- Ag Docket
In this Chapter 12 case, the debtor took over his father’s 3,000-acre crop and dairy farm upon the father’s retirement. The debtor got divorced and, as a result, only had 1,000 crop acres at the petition date. Because the row crop business suffered continual losses, the debtor sold some of the land to his son and began growing berries and raising pheasants for hunting. The debtor became licensed by the state to acquire and release pheasants. The pheasants were raised in a barn until fully grown. The incubation period of three weeks required the debtor to ensure that the birds were protected and remained disease-free. The pheasants were ultimately released for hunts by customers on the debtor's land that had been placed in the CRP. Upon filing Chapter 12, the creditors argued that debtor was not engaged in farming but in a recreational activity. The court determined that the debtor was engaged in farming under the totality of the circumstances citing the dissent in Armstrong v. Corn Belt Bank, 812 F.2d 1024 (7th Cir. 1987), cert. den., 484 U.S. 925 (1987) and In re Maike, 77 B.R. 832 (Bankr. D. Kan. 1987). However, the court determined that the amount of the debtor’s debt was not 50 percent or more related to a farming operation. This was the result because the court concluded that the debt related to the debtor’s personal residence did not arise out of the farming operation, and there was no evidence presented that the mortgage secured the farm debt. The court held that the case was to be dismissed or converted to a different chapter. On appeal, however, the appellate court held that the residence debt, as non-farm related, should be excluded from aggregate debt - both the numerator and the denominator in the calculation set forth in 11 U.S.C. Sec. 101(18)(A). However, the appellate court determined that the bankruptcy court correctly concluded that the residence debt was not farm-related debt. Upon recalculation, 93 percent of the aggregate debt arose from a farming operation and satisfied the farm debt test of Chapter 12. As for the corporation owning the CRP land on which the pheasant hunts were conducted, the court determined that simply having land in the CRP was insufficient to constitute a farming operation by itself without other income from farming. In re Acee, No. 6:14-CV-0259 (LEK), 2015 U.S. Dist. LEXIS 41055 (N.D. N.Y. Mar. 31, 2015), aff'g and rev'g., No. 12-61632, 2013 Bankr. LEXIS 4789 (Bankr. N.D. N.Y. Nov. 12, 2013).
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