Esch v. United States

49 Fed. Cl. 631, 2001 U.S. Claims LEXIS 114, 2001 WL 732009
CourtUnited States Court of Federal Claims
DecidedJune 28, 2001
DocketNo. 00-529C
StatusPublished
Cited by5 cases

This text of 49 Fed. Cl. 631 (Esch v. United States) is published on Counsel Stack Legal Research, covering United States Court of Federal Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Esch v. United States, 49 Fed. Cl. 631, 2001 U.S. Claims LEXIS 114, 2001 WL 732009 (uscfc 2001).

Opinion

ORDER

TIDWELL, Senior Judge.

This matter is before the court on defendant’s RCFC 12(b)(1) motion to dismiss pursuant to 28 U.S.C. § 1500 (2000). Although the Court of Federal Claims has jurisdiction over plaintiffs’ breach of contract claim, pursuant to 28 U.S.C. § 1491(a) (2000), plaintiffs have failed to state a claim upon which relief may be granted. Accordingly, the court treats defendant’s RCFC 12(b)(1) motion to dismiss for lack of subject matter jurisdiction as a RCFC 12(b)(4) motion to dismiss for [632]*632failure to state a claim upon which relief may be granted. For the reasons set forth below, the court allows defendant’s motion.

BACKGROUND

Plaintiffs in this action are nine brothers and sisters who have operated various farming ventures in the state of Colorado. Plaintiffs have at different times, in different combinations, formed partnerships that have performed farming, ranching, and cattle raising operations.

In January 1984, the United States Department of Agriculture (USDA or defendant), through the Farmers Home Administration (FmHA), loaned approximately $835,000.00 to L J Farms, a partnership operated by plaintiffs Patrick Esch and Dennis Esch. To secure the FmHA loan, L J Farms executed a real estate Deed of Trust (Deed) against L J Farms’ real property, naming the United States as third lien holder.1 Also, L J Farms signed a promissory note, as did Patrick Esch and his wife Arlene Esch (as individuals) and Dennis Esch and his wife Kathleen Esch (as individuals), for a total of three promissory notes.

In September 1984, Patrick Esch and Dennis Esch dissolved L J Farms, and, collectively, the nine plaintiffs in the present action formed a new venture known as “L J Farms Partnership.”

In April 1986, plaintiffs, as L J Farms Partnership, entered the Conservation Reserve Program (CRP or first subsidy program) operated under the USDA. Under the CRP, plaintiffs agreed to remove 12,000 acres of farmland from production in exchange for payments from the USDA.

In August 1986, the Office of Inspector General (OIG), while conducting an agency audit, suspended plaintiffs’ CRP payments, on the basis that the newly-formed partnership had too many partners under the CRP regulations. On July 21,1987, plaintiffs sued the United States in Federal District Court for the District of Columbia seeking reinstatement of plaintiffs’ CRP payments. Esch v. Lyng, U.S.D.C. D.C. C.A. No. 87-0885. On August 30,1990, plaintiffs and the United States entered into a settlement agreement that resolved all claims between the parties relating to the CRP. Compl. Ex. A at 1. Pursuant to the agreement, plaintiffs received $1,087,819.40, and the parties agreed to forgo prosecuting claims each had against the other for crop years 1984 to 1989. Compl. ¶ 21.

Plaintiffs dissolved L J Farms Partnership and formed a new partnership known as Horsecreek Farms in April 1990. Plaintiffs thereafter (through Horsecreek Farms) purchased the land that had been used as collateral against the $835,000.00 FmHA loan that plaintiffs received in January 1984.2 Compl. H 22.3

On October 31, 1990, defendant informed plaintiffs that the government was accelerating the debt due on the three notes signed by Patrick Esch, Dennis Esch, Arlene Esch, and Kathleen Esch, and that defendant was claiming an interest in the 1990 settlement proceeds as a “rent” or “profits” earned off of the land identified in the Deed. On November 15, 1990, plaintiffs administratively appealed defendant’s actions. After a hearing on December 20,1990, the hearing officer determined that defendant could accelerate the debt and claim an interest in the settlement payments. On December 17, 1991, plaintiffs administratively appealed the hearing officer’s decision, and on March 17, 1992, the USDA issued a final administrative decision affirming the hearing officer’s decision.

On February 1, 1993, defendant notified L J Farms Partnership that it was accelerating [633]*633the $835,000.00 loan and demanding immediate payment. Defendant did not attempt to collect on its demand until September 20, 1996 when it began offsetting payments due plaintiffs under a subsequent farm subsidy program (the second subsidy program) that plaintiffs entered on July 10, 1996. Def.’s Mot. Dis. at 9.

In early September 1996, plaintiffs received their initial payment under the second subsidy program. On September 20, 1996, defendant informed plaintiffs that the government was offsetting future payments due under the second subsidy program because of plaintiffs’ “conversion of security property arising from the $1,068,931.65” settlement payment. Compl. at Ex. B. Defendant was asserting a claim to the settlement funds based on the USDA March 1992 decision. Def.’s Mot. Dis. at 8.

Plaintiffs appealed defendant’s decision to offset the payments, and on January 17, 1997, an agency hearing officer reversed the defendant’s decision to offset. Defendant administratively appealed the hearing officer’s decision, and on August 28,1997, the National Appeals Division (NAD) director reversed the officer’s decision.

Plaintiffs filed suit (Civ. No. 98-CV-0712) in the United States District Court for the District of Columbia, on March 20, 1998, appealing the NAD director’s decision. On April 17, 2000, the District Court granted plaintiffs’ motion and transferred the case to the United States District Court for the District of Colorado (reassigned Civ. No. 00-M-957). At the time plaintiffs filed the present action in United States Court of Federal Claims, civil action Number 00-M-957 was pending in the District of Colorado.

DISCUSSION

Plaintiffs argue that defendant breached the August 30,1990 settlement agreement on September 20, 1996 when defendant notified plaintiff that the government was offsetting farm subsidy benefits due plaintiffs. Plaintiffs contend that the settlement agreement barred the government from asserting claims against plaintiffs for crop years 1984-1989. Plaintiffs assert that defendant’s offset of the farm subsidy benefits “is, by its terms, related to farm program payments for crop years 1984 through 1989.” Brief in Support of Plaintiffs’ Resistance to-Defendant’s Motion to Dismiss at II, H 4 (Filed: April 4, 2001).

Defendant’s motion, in addition to challenging the court’s jurisdiction, challenges plaintiffs’ breach of contract claim on its merits. Defendant argues that the challenged offsets are legal and intended as a debt collection measure. Defendant argues that the offsets are legal based on the USDA’s March 17, 1992 final administrative decision “affirm[ing] FmHA’s claimed interest in the settlement agreement proceeds,” and the USDA’s decision allowing defendant to accelerate the loan. Moreover, the USDA’s decision was reinforced on August 28,1997 when the director of the NAD determined that the offsets were legal. Since defendant is challenging plaintiffs’ breach of contract claim as a legal debt collection action, defendant is challenging plaintiffs’ case on its merits.

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Cite This Page — Counsel Stack

Bluebook (online)
49 Fed. Cl. 631, 2001 U.S. Claims LEXIS 114, 2001 WL 732009, Counsel Stack Legal Research, https://law.counselstack.com/opinion/esch-v-united-states-uscfc-2001.