In re Duss

• Decision Date: 30 October 1987
• Docket Number: Bankruptcy No. EU7-87-00830.
• Citation: 79 BR 821
• Parties: In re Ronald L. DUSS, Jan L. Duss, Debtors.
• Court: U.S. Bankruptcy Court — Western District of Wisconsin

79 B.R. 821 (1987)

In re Ronald L. DUSS, Jan L. Duss, Debtors.

Bankruptcy No. EU7-87-00830.

United States Bankruptcy Court, W.D. Wisconsin.

October 30, 1987.

Howard D. White, Eau Claire, Wis., for debtors.

Sheree L. Gowey, Asst. U.S. Atty., Madison, Wis., for Farmers Home Admin.

MEMORANDUM OPINION, FINDINGS OF FACT, AND CONCLUSIONS OF LAW

THOMAS S. UTSCHIG, Bankruptcy Judge.

The debtors, by Howard D. White, have brought a motion pursuant to 11 U.S.C. § 522(f) and Bankruptcy Rule 4003(d) to avoid liens. The Farmers Home Administration (FmHA) appears by Assistant U.S. Attorney, Sheree L. Gowey, and objects to the motion. By agreement of the parties, the issues have been submitted to the Court for determination through briefs.

On July 23, 1987, the debtors filed an amended motion to avoid nonpossessory, nonpurchase-money security interests that impair exemptions to which they would have been entitled under § 522(b)(2). Through said motion the debtors seek lien avoidance with respect to certain listed farm equipment.

The debtors filed a second amended exemption schedule on October 14, 1987, claiming exemptions pursuant to § 522(b)(2) of the Bankruptcy Code and § 815.18 of the Wisconsin Statutes. The FmHA has affirmatively conceded that the items listed on said schedule should be allowed as exempt. The debtors have apparently withdrawn their claim for exemption as to the farm equipment not listed in this second amended exemption schedule. Accordingly, the lien avoidance motion with respect to such non-exempt property must be denied in that the security interests are not impairing the debtors' exemptions. In re Clowney, 19 B.R. 349 (Bankr.M.D.N.C. 1982).

FmHA does not contend that any of its security interests are either possessory or purchase-money. Nor does FmHA dispute the fact that the trade of the debtors is farming.

The debtors seek to avoid FmHA's security interest in thirty (30) acres of hay. They contend that the hay constitutes crops held primarily for the personal, family, or household use of the debtors within the meaning of § 522(f)(2)(A). FmHA argues that the hay is not a consumable and cannot really be considered to be held primarily for personal, family, or household purposes. The Court agrees with FmHA and accordingly the debtors' motion with respect to the thirty (30) acres of hay should be denied.

Finally the debtors seek to avoid the liens on the remaining items asserting that they constitute implements or tools of the trade of the debtors. No party in interest has objected to the debtors' claim of exemptions. Therefore, such property should be allowed as exempt. 11 U.S.C. § 522(l).¹ FmHA objects to the motion of the debtors and contends that the exempt items of farm machinery do not constitute tools or implements of the trade of the debtors within the meaning of § 522(f)(2)(B) of the Bankruptcy Code. FmHA bases this argument on dicta from the case of In re Patterson, 825 F.2d 1140 (7th Cir.1987).

FmHA's reliance on Patterson is misplaced. The Patterson decision stands for the single and narrow proposition that expensive farm tools and implements are not exempt as tools and implements under § 522(d) of the Bankruptcy Code and, therefore, the liens on such machinery cannot be avoided under § 522(f).² The Court in Patterson explictly distinguished situations where property has been allowed as exempt under state law in accordance with § 522(b)(2) of the Bankruptcy Code. . . .

There is authority at this level, though not in this circuit, on the question whether liens on farm machinery may sometimes be avoided by virtue of section 522(f), but that question is distinct. Section 522(f) allows the avoidance of liens on property exempt not only by virtue of 522(d), the list of federal exemptions (that is, the exemptions created by the Bankruptcy Code rather than merely absorbed by it from state law), but also by virtue of state exemption laws, some of which exempt tools of the trade more broadly than section 522(d) does. The same language in section 522(f), since it could be picking up a tools of the trade exemption in state law as well as the tools of the trade exemption (which need not have the same scope) in 522(d), could mean two different things. Thus, cases like In re Liming, 797 F.2d 895, 899-901 (10th Cir.1986); In re LaFond, 791 F.2d 623, 626-27 (8th Cir.1986), and Augustine v. United States, 675 F.2d 582 (3d Cir.1982) all of which allow a lien on farm machinery to be avoided under (f), do not necessarily control the present case, which is under (d).

In re Patterson, 825 F.2d 1140, 1146 (7th Cir.1987).

The language of § 522 of the Bankruptcy Code is clear, plain, and unambiguous. Thus the plain meaning of the statute should be controlling. Jones v. Liberty Glass Company, 332 U.S. 524, 531, 68 S.Ct. 229, 232-33, 92 L.Ed. 142 (1947); Rosenman v. United States, 323 U.S. 658, 661, 65 S.Ct. 536, 537-38, 89 L.Ed. 535 (1945). The Court will now proceed to navigate through the § 522 lien avoidance provision incorporating the relevant facts and using the above principle of statutory interpretation as its lighthouse.

In Wisconsin a debtor in bankruptcy may choose to use either the federal exemptions as provided by § 522(b)(1) and (d), or the state exemptions provided by § 522(b)(2).³ In the case sub judice the debtors have chosen to use the state exemptions as provided by § 522(b)(2). Specifically, the debtors have claimed several items of property as exempt pursuant to § 815.18(6) of the Wisconsin statutes. FmHA has affirmatively agreed that these items should be allowed as exempt. Absent an objection by a party in interest, the property claimed by a debtor as exempt is exempt. 11 U.S.C. § 522(l).

The effect of the exemption is to remove such exempt property from the bankruptcy estate and, after discharge, from the claims of unsecured creditors. 11 U.S.C. § 522(c)(2); H.Rep. No. 95-595, 95th Cong., 1st Sess. (1977). The fact that property is claimed as exempt does not destroy pre-existing valid liens nor prevent the enforcement of such liens. H.Rep. No. 95-595, 95th Cong., 1st Sess. (1977) pp. 360-63 (adopting the rule of Long v. Ballard, 117 U.S. 617, 6 S.Ct. 917, 29 L.Ed. 1004 (1886)); see also In re Tarnow, 749 F.2d 464 (7th Cir.1984).

Congress did, however, provide a method by which a debtor could avoid liens on property claimed as exempt. 11 U.S.C. § 522(f). Under § 522(f)(2)(B) debtors may avoid nonpossessory, nonpurchase-money security interests to the extent that such liens impair exemptions to which the debtors would have been entitled in any implements or tools of the trade of the debtors. FmHA's sole objection rests in its contention that the items of property the debtors have claimed as exempt do not constitute tools or implements within the meaning of § 522(f).

Initially, FmHA implicitly asserts that § 522(f)(2)(B) should be limited to the value limitations provided in the federal exemptions of § 522(d). The Court disagrees. It is quite apparent that Congress chose not to place value limitations in § 522(f)(2)(B). Certainly if the result FmHA requests was intended, Congress in its wisdom could have placed value limitations in § 522(f)(2)(B) similar to those placed in § 522(d). Instead, Congress elected to delete such value limitations from § 522(f). The Tenth Circuit Court of Appeals has recently addressed this issue.

Although the wording of the subsection (f) avoidances closely follows the wording of the subsection (d) exemptions, subsection (f) contains no express dollar limitations on the value of the items that the debtor may avoid. Indeed, that the wording is identical but for the dollar limitations suggests a deliberate omission.

In re Liming, 797 F.2d 895, 901 (10th Cir. 1986).

Further, the limitations of § 522(d) do not logically come into the analysis when a debtor has selected the § 522(b)(2) exemptions. When a debtor has elected to use the state exemptions, as is authorized by Congress in § 522(b), it is clearly contrary to the plain language of the statute to "read over" the value limitations of § 522(d) into § 522(f). It should further be noted that a state may opt-out of § 522(b)(1) altogether. Thus, it would be an incongruous result to apply § 522(d) value limitations after a state has affirmatively decided that § 522(d) should not be used. Congress was perfectly aware that states could opt-out of § 522(d) and if it had intended the § 522(d) value limitations in § 522(f), then such limitations would have been directly provided in § 522(f). FmHA has not argued or provided any reason for the Court to believe that Congress somehow "goofed" in not placing value limitations in § 522(f). In addition FmHA's argument has already been rejected in this district. In re Flake, 33 B.R. 275, 277 (W.D.Wis.1983).

To reiterate, a debtor may elect to use either the federal exemptions of § 522(b)(1) and (d) or the state exemptions of § 522(b)(2). Had the debtor ultimately decided to use the § 522(b)(1) exemptions, it may be possible that the language of § 522(b)(1) and (d) could be helpful with respect to § 522(f) lien avoidance issues. However, where a debtor has elected to use the state exemptions in accordance with § 522(b)(2), then § 522(b)(2) is also the operative exemption provision with respect to lien avoidance issues and § 522(d) does not even come into the scheme of the analysis.

Next, FmHA argues that the terms tools and implements as used in § 522(f)(2)(B) should be restricted to small hand tools and modest implements. Basically, this is a request that the Court engage in judicial legislation. This request shall be humbly declined. As noted earlier, the language of the statute is quite clear and absent any ambiguity a court should be reticent to engage in statutory reconstruction. The Court notes the statute specifically states any tool or implement. The items of property claimed as exempt by the debtors are very much considered tools and implements in the...