B-142279, JUN. 12, 1961

B-142279, JUN. 12, 1961

TO THE SECRETARY OF AGRICULTURE:

BY LETTER OF MAY 4, 1961, ASSISTANT SECRETARY JOHN P. DUNCAN, JR., REQUESTED OUR ADVICE AS TO THE PROPRIETY OF MAKING PAYMENT TO CERTAIN PERSONS AND FIRMS UNDER THE CRANBERRY PAYMENT PROGRAM PROMULGATED BY THE FORMER SECRETARY OF AGRICULTURE UNDER AUTHORITY OF SECTION 32, PUBLIC NO. 320, 74TH CONGRESS, AS AMENDED, 7 U.S.C. 612C. THE BACKGROUND LEADING TO THE ASSISTANT SECRETARY'S REQUEST MAY BE SUMMARIZED AS FOLLOWS:

AS A RESULT OF AN ANNOUNCEMENT BY THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE ON NOVEMBER 9, 1959, THAT SOME SHIPMENTS OF CRANBERRIES HAD BEEN FOUND TO BE UNFIT FOR HUMAN CONSUMPTION BECAUSE OF CONTAMINATION WITH AMINOTRIAZOLE, A SPRAY HAVING CARCINOGENIC ATTRIBUTES AND USED ON CRANBERRY BOGS, THE PUBLIC BECAME FRIGHTENED; AND ALTHOUGH CONTAMINATION WITH AMINOTRIAZOLE WAS, IN FACT, VERY LIMITED, THE BULK OF THE 1959 CRANBERRY CROP BECAME UNMARKETABLE. TO ALLEVIATE THE RESULTANT MARKETING CONDITIONS, THE FORMER SECRETARY OF AGRICULTURE PROPOSED A PROGRAM UNDER SECTION 32, TO "REESTABLISH FARMERS' PURCHASING POWER" BY MAKING PAYMENTS TO CRANBERRY GROWERS AT LEVELS WHICH WOULD GIVE THEM PURCHASING POWER EQUAL TO THAT WHICH THEY HAD HAD FROM THE VALUE OF THEIR PRODUCTION IN 1957 AND 1958. THE PROPOSED PROGRAM WAS SUBMITTED TO THIS OFFICE FOR AN ADVANCE DECISION AS TO WHETHER THE AUTHORITY CONFERRED BY SECTION WAS SUFFICIENT TO COVER PAYMENTS UNDER THE CIRCUMSTANCES INVOLVED. BY LETTER OF MARCH 28, 1960, B-142279, WE ADVISED THE FORMER SECRETARY OF AGRICULTURE THAT WE WOULD NOT OBJECT TO THE USE OF SECTION 32 FUNDS FOR THE PURPOSE CONTEMPLATED; BUT WE EMPHASIZED THAT OUR VIEWS RELATED SOLELY TO THE LEGALITY OF SUCH USE AND WERE NOT TO BE CONSTRUED AS AN APPROVAL OF PROGRAM DETAILS. ON MAY 4, 1960, THE FORMER SECRETARY PROMULGATED CRANBERRY PAYMENT PROGRAM AMM181A.

IN THE COURSE OF ADMINISTERING THE PROGRAM A NUMBER OF QUESTIONS AROSE CONCERNING THE RIGHT OF CRANBERRY GROWERS TO RECEIVE PAYMENT FOR CRANBERRIES WHICH HAD BEEN SOLD OR WERE IN TRANSIT AT THE TIME OF THE ANNOUNCEMENT BY THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE ON NOVEMBER 9, 1959, AND WHICH WERE SUBSEQUENTLY REJECTED BY THE BUYERS. THESE QUESTIONS WERE DISCUSSED WITH MEMBERS OF OUR STAFF AND IT WAS CONCLUDED THAT APPROPRIATE AMENDMENTS TO THE PROGRAM SHOULD BE ISSUED TO MAKE CLEAR AMONG OTHER THINGS THAT COMMERCIAL BUYERS AND PROCESSORS OF CRANBERRIES WERE NOT ENTITLED TO PROGRAM BENEFITS INTENDED FOR GROWERS. ACCORDINGLY, AMENDMENT NO. 2 TO CRANBERRY PAYMENT PROGRAM AMM181A WAS ISSUED, EFFECTIVE JUNE 21, 1960.

AMENDMENT NO. 2 PROVIDED THAT IF THE GROWERS HAD SOLD THEIR CRANBERRIES FOR A FIXED PRICE TO A HANDLER OR PROCESSOR AND TITLE TO THE CRANBERRIES HAD PASSED TO THE BUYER THE TRANSACTION WOULD BE CONSIDERED COMPLETED. A GROWER'S ENTIRE CROP OF CRANBERRIES WAS SOLD AT A FIXED PRICE PRIOR TO NOVEMBER 10, 1959, NONE OF SUCH CRANBERRIES WOULD BE ELIGIBLE FOR PAYMENT UNDER THE PROGRAM. IN THE CASE OF OTHER SALES, IF A GROWER RECEIVED LESS THAN $10.34 PER BARREL FOR SCREENED BERRIES OR $9.74 FOR UNSCREENED BERRIES HE WOULD BE ELIGIBLE FOR PAYMENTS UNDER THE PROGRAM UNLESS THE FIXED SALES PRICE AT WHICH SUCH CRANBERRIES WERE SOLD TO HIS BUYER WAS MORE THAN THE PRICES INDICATED ABOVE. IF THE GROWER HAD RECEIVED ONLY PART PAYMENT OF THE FIXED SALES PRICE AND WAS FOUND TO HAVE AN ACCOUNT RECEIVABLE FOR THE BALANCE, THE BERRIES INVOLVED WOULD NOT ELIGIBLE FOR CLAIM UNDER THE PROGRAM UNLESS THE TOTAL PRICE, I.E. THE AMOUNT RECEIVED AND THE RECEIVABLE, WAS LESS THAN $10.34 PER BARREL FOR SCREENED BERRIES AND $9.74 PER BARREL FOR UNSCREENED BERRIES.

THE ASSISTANT SECRETARY STATES THAT AT THE TIME AMENDMENT NO. 2 WAS PROMULGATED YOUR DEPARTMENT HAD NOT AUDITED CLAIMS MADE BY GROWERS UNDER THE PROGRAM AND WAS THEREFORE UNAWARE THAT THE AMENDMENT WOULD PRECLUDE A NUMBER OF INDEPENDENT GROWERS AND SMALL COOPERATIVES FROM PARTICIPATING EITHER IN TOTO OR IN PART ALTHOUGH ALL GROWER-MEMBERS OF THE MAJOR COOPERATIVE, OCEAN SPRAY, WOULD BE ELIGIBLE UNDER THAT COOPERATIVE'S MARKETING ARRANGEMENTS. IT APPEARS THAT OCEAN SPRAY WHICH NORMALLY MARKETS APPROXIMATELY 80 PERCENT OF THE NATION'S CRANBERRY PRODUCTION WAS ELIGIBLE TO PARTICIPATE WITHOUT DIFFICULTY IN THE PROGRAM SINCE ALL OF THE CRANBERRY PRODUCTION OF ITS MEMBERS IS HANDLED ON A SINGLE "POOL BASIS" WITH THE PRICE TO THE MEMBERS BEING DETERMINED AFTER THE MARKETING SEASON ON THE BASIS OF TOTAL RECEIPTS FROM MARKETING, PROCESSING (INCLUDING CANNING), PACKAGING AND ALL RELATED ACTIVITIES CARRIED OUT BY THE COOPERATIVE ITSELF. ON THE OTHER HAND, THE INDEPENDENT GROWERS AND SMALL COOPERATIVES WHO MARKETED THEIR CRANBERRIES THROUGH COMMERCIAL BUYERS AND PROCESSORS WERE FOUND IN A NUMBER OF INSTANCES TO HAVE CONTRACTED FOR THE DISPOSITION OF BERRIES ON VARIOUS PRICING BASES WHICH RAISE QUESTIONS AS TO THEIR ELIGIBILITY IN VIEW OF THE PROVISIONS OF AMENDMENT NO. 2. BRIEF SUMMARY OF SEVEN QUESTIONED CLAIMS WAS SUBMITTED WITH THE ASSISTANT SECRETARY'S LETTER TOGETHER WITH DEPARTMENT REPORTS OF AUDIT APPLICABLE TO SIX OF THEM. BASICALLY, THE QUESTION PRESENTED IS WHETHER THE GROWERS INVOLVED MAY BE PAID UNDER THE PROGRAM NOTWITHSTANDING THAT THEY MIGHT HAVE SOLD THEIR CRANBERRIES FOR A FIXED PRICE AND TRANSFERRED TITLE TO PURCHASERS OF THE CRANBERRIES.

THE ASSISTANT SECRETARY POINTS OUT THAT IN ALL OF THE INSTANCES COVERED BY THE REQUEST FOR OPINION, THE CRANBERRIES INVOLVED WERE RETURNED TO GROWERS EITHER AT OR ABOUT THE TIME OF THE HEW ANNOUNCEMENT OR WITHIN THE ENSUING SIX TO EIGHT MONTHS; THAT IN EVERY CASE FOR WHICH THE DATE OF RETURN IS KNOWN, THE ACTION PRECEDED THE ISSUANCE AND EFFECTIVE DATE OF AMENDMENT 2; THAT ALL OF THE RETURNED BERRIES WERE DESTROYED BY THE GROWERS UNDER FEDERAL SUPERVISION APPARENTLY IN THE BELIEF THAT SUCH DESTRUCTION WOULD COMPLY WITH PROGRAM REQUIREMENTS; AND THAT WHILE IT IS CONCEIVABLE THAT THE GROWERS INVOLVED COULD HAVE REFUSED TO ACCEPT RETURN OF THEIR CRANBERRIES FROM THE PROCESSORS, IT IS APPARENT THAT SINCE THEY DID ACCEPT RETURN OF THE BERRIES AND SINCE ALL OF THE BERRIES INVOLVED HAVE NOW BEEN DESTROYED, THE LOSS AT THIS DATE WILL FALL ON THE GROWERS, SUCH ACCOUNTS RECEIVABLE AS THEY MAY HAVE HAD BEING NO LONGER ENFORCEABLE. THE ASSISTANT SECRETARY POINTS OUT FURTHER THAT DESTRUCTION OF THE RETURNED CRANBERRIES SERVED THE PURPOSE OF THE PROGRAM SINCE ALMOST THE ENTIRE QUANTITY OF BERRIES DESTROYED BY THE VARIOUS APPLICANTS INVOLVED WERE BERRIES WHICH HAD BEEN FROZEN AND WHICH IF NOT DESTROYED WOULD HAVE BEEN AVAILABLE FOR SALE DURING THE 1960 MARKETING SEASON THEREBY OPERATING TO DEPRECIATE 1960-CROP CRANBERRY PRICES. THIS WOULD MEAN A FURTHER DETERIORATION IN THE PURCHASING POWER OF THE FARMERS WHICH WAS SOUGHT TO BE REESTABLISHED UNDER THE CRANBERRY PAYMENT PROGRAM IN THE FIRST INSTANCE.

IN VIEW OF THE CIRCUMSTANCES INVOLVED, YOUR DEPARTMENT IS OF THE OPINION THAT FURTHER AMENDMENT OF CRANBERRY PAYMENT PROGRAM AMM181A, IS WARRANTED SO AS TO PERMIT PAYMENT OF SPECIFIED AMOUNTS TO THE GROWERS INVOLVED AND OTHERS SIMILARLY SITUATED. PAYMENT IS CONTEMPLATED ONLY WITH RESPECT TO CLAIMS RELATED TO BERRIES WHICH WERE RETURNED FROM PURCHASER TO GROWER AND WHICH WERE DESTROYED UNDER FEDERAL SUPERVISION IN ACCORDANCE WITH PROGRAM REQUIREMENTS. IT IS YOUR DEPARTMENT'S VIEW THAT AN APPROPRIATE AMENDMENT TO SUCH EFFECT IS REQUIRED TO FULLY ACCOMPLISH THE PURPOSES OF THE PROGRAM AND TO PREVENT VARIATIONS IN PAYMENT BETWEEN GROWERS SIMILARLY SITUATED; THAT, EVEN THOUGH A BASIS MAY EXIST UNDER THE EXISTING PROGRAM FOR PAYMENT OF THE AMOUNTS CLAIMED IN CERTAIN CASES FOR BERRIES SOLD ON AN "ADVANCE PRICE" BASIS, YOU BELIEVE THAT SUCH A DIFFERENTIATION OF THE TRANSACTIONS WOULD MERELY ADD A FURTHER CLASSIFICATION OF GROWERS DESPITE THE FACT THAT IN ALL OF THE CASES THE GROWERS DESTROYED THE CRANBERRIES INVOLVED AND HAVE NOT BEEN, AND PROBABLY CANNOT NOW BE, FULLY COMPENSATED FOR THE BERRIES BY THE HANDLERS AND PROCESSORS TO WHOM THEY HAD CONTRACTED TO SELL THEM.

SECTION 32 OF PUBLIC NO. 320, AS AMENDED, PROVIDES, IN PERTINENT PART, AS FOLLOWS:

"THERE IS APPROPRIATED FOR EACH FISCAL YEAR BEGINNING WITH THE FISCAL YEAR ENDING JUNE 30, 1936, AN AMOUNT EQUAL TO 30 PERCENTUM OF THE GROSS RECEIPTS FROM DUTIES COLLECTED UNDER THE CUSTOMS LAWS DURING THE PERIOD JANUARY 1 TO DECEMBER 31, BOTH INCLUSIVE, PRECEDING THE BEGINNING OF EACH SUCH FISCAL YEAR. SUCH SUMS SHALL BE MAINTAINED IN A SEPARATE FUND AND SHALL BE USED BY THE SECRETARY OF AGRICULTURE * * * TO * * * (3) REESTABLISH FARMERS' PURCHASING POWER BY MAKING PAYMENTS IN CONNECTION WITH THE NORMAL PRODUCTION OF ANY AGRICULTURAL COMMODITY FOR DOMESTIC CONSUMPTION. * * *

"THE SUMS APPROPRIATED UNDER THIS SECTION SHALL BE EXPENDED FOR SUCH ONE OR MORE OF THE ABOVE-SPECIFIED PURPOSES, AND AT SUCH TIMES, IN SUCH MANNER, AND IN SUCH AMOUNTS AS THE SECRETARY OF AGRICULTURE FINDS WILL EFFECTUATE SUBSTANTIAL ACCOMPLISHMENT OF ANY ONE OR MORE OF THE PURPOSES OF THIS SECTION. * * *"

CRANBERRY PAYMENT PROGRAM AMM181A WAS INSTITUTED UNDER SECTION 32 TO REESTABLISH THE PURCHASING POWER OF CRANBERRY GROWERS WHO SUFFERED LOSS THROUGH NO FAULT OF THEIR OWN IN CONNECTION WITH THE NORMAL PRODUCTION OF THEIR 1959 CROP. UNDER THE STATUTE AND THE PROGRAM TERMS AND CONDITIONS AS INITIALLY PROMULGATED, AUTHORITY TO UTILIZE SECTION 32 FUNDS EXISTS ONLY FOR MAKING PAYMENTS FOR THE BENEFIT OF THE GROWERS OF CRANBERRIES. THAT LOSSES WERE SUFFERED BY OTHER THAN GROWERS IN CONNECTION WITH THE 1959 CRANBERRY CROP DOES NOT AFFORD A PROPER BASIS FOR MAKING PAYMENT TO THEM UNDER THE PROGRAM. SECTIONS 517.475, 517.477 (F), AND 517.483 OF THE PROGRAM TERMS AND CONDITIONS MAKE THIS CLEAR AS DO THE QUOTED PROVISIONS OF THE STATUTE ITSELF. AMENDMENT NO. 2 TO THE PROGRAM TERMS AND CONDITIONS DOES NOT AFFECT OR INTRODUCE ANYTHING NEW WITH RESPECT TO THE BASIC REQUIREMENT THAT SECTION 32 FUNDS BE UTILIZED TO BENEFIT ONLY GROWERS.

IN LIGHT OF THE RATIONALE UNDERLYING THE PROGRAM THERE CAN BE NO QUESTION BUT THAT PAYMENT IS NOT AUTHORIZED WHERE A GROWER HAS SOLD HIS CROP AND RECEIVED IN RETURN AN AMOUNT IN EXCESS OF THE LEVELS SET UNDER THE PROGRAM. NOR IS PAYMENT ORDINARILY AUTHORIZED WHERE A GROWER HAS SOLD HIS CROP AND HOLDS A LEGALLY BINDING ACCOUNT RECEIVABLE FOR AN AMOUNT WHICH WHEN ADDED TO ANY CASH HE MAY HAVE RECEIVED UNDER THE SALE RESULTS IN A TOTAL THAT EQUALS OR EXCEEDS THE PROGRAM LEVELS. FOR, AT LEAST TO THE EXTENT THAT THE DEBTOR IN SUCH CASE HAS ASSETS WITH WHICH TO PAY HIS DEBT, ANY PAYMENT UNDER THE PROGRAM WOULD GENERALLY OPERATE TO AID THE PURCHASER RATHER THAN THE GROWER OF THE CRANBERRIES. WE DO NOT CONSIDER THE FACT THAT THE GROWERS ACCEPTED RETURN OF THEIR BERRIES IN LIEU OF PAYMENT AND DESTROYED THEM TO BE DETERMINATIVE, IN AND OF ITSELF, OF THEIR ENTITLEMENT UNDER THE PROGRAM. THE PURPOSE FOR THE PROGRAM WAS TO ASSIST CRANBERRY GROWERS WHO SUFFERED LOSS DUE TO CIRCUMSTANCES BEYOND THEIR CONTROL, AND PAYMENT IN THOSE INSTANCES WHERE GROWERS VOLUNTARILY BORE A LOSS BY ACCEPTING RETURN OF CRANBERRIES ALREADY SOLD WOULD NOT BE IN CONSONANCE WITH THE RATIONALE OF THE PROGRAM AND WOULD BE DISCRIMINATORY AGAINST THOSE PURCHASERS OF BERRIES WHO MIGHT HAVE RECOGNIZED THEIR LEGAL OBLIGATIONS BY LIVING UP TO THE TERMS OF THE AGREEMENTS UNDER WHICH THEIR PURCHASES WERE MADE.

HOWEVER, TO THE EXTENT THAT THE GROWERS INVOLVED ACCEPTED RETURN OF THE CRANBERRIES THEY HAD SOLD BECAUSE THEY DID NOT REASONABLY EXPECT TO RECEIVE PAYMENT FOR THEM DUE TO THE PURCHASERS' FINANCIAL INABILITY TO PAY, REFUSAL TO ACCEPT, OR OTHERWISE, WE WOULD AGREE THE LOSS SUFFERED BY THEM SHOULD NOT BE CLASSED AS VOLUNTARY, NOTWITHSTANDING THAT THE PURCHASERS MAY HAVE BEEN UNDER A TECHNICAL LEGAL LIABILITY. AND IN LIGHT OF THE AUTHORITY CONTAINED IN THE SECOND PARAGRAPH OF SECTION 32, QUOTED ABOVE, WE WOULD NOT BE REQUIRED TO OBJECT IF PAYMENT WERE MADE UNDER THE PROGRAM IN SUCH CASES IF IT IS ADMINISTRATIVELY DETERMINED THAT PAYMENT IS NECESSARY TO EFFECTUATE SUBSTANTIAL ACCOMPLISHMENT OF THE PROGRAM PURPOSES. ALSO, WHILE FROM THE INFORMATION SUBMITTED WITH THE ASSISTANT SECRETARY'S LETTER WE CANNOT DETERMINE WITH ANY DEGREE OF PRECISION THE LEGAL RELATIONSHIPS WHICH EXISTED BETWEEN ANY OF THE GROWERS AND THE PURCHASERS OF THEIR CRANBERRIES NOR THE CIRCUMSTANCES UNDER WHICH THE BERRIES WERE RETURNED AND DESTROYED, IT IS READILY APPARENT THAT THE GROWERS WERE NOT IN POSITION TO RELY UPON TECHNICAL LEGAL ARGUMENTS AND THAT TO BASE PAYMENT OR NONPAYMENT UPON THE STRICT LEGAL RELATIONSHIPS WHICH MIGHT HAVE EXISTED COULD CREATE SUBSTANTIAL INEQUITIES BETWEEN GROWERS AND POSSIBLY DO VIOLENCE TO THE VERY PURPOSE FOR WHICH THE PROGRAM WAS INITIATED. THEREFORE, AND SINCE IT IS CLEAR THAT THE GROWERS DID SUFFER A LOSS, WE WOULD NOT BE REQUIRED TO OBJECT TO YOUR AMENDING THE PROGRAM AS PROPOSED IN THE ASSISTANT SECRETARY'S LETTER UPON APPROPRIATE ADMINISTRATIVE DETERMINATIONS IN THE MATTER.