Opinion
Joseph L. Fainer and Russell E. Parsons, both of Los Angeles, Cal., for debtors.
Harry W. Horton and George R. Kirk, both of El Centro, Cal., for petitioners Imperial Irr. Dist. and William L. Hess.
On the 27th day of January, 1941, debtors filed their petitions stating that they are 'primarily engaged in growing and producing barley, corn and flax on 160 acres of land * * * also the principal part of petitioners income is derived from farming operations; that such operations occur within said (this) Judicial district; that they are unable to meet their debts as they mature, and desire a composition or extension of time to pay off their debts, under Sec. 75 of the Bankruptcy Act. ' On the same date the petition was approved, and Judge McCormick ordered that the matter be referred to the Conciliation Commissioner in the Bankruptcy Court, and that the petitioners appear before the Conciliation Commissioner on February 15, 1941, for examination, etc. At this hearing William H. Hess, a secured creditor, made an oral motion to dismiss the proceeding because petitioners were not 'farmers', this motion was by the Commissioner summarily denied.
On the 3rd day of April, 1941, Hess filed a petition for review of the Conciliation Commissioner's order denying the oral motion to dismiss the proceedings, on the ground, among others, that neither of said debtors are 'farmers'. This petition for review was certified to this court by the Conciliation Commissioner on the 16th day of May, 1941. Thereafter the Conciliation Commissioner, ignoring the Hess petition for review, made report recommending 'confirmation and extension of the period of debtors' offer. ' On the 22nd day of May, 1941, Judge McCormick ordered that a hearing for the confirmation of the recommendation confirming the order of extension agreement of the debtors be set for hearing June 17, 1941, and also ordered that the petition of William L. Hess for review of the Conciliation Commissioner's order of February 15th, 1941, be set for hearing at the same time and place. On June 17th, 1941, the motion for confirmation of the order of the Commissioner and the petition of William L. Hess, to review the order denying the oral motion to dismiss the proceedings, came on for hearing before Judge Jenney, and the matter was taken under advisement.
On July 1st, 1941, the Imperial Irrigation District, a creditor, by motion, prayed dismissal of this proceeding upon the ground that the debtors were not 'farmers' within the meaning of Sec. 75 of the Bankruptcy Act, 11 U.S.C.A. § 203.
On the 23rd day of July, 1941, among other things Judge Jenney ordered that 'the Commissioner should make a more complete report of the facts in connection with the claim of 'whether or no', Kelsey and his wife are 'farmers' within the meaning of Sec. 75 of the Bankruptcy Act.'
After the order of Judge Jenney of July 23, 1941, the Conciliation Commissioner proceeded to take further testimony on the question as to 'whether or no' the petitioners were 'farmers'; the debtors appeared at the appointed time and place and were examined; their answers were taken by a stenographer and transcribed; and on the 8th day of October, 1941, the Conciliation Commissioner reported that the testimony disclosed that the petitioners were not 'farmers' within the provision of Sec. 75 of the Bankruptcy Act and recommended dismissal of the proceedings. The finding is established by the testimony, which is now filed, and has been examined by me.
On the 16th day of October, 1941, the matter was on for hearing on the recommendation for dismissal of the above proceedings by the Conciliation Commissioner and Judge McCormick ordered as follows:
'Now therefore, good cause appearing, it is ordered that the debtors' petition herein and all proceedings hereunder be and the same are hereby dismissed.'
NETERER, District Judge.
It is obvious that the motion to dismiss is futile. This case was dismissed by Judge McCormick on October 16th, 1941. That order is a final order; it was not disturbed by appeal or otherwise, and is in full force and says: 'All proceedings hereunder be and the same are hereby dismissed.'
This is all that need be said. But in view of the contention of counsel that the petition for review by Hess has no status in procedure or law, and finally was not taken within time, is mythical, and that the Conciliation Commissioner's order of Feb. 15th, 1941, is res adjudicata; and that the motion of Imperial Irrigation District to dismiss, it may be said, that the Hess petition was set for hearing, at the time of the hearing of the recommendation of the Conciliation Commission for affirmance; it was with the other issue taken under advisement, and Judge Jenney did direct further report as to the 'farmers' status of petitioners, and before rendering the decision the Imperial Irrigation District filed its motion, and he presumptively considered this motion and the Hess petition. All of these matters were in the record and presumptively considered by Judge McCormick when the case was dismissed. The court had a right, and it was its duty, to consider at any time when the issue was raised, in any fashion, the question of jurisdiction. The writer in Charroin v. Romort Mfg. Co. et al., D.C., 236 F. 1011, at page 1012, said: 'The question of jurisdiction, however, is one which the court is bound to ask and answer for itself, even when not otherwise suggested, and without respect to the relation of the parties. Mansfield, etc., Ry. Co. v. Swan, 111 U.S. 379, 4 S.Ct. 510, 28 L.Ed. 462; Chicago, Burlington & Q.R. Co. v. Willard, 220 U.S. 413, 31 S.Ct. 460, 55 L.Ed. 521. The jurisdiction of the court is limited, and the court is powerless to determine an issue not within its jurisdiction, and lack of jurisdiction will defeat an action, even though such lack may not be discovered until the cause finally appears before the Supreme Court of the United States.'
The jurisdiction could be challenged at any time, in this, the Appellate or Supreme Court, and it was the duty of the court to raise this question on its own motion, if not otherwise challenged. And it was the duty of the Conciliation Commissioner to re-examine the 'farmer' status of the petitioners when directed by the Judge.
An erroneous order in bankruptcy proceedings may be abrogated unless vested rights in reliance will be disturbed. 'The rule is that an erroneous order made during the progress of a bankruptcy proceeding, although not appealed from, may subsequently be set aside and vacated unless rights have become vested in reliance upon it which will be disturbed by its vacation. ' Wharton v. Farmers & Merchants Bank, etc., 8 Cir., 119 F.2d 487, at page 489 and cases cited.
The Court of Appeals of this Circuit in McLaughlin Land & Livestock Co. v. Bank of America, etc., 9 Cir., 94 F.2d 491, at page 493, defined a farmer as follows: 'A farmer, as defined by section 75(r) as amended (11 U.S.C.A. § 203(r)) is an individual who is primarily bona fide personally engaged in producing products of the soil, engaged in dairy farming, the production of poultry products or livestock in their unmanufactured state, or the principal part of whose income is derived from any one or more of the foregoing operations.'
The Conciliation Commissioner found upon the evidence submitted at the hearing that the petitioners were not farmers. And upon submitting his recommendation for dismissal upon which is predicated the order supra of Judge McCormick this proceedings ended by dismissal.