In re Cook
| Decision Date | 26 June 1986 |
| Docket Number | Adv. No. 86-7021.,Bankruptcy No. 85-05076 to 85-05078 |
| Citation | 63 BR 789 |
| Parties | In re James K. COOK and Brenda L. Cook, d/b/a Cook Ranch and Cook Irrigation, Debtors. In re Joseph B. COOK and Jean M. Cook, d/b/a Cook Ranch and Cook Irrigation, Debtors. In re COOK ANGUS RANCH, a partnership, a/k/a Cook Ranch, Cook Irrigation, Joseph A. Cook and James K. Cook, partners, Debtors. UNION STATE BANK OF HAZEN, Plaintiff, v. James K. COOK and Brenda L. Cook, d/b/a Cook Ranch and Cook Irrigation, Joseph B. Cook and Jean M. Cook, d/b/a Cook Ranch and Cook Irrigation, Cook Angus Ranch, a partnership, a/k/a Cook Ranch, Cook Irrigation, Joseph B. Cook and James K. Cook, partners; Thomas Cook and United States of America/Farmers Home Administration, Defendants. |
| Court | U.S. Bankruptcy Court — District of North Dakota |
David L. Johnson, Fargo, N.D., for plaintiff.
Max Rosenberg, Bismarck, N.D., for Cooks.
Charles S. Miller, Jr., Atty., Dept. of Justice, Bismarck, N.D., for U.S.
William P. Westphal, U.S. Trustee.
The plaintiff, Union State Bank of Hazen (Bank), by complaint filed February 18, 1986, seeks to establish a priority position ahead of various parties claiming interests in property of the debtor estates. The Bank alleges that its interest in certain cash collateral is superior to that of defendant Farmers Home Administration (FmHA). The Bank also alleges that it has an interest in rental income from the debtors' real estate for the 1986 season which is superior to any interest of the defendants. In addition, the Bank and Tom Cook (Tom), debtor Jim Cook's brother, are in dispute as to each party's respective interest in cattle in the debtor's present possession, in which Tom claims an ownership interest. By answer filed March 17, 1986, the debtors generally denied the Bank's allegations. By answer filed March 17, 1986, Tom agreed that a dispute exists regarding his interest in the cattle. By answer filed March 24, 1986, FmHA agreed that its interest in cash proceeds was disputed and counterclaimed against the Bank for compensation for the use and conversion of feedstuffs in which FmHA has a superior interest. The Bank responded by asserting that it has a superior position. Prior to trial, the Bank and FmHA resolved their differences. Thus, a trial on the disputes remaining between the Bank, Tom Cook, and the debtors was held before the undersigned on April 23, 1986. The facts, as material, are as follows:
FINDINGS OF FACT
The defendants/debtors, James and Brenda Cook, Joseph and Jean Cook, and Cook Angus Ranch each filed a Chapter 11 bankruptcy petition on February 5, 1985, and have continued to operate under the protection of the United States Bankruptcy Code since that time.
Debtors Joseph and Jean Cook are the parents of the debtor James Cook and the non-debtor/defendant, Tom Cook. The debtors operate a family farm and ranching business which has also included the sale of irrigation equipment. The production from the debtors' farming operation has mainly been used as feed for cattle, including those in their custom feedlot and their own herd of purebred Angus cattle. The debtors have in the past also conducted an annual production sale as a tool in merchandising the Angus breeding cattle which they produce.
The debtors relocated their farm and ranch operation from eastern North Dakota to near Hazen, in western North Dakota, in 1962. James Cook (Jim) has resided at the Hazen location since graduating from college in 1964 and has since been actively involved in operating the ranch. Unlike Jim, Tom Cook has not returned to the family farm and ranch, but Tom has maintained ties to it. Tom grew up in eastern North Dakota, before the ranch was relocated, and had Angus cattle as 4-H projects. Cancelled checks establish that Tom purchased cattle in earlier years. Many of the cattle in which Tom now claims an ownership interest are direct descendants of a registered Angus cow which was part of his 4-H project. Tom is currently employed by the National Cattleman's Association (NCA). During the past four and one-half years of his thirteen years with the NCA, Tom has worked out of the Washington, D.C. office, holding the position of Director of Industry Affairs.
It is not clear from the evidence exactly how many head of cattle, or the amount of proceeds thereof, Tom is claiming an interest in. The statement of financial affairs filed in the Cook Angus Ranch case listed the ranch as holding cattle for Tom valued at approximately $22,200.00 which included approximately 36 head. At trial, Tom presented the court with a list containing 21 cows, and various offspring thereof, which he claims to be the sole owner of. The cattle which Tom claims are his were either branded with the Cook Angus Ranch brand, or in the case of younger stock, were not yet branded. However, the cattle all contained a permanent ear tattoo of the animal's identification number, which corresponds to the number listed on the American Angus Association (AAA) registration certificates and which also corresponds to numbered ear tags which identify the animals. Although some of the offspring of the cows may not have been registered, all of the cattle which Tom claims an interest in are either the cows registered in his name or the offspring thereof.
The AAA registration certificates, many of which were introduced at trial, are used to maintain purity of bloodlines within the Angus breed. A registration certificate is issued for each animal registered with the AAA. The certificate contains the animal's registration number, name, sex, ear tattoo number, birthday, and a three generation chart or pedigree of the animal's ancestors. In addition, the certificate contains the individual breeder of the animal, the first owner, and the present owner, along with the present owner's member code and date of sale if the animal has been purchased from someone else. In the eyes of the AAA, the registration certificate is proof of ownership.
A computer print-out from the AAA was also introduced as evidence of Tom's interest in the cattle. The computer print-out contains a listing of twenty-one cows and five bulls which the AAA records indicate were owned by Tom as of July 3, 1985. Tom was listed as breeder and first owner of all but two of the animals on the list, the exception being a bred female purchased by Tom from Vermillion Ranch in Montana, which was documented by a cancelled check, and a calf born from that purchase.
Robert Albers, a lifelong resident of Hazen and also a farmer and feedlot operator, had served as a consultant to the debtors until February, 1986. He is presently employed by the Bank as a consultant to oversee the Cook operation. Albers was aware of Tom's ownership in the cattle prior to the time when he became employed by the ranch. He also knew Tom was listed in the annual production sale catalogs as a breeder of some of the cattle. The court is convinced that, at least between the debtors and Tom, the Cooks all considered Tom as the owner of the contested cattle.
The business relationship between Tom and the debtors can be characterized as being quite loose. Tom has often allowed the income from sale of his cattle to be retained in the debtors' operation. Tom has not ever had a formal agreement with the debtors and does not consider himself to ever have been a legal partner in the debtors' business. He has, however, contributed some money directly to the operation for supplies, semen and registration certificates, and for purchase of a computer for the ranch to use. In addition to monetary contributions, Tom normally spends a week at the ranch in the spring to assist in working the cattle. He also spends some time at the ranch during the holidays at which time he does most of the registration and record keeping necessary to register the cattle with the AAA.
Tom's cattle have normally been fed as a group with the debtors' cattle and with feed produced on the ranch, in which the Bank has held a security interest. Jim has had virtually full authority to manage, cull, and market Tom's cattle as he sees fit, although Tom has never given Jim the authority to mortgage the cattle. Moreover, Jim testified that he did not have authority to encumber Tom's cattle. Tom has never shared in profits or losses of the ranch operation, nor has he ever made loans with any bank in connection with the Cook ranch operation. Neither has Tom ever filed a partnership return.
Tom's "F" schedules from his various tax returns, which are schedules of farm income and expenses, are useful in summarizing the nature of his income and expenditures relating to the cattle in which he claims an interest:
Year Cattle Income Breeding Fees Supplies, Travel, Total
Subscriptions and Expenses
Phone
1983 $1,666.00 $ 37.00 $1,421.00 $1,460.00
1982 $2,500.00 $2,780.00 $1,557.00 $4,337.00
1980 $1,600.00 $ 329.49 $ 789.09 $1,118.49
1979 $5,700.00 $4,822.00 $1,116.50 $5,938.50
1978 $ 300.00 $ 203.00 $ 387.00 $ 490.00
1977 $ 312.00 $ 576.00 $ 412.00 $ 988.06
1976 $ 750.00 $ 955.00 $ 409.00 $1,364.00
1975 $ 357.15 $ 535.00 $ 492.70 $1,027.70
From the above information and testimony, it appears that Tom has allowed most, if not all, of his cattle income to remain in the operation and that he has directly received income only to the extent necessary to offset some of his direct cattle expenses.
The Bank's involvement in these proceedings centers around financing arrangements entered into between the Bank and the...
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