                          June 19, 1958


Mr. Arthur B. Scharlach                   Opinion No. WW-457
Executive Secretary
Veterans Lend Board                       Re: Handling of Proceeds
Austin, Texas                                 Received from Land
                                              After Forfeiture.
Dear Mr. Scharlaah:
            You have requested en opinion on the above matter
based on faots set forth In your letter a8 followsl
            "Pursuant to the provisions of the Veterans'
      Land Act, the right of forfeiture by the Board
      has been exercised against the contracts of sale
      and purchase of veterans whose Interest and prin-
      cipal have beoome delinquent. There have been
      oacasions when proceeds, such as,rentals from
      growing arops end Soil Bank payments, have been
      reaeived in the Veterans' Land Board from a tract
      of land upon whioh the original veteran purchaser's
      contract has been forfeited.

           "The basis for our opin$on request is a for-
      feited traat of land which is pending relnstate-
      ment and transfer at the present time. The oontract
      on this tract of land was forfeited on November 15,
      1956; prior to the time when the Board was to order
      the resale of this tract, an application for rein-
      statement and transfer were reoeived in this offlae.
      The proposed transferee has deposited with this of-
      fice an amount equal to the delinquent Interest and
      principal and the penal interest, and this amount
      has been plaaed in a suspense account awaiting ap-
      proval of the reinstatement and transfer. Also, In.
      another suspense account, in the name of this same
      forfeited contract, we have on deposit an amount of
      $560.22, reaelved from the Commodity Credit Corpora-
      tion, after forfeiture, and being the emount earned
      by this tra,ctas a participant in the Conservation
      Reserve Soil Bank program.
Mr. Arthur B. Scharlach, page 2 (WW-457)

           "A brief history of the above-described
      contract is set out below:
      "Effective Date of Veteran's
           Contract .                       March 23, 1953
      Date of Applloation to' ' ' ' '   '
           participate in Conser-
           vation Reserve Soil Bank
           Program    .                     Nov.    2,   1956
      Approval of Soil Bank Con-',' '   *
           tract by A.S.C. Commlttee-
           La Salle County . . . . .    . Nov.      9, 1956
      Date of Forfeiture of Con-
           tract . . .   .    . . . .   . Nov.     1.5, 1956
      Date of Application for
           Transfer . . . . . . . . .   . Sept. 30, 1957
      Date of Deposit for Reln-
           statement of Contraot . .    . Nov.      2,   1957
      Date of Deposit from Com-
           modity Credit Corporation.   . Nov.     12,   1957”
            Based on the above facts, you request our opinion
on the following questions:
           "1. Can the money received under a Soil
      Bank contraat or from the sale of growing crops
      be applied against the amount of the delinquency
      for the purpose of reinstatement?
            "2. If the account should be fully rein-
       stated, can the money so received be applied
       against the unpaid principal balance?
            “3. If the answers to the above two questions
       are in the negative, then where should this money
       be applied?"
            As the basis for your request is a Soil Bank pay-
ment, we shall limit this opinion acaordlngly and omit any
discussion of crop rentals. Since receipt of the above inquiry,
we have been furnished with the following additional informa-
tion in connection with this tract of land:
            (1) The contract has been fully reinstated and
completely transferred to the transferee.
            (2) The transferee has executed a new Soil Bank
Conservation Reserve contract which continues in effect the
original Soil Bank aontract.
Mr. Arthur B. Scharlach, Page 3 (WW-457)

            (3) Your office has received a memorandum from
the Office of the General Counsel, Soil Bank Division, Depart-
ment of Agriculture In Washington, D.C., which answers several
questions relating to participation in the Conservation Re-
serve Program by veterans purchasing land from the Board under
the Veterans Land Program.
            From an examination of the mdmorandum of the
Soil Bank Division General Counsel, and the terms and condi-
tions in the Soil Dank Conservation Reserve contract, it is
apparent that the obligations and rights, including the right
to Soil Dank payments, of participants in the Conservation
Reserve Program are governed by the contract end the provi-
sions of the regulations issued by the Secretary of Agrioulture
governing the Conservation Reserve Program, which regulations
are made a part of the Conservation Reserve contract. It is
specifically noted that Part III of the Soil Bank Conservation
Reserve contract specifies to whom, and in what percentage,
annual payments thereunder will be made. Additionally, in order
to secure the annual payment, the parties specified in the
contract as entitled to payment must sign an application there-
for, certifying that for the program year Indicated they have
complied with the Conservation Reserve Program requirements
and that the payment is due.
            Under the provisions of the Veterans Land Act,
Article %21m, V.C.S., when a tract of land is purchased by
a Texas veteran he acquires equitable title to the land under
the contract of sale and purchase, but the legal title remains
In the State until the full purchase price has been paid, and
If the veteran breaches the terms of his contract with the
Board, by failure to make the installment payments or other-
wise, the statute authorizes the Board to forfeit the contract
whereupon full title to the land revests in the Board. The
original veteran purchaser or his vendee, however, has the
right to reinstate his purchase contract at any time prior to
the date on which the Board shall have met and ordered such
land to be advertised for resale or for lease for mineral de-
velopment, but not thereafter, by paying all delinquent in-
stallments, penalties and costs Incident to the reinstatement.
             The effect of forfeiture of the veteran's pur-
chase contract and repossession of the land by the Board is
that the veteran has lost control of the land to the Board.
Under paragraph 8(b) of the Conservation Reserve contract
and under Section 485.169(b)(l)   of the Conservation Reserve
regulations, the loss of control,   by sale or otherwise, by
a producer signatory to the contract (I.e., the veteran)
terminates the contract as to such producer. In such event
the producer losing control Is not entitled to further com-
pensation under the contract and must refund all federal
Mr. Arthur B. Scharlaoh, page 4 (W-457)

conservation practice cost-shares received by him under the
contract unless the producer who acquires his interest in
the farm or who acquires control of the farm (I.e., the
Veterans Land Board) becomes a,party to the contract and
assumes all obligations thereunder. The memorandum from the
Soil Bank General Counsel thus points out that the Board
may recognize the contract and elect to continue under the
terms of the contract, but only if It signs a contract to
continue In effect its terms.
             The foregoing regulations and memorandum had
not been received by your office at the time of the trans-
action set forth In your letter and insofar as this tract
is concerned the Veterans Land Board has not entered into
any contract with the U.S. Department of Agriculture under
its Soil Bank Program. It Is understood that subsequent to
the receipt of the above referred to memorandum, it has been
the practice of the Board to enter into renewal Soil Bank
contracts on those forfeited tracts which had previously been
placed in the Soil Dank Conservation Reserve by the veteran
purchaser, and the facts involved in the instant case are
therefore not likely to recur. Since the Board was not a
party to this oontraot and in fact has never entered into
any Soil Bank contract on this particular tract and has as-
sumed no conservation obligations thereunder, it is not en-
titled to the annual Soil Bank payment made under that contract.
The party or parties designated in that contract are the ones
entitled thereto. It is understood that this payment was made
by the Commodity Credit Corporation to the originalveteran
purchaser end/or his assigriee,and endorsed and forwarded to
your office by those parties. Under present regulations there
might be some question as to whether this Soil Bank contract
had been terminated by the forfeiture and loss of control of
the farm by the veteran, but reinstatement of the veteran's
purchase contract has restored control to the veteran pur-
chaser or his assignee, the Soil Bank Conservation practices
were complied with during the interim so as to entitle the
producer signatory to the contract to the annual payment
specified, and such Conservation Reserve contract has now been
continued in force and effect by the execution of a new Con-
servation Reserve contract by the present veteran purchaser
which continues the original contract for the duration of the
contract period. On the other hand, the Veterans Land Board
has received all payments of delinquent principal and interest
plus penalty interest, and is in the same position as if the
forfeiture had never occurred.
             Based on the specific facts presented, we there-
fore answer your first and second questions in the negative,
and your third question by advising that the money should be
returned to the party or parties from whom it was received.
 .- -




Mr. Arthur B. Scharlach, pages5 (w-457)

In further answer to your inquiry, in those cases wherein the
Board has, following a forfeiture, executed a new Soil Bank
contract, we call your attention to the following portions
of the memorandum from the Soil Bank General Counsel's office:
        "The matter of a division of payment where
        a contract changes hands in the middle of
        the year needs to be covered in our regu-
        lations. We are at present trying to re-
        solve the answer to this question and It is
        anticipated that instructions will be issued
        in the near future.
        II
          . . . As Indicated above, the board upon
        repossession of the land must execute a new
        contract to continue the original contract
        in effect. If the board, after entering such
        a new contract, resells the land to another
        veteran, It may retain any annual payment
        earned during the time it retained full title
        to the land, but the second veteran purchaser
        would have to elect whether to continue the
        contract in effect. Any default by the second
        veteran purchaser who continued the contract
        in effect would not affect the right of the
        board to retain annual payments earned during
        its holding title to the land. (Any aonserva-
        tion practice cost-share earned by the board
        during its tenure would have to be forfeited
        or refunded if the second veteran purchaser
        did not continue the contract in effect.)"
             (We are here concerned only with'annual payments
and not with conservation practice cost-shares which might be
subject to refund.)
             Until such time as regulations are issued by the
Secretary of Agriculture covering division of payment where a
contract changes hands during the contract year, or the con-
tract itself is revised to cover such situations, you are ad-
vised that annual Soil Bank payments which are paid to the
Board under a Conservation Reserve contract which the Board
has executed covering a forfeited tract are to be treated as
income received from the land, and in accord with Section 8
of Article 921m, shall be deposited to the credit of the
Veterans Land Fund, less any reasonable and necessary expenses
incurred by the Board in complying with the terms of the con-
tract. If the veteran reinstates his purchase contract with
the Board, then he must execute a Conservation Reserve con-
tract if he desires to continue to participate in the program,
and future payments would then be made In accord with such,
contract.
                                                          - ..




Mr. Arthur B. Soharlach, page 6 (WW-457)

                             SUMMARY

             Proaeeds payable under a Soil Bank
        Conservation Reserve oontradt are governed
        by the terms of the particular oontract in
        force at the time, as supplemented by Regu-
        lations issued by the Secretary of Agriculture,
        and ordinarlly those entitled to payments under
        such contracts are as specified therein.
                                 Very truly yours,
                                 WILL WILSON
                                 Attorney General of Texas



                                 BY
                                       Assistant

MN:bh
APPROVED:
OPINION COMMITTEE
Geo.P. Blackburn, Chairman

 Leonard Passmore
 Wayland C. Rivers, Jr.
 Henry G. Braswell
RXVIEWED FOR TBE ATTORNEY GENERAL
BY:
        W.V. Geppert
