June 4, 2010
North Dakota's Anti-Corporate Farming Law: No Piecemeal Approaches Allowed
In May, the North Dakota Supreme Court issued an opinion related to the state’s anti-corporate farming law. Until the decision, I did not know there was such a law. In my defense, I never really had a reason to look.
The background: Crosslands is a nonprofit corporation formed to “preserve and protect migratory waterfowl habitat in North Dakota.” Crosslands bought 949 acres of rural land in 2003 “for the express purpose of maintaining and preserving habitat for migratory waterfowl and other wildlife.” The court below determined, after a detailed analysis, that 267 acres of the 949-acre tract were not farmland or ranchland. The State argued that the whole parcel should be deemed farmland.
The statute starts with a general prohibition found in the North Dakota Century Code § 10-06.1-02:
All corporations and limited liability companies, except as otherwise provided in this chapter, are prohibited from owning or leasing land used for farming or ranching and from engaging in the business of farming or ranching.
The statute then provides a number of exceptions, one of which permits certain nonprofit organizations to own farmland, as long as they meet a long list of requirements. One of the requirements provides: “Before farmland or ranchland may be purchased by a nonprofit organization for the purpose of conserving natural areas and habitats for biota, the governor must approve the proposed acquisition.” N.D. Cent. Code § 10-06.1-10.
Crosslands did not comply with this requirement, but the court below determined that the nonprofit should be allowed to divest the farmland it had acquired, but keep other rural (nonfarm) land it had purchased. The North Dakota Supreme Court reversed, stating that the statute required the court to consider the land as a single parcel and ordered divestiture within a year.
The case is fairly straightforward, but both the case and the statute provide a few puzzles. For example, another requirement for nonprofit organizations is that the nonprofit organization must have been either incorporated in this state or issued a certificate of authority to do business in this state before January 1, 1985, or, before January 1, 1987, have been incorporated in this state if the nonprofit organization was created or authorized under Public Law No. 99-294 [100 Stat. 418].” N.D. Cent. Code § 10-06.1-10. The court quotes this part of the statute, but interestingly doesn’t state the date Crosslands was formed.
Perhaps that was addressed by the court below, but in North Dakota, lower court decisions aren’t reported, so I can’t be sure. It does appear that Crosslands has been around since 1984, based on an old newspaper report, but it still seems odd not to mention it in the decision.
Furthermore, why does it matter if the nonprofit was formed before 1987 (or earlier) if it meets the other requirements? I assume this was grandfathering older nonprofits, but it seems rather odd. Why not just outlaw the practice generally?
Anyway, I find the case and the statute section quite interesting. I suppose that’s why I do what I do.
UPDATE: A kind reader provided a link to the lower court decision at National Ag Law Center's website here.
June 4, 2010 | Permalink