Category: Ag Law

Heirs property has become an important topic in agriculture. The term “heirs property,” describes a form of ownership where at least some of the owners have acquired the property through inheritance. As the property passes down through the generations, more and more people are co-owners, making the property unmanageable. As time passes, some owners may not be able to be found or may not be known. 

In most states all owners would have to agree to, for example, farm the property. If consensus among heirs is not reached, the on-farm heirs may not be able to obtain a farm number to participate in United States Department of Agriculture programs. When a disaster strikes and landowners seek federal or state government assistance, the inability to prove ownership or have all owners sign can bar any assistance.

If the land is already classified as heirs property, the first task is to identify and locate all persons with an ownership interest, which can be very time-consuming and expensive. Once all owners are identified and located, the farm can be placed in a business entity like a limited liability company, or a co-tenancy agreement can be entered into for easier management. However, all owners need to agree, which can be problematic. 

If all owners cannot be identified or located, title must be “cleared”- the proper owners must be determined. In most cases, this process involves a court case. The process of clearing title can be extremely expensive and take years to accomplish.

Any owner of the property can also file a partition suit to have the land either physically divided among the heirs, or sold and the proceeds, after costs, divided among the heirs. As a practical matter, a partition suit most often results in sale of the property. 

The latest Farm Bill contains two provisions to attempt to address these issues. First, the bill provides alternative ways for owners of heirs property to obtain a farm number. Second, the Farm Bill provides for a relending program where owners of heirs property can borrow money to clear title and develop business entities or other documents to manage the farm. 

Careful estate planning can prevent your property from becoming heirs property. If you own land, consult an attorney to prevent and/or address heirs property issues.

For more information see:

https://www.calt.iastate.edu/article/problem-heirs-property

https://wvleap.wvu.edu/additional-tools/highlight-heirs-property

Richardson, Jesse. “Heirs Property and Agriculture“. Southern Ag Today 2(36.5). September 2, 2022. Permalink

Estate planning is not a topic most people are excited to consider.  However, having certain key documents in place can help ensure that one’s wishes are followed and help ease the legal burden on family members left behind. Many states, like Texas, for example, offer statutory forms for certain documents such as powers of attorney and advanced directives, making it easy for residents to prepare and execute these documents.  

There are five key documents for everyone to have in place:

1. Will

A will is simply a document providing how certain assets will be handled upon a person’s death and often appoints an executor to act on behalf of the estate.  The specific rules for executing a will differ by state and may require signatures before witnesses or a notary on the particular state law.  It is highly recommended to have an attorney help draft a will, particularly if an estate includes minor children, adults with special needs, or significant assets such as a farm or ranch.

2. Advanced Directive

An Advanced Directive is a document instructing a physician of the patient’s wishes regarding life-sustaining treatment in the event they are diagnosed as terminal or irreversible.  This document clarifies how the patient wants to be treated in this scenario and is designed to avoid devastating family conflicts when wishes are unknown. 

3. Medical Power of Attorney 

A Medical Power of Attorney allows the person executing the document to appoint an agent to make medical decisions on they behalf in the event the signor is incapacitated.  For example, if a patient is unconscious during a surgical procedure and a decision must be made, the medical power of attorney would allow the agent to make that decision legally.  

4. HIPAA Release

The “Healthcare Insurance Portability and Accountability Act” protects a person’s private healthcare information from disclosure.  Generally, this is a positive, but it can be if a person is incapacitated, and family members are unable to obtain information about the care or condition of their loved one.  A simple form can help alleviate this issue and ensure a selected representative can obtain medical information. 

5. Durable Power of Attorney

A power of attorney allows the signor to appoint an agent to act on their behalf to handle financial affairs.  The power of attorney may be general (meaning the POA becomes effective immediately upon signing) or springing (which means the POA is not effective until a future event or date–usually the signor being declared incapacitated by a doctor).  This document allows an appointed agent to do things like pay bills, manage bank accounts, and deal with real estate issues.

Lashmet, Tiffany. “Key Estate Planning Documents“. Southern Ag Today 2(35.5). August 26, 2022. Permalink

In 2019, a series of class-action lawsuits were filed against JBS, National Beef Packing, Tyson, and Cargill, commonly known as “The Big Four” packers on behalf of direct purchasers, producers, and indirect purchasers as separate classes seeking class certification. These suits allege that The Big Four violated the Sherman Act, the main federal law protecting free market competition and prohibiting restraint on interstate commerce. In addition, these suits alleged violations of 25 different states’ antitrust laws and 21 states’ consumer protection laws totaling 48 claims in a single suit. The suits alleged that The Big Four have a tight oligarchy for both slaughter capacity and processed beef sales and that The Big Four conspired to artificially deflate the beef supply and drive up the cost of boxed beef. The suits also name a market forecasting service, Agri Stats, as a defendant. In 2021, JBS settled with the direct purchaser class only, for $52.5M, agreeing to provide “extensive cooperation” to plaintiffs in proving their claims against the other defendants. 

In June and July of 2022, Sysco Corporation, along with other grocers and food distributors, filed similar lawsuits against The Big Four, alleging violations of the Sherman Act and conspiracy to artificially deflate cattle market prices while simultaneously causing boxed beef prices to soar. Sysco’s complaints quote a former employee witness who purported to have first-hand knowledge of the alleged conspiracies. 

A search of public access court records shows 11 associated cases to Sysco’s suit against The Big Four. Two of the cases have already consolidated multiple suits with similar claims. As the U.S. Department of Justice continues its investigation of these allegations quietly, the litigation is heating up. The Defendants publicly and vigorously deny the allegations, and all testified before Congress in April of 2022, unequivocally denying any conspiracy as alleged between them. There’s a lot of smoke around this issue, and time will tell if it’s a smoke screen or an inferno. For now, the larger agriculture community is following closely as the poultry and swine industries wait in the wings. 

Friedel, Jennifer. “Sysco Becomes Latest Beef Packer Antitrust Claimant“. Southern Ag Today 2(31.5). July 29, 2022. Permalink

Farm tenants often make improvements to the farm they are leasing. Building or repairing sheds or barns are an example, as is a tenant purchasing and installing irrigation equipment. However, before doing so, tenants should consider the legal status of these investments.  This issue is important as almost 40% of U.S. farmland is rented/leased (Figure 1).

Legally, property comes in two forms, real and personal. Real property is land and everything growing upon or attached to it. Personal property is essentially everything else. A fixture, however, is personal property that becomes real property by being incorporated into or attached to real property.  Figure 2 provides an illustration of these concepts. 

Whether an improvement qualifies as a fixture is important because fixtures are owned by the owner of the real property to which they become attached, regardless of who owned them before they were attached. Absent an agreement to the contrary, a landowner is entitled to keep fixtures at the end of a lease. Further, a tenant’s insurance may not cover a fixture, and if the landowner has a mortgage, the landlord’s lender may have a security interest in it, while the tenant’s lender may not.  

Courts typically consider three factors when determining whether personal property has become a fixture. The first is whether the object is physically or constructively attached to real property. Constructive attachment occurs when the object comprises a necessary, integral, or working part of another object that is physically attached to real property. The second factor is whether the object is adapted to the use of real property. Thus, the more useful an article is to normal operations conducted on the property, the more likely it is to be considered a fixture. However, the most important of the three factors is whether there is evidence that the tenant intended to attach the object permanently. Courts are likely to presume such intent if removing the object would cause material injury to the real property or other fixtures. However, the best evidence of the parties’ intent is a provision in a written lease specifically stating who owns the improvement and what is to happen to it at the end of the lease. Tenants who make improvements without such language risk losing ownership and control of those improvements.

In the past 15 years, several states have passed laws regarding the amount of space that specific types of farm animals- pregnant sows, veal calves and laying hens- must be given.  The constitutionality of one of these laws, passed as a ballot proposal in California, will be considered in October by the Supreme Court of the United States (“SCOTUS”). 

“Prop 12” was passed in 2018 and required that eggs produced and sold in California be from cage-free hens.  Additionally, it required that pork and veal sold in California come from farms without veal crates or gestation crates.  These requirements apply not only to California producers, but also to producers across the country (and the world) selling products into the large California market.  While Prop 12 took effect in January 2022, a California state court has prevented its enforcement until six months after the regulations outlining its administration are finalized.  

Prop 12 was also challenged in federal court.  In one case, the National Pork Producers Council and American Farm Bureau Federation (“NPPC/AFBF”) argued that it violates the “commerce clause” to the United States Constitution.  The commerce clause gives Congress the right to pass laws affecting multiple states.  On the flip side, the “dormant commerce clause” limits state legislatures, with some exceptions, to only passing laws affecting people located in that specific state.  The NPPC/AFBF case argued that Prop 12 acted as a barrier to trade between states by imposing obligations on out-of-state competitors in order to assist local producers.

The plaintiffs lost at both the federal district court and the Ninth Circuit Court of Appeals.  However, NPPC/AFBF requested that SCOTUS hear the appeal and that request was accepted.  It will be heard at SCOTUS on October 11^th.  To see other states with similar statutes, click here.      

Rumley, Elizabeth. “U.S. Supreme Court to Hear Proposition 12 Case“. Southern Ag Today 2(29.5). July 15, 2022. Permalink