Full opinion text
GRAVEN, Senior District Judge (assigned) . In this proceeding the plaintiffs have brought to this Court for review a determination made by a Review Committee acting under the provisions of the Agricultural Adjustment Act of 1938, as amended. The determination of the Review Committee had to do with the transfer to Culberson County, Texas, of cotton allotments which had pertained to certain tracts in Custer County, Oklahoma, which had been taken by the United States under eminent domain. In this proceeding the plaintiffs have also brought before the Court certain other matters and issues which will be discussed later. Cotton allotment programs have been in effect since 1954 under Farm Referendums held under the provisions of Section 1343, Title 7, U.S.C.A. Under those programs the Secretary of Agriculture determines the national cotton acreage allotment; that allotment is apportioned among the states; the allotment of each state is apportioned among its counties; and the county allotments are then apportioned among the cotton producing farms in the respective counties. Section 1344(a, b, e, f), Title 7, U.S.C.A. The administrative organization which has been provided for the administration of the cotton allotment programs and other farm programs is now known as the Agricultural Stabilization and Conservation Service, commonly referred to as ASCS. Under the administrative organization certain farm program matters are handled at the state level by a State ASCS Committee and at the county level by a County ASCS Committee. The members of the State ASCS Committee are appointed by the Secretary of Agriculture. The members of the County Committee are three in number and are elected by the producers in each county acting through county conventions. In connection with the administration of the cotton allotment programs, the County Committees have had to do with the allotment of cotton acreage allotments to the cotton producing farms in their respective counties and the increasing or decreasing of those allotments. Section 1363, Title 7, U.S.C.A., provides, in substance, that any producer who is dissatisfied with the action taken in connection with his allotment may have such action reviewed by a Review Committee consisting of three farmers from the same or nearby counties appointed b.y the Secretary of Agriculture. Section 1365, Title 7, U.S.C.A., provides, in part: “If the farmer is dissatisfied with the determination of the review committee, he may, within fifteen days after a notice of such determination is mailed to him by registered mail or by certified mail, file a bill in equity against the review committee as defendant in the United States district court * * * for the purpose of obtaining a review of such determination. * * * ” That Section further provides that upon being served with notice of the review the Review Committee shall file in the reviewing court a transcript of the record upon which the determination complained of was made together with its findings of fact. It has been an integral part of the cotton allotment programs that, save where specifically authorized by law, a cotton allotment may not be sold or transferred except in connection with the sale or transfer of the farm to which it pertains. During World War II the United States condemned large tracts of land for military installations and since World War II the United States has condemned numerous tracts for military and other purposes. Many of the tracts condemned contained farms which had crop allotments. To deal with those situations the Congress in 1958 enacted what now appears as Section 1378, Title 7, U.S.C.A. That Section provides, in part: “(a) Notwithstanding any other provision of this chapter, the allotment determined for any commodity for any land from which the owner is displaced because of acquisition of the land for any purpose * * * by any Federal, State, or other agency having the right of eminent domain shall be placed in an allotment pool and shall be available only for use in providing allotments for other farms owned by the owner so displaced. Upon application to the county committee, within three years after the date of such displacement, * * * any owner so displaced shall be entitled to have established for other farms owned by him allotments which are comparable with allotments determined for other farms in the same area * * Section 1388, Title 7, U.S.C.A., is a part of a chapter which relates to cotton allotment programs. It provides, in part: “(a) The provisions of sections 590h(b) and 590k of Title 16, relating to the utilization of State, county, local committees, * * * shall apply in the administration of this chapter; * * Section 590h(b) of Title 16 referred to provides for the organization of state, county and local committees. That Section further provides, in part: “ * * * The Secretary [of Agriculture] shall make such regulations as are necessary relating to the selection and exercise of the functions of the respective committees, and to the administration, through such committees, of such programs. * * * ” The Secretary of Agriculture has promulgated extensive regulations relating to cotton allotment programs. They presently appear in 7 C.F.R. as Section 722.1 through Section 722.582 and are 178 pages in length. Reference has heretofore been made to Section 1378, Title 7, U.S.C.A., under which cotton producers whose farms had been taken by eminent domain could secure transfer of the allotments pertaining to those farms to other farms acquired by them for the purpose of reestablishing their farming operations. Following the enactment of that statute, the Secretary of Agriculture implemented that statute from time to time by regulations. 7 C.F.R. 719.12. Under those regulations the application for the transfer of an allotment under the provisions of Section 1378 is to be made to the County ASCS Committee of the county in which the displaced owner proposed to reestablish his farming operations. That Committee is referred to as the receiving County Committee. Starting in 1958 and ending in 1960 the United States condemned numerous tracts of land in Custer County, Oklahoma. Included among the tracts condemned were sixteen farms owned by fifteen owners. One of the displaced owners, J. R. Kenney, was the owner of two of the farms condemned. The applicants for this review consist of those fifteen owners, Fred Chandler, Sr., Fred Chandler, Jr., and the Chandler Company. The displaced owners are Cecil E. Brown, A. H. Crawford, A. N. Easley, Vernon Fletcher, Woodrow Gum, J. R. Kenney, Jack H. Kenney, Lewis E. Kenney, Paul Kenney, Walter S. Kenney, Hubert Kephart, Vernon McLaughlin, L. M. Stout, Jack V. Warner, and Vance Kenney. The transactions which are the subject matter of this proceeding were had between the fifteen owners and Fred Chandler, Sr., Fred Chandler, Jr., and the Chandler Company, a co-partnership composed of Fred Chandler, Sr., and Fred Chandler, Jr. They are residents of Texas. A Texas corporation, Capitan Company, which will be hereinafter referred to, was a family corporation of the Chandlers. For convenience, Fred Chandler, Sr., Fred Chandler, Jr., and the Chandler Company will be frequently referred to as the Chandlers. The defendants herein appeared throughout in these proceedings by an attorney for the Department of Agriculture, by the United States District Attorney for this District, and a member of his staff. It is clear that the resistance to the granting of the relief sought by the fifteen farmers and the Chandlers is being made by the Department of Agriculture. For convenience in reference, the contentions and claims made in behalf of the defendants herein will be referred to as being made by the Government. A preliminary statement setting forth facts which are not in dispute will next be made. By a deed dated June 27, 1960, the Capitan Company acquired from Paul C. Teas, Jr., of Midland County, Texas, and his sister, Laura Sutherland, also referred to as L. S. Sutherland, of Dallas County, Texas, a tract of land in Culberson County, Texas, containing approximately 3,000 acres. That tract included all of Sections 3 and 9 in the area described. The total purchase price was $450,000, of which $10,000 was paid in cash. The balance of the purchase price was evidenced by promissory notes. One note was for $10,000 payable September 1, 1960. Another note was for $15,000 payable December 1,1960. Another note was for $415,000 payable in twenty annual installments due on December 1 of each year, the first installment of which was due on December 1, 1961, and the last installment of which was due on December 1, 1980. The notes bore interest at the rate of five and one-half per cent (5%%) per annum. The unpaid purchase price was secured by a deed of trust to the land conveyed. The conveyance was subject to the oil, gas and other mineral rights reserved to the State of Texas in the patents to the lands included in the tract. By deed dated January 19, 1961, Fred Chandler, Sr., and Fred Chandler, Jr., acquired from Paul C. Teas of Dallas County, Texas, a tract of land in Culberson County, Texas, described as Survey No. 40, block 64, township 7. It is referred to in the record as being land in Section 40. The total purchase price was $22,-274 of which $5,000 was paid in cash. The balance of the purchase price was evidenced by a note dated January 19, 1961, for $17,274 payable in ten equal annual installments. The note was secured by a deed of trust to the land conveyed. The deed of conveyance conveyed the surface of the land together with an undivided one-half participatory oil and gas royalty interest. The deeds to the tracts and the mortgages were recorded. In November, 1960, the Chandlers entered into an unrecorded agreement with Paul C. Teas, Jr., and Laura Sutherland under which the note for $415,000 was surrendered and replaced by two notes, one for $35,000 and one for $380,000. The note for $35,000 was intended to reflect the unpaid purchase price of the land located in Section 9 and in the east pax't of Section 3. Under the agreement upon the payment of $35,000 that part of the land would be released from the lien of the mortgage. Under the agreement the Chandlers were privileged to pay the full amount on December 1, 1961. Later the agreement was modified so as to permit the Chandlers to pay one-half of the $35,000 on December 1, 1961, and the balance on December 1, 1962, if they wished to do so. Some of the land purchased from Paul C. Teas, Jr., and Laura Sutherland was improved land which had certain cotton allotments, but a substantial portion of it was unimproved land which had no cotton allotments. In the spring of 1960 Fred Chandler, Sr., learned that a number of farm owners owning land in Custer County, Oklahoma, had had their farms taken by the United States by eminent domain. He thereupon became interested in the possibility of having the cotton allotments of those farms transferred to Texas. In the summer of 1960 he went to Clinton, Custer County, Oklahoma, with the objective of working out arrangements under which the cotton allotments of the displaced farmers could be withdrawn from the Custer County cotton allotment pool and transferred to Culberson County, Texas. At Clinton he contacted Harry White, the Performance Supervisor in the Custer County ASCS Office, and Russell Dill, the County Office Manager in the same office. Prior to coming to Clinton Fred Chandler, Sr., had talked to Harry White over the telephone. Fred Chandler, Sr., made arrangements with Hairy White and Russell Dill to render services for him for compensation. Fred Chandler, Sr., had oral negotiations with the fifteen displaced owners in regard to the matter of the transfer of their cotton allotments to Culberson County, Texas. Between January 25, 1961, and February 11, 1961, sixteen deeds were executed in favor of the fifteen displaced farm owners. The deeds described portions of the tracts in Culberson County, Texas, which had been earlier purchased from Paul C. Teas, Jr., and Laura Sutherland. The grantees of those deeds then executed leases for the tracts described in the deeds in which Fred Chandler, Sr., was the lessee. The leases were all similar in form. They provided that the land described therein was leased for a lump sum to the lessee for a term of twenty years. The leases contained the following provisions: “Lessee shall pay to Lessor as cash rent for the entire term of this lease the sum of [amount different in each lease], and Lessee shall pay all taxes during the term of this lease. “It is further agreed by the parties hereto that upon the execution of this lease and contract, Lessee herein shall take possession of the land and premises herein described and shall farm the same during the period of this lease in a good and farmer-like manner and shall maintain all improvements thereon in a good state of repair, reasonable wear and tear excepted and upon the termination of said lease, shall surrender the property to Lessor. #**•**# “It is further agreed and understood that Lessee herein shall have the right and may assign this lease without the consent of Lessor but that Lessee will remain liable to Lessor as hereinbefore set forth.” The only written evidence as to the transactions between Fred Chandler, Sr., and the displaced owners was contained in the leases and in the deeds. The deeds were warranty deeds and, save as to the grantor or grantors, the land described, and the amounts to be paid by the grantee, contained identical provisions. The deed to Woodrow Gum is typical. That deed, in part, was as follows: That Fred Chandler, Sr., and Fred Chandler, Jr., of Fort Stockton, Pecos County, Texas, for and in consideration of the sum of Ten Dollars ($10.00) to us in hand paid by Woodrow Gum of Custer County, Oklahoma, the receipt of which is hereby acknowledged and confessed and in further consideration the said Woodrow Gum does hereby agree and does assume the payment of an indebtedness against the hereinafter described land and premises in the amount of ONE THOUSAND FIVE HUNDRED SEVENTY-FIVE DOLLARS ($1575.00) which said sum represents the purchase price of said land by the Grantors herein from Paul Teas, Jr., of Midland County, Texas, and the further sum of Nine Hundred Dollars ($900.00) being the cost of clearing said land, has granted, sold and conveyed and by these presents does grant, sell and convey unto the said Woodrow Gum of the County of Custer, State of Oklahoma, all that certain tract, lot or parcel of land described as follows, TO-WIT: [Description of forty-five acres] #***»> The assumed indebtedness recited in each deed was equal to $35 an acre and the clearing cost recited was $20 an acre. In each ease the acreage of the tract described in the deed contained sufficient land to support the transfer of the cotton allotment each of the displaced owners had in the county cotton allotment pool. The ratio was approximately three acres for each cotton allotment transferred. It was orally agreed between the displaced owners and Fred Chandler, Sr., if he drilled wells on any of the tracts conveyed the owner would sell him the one acre of land on which the well was located for $75. The displaced owners made applications for the transfer of their cotton allotments to the lands in Culberson County, Texas, described in the deeds referred to. On February 17, 1961, eight of the displaced owners appeared before the Culberson County ASCS Committee in support of their applications. Four of them appeared before that Committee on May 22, 1961, in support of their applications. J. R. Kenney appeared before that Committee on both February 17, 1961, and May 22, 1961. Three of them did not appear before that Committee but filed affidavits in support of their applications. The Culberson County Committee approved all of the applications. Commencing on February 17, 1961, and ending on July 13, 1961, the Texas State ASCS Office approved the actions of the Culberson County Committee in connection with the transfers. In 1961 the Chandler Company, a co-partnership composed of Fred Chandler, Sr., and Fred Chandler, Jr., planted and raised cotton on the tracts purchased from Paul C. Teas, Jr., and Laura Sutherland to the extent of the cotton allotments attaehed to those tracts at the time of purchase and to the extent of the cotton allotments transferred from Oklahoma. During the 1961 crop year each of the tracts to which the Oklahoma allotments had been transferred bore its own cotton allotment ASCS number. In March, 1962, the Chandler Company had all of the tracts with cotton allotments reconstituted under one ASCS number. During the summer of 1961 the Department of Agriculture started an investigation as to the transfers of cotton allotments here involved as well as to other cotton allotment transfers. Upon direction of the Department of Agriculture, the Culberson County Committee requested the Chandler Company to furnish information as to the transfers on forms entitled “Seller’s Certification of Bona Fide Sale of Land” as to the transfers here involved. Those certifications were completed by the Chandler Company and returned to the Culberson County Committee on February 27, 1962. Investigative activity on the part of the Department of Agriculture as to the transfers continued. On April 26, 1962, the Culberson County Committee held a meeting. A portion of the minutes of that meeting is next set forth: “UNITED STATES DEPARTMENT OF AGRICULTURE Agricultural Stabilization and Conservation Extract of the minutes of the County ASC Committee for Culberson County, Texas held at Van Horn, Texas on the 26th day of April 1962. 1. Revised Farm Allotment Notices: At the direction of the Administrator ASCS, revised farm allotment notices are being furnished the following farm operators and owners for the reason that investigation has disclosed irregularities in certification that no side agreements exists relating to the sale and lease back of the land involved. It has been concluded that failure to furnish all documents and side agreements (oral or written) was a misrepresentation of the facts when coupled with the applicants certification on Form CSS-178 that there were no side agreements for the purpose of obtaining an allotment for a person other than the applicant: Farm No. Farm Operator Farm Owner Revised 1961 Allotment 127 Chandler Company J. R. Kenney .0 128 Chandler Company Vernon McLaughlin .0 129 Chandler Company Woodrow Gum .0 130 Chandler Company A. N. Easley .0 131 Chandler Company L. M. Stout .0 132 Chandler Company Cecil E. Brown .0 133 Chandler Company Jack D. Warner .0 134 Chandler Company Vernon Fletcher .0 135 Chandler Company A. H. Crawford .0 136 Chandler Company Hubert Kephart .0 138 Chandler Company Lewis Kenney .0 139 Chandler Company Jack Kenney .0 140 Chandler Company J. R. Kenney .0 141 Chandler Company Walter S. Kenney .0 142 Chandler Company Paul Kenney .0 143 Chandler Company .Vance Kenney .0 On April 27,1962, the Culberson County Committee executed and issued formal notices reducing the allotments in question to zero. Timely appeals were then taken to the Review Committee as to those notices. Later the Culberson County Committee issued notices of penalties in excess of $58,000 because of the cotton produced on and marketed from the tracts in question by the Chandlers during 1961. Timely appeals to the Review Committee were also taken as to those notices. The reduction of the cotton allotments of the disputed tracts to zero by the Culberson County Committee left those tracts without cotton allotments for the 1962 cotton crop year. The Chandlers nevertheless produced cotton on those tracts in 1962. Penalty notices were issued to the Chandlers because of such production. While the appeals to the Review Committee as to the reduction of the cotton allotments to zero and the amount of penalties as to the 1961 crop were pending, but before they had been heard and determined, the plaintiffs on August 22, 1962, commenced an action in this Court designated as Civil No. 2438. In that action the jurisdictional allegations were as follows: “1. The jurisdiction of this Court is invoked under the general equity powers of the Court, U.S.C. Title 28, Sections 1331 and 1337; the Declaratory Judgments Act, U.S.C. Title 28, Sections 2201 and 2202; and the Administrative Procedure Act, U.S.C. Title 5, Sections 1001, et seq. This action arises under Article V of the Amendments to the Constitution of the United States; the Agricultural Adjustment Act of 1938, as amended, U.S.C. Title 7, Sections 1281, et seq., and regulations promulgated by the Secretary of Agriculture pursuant thereto (7 C.F.R., Ch. VII); and the Agricultural Act of 1949, U.S.C. Title 7, Sections 1421, et seq., and regulations promulgated by the Secretary of Agriculture pursuant thereto (6 C.F.R., Ch. IV).” The defendants to that action were the members of the Culberson County Committee, the State ASCS Director, and the members of the State ASCS Committee. In their complaint the plaintiffs alleged that the Culberson County Committee, in reducing the cotton allotments to the disputed tracts to zero and in issuing the penalty notices in connection with the 1961 crop, had acted improperly. They alleged that the Culberson County Committee had also improperly refused to issue cotton allotments for the disputed tracts for 1962 and that penalty notices had been issued by that Committee for the 1962 crop on those tracts. The plaintiffs asked that the defendants be enjoined from taking any action to collect the penalties for the 1961 crop on the disputed tracts. They also asked that the defendants be restrained from refusing 1962 acreage allotments for the disputed tracts and from taking any action to collect the penalties for the 1962 crop. On September 12-14, 1962, the appeals of the plaintiffs were heard by the Review Committee. On September 27, 1962, the findings of facts and determination of the Review Committee were entered. That Committee determined that the allotments in question were properly cancelled. On October 17, 1962, the plaintiffs filed another action in this Court designated as Civil No. 2451. The defendants to that action were the members of the Culberson County Committee and the members of the Review Committee. In that action the jurisdictional allegations were: “1. The jurisdiction of this Court is invoked under the general equity powers of the Court, U.S.C. Title 28, Sections 1331 and 1337; the Declaratory Judgments Act, U.S.C. Title 28, Sections 2201 and 2202; the Administrative Procedure Act, U.S.C. Title 5, Sections 1001, 1009; and the Agricultural Adjustment Act of 1938, as amended, Section 365, U.S.C. Title 7, Section 1365. The action arises under the Agricultural Adjustment Act of 1938, as amended, U.S.C. Title 7, Section 1281, et seq. and regulations promulgated by the Secretary of Agriculture thereunder, 7 C.F.R. Ch. VII.” The plaintiffs in their brief state that in Civil No. 2451 they sought in the alternative : “ * * * (1) that this Court declare that the cancellation of the allotments and the subsequent imposition of the sanctions were illegal and that the review of this action was beyond the jurisdiction of the Review Committee; or, (2) that this Court review the determination of the Review Committee pursuant to Section 365 of the Agricultural Adjustment Act, set such determination aside and reinstate the allotments.” On October 17, 1962, the plaintiffs made an application for a preliminary injunction which was granted by the Court upon the furnishing of an injunction bond. The requisite bond was furnished. Under the preliminary injunction the defendants were, in substance, restrained from taking any action in regard to collecting penalties for the 1961 and 1962 cotton crops upon the disputed tracts pending final determination. That preliminary injunction has been continued and is still in effect. By Court order the two actions were consolidated in this one action which is designated as Civil action No. 2438. On appeal to the Review Committee all of the appellants challenged the action of the Culberson County Committee in reducing to zero the allotments to the tracts involved. On appeal to the Review Committee the Chandlers also challenged the correctness of the amount of the penalties fixed by the County Committee for the year of 1961. The Review Committee was composed of three members. The findings, conclusions and determinations of the Committee were concurred in by two members of the Committee. One member dissented. Both the majority and the minority filed extensive findings of fact. The findings, conclusions and determinations made by the majority of the Committee constitute the findings, conclusions and determinations of the Committee and will be referred to as such. The Committee held that the allotments in question were properly reduced to zero. It also held in accord with the contentions of the Chandlers that the penalties for the year 1961 had been incorrectly computed. The correctness of the computation is not involved in this proceeding. The plaintiffs herein, by the civil action designated as Civil Case No. 2451, have brought before this Court for review the findings, conclusions and determinations of the Review Committee as to the allotments in question. By that action and by Civil Case No. 2438 they have also brought before the Court for consideration certain other contentions made by them. Those contentions are centered around a legal challenge relating to administrative procedure. That challenge presents legal questions which are determinable by this Court. That challenge will be later considered. The review phase of the present proceedings will be next considered. There will first be considered the nature of the review by the Review Committee and by this Court. Section 1363, Title 7, U.S.C.A., provides that any farmer who is dissatisfied with his farm marketing quota may have such quota reviewed by a Review Committee. The hearing before the Review Committee is a de novo hearing. Graham v. Lawrimore (4th Cir. 1961), 287 F.2d 207; United States v. Stangland (7th Cir. 1957), 242 F.2d 843. The determination of the Review Committee is reviewable by a bill in equity filed in the proper court. Section 1365, Title 7, U.S.C.A. Section 1366, Title 7, U.S.C.A., provides, in part: “The review by the court shall be limited to questions of law, and the findings of fact by the review committee, if supported by evidence shall be conclusive. * * * ” (Emphasis supplied.) Section 1366 makes use of the word “evidence.” The greater number of federal statutes relating to the findings of facts of administrative agencies make use of the term “substantial evidence.” It is well settled that the word “evidence” used in a statute relating to findings of facts of administrative agencies means “substantial evidence.” Universal Camera Corp. v. National Labor Relations Board (1951), 340 U.S. 474, 71 S.Ct. 456, 95 L.Ed. 456. The United States Court of Appeals for the Fifth Circuit holds that “substantial evidence” means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Continental Casualty Company v. Holmes (1959), 266 F.2d 269, 276, certiorari denied (1959), 361 U.S. 877, 80 S.Ct. 140, 4 L.Ed.2d 114. That Court cites in support of that definition the statement of Chief Justice Hughes in the case of Consolidated Edison Co. v. National Labor Relations Board (1938), 305 U.S. 197, 229, 59 S.Ct. 206, 83 L.Ed. 126. In 73 C.J.S. Public Administrative Bodies and Procedure § 126, p. 447, it is stated: “In an adjudicatory proceeding before an administrative body, it is for the administrative body to determine the weight and sufficiency of the evidence, to draw inferences from the facts, and to appraise conflicting and circumstantial evidence.” An administrative agency has the right to and should appraise the totality of the situation presented by the evidence. American Nat. Bank v. National Labor Relations Board (8th Cir. 1944), 144 F.2d 268, 270. In passing upon the question as to whether findings of facts by an administrative agency have a substantial basis, the reviewing court must take the entire record into consideration, including whatever in that record detracts from its weight. Universal Camera Corp. v. National Labor Relations Board, supra. The conclusive effect given to administrative findings of facts includes the inferences from the evidence if there is a substantial basis for such inferences. Carqueville v. Flemming (7th Cir. 1959), 263 F.2d 875, 877. Inferences drawn by an administrative agency which are supported by substantial circumstantial evidenee^have a substantial basis. American Nat. Bank v. National Labor Relations Board, supra. In a judicial review of the findings of facts of an administrative body where oral testimony had been presented before that body bearing upon the material facts, the fact that that body had the opportunity to observe the appearance and demeanor of the orally testifying witnesses is to be taken into consideration. Gamble-Skogmo, Inc. v. Federal Trade Commission (8th Cir. 1954), 211 F.2d 106, 113. The hearing before the Review Committee was quite lengthy. Fred Chandler, Sr., Fred Chandler, Jr., and a number of the other plaintiffs testified orally before the Committee. There was also other oral testimony and numerous exhibits. Fred Chandler, Sr., testified at length and was cross-examined at length. The plaintiffs, among other witnesses, presented M. K. Woodward. He is a professor on the faculty of the School of Law of the University of Texas. His special fields are real property law, real property mortgage law, and oil and gas. He testified at length as to the various aspects of those fields of law in relation to the transactions in question. He also testified as to the practices and customs in those fields. In the present case there is under review the findings of facts of the Review Committee. The federal courts and the state courts make use of the terminology of ultimate facts and basic facts. 2 Davis, Administrative Law Treatise, Section 16.06-, p. 449. - In the same Section, on page 451, the author states: “The basic findings are,those on which the ultimate findifig rests; the basic findings are more detailed than the ultimate finding but less detailed than a summary of the evidence. * * In the case of Saginaw Broadcasting Co. v. Federal Communications Commission (1938), 68 App.D.C. 282, 96 F.2d 554, certiorari denied sub nom. Gross v. Saginaw Broadcasting Co. (1938), 305 U.S. 613, 59 S.Ct. 72, 83 L.Ed. 391, the Court, in discussing the matter of findings of facts by administrative agencies, stated (96 F.2d p. 559): “ * * * The process necessarily includes at least four parts: (1) evidence must be taken and weighed, both as to its accuracy and credibility; (2) from attentive consideration of this evidence a determination of facts of a basic or underlying nature must be reached; (3) from these basic facts the ultimate facts * * * are to be inferred, or not, as the case may be; (4) from this finding the decision will follow by the application of the statutory criterion. "x" * * ” The record in the present case and the findings of the Review Committee show that it proceeded in the manner just outlined. That Committee made very complete findings as to the basic facts. From those facts and the inferences drawn therefrom the Committee made a finding as to the ultimate facts. Its finding as to certain ultimate facts contained in Finding of Fact No. 18 is of key importance. That finding is as follows: “The transactions by which the applicants obtained deeds to the farms in question were not for the purpose of reestablishing the farming operations of the applicants as displaced owners but were schemes and devices to sell the allotments and to transfer the allotments for the benefit of Fred Chandler, Sr., and Fred Chandler, Jr.” Prior to the time of the transfer- of the allotments in question the Oklahoma cotton allottees and the members of the Culberson County Committee all knew and understood that it would be unlawful for a cotton allottee to transfer his cotton allotment, except to a tract of land he had purchased for the purpose of reestablishing his farming operations. Therefore, when each of the Oklahoma cotton allottees made application to transfer his cotton allotment to a tract of land in Texas, the application itself constituted a representation that the transfer sought to be made was for the purpose of reestablishing his farm operations on such tract and was not for the purpose of effecting a sale or transfer of the allotment for the benefit of the Chandlers. The Chandlers also knew and understood that it would be unlawful for the Oklahoma cotton allottees to sell or transfer their cotton allotments to them for their benefit. Fred Chandler, Sr., is a lawyer and a member of the Texas Bar and had previously served on the Texas State ASC Committee. The finding of the Review Committee above set forth was, in substance and effect, that the transfers in questions were procured by fraud practiced on the Culberson County Committee and were void ab initio. The determination of the Review Committee was that the allotments in question were cancellable because of such fraud. That finding of the Review Committee is based upon inferences drawn by it from the basic facts which it found had been established by the evidence. The parties are not in serious controversy as to the basic evidentiary facts as found by the Review Committee. They are in serious controversy as to the inferences apparently drawn by the Committee from certain of those facts and from the record as a whole. Certain facts found by the Review Committee, which are seemingly of pertinence, will next be considered. It was heretofore noted that in the summer of 1960 Fred Chandler, Sr., entered into arrangements with Harvey White, the Performance Supervisor of the Custer County, Oklahoma, ASCS Office, and Russell Dill, the County Office Manager in the same office, to render services for him for compensation. Fred Chandler, Sr., testified that they were employed for the purpose of assisting them in meeting the Oklahoma farmers whose farms had been taken by eminent domain. He further testified in regard to their employment as follows; “My understanding as related to me by them, each of them, was that they had discussed the matter with their county ASC chairman * * * and he asured them that there was nothing wrong with it that he could see, so long as they didn’t work in helping me to contact these men and to sell this land at any time during the hours of their employment with the committee.” He further testified that the services rendered by Harvey White and Russell Dill were rendered mornings before work and afternoons and evenings after work. Fred Chandler, Sr., testified that he had not made any specific agreement with them as to the amount of their compensation until after the transactions had been consummated but that after the transactions had been consummated he agreed to pay them ten dollars per basic cotton allotment acre for the sale of the land. On May 30, 1961, he paid Harvey White the sum of $1,765 and on June 15, 1961, he paid Russell Dill the sum of $1,765. The two payments amounted to ten dollars per acre for the basic cotton allotment acres. The allotment acres transferred amounted to 350.4 acres. The payments were not made until after the transfers had been approved by the Culberson County Committee. After an investigation was started in regard to the transactions, Harvey White and Russell Dill repaid the amounts received by them by checks payable to the Chandler Company. The Review Committee in its findings set forth in detail the transactions between the Chandlers and Harvey White and Russell Dill. It is clear that neither of them had any discretionary authority in connection with the transfer of cotton allotments. The plaintiffs contend that such being the case no unfavorable inferences could be properly drawn from the parts played by Harvey White and Russell Dill. The Government contends that the Review Committee could properly draw certain unfavorable inferences from the arrangements between the Chandlers and Harvey White and Russell Dill. The Government concedes that neither Harvey White nor Russell Dill had any discretionary authority in connection with the transfers. However, it contends that by virtue of their official positions their association with the Chandlers would, in the first instance at least, give the proposed arrangements an aura of legality and Governmental approval. The Government argues that the Chandlers, by making arrangements so that Harvey White and Russell Dill had a stake in the transactions, necessarily restrained them from giving objective advice to the displaced owners. The plaintiffs in their brief and argument state as follows in connection with the matter of the employment of Messrs. White and Dill by Fred Chandler, Sr.: “Mr. Chandler testified that he had engaged the services of Messrs. White and Dill to assist him in locating displaced farmers in Custer County to whom he could present an offer to sell land in Culberson County, Texas. The Government’s contention that Mr. Chandler engaged their services ‘to render assistance in obtaining pooled cotton allotments’ is wholly unfounded. The evidence indicates that neither Mr. White nor Mr. Dill, nor the County Committee for which they were employed had any power to effect the transfer of pooled allotments. “The record shows that the compensation received by Messrs. White and Dill was conditioned not upon the approved transfer of pooled allotments, but upon the number of acres of allotment in the pool to the credit of the displaced owners who purchased land from Mr. Chandler. Messrs. White and Dill were to perform their services for Mr. Chandler during time not committed to their employment with the Department of Agriculture. The record further shows that the Oklahoma farmers were not advised by Messrs. White and Dill regarding the transfer of their allotments, nor did they know of Messrs. White and Dill being employed by the Chandlers. “Whether or not Mr. Chandler’s employment of Messrs. White and Dill was improper is not a question relevant to the cancellation of the allotments in dispute. * * The Chandlers made what are referred to as earnest money payments to the Oklahoma allottees before leases to the Texas tracts were executed and before the transfer of the allotments had been approved and before the allottees had seen the Texas land. On cross-examination Fred Chandler, Sr., testified in regard to that matter as follows: “Q * * * you paid out the money, you paid out ten per cent of the lease money without ever having a lease, and you never required a single penney [sic] and downpayment on the land? “A That’s correct, we had faith in them and evidently they had faith in us.” Fred Chandler, Sr., then made reference to the matter of chances that have been taken. His cross-examination then continued as follows: “Q What do you mean, there has been some chances taken ? “A I mean whether or not it would go through when we agreed to pay ten per cent down on this, and I mean other chances were taken. Whether we would go ahead and lease the land for what I think is a very substantial price, even though the allotment might terminate next year.” Fred Chandler, Sr., further testified on cross-examination that the ten per cent payment was in the form of earnest money and that if the deal did not go through the Oklahoma allottees could retain the earnest money. The Government contends the arrangement in regard to earnest money was most unusual in that normally it is the purchaser of land rather than the seller thereof who makes an earnest money payment and that, therefore, the earnest money arrangement tends to give an air of unreality to the entire situation. The plaintiffs contend that the arrangement does not do so. Sometime during the period between January 26 and February 11, 1961, Fred Chandler, Sr., prepared the deeds to the tracts in question. They were all prepared at the same time. He determined the shape and location of each of the tracts described in the deeds. The Oklahoma allottees accepted the deeds without being furnished abstracts of title to the tracts described therein and without title examinations. It was disclosed later that there were errors in seven of the deeds. The original deed to A. N. Easley was executed by Fred Chandler, Sr., and Fred Chandler, Jr., although title to the tract described in that deed was in the Capitan Company. Seven correction deeds were later executed. The larger tracts from which the tracts described in the deeds were carved out of had been conveyed to the Chandlers subject to the reservation of certain mineral rights. No reservations of mineral rights were made in the deeds to the Oklahoma allottees. The first time any of those allot-tees saw any of the land described in the deeds was at the time some of them came down to Texas for the hearing on the applications for transfer before the Culberson County Committee on February 17, 1961. The Chandlers paid part of the expenses of some of the Oklahoma allot-tees for their travel to Texas. Fred Chandler, Sr., caused the deeds to be recorded and paid the recording fees. The Government contends that all of the facts referred to strongly indicate complete indifference to and complete lack of concern on the part of the Oklahoma allottees as to the character, location, and the state of the title to the tracts allegedly purchased by them and that such being the case such inference, with other properly drawn inferences, would give support to the finding of the Review Committee that the transactions did not constitute bona fide purchases of the tracts by the Oklahoma allottees for the purpose of reestablishing their farming operations but, in reality, were a disguised sale of the cotton allotments for the benefit of the Chandlers. The plaintiffs contend that no such unfavorable inference should be drawn. They contend that the record shows that the Oklahoma allottees had complete confidence in Fred Chandler, Sr., and they relied upon and trusted him to see that they received suitable tracts and proper title thereto. In regard to the fact that the deeds to the Oklahoma allottees did not make any reservations of mineral rights, the plaintiffs in their brief and argument stated that this feature was without relevance. They further stated as follows: “ * * * The Oklahoma farmers and the Chandlers had no interest in the transfer of mineral rights. Their sole consideration was the transfer of land suitable for cotton farming. Mr. Chandler intended to convey all his interest in the lands in question, and the deeds he gave the Oklahoma farmers fulfilled this intention. However, Mr. Chandler’s failure to specify this reservation, plaintiffs concede, constitutes a technical breach of his general warranty of title.” In each case the tract described in the deed was leased back to the Chandlers for a twenty-year period with the rent payable in a lump sum. Fred Chandler, Sr., testified that he would not have sold the tracts to the Oklahoma allottees unless they would lease them back to him. Thus, the leasing arrangements were an integral part of the transactions. The plaintiffs contend, and correctly so, that it is proper and lawful for an owner of land having a cotton allotment to lease such land and to have cotton produced thereon to the extent of the allotment by the lessee. The plaintiffs contend, and correctly so, that the Oklahoma allottees could properly and lawfully purchase land for the purpose of reestablishing their farm operations and carry on such reestablished farm operations by lease arrangements. The Government concedes that such is the case. However, it contends that the character, nature and terms of the leases in question and the circumstances surrounding them were such that the Review Committee could properly draw the inference that the leasings were, in reality, a part of the claimed disguise. Fred Chandler, Sr., testified that during the negotiations he proposed to lease the tracts involved on the basis of $100 per cotton acre allotment, except in the case of Hubert Kephart who had a very large allotment. The basis in his case was to be $125 per cotton allotment acre. While each lease specified a lump sum payment for the twenty-year term, none of them specified when the lump sum was to be made. Fred Chandler, Sr., in his testimony before the Review Committee, was asked as to what the understanding was as to the payment of the lump sum rent. In that regard he testified as follows: “ * * * When we settled down there and agreed on this lease, the terms and all, we had in mind, and I think I had conveyed it to them [the displaced owners] that we would pay it if they wanted it at the time the leases were executed, * * * one of them at a time, different ones spoke up * * * they decided they would much rather have their lease money, half of it in March of '61 and the other half in March of ’62, but they had already received ten dollars per cotton allotment acre, that was earnest money, what I call it. Therefore, those who wanted their first half in March of ’61 included that ten dollars, that which happened to be ten per cent, I believe, that they received. * * * ” Fred Chandler, Sr., further testified that L. M. Stout wished all of his rent then and that Vernon McLaughlin desired all of his in March, 1962, and that Hubert Kephart wished only a small part of his rent then. Thus, it appears that the Oklahoma allottees were entitled to be paid the lump sum rent payment at the time the leases were executed if they so desired. In the case of all of the Oklahoma allottees, except two, the lump sum rent payment was equal to $100 per acre for their cotton allotment acres. In the case of Vernon Fletcher the lump sum rent payment was equal to $103.26 per acre for his cotton allotment acres and in the case of Hubert Kephart the lump sum rent payment was equal to $125 per acre for his cotton allotment acres. Each lease provided that the lessee should pay the real estate taxes on the leased premises. The Government contends that the situation as to the leases was such as to properly permit the Review Committee to draw unfavorable inferences as to the transactions. The Government stresses that under the arrangements the lump sum rent payment in each case was equal in amount to the amount agreed upon as the value of the allotments and that the allottees were entitled to that sum immediately upon the execution of the lease, or, in other words, the allottees were entitled to receive and did receive payment on a cotton allotment acre basis of the value per acre which was recognized by the parties as the value of such cotton allotment acres. The Government calls attention to the length of the leases, the feature of immediate lump sum payments for the entire twenty-year term, and the lease provisions making the payment of the real estate taxes the obligation of the lessee. The Government argues that the provision for the payment of the real estate taxes by the lessee would have the effect of protecting the lump sum payments against being cut into by the payment of future real estate taxes when the allottees would be receiving no current income from the tracts. The Government contends that all of the features of the leases referred to would properly permit the Review Committee to draw inferences which would support its conclusion as to the real nature of the transactions. The plaintiffs contend that none of the lease features referred to are unusual and presented evidence before the Review Committee to that effect. The plaintiffs further contend not any one or all of the lease features referred to would properly permit the Review Committee to draw unfavorable inferences as to the transactions. It was heretofore noted that the Oklahoma allottees and Fred Chandler, Sr., had orally agreed that if he drilled any wells on any of the tracts the owner would sell him the acre of land on which the well was located. It appears that irrigation was necessary in order to grow cotton on the tracts in question and that irrigation would have to be made by means of wells and irrigation ditches. Fred Chandler, Sr., testified, in substance, that it would be difficult for them to finance the drilling of the wells unless they owned the land around the well. He further testified that it would .cost around $20,000 to drill a well and that the Chandlers had drilled four pretty good wells on three tracts. The lands described in the deeds to the Oklahoma allottees were located in three different Sections: 90 acres in Section 3; 480 acres in Section 9; and 464.4 acres in Section 40. The tracts in Sections 3 and 9 were subject to a blanket overriding first lien in favor of Paul Teas, Jr., and L. S. Sutherland. That lien secured the sum of $35,000 payable in twenty annual installments with interest payable on December 1 of each year. It was first agreed between Paul Teas, Jr., L. S. Sutherland, and the Chandlers that the Chandlers were to have the privilege of paying the full amount secured by the lien on December 1, 1961. Later it was agreed between them that the Chandlers could pay one-half of the amount secured by the lien on December 1, 1961, and the other half on December 1, 1962, if they desired. The tracts in Section 40 were subject to a blanket overriding lien in favor of Paul Teas, Sr., securing the sum of $17,274 payable in ten annual installments with the interest payable on January 19 of each year. It was the testimony of the plaintiffs that the consideration for the tracts conveyed to the Oklahoma allottees was $55 per acre, which consideration was made up of the following items: the assumption by each of them to the amount of $35 for each acre conveyed of the overriding lien thereon and the payment by each of them to the Chandlers of $20 per acre for the clearing of the land conveyed. The feature of the Oklahoma allottees agreeing to pay a portion of blanket overriding liens was the subject of testimony at the hearing before the Review Committee. Fred Chandler, Sr., testified that he had no definite agreement with the lienholders and with the Oklahoma allot-tees that any of the allottees could secure a release of his tract from the overriding lien by the payment of the $35 per acre assumed by him. The Review Committee found that the Oklahoma allottees had no agreement under which they could secure a release of their tracts from the blanket overriding liens by the payment of the $35 per acre specified in their deeds. The Government contends that the situation just referred to was of such a nature as to permit the Review Committee to properly draw an inference which, with other properly drawn inferences, would give support to the finding of the Review Committee as to the nature of the transactions. In connection with this matter the plaintiffs in their brief and argument state as follows: “There has been no agreement negotiated between the Oklahoma farmers and the prior lien holders for the release of the lien as to the individual Oklahoma farmer as his purchase price is paid. Mr. Chandler had secured from the prior lien holders, a partial segregation of the land purchased by the Oklahoma farmers from the total indebtedness owed by Mr. Chandler to them. However, release of the lien against the land purchased by the Oklahoma farmers cannot be obtained unless Mr. Chandler satisfies a part of the total secured indebtedness. Mr. Chandler has expressed full intention of doing this, and the Oklahoma farmers are satisfied with this arrangement. As Professor Woodward has observed, this is not a model conveyance, however, the parties are satisfied to rely upon their faith in each other and the absence of an agreement of this nature has no effect upon the passage of ownership from the Chandlers to the Oklahoma farmers.” The Government also calls attention to the fact that in the deeds which contained the assumption clauses no reference was made as to the matter of the installment payments or interest on the overriding liens and that no schedule of payment was set forth. It claims that an unfavorable inference could properly be drawn by the Review Committee because of that feature. In connection with this feature the plaintiffs in their brief and argument state: “Each of the plaintiffs assumed an obligation to pay a specified dollar amount of a pre-existing obligation of the Chandlers. The times of payment of the Chandlers’ obligation were set forth in other instruments. When the plaintiffs assumed their obligation to pay a prescribed portion of these obligations, they assumed the obligation to make those payments when the Chandlers’ obligations became due.” The plaintiffs contend that no unfavorable inference could properly be drawn from the feature referred to. The Review Committee found that in the summer of 1961, after the Department of Agriculture had started investigating the transactions, Fred Chandler, Sr., went to Custer County and met with most of the applicants and that he prepared and presented a schedule of payments to be made by them and that those scheduled payments were equal to one-tenth of the purchase price exclusive of clearing costs, plus interest, in the case of the tracts in Section 40 and one-half of the purchase price exclusive of clearing costs, plus interest, in the case of the tracts in Sections 3 and 9. The Department of Agriculture continued its investigation of the transactions. On December 1, 1961, an annual principal payment installment and interest was due on the overriding lien on the tracts in Sections 3 and 9 and on January 19, 1962, an annual principal payment installment and interest was due on the overriding lien on Section 40. The Review Committee made the findings hereinafter set forth in regard to those payments: “(a) On December 1, 1961, Chandler Company paid Paul Teas, Jr., and L. S. Sutherland $566.21 on behalf of Jack Kenney. Thereafter on March 1, 1962, Chandler Company paid Jack Kenney the balance of the lease money in the sum of $500.00 without deduction. “(b) On December 1, 1961, Chandler Company paid $566.21 to Paul Teas, Jr., and L. S. Sutherland for Paul Kenney. On March 13, 1962, Chandler Company paid Paul Kenney $500.00 as a balance of the lease money without deduction. “(c) On December 1, 1961, Chandler Company paid $566.21 to Paul Teas, Jr., and L. S. Sutherland for Vance Kenney and on either March 13, 1962, or August 13, 1962, paid Vance Kenney $500.00 as the balance of the lease money without deduction. “(d) On December 1, 1961, Chandler Company paid $566.21 for L. M. Stout to Paul Teas, Jr., and L. S. Suthei'land and has made no effort to collect from Stout. “(e) On December 1, 1961, Cecil Brown paid Paul Teas, Jr., and L. S. Sutherland $566.21, and on November 29, 1961 was paid $635.00 by Chandler Company as the balance due on the rent. “(f) On December 1, 1961, A. N. Easley paid Paul Teas, Jr., and L. S. Sutherland $1,698.64, and on November 29, 1961, A. N. Easley was paid $1,610.00 by Chandler Company as the balance due on the rent. “(g) On December 1, 1961, A. H. Crawford paid Paul Teas, Jr., and L. S. Sutherland $1,132.42, and on November 29, 1961, A. H. Crawford was paid $1,150 by Chandler Company as the balance due on the rent. “(h) On December 1, 1961, J. R. Kenney paid Paul Teas, Jr., and L. S. Sutherland $206.64 and on the same date J. R. Kenney paid Paul Teas, Jr., and L. S. Sutherland $2,-264.85. On March 13, 1962, Chandler Company paid J. R. Kenney a total of $2,845.00 the balance due on rent money. “(i) On December 1,1961, Vernon McLaughlin paid Paul Teas, Jr., and L. S. Sutherland $2,264.85. On March 13, 1962, Chandler Company paid Vei-non McLaughlin $3,942.00 as balance due on rent money. “(j) On December 1, 1961, Woodrow Gum paid Paul Teas, Sr., $232.-42. On November 29, 1961, Chandler Company paid Woodrow Gum $755.00 balance due on rent money. “(k) On December 1, 1961 * * Jack D. Warner paid Paul Teas, Sr., $232.47. On November 29, 1961, Chandler Company paid Jack Warner $840.00 balance due on rent payments. “(1) On December 1, 1961, Vernon Fletcher paid Paul Teas, Sr., $232.47. On March 13, 1962, Vernon Fletcher was paid $787.50 by Chandler Company as balance due on rent payments. “(m) On December 1, 1961, Hubert Kephart paid Paul Teas, Sr., $1,084.86. On March 13, 1962, Chandler Company paid Hubert Kephart $6,000. “(n) On December 1, 1961, Lewis Kenney paid Paul Teas, Sr., $206.64. On March 13, 1962, Chandler Company paid Lewis Kenney $500.00 balance due on rent. “(o) On December 1,1961, Walter S. Kenney paid Paul Teas, Sr., $203.54. On March 13, 1962, Chandler Company paid Walter S. Kenney $500.00 balance due on rent.” At the hearing before the Review Committee the matter of the rent payments in relation to the payments made on the overriding liens was gone into. On recross-examination of Fred Chandler, Sr., the following appears: “Q Mr. Chandler, you had made the first [rent] payment in March of 1961, hadn’t you? “A Yes, sir. Those who wanted it then, yes, sir. “Q And then this next payment was to be a year later in March of 1962? “A Yes, sir. “Q What is your explanation that they didn’t have any arrangements to make this payment due in December 1, 1961? . “A You mean those who didn’t have? “Q Yes? “A Well, I’ll tell you, that’s a little hard to explain. To me — I’ll just have to say what I think about it — it was kind of a feeling of indifference, lack of interest.” Earlier in his testimony Fred Chandler, Sr., testified, in effect, that the reason some of the Oklahoma allottees wanted part of the rent payment made in 1962 was because they had received substantial sums for their condemned lands and considered it desirable for income tax purposes to have part of the rent payments made in 1962. It appears from the record that at the time the transactions were entered into some of the Oklahoma allottees had received their condemnation awards. However, some of the allottees litigated the amount of the proposed awards and the litigation had not been completed at that time. The Government points out that the record indicates that the Oklahoma allottees apparently did not make use of the proceeds received by them for their condemned land towards the purchase price of lands allegedly purchased by them for the purpose of reestablishing their farming operations and that the payments made on the purchase price of those tracts were made as heretofore set forth. The Government in its brief makes the following argument: “ * * * The purchasers for the most part had received $50 per allotment acre and were to receive $50 more by March 15, 1962. However, before making any payment Jack Warner, Woodrow Gum, A. N. Easley, Cecil Brown and A. H. Crawford required Chandler Company to pay in advance the rent payment due March 15, 1962. These people had received a rent payment in the spring of 1961 but apparently had given no consideration to making a payment on the purchase price on December 1, 1961. * * * ” The Government makes the following reference to the payments on behalf of L. M. Stout, Jack Kenney, Paul Kenney, and Yance Kenney: “ * * * L. M. Stout made no payment out of his own funds. He had received all of the rent money and yet Chandler and Company advanced the money and have made no effort to collect from him. Jack Kenny, Paul Kenny, and Vance Kenny made no payment from their own funds. The payments were advanced by Chandler and Company and yet Chandler and Company on March 1, 1962 paid Jack Kenny $500 without deduction for the adva