Cattle Owners Corporation v. Arkin

• Decision Date: 25 February 1966
• Docket Number: Civ. No. 5-1323,5-1324.
• Citation: 252 F. Supp. 34
• Parties: CATTLE OWNERS CORPORATION et al., Plaintiffs, v. David ARKIN et al., Defendants. SWINE OWNERS CORPORATION et al., Plaintiffs, v. Leo JACOBSON et al., Defendants.
• Court: U.S. District Court — Southern District of Iowa

252 F. Supp. 34

CATTLE OWNERS CORPORATION et al., Plaintiffs, v. David ARKIN et al., Defendants.

SWINE OWNERS CORPORATION et al., Plaintiffs, v. Leo JACOBSON et al., Defendants.

Civ. Nos. 5-1323, 5-1324.

United States District Court S. D. Iowa, Central Division.

February 25, 1966.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Philip H. Cless, Des Moines, Iowa, for plaintiffs and receiver.

Robert E. Mannheimer, John H. Neiman, Matthew J. Heartney, Jr., Des Moines, Iowa, Leslie L. Boomhower, Mason City, Iowa; Marvin R. Adams, Des Moines, Iowa; William Pappas, Mason City, Iowa; Paul F. Ahlers, Kenneth H. Haynie, Donald A. Wine, Des Moines Iowa, Matthew Silverman, New York City; Harold H. Newcomb, Hiram S. Hunn, Plainfield, Vt.; D. J. Fairgrave, Mark W. Putney, John D. Galvin, John McClintock, Eugene Davis, Des Moines, Iowa, for defendants.

HANSON, District Judge.

The instant submission involves but one facet of the issues of two cases as above indicated, one bearing cause No. 5-1323 and the other bearing cause No. 5-1324. The causes of action have been consolidated for disposition and, in most instances in the past, as it relates to the disposition of the cases, have been considered together. Both cases in their present form and by their own denomination are indicated to be multi-party interpleader actions brought pursuant to Title 28, U.S.C.A. § 1335.

The immediate concern in this submission is a hearing on a report and recommendation of a receiver in both causes of action. Since both cases have in truth and fact been adjudicated to be in substance interpleader actions, the receiver herein, it would seem, could also be referred to as a stakeholder, and throughout these proceedings, he will from time to time be referred to as both. In any event, it may be of little significance what he is called by reason of the dispositions hereinafter to be made.

The historical background can generally be gleaned from the admitted pleadings and Orders of the Court contained within the files of both cases. It has in substance been succinctly described in another portion of the cases heard by the United States Circuit Court of Appeals, Smith v. Sherman, 8 Cir., 349 F.2d 547 at pp. 548 and 549. It is even more detailed in the adjudication of the court in cause No. 5-1323 as is set out in the Order of Judge Stephenson entered as of the 14th day of January, 1963; and further in cause No. 5-1324 by the Order of Judge Stephenson entered on the 15th day of January, 1963. It would thus seem by reason of these Orders that a discussion of the propriety and identification of the parties as they relate to these proceedings would be of little assistance because they are identified in the former adjudications. The record as related to these proceedings, particularly as to appearances and as to actual participation in the trial of the immediate cause, is sufficient so that they will not be plenarily set out herein.

In any event, it does not seem to be challenged by anyone that on or about the year of 1958, under the imaginative process of a high school graduate by the name of Carroll Morris, then 23 years of age, the embryonic Fashion Farm originated. In common parlance, the process was called a cow pool. The local farmers boarded their animals for milking purposes. The idea of such a cow pool appeared rather novel to some and it was apparent that the public by the encouragement of the news media generally viewed the operation as having much more merit than it actually had. It appears that Morris was told that he had a novel idea so many times that he began to believe it himself. It does appear further that he tried to improve the quality of the milk from grade B to grade A and was in some aspects successful. Ultimately, the matter became attractive to financiers of the eastern seaboard, and under the general scheme of events, many millions of dollars worth of animals were purchased in the operation.

For many reasons, which the court will not detail as they are of no significance in the ultimate disposition of the problem at hand, the relationship financially collapsed in the year of 1962. It is what to do with the remaining fruits of the financial debacle that this court has to contend. Division of the fruits of a collapsed financial adventure becomes more difficult in proportion to its expectancy at the time the adventure hatched. The enthusiasm for this type of operation as manifested by Morris was exceeded only by those who had the wherewithal to venture.

No one could ever deny in a study of these transactions that the machinery incidental to the distribution of the property and livestock remaining for those to whom it properly belonged was not exhausted, for, first, it appears that the individuals claiming to be the owners of the property tried in their way, working with Morris, to in some manner amicably get their rightful fruits. This did not seem to work. Fashion Farm, Inc., was from every aspect insofar as its efforts and conduct were concerned controlled by Carroll Morris. The corporation actually on or about August 7, 1962, threw up its management of the livestock and so indicated the same to the owners thereof. In addition thereto, the Swine Improvement Association, an individual proprietorship operated by Carroll Morris and involved in cause No. 5-1324, did likewise. Since liquidation could not take place through Fashion Farm, Inc. or the Swine Improvement Association, it was ultimately decided that liquidation corporations would be formed and they were formed. Cattle Owners Corporation, involved as plaintiff in 5-1323, and Swine Owners Corporation, involved as plaintiff in 5-1324, were formed, and a lawyer by the name of Robert E. Mannheimer appears to have been somewhat instrumental as counsel for these corporations, and one Don O. Jones, then not the receiver in this interpleader action, assumed the management and liquidation of the cattle and swine involved in the corporations. The process of liquidation by way of the corporations apparently failed on November 23, 1962. Thus it is apparent that this manner of liquidation failed.

Of course, the manager and the owners of the property both by way of cash and livestock had a fund which apparently could not be at that time amicably distributed. Thus the next resort was to the United States Federal Court. Thus is born the case bearing Civil No. 5-1323 which is herein referred to as the Cattle Owners case, and in addition thereto, on that same day, November 23, 1962, the case known as the Swine Owners case bearing No. 5-1324 was filed. These must be considered by reason of the process of adjudication as being interpleader actions in both instances. Thus we have another form for distribution and liquidation of the remains of personal property and cash. It must, however, be remembered also that bankruptcy insofar as Fashion Farm, Inc., was concerned was filed on November 14, 1962, and was in action at the time that these interpleader actions were filed on November 23, 1962. It appears to this court that the Order made on the 15th day of January, 1963, in cause No. 5-1324 and the Order made on the 14th day of January, 1963, in cause No. 5-1323 ultimately adjudicated them to be interpleader actions and do in general invoke the machinery incidental to the distribution of the stake. The court does not observe that there has ever been any appeal from these Orders in 1963. In any event, for the purposes of this decision, the court deems them to be the law of the case.

The next vital step in these proceedings was the filing of a Report and Recommendation by Don O. Jones, the duly appointed, acting and qualified receiver, appointed in connection with the interpleader. It will be remembered that he was also the manager of the liquidating corporations.

A report was filed as of November 8, 1963, said report being filed in both causes of action, and in many respects were in substance identical with the exception as it related to matters of accounting. The gist of this report seemed to indicate that the Receiver was having some difficulty with relation to identification of the animals involved within the respective corporations and that it is apparent he had reached some conclusions that he felt precipitated a trust situation and indicated in his report that he should be appointed as a Trustee rather than a Receiver. On the same date, the court fixed a hearing on these reports. These reports were extensively objected to by a great majority of the individuals involved in the transactions. It does not appear that these reports and recommendations were in any respect ever accepted by anyone. Indeed, in this respect, even the Trustee in Bankruptcy, Mr. John M. Powell, of Fashion Farm in the bankruptcy established as indicated heretofore, filed objections to the reports and recommendations of the Receiver. Subsequent thereto, without going into detail, new counsel for the Receiver was appointed and further and different reports were subsequently filed.

The United States District Court for the Southern District of Iowa, Central Division, on its own motion on July 8, 1964, entered another Order requiring the Receiver to indicate the current status of the liquidation of the cattle and hogs in the two proceedings, also a proposal for reducing the administration expense, and lastly, ordered recommendations from the Receiver as to eventual termination of these proceedings including the distribution of proceeds particularly as these proceedings may be related to the bankruptcy cases. (This Order and all other Orders hereinbefore referred to and hereinafter referred to are incorporated as a part hereof in full and as though fully set out herein. The purpose of referring to these Orders and adjudications is to relate them to the ultimate disposition of the cases.)

Pursuant to the Order of the 8th day of July, 1964, there was filed on August 25, 1964, a report and recommendation of...