General Practice, Solo, and Small Firm Division The Compleat Lawyer
Winter 1997, Volume 14, No. 1 copyright American Bar Association. All rights reserved.
BY DAVID W. PRYOR
David W. Pryor is a lawyer at Hamilton, Kramer, Myers & Cheek in Columbus, Ohio, where he concentrates extensively on agricultural law issues. He teaches a course in agricultural law at Capital University Law School.
General practitioners now face agricultural law issues on a consistent basis as the furrows of rural America intertwine with metropolitan society. Thus, in a federally subsidized nutshell, understanding the historical significance and general application of agricultural law will most certainly make any lawyer a more effective practitioner.
Every American citizen is touched by agricultural law on a daily basis, from the price of a loaf of bread to the cost of college tuition. This massive body of law, developed through 200+ years of American jurisprudence, provides a plethora of special and unique applications of law to those most generally involved in "agricultural purposes."
A Unique Industry
Historically, this country was predominantly an agrarian society, and the political power base remained with agriculture for more than a century. Throughout these years, our democratic and free enterprise system evolved to attempt "parity" for American agriculture; more simply stated, to provide all citizens with an equal playing field.
However, because the agricultural industry has always faced a variety of circumstances well beyond the control of the American farmer, legal protections and privileges evolved for agriculture that were not afforded to other industries. If our land of the free and home of the brave were to survive, this country needed to ensure the ability (stability) of our agricultural society to provide affordable food, clothing, and shelter. Today, agricultural law continues to regulate the single largest industry in this country.
Agricultural law is often discussed as the distinction between cooperatives and corporations, commodities and securities. It is international grain deals, exemptions from fuel and sales tax, Fair Labor Standards Act, Social Security, and the Clean Water Act. Additionally, we think of governmental subsidies, federal crop insurance, guaranteed loans, and special use valuation for agricultural lands.
But agricultural law also encompasses many issues much closer to home. For example, most real estate lawyers find themselves dealing with clients purchasing or selling agricultural lands and/or businesses, and the attendant issues of water rights, development rights, nuisance actions, and zoning. Business lawyers are finding agricultural clients to be extremely sophisticated in the formation of their agri-businesses, family farm corporations, and/or limited liability companies. It has become critical to understand the unique application of the Uniform Commercial Code to agriculture in order to represent lenders and security interest holders. Probate, domestic relations, and labor lawyers are also discovering frequent application of unique specialized laws pertaining to agriculture within their everyday practice.
Stay on the Lookout
Most agricultural law questions are no more difficult to answer than those in any other area of the law. Recognizing that your representation may involve some form of agricultural law, and understanding the appropriate questions and issues, is often the more difficult task.
A very simple formula should suffice: If your representation appears to involve some form of agriculture or agricultural law, isolate those specific issues and seek further inquiry. Dig out the old statutes and regulations, pay attention to the 100-year-old cases, and talk to the farmers--chances are they know more about agricultural law than most lawyers. One Scenario
Dr. Jones walks into GP Smith's office and states, "Attorney Smith, we need your help. I am involved with a group of doctors (Buyers) who have pooled investment funds and wish to purchase a specific 200-acre farm just east of town. Our thoughts are to keep it as a working farm, to the extent that we are capable of doing so. Perhaps in ten to 15 years, we will consider this farm as a site for future development. Attorney Smith, can you please provide us with all the necessary information and/or advice necessary to accomplish these goals?"
Attorney Smith feels quite able to handle their legal needs and suggests to Dr. Jones that he will provide a preliminary opinion letter outlining the potential legal issues and considerations for each phase of their plan.
Attorney Smith is an extremely competent lawyer. Approximately 30 percent of his practice is concentrated in the area of real estate. However, at no time during his meeting with Dr. Jones did Attorney Smith recognize the need for any particular knowledge of "agricultural law."
Questions That May Arise
Surveys. Should Buyers be willing to waive an expensive and difficult survey, or pay for it themselves, in the event that Farmer Bob (Seller) is not willing to provide one? After all, Farmer Bob claims that he drove Dr. Jones around the farm and showed him the fence lines. If the cost of the survey is a deal killer, can Buyers eliminate their risk by structuring the purchase price as "per acre" rather than "in gross"?
Standing crop arrangements. A standing crop of approximately 120 acres is currently on the land. Who has rights to the proceeds of these crops, and/or are there any actual or constructive liens attaching to them? Farmer Bob apparently leased this ground to a neighboring farmer on a crop/share arrangement, per a verbal agreement. What happens if Farmer Bob dies during Dr. Jones's contract period and has not left behind any documented evidence of the lease terms?
Storage tanks. What about the underground fuel storage tank? Is this a deal-buster or exempted from state and federal regulations? Farmer Bob has been filling "this ole tank" for years to supply his farm equipment, but he's not sure why he is filling it two times a year now instead of one.
Taxes. Farmer Bob is only paying $1,200 per year in real estate taxes for the entire 200 acres. If his taxes were based on the fair market value of the property instead of the agricultural use valuation, he says the taxes would be approximately $6,000. Is it true that if Buyers don't maintain qualification under the agricultural tax valuation, Buyers could be responsible for the tax savings that Farmer Bob received during his last three to four years of ownership? Are any other programs encumbering the land as opposed to Farmer Bob, such as conservation easements or enrollment in agricultural districts?
Nuisance actions. Following the purchase, Buyers hire a farm manager to continue the grain operation only. What if the Buyers decide to wait a few years before restarting the hog operation? One very significant concern would be that in the interim, a small development is constructed on the adjacent property. In most states, statutory protection exists in the form of a defense to nuisance actions for unreasonable smells, flies, noise, etc., but only if the operation creating the nuisance was in existence for at least two years prior to the asserted nuisance claims.
Should Attorney Smith advise Buyers to continue the hog operation or risk losing their statutory defense to a subsequent nuisance action? Chances are, those city folks moving into that new development do not realize the extent to which the flies and smells will put a damper on their evening cookouts, especially when the corn fields are fertilized with the hog manure.
Water. An agricultural districting statute in this state also affords protection against water and sewer assessments if the land is enrolled as an "agricultural district." Learning this, Buyers would like to know what other potential programs, governmental or private, might provide additional income or other benefits, perhaps in exchange for preservation or conservation agreements.
Buyers become aware that Farmer Bob had tiled the 120 acre watershed down to the railroad ditch. However, this ditch has become badly clogged, and sink holes are blowing up throughout the fields. Is there a specific "agricultural law" that requires the railroads to adequately maintain their ditches and culverts? Is there also a statutory provision potentially entitling the landowner to treble damages for reckless destruction of trees, shrubs, and crops? Chances are--you betcha!
Speaking of water, are Buyers liable for damage to a lower landowner if Buyers cause a diversion of the natural surface water flow. Again, this probably will depend on whether or not the "divertor" is involved in an "agricultural purpose."