This action arises under the Soil Bank Act, 7 U.S.C. §§ 1801-1837, and particularly § 1831(d). The contract involved is a “Soil Bank Conservation Reserve Contract” entered into by appellant Henry F. Reimann as “producer” on November 24, 1958. Appellant Eunice W. Rеimann is his wife, and did not sign the contract. The contract was approved for the Secretary of Agriculture on January 6,1959. It is of the type authorized by § 1831(a). While it differs from an “Acreage Reserve Agreement,” authorized under § 1821(a), it is in most resрects similar and in many of its provisions identical to such a contract. We had occasion to consider the provisions of an “Acreage Reserve Agreement” at some length in Shay v. Agricultural Stabilization & Conservation State Comm., 9 Cir., 1962,
The contract relates to a farm owned by appellants as community property and located seven miles northeast of Ashton, Idaho. Under the contract, 276.8 acres were designated as conservation reserve acreagе, to be established and maintained with a permanent cover of grass and legumes for a period of ten years, 1959-68, the maximum period authorized by § 1833(b). This was all of the cropland on the farm. The payments to be made to Reimann undеr § 1831(b) were annual payments of $4,567.20, and “cost-share payments” of $1,384.00, representing one-half his cost of seed and labor. The contract prohibited his harvesting wheat from the lands affected.
In August of 1958, Reimann had planted approximately 112 of these acres to wheat. In the spring of 1959, he seeded 170 acres to grass. During the spring of 1959, he received both oral and written notices from the county Agricultural Stabilization Committee stating that, to comply with the contraсt, he would have to destroy the wheat by July 31, 1959. He did not do so, and subsequently harvested the wheat, realizing approximately $7,600.00.
Shortly before July 31, Mrs. Reimann told the county committee that, because she was a producer and owner as wеll as her husband, and had not signed the contract, it was void and that the Reimanns intended to harvest their wheat.
The procedures outlined in the regulations of the Secretary (7 C.F.R. 750.172 ff., formerly 6 C.F.R. 485.172 ff.) and in § 1831(d) were followed, and the state committee dеtermined that the harvesting of the crop was a knowing and willful violation of the contract, and that Reimann should forfeit the payments that he was to receive (i. e., $4,567.20 plus $1,384.00). The committee also purported to determine that Rеimann was liable for a civil penalty, under § 1811, of one-half the foregoing amounts or $2,975.60. These determinations were against Henry F. Reimann alone, not against his wife.
The committee did not determine whether the violation was one “which would warrant termination of the contract” or that “the nature of the violation is such as to defeat or substantially impair the purposes of the contract” (§ 1831(d)). We held, in Shay, supra, that before a forfeiture or refund of all payments can be required, such determination should be made by the committee, and that a regulation (former 6 C.F.R. § 485.286) which purported to establish a flat rule that a knowing and willful violation requires forfeiture is invalid because in conflict with §§ 1831 (d) and 1821. Evidently the committee relied upon a similar regulation here (former 6 C.F.R. 485.294, now 7 C.F.R. 750.294). However, there is no need *748 to remand for this reason, as we did in Shay, because the Reimanns conceded, in the court below, that the violation (if it was a violаtion) was such as to warrant termination. 1
In Shay, we also held that neither the Secretary, the committee, nor the court in an action brought under § 1831(d), has anything to do with whether the former is liable for the penalty prescribed by § 1811 for knowing and willful viоlations, that question being solely for the court in an action brought to recover the penalty in the name of the United States. The contract form, and the regulations, do appear to provide that the committee shаll assess such a penalty. (7 C.F.R. 750.295, former 6 C.F.R. 485.295) In Shay, there was a separate action pending to recover the penalty, and we held that the committee could not assess the penalty, and that it was error for the court to аffirm that action. Here, the government counterclaimed for the penalty; as it did in United States v. Maxwell, 8 Cir., 1960,
Appellants make three points: (1) that the contract is an enсumbrance upon the farm, and is void under Idaho law (Idaho Code Ann. § 32-912 (1948)) 2 because Mrs. Reimann was not a signatory; (2) that the Reimanns acted in good faith, so that the penalty is not authorized; (3) that the court should have declared that the сontract is terminated.
(1) The contract is not an encumbrance.
The government urges that the meaning and effect of the contract is a matter of federal law, so that the state statute does not apply. We are satisfied that the contract is governed by federal law, not state law. But we need not, and do not, decide whether we should adopt, for the purpose of this decision, the law of Idaho as being the federal law in relation to what authority a husband has, and as to what constitutes an encumbrance. (See Sam Macri & Sons, Inc. v. United States for Use of Oaks Constr. Co., 9 Cir., 1963,
*749
The contract does not purport to sell, or to convey to anyone, any interest in the Reimann farm. Nor does it create an encumbrance, as that term has beеn defined by the Idaho Supreme Court in Fargo v. Bennett,
Since the contract is a personal agreement relating to the management and control of the farm, and since Reimann’s powers inсlude the power to manage and control the community property, Mrs. Reimann’s joining in the contract was not necessary. It endures only while he has control, and is merely an exercise of his lawful powers under Idaho law.
(2) The сontention that the Reimanns acted in good faith is foreclosed by the court’s findings.
In essence, what Reimann did was to weigh the amount he thought he might lose by forfeiture ($5,159.20) against what he could get for the wheat ($7,600.00). He chose the latter. He had been repeatedly told that, to comply with the contract, he must destroy the wheat; he knew that, if he harvested it, he would violate the contract. This is admitted. He claims that he did not know that he would also be subject to the penalty provided for under § 1811. Assuming that this is true (although the court did not so find), it would make no difference. The penalty is statutory, and affords the government an additional remedy for breach. Surely it is no defense to a charge that I willfully and knowingly breached a contract for me to say, “Yes, I knew that what I did was a breach, and I intended to do it, but I underestimated the damages that I might suffer.” Under our decision in Shay, supra, what Reimann did was clearly a knowing and willful breach. The court so found; its finding is not clеarly erroneous. On the contrary, it is clearly correct. It is also urged that the Reimanns believed in good faith that the contract was void because Mrs. Reimann did not sign it. The trial court did not believe them and did not have to believe thеm, nor do we.
(3) The court lacked jurisdiction to declare the contract terminated.
Under the statute, termination of the contract for breach by the farmer is an additional, and optional, remedy given to the United States (§ 1831(a) (6) and (d)). It does not automatically occur upon such a breach (see 7 C.F.R. 750.294j, former 6 C.F.R. 485.294j). The committee’s authority is to determine whether a breach warrants termination; it was not required, upon making such a determination, to take the *750 next step and actually terminate. It would be a most peculiar rule that would allow the farmer to escape his obligations by electing to commit a substantial breach of them.
Since the statute only authorizes a review оf the committee’s determination, and since the committee was neither required to nor did determine that the contract was terminated, the court had no authority to terminate it. (See Shay, supra.)
Affirmed.
Notes
. In their complaint in the trial court, the Reimanns did not attack the determination of the committee that the annual cost-share payments which had not been paid to the Reimanns, should be forfeited. They attacked only the committee’s purported detеrmination that Henry F. Reimann should in addition pay the penalty of $2975.60. At the pretrial, they were permitted to amend their complaint to allege that they were entitled to a declaration that the contract was terminated as of the determination of the state committee. Appellants’ theory that the court should have declared the contract terminated rests entirely upon the proposition that the violation is such as would warrant termination under § 1831(d).
. “Husband’s control of community property. — The husband has the management and control of the community property, except the earnings of the wife for her personal services and the rents and profits of her separate estate. But he can not sеll, convey or encumber the community real estate unless the wife join with him in executing and acknowledging the deed or other instrument of conveyance, by which the real estate is sold, conveyed or encumbered: provided, thаt the husband or wife may, by express power of attorney, give to the other the complete power to sell, convey or encumber said community property, either real or personal. All deeds, conveyances, bills of sale, or evidences of debt heretofore made in conformity herewith are hereby validated.”
. “Every right to or interest in the land which may subsist in third persons, to the diminution of the value of the land, but consistent with the passing of the fee by the conveyance.”