Opinion ID: 1473033
Heading Depth: 1
Heading Rank: 5

Heading: The Farmers Fund, Incorporated.

Text: Prior to June, 1924, the Southern Minnesota Bank had acquired certain lands in the course of its operation, by foreclosure of mortgages and otherwise. This was due in large part to the depression in agriculture which existed from 1921 to 1924. The officers of the bank thought that these lands should be disposed of to a separate corporation and handled by it. The matter was taken up with members of the Farm Loan Board, and the plan of the separate corporation was approved by them. Accordingly, the Farmers Fund, Incorporated, was formed May 15, 1925, with a capital of $100,000. The lands owned by the Southern Minnesota Bank were conveyed to it for a cash consideration of $75,000, and mortgages taken back covering the full amount of the mortgage loans originally made upon the lands by the Southern Minnesota Bank, together with all costs and disbursements. In addition, the Golds and Guy Huston gave bonds in the total sum of $100,000 to cover any possible loss which might be sustained by the Farmers Fund, Incorporated, in connection with the transfers of said real estate. That this plan of having a separate corporation take over the lands thus held by the bank was a very common one, the court will take judicial notice; that the plan was approved by members of the Farm Loan Board, and that it was for the best interest of the bank, is established by the uncontroverted evidence. The government contends that the formation of the Farmers Fund, Incorporated, was a mere subterfuge; that whatever capital it had was furnished by the Southern Minnesota Bank. A careful examination of the evidence convinces that the capital was furnished by Guy Huston  $75,000 in cash and $25,000 in credit on the books of the Guy Huston Company; $15,000 of this credit was shortly paid over; that the stock of this corporation was taken and owned by him with a double liability attached; that the transaction was bona fide and without the intention on the part of any one to defraud; that later on, when the Farmers Fund, Incorporated, was taken over by the Farms Company of Massachusetts, and it became necessary to increase the capitalization, $135,000 more was furnished for that purpose by Guy Huston. In return he took B stock in the Farms Company of Massachusetts, an issue subordinate to the A stock. That one of the purposes in forming the Farmers Fund, Incorporated, was to transform certain non-liquid assets of the Southern Minnesota Bank into liquid assets, is clear from the evidence; that the purpose was accomplished is also clear; and that such purpose was legitimate and without intent to defraud any one, is equally clear. The record, when analyzed, furnishes no substantial evidence to the contrary of these conclusions.