Leonard v. Bennett

• Decision Date: 12 December 1940
• Docket Number: No. 9444.,9444.
• Citation: 116 F.2d 128
• Parties: LEONARD v. BENNETT.
• Court: U.S. Court of Appeals — Ninth Circuit

116 F.2d 128 (1940)

LEONARD v. BENNETT.

No. 9444.

Circuit Court of Appeals, Ninth Circuit.

December 12, 1940.

John W. McCulloch and Hugh L. Biggs, both of Portland, Or., for appellant.

S. J. Bischoff, of Portland, Or., and Pat H. Donegan, of Burns, Or., for appellee.

Before GARRECHT, HANEY, and HEALY, Circuit Judges.

GARRECHT, Circuit Judge.

Samuel R. Bennett, appellee herein, on December 22, 1938, filed in the District Court of the United States for the District of Oregon a "Debtor's Petition for Composition or Extension under Section 75, Act of March 3, 1933." The petition was attested by the debtor and was accompanied by the requisite schedules and oaths. On December 31, 1938, appellant C. H. Leonard, who, as second mortgagee, is a secured creditor of the debtor, filed in the lower court a motion to dismiss the petition of the debtor on the ground, in particular, that the debtor was not a farmer within the meaning of the Farmer-Debtor Act (Section 75 of the Bankruptcy Act, 11 U.S.C.A. § 203).

The District Court, on January 25, 1939, made an order referring said motion to Richard E. Kriesien, Conciliation Commissioner for Harney County, Oregon, for consideration. After a hearing the commissioner concluded that the debtor was not a farmer, as that term is defined in Section 75 of the Act.

On March 27, 1939, the debtor filed a proposal for composition and extension, and on the same date also filed his petition for review of the finding of the Conciliation Commissioner, alleging that the evidence was sufficient to show that he was a farmer within the meaning of Section 75 of the Act. On April 15, 1939, the District Court entered an order in which it reserved its decision on the question of whether the debtor is a farmer as defined by the act, and referred the case back to the conciliation commissioner to determine whether or not the proposal of the debtor to his creditors already made or as the same may be modified includes an equitable and feasible method of liquidation for the secured creditors, and for financial rehabilitation for the debtor." A month later the debtor submitted an amended proposal for composition and extension to the commissioner, who found it to be inequitable because it proposed that the secured creditor, appellant Leonard, accept $4,000 with interest thereon at the rate of 6 per cent. per annum as a full and complete satisfaction and discharge of his judgment.¹ The debtor claimed that proceeds received from the farms, while operated by Leonard, if accounted for, would reduce the indebtedness due Leonard to approximately $5,000 or $6,000. Appellant Leonard refused to consent to the amended proposal.

Motions to dismiss the debtor's petition for composition and extension made by the objecting creditors, C. H. Leonard and Federal Land Bank of Spokane, were denied on October 19, 1939, "without prejudice to the right of the creditors to raise the question of probability of rehabilitation in the event that the debtor should file an amended petition under Subdivision s of the Farmer-Debtor Act," and by the same order the exceptions of the debtor to the reports of the conciliation commissioner were sustained. Leave was granted the debtor to file an amended petition under subdivision s of the Act, because "efforts to effect a composition under Subdivisions a to r of the Act have failed by reason of the failure of the debtor to obtain the consents of the creditors as required by law."

On November 14, 1939, there was filed by debtor Bennett in the District Court an amended petition, which stated that his occupation was that of a farmer and that "he is personally bona fide engaged primarily in farming operations (or the principal part of his income is derived from farming operations)." On the same day the District Court adjudged the debtor to be a bankrupt. The question of probability of rehabilitation of the debtor was not raised by the creditors of appellee.

C. H. Leonard has appealed to this court from the District Court's order of October 19, 1939, and also from that of November 14, 1939. He relies chiefly (1) upon the contention that the debtor's petitions (a) for composition and extension of his indebtedness and (b) for adjudication in bankruptcy under the Farmer-Debtor Act do not state sufficient facts to sustain the District Court's jurisdiction, because "they do not allege that the debtor is or was personally engaged in farming nor deriving the principal part of his revenue from farming as that term is defined in Subsection r of Section 75 of the Bankruptcy Act, as amended by Act, May 15, 1935," and (2) upon the contention that the debtor is not in fact a farmer within the meaning of the act.

In his original petition for composition and extension the debtor adhered to the language found in Section 75, sub. r of the Bankruptcy Act of 1933, which read as follows: "For the purpose of this section * * * the term `farmer' means any individual who is personally bona fide engaged primarily in farming operations or the principal part of whose income is derived from farming operations, and includes the personal representative of a deceased farmer; * * *." 47 Stat. 1473.

The pertinent part of the debtor's petition reads: "The petition of Samuel R. Bennett of Burns, in the County of Harney, District, State of Oregon, who is at present employed as a District Grazier by the Division of Grazing of the Department of Interior at Burns, respectfully represents that he is personally bona fide engaged primarily in farming operations (or that the principal part of his income is derived from farming operations) as follows: * * *."

It is objected by the appellant that the petition failed to show that the debtor was an individual who was entitled to the benefits of Section 75 of the Bankruptcy Act as amended in 1935 and that, as a result, the lower court was lacking in jurisdiction to entertain the petition. In explanation of his objection appellant contends that the petition does not allege that the petitioner is personally engaged in any of the occupations mentioned or enumerated in Section 75, sub. r, as defined in 1935. The 1935 version of subsection r of the Act reads as follows: "For the purposes of this section * * * the term `farmer' includes not only an individual who is primarily bona fide personally engaged in producing products of the soil, but also any individual who is primarily bona fide personally engaged in dairy farming, the production of poultry or livestock, or the production of poultry products or livestock products in their unmanufactured state, or the principal part of whose income is derived from any one or more of the foregoing operations, and includes the personal representative of a deceased farmer; * * *." 49 Stat. 246, 11 U.S.C.A. § 203, sub. r.

The sufficiency of the language of the petition was not challenged in the court below, but is questioned for the first time by appellant in his brief. The objection that the allegations are insufficient to show jurisdiction may be raised for the first time on appeal (United States v. Corrick, 298 U.S. 435, 56 S.Ct. 829, 80 L.Ed. 1263; City of New Orleans v. Howard et al., 5 Cir., 160 F. 393, 397; Magna Oil & Refining Co. v. White Star Refining Co., 3 Cir., 280 F. 52), but in such case the language is to be liberally construed for the purpose of sustaining jurisdiction. In Butchers' & Drovers' Stock-Yards Co. v. Louisville & N. R. Co., 6 Cir., 67 F. 35, 40, the court said: "* * * We think a liberal construction of the bill must be given to sustain the jurisdiction of the court at this time, in view of the fact that no plea to the jurisdiction was made below, and no question of the jurisdiction seems there to have been raised. * * *"

In challenging the jurisdiction of the District Court appellant submits that the words "farming operations" used by the debtor in his petition are not to be found in the 1935 amendment of subsection r of the Farmer-Debtor Act. Appellee Bennett in drawing up that petition employed, as mentioned heretofore, the language of subsection r as defined in 1933. The House Committee Report upon the 1935 amendment advances this explanation for the change: "The definition of the word `farmer' is further clarified by the descriptive enumeration of individuals who are engaged in dairy farming, the production of poultry or livestock, or the production of poultry products or livestock products in their unmanufactured state, as well as those engaged in producing products of the soil or livestock; but it is not intended by such enumeration to exclude from the definition any other classes of individual primarily engaged in agricultural pursuits. To the contrary, it is the purpose of Congress to broaden the definition of the word `farmer' beyond the boundaries of the present definition as heretofore interpreted and applied by the United States courts." H.R. No. 455, 74th Congress, 1st Sess., p. 2.

In First National Bank & Trust Co. v. Beach, 301 U.S. 435, 57 S.Ct. 801, 81 L.Ed. 1206, Mr. Justice Cardozo stated that the definition of a farmer as contained in the Act of 1933 was amplified by the amendment of 1935. After quoting the 1933 and 1935 acts, he said: "The only effect of the 1935 amendments of the statute, in so far as they have to do with the definition of a farmer was to make it clear that farming operations include dairy farming and the production of poultry and livestock products in their unmanufactured state as well as the cultivation of the products of the soil. There had been decisions to the contrary. * * * House Report, No. 455, 74th Congress, 1st Session, p. 2; Senate Report, No. 498, 74th Congress, 1st Session, p. 4. For the purpose of the case at hand the amendments may be laid aside and the simpler phraseology of the section as it stood at the beginning may be accepted as the test. Was respondent a farmer because `personally bona fide engaged primarily in farming operations' or because `the...