485 U. S. 197
March 7, 1988
This is a sad case.
A farm in Minnesota ended up more than a million dollars in debt, most of it owed to a bank. The farm tried to declare bankruptcy, but the bank objected under the ‘absolute priority’ rule, which gives creditors with unsecured debt the power to halt a bankruptcy reorganization. The farm tried to get around the absolute priority rule in several ways.
Unanimously, the Court rejected all of farm’s arguments (Kennedy did not participate). White said the farm could not secure the bank’s debt through promises of future labor and payments. Although a 1939 Court case allowed for some more creative ways to secure debtors, future labor was too speculative to qualify for this exception. Congressional debates bolstered this conclusion. White also shot down, as obviously false, a wacky argument that the farmland had no property value to the bank (and that somehow this meant the absolute priority rule did not apply).
Finally, White addressed the elephant in the room: that not allowing the farmers to reorganize and try to give the farm new life was… well, cruel. Cruel or not, the Court felt constrained to obey the provisions of the bankruptcy code. It’s cases like this that really sour me on the entire concept of legal positivism. A truly Biblically minded nation would not have its highest Court rule in such a way. No, a Christian nation would remember the seventh year debt forgiveness in ancient Israel (Deuteronomy 15:1-11), or the parable of the unforgiving debtor (Matthew 18:21-35). My heart goes out the the Ahlers family, who had the misfortune of living in a country that loved money more than mercy.