Matter Of Whatle

5th Cir. Ct. of App., 874 F.2d 997 (1989)

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Nature of the Case

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Facts

On October 28, 1975, Whatley Farms was issued a certificate of incorporation. Certain farm equipment was depreciated on the corporate tax return, yet this equipment had been owned previously by the Whatleys, and they did not formally sell it to the corporation. In 1981 the Whatleys moved their farm to Kemper County, Mississippi and received a $158,000 loan from the SBA, pledging all farm equipment as security. In 1983, they moved back to Humphreys County and received a loan from Guaranty Bank, pledging the same equipment as collateral. Both the bank and the SBA acted in good faith by filing financial statements within each county as required by Mississippi law. At no time did the Whatleys follow corporate formalities like annual meetings and minutes. In April of 1984, Whatley Farms entered bankruptcy.