Missco Homestead Ass'n v. United States

• Decision Date: 01 November 1950
• Docket Number: No. 14101.,14101.
• Citation: 185 F.2d 280,22 ALR 2d 1015
• Parties: MISSCO HOMESTEAD ASS'N, Inc., v. UNITED STATES et al.
• Court: U.S. Court of Appeals — Eighth Circuit

22 ALR 2d 1015, 185 F.2d 280 (1950)

MISSCO HOMESTEAD ASS'N, Inc., v. UNITED STATES et al.

No. 14101.

United States Court of Appeals Eighth Circuit.

November 1, 1950.

Max B. Reid, Blytheville, Ark. (Bruce Ivy, Osceola, Ark., on the brief), for appellant.

G. D. Walker, Assistant United States Attorney, Little Rock, Ark. (James T. Gooch, United States Attorney, Little Rock, Ark., on the brief), for appellees.

Before SANBORN and THOMAS, Circuit Judges, and DEWEY, District Judge.

DEWEY, District Judge.

The appeal is from an order of the Bankruptcy Court finding and adjudging the Missco Homestead Association, Inc., a bankrupt. The judge's opinion is to be found in D.C., 86 F.Supp. 511.

Missco Homestead Association, Inc., was duly incorporated under the supervision of officers of the F.S.A. on January 10, 1939. The plan and purpose of the incorporation was to borrow money from the United States government and to use it to lease large tracts of real estate and to divide and sublet the real estate to tenant farmers, and in general to provide a method and means for the rehabilitation and relief of needy farm families.

The Trial Court found that the petition was filed on March 12, 1945, and that fact is challenged by the United States of America, in a separate appeal, as it claims that the petition was filed on March 9, 1945. That question is decided in a separate opinion.

The first point argued by the appellant is that the court erred in findings that Missco Homestead Association, Inc., was a moneyed, business, or commercial corporation subjecting it to an adjudication in involuntary proceedings as authorized by Section 4, sub. b of the Bankruptcy Act, 11 U.S.C.A. § 22, sub. b.

While Missco was incorporated under the provision of the statutes of Arkansas governing formation of benevolent corporations, yet the powers granted it were very broad and authorized it to engage in practically any business activity.

It borrowed large sums of money aggregating $149,620, from the United States government which it used in an endeavor to promote the interests of the tenant families and aiding them in engaging in their business of farming the land. It leased more than 6,000 acres of real estate which it sublet to tenant farmers. It maintained "several enterprises"; the care of livestock and rental equipment; a purchasing and marketing department, and it paid the rental for the land leased by it.

The activities of the purchasing department was to buy and sell supplies, and cotton seeds, to and from the members; and of the livestock department to buy and sell livestock; also there was a machinery department where repairs for the members and some outsiders was done. The Association also owned heavy equipment and did the heavy farm work for members and made a charge for that service. And in the loan agreement with the United States of America, it was provided that the loan was to be used by Missco for the following purposes:

"Operation of cooperative services on land now or hereafter leased or owned by the Association, including the construction, equipment and operation of facilities in connection with the leasing of realty to its members and in connection with purchasing, marketing, processing and other services."

At the first meeting of the Board of Directors it passed by-laws which provided for the determination and distribution of profits.

On November 10, 1944, the Missco Homestead Association, Inc., paid $2,500.00, to the lessor of the real estate and sold and transferred to said lessor for the sum of $8,938.72, certain personal property of the company to be credited as part payment of rent which was due December 1, 1944.

There were several of these cooperative corporations formed, some of them proved successful, others not.

From the foregoing statement it is apparent that Missco Homestead Association, Inc., was a moneyed, business, or a commercial corporation.

Congress, in classifying corporations subject to adjudication in bankruptcy, intended to include corporations which were engaged in enterprises for profit, but did not intend to include charitable, fraternal, educational, and literary or nonprofit corporations, none of which are conducted for profit.

A few cases hold that in determining whether a corporation is a member of the accepted class, the classification of the corporation by the State should be given predominate influence. In re Dairy Marketing Association of Fort Wayne, Inc., D.C., 8 F.2d 626; Hoile et al. v. Unity Life Ins. Co., 4 Cir., 136 F.2d 133, 136.

But in the light of the decision of the Supreme Court of the United States that in the interpretations and applications of the Bankruptcy Act, 11 U.S.C.A. § 1 et seq., as in the case of other federal statutes, federal and not local laws apply, this rule is questionable. Wragg v. Federal Land Bank, 317 U.S. 325, 63 S.Ct. 273, 87 L.Ed. 300.

In determining whether a corporation is within the classification of a moneyed business, or commercial corporation, it would seem the better rule to take into consideration the classification of the corporation by the state; the powers conferred upon it; and the character and extent of its main activities. See Remington on Bankruptcy (5th Edition) Vol. 1 Sec. 95.

The trial court was clearly right in finding that the Missco Homestead Association, Inc., although it may have been a cooperative society, was a moneyed, business, or commercial corporation. In re Wisconsin Co-operative Milk Pool, 7 Cir., 119 F.2d 999, Certiorari Denied, Wisconsin Co-operative Milk...