Mount Forest Fur Farms of America v. Farnsworth, 7527.

• Decision Date: 15 May 1937
• Docket Number: No. 7527.,7527.
• Citation: 92 F.2d 342
• Parties: MOUNT FOREST FUR FARMS OF AMERICA, Inc., et al. v. FARNSWORTH et al.
• Court: U.S. Court of Appeals — Sixth Circuit

92 F.2d 342 (1937)

MOUNT FOREST FUR FARMS OF AMERICA, Inc., et al. v. FARNSWORTH et al.

No. 7527.

Circuit Court of Appeals, Sixth Circuit.

May 15, 1937.

William W. Brashear, of Detroit, Mich. (Frederick B. Darden, of Detroit, Mich., on the brief), for appellants.

Harold Shapero, of Detroit, Mich. (Shapero & Shapero, of Detroit, Mich., on the brief), for appellees.

Before MOORMAN, SIMONS, and ALLEN, Circuit Judges.

ALLEN, Circuit Judge.

This is an appeal from an order of the District Court approving the petition of appellees for reorganization of Mount Forest Fur Farms of America, Inc., as properly filed in good faith under section 77B of the Bankruptcy Act. The principal question is whether appellees are creditors of the corporation having provable claims in the amount of $1,000. Title 11, U.S.C. § 207.

The Mount Forest Fur Farms was organized as a Michigan corporation. Later a Delaware corporation of similar name took over all the assets of the Michigan corporation and assumed its liabilities. Cf. Morlock v. Mount Forest Fur Farms, 269 Mich. 549, 257 N.W. 880. Appellees are holders of certain contracts executed by the Michigan corporation. Appellants claim that appellees are not creditors, and that the aggregate of their claims if provable is not sufficient to entitle them to reorganization.

The corporation raised, ranched and bred muskrats and other fur bearing animals for the purpose of producing fur pelts. As a part of its business the corporation entered into some 10,000 contracts of three years' duration, 14 of which are here involved. Each contract provided that the corporation should sell to appellants one or more pairs of muskrats at a stipulated price. Each pair was represented to increase to about 2,662 muskrats in the course of three years. The corporation was to retain one-half of this number as its fee for ranching the muskrats, and the contract holder was to receive the other one-half or to be paid the current price for pelts of all muskrats belonging to him, if he left the muskrats to be ranched by the corporation and to pyramid instead of pelting them before the expiration of the contract period. It developed that muskrats could not be bred in captivity, that they devoured each other, and were subject to diseases, and none were turned over to Harry J. Merritt, receiver of the corporation, appointed by the Circuit Court of Wayne County, Michigan, on August 21, 1931. The principal assets at that time were several parcels of real estate, all but two of which have been sold by the receiver with the approval of the state court, but without notice to the contract holders. At no time were the contract holders notified to file their claims with the receiver. The sole assets of the corporation consist of the two remaining parcels of land, one of 52,000 and the other of 10,000 acres of swamp land in Louisiana.

It is not necessary to consider whether the petition was filed in good faith, for the order must be reversed upon the ground that appellees'...