Argued September 23, 2014.
Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 12 C 5556-- John A. Nordberg, Judge.
For Stable Investments Partnership, Plaintiff - Appellant: Maynerd I. Steinberg, Attorney, Locke Lord Llp, Chicago, IL.
For THOMAS J. VILSACK, in his official capacity as Secretary, United States Department of Agriculture and The Farm Service Agency, United States Department of Agriculture, Defendants - Appellees: James M. Kuhn Sr., Attorney, Office of The United States Attorney, Chicago, IL.
Before POSNER, ROVNER, and WILLIAMS, Circuit Judges.
Rovner, Circuit Judge.
Stable Investments Partnership (" Stable" or the " partnership" ) is the beneficiary of an Illinois land trust that holds title to farmland in Livingston County, Illinois. The land is leased to an operator who farms the land and shares the revenue with the trust. As the trust beneficiary, Stable formally holds only a personal property interest in the income generated by the farmland and neither legal nor equitable title to the land itself; title to the property instead is held by the bank which has been designated the trustee. Stable contends nonetheless that it should be recognized as an owner of the property and as such deemed eligible for receipt of farm subsidies under a now-defunct program operated by the United States Department of Agriculture (" USDA" ). See 7 U.S.C. § 7901(12) (defining " producer" eligible for subsidies to include an " owner" that shares in risk of producing farm crop). The pertinent regulation defines an " owner" as " one who has legal ownership of farmland." 7 C.F.R. § 718.2. The USDA concluded that because Stable did not hold title to the property, it was not an owner of the property eligible for benefits; the government therefore sought return of some $448 in benefits it had initially paid to the partnership in October 2010. Stable filed suit in the district court seeking review of that adverse determination. The district court ruled in favor of the USDA, Stable Inv. Partnership v. Vilsack, No. 12 C 5556, 2014 WL 1017032 (N.D.Ill. Mar. 17, 2014), and Stable appeals. We affirm.
Stable was formed by Chicago attorneys Maynerd Steinberg (through a living trust) and Keith Parr in July 15, 2009. The following month, the partnership arranged to purchase some 86 acres of farmland in Livingston County from Raymond and Donna Adams through an Illinois land trust. The parties refer to the property as Farm Number 1222. Pursuant to a trust agreement with Heartland Bank & Trust Company (" Heartland" ), Heartland would take title to the property as trustee. Stable, as the beneficiary of the trust, would hold a personal property interest in " the earnings, avails and proceeds" of the trust; no beneficiary, be it Stable or any future
beneficiary, would possess any other " right, title or interest in or to any portion of said real estate as such, either legal or equitable. ..." R. 14-2 at 2. By its terms, the trust agreement was not to be filed with the County Recorder's office or otherwise placed in the public record.
The provisions of the trust agreement are typical of the Illinois land trust. This form of trust was created by the Illinois bar, with the aid and acceptance of the Illinois bench, in the nineteenth and early twentieth centuries. The trust is unique in the respective powers it assigns to the trustee and beneficiary. Pursuant to the land trust, the trustee holds both legal and equitable title to the trust property, whereas the beneficiary holds a special personal property interest in the trust proceeds. But, in contrast to the more traditional trust, the exclusive power to manage the trust assets belongs to the beneficiary rather than the trustee, including authority to direct the trustee in dealing with title to the property. Nominally, then, although the trustee as the titleholder is held out to the world as the owner of the property, it is the beneficiary who actually exercises the powers of ownership. The land trust holds a number of advantages for property owners. Principal among them are these: First, the identity of the trust beneficiaries is shielded from public knowledge; generally, one must resort to legal process in order to ascertain the identity of the beneficiaries. Second, interests in the property can be pledged, assigned, or sold more simply than with other forms of ownership. See 765 Ill. Comp. Stat. § § 430/1, 405/1, 420/2; Old Orchard Bank & Trust Co v. Rodriguez, 654 F.Supp. 108, 110 (N.D.Ill. 1987); Klein v. LaSalle Nat'l Bank, 155 Ill.2d 201, 613 N.E.2d 737, 740, 184 Ill.Dec. 420 (Ill. 1993), abrogated on other grounds by People v. Vincent, 226 Ill.2d 1, 871 N.E.2d 17, 312 Ill.Dec. 617 (Ill. 2007); People v. Chicago Title & Trust Co., 75 Ill.2d 479, 389 N.E.2d 540, 543, 27 Ill.Dec. 476 (Ill. 1979); Chicago Fed. Sav. & Loan Ass'n v. Cacciatore, 25 Ill.2d 535, 185 N.E.2d 670, 674 (Ill. 1962); Espevik v. Kaye, 277 Ill.App.3d 689, 660 N.E.2d 1309, 1313-14, 214 Ill.Dec. 360 (Ill.App.Ct. 1996); Smith v. First Nat'l Bank of Danville, 254 Ill.App.3d 251, 624 N.E.2d 899, 909, 191 Ill.Dec. 711 (Ill.App.Ct. 1993); Robinson v. Chicago Nat'l Bank, 32 Ill.App.2d 55, 176 N.E.2d 659, 661 (Ill.App.Ct. 1961); Julius J. Zschau, Ulysses Clayborn, & Andrew M. O'Malley, Using Land Trusts to Prevent Small Farmer Land Loss, 44 Real Property, Trust & Estate L. J. 521, 540-43 (2009); Steven C. R. Brown, Kill the Dummy: The Land Trust Alternative to the Nominee, 19 Cumberland L. Rev. 241, 270-72 (1988/1989); Eric T. Freyfogle, Land Trusts and the Decline of Mortgage Law, 1988 U. Ill. L. Rev. 67, 71-74 (1988).
On January 14, 2010, Stable, as the beneficiary of the trust, entered into an Illinois Crop Share Cash Farm Lease with Stanley Blunier, a farm operator. Under a crop share cash farm lease, a farm owner accepts a share in the proceeds of the crop that his tenant will produce in lieu of rent. Under the terms of the lease with Blunier, Stable assumed fifty percent of the risk of producing the crop, which we understand to mean that Stable agreed to share the potential losses and gains equally with Blunier.
During the time period relevant to this suit, a " producer" of certain agricultural commodities, including the crops cultivated on the farmland at issue here, was eligible for farm subsidies under the USDA's Direct and Counter Cyclical Program (" DCP" ). The DCP was established by the Farm Security and Rural Investment Act of 2002, Pub. L. 107-171, 116 Stat. 134 (May 13, 2002), codified at 7 U.S.C. § 7901, et seq. (the " Act" ), as a means of shielding farmers from the cyclical variations in crop
prices by providing subsidies to the producers of certain agricultural commodities. The program was originally scheduled to expire in 2007, but was subsequently extended through 2013. A provision in the Agricultural Act of 2014, Pub. L. 113-79, 128 Stat. 649, 658 (Feb. 7, 2014), terminated the program.
The Act defines a " producer" to include " an owner, operator, landlord, tenant, or sharecropper that shares in the risk of producing a crop and is entitled to share in the crop available for marketing from the farm, or would have shared had the crop been produced." § 7901(12). Without doubt, Blunier, as the tenant farming the property, qualified as a producer eligible for DCP subsidies and did, in fact, apply for and receive such subsidies. Stable also sought subsidies, on the ground that as an " owner" of the property, which by virtue of the lease arrangement with Blunier shared in the risk of producing the crops, it likewise qualified as an eligible " producer." See 7 C.F.R. § ...