886 F.2d 280 (10th Cir. 1989), 88-1739, In re Heape

Docket Nº88-1739.
Citation886 F.2d 280
Party NameIn re Curtis Neal HEAPE and Billie Jean Heape, Debtors. Curtis Neal HEAPE and Billie Jean Heape, Debtors-Appellants, v. CITADEL BANK OF INDEPENDENCE, Appellee.
Case DateSeptember 22, 1989
CourtUnited States Courts of Appeals, Court of Appeals for the Tenth Circuit

Page 280

886 F.2d 280 (10th Cir. 1989)

In re Curtis Neal HEAPE and Billie Jean Heape, Debtors.

Curtis Neal HEAPE and Billie Jean Heape, Debtors-Appellants,

v.

CITADEL BANK OF INDEPENDENCE, Appellee.

No. 88-1739.

United States Court of Appeals, Tenth Circuit

September 22, 1989

Page 281

Donald B. Clark, Wichita, Kan., for debtors-appellants.

James R. Gilhousen of Crockett, Keeley & Gilhousen, Wichita, Kan., for appellee.

Anne L. Baker of Eidson, Lewis, Porter & Haynes, Topeka, Kan., filed an amicus brief for the Kansas Bankers Ass'n.

Before LOGAN, SEYMOUR and BALDOCK, Circuit Judges.

PER CURIAM.

The issue on appeal in this case is whether the bankruptcy debtors' breeding livestock, exempt from the bankruptcy estate by virtue of state statute, is also protected by the lien avoidance provisions of 11 U.S.C. Sec. 522(f)(2)(B) (1982) as a "tool of the trade." We conclude that Sec. 522(f) permits the lien on this debtor's breeding stock to be avoided to the $5000 limit of the state exemption. 1

Debtors in bankruptcy, Curtis Neal Heape and Billie Jean Heape, filed for relief under Chapter 7 of the Bankruptcy Code. Pursuant to Kan.Stat.Ann. Sec. 60-2304(5) (1983), they claimed exemption of nineteen head of breeding stock. 2 No objection was filed to debtors' assertions that they were farmers or to their claim of this exemption, and thus the exemption was automatically allowed. The bankruptcy court went on to find that the breeding stock constituted security for a nonpurchase money, nonpossessory lien held by Citadel Bank of Independence (Kansas). The court held that the lien was not avoidable under 11 U.S.C. Sec. 522(f)(2)(B) as a lien on "tools of the trade." The Heapes appealed the denial of lien avoidance to the federal district court, which affirmed the bankruptcy court's decision. In re Heape, 85 B.R. 577 (D.Kan.1988).

The district court found that the common meaning of the terms "tools" or "implements" does not include livestock, and that to construe livestock as a tool would be an unjustified deviation from normal usage of the term. Id. at 578. In addition, the court noted that Congress included the term "animals" in the section of the code avoiding liens on exempt household goods and furnishings, Sec. 522(f)(2)(A), but did not include it as a separate, specific category under Sec. 522(f)(2)(B). Id. The district court stated that the lien avoidance provisions were intended to prevent creditors from forcing debtors to reaffirm consumer debts while preserving the possibility of a fresh start for the debtor, but that every item exempt under state law is not necessarily protected by the federal lien avoidance provisions. Id. at 578-79. The district court agreed with the analysis of the

Page 282

Seventh Circuit in In re Patterson, 825 F.2d 1140, 1146 (7th Cir.1987), that livestock are in the nature of capital assets rather than tools of the trade. Heape, 85 B.R. at 579.

We review the legal determinations of the district court de novo, although we accept the factual findings of the bankruptcy court unless they are clearly erroneous. Branding Iron Motel, Inc. v. Sandlian Equity, Inc. (In re Branding Iron Motel, Inc.), 798 F.2d 396, 399-400 (10th Cir.1986).

Section 522(f) of the Bankruptcy Code 3 permits debtors to avoid the fixing of certain liens to the extent they impair an exemption existing under either federal or state law. Patterson, 825 F.2d at 1146; 3 Collier on Bankruptcy p 522.29 (L. King 15th ed. 1989). It is undisputed that debtors' claimed breeding stock is exempt under state statute, Kan.Stat.Ann. Sec. 60-2304(5) (1983). While state law governs the question of the debtors' exemption on their breeding cattle, federal law determines the availability of lien avoidance under Sec. 522(f). In re Thompson, 750 F.2d 628, 630 (8th Cir.1984); Eakes v. Farmers Home Admin. (In re Eakes), 69 B.R. 497, 498 (Bankr.W.D.Mo.1987). But cf. In re Thompson, 867 F.2d 416, 420-21 (7th Cir.1989) (using state law definition of "tools of the trade" for Sec. 522(f)(2)(B) when debtor elected state law exemptions); In re Newbury, 70 B.R. 1, 1 (Bankr.D.Kan.1985) (same). Liens on property exempt under Kansas law are avoidable only if enumerated in 11 U.S.C. Sec. 522(f)(2). Newbury, 70 B.R. at 1.

The statute's legislative history can be of assistance to us. 4 Production Credit Association v. LaFond (In re LaFond), 791 F.2d 623, 627 (8th Cir.1986) (quoting In re Duchesne, 21 B.R. 390, 391 (N.D.N.Y.1982)), explains that Sec. 522(f)(2)(A) was intended to protect household goods with low resale value from being the subject of creditor coercion of the debtor, while Sec. 522(f)(2)(B) was intended to allow a debtor " 'to make a fresh start after bankruptcy by the use of tools or implements necessary to enable him to pursue and make a living at his trade.' "

Because the term "tools of the trade" is not defined by statute or legislative history, decisions among bankruptcy courts are inconsistent. Courts have based their analyses on such diverse rationales as the plain meaning of the word "tool," the value of the property in question, the interaction between the federal exemption and lien avoidance statutes, and the ratio of the property to the total capital assets of the debtor. In re Bulger, 91 B.R. 129, 131-32 (Bankr.M.D.Ala.1988).

The Bulger court rejected all these tests in favor of the "use" test set forth in Walkington v. Production Credit Association (In re Walkington), 42 Bankr. 67, 72 (Bankr.W.D.Mich.1984); see also Credithrift of Am., Inc. v. Dubrock (In re Dubrock), 5 B.R. 353, 354-55 (Bankr.W.D.Ky.1980) (a tool is an item which is necessary and used by the debtor in his business). This "use" test is compatible with Kansas exemption law. Eight decades ago, the Kansas Supreme Court accepted the "use" test when it defined "tools of the trade" as found in the Kansas exemption statute: "[For] tools and implements ... [to come within] the operation of the statute.... [i]t is enough that they belong to the ... [debtor], that they are necessary and are personally used for the purpose of carrying on his trade or business." Reeves & Co. v. Bascue,

Page 283

6 Kan. 333, 91 P. 77, 77 (1907); see also In re Currie, 34 Bankr. 745, 748 (D.Kan.1983) ("The test in Kansas has long been that the property must be reasonably necessary, convenient or suitable for the production...

To continue reading

Request your trial
44 practice notes
  • 428 B.R. 533 (Bkrtcy.D.Colo. 2010), 08-24291-SBB, In re Pearson
    • United States
    • Federal Cases United States Bankruptcy Courts Tenth Circuit
    • 16 April 2010
    ...In re Niemyjski, 26 B.R. 466, 468 (Bankr.D.N.M.1983)). [11] Id. at 260-61 (citing Heape v. Citadel Bank of Independence (In re Heape), 886 F.2d 280, 282 (10th [12] Emphasis added. [13] See also In re Saal, 338 B.R. 501, 503 (Bankr.D.Colo.2006) ( " In 1994, Congress amended 11 U.S.C. § ......
  • 156 B.R. 667 (D.Utah 1993), 93-C, In re Sanders
    • United States
    • Federal Cases United States District Courts 10th Circuit United States District Court of Utah
    • 8 July 1993
    ...522(f) permits avoidance of the lien only in the amount of the debtor's exemption. See Heape v. Citadel Bank of Independence (In re Heape) 886 F.2d 280, 284 n. 5 (10th Cir.1989) (dictum); City Nat'l Bank v. Chabot (In re Chabot), 992 F.2d 891, 895 (9th Cir.1993), In re Gonzalez, 149 B.R. 9,......
  • In re Leicht, 070798 FED01BC, MW 97-067
    • United States
    • Federal Cases United States Bankruptcy Courts First Circuit
    • 7 July 1998
    ...section 522(f) still controls the 'availability of lien avoidance, '" quoting Heape v. Citadel Bank of Independence (In re Heape), 886 F.2d 280, 282 (10th Cir. 1989)); Tower Loan of Mississippi, Inc. v. Maddox (In re Maddox), 15 F.3d 1347, 1356 (5th Cir. 1994)("[A]lthough states r......
  • 39 F.3d 258 (10th Cir. 1994), 93-4136, In re Sanders
    • United States
    • Federal Cases United States Courts of Appeals United States Court of Appeals (10th Circuit)
    • 1 November 1994
    ...section 522(f) still controls the "availability of lien avoidance." Heape v. Citadel Bank of Independence (In re Heape), 886 F.2d 280, 282 (10th Cir.1989). Thus, resolution of the first issue before us Page 261 from interpretation of Sec. 522(f)(1), which provides that "the d......
  • Request a trial to view additional results
43 cases
  • 428 B.R. 533 (Bkrtcy.D.Colo. 2010), 08-24291-SBB, In re Pearson
    • United States
    • Federal Cases United States Bankruptcy Courts Tenth Circuit
    • 16 April 2010
    ...In re Niemyjski, 26 B.R. 466, 468 (Bankr.D.N.M.1983)). [11] Id. at 260-61 (citing Heape v. Citadel Bank of Independence (In re Heape), 886 F.2d 280, 282 (10th [12] Emphasis added. [13] See also In re Saal, 338 B.R. 501, 503 (Bankr.D.Colo.2006) ( " In 1994, Congress amended 11 U.S.C. § ......
  • 156 B.R. 667 (D.Utah 1993), 93-C, In re Sanders
    • United States
    • Federal Cases United States District Courts 10th Circuit United States District Court of Utah
    • 8 July 1993
    ...522(f) permits avoidance of the lien only in the amount of the debtor's exemption. See Heape v. Citadel Bank of Independence (In re Heape) 886 F.2d 280, 284 n. 5 (10th Cir.1989) (dictum); City Nat'l Bank v. Chabot (In re Chabot), 992 F.2d 891, 895 (9th Cir.1993), In re Gonzalez, 149 B.R. 9,......
  • In re Leicht, 070798 FED01BC, MW 97-067
    • United States
    • Federal Cases United States Bankruptcy Courts First Circuit
    • 7 July 1998
    ...section 522(f) still controls the 'availability of lien avoidance, '" quoting Heape v. Citadel Bank of Independence (In re Heape), 886 F.2d 280, 282 (10th Cir. 1989)); Tower Loan of Mississippi, Inc. v. Maddox (In re Maddox), 15 F.3d 1347, 1356 (5th Cir. 1994)("[A]lthough states r......
  • 39 F.3d 258 (10th Cir. 1994), 93-4136, In re Sanders
    • United States
    • Federal Cases United States Courts of Appeals United States Court of Appeals (10th Circuit)
    • 1 November 1994
    ...section 522(f) still controls the "availability of lien avoidance." Heape v. Citadel Bank of Independence (In re Heape), 886 F.2d 280, 282 (10th Cir.1989). Thus, resolution of the first issue before us Page 261 from interpretation of Sec. 522(f)(1), which provides that "the d......
  • Request a trial to view additional results
1 books & journal articles
  • Section 522(f): forward to the past or back to the future?
    • United States
    • Florida Bar Journal Vol. 82 Nbr. 10, November 2008
    • 1 November 2008
    ...the District of Columbia. (22) In re Sanders, 156 B.R. 667, 670 (D. Utah 1993), citing Heape v. Citadel Bank of Independence (In re Heape) 886 F.2d 280, 284 n.5 (10th Cir. 1989) (dictum); City Nat'l Bank v. Chabot (In re Chabot), No. 9156171, 1993 WL 114719, at 3 (9th Cir. April 16, 1993); ......