Gratz v. United States

25 Cl. Ct. 411, 1992 U.S. Claims LEXIS 82, 1992 WL 38584
CourtUnited States Court of Claims
DecidedMarch 2, 1992
DocketNo. 91-1107C
StatusPublished
Cited by2 cases

This text of 25 Cl. Ct. 411 (Gratz v. United States) is published on Counsel Stack Legal Research, covering United States Court of Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gratz v. United States, 25 Cl. Ct. 411, 1992 U.S. Claims LEXIS 82, 1992 WL 38584 (cc 1992).

Opinion

OPINION

NETTESHEIM, Judge.

This case is before the court after argument on the parties’ cross-motions for summary judgment. The issue for decision is whether the Department of Agriculture’s Agricultural Stabilization and Conservation Service properly called and ordered delivery of plaintiffs’ loan collateral.

FACTS

The following facts derive from the administrative record and are undisputed, unless otherwise noted. James L. and Therese Gratz (“plaintiffs”) operate farms in Lafayette County, Wisconsin. During the period in question, plaintiffs participated in the Price Support, Farm Storage Grain Reserve and Special Producer (also known as “Production Adjustment”) loan programs administered by the Commodity Credit Corporation (the “CCC”) through the Lafayette County Agricultural Stabilization and Conservation Service (the “county ASCS” or “the committee”) of the United States Department of Agriculture. Plaintiffs had numerous outstanding CCC loans at the time the events that give rise to these claims occurred. Plaintiffs seek damages for the calling and delivery of corn loan collateral by the Agricultural Stabilization and Conservation Service (the “ASCS”).

Regulatory framework

The Department of Agriculture directs price support, grain reserve and special producer loan programs available to agricultural products producers. 7 U.S.C. §§ 1281-1469 (1988); 15 U.S.C. § 714 (1988). The CCC funds the various programs, while the ASCS administers their day-to-day operations. The ASCS maintains and directs price support and production adjustment programs entitling producers to loans at the county, state, and national levels.

The Price Support, Grain Reserve and Special Producer programs, among other features, allow a producer to borrow money against grain which the producer then holds as collateral. 7 C.F.R. §§ 713.49(b), (c), 1421.1-30, 1421.90-100, 1421.740-755, 1421.900-917 (1987). Normally, a producer signs a loan contract that specifies the specific rights and responsibilities of both the producer and the CCC. 7 C.F.R. §§ 713.-49-50. By regulation the producer is required to provide the Government with lien waivers from all grain collateral lienhold[414]*414ers.1 7 C.F.R. § 1421.10. Failure to comply with the terms of the contract subjects the producer to penalties and/or the calling (accelerated maturity) of loans. 7 C.F.R. §§ 713.49(d), 1421.6(d).

The county ASCS directs and administers the particular loan contracts and programs. Inspectors from county ASCS offices perform random checks on a producer’s loan collateral in order to assure quality control. The county ASCS similarly checks whether any collateral is missing (unauthorized disposition). 7 C.F.R. § 1421.17(g). The county may, at any time in its discretion, call and/or order delivery of loan collateral. 7 C.F.R. § 1421.6(d).

Quality control problems

Between January 1982 (crop year 1981) and December 1987 (crop year 1986), plaintiffs stored corn in seven locations as collateral under 13 CCC loan contracts. Plaintiffs signed a “Farm Storage Grain Reserve Agreement” and a “Farm Storage Note and Security Agreement” (“FSNSA”) in order to receive the contracts. The former provides, inter alia, that the producer will not earn storage payments if the producer “negligently or otherwise impairs the commodity.”

The FSNSA states the circumstances under which a producer will be held personally liable for the amount of a loan:

(j) Loss in Quantity or Quality. The producer is responsible for any loss in quantity or quality of the commodity placed under farm-storage loan____ [P]hysical loss or damage occurring after disbursement of the loan funds will be assumed by the CCC ... if the producer established to the satisfaction of the CCC ... (1) the physical loss or damage occurred without fault, negligence, or conversion on the part of the producer or anyone else having control of the storage structure; (2) the ... damage resulted from an external cause (other than insect infestation, rodents, or vermin____)

See 7 C.F.R. § 1421.15.

The county ASCS made periodic inspections of the corn to ensure freshness, coolness, and lack of weevil infestation. On May 6 and 11, 1987, the county ASCS inspected several of plaintiffs’ storage sites. Inspectors noted quality control problems at seven storage locations:2 1) Moore farm flat storage, Contract No. 86-74-1 (“corn in west end moldy [with] weevil[s] [in] top 1-2 ft; south bulkheads marginal and bowed.”); 2) Moore farm bin, Contract No. 85-350-1 (“mold/crust on north”); 3) Harold Gratz farm, only bin, Contract No. 84-28-1 (“mold on top; Jim should remove some of this corn____; crust covered area access.”); 4) Harold Gratz farm middle bin, Contract No. 86-17-2 (“warm spot in center of bin ... should be levelled or broken up with shovel.”); 5) Harold Gratz farm east bin, Contract No. 85-23-1 (“weevils are heavy by door — no inside ladder — looks crusted on south side.”); 6) Koesche farm small bin, Contract No. 81-166-2 (“moldy lumps still on top____”); and 7) Koesche farm flat storage building, Contract No. 85-154-1 (“west Vs of shed [has] heavy weevil feeding [on] entire surface____”). While the inspectors gave “questionable” ratings to two of these sites (Contract Nos. 84-28-1 and 85-23-1), they rated other sites as satisfactory despite these deficiencies.

By letter of May 19, 1987, county ASCS Executive Director Leon N. Wolfe advised plaintiffs of these deficiencies and requested that they redeem (exchange) 10,000 bushels from Contract No. 85-154-1 by June 18, 1987, to prevent spoilage. Mr. Wolfe also requested that plaintiffs redeem 200 to 300 bushels from Contract No. 84-28-1 and meet with the county ASCS to discuss these problems along with possible new crop rotation. The record does not indicate that plaintiffs ever redeemed the corn.

[415]*415On May 26, 1987, Mr. Gratz met with the county ASCS. To address the committee’s concerns, he presented a plan to redeem 4,000 bushels with certificates and rotate another 20,000 bushels. The county ASCS approved this plan, but reminded Mr. Gratz that “corn sold under rotation must be deposited ... in [the] Reserve Rotation Fund [and] [a]s soon as new corn is in place and inspected by our office the amount of the original deposit will be reissued to you — ”

Relying on a chronological summary dated May 12, 1988, defendant claims that the county ASCS advised Mr. Gratz at the meeting that “rotation [could] ... begin approximately August 1, 1987 provided all necessary lien waivers are

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Bluebook (online)
25 Cl. Ct. 411, 1992 U.S. Claims LEXIS 82, 1992 WL 38584, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gratz-v-united-states-cc-1992.