McLean v. Federal Land Bank of Omaha

• Citation: 130 F.2d 123
• Decision Date: 17 August 1942
• Docket Number: No. 12226.,12226.
• Parties: McLEAN v. FEDERAL LAND BANK OF OMAHA.
• Court: U.S. Court of Appeals — Eighth Circuit

130 F.2d 123 (1942)

McLEAN v. FEDERAL LAND BANK OF OMAHA.

No. 12226.

Circuit Court of Appeals, Eighth Circuit.

July 2, 1942.

Rehearing Denied August 17, 1942.

COPYRIGHT MATERIAL OMITTED

R. Brown, of Creston, Iowa, for appellant.

Don C. Young, of Omaha, Neb. (J. C. Pryor, of Burlington, Iowa, and Harold J. Reed, of Omaha, Neb., on the brief), for appellee.

Before STONE, SANBORN, and THOMAS, Circuit Judges.

STONE, Circuit Judge.

This is an appeal from a decree remanding to a conciliation commissioner a debtor's petition amended under Section 75, sub. s, of the Bankruptcy Act, as amended, 11 U.S. C.A. § 203, sub. s, with instructions to dismiss for want of jurisdiction because the debtor was not a "farmer", within the purview of the section, at the time his petition was filed. The debtor seeks an extension as to and possession of a farm in Iowa at a time when sale of the farm in foreclosure of a mortgage had taken place; a certificate of purchase had passed to appellee (the mortgagee); but the sheriff's deed had not passed because the one year period of redemption had not expired. There is no dispute in the evidentiary facts. The real controversy, here as below, is whether the evidentiary facts do or do not place appellant within the class of persons intended by Section 75, 11 U.S.C.A. § 203.

An outline of the present proceedings and the evidentiary facts as to title to this property are as follows. The land is a farm of about 242 acres in Iowa. All but about 14 acres was patented by the grandfather of petitioner in 1842. It descended to petitioner's father who died in 1926 leaving it to petitioner and a brother. While they held the land, they executed two successive mortgages — the first mortgage to the appellee and the second to Don McGiffin, a brother-in-law of petitioner. In 1932, McGiffin foreclosed this second mortgage, bought in the property, received sheriff's deed, and took possession. In April, 1940, there was a foreclosure decree of the first mortgage in the amount of $18,625.85 with interest from February 7, 1940 — a total of $19,391.18. At sheriff's sale, appellee purchased for $17,391.18, leaving a deficiency against appellant of $2,000. Sheriff's certificate of purchase issued May 31, 1940. Under the law of Iowa, appellee would have been entitled to receive a deed, at the expiration of one year for redemption, on May 31, 1941. In February and March, 1941, petitioner obtained quit claim deeds from the widow and heirs of Don McGiffin, for nominal considerations. April 15, 1941 (about six weeks before expiration of the redemption year), petitioner filed his petition under Section 75. After failing to obtain sufficient acceptance of an offer of composition, petitioner filed an amended petition under 75, sub. s. The conciliation commissioner issued a notice to creditors to show cause why exemptions should not be set off and an order entered staying proceedings, continuing the debtor in possession of the remainder of the property, determining a reasonable rental, or, if necessary, appointing a trustee. Appellee filed a resistance: "alleging that debtor is a single man, that he did not file his petition in good faith but for the sole and only purpose of delaying and defrauding the Federal Land Bank of Omaha, and that the court is without jurisdiction to enter an order staying any and all proceedings against said debtor or continuing said debtor in possession of any of his alleged property, or in determining a reasonable rental therefor, for the reason the petitioner is not a farmer, and asked that the proceedings be dismissed." There was a hearing before the commissioner resulting in an order overruling the resistance. On review, the court set aside the order of the commissioner and remanded the matter with directions to dismiss the proceedings "on the ground that the court is without jurisdiction to maintain the same" because the debtor bankrupt "is not now and was not at the time of the filing of his debtor's petition a farmer within the purview of Section 75 of the Bankruptcy Act."

The evidence as to petitioner's livelihood and as to his connection with this property is as follows. At time of trial before the commissioner, petitioner was sixty-two years old. He was born and lived on the farm until the spring of 1932. From the death of his father in 1926 until McGiffin took possession in the spring of 1932, he operated the farm as part owner and as tenant of his brother who was co-owner. From the spring of 1932 to spring of 1937, he was off the farm and working "at odd jobs, mostly on farms as a laborer." In the spring of 1937, he went back on the farm (then owned by McGiffin) under a verbal arrangement whereunder petitioner was to conduct the farming until the fall of 1939, at which time, if the income therefrom would justify it, an equal partnership arrangement between him and McGiffin as to operation of the farm was to be made for the future. Under this tentative arrangement, petitioner was advanced his living expenses by McGiffin. Petitioner had little farm equipment and no live stock. McGiffin died in May, 1939, and the arrangement came to an end before the time for a partnership had been reached. After the death of McGiffin, he stayed on the farm until November 9, 1939, under the administrator, receiving about ten dollars a week. The arrangement with the administrator is not entirely clear. At its close, the administrator settled with McLean by paying $156 and giving him 250 bushels of oats, 100 bushels of corn and 18 tons of straw. December 1, 1939, he and a Mr. Stever leased the farm until March 1, 1941, from the receiver who had taken possession under the foreclosure proceeding by appellee. Under the arrangement between him and Stever (who had farm equipment), Stever took the farm and hay land and he took the pasture, lots and buildings and lived there putting in a garden and caring for a cow and poultry which belonged to a Mrs. Thomas who lived on the farm. The receiver declined to renew the lease ending March 1, 1941, and appellant left the farm. During the month of March, 1941, he worked in a jewelry store. From April 1, 1941, until the trial, he worked and then was working as a farm hand for a Mr. Hicks.

Concisely, this evidence shows the following. Appellant was engaged in farm work during his life except for the month of March, 1941. During all of this time, except for the five years (spring, 1932 to spring, 1937) and since March, 1941, his work was on this farm. Until the death of his father in 1926, it is fairly inferable that his work there was as a member of his father's family. For six years thereafter, he was on the farm as part owner and tenant until the spring of 1932. Then he lost title until he again acquired it in February and March, 1941. From the spring of 1937 to the death of McGiffin (May 9, 1939) he operated the farm under an arrangement which provided living expenses and contemplated future partnership operation with the owner. After McGiffin's death, he was in charge under some arrangement with the administrator until he became a tenant of the receiver (for something more than a year) until he left on March 1, 1941. He is subject to a deficiency judgment of $2,000 from the foreclosure by appellee. It is to this situation we are to apply the test of whether he is a farmer within the Act.

The definition of "farmer" in proceedings of this character is to be found in amended § 75, sub. r, Title 11 U.S.C.A. § 203, sub. r. Carlota Benitez Sampayo v. Bank of Nova Scotia, 313 U.S. 270, 61 S.Ct. 953, 85 L.Ed. 1324. This section contains two contrasting (First National Bank & Trust Co. v. Beach, 301 U.S. 435, 438, 57 S.Ct. 801, 81 L.Ed. 1206) definitions. The first is an individual "primarily bona fide personally engaged in producing products of the soil, * * * in dairy farming, the production of poultry or livestock, or the production of poultry products or livestock products in their unmanufactured state"; the second is one "the principal part of whose income is derived from any one or more of the foregoing operations." The second definition is intended to cover instances "when the receipt of income derived from farming operations would make a farmer out of some one who personally or primarily was engaged in different activities." Beach case, supra, 301 U.S. at page 438, 57 S.Ct. at page 803, 81 L.Ed. 1206. Here, appellant's entire life and labor (except one month) had been spent upon farms, so that the first definition is more applicable.

Since appellant had spent his life and labor on farms, he could properly be called a farmer if one were describing his vocation. Whether he is a "farmer" within the intendment of subsection r of the Act, as to this farm, is to be found by applying to the status of appellant the first definition in subsection r, as clarified by the purposes of the Act. This Act was a temporary measure for "the relief of hard-pressed farmers" (Carlota Benitez Sampayo v. Bank of Nova Scotia, 313 U.S. 270, 273, 61 S.Ct. 953, 954, 85 L.Ed. 1324) by affording an opportunity "for rehabilitation". Wright v. Vinton Branch of Mountain Trust Bank of Roanoke, 300 U.S. 440, 467, 57 S.Ct. 556, 81 L.Ed. 736, 112 A.L.R. 1455. The statutory means of affording this opportunity for rehabilitation were by two successive steps: First, an effort "to effect a composition or an extension of time to pay his debts" (Title 11 U.S.C.A. § 203, sub. c, through an arrangement with his creditors under jurisdiction of the court (same, § 203, subs. d to p); second, failing in efforts so to compose or extend, an adjudication in bankruptcy with a right to exemptions, a right to retain possession, under the supervision and control of the court, of any part or all of the remainder of his property designated by him and a right to stay (on terms fixed by the court) of proceedings to oust him from such possession (same, § 203, sub. s). "The pervading purpose of subdivision s § 203,...