN PROPERLY PAID AT THAT TIME IF THE SET OFF HAD NOT BEEN MADE. IF THIS HAD BEEN DONE AND IT WAS LATER DETERMINED THAT THE AGREEMENT WAS VIOLATED, THERE IS NO DOUBT THAT YOU COULD RECOVER FROM THE CRAWFORDS THE AMOUNT YOU HAD PAID THEM BEFORE THE DETERMINATION OF THE VIOLATION.'

THE ASSISTANT SECRETARY POINTS OUT THAT THE SITUATION WITH RESPECT TO THE SALE OF MR. CRAWFORD'S FARM WAS UNKNOWN TO YOUR DEPARTMENT AT THE TIME OF THE CORRESPONDENCE WITH THE GENERAL COUNSEL OF THE FEDERAL HOUSING ADMINISTRATION. HOWEVER, YOUR DEPARTMENT FEELS THAT THE REASON WHY THE SOIL BANK COMPENSATION WAS NOT PAYABLE TO MR. CRAWFORD, WHETHER BECAUSE OF THE SALE OF HIS FARM OR BECAUSE OF THE VIOLATION OF HIS AGREEMENT, IS NOT MATERIAL. THE ASSISTANT SECRETARY STATES THAT SINCE THE SOIL BANK COMPENSATION IS NOT PAYABLE TO MR. CRAWFORD, IT IS THE POSITION OF YOUR DEPARTMENT THAT THE MAKING OF THE SET OFF UNDER THE CIRCUMSTANCES OF THIS CASE IS IMPROPER AND THE CREDITING OF THE AMOUNT OF THE SET OFF ON THE FEDERAL HOUSING ADMINISTRATION JUDGMENT AMOUNTS TO A WINDFALL TO MR. CRAWFORD.

IT IS CLEAR FROM THE ASSISTANT SECRETARY'S LETTER THAT UNDER THE PERTINENT SOIL BANK REGULATIONS THE CRAWFORDS WERE NOT LEGALLY ENTITLED TO COMPENSATION UNDER THEIR ACREAGE RESERVE AGREEMENT AT THE TIME (AUGUST 1957), THE SET OFF INVOLVED HERE WAS MADE, SINCE THEY ENTERED INTO A CONTRACT ON MAY 22, 1957, FOR THE SALE OF THE FARM WITHOUT RETAINING ANY INTEREST IN THE CROPS OR NOTIFYING THE COUNTY COMMITTEE OF THE SALE AND WITHOUT THE BUYER BECOMING A PARTY TO THE ACREAGE RESERVE AGREEMENT. INASMUCH AS THE CRAWFORDS WERE NOT LEGALLY ENTITLED TO PAYMENT UNDER THE SOIL BANK AGREEMENT ON THE DATE SET OFF WAS MADE, IT CAN HARDLY BE SAID THAT MAKING THE SET OFF IN QUESTION WAS TANTAMOUNT TO PAYMENT TO THE CRAWFORDS SO AS TO ESTABLISH IN YOUR DEPARTMENT A RIGHT AGAINST THE CRAWFORDS FOR REIMBURSEMENT OF THE AMOUNT SET OFF. THEREFORE, IT IS OUR VIEW THAT THE FEDERAL HOUSING ADMINISTRATION CAN AND SHOULD COMPLY WITH YOUR DEPARTMENT'S REQUEST FOR REFUND OF THE AMOUNT SET OFF AGAINST THE JUDGMENT. CF. 39 COMP. GEN. 246.

IN HIS LETTER OF APRIL 28, 1959, THE GENERAL COUNSEL OF THE FEDERAL HOUSING ADMINISTRATION STATES THAT IF THE GENERAL COUNSEL OF THE DEPARTMENT OF AGRICULTURE BELIEVES THAT THE CRAWFORDS NEVER HAD A LEGAL RIGHT TO PAYMENT UNDER THE SOIL BANK AGREEMENT AND YOUR DEPARTMENT'S REGULATIONS AT THE TIME SET OFF WAS MADE, THE FEDERAL HOUSING ADMINISTRATION WOULD BE GLAD TO RECONSIDER THE MATTER.

IN LIGHT OF THE FOREGOING WE SUGGEST YOU REQUEST THE FEDERAL HOUSING ADMINISTRATION TO RECONSIDER THE MATTER. WE ARE SENDING A COPY OF THIS LETTER TO THE COMMISSIONER, FEDERAL HOUSING ADMINISTRATION.