In re LaFond
| Decision Date | 20 December 1984 |
| Docket Number | Bankruptcy No. 5-84-41. |
| Citation | 45 BR 195 |
| Parties | In re Jerome Thomas LaFOND and Charlotte Agnes LaFond, Debtors. |
| Court | U.S. Bankruptcy Court — District of Minnesota |
Shawn M. Dunlevy, Duluth, Minn., for PCA.
James P. Fossum, Brainerd, Minn., for debtors.
The above-captioned matter came on before the undersigned United States Bankruptcy Judge on October 24, 1984, upon Debtors' Motion for Lien Avoidance pursuant to 11 U.S.C. § 522(f). Debtors appeared personally and by their attorney, James P. Fossum, Legal Aid Service of Northeastern Minnesota. Production Credit Association of St. Cloud (hereinafter "PCA") appeared by its attorney, Shawn M. Dunlevy. Upon the testimony adduced at said hearing, the arguments and Memoranda of Law submitted by counsel, and all of the other files and records herein, the Court makes the following Order.
1. That Debtors filed their Petition for Relief under Chapter 7 of the Bankruptcy Code in this Court on February 6, 1984.
2. That, prior to April, 1981, Debtors resided in Medina, Minnesota on a farm, where they raised beef cattle. Debtor Jerome Thomas LaFond was employed up to April, 1981, as a police officer by the City of Medina.
3. That in April, 1981, Debtors entered into a contract for deed for the purchase of certain farm property in Aitkin County, Minnesota, moved to this property, and began beef cattle, dairy and crop farming on this property. Both Debtors worked in their farming activities. Since April, 1981, Debtor Jerome LaFond has been employed on a part-time basis as a police officer by the City of McGregor, Minnesota.
4. That Debtors' contract for deed for the purchase of their farm was cancelled by the vendors thereon in November, 1983, and Debtors vacated this property in November, 1983.
5. That since November, 1983, Debtors have occupied rented land in Aitkin County, Minnesota, on which they have raised beef cattle belonging to Debtor Charlotte LaFond's mother and to Debtors. Debtor Jerome LaFond has continued his employment as a police officer with the City of McGregor, Minnesota.
6. That Debtors' federal tax returns for 1981 through 1983 show that during those years, Debtors Jerome LaFond received the following income from employment and farming (all amounts in parentheses are net losses):
Taxable Farm
Employment as Gross Farm Income
Police Officer Income (Schedule F)
1981 $14,011.06 $16,768.47 ($14,415.05)
1982 $ 7,524.01 $20,780.49 ($20,587.68)
1983 $ 8,991.00 $17,551.64 ($21,658.21)
7. That, before Debtors moved to Aitkin County, Minnesota, they owned certain used farming equipment free and clear of all liens or encumbrances, which they had purchased with the proceeds of the sale of their former homestead in Medina, Minnesota. This equipment included the following:
John Deere 4010 tractor with cab John Deere F-145H 4-bottom plow Hesston PT10 haybine Oliver 11' disk John Deere 494 corn planter Forage King silage box and wagon Columbia 6-ton wagon with rack John Deere # 25 chopper with hitch Fox forage blower Kovar 4-section harrow Cylinder and hoses.
8. That in April, 1981 Debtors applied for an operating loan from PCA. On April 30, 1981, Debtors entered into a "Basic Loan Agreement", Security Agreement, and "Supplemental Loan Agreement" with the PCA for an operating loan. Under the terms of the Security Agreement, Debtors granted to PCA a security interest in "all equipment, motor vehicles and fixtures, all accessions thereto, and all spare parts and special tools for such equipment," as well as in livestock, poultry, and milk. A Financing Statement perfecting this lien was filed in the office of the Aitkin County Recorder on May 7, 1981. Debtors loan from PCA was apparently renewed by one or several successive Supplemental Loan Agreements, the final one of which was dated May 26, 1983. The final Supplemental Loan Agreement and Security Agreement continued the prior security interest in equipment, motor vehicles, and fixtures.
9. That Debtors now seek to avoid PCA's security interest in the following equipment (hereinafter "the equipment"), which was of the following value as of February 6, 1984, and all of which is now and always has been in the possession of Debtors or their agents:
10. That no portion of the proceeds of the loan of April 30, 1981, or any subsequent advance thereon, was used by Debtors to purchase any of the items of farming equipment listed in Finding of Fact 9.
11. That PCA asserts a security interest in an Allis-Chalmers # 160 tractor with loader and a John Deere # 410 round bailer which were purchased by Debtors after they moved to Aitkin County, Minnesota, and which are presently in the possession of PCA or its agents. Debtors have waived any claim or right to avoid PCA's security interest in these items of equipment.
12. That all of the items of the equipment on which Debtors seek to avoid PCA's security interest are commonly understood by persons in the farming trade and the public at large as farming implements or tools.
13. That all of the items of equipment on which Debtors seek to avoid PCA's security interest are commonly used by persons in the farming trade in the course of their farming activities, and are necessary to the operation of a farm of the nature of Debtors' farm.
14. That on Amended Schedule B-4 of their bankruptcy Petition, Debtors have claimed as exempt under 11 U.S.C. § 522(d)(5) and § 522(d)(6), in the so-called "federal bankruptcy exemptions", all of the equipment, and the following items of personal property of the following values:
1981 Dodge Omni $800.00
(equity above § 522(d)(2) exemption)
1968 GMC pick-up $200.00
Topper/camper $300.00
Boat, motor, trailer $500.00
Cash $50.00
Riding lawnmower $100.00
Woodworking table $3,000.00
Life insurance cash surrender value $200.00
Total $5,150.00
CONCLUSIONS OF LAW
Debtors' Motion is premised upon 11 U.S.C. § 522(f), which provides in pertinent part as follows:
In order to avoid a lien on property under § 522(f)(2)(B), the debtor must prove the existence of four elements:
In Re Quidley, 39 B.R. 362, 365 (Bankr.E. D.Va.1984).
PCA raises three defenses to Debtors' Motion. First, it argues that Debtors were and are not engaged in the trade of farming and therefore may not allege that the equipment was an implement or tool of their trade. In support of this position, PCA argues that Debtors are not "farmers" within the meaning of the statutory definition set forth in 11 U.S.C. § 101(17) and, alternately, that Debtors abandoned the trade of farming at some point between the cancellation of the contract for deed on their prior farmstead and the Meeting of Creditors in these proceedings. Second, PCA argues that the meaning of "implements" or "tools of the trade" of a farmer-debtor under § 522(f) does not encompass large items of farming equipment. Third, PCA apparently argues that the value of the equipment exceeds the parameters of the "spillover" exemption available to Debtors under 11 U.S.C. § 522(d)(5) and, therefore, Debtors' Motion must be denied in whole or in part as its lien does not impair an exemption to which Debtors would have been entitled. The Court will deal with these issues individually.
11 U.S.C. § 522(f) grants a debtor the remedy of avoiding a secured creditor's lien against certain enumerated classes of personal property under certain circumstances. Congress' main goal in enacting this provision was to afford a debtor the fullest and most realistic prospect of making his "fresh start". By freeing certain protected classes of property from pre-bankruptcy security interests, the debtor would not be forced either to give up the property to the secured creditor or to reaffirm the debt secured by the property. H.R.REP. No. 595, 95th Cong., 1st Sess. 126-7 (1977), U.S.Code Cong. & Admin. News 1978, p. 5787; In Re Meyers, 2 B.R. 603, 605 (Bankr.E.D.Mich.1980). In granting a debtor the power to avoid liens against household goods...
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