Lingle State Bank of Lingle v. Podolak

• Decision Date: 05 August 1987
• Docket Number: No. 86-303,86-303
• Citation: 740 P.2d 392
• Parties: LINGLE STATE BANK OF LINGLE, Wyoming, a corporation, Appellant (Plaintiff), v. Ronald F. PODOLAK and Donna J. Podolak, husband and wife, Appellees (Defendants).
• Court: Wyoming Supreme Court

Page 392

740 P.2d 392

LINGLE STATE BANK OF LINGLE, Wyoming, a corporation, Appellant (Plaintiff), v. Ronald F. PODOLAK and Donna J. Podolak, husband and wife, Appellees (Defendants).

No. 86-303.

Supreme Court of Wyoming.

Aug. 5, 1987.

Donald E. Jones of Jones and Graham Law Offices, Torrington, for appellant (plaintiff).

Herbert K. Doby of Elletson & Doby, Cheyenne, for appellees (defendants).

Before BROWN, C.J., and THOMAS, CARDINE, URBIGKIT and MACY, JJ.

URBIGKIT, Justice.

This case presents the debtors' earnings exemption statute, § 1-17-411, W.S.1977, 1986 Cum.Supp., as applied to a farmer's wheat crop sales proceeds upon which a bank, as creditor, had executed. We affirm the trial court exemption allowance.

FACTS

Ronald and Donna Podolak are family farmers and ranchers in Goshen County, Wyoming. Lingle State Bank (Bank) had made an operation loan to them, and obtained loan security interest in much of their equipment, livestock, and crops. In the fall of 1985, the lender-borrower relationship became severely strained, and litigation ensued in both federal and state courts. The state court proceeding included a replevin action by the Bank to obtain possession of property in which it had a security interest as well as a money judgment. The trial court granted summary judgment for the Bank in that first case, and we affirmed in Podolak v. Lingle State Bank, Wyo., 730 P.2d 126 (1986), from which a judgment deficiency remains.

The Podolaks previously grew alfalfa on a 140-acre irrigated circle. In August of 1985, they plowed under the alfalfa and planted wheat, and they employed a neighbor, David Bredthauer, to plow, plant and harvest. When ready to harvest, the Bank executed on the crops, the wheat was sold by agreement of the litigants, and the proceeds paid into court. From these funds, the court paid the neighbor for his labor and services. The deficiency judgment execution originally claimed a total of $41,855 in attached lands, crops and vehicles. After the vehicles were sold in execution sale, a second execution attached crops only.

The Podolaks then filed a claim for exemption pursuant to § 1-17-411, W.S.1977, 1986 Cum.Supp., on remaining crop proceeds of $13,400. The district court held a hearing, and after denying a separately claimed homestead exemption, granted the exemption for one-half the remaining proceeds from the wheat sale, with the balance to be paid to the Bank for deficiency application. At this last stage, we now consider the litigation over the claimed exempt "earning" amount of $6,700.

ISSUES

This appeal presents two issues:

I. Does the personal earnings exemption statute, § 1-17-411, W.S.1977, 1986 Cum.Supp., operate to exempt from execution one-half of the proceeds of the sale of a farmer's wheat crop?

II. If the exemption is available, does the security agreement covering the wheat crop result in a waiver as to crop proceeds, and alternatively, when the collection process is used, is judgment execution?

I

The personal earnings exemption statute, Section 1-17-411, W.S.1977, 1986 Cum.Supp., existent in some form in Wyoming for a century (Ch. 60, S.L. of Wyoming 1886), provides:

"The court may order any property of the judgment debtor or money due him in the hands of either himself or another person, not exempt by law, to be applied toward the satisfaction of a judgment. Upon seizure of his property or money, a judgment debtor may request a hearing pursuant to W.S. 1-17-405(c). One-half ( 1/2) of the earnings of the judgment debtor for his personal services rendered within sixty (60) days immediately preceding the levy of execution or levy of attachment, and due and owing at the time of the levy, are exempt when it appears by the debtor's affidavit or otherwise that the earnings are necessary for the use of his family residing in this state supported wholly or in part by his labors."

To determine the application of this statute, we look to the purpose for enactment, which, in Lafferty v. Sistalla, 11 Wyo. 360, 72 P. 192 (1903), had been considered:

" * * * [S]uch statutes are enacted for the purpose of saving debtors and their families from want by reason of misfortune or improvidence, they will be liberally In Pellish Bros. v. Cooper, 47 Wyo. 480, 38 P.2d 607 (1934), we construed a related exemption statute also enacted to protect debtors, which exempted from execution or attachment tools and implements of a worker's trade of a maximum value of $300 used and kept for the purpose of carrying on a trade or business. Justice Blume, writing for the court, stated that "it should be borne in mind that exemption statutes are construed liberally so as to effect their beneficent purposes." 38 P.2d at 609. See Penrose v. Stevens, 100 Colo. 83, 65 P.2d 697 (1937); Sandberg v. Borstadt, 48 Colo. 96, 109 P. 419 (1910); Celco, Inc. of America v. Davis Van Lines, Inc., 226 Kan. 366, 598 P.2d 188 (1979); Anaconda Federal Credit Union No. 4401 v. West, 157 Mont. 175, 483 P.2d 909 (1971); Slyfield v. Willard, 43 Wash. 179, 86 P. 392 (1906). Cf. Beneficial Finance Co. of Colorado v. Schmuhl, Colo., 713 P.2d 1294, 1298 (1986), Dubofsky, J. dissenting.

construed to accomplish that purpose * * *." 72 P. at 193. ¹

Appellant contends that the income or earnings from a farming and ranching business are not exempt. To support this claim, the Bank argues that the agricultural economy in Wyoming and across the United States has changed from a labor-based activity to a type of business whereby income is generated from capital. Because this statute exempts "earnings" for "personal services rendered," it is contended that it cannot apply to the operator of a farm or ranch. We do not find the Bank's contention persuasive. There is nothing in the statute to suggest that a person who earns a living by running a business should be treated any differently than one who earns wages. See 31 Am.Jur.2d, Exemptions, §§ 39 and 40, pp. 363-365. Certainly, although a farm or ranch is a business enterprise by definition, the "proprietor" usually renders personal service to obtain earnings.

"It seems clear beyond dispute that the language of the statute, 'earnings of the judgment debtor for his personal services,' is intended to have a broader application than the restrictive meaning of the phrase 'wages of a laborer' * * *." Russell M. Miller Company v. Givan, 7 Utah 2d 380, 325 P.2d 908, 909 (1958).

In light of the beneficent purpose and liberal construction to be given exemption statutes, this court concludes that income produced by farming and ranching is a species of earnings to which the legislature intended the earnings exemption statute to apply. The beneficent purposes of this statute includes protecting both debtors who earn wages and debtors who earn income by working for someone else or by running a business for themselves. Under its language, the statutory exemption applies to earnings derived from personal services, and we address only that exemption. We specifically do not consider issues relating to tangible chattel or real-property security issues.

The Bank urges us to deny the exemption because the Podolaks hired Bredthauer to plant and harvest. We do not think that his involvement precludes the Podolaks from taking the exemption for the services they performed in raising that wheat, particularly The record was conflicting as to how much work was performed by the Podolaks. The trial court found

so where the Bank's earlier repossession of the Podolaks' equipment was apparently responsible for the Podolaks' inability to otherwise produce the wheat crop with their own equipment.

"[t]hat defendants, though certainly relegated to a passive role, when compared to the actual labor and technical skill performed by Mr. Bredthauer in the development of the finished wheat crop, rendered personal services which aided in the production of the crop."

When reviewing factual determinations made by the trial court, we will not substitute our view of the facts for that of the trial court if there is substantiated and creditable evidence to support the decision. Wangler v. Federer, Wyo., 714 P.2d 1209, 1217 (1986); Walter v. Moore, Wyo., 700 P.2d 1219 (1985). There is uncontradicted testimony in the record that Mr. Podolak supervised the progress of the wheat crop and ensured that no wild game trespassed upon it. We will respect the trial court's finding that Mr. Podolak rendered personal services in management and supervision which contributed to the crop production.

The exemption statute exempts only those earnings from personal services rendered within 60 days immediately preceding the levy of execution or levy of attachment. In this case the wheat was planted in August of 1985, and harvested in late July of 1986. The sub-issue is presented to determine what portion of the income from the sale of the wheat currently received should be attributed to earnings from services rendered in the last 60 days.

The trial court found that

" * * * [j]ust as a product or process may take more than sixty days in development, so does a wheat crop. In all of these situations, the 'earnings' cannot very readily be apportioned over the total span between inception and completion and I, therefore, believe that the money was earned at the time of sale * * *."

We agree, and conclude that the proceeds of a farmer's crop sale were earned at the time of the proceeds receipt. The requirement that the services be rendered within 60 days does not operate to apportion or deny a farmer the exemption for earnings received at the time of sale. To ensure that the earnings exemption provision is not abused, the statute additionally requires the trial court to find that "the earnings are necessary for the use of his family." (Emphasis added.)

Consequently, we have no problem with the trial court's analysis that earnings constitute funds received, and this is not to be otherwise defined by us as work done. Logically, crop proceeds...