B-156446, MAY 18, 1965, 44 COMP. GEN. 735

B-156446: May 18, 1965

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SETTLEMENT OF THE TOBACCO PRODUCERS' CLAIMS WILL NOT BE SUBJECT TO LEGAL OBJECTION FROM FUNDS SUBSEQUENTLY MADE AVAILABLE FOR THE TOBACCO PROGRAM. 1965: REFERENCE IS MADE TO LETTER OF MARCH 30. THE QUESTION IS DISCUSSED IN AN ACCOMPANYING OPINION OF THE GENERAL COUNSEL OF YOUR DEPARTMENT. IN WHICH THE FOLLOWING PERTINENT FACTS INVOLVED ARE RELATED. A COOPERATOR IS DEFINED AS A . IF THE BID PRICE IS NOT ABOVE THE SUPPORT PRICE. THE WAREHOUSEMAN PAYS THE PRODUCER FOR ALL OF HIS TOBACCO WHICH WAS SOLD. IT IS STATED THAT THE REGULAR AUCTION SEASON FOR TOBACCO ON THE LEXINGTON MARKET CLOSED SOME TIME IN JANUARY 1965. THAT CLEAN UP SALES FOR ANY REMAINING TOBACCO WHICH HAD BEEN DELAYED IN REACHING THE AUCTION FLOOR DURING THE REGULAR SEASON WERE SCHEDULED FOR FEBRUARY 9.

B-156446, MAY 18, 1965, 44 COMP. GEN. 735

AGRICULTURE DEPARTMENT - PRICE - SUPPORT PROGRAMS - TOBACCO - APPROPRIATION EXHAUSTION EFFECT ALTHOUGH A SALE OF TOBACCO AT A CLEANUP AUCTION, AFTER THE CLOSE OF THE REGULAR AUCTION SEASON FOR PRICE SUPPORT ELIGIBILITY, ON A DAY WHEN THE WAREHOUSEMEN HAD BEEN ADVISED TO SUSPEND PRICE SUPPORT OPERATIONS DUE TO THE TEMPORARY UNAVAILABILITY OF FUNDS MIGHT NOT IMPOSE ANY LIABILITY ON THE COMMODITY CREDIT CORPORATION FOR PRICE SUPPORT, IN VIEW OF THE FACT THAT THE PRODUCERS COMPLIED WITH THE LAW AND REGULATIONS AT THE CLEANUP SALE AND THE NOMINAL AMOUNT INVOLVED, SETTLEMENT OF THE TOBACCO PRODUCERS' CLAIMS WILL NOT BE SUBJECT TO LEGAL OBJECTION FROM FUNDS SUBSEQUENTLY MADE AVAILABLE FOR THE TOBACCO PROGRAM.

TO THE SECRETARY OF AGRICULTURE, MAY 18, 1965:

REFERENCE IS MADE TO LETTER OF MARCH 30, 1965, WITH ENCLOSURES, FROM THE UNDER SECRETARY OF AGRICULTURE, IN WHICH HE REQUESTS OUR VIEWS AS TO WHETHER THE COMMODITY CREDIT CORPORATION HAS LIABILITY TO CERTAIN TOBACCO PRODUCERS BECAUSE OF SUSPENSION OF TOBACCO PRICE SUPPORT OPERATIONS DUE TO A TEMPORARY UNAVAILABILITY OF FUNDS.

THE QUESTION IS DISCUSSED IN AN ACCOMPANYING OPINION OF THE GENERAL COUNSEL OF YOUR DEPARTMENT, DATED MARCH 26, 1965, IN WHICH THE FOLLOWING PERTINENT FACTS INVOLVED ARE RELATED.

SECTIONS 101 AND 106 OF THE AGRICULTURAL ACT OF 1949, AS AMENDED, 7 U.S.C. 1441, 1445, REQUIRE THE SECRETARY OF AGRICULTURE TO SUPPORT THE PRICE OF CERTAIN BASIC AGRICULTURAL COMMODITIES, INCLUDING TOBACCO, TO COOPERATORS AT A SPECIFIED LEVEL OF SUPPORT. A COOPERATOR IS DEFINED AS A ,PRODUCER ON WHOSE FARM THE ACREAGE PLANTED TO THE COMMODITY DOES NOT EXCEED THE FARM ACREAGE ALLOTMENT FOR THE COMMODITY.' 7 U.S.C. 1428 (B).

THE COMMODITY CREDIT CORPORATION ENTERED INTO A 1964 TOBACCO LOAN AGREEMENT WITH BURLEY TOBACCO GROWERS COOPERATIVE ASSOCIATION OF LEXINGTON, KENTUCKY, TO MAKE PRICE SUPPORT AVAILABLE, THROUGH THE LATTER'S FACILITIES, ON THE 1964 CROP OF BURLEY TOBACCO TENDERED BY PRODUCERS IN COMPLIANCE WITH THE LAW AND REGULATIONS ISSUED THEREUNDER. 7 CFR 1464.1505, 1464.1506. UNDER THE TERMS OF THE AGREEMENT, THE ASSOCIATION, AS THE PRODUCERS' MARKETING AGENT, RECEIVES A LOAN FROM THE CORPORATION TO MAKE PRICE SUPPORT ADVANCES TO PRODUCERS, AND TO HANDLE AND PROCESS THE TOBACCO PREPARATORY TO ITS ACCEPTANCE AS COLLATERAL BY THE CORPORATION. THE AGREEMENT FURTHER PROVIDES THAT ELIGIBLE TOBACCO MAY BE RECEIVED THROUGH APRIL 30, 1965, UNLESS MARKET OR OTHER CONDITIONS, WOULD PREVENT SATISFACTORY HANDLING OF THE TOBACCO.

UNDER THESE ARRANGEMENTS, PRODUCERS PLACE THEIR TOBACCO ON THE AUCTION WAREHOUSE FLOOR FOR SALE. IF THE BID PRICE IS NOT ABOVE THE SUPPORT PRICE, THE WAREHOUSEMAN CONSIGNS THE TOBACCO TO THE ASSOCIATION FOR PLEDGING AS COLLATERAL FOR THE PRICE SUPPORT LOAN. AT THE END OF EACH SALE, THE WAREHOUSEMAN PAYS THE PRODUCER FOR ALL OF HIS TOBACCO WHICH WAS SOLD. FOR THE TOBACCO CONSIGNED TO THE ASSOCIATION THE WAREHOUSEMAN PAYS THE PRODUCER THE SUPPORT PRICE, LESS CERTAIN AUTHORIZED DEDUCTIONS. THE ASSOCIATION REIMBURSES THE WAREHOUSEMAN FOR THESE PRICE SUPPORT ADVANCES WITH THE FUNDS LOANED THE ASSOCIATION UNDER ITS AGREEMENT WITH THE COMMODITY CREDIT CORPORATION.

IT IS STATED THAT THE REGULAR AUCTION SEASON FOR TOBACCO ON THE LEXINGTON MARKET CLOSED SOME TIME IN JANUARY 1965, AND THAT CLEAN UP SALES FOR ANY REMAINING TOBACCO WHICH HAD BEEN DELAYED IN REACHING THE AUCTION FLOOR DURING THE REGULAR SEASON WERE SCHEDULED FOR FEBRUARY 9, 1965. IT IS POINTED OUT THAT CLEAN UP SALES ARE USUAL, AND THAT IT IS CUSTOMARY FOR PRICE SUPPORT TO BE AVAILABLE FOR AT LEAST THE FIRST CLEAN UP SALE SINCE REDRYING AND OTHER HANDLING FACILITIES ARE STILL IN OPERATION AT THE TIME.

ON THE MORNING OF FEBRUARY 9, THE DEPARTMENT'S DIRECTOR OF THE PRODUCER ASSOCIATIONS DIVISION SENT TO THE ASSOCIATION A TELEGRAM AS FOLLOWS:

"DUE TO TEMPORARY LIMITATION ON THE AVAILABILITY OF CCC FUNDS, DEFER ALL DISBURSEMENTS OR REQUESTS FOR CCC FUNDS OF WHATSOEVER NATURE AND MAINTAIN STRICT STATUS QUO UNTIL FURTHER NOTICE. NOTIFY ALL RECEIVING AND AUCTION WAREHOUSES IMMEDIATELY. SERVICING AGENT BANKS BEING NOTIFIED ACCORDINGLY.'

WHILE THE ASSOCIATION RECEIVED THE TELEGRAM AT 10:01 A.M., FEBRUARY 9, THE CONTENTS WERE DISCUSSED WITH THEIR REPRESENTATIVES EARLIER THAT MORNING BY TELEPHONE. THE ASSOCIATION, PRIOR TO THE COMMENCEMENT OF THE SALES AT 9:30 A.M., DISCUSSED THE SUBJECT MATTER OF THE FORTHCOMING TELEGRAM WITH THE AUCTION WAREHOUSEMEN BUT DESPITE SUCH NOTICE AND DISCUSSION THE LATTER ELECTED TO PROCEED WITH THE SALES.

AT THE FEBRUARY 9 AUCTION SALES, ELIGIBLE TOBACCO AMOUNTING TO 142,820 POUNDS WAS SOLD FOR $9,367.40 LESS THAN THE SUPPORT PRICE. ABOUT 321 PRODUCERS OWNED AN INTEREST IN THIS TOBACCO, EITHER AS LANDLORD, TENANT, OR OWNER-OPERATOR OF THE FARMS.

BASED UPON THE FACTS OUTLINED ABOVE, YOUR GENERAL COUNSEL EXPRESSES THE OPINION THAT THE COURTS WOULD HOLD THE COMMODITY CREDIT CORPORATION LIABLE TO PRODUCERS FOR THE AMOUNT OF PRICE SUPPORT WITHHELD ON TOBACCO SOLD AT AUCTION ON FEBRUARY 9, BY REASON OF DEFAULT IN CARRYING OUT THE OBLIGATIONS ARISING OUT OF THE CITED LAW AND IMPLEMENTING REGULATIONS, AND THAT THE UNAVAILABILITY OF FUNDS WOULD NOT OPERATE TO DEFEAT THE RIGHTS OF PRODUCERS TO PRICE SUPPORT. THE GENERAL COUNSEL ALSO CONCLUDES THAT THE CORPORATION MAY MAKE APPROPRIATE SETTLEMENT OF PRODUCERS' CLAIMS UNDER THE AUTHORITY CONTAINED IN SECTIONS 4 (J) AND (K) OF ITS CHARTER ACT, 15 U.S.C. 714B (J) (K), TO BE MEASURED BY THE DIFFERENCE BETWEEN THE AMOUNT PRODUCERS RECEIVED FROM THE WAREHOUSEMEN FOR ELIGIBLE TOBACCO AND THE AMOUNT THEY WOULD HAVE RECEIVED FROM THE WAREHOUSEMEN HAD PRICE SUPPORT BEEN AVAILABLE.

THE AGRICULTURAL ACT OF 1949, AS AMENDED, DIRECTS THE SECRETARY OF AGRICULTURE TO SUPPORT THE PRICE OF TOBACCO AND OTHER BASIC COMMODITIES. 7 U.S.C. 1428 (C) AND 1441. SECTION 401 (A) OF THAT ACT (7 U.S.C. 1421 (A) ( PROVIDES THAT THE SECRETARY OF AGRICULTURE SHALL PROVIDE THE PRICE SUPPORT AUTHORIZED OR REQUIRED THEREIN THROUGH THE COMMODITY CREDIT CORPORATION AND OTHER MEANS AVAILABLE TO HIM. SECTION 401 (B) OF THE ACT PROVIDES THAT, EXCEPT AS OTHERWISE PROVIDED IN THE ACT, THE SECRETARY OF AGRICULTURE SHALL DETERMINE OR APPROVE THE AMOUNTS, TERMS, AND CONDITIONS OF PRICE SUPPORT OPERATIONS AND THE EXTENT TO WHICH SUCH OPERATIONS ARE CARRIED OUT.

TO FINANCE THE ACTIVITIES OF THE COMMODITY CREDIT CORPORATION, THE ACT OF MARCH 8, 1938, 15 U.S.C. 713A-4 AND THE COMMODITY CREDIT CORPORATION CHARTER ACT, 15 U.S.C. 714, PLACE A LIMITATION OF $14.5 MILLION ON THE TOTAL AMOUNT OF BORROWINGS FROM ANY SOURCE THAT THE CORPORATION CAN HAVE OUTSTANDING AT ANY ONE TIME. THE CHARTER ACT ALSO REQUIRES THE CORPORATION TO RESERVE A SUFFICIENT AMOUNT OF ITS AUTHORIZED BORROWING POWER TO ENABLE IT TO PURCHASE ALL LOANS HELD BY LENDING AGENCIES UNDER THE CORPORATION'S PROGRAMS.

IN MAKING PRICE SUPPORT AVAILABLE TO ELIGIBLE PRODUCERS ON THEIR 1964 CROP OF TOBACCO, THE REGULATIONS (7 CFR 1464.1506 (3) ( PROVIDE THAT "PRICE SUPPORT WILL BE AVAILABLE TO ELIGIBLE PRODUCERS ON ELIGIBLE TOBACCO ONLY DURING EACH YEAR'S NORMAL MARKETING SEASON FOR EACH KIND OF TOBACCO FOR WHICH SUPPORT IS PROVIDED.' THE REGULAR OR NORMAL AUCTION SEASON FOR TOBACCO ON THE LEXINGTON, KENTUCKY, MARKET CLOSED SOME TIME IN JANUARY 1965, WHEREAS THE SALE IN QUESTION OF BURLEY TOBACCO IN LEXINGTON--- TERMED A CLEAN UP SALE--- WAS MADE ON FEBRUARY 9.

WHILE IT MAY BE AS STATED ABOVE THAT CLEAN UP SALES ARE USUAL AND THAT IT IS CUSTOMARY FOR PRICE SUPPORT TO BE AVAILABLE FOR AT LEAST THE FIRST CLEAN UP SALE FOLLOWING THE REGULAR AUCTION SEASON, THERE IS NOTHING IN THE CITED LAW OR REGULATIONS THAT MAKES OR REQUIRES PRICE SUPPORT FOR SUCH SALES MANDATORY. CONSEQUENTLY, THE QUESTION AS TO WHETHER THE COMMODITY CREDIT CORPORATION IS LEGALLY LIABLE TO CERTAIN TOBACCO PRODUCERS FOR PRICE SUPPORT ON THE CLEAN UP SALES IN QUESTION, UNDER CIRCUMSTANCES AS HERE INVOLVED WHERE BECAUSE OF THE TEMPORARY UNAVAILABILITY OF FUNDS PRICE SUPPORT OPERATIONS WERE SUSPENDED, IS NOT FREE FROM DOUBT.

BUT HOWEVER THAT MAY BE, IT APPEARS THAT THE PRODUCERS COMPLIED WITH THE LAW AND REGULATIONS ON THEIR ELIGIBLE TOBACCO SOLD AT AUCTION ON FEBRUARY 9. IN VIEW THEREOF, CONSIDERING THE NOMINAL AMOUNT OF FUNDS INVOLVED, AND HAVING REGARD FOR THE ESTABLISHED PRACTICE OF PROVIDING PRICE SUPPORT FOR AT LEAST THE FIRST CLEAN UP SALE AFTER THE REGULAR MARKETING SEASON, WE SEE NO LEGAL OBJECTION TO THE PROPOSED SETTLEMENT OF PRODUCERS' CLAIMS OF THE COMMODITY CREDIT CORPORATION, AS OUTLINED ABOVE, FROM FUNDS THEREAFTER MADE AVAILABLE TO THE CORPORATION BY PUB.L. 89-2, APPROVED FEBRUARY 11, 1965, FOR SUCH PROGRAM OPERATIONS, IF OTHERWISE PROPER.