Conflict of Laws-Application of Full Faith and Credit Clause to State Court's Finding in Support of Its Jurisdiction
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Washington and Lee Law Review Volume 6 | Issue 1 Article 6 Spring 3-1-1949 Conflict Of Laws-Application Of Full Faith And Credit Clause To State Court'S Finding In Support Of Its Jurisdiction Follow this and additional works at: https://scholarlycommons.law.wlu.edu/wlulr Part of the Conflict of Laws Commons Recommended Citation Conflict Of Laws-Application Of Full Faith And Credit Clause To State Court'S Finding In Support Of Its Jurisdiction, 6 Wash. & Lee L. Rev. 61 (1949), https://scholarlycommons.law.wlu.edu/wlulr/vol6/ iss1/6 This Comment is brought to you for free and open access by the Washington and Lee Law Review at Washington & Lee University School of Law Scholarly Commons. It has been accepted for inclusion in Washington and Lee Law Review by an authorized editor of Washington & Lee University School of Law Scholarly Commons. For more information, please contact [email protected]. 1949 CASE COMMENTS 55 CASE COMMENTS BANKRUPTCY-DEFINITION OF "FARUER" FOR PURPOSES OF RELIEF THROUGH AGRICULTURAL COMPOSITIONS AND EXTENSIONS. [Federal] The availability of relief under the agricultural compositions and extensions phases of federal bankruptcy legislation depends on the pe- titioner's ability to bring himself within the definition of a farmer as set out in Section 75 (r) of the Bankruptcy Act.1 Prior to 1933, the Bankruptcy Act reference to farmers was merely to those "engaged chiefly in fanning or the tillage of the soil."2 However, the special legis- lation of 1933 adopted a definition in the alternative, providing that persons who are "primarily bona fide personally engaged in" one or more of several enumerated operations, or, who derive the "principal part" of their incomes from one or more of such operations, shall be classified as "farmers." 3 Obviously, the second alternative could have been utilized by the courts to swell the ranks of persons who could be classified as "farm- ers.' 4 That such was the prima facie intent of the Act is indicated by the existence of a large number of cases involving persons seeking, on the basis of the second alternative, the agricultural benefits; and, in one early instance, a court seems to have approved the literal interpre- tation of this provision.5 However, the vast majority of the cases dis- closes an extreme reluctance on the part of the courts to give substan- tial recognition to the second portion of the definition. This judicial reluctance is manifested to an unprecedented degree in the recent case of Smith v. White.6 The petitioner had been a farmer 1 Sampayo v. Bank of Nova Scotia, 313 U. S. 270, 61 S. Ct. 953, 85 L. ed. 1324 (1941). Prior to 1938, § 75 (r) defined the term "farmer," for purposes of § 75 and § 4 (b), substantially in the same words as at present. However, the incorporation of another definition in the Act in 1938, in § 1 (17), gave rise to the argument that § 75 (r) was impliedly repealed. The-Sampayo case rejected this contention as to § 75, but whether or not § 75.(r) applies to § 4 (b) is a matter- of dispute. See i Collier, Bankruptcy (14 ed. 1940) § 4.15. 2Section 4 (b), Act of 1898. U. S. Stat., 55th Cong., c. 541, § 4 (b), p. 547. This reference concerned persons who were not subject to involuntary bankruptcy. 31i U. S. C. § 75 (r) (i9a8) as amended- by Act of March 4, 194o, § 2-, 54 Stat. 40. Enumerated operations iiclude (i) "producing. products of the soil," .(2) "dairy farming,"'(3) "production of poultry or livestock" and (4) "production of poultry products or livestock products in their unimanufactured state." 'Some authorities have viewed this possibility with- alarm. P. L. I., Significant Developments in the Law, Glenn, Creditors Rights (1946) 35. 'In re Shonkwiler, 17 F. Supp. 697 (E. D. Ill. 1935), see note 14, infra. 6166 F. (2d) 269 (C. C. A. 9th, 1948). WASHINGTON AND LEE LAW REVIEW [Vol. VI but had given up farming and entered a contracting business during World War II. After operating this venture at a loss for a period of years, he terminated his activities as a contractor in 1945, and returned to full-time farming. During the contracting interval he seems to have lived at the farmhouse part of the time and retained some indefinite measure of supervisory control over the farm, but at least part of the land had been leased to another, and the court determined that "sub- stantially more of appellant's time and energy during this period were 7 devoted to his contracting venture than to his farming activities." Though his post-war farming had returned some profit, petitioner in March, 1947, sought relief under Section 75 of the Bankruptcy Act, relating to agricultural compositions and extensions. Even though appellant had returned to farming operations, and even though the principal part of his income had been derived from his farm during the war years, the district court denied his petition, and the Circuit Court of Appeals for the Ninth Circuit affirmed the decision, holding that "appellant is not entitled to the status of a farmer within Section 75 of the Bankruptcy Act."83 The court's failure to give effect to the prima facie meaning of the second alternative of Section 75 (r), providing that a person may be classified as a "farmer" on the basis of having derived the "principal part" of his income from farming operations, is explained by the conclusion that "In every case the totality of the facts is to be considered and appraised," and by the determination that the key factor in the "totality of the facts" in this case was the source of the indebtedness. 9 Disregarding the fact that the petitioner had admittedly resumed his farming operations well in advance of seeking relief, it is clear that he could not have successfully claimed, on the basis of the first alternative, that he had been a "farmer" during the interval in which he was engaged in the contracting business. Moreover, this decision, as to the second alternative, can readily be fitted into the pattern of the earlier cases limiting the scope of the farmer class as defined in Section 75 (r) since 1933. Because of the broad inclusiveness of the definition, the courts have repeatedly thought it necessary to refuse relief to per- sons who contend they come within the words of the statute, but whom the courts believe to be beyond the intent of the Act. Except for a few cases in which the petitioner failed to show any connection at all between the "principal part" of his income and some 166 F. (2d) 269, 270 (C. C. A. 9th, 1948). 8166 F. (2d) 269, 273 (C. C. A. 9th, 1948). 9166 F. (2d) 269, 272 (C. C. A. 9th, 1948). 1949] CASE COMMENTS farming activity, 10 the courts have had to meet the elusive issue of what degree of relation between the source of income and some farm- ing operations is to be required. In cases involving "absentee landlordism" in the clearest sense, the connection between income and farming has been deemed not dose enough. In Shyvers v. Security-First Nat. Bank," the same court which later decided the principal case held that the benefits of Section 75 could not be extended to an owner of farm land in California who re- sided in England, regardless of the fact that the major portion of the owner's income came from the rentals. Significantly, the court said, concerning the second alternative, "We conclude that to come within this subdivision, the debtor must personally be engaged in farmil."'12 This view in effect incorporates one of the requisites of the first alterna- tive into the seemingly separate and independent second alternative. The ordinary landlord cases, in which the owners do not reside so far away as to make direct participation in the control of the farm un- likely, are decided with more difficulty but still demonstrate the hesi- tancy of the courts to apply the second alternative. In a leading case the court pointed out: "The cash rentals which [the petitioner-land- lord] received were not dependent upon the results of the operation of the ranch by his tenants, and he retained no control over their activ- ities in operating the ranch."' 3 It was noted that if some degree of con- trol (not defined) were retained, or if the rentals were dependent on the results of the tenant's operation (which in itself would indicate supervision on the part of the landlord), the status of farmer could be proved. This requirement amounts to personal participation to a greater or lesser degree, though perhaps not "primary" participation. With possibly one exception, all of the circuit courts of appeals have substantially adopted the same requirement, or have left the way open to do so.14 1 01n re Cox, 22 F. Supp. 925 (S. D. Idaho 1938); In re Cresap, 99 F. (2d) 722 (C. C. A. 7th, 1938); Perry v. Baumann, 128 F. (2d) 727 (C. C. A. 9th, 1942); Skinner v. Dingwell, 134 F. (2d) 391 (C. C. A. 8th, 1943). uto8 F. (2d) 611 (C. C. A. 9th, 1939). 121o8 F. (2d) 611, 612 (C. C. A. 9th, 1939) [italics supplied]. 1 3Jordan v. Federal Land Bank of Omaha, 139 F. (2d) 203, 2o6 (C. C. A. 8th, 1943). It was held that an erstwhile farmer who "had definitely ceased farming, had removed from the farm, had leased it to a tenant, and had no further connection with its pperation," was no longer a farmer so as to take advantage of § 75, re- gardless of the fact that he had no occupation other than that of landlord.