Summary of a Recent
Judicial Development in
Bankruptcy

Joint Venture Farming Satisfies the
Definition of "Farmer"

Joshua T. Crain
National AgLaw Center Graduate Assistant

Summary of Decision

In In re Bli, 309 B.R. 295 (E.D. Mich. 2004), the United States Bankruptcy Court for the Eastern District of Michigan held that debtors' Chapter 11 bankruptcy cases were ineligible for conversion to a Chapter 7 under 11 U.S.C. § 1112(c).

Background

Debtors James and Richard Bli were brothers who operated "Bli Farms" pursuant to a Joint Venture Agreement. See id. The joint venturers were James Bli, James Bli, Jr., Richard Bli, and William Bli. See id. James and Richard Bli provided all the inputs of land and equipment for the farming operation. See id. The debtors had been involved in approximately five bankruptcy cases prior to the Chapter 11 cases before this court. See id. Based upon the trustee's experience with the debtors, he sought to have their current Chapter 11 cases dismissed or converted to Chapter 7; with conversion the preferred option. See id.

Arguments

The trustee argued that the debtors were not farmers and that the determination of the debtors' status as farmers should be considered only in light of their filed monthly statements. See id.

Analysis and Holdings

The court explained that viewing the debtors' filed monthly statements showed that the debtors each had approximately $7,000 in gross income for 2002, none of which was from farming. See id. It also explained that this was because the filed monthly statements did not include any share of the debtors' gross income or expenses from the farming operation. See id. The court further explained that it was the position of the trustee that if the debtors were farming through a joint venture that none of the income from the joint venture should be considered in deciding whether the debtors are farmers for purposes of the Code. See id.

The court noted that if the gross income from the joint venture was considered, each of the debtors met the 80% requirement imposed by the Code at 11 U.S.C. § 101(20). See id. It stated that a person farming as an individual is no more a farmer than one farming as part of a joint venture. See id. The court held, therefore, that the debtors were farmers for purposes of Chapter 11 and that there case could not be converted to Chapter 7. See id.

The case was decided on April 27, 2004; this summary was posted Dec. 22, 2004.