ORDER
The matter before the Court is a Motion to Dismiss this Chapter 12 case filed by Simmons First National Bank (“Simmons”).
This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157(a), 1334. Moreover, this Court concludes that this matter is a “core proceeding” within the meaning of 28 U.S.C. § 157(b) as exemplified by 28 U.S.C. § 157(b)(2)(A) and (0).
Simmons seeks dismissal of this Chapter 12 case asserting among other things that the debtor does not quаlify for relief under Chapter 12 of the Bankruptcy Code because it is not involved in a farming operation. The debtor describes its activities as “caring” for the crops оf others and argues that it qualifies for Chapter 12 relief because it is engaged in the production of crops.
FINDINGS OF FACT
1. The debtor filed this Chapter 12 bankruptcy proceeding оn or about May 22, 1992.
2. The debtor is a closely held corporation owned by two brothers. Albert Van-gilder is president and William Vangilder is secretary. Both own fifty percent (50%) of the corporation.
4. The debtor’s sole, primary asset is one (1) Ayres Turbinе Thrush Aircraft (“the Aircraft”). The debtor owns no land and has no interest in any of the crops grown by the farms it considers its customers.
5. The debtor does not have inventory. The customer fаrmers of the debtor purchase the seed and chemicals, and decide where seed will be sown as well as which chemicals will be applied. The debtor does dеcide rate of application, and claims its skill is knowledge of chemicals. The debt- or’s risks according to testimony of its principals are that it might not be able to fly due to weather and crop price fluctuations; if prices are down the farmers are “reluctant to use their services” (testimony of Albert Vangilder).
6. The debtor’s sole sеcured creditors are Farm Credit Services of Central Arkansas, PCA (“Farm Credit”) and Simmons. Both secured creditors possess a lien on the aircraft. Farm Credit possesses a first lien in the approximate amount of $163,000.00 plus interest, attorney’s fees and costs. Simmons possesses a second lien.
7. The debtor has no unsecured, non-priority creditors other than a vaguely described leasehold claim.
8. The debtor’s unsecured, priority creditors are state and federal taxing authorities who are owed apprоximately $24,-300.00.
9. William Vangilder devotes full time to the debtor’s business. Albert Vangilder and three or four others including two pilots are described as part-time or seasonal employеes.
10. The Vangilder brothers have or have had since 1991 an interest in numerous partnerships and corporations engaged in various farming operations. The debtor cоrporation has no interest or involvement in these entities.
DISCUSSION
Relief under Chapter 12 of the Bankruptcy Code, 11 U.S.C. §§ 1201-1231, is restricted to “family farmers with regular annual income.” 11 U.S.C. § 109(f). A corporation can qualify under this chapter if it meets certain criteria; among other things more than fifty percent (50%) of the outstanding stock or equity must be held by one family and this family must сonduct the farming operation. 11 U.S.C. § 101(18)(B). The Code also defines “farming operation” as including “farming, tillage of the soil, dairy farming, ranching, production or raising of crops, poultry or livestock, and production of poultry or livestock products in an unmanufactured state.” 11 U.S.C. § 101(21). Since the debtor corporation is entirely owned by the two brothers, thе only issue before the Court is whether this debtor corporation is conducting a farming operation.
Debtor concedes it is not a farmer in the traditional sense but reliеs on language in 11 U.S.C. § 101(21) asserting that its activities amount to “production or raising of crops.” The Vangilder brothers both testified that the corporate activities involve aerial application of seed and various chemicals including fertilizers, insecticides, fungicides and finally defoliants applied at the end of the growing and harvesting season. They describe these activities as “caring” for crops, albeit belonging to others, from beginning to end of the crop cycle or production. The debtor cоncedes that it must be hired by farmers, that it receives all seed and/or chemicals from the customers and that all decisions with regard to type of crop to be planted and/or number of acres to be planted or sprayed, comes from the customer. Debtor’s only decision with regard to application of the seed and/оr chemicals is the rate to be applied.
The Court concludes that these activities do not rise to the level of a farming operation for purposes of Chapter 12 relief. The debtor indeed conducts a business that provides a valuable and necessary service to
Many courts have considered various activities by individuals and/or corporations which are not those of the “traditional” farmer tо qualify for Chapter 12 relief. This inquiry is essentially one of fact. It is clear Congress intended, by its language in section 101(21), to include those performing activities outside the traditional functions, but not all. A review of the cases is helpful.
In
In re Edwards,
“Such farming operation” refers directly to the previous part of the statute to mean “a farming operation owned or operated” by the Debtor. The Debtor neither owns nor operates the farms where he contracts his spraying services. The evidence was clеar that, other than the ordinary business risks of any creditor, the Debtor assumes none of the ordinary “farming” risks. The evidence was that the Debtor does not take a percеntage of the crops sprayed as his compensation, but rather charges a specific amount for his services. He stands in the same position to his spraying clients as does the merchant who sells the farmer seed and fertilizer, or the banker who loans the farmer money to operate. Neither the merchant nor the banker would be considered to derive their income from “a farming operation.”
CONCLUSION
Like the debtor in the
Richardson
case, Van Air Flying Service, Inc., is paid by farmers for services. It takes no direct farming risk but, by its own descriрtion, its business is merely impacted adversely by the problems facing its farmer customers. The party filing a Chapter 12 petition bears the burden of proving eligibility.
In re Tim Wargo & Sons, Inc.,
Accordingly, it is hereby
ORDERED that debtor is ineligible for relief under Chapter 12 and shall have ten (10) days within which to convert this case to another chapter or dismiss the case,
IT IS SO ORDERED.