Moody v. United States

United States Court of Appeals
for the Federal Circuit
______________________
VERNON MOODY, ANITA MOODY,
Plaintiffs-Appellants
v.
UNITED STATES,
Defendant-Appellee
______________________
2018-2227
______________________
Appeal from the United States Court of Federal Claims
in No. 1:16-cv-00107-EJD, Senior Judge Edward J.
Damich.
______________________
Decided: July 24, 2019
______________________
TERRY LEE PECHOTA, Pechota Law Office, Rapid City,
SD, argued for plaintiffs-appellants.
ANN MOTTO, Commercial Litigation Branch, Civil Divi-
sion, United States Department of Justice, Washington,
DC, argued for defendant-appellee. Also represented by
MARGARET JANTZEN, JOSEPH H. HUNT, TARA K. HOGAN,
ROBERT EDWARD KIRSCHMAN, JR.
______________________
Before DYK, CHEN, and STOLL, Circuit Judges.
2 MOODY v. UNITED STATES
DYK, Circuit Judge.
Vernon and Anita Moody sued the United States in the
Court of Federal Claims (“Claims Court”) alleging that the
United States was a party to contracts with the Moodys
and breached these contracts. 1 The Moodys also contended
that they had implied-in-fact contracts with the United
States, and that the United States committed an uncom-
pensated takings under the Fifth Amendment. The Claims
Court dismissed the complaint. It concluded that the
United States was not a party to the contracts. The Claims
Court also concluded that the Moodys failed to state a claim
upon which relief could be granted as to the alleged im-
plied-in-fact contracts with the United States, and that
there was no cognizable takings claim. We affirm.
BACKGROUND
The Moodys leased various parcels on the Pine Ridge
Indian Reservation in South Dakota for agricultural use.
The question is whether the United States was a party to
those contracts.
“[T]he United States has a trust responsibility to pro-
tect, conserve, utilize, and manage Indian agricultural
lands consistent with its fiduciary obligation and its unique
relationship with Indian tribes.” 25 U.S.C. § 3701(2). To
carry out this trust responsibility “the Secretary [of the In-
terior is authorized] to take part in the management of In-
dian agricultural lands, with the participation of the
beneficial owners of the land, in a manner consistent with
the trust responsibility of the Secretary and with the objec-
tives of the beneficial owners.” 25 U.S.C. § 3702(2). The
Secretary has delegated some of these responsibilities to
1 For convenience, this opinion treats the leases as
being entered into by both of the Moodys, though all the
leases were, in fact, entered into either by Vernon Moody
or Anita Moody, not both.
MOODY v. UNITED STATES 3
the Bureau of Indian Affairs (“BIA”), within the Depart-
ment of the Interior, which has promulgated regulations
governing agricultural leases on Indian lands. See 25
C.F.R. §§ 162.101–.256. These regulations generally allow
Indian landowners to enter into such agricultural leases
with the approval of the BIA. The BIA is also involved in
the enforcement of the lease provisions. See id. §§ 162.247–
.256.
In 2011, the Moodys entered into five-year leases with
respect to the parcels of land in question. The leases con-
tain similar, albeit not identical, language. Each lease de-
fined “the Indian or Indians” as the “LESSOR” and the
Moodys as “LESSEE.” See J.A. 18, 32, 35, 47, 61. Although
the documentary record is not entirely clear, the Claims
Court concluded that “[t]he Oglala Sioux Tribe was a sig-
natory to all five leases.” J.A. 2. No party disputes this on
appeal. 2 The leases stated that “the Secretary of the Inte-
rior [was] acting for and on behalf of Indians,” and that the
land being leased was “lands and interest(s) held in trust
or restricted status by the United States for the benefit of
an Indian Tribe.” See, e.g., J.A. 18. Other provisions of the
leases further distinguished between the parties to the
lease and the Secretary of the Interior/United States. 3
2 At oral argument the Moodys agreed. Oral Arg. at
2:11–36 (“Q. [I]t is quite clear that the other party is the
Oglala Sioux . . . A. Okay. I agree with that . . . .”).
3 See, e.g., J.A. 19 (“Any [change to the lease] may be
made only with the approval of the Secretary and the writ-
ten consent of the parties to the lease . . . .”); id. (“[The
LESSEE] shall not destroy or permit to be destroyed any
trees, except with the consent of the LESSOR and the ap-
proval of the Secretary . . . .”); id. (“The owners of the land
and the LESSEE shall be notified by the Secretary of
any . . . change in the [trust] status of the land.”); J.A. 20
(“Neither the LESSOR, nor the United States . . . .”).
4 MOODY v. UNITED STATES
Issues with respect to lease payments arose in 2012.
The Moodys’ amended complaint alleged the following,
which we must accept as true for purposes of this appeal.
The Moodys visited the BIA Pine Ridge Agency of Interior
to determine the amount they owed on the leases. They de-
livered a personal check for the proper amount to the BIA,
J.A. 93 ¶ 16, but the BIA subsequently returned the check
and demanded that the payment be made by cashier’s
check, J.A. 93 ¶ 18. The BIA then sent letters to the
Moodys, which “serve[d] as [the Moodys’] official notifica-
tion that effective April 18, 2013, [four of the leases were]
hereby cancelled for non-compliance” for failure “to submit
bonding, and payment” as to Lease Nos. 1-0218-11-15 and
1-T561-11-15, J.A. 76, 78, and “for failure to submit bond-
ing, Crop Insurance for 2012,” “any crop reports,” and “Ne-
gotiable Warehouse Receipts” for Lease Nos. 1-Unit5-11-15
and 1-UNT19-11-15, J.A. 80–81. J.A. 3; J.A. 93 ¶ 19. The
letters also noted that the Moodys could appeal the decision
to the BIA’s “Regional Director . . . in accordance with the
regulations in 25 CFR Part 2,” and that the “notice of ap-
peal must be filed in this office within 30 days of the date
[the Moodys] receive this decision.” J.A. 78. The letters fur-
ther specified that “[i]f no appeal is timely filed, this deci-
sion will become final for the Department of Interior at the
expiration of the appeal.” J.A. 79. “No extension of time
may be granted for filing a notice of appeal” and “[i]f [the
Moodys] should require further assistance in this matter,
[they] may contact the Branch of Realty.” J.A. 79.
Within the 30-day appeal period, the Moodys went
back to the BIA with a cashier’s check in the proper
amount, which the BIA accepted. J.A. 93 ¶¶ 19–20. The
BIA also informed the Moodys that they did not need to
appeal, could continue farming the land according to the
leases, and did not require written confirmation. J.A. 93
¶ 20. Subsequently, on June 3, the Moodys received tres-
pass notices, which led them to once again return to the
BIA to resolve the issue. J.A. 93–94 ¶¶ 22–24. For a second
MOODY v. UNITED STATES 5
time they were instructed that they “should continue to
farm.” J.A. 94 ¶¶ 23, 24. But, a short time later, they were
instructed to vacate the land, which they did. J.A. 94 ¶ 25.
On July 9, 2013, the Moodys received a cancellation letter
“for failure to submit bonding, all crop reports and ‘nego-
tiable Warehouse receipts’” for the fifth lease, Lease No. 1-
T367B-12-16, J.A. 83. Accord J.A. 3; J.A. 94 ¶ 26.
Based on the allegations in the complaint, it appears
that the Moodys would have had good grounds to appeal
the lease terminations with the BIA. After there is a can-
cellation decision on an agricultural lease, the tenant has
30 days from receiving the cancellation letter to appeal the
decision. 25 C.F.R. § 162.254. The cancellation will typi-
cally remain ineffective during the time that tenant’s ap-
pellate rights are being exhausted. Id. §§ 2.6(a), 162.254.
For cancellation of agricultural leases, the appeal is first
filed with the Area Director and thereafter with the Inte-
rior Board of Indian Appeals. Id. §§ 2.4(a), (e), 2.20.
The Board reviews questions of law and the sufficiency
of the evidence de novo, Early S. Burley v. Acting S. Plains
Reg’l Dir., 64 IBIA 162, 167, 2017 WL 2415322, at *5 (IBIA
2017), but will not substitute its own judgment for the BIA
official’s if the matter is committed to the BIA’s discretion
and is otherwise consistent with law, Barber v. W. Reg’l
Dir., 42 IBIA 264, 266, 2006 WL 1148723, at *2 (IBIA
2006). The appellant bears the burden of showing error
with the decision below. Guerrero v. Nw. Reg’l Dir., 63 IBIA
346, 350, 2016 WL 5335850, at *3 (IBIA 2016) (citing 43
C.F.R. § 4.322(a)). Generally, after the exhaustion of ad-
ministrative remedies, see 25 C.F.R. §§ 2.1–2.21; 43 C.F.R.
§ 4.331, the BIA’s final agency decision is subject to chal-
lenge in district court under the Administrative Procedure
Act, 5 U.S.C. § 704.
The Moodys did not file an appeal with the BIA for the
cancellation of any of the leases. Instead, in 2016, the
Moodys filed a complaint against the United States in the
6 MOODY v. UNITED STATES
Claims Court seeking more than $1.5 million in damages.
They asserted three main theories of liability. First, they
contended that the United States was a party to the leases
and had breached the leases. Second, they contended that
even if the United States was not a party to the original
leases, the United States agreed to revive the leases
thereby creating implied-in-fact contracts with the United
States, which were breached by the United States. Third,
the Moodys contended that the United States committed
an uncompensated takings under the Fifth Amendment
when the BIA cancelled the leases, informed the Moodys to
continue farming, and then ultimately removed the
Moodys.
The Claims Court dismissed the written contract
claims for lack of jurisdiction because the United States
was not a party to the leases, for failure to state a claim
upon which relief could be granted because the Moodys did
not have implied-in-fact contracts with the government,
and for failure to raise a legally cognizable takings claim
because their claim was based on the government’s alleged
violation of applicable regulations.
The Moodys appealed. We have jurisdiction pursuant
to 28 U.S.C. § 1295(a)(3). We review dismissal of a com-
plaint for lack or jurisdiction and failure to state a claim de
novo. See Turping v. United States, 913 F.3d 1060, 1064
(Fed. Cir. 2019).
DISCUSSION
We reject each of the Moodys’ three arguments as to
why the United States is liable for damages arising from
the cancellation of the leases. 4
4 The Moodys argue that they should be able to re-
cover in quantum meruit, but we conclude that the Claims
MOODY v. UNITED STATES 7
First, the Moodys contend that, even though the tribe
was a party to the leases, the United States was also a
party to the leases. Unless the United States is a party to
the contracts, there is no privity of contract between the
United States and the Moodys and thus no jurisdiction in
the Claims Court under the Tucker Act for this claim. See
Cienega Gardens v. United States, 194 F.3d 1231, 1239
(Fed. Cir. 1998). The theory that the United States is a
party to the leases is contrary to the express contractual
language, which distinguished between the Secre-
tary/United States “acting for and on behalf of” the Indian
landowners and the parties to the lease—the Oglala Sioux
Tribe as the “LESSOR” and the Moodys as the “LESSEE.”
In United States v. Algoma Lumber Co., 305 U.S. 415
(1939), the Supreme Court held that the United States’ en-
try into leases on behalf of an Indian landowning tribe and
exercise of its trust responsibilities to Indian beneficial
landowners “does not necessarily involve the assumption of
contractual obligations” “in the absence of any action taken
by the government or on its behalf indicating such a pur-
pose.” Id. at 421. “The Algoma opinion represents the
Court’s rejection of the trust theory of liability as a means
of holding the United States contractually liable to third
parties when it acts on behalf of Indians.” Sangre de Cristo
Dev. Co. v. United States, 932 F.2d 891, 895–96 (10th Cir.
1991). Here, there are no alleged facts that would support
a conclusion that the United States was acting as anything
other than a trustee when approving and managing the
leases. Under Algoma, the allegations of the complaint are
legally insufficient to support a conclusion that the United
States was a party to the leases.
In Wapato Heritage, L.L.C. v. United States, 637 F.3d
1033 (9th Cir. 2011), the Ninth Circuit rejected a similar
Court properly found that the Moodys did not plead such a
claim in their complaint.
8 MOODY v. UNITED STATES
argument and concluded that the United States was not
the “lessor” in a lease between members of an Indian tribe
and the plaintiff. Based on Algoma, the Ninth Circuit noted
that “the BIA’s obligation to act in furtherance of Native
American interests does not mean that the BIA per se as-
sumes their contractual obligations when it acts on their
behalf.” Id. at 1037. Although the applicable regulations
“authorize an approval role for the BIA concerning [l]eases
signed with Native Americans, [they] do not authorize the
BIA to enter into a contract with [the plaintiff] . . . on be-
half of the government.” Id. at 1038–39. The court also
found that the contract language unambiguously showed
that the BIA was not the lessor, as “[t]he [l]ease explicitly
define[d] the individual Landowners as the ‘Lessor’ and
separately define[d] the Secretary” and treated the two as
separate parties. Id. at 1039–40. We have the same situa-
tion here where the BIA’s alleged acts were all made pur-
suant to its trust responsibilities to the tribe, and the
contract clearly distinguishes between the parties to the
contract, LESSOR and LESSEE, and the Secretary/United
States. See also Sangre de Cristo, 932 F.2d at 895–96.
The Moodys contend that Algoma and related cases are
inconsistent with the Restatement (Second) of Trusts,
which recognized that “the trustee is subject to personal li-
ability upon contracts made by him in the course of the ad-
ministration of the trust.” Restatement (Second) of Trusts
§ 262 (Am. Law. Inst. 1959). To be sure, the Supreme Court
has looked to the Restatement when evaluating the trust
relationship between the United States and the Indians,
see White Mountain Apache Tribe v. United States, 249
F.3d 1364, 1377–78 (Fed. Cir. 2001) (collecting Supreme
Court cases), aff’d, 537 U.S. 465 (2003). But even if the Re-
statement (Second) of Trusts could be read as making the
trustee a party to the contract, the Restatement (Third) of
Trusts reflects a change in the law. Now it is recognized
that, in general, a trustee is not personally liable for con-
tracts entered into for the benefit of the trust. Section 106
MOODY v. UNITED STATES 9
states that “[a] trustee is personally liable . . . on a contract
entered into in the course of a trust administration only if
[(1) it constituted a breach of the trust, (2) the trustee’s rep-
resentative capacity was undisclosed, or (3) the contract
otherwise provides].” Restatement (Third) Trusts § 106
(Am. Law. Inst. 2012) (emphasis added). 5 None of these cir-
cumstances is alleged to be present here.
This approach is also consistent with the Restatement
(Third) of Agency § 6.01 (Am. Law Inst. 2006) (“[w]hen an
agent acting with actual or apparent authority makes a
contract on behalf of a disclosed principal . . . the agent is
not a party to the contract unless the agent and third party
agree otherwise” (emphasis added)), the Uniform Probate
Code § 7-306(a) (“[u]nless otherwise provided in the con-
tract, a trustee is not personally liable on contracts
properly entered into in his fiduciary capacity in the course
of administration of the trust estate unless he fails to re-
veal his representative capacity and identify the trust es-
tate in the contract”), and the Uniform Trust Code
§ 1010(a) (“[e]xcept as otherwise provided in the contract,
a trustee is not personally liable on a contract properly en-
tered into in the trustee’s fiduciary capacity in the course
of administering the trust if the trustee in the contract dis-
closed the fiduciary capacity”).
Given the Supreme Court’s decision in Algoma and the
state of general trust law, we see no basis for concluding
that the United States became a party to the contract and
waived its sovereign immunity by approving and acting for
5 See 4 Austin Wakeman Scott, William Franklin
Fratcher & Mark L. Ascher, Scott & Ascher on Trusts
§ 26.2 (4th ed. 2007) (“[T]here is now a substantial body of
authority . . . that a trustee who has signed a contract in a
representative capacity is . . . not personally [liable].”).
10 MOODY v. UNITED STATES
the benefit of the Indian or Indians with respect to the
leases.
Second, the Moodys contend that there were implied-
in-fact agreements created between the Moodys and the
United States when the BIA told the Moodys (twice) to con-
tinue farming the lands after sending the cancellation let-
ters. The BIA does not have general authority to lease land
held for the benefit of a tribe unless it receives direct au-
thorization from the tribe. See 25 C.F.R. § 162.207(a)
(“Tribes grant leases . . . subject to [BIA’s] approval.”); id.
§ 162.209 (identifying limited circumstances, not applica-
ble here, where the BIA can grant an agricultural lease
without direct authorization). Such direct authorization
was satisfied here by the tribal signature on the original
leases. It is difficult to see how the United States, without
specific authorization, could enter into an implied-in-fact
contract with the Moodys on behalf of the tribe. The
Moodys’ only response to this issue appears to be that the
earlier cancelled leases, which were signed by the Tribe,
were revived by the BIA’s oral representations and thus did
not require new tribal authorization. The Moodys do not
present any salient legal support for their position that the
BIA can revive a cancelled lease without tribal authoriza-
tion. Even if such authority did exist, as the Moodys recog-
nize, the effect would merely be that “[t]here were
originally written leases that were terminated but then
orally revived on the same terms as in the previous written
leases.” Moody Br. at 23. As discussed above, the United
States was not a party to the original leases, and thus
would also not be a party to the implied-in-fact contracts
revived with the same terms. We agree with the Claims
Court that the Moodys’ implied-in-fact contract claim does
not constitute a claim upon which relief can be granted.
Third, the Moodys contend that the United States ef-
fectuated an uncompensated takings when it evicted the
Moodys after the BIA had informed them to continue to
farm the land despite the earlier cancellation letters. In
MOODY v. UNITED STATES 11
their amended complaint, the Moodys claimed that they
“and their property were removed, contrary to applicable
regulations, from the leases and plaintiffs were deprived of
monies expended to plant and sow the crops and the profits
from any harvest.” J.A. 95 (emphasis added); see J.A. 91
(“This is an action by plaintiffs against defendant for un-
lawful termination and breach of lease agreements . . . .”
(emphasis added)).
A takings claim cannot be found on the theory that the
United States has taken unlawful action. “[A]n uncompen-
sated taking and an unlawful government action constitute
two separate wrongs that give rise to two separate causes
of action.” Acadia Tech., Inc. v. United States, 458 F.3d
1327, 1331 (Fed. Cir. 2006). “[C]omplaints about the
wrongfulness of the [government action] are therefore not
properly presented in the context of [a] takings claim.” Rith
Energy, Inc. v. United States, 270 F.3d 1347, 1352 (Fed.
Cir. 2001) (on petition for rehearing). “[T]o the extent that
[a] plaintiff claims it is entitled to prevail because the
agency acted in violation of statute or regulation, [our de-
cisions do] not give the plaintiff a right to litigate that issue
in a takings action rather than in the congressionally man-
dated administrative review proceeding.” Lion Raisins,
Inc. v. United States, 416 F.3d 1356, 1369 (Fed. Cir. 2005)
(emphasis and first and third alterations in original) (quot-
ing Rith Energy, Inc. v. United States, 247 F.3d 1355, 1366
(Fed. Cir. 2001)). Thus, “a claim premised on a regulatory
violation does not state a claim for a taking.” Id. The theory
that the Moodys were harmed by the BIA’s violation of reg-
ulations does not give rise to a takings claim but rather the
right to appeal the lease cancellations through the admin-
istrative process at the BIA, an action that the Moodys did
not take. The Moodys argue on appeal that their allegation
in the complaint that the BIA’s actions were “contrary to
applicable regulations,” J.A. 95, should be ignored, but
even without that clause, the Moodys’ argument rests on
the same theory. Namely, the theory that the BIA’s actions
12 MOODY v. UNITED STATES
were contrary to law, which, as discussed above, cannot be
the basis of a takings claim. We therefore see no reversible
error with the Claims Court’s decision dismissing the tak-
ings claim.
We express no opinion as to whether the Moodys now
have an administrative remedy or whether the limits for
seeking such relief should be equitably tolled. See Irwin v.
Dep’t of Veterans Affairs, 498 U.S. 89, 96 (1990) (“We have
allowed equitable tolling . . . where the complainant has
been induced or tricked by his adversary’s misconduct into
allowing the filing deadline to pass.”).
AFFIRMED
COSTS
No costs.