In re Indvik, Bankruptcy No. X88-01247M

CourtUnited States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — Northern District of Iowa
Writing for the CourtWILLIAM L. EDMONDS
Citation118 BR 993
PartiesIn re Lowell E. INDVIK and Melva Indvik, Debtors. In re Eldon INDVIK, Debtor.
Decision Date09 July 1990
Docket NumberContested No. 1172,1173.,X88-01246M,Bankruptcy No. X88-01247M

118 B.R. 993 (1990)

In re Lowell E. INDVIK and Melva Indvik, Debtors.
In re Eldon INDVIK, Debtor.

Bankruptcy Nos. X88-01247M, X88-01246M, Contested Nos. 1172, 1173.

United States Bankruptcy Court, N.D. Iowa.

July 9, 1990.

118 BR 994
118 BR 995
118 BR 996
Peter Riley, Cedar Rapids, Iowa, for debtors

Larry S. Eide, Mason City, Iowa, trustee.

David L. Davitt, Des Moines, Iowa, for F.D.I.C.

U.S. Atty., Cedar Rapids, Iowa, for FmHA.


WILLIAM L. EDMONDS, Bankruptcy Judge.

The matters before the court are creditors' objections to the debtors' claims of exemption and the debtors' separate motions to avoid liens. Debtors in each of the contested matter proceedings were represented by David Smith. David Davitt appeared on behalf of the Federal Deposit Insurance Corporation (FDIC). Assistant U.S. Attorney Martin McLaughlin appeared on behalf of the United States of America acting for the Farmers Home Administration (FmHA). Although these matters have not been consolidated, counsel agreed at the outset of the hearings that these matters could be simultaneously tried as they involve essentially the same or similar facts and the same questions of law. Therefore, the findings of fact hereinafter set out will be set out for each case, but with a joint discussion on the application of law to facts. These are core proceedings pursuant to 28 U.S.C. § 157(b)(2)(B) and (O).


Lowell and Melva Indvik, husband and wife, filed their joint voluntary petition under chapter 12 on August 17, 1988. On the Schedule B-4 filed shortly thereafter, $10,000.00 in "Trade Implements" were claimed as exempt with an itemization provided as Exhibit "A". Items claimed exempt by Lowell Indvik were identified as a 1974 IH 12 Row Cultivator valued at $1,000.00, a 1977 JD 4430 valued at $9,000.00, and a Westco 60" Auger valued at $1,000.00. Melva Indvik did not claim any farm machinery or equipment as exempt.

On Schedule A-2, Lowell and Melva Indvik listed seven "Creditors Holding Security." The claims of six of these creditors were described as "Partnership Debt." The debt to the seventh, United Mortgage Corp., was described as debt of "Lowell & Melva Indvik." On Schedule A-3, debtors listed seven creditors having unsecured claims. Six of the unsecured claims were explained as "Incurred as Partner; ½ interest Eldon Indvik."

The order for meeting of creditors filed August 22, 1988 directed that the section 341(a) meeting of creditors would be conducted September 19, 1988 and further provided that "Unless extended, objections to debtor(s) claim of exempt property must be filed within 30 days after the section 341(a) meeting."

On October 19, 1988, the FDIC timely filed an objection to the claim of exemption in the farm machinery and equipment. The objection specified two grounds: (1) that the machinery and equipment was owned by a partnership and therefore was not exempt; and (2) that the value claimed as exempt exceeded the allowable values under state law. This latter objection has been waived by FDIC.

FmHA twice sought and received extensions of time to file objections to exemptions. On December 19, 1988, FmHA objected to Lowell's claim of exemption in the farm implements on the ground that the items were partnership property and therefore not exempt to Lowell.

118 BR 997

Lowell and Melva Indvik voluntarily converted their chapter 12 case to a chapter 7 case on January 31, 1989. A court order dated January 31, 1989 required new schedules. Debtors filed amended schedules including an amended schedule B-4. In it Lowell and Melva together claimed farm machinery and equipment exempt to the extent of $20,000.00 in value. As the statutory basis for the claim, they cited Iowa Code § 627.6(11). The amended schedules, filed February 16, 1989, provided an itemized list of machinery and equipment showing the full value of each item and the value of the one-half interest claimed to be owned by Lowell and Melva. Certain of the items were marked with an asterisk to identify those items claimed as exempt. The asserted value of debtors' interest in the items claimed as exempt was $19,976.00. The list, which will be set out in its entirety, included the 1974 International Harvester 12 row cultivator, the 1977 John Deere 4430 tractor, and the Westco 60" auger, all of which were originally claimed as exempt by Lowell Indvik. The values alleged for these three items were less than those originally claimed when the chapter 12 case was filed. This is the debtors' list:

                 Full One-Half
                 Value Interest
                *Miscellaneous Tools $ 300 $ 150
                 1974 6600 Combine 6,500 3,250
                *1974 IH 12 Row Cultivator 700 350
                 1974 IH 6 Row Cultivator 250 125
                 1973 JD Disc 200 100
                *1974 JD Disc 400 200
                *1978 IH Field Cultivator 24' 1,600 800
                *1971 JD 7' Mower 175 88
                *1979 12 Row JD Corn Planter 7,500 3,750
                 1979 IH 6 Bottom Plow 3,500 1,750
                *1980 JD 30' Rotary Hoe 1,500 750
                *1978 300 Gal. Sprayer 275 138
                *7 Gravity Wagons & Gears 4,500 2,250
                *1977 JD 4430 10,000 5,000
                 1968 JD 4520 6,000 3,000
                *1968 JD 3020 2,500 1,250
                 JD 2030 (parts) 100 50
                *JD 400 Tractor/Backhoe 4,500 2,250
                 IHC Tractor (parts) 100 50
                *Triggs Loader 300 150
                 HIPCO Heater 50 25
                 Lundell 13' Chisel Plow 375 188
                 Brady 3 pt. Field Cultivator 24' 400 200
                *Lundell Stalk Cutter 6 row 700 350
                 JD 20' Grain Table 400 200
                *JD 6 row Corn hd. 4,000 2,000
                 Mayrath Auger 200 100
                *Westco 60' Auger 1,000 500
                 Wagon Auger 75 38
                 $29,0521 (sic)

By notice to creditors, a new section 341 meeting was scheduled for April 3, 1989. It contained language notifying creditors that the deadline for objecting to claims of exemption was "30 days after the section 341(a) meeting." This notice was served upon all creditors and parties-in-interest. On February 16, 1989, debtors' counsel served the amended schedules on all creditors and parties-in-interest. By May 3, 1989, no objections to the amended claims of exemption had been filed. On June 2, 1989, Lowell and Melva Indvik filed contested matter number 1172 seeking the avoidance of liens on the machinery and equipment. The liens sought to be avoided were those which might be claimed by FDIC, FmHA, Hanseco Insurance Co., and Production Credit Association. The latter two creditors failed to resist the lien avoidance motion. FDIC and FmHA each filed resistances alleging that the property on which lien avoidance was sought was not exempt because it was partnership property.

On November 9, 1989, FDIC filed a renewal of the objections to claims of exemption it had previously filed while the case was pending under chapter 12. On December 6, 1989, FmHA filed an amendment to its resistance to lien avoidance stating as an additional ground of resistance that the debtor, Lowell Indvik, was not engaged in farming and therefore was not entitled to avoid liens on farm machinery and equipment and also alleging that Melva Indvik was never a farmer and therefore was not entitled to lien avoidance.

Lowell Indvik has been a farmer since 1949. He has farmed with his brother Eldon. The brothers have a joint ownership interest in farm land purchased from their parents. In 1985, Lowell Indvik executed several promissory notes to Forest City Bank & Trust Co., the predecessor in interest of FDIC. On each of the notes, the borrower's name was shown as "Indvik Brothers." In the signature area for each of the promissory notes, the name "Indvik Brothers" was typed above the line identified as "Name of Corporation, Partnership or Organization." In 1985, Lowell Indvik alone signed at least ten of these notes and Eldon signed one. Two agricultural security agreements were entered into evidence

118 BR 998
(Exhibits B and C) bearing the signatures of both Lowell and Eldon Indvik and identifying the corporation, partnership or organization as "Indvik Brothers." On November 9, 1983, Lowell Indvik signed a document entitled "Agricultural Financial Statement." This was identified, using a check mark, as a "Partnership" financial statement. On April 1, 1958, Lowell and Eldon Indvik executed an "Authority of Partnership to Open Deposit Account and to Procure Loans." This was provided to Forest City Bank & Trust Co. in order to establish a deposit and checking account to be known as "Indvik Bros." The authority provided that checks and orders for payment of money withdrawing funds from the bank account could be signed by either Lowell or Eldon Indvik. The document also stated as follows: "We have also agreed that any and all partnership property may be pledged, transferred or assigned, that money may be borrowed, liabilities incurred and promissory notes, signed and delivered by either Eldon Indvik or Lowell Indvik." Lowell Indvik does not recall having executed this document. Although not introduced into evidence, loan documents and operational plans were submitted to FmHA under the name "Indvik Brothers." Notes to FmHA were signed by Lowell, Eldon and Melva

Lowell Indvik describes his farming operation with his brother as being "just brothers who farm together." Profits and losses of the farming operation were divided equally between the brothers. Lowell Indvik testified, however, that the use of the name "Indvik Brothers" with the bank was for convenience sake. There was no written partnership agreement between the brothers, and they never filed a partnership tax return either with the Internal Revenue Service or the State of Iowa. Lowell Indvik concedes that the machinery and equipment was owned with his brother, but denies it was property of a formal partnership.

Because of financial difficulties, Lowell Indvik has farmed only sporadically since 1987, a year in which he farmed 100 acres of crop land and in which he tended certain real property enrolled in the conservation reserve program. No crops were...

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