Matter of Myers, Bankruptcy No. 85-1459-C.

• Court: United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — Southern District of Iowa
• Writing for the Court: RICHARD STAGEMAN
• Citation: 56 BR 423
• Parties: In the Matter of Max A. MYERS, Mary Lou Myers, fdba Myers Farm, Engaged in Farming, Debtors.
• Docket Number: Bankruptcy No. 85-1459-C.
• Decision Date: 12 December 1985

56 B.R. 423 (1985)

In the Matter of Max A. MYERS, Mary Lou Myers, fdba Myers Farm, Engaged in Farming, Debtors.

Bankruptcy No. 85-1459-C.

United States Bankruptcy Court, S.D. Iowa.

December 12, 1985.

56 BR 424

Dallas J. Janssen, West Des Moines, Iowa, for debtors.

Walter H. Sheata, St. Louis, Mo., Robert R. Rydell, Des Moines, Iowa, for Mercantile Bank of Memphis.

MEMORANDUM OF DECISION

RICHARD STAGEMAN, Bankruptcy Judge.

At Des Moines, in the Southern District of Iowa, on the 10th day of December 1985.

This is a case under Chapter 7 of the Bankruptcy Code filed by the debtors, Max A. and Mary Lou Myers. The specific matter before the court is a motion to avoid liens on exempt tools of the trade pursuant to § 522(f)(2). The motion has been resisted by the lien-holder, Mercantile Bank of Memphis ("Bank").

I.

The debtors seek to avoid liens on certain farm equipment they claim exempt as tools of the trade.¹ The Bank resists the debtors' motion on the ground that the debtors are not engaged in the trade of farming. In support of its resistance the Bank advances two arguments frequently heard by this court. First, the Bank argues that the debtors cannot be entitled to a farmer's implements of husbandry exemption because they are both full-time schoolteachers. Second, the Bank argues that the debtors have abandoned farming.

II.

Numerous decisions by bankruptcy courts have addressed the question whether a debtor who farms and also engages in another occupation is entitled to claim exemptions and avoid liens as a farmer. The weight of authority holds that the definition of a farmer found in Bankruptcy Code § 101(17) does not apply to exemption and lien avoidance questions. E.g., Flick v. United States, 47 B.R. 440, 443 (W.D.Pa. 1985); Middleton v. Farmers State Bank of Fosston, 45 B.R. 744, 747 (Bkrtcy.D. Minn.1985); In re La Fond, 45 B.R. 195, 199 (Bkrtcy.D.Minn.1984); Matter of Decker, 34 B.R. 640, 641 (Bkrtcy.N.D.Ind.1983). Contra, In re Holman, 26 B.R. 110, 112 (Bkrtcy.M.D.Tenn.1983).

The courts have used varying approaches in deciding whether a debtor engaged in two occupations may claim an exemption for "tools of the trade". In In re Walkington, 42 B.R. 67 (Bkrtcy.W.D.Mich.1984), a nonfarm case, the court allowed an exemption for tools used in the debtor's primary occupation. Id. at 72. An income test was used to determine the primary occupation. Id.

56 BR 425

In In re Oetinger, 49 B.R. 41, 42 (Bkrtcy. D.Kan.1985), the court applied Kansas law and allowed exemptions for tools of the debtor's primary occupation. Apparently, the court determined the primary occupation based on hours worked rather than on income. See id. at 43. See also In re Samuel, 36 B.R. 312, 314 (Bkrtcy.E.D.Va. 1984) (nonfarm case applying state law to allow exemption only for principal occupation).

Other courts have not followed a primary occupation test or an income test. In In re La Fond, an income test was rejected. 45 B.R. at 200. Instead, the debtor was required to

. . . prove that he is legitimately engaged in a trade which currently and regularly uses the specific implements or tools exempted and on which lien avoidance is sought.

Id. Other cases have adopted the same test. E.g., Flick v. United States, 47 B.R. at 443; In re Yoder, 32 B.R. 777, 781 (Bkrtcy.W.D.Pa.1983).

Although the bankruptcy farm cases cited show a general tendency of being liberal in deciding whether a debtor with two occupations may claim farm implements as exempt tools of the trade, they do not dispose of the present case. The question presented is properly one of Iowa law, and the above cited cases do not interpret Iowa law.

In determining that Iowa law controls this case, the court looks to Bankruptcy Code § 522(f). That lien avoidance provision is a matter of federal law, not state law. Matter of Thompson, 750 F.2d 628, 630 (8th Cir.1984). However, lien avoidance is only available for liens that impair "an exemption to which the debtor would have been entitled to under subsection (b) of section 522. . . ." 11 U.S.C. § 522(f). In short, a valid exemption under state law is a prerequisite to receiving relief through lien avoidance in states where the uniform federal exemptions do not apply. Under Iowa Code § 627.10 (1985) a debtor in Iowa may only claim exemptions under Iowa law. Thus, questions about the propriety of an exemption are matters of Iowa law. See also In re Oetinger, 49 B.R. at 42; In re Samuel, 36 B.R. at 314 (both cases applying state exemption law). Since the Bank has only challenged the propriety of the debtors' exemptions, Iowa law is controlling.²

III.

The Meyers claim their farm equipment and machinery are exempt pursuant to Iowa Code § 627.6(10)(d) (1985). That section provides:

A debtor who is a resident of this state may hold exempt from execution the following property:

. . . .

10. Any combination of the following, not to exceed a value of five thousand dollars in the aggregate:

. . . .

d. If the debtor is engaged in farming, a team consisting of not more than two horses or mules or two yokes of cattle, and the wagon or other vehicle, with the proper harness or tackle, or other necessary implements of husbandry, or a combination of these. This exemption is in addition to any motor vehicle held exempt under paragraph "b."

The question presented here is whether the Meyers' occupations as full-time teachers disqualifies them from claiming this exemption.

Iowa exemption laws are to be liberally construed in favor of those claiming the benefit of such laws. Frudden Lumber Co. v. Clifton, 183 N.W.2d 201, 203 (Iowa 1971); Matter of Hahn, 5 B.R. 242, 245 (Bkrtcy.S.D.Iowa 1980). The Iowa court has construed the statute liberally when

56 BR 426

deciding whether a debtor with two occupations may claim an exemption for tools of the trade. In Equitable Life Assurance Society of United States v. Goode, 101 Iowa 160, 70 N.W. 113 (1897), the debtor was in the real estate business and was also an attorney. The court ruled that the debtor was entitled to exempt his law books from execution. The court stated

The undisputed evidence is that the defendant was occupied at least

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