Court Opinion

ID: 9479419
Source: CourtListenerOpinion
Date Created: 2023-08-05 07:18:09.350553+00
Date Added: 2024-06-11T17:47:01.997631
License: Public Domain

HANSON, Senior District Judge,
concurring in part and dissenting in part.
I wholeheartedly agree that the protections afforded by Chapter 12 of the Bankruptcy Code extend only to those debtors who fall within the definition of “family farmer” found at 11 U.S.C. § 101(17)(A). I disagree, however, with the majority’s analysis of this provision and with their characterization of the actions of the courts below as conferring “statutory ‘family farmer’ status upon individuals simply because they reside on a farm and carry on some farm-related tasks.” The courts below found statutory “family farmer” status because their review of all of the circumstances surrounding the Eastons’ farming operation established that the rental arrangements should be considered an integrated part of this enterprise — a holding which I find is consistent with both the text and intent of the statute at issue. Thus, I write separately to explain my dissent from the majority’s characterization of the law. I concur in the remand, though, because I believe it will further strengthen the record establishing the Eastons’ rights to chapter 12 protection.
The provision of the bankruptcy code at issue requires that more than 50% of debtors gross income for the taxable year preceding the year of their filing come from a “farming operation” owned or operated by debtors. 11 U.S.C. § 101(17)(A). This provision was added to the Code as part of the Family Farmers Bankruptcy Act of 1986, Pub.L. 99-554, § 255, 100 Stat. 3105-3114. This law created a new chapter of the Bankruptcy Code aimed at providing additional protections to family farmers caught in the agricultural crisis which began in the early 1980’s. See In re Welch, 74 B.R. 401 (Bkrtcy.S.D.Ohio 1987). Such a law was necessary because of the “difficulties farmers encountered in seeking to reorganize under” the other provisions of the Bankruptcy Code. Norwest Bank Worthington v. Ahlers, 485 U.S. 197, 108 S.Ct. 963, 970, 99 L.Ed.2d 169 (1988). The specific provisions at issue in this case were enacted by Congress to “ensure that only family farmers — not tax shelters or large corporate entities — will benefit” from the protections available through the newly created chapter 12. 132 Cong.Rec. S15076 (daily ed. Oct. 3, 1986) (statement of Sen. Grassley).
All parties agree that debtors meet the 50% requirement in 1986, the year at issue, only if the cash rent received from the Ritz’s is considered income from the Ea-stons’ farming operation. The bankruptcy and district court both found that this income did qualify as income from their farming operation in this case. The courts made this conclusion based on a review of the “totality of the circumstances” surrounding the rental arrangement.
The majority rejects these holdings finding the “totality of the circumstances” test inappropriate for determining “whether money an individual receives from a given source is income ‘from such farming operation’ within the meaning of § 101(17)(A).” I believe the majority errs in dismissing this test because the definition of farming operation enacted in law by Congress necessitates this type of fact specific inquiry. *638This provision, in its entirety, states that “ ‘farming operation’ includes farming, tillage of the soil, dairy farming, ranching, production of crops, poultry, or livestock, and production of poultry or livestock products in an unmanufactured state.” 11 U.S.C. § 101(20) (Supp. V 1987) (emphasis added).
The use of the general phrase “farming” as the first example of an activity which constitutes a “farming operation” is important for two reasons. First, “farming” is an ambiguous description in comparison to the other description of activities in the statute as the phrase relates more to a concept than it does to a specific activity. Thus, by using this phrase Congress indicated that it did not intend to limit the definition of a farming operation solely to the specific activities listed after “farming”. Otherwise there would have been absolutely no reason to include the phrase farming in the definition. We do not infer such an intent on Congressional action. Instead, “[i]n construing a statute we are obliged to give effect, if possible, to every word Congress used.” Reiter v. Sonotone Corp., 442 U.S. 330, 339, 99 S.Ct. 2326, 2331, 60 L.Ed.2d 931 (1979).
Secondly, the phrase “farming” also envisions a pattern of activity. Thus, courts should not automatically break down all of the actions of someone engaged in farming into separate components before determining whether these activities constitute farming. Some of the actions are more properly viewed in context with each other. For example, although the sale of farm equipment does not appear to be farming when viewed in isolation, it may indeed be farming when viewed in the context of all the other activities and circumstances of the debtor. Matter of Armstrong, 812 F.2d 1024, 1026 (7th Cir.1987) (holding that as definition of “farming operation” in Bankruptcy Code begins with general term “farming” it is implicit that definition includes general activities inherent in farming and in perpetuating the farming operation), cert. denied, 484 U.S. 925, 108 S.Ct. 287, 98 L.Ed.2d 248 (1987).
Thus, contrary to the majority’s assertions, embracing the “totality of the circumstances” test will not result in “no readily discernible limiting principle”. It will simply allow the bankruptcy courts, in the appropriate circumstances, to look at a farming operation as a whole without dissecting it into the smallest possible divisions. The majority’s failure to recognize this, I fear, will put a straitjacket on the bankruptcy courts which will disable them from being able to fully provide the relief Congress envisioned.
Accordingly, I disagree strenuously with the majority’s suggestion that a farmers renting out of a portion of his land, by itself, can never be considered part of a farming operation. The “leasing of farm land, for either cash or a crop share, has been an integral part of many family farm operations throughout this country for years,” as has the practice of custom farming, in which a farmer hires all the farm labor done for him. In Re Mikkelsen Farms, Inc., 14 B.R. 280, 285 (Bkrtcy.D.Or.1987). Indeed, the definition of the verb “farm” is “[t]o lease or let; to demise or grant for a limited term and at a stated rental. To carry on business or occupation of farming.” Black’s Law Dictionary 545 (5th Edition 1979). Thus, bankruptcy courts are acting entirely within their discretion when they consider all of the circumstances surrounding a rental agreement to determine whether the income generated is from the debtor’s farming operation. Indeed, it seems logical that Congress specifically chose the phrase “farming” in order to give the bankruptcy courts sufficient discretion to target relief to their intended beneficiaries.1
A compelling explanation of why a fluid definition of farming is appropriate is *639found in Matter of Burke, 81 B.R. 971 (Bkrtcy.S.D.Iowa 1987). In this case Judge Jackwig recites the following fact pattern as a prime example of those farmers which Congress intended to help:
A familiar example is the “financially distressed farm family” of four who began farming in the mid-1960’s, first renting then purchasing land. During the prosperous late 1970’s, the family purchased additional land for a price in excess of $2,000.00 per acre. Subsequent high interest rates, foreign production, domestic overproduction, depressed markets and the value of the dollar combined to depress commodity prices. The farm no longer was able to generate sufficient income to service its debt. Some production lenders cut off credit. To make ends meet, the husband and wife obtained at least part-time employment off the farm. Some or all of the land was leased.
Id., 81 B.R. at 976.
There is every indication that Congress was fully aware that many farmers were facing this type of situation, and that some were being forced to rent out all or part of their farmland because of problems securing credit for putting in a crop. There is, however, no evidence that Congress intended chapter 12 to be unavailable to such farmers. Thus, I refuse to give an unnecessarily narrow reading to the phrase “farming” when the effect would be to deny relief to the very people Congress sought to help, especially when such a reading is at odds with both the legal definition of the term and with the past and present realities of farming.
Further, I must note that it is established law in this circuit that findings of fact by a bankruptcy court are not to be overturned unless they are clearly erroneous. In re Martin, 761 F.2d 472 (8th Cir.1985). The majority, though, fails to give such deference to the court below. Instead, they analyze the issue as a purely legal question. The issues of whether a practice constitutes farming and of whether income is from a farming operation, however, are factual inquiries which Congress put in the hands of the bankruptcy courts, not the appellate courts. Thus, it is error for this court to pre-empt the bankruptcy courts’ jurisdiction to determine these issues.
I agree that those operations in which the agricultural landlord is completely nonactive with regard to any other farming activities and which are purely pass-through operations are not eligible for chapter 12. This, however, is not such an operation. Instead, the record shows that the Eastons have already established their right to the protections of chapter 12. I concur in the remand simply because I believe an even stronger record can be established. Thus, my concurrence does not extend to the majority’s representation of the law, or to the hurdles which the majority says the Eastons must jump to get chapter 12 protection. Accordingly, I urge the courts below to explore all evidence indicating that the rental arrangements are an integral part of the Eastons’ farming operation, as well as exploring all ways in which the Eastons influence, direct and participate in the stewardship of the portion of their farm which they rent out to others for cultivation.
I also note that it is not clear to me that the issue of whether debtors meet the 80% debt requirement is properly before this court. Appellants first raised this issue in a motion to alter or amend judgment after the bankruptcy court had ruled that debtors were family farmers within the meaning of the bankruptcy code. This judgment was issued after the bankruptcy court held a hearing on appellant’s motion to dismiss based on the allegation that debtors were not family farmers within the meaning of the bankruptcy code. Appellants never raised the debt issue in their motion to dismiss, during the hearings on the motion, or in their post hearing submission. This fact led the bankruptcy court to challenge the legitimacy of raising the issue in the motion to amend judgment. See Transcript of Nov. 30, 1987 Hearing at 29.
Specifically, the court ruled from the bench that the debt issue “wasn’t even raised in the motion to dismiss. And I guess I have a problem with revisiting the *640motion over and over again. * * * And to — to come in and raise it in the context of a motion to amend I think is improper because the facts — I don’t think it has any merit, and so I am going to renew my ruling denying the motion to dismiss subject to the — to what I have just stated.” Id. The Court went on to discuss why it thought the claim was meritless even if properly raised.
Accordingly, I question whether this claim is properly before us. It may be that after fully examining the issue we would find that the debt question is a jurisdictional issue which could be raised at any time, or that the issue was properly presented to the court below. However, I find it necessary to jump at least one of these hurdles before addressing the issue. Thus, I concur in the remand of this issue to give the courts below the opportunity to examine whether this is still a “live” issue, as well as to produce evidence indicating the extent to which the Eastons’ and their grandson’s farming operations were commingled with regard to the hog-raising enterprise. In my view this would include all evidence indicating that it was the intent of the Eastons to bring their grandson into their farming operation through this joint venture with him.
Finally, it is misleading for the majority opinion to refer to George and Elsie Easton as being “basically retired from farming”. The Eastons are engaged in a substantial cow/calf cattle raising operation for which they alone provide all labor. Transcript of May 12, 1987 Hearing at 5. In 1986, the operative year under the bankruptcy code, approximately 170 acres of the Eastons’ land were devoted solely to this enterprise. Thus, the Eastons are not “basically retired from farming”, nor are they merely carrying on “some farm-related tasks”. They are fully and actively engaged in the enterprise of farming. It is also somewhat misleading for the majority to refer to the Eastons’ farm of more than 400 acres as “their acreage”.
In closing I note one last irony. In Norwest Bank Worthington v. Ahlers, 108 S.Ct. 963, the Supreme Court reversed a decision by this court on the grounds that we had failed to adhere to the then applicable bankruptcy code. The Court wrote “relief from current farm woes cannot come from a misconstruction of the applicable bankruptcy laws, but rather, only from action by Congress.” 108 S.Ct. at 970. Congress, fortunately, did act and created an entirely new chapter aimed at farmers like the Eastons. Today, however, this court enacts an obstacle in the path of such farmers through an interpretation of the phrase “farming” which is in no way necessitated by the statute Congress passed. On this aspect of the opinion I must dissent.

. The suggestions by the majority that the use of the totality of the circumstances test would allow a court to confer family farmer status on a land-holder who has no other attachment to farming evidences a complete misunderstanding of the concept of weighing all of the circumstances. A court weighs all the circumstances to see if rental agreements are part of a farming operation. If ail there are, are rental arrangements, then there is no farming operation for these arrangements to be part of.