Hilligoss, Matter of, 87-2930

• Decision Date: 20 May 1988
• Docket Number: No. 87-2930,87-2930
• Citation: 849 F.2d 280
• Parties: In the Matter of Max Leon HILLIGOSS and Marilyn L. Hilligoss, Debtors. Appeal of CENTRAL NATIONAL BANK OF MATTOON.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 280

849 F.2d 280

11 Fed.R.Serv.3d 720

In the Matter of Max Leon HILLIGOSS and Marilyn L.

Hilligoss, Debtors.

Appeal of CENTRAL NATIONAL BANK OF MATTOON.

No. 87-2930.

United States Court of Appeals, Seventh Circuit.

Submitted May 20, 1988. ^*

Decided June 13, 1988.

Kenneth L. Bast, Kidwell, Cummins & Bast, Mattoon, Ill., for debtors.

Nancy Menard Riddle, Reno O'Byrne & Kepley, P.C., Champaign, Ill., for appellee.

Before CUMMINGS and POSNER, Circuit Judges, and ESCHBACH, Senior Circuit Judge.

CUMMINGS, Circuit Judge.

Central National Bank of Mattoon (the "Bank") as intervenor seeks to reverse the district court's affirmance of a bankruptcy court's order, 69 B.R. 781 (1986), directing James R. Geekie, the trustee in bankruptcy, both to set aside a landlord's lien upon crops grown on forty acres leased by the debtors Max Leon and Marilyn L. Hilligoss from L.H. Monke and to take no action regarding 437 acres of crops in possession of Avey Farms, Inc. ("Avey"). We dismiss the appeal as to Monke's claim for lack of jurisdiction and affirm the appeal as to Avey's claim.

This case concerns whether Geekie should set aside two landlord's liens upon the corn and bean crops growing when Hilligoss filed his bankruptcy petition. When he filed for bankruptcy liquidation under Chapter 7 on September 9, 1985, Hilligoss was a farm tenant on land owned by Monke on a cash rent basis of forty acres for $5,800, half ($2,900) of which had already been paid. He was also a farm tenant on a crop share basis of approximately 437 acres of land owned by Avey and its vice president Richard A. Black.

On September 27, 1985, Geekie first filed his "Petition Authorizing Harvesting, Storage, and Sale of Crops" in the bankruptcy court. That court, on October 15, 1985, authorized Geekie to do "everything necessary" with the crops, and to hold the balance of the proceeds until the issues involved in the alleged security interest of the Bank, the largest unsecured creditor in the case, could be resolved. The Bank had taken a second mortgage on the Hilligoss residence during the Spring of 1985 to secure the sum of $14,400.

Section 545 of the bankruptcy code governs this case, of which the pertinent Sections 545(3) and (4) provide as follows:

The Trustee may avoid the fixing of a statutory lien on property of the debtor to the extent that such lien--

(3) is for rent; or

(4) is a lien of distress for rent.

11 U.S.C. Secs. 545(3) and (4). Under Illinois law, a landlord's lien for rent due is a statutory lien, see Ill.Rev.Stat. ch. 110, p 9-316 (1985), which could be set aside by Geekie as trustee. For a landlord's lien on crops to arise, there of course had to be a landlord-tenant relationship between the relevant parties. Such a relationship could be evidenced by a written lease containing words of demise and a description of the property to be leased. See, e.g., Nat'l Distillers v. First Nat'l Bank, 804 F.2d 978 (7th Cir.1986) (construing ambiguities in lease under Illinois law). The bankruptcy court found a landlord-tenant relationship between Monke and Hilligoss but not between Avey and Hilligoss. Accordingly, the court ordered Geekie to set aside Monke's landlord's lien upon Hilligoss' crops on the forty acres leased by Monke. Furthermore, Monke was to petition the court for payment of the lease rental as a cost of administration. See 11 U.S.C. Sec. 503(b)(1)(A). The court also held that since Avey had possession of one-half of the crops it was entitled to under its crop share arrangement with Hilligoss, there was no landlord's lien to be set aside. In reviewing the legal conclusions determined by the bankruptcy court de novo, we must defer to the factual findings of that court. Bankruptcy Rule 8013; ¹ In re: Agnew, 818 F.2d 1284 (7th Cir.1987). With that standard in mind we review the Bank's assertions of error on appeal.

The Monke Claim

Upon construing the lease between Monke and Hilligoss, the bankruptcy court determined that a landlord-tenant relationship existed between the two parties, and therefore that Monke had a landlord's lien on the forty acres of crops that could be set aside by the trustee pursuant to Section 545. The court made no order concerning the award of costs of administration to Monke. Rather, the court suggested that

the rent provided for in the [Monke] lease may well be a cost of administration under 11 U.S.C. Sec. 503(b)(1)(A), as an actual, necessary cost and expense of preserving the estate. See 15 Collier on Bankruptcy, 503.04 at 503-20 (15th ed. 1985).

The Monkes should file a request with the Court that their claim for $2,900 be allowed as an administrative expense, so that the matter may be noticed and set for hearing as provided by Sec. 503(b).

(Bank's Br. at 9). The district court here correctly determined that it had no jurisdiction to review this part of the bankruptcy court's order, for it made "no adjudication of costs of administration. All the order does is direct the trustee to set aside Monke's claim." (Bank's Br. at 15). Any appeal of such an obviously non-final order was frivolous, and contentions of this character are sanctionable under Fed.R.App.P. 38. See Augusta Bakery Corp. v. NLRB, 846 F.2d 445, 447 (7th Cir.1988). Before imposing sanctions, in addition to finding an appeal frivolous, we must also determine whether the case is appropriate for imposing a penalty for abusing appellate procedure. Flip Side Productions v. Jam Productions, 843 F.2d 1024 (7th Cir.1988).

On appeal to this Court, the Bank's brief simply rehashes the identical argument regarding the Monke claim it made to the district court. It completely failed to address the issue of finality even when it was raised in Monke's responsive brief. This inadequate submission demonstrates that this Court should award attorney's fees and costs against the Bank for vexatiously pursuing a premature appeal of an obviously unappealable order. See Maneikis v. Jordan, 678 F.2d 720 (7th Cir.1982), certiorari denied, 459 U.S. 990, 103 S.Ct. 346, 74 L.Ed.2d 386; see also Hays v. Sony Corp., 847 F.2d 412, ---- (7th Cir. 1988).

Without citing any supporting authority, Monke claims that the Bank's appeal from the bankruptcy court order should be dismissed for failure to name him as a party to the order in the Bank's notice of appeal to the district court, which listed only Hilligoss, Geekie, and Avey as "parties to the order appealed from" (Br. 9 and Supp.App. 4). ² It is true that Bankruptcy Rule 8001 and Official Form No. 35 maintain such a requirement, but neither has been mentioned in Monke's brief and therefore will not be considered here, particularly since Monke does not assert any prejudice from noncompliance.

Recently, this Court considered Rule 3(c) of the Federal Rules of Appellate Procedure, which requires that the notice of appeal to courts of appeals specify the party taking the appeal and that "an appeal shall not be dismissed for informality of form or title of the notice of appeal." Hays, supra, at 414-415; see also Chathas v. Smith, 848 F.2d 93, 94-95 (7th Cir. 1988) (court denies motion to amend notice of appeal). In Hays, this Court refused to dismiss an appeal from sanctions imposed on an attorney due to his failure to name himself as the appellant. Id. In this case, unlike Hays, there is no contention that the Bank's omission misled Monke and Rule 3(c) only covers the failure to name "the party or parties taking the appeal" and says nothing about appellees. For these reasons, this Court will dismiss the Bank's appeal of Monke's claim for lack of a final judgment rather than for want of a proper party appellee.

The Avey Claim

The bankruptcy court determined that the Avey-Hilligoss relationship was a sharecropping operation wherein the landowner and the debtor combined their joint efforts and resources to produce crops. Because there was no landlord-tenant relationship, Avey thus had no landlord's lien to be set aside. While the evidence presented below was somewhat sketchy--consisting only of statements of counsel and documents of record--the district court nevertheless affirmed the bankruptcy court's findings of fact.

Illinois law, which determines the nature of property interests of the parties in this case, see In re: Xonics Photochemical, 841 F.2d 198 (7th Cir.1988); Hazen v. Hospitality Assoc., 6 B.R. 778 (Bankr.D.Or.1980), directs that while "[a] tenant has an interest in the land and a right of property in the crop ... [a] cropper has no such interest and works in consideration of receiving a portion of the crop for his labor." Estate of Flowers, 95 Ill.App.3d 333, 336, 50 Ill.Dec. 899, 901, 420 N.E.2d 216, 218 (4th Dist. 1981) (citing Dopheide v. Schoeppner, 163 N.W.2d 360, 362 (Iowa 1968)); but see Grossman & Fischer, The Farm Lease in Bankruptcy: A Comprehensive Analysis, 59 Notre Dame L.Rev. 599, 605 (1984) (criticizing Flowers as creating confusion by encouraging courts to give different interpretations to essentially identical contracts). Thus a sharecropper is an employee rather than a tenant. See id. Focusing on the circumstances of Hilligoss' possession, the bankruptcy court inferred that the parties intended their relationship to be a sharecropping arrangement. See generally Alwood v. Ruckman, 21 Ill. 200 (1859); Chase v. McDowell, 24 Ill. 237 (1860); Dixon v. Niccolls, 39 Ill. 372 (1866); Wheeler v. Sanitary District, 270 Ill. 461, 469-70, 110 N.E. 605 (1915). Our review of the evidence presented at the bankruptcy hearing sustains this conclusion.

The Dopheide case relied on by...