Production Credit Ass'n of St. Cloud v. LaFond
| Decision Date | 08 July 1985 |
| Docket Number | Bankruptcy No. 5-84-41.,Civ. No. 5-85-55 |
| Citation | 61 BR 303 |
| Parties | PRODUCTION CREDIT ASSOCIATION OF ST. CLOUD, Appellant, v. Jerome Thomas LaFOND and Charlotte Agnes LaFond, Appellees. |
| Court | U.S. District Court — District of Minnesota |
John N. Nys, Johnson, Fredin, Killen, Thibodeau & Seiler, P.A., Duluth, Mn., for appellant.
James P. Fossum, Legal Aid of Northeastern Minnesota, Brainerd, Mn., for appellees.
Appellant Production Credit Association (PCA) appeals an adverse decision of the Bankruptcy Court. This court has jurisdiction. 28 U.S.C. § 158(a). Appellant requests oral argument as provided by Bankruptcy Rule 8012. After examination of the briefs and record, this court concludes that oral argument is not needed. The facts and legal arguments are adequately presented in the papers and the decisional process would not be significantly aided by oral argument. See Bankr.R. 8012.
Appellees, Jerome and Charlotte LaFond, originally resided in Medina, Minnesota, where they raised beef cattle. During that time, Jerome LaFond also worked as a police officer for city of Medina. In April, 1981, the LaFonds sold their farm and entered into a contract for deed for the purchase of farm property in Aitkin County, Minnesota. They moved and began raising beef and dairy cattle and crop farming. Jerome LaFond again obtained part-time work as a police officer, this time for the city of McGregor. In November, 1983 the LaFonds lost the Aitkin property when the contract for deed was cancelled. They currently rent land on which they raise beef cattle jointly owned by themselves and by Charlotte LaFond's mother.
On February 6, 1984, the LaFonds filed a voluntary petition in bankruptcy under Chapter 7 of the Bankruptcy Code. Appellant PCA had made an operating loan to the LaFonds in April, 1981, secured by a lien 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. Debtors seek to avoid this lien on certain items of property valued at $10,475, which they claim constitute tools or implements of the trade of farming and are thus exempt under 11 U.S.C. § 522(f)(2)(B). PCA holds a duly perfected, nonpossessory, non-purchase money security interest in all of the items of property for which exemption is claimed.
The present action involves debtors' Motion for Lien Avoidance. A hearing was held on October 24, 1985 before Bankruptcy Judge Gregory F. Kishel. In a decision dated December 20, 1984, debtors' motion was granted. See In Re LaFond, 45 B.R. 195 (Bankr.D.Minn.1984). PCA now appeals this decision, contending: 1) the evidence fails to support a conclusion that farming is the debtors' primary occupation; 2) the items of equipment in dispute were not "used" in the debtors' trade; and 3) large items of farm equipment are not properly the subject of lien avoidance proceedings under 11 U.S.C. § 522. After reviewing the file, briefs, and proceedings herein, this court affirms the decision of the Bankruptcy Court.
The findings of fact of a bankruptcy judge must be upheld unless "clearly erroneous." Bankr.R. 8013. This court is, however, free to reach its own conclusions as to matters of law. E.g., In Re Newcomb, 744 F.2d 621, 625 (8th Cir.1984); In Re Schwens, Inc., 20 B.R. 638, 640 (D.Minn.1982).
Appellant PCA first contends the Bankruptcy Court erred in finding that debtors' primary occupation was farming because no evidence was introduced to show that Charlotte LaFond worked on the farm. Concededly, Charlotte LaFond did not testify at the hearing and her husband did not testify as to her activities around the farm. Debtors note, however, that during an earlier hearing before the same bankruptcy judge, testimony was taken regarding Charlotte LaFond's farming activities. The record of this previous hearing is not now before this court and is not properly at issue here. Nevertheless, with nothing in this record to suggest otherwise, it is entirely reasonable to assume that Charlotte LaFond must have worked on the farm. In Re Pommerer, 10 B.R. 935, 942 (Bankr.D.Minn.1981). The Bankruptcy Court's finding that Charlotte LaFond is also engaged in the farming trade is thus not clearly erroneous.
PCA next contends that the Bankruptcy Court erred in finding that the LaFonds' primary occupation is farming because they fail to qualify as farmers under 11 U.S.C. § 101(17) which reads:
(17) "farmer" means person that received more than 80 percent of such person\'s gross income during the taxable year of such person immediately preceding the taxable year of such person during which the case under this title concerning such person was commenced from a farming operation owned or operated by such person.
The LaFonds' income tax returns for the past three years indicate that they have failed to make a net profit from farming and that Jerome LaFond's non-farming employment was their major source of support for these years. PCA urges that because debtors did not meet the 80 percent test set out in 11 U.S.C. § 101(17), they do not qualify as farmers under the Bankruptcy Code.
For several reasons, however, this restrictive definition should not be applied in this case. Requiring farmers to meet the 80 percent test would unfairly preclude many debtors legitimately engaged in farming from utilizing the lien avoidance remedy. Moreover, § 101 provides definitions for only five occupations or trades, evidence that Congress did not intend these definitions to be all inclusive and applicable in all cases. The language of § 522 does not expressly require application of § 101 definitions to lien avoidance procedures. Legislative history notes that the purpose of the definition of farmer contained in § 101(17) is "for use in the sections of the proposed bankruptcy code prohibiting involuntary cases against farmers." H.R. Rep. No. 595, 95th Cong., 2d Sess. 311, reprinted in 1978 U.S. Code Cong. & Ad. News 5963, 6268 (emphasis added). In this case, the Bankruptcy Court concluded that "Congress intended that the definition of `farmer' at § 101(17) was to be applied only where the work `farmer' itself was used in the Bankruptcy Code as, for instance, in 11 U.S.C. § 303(a)." In Re LaFond, 45 B.R. at 200. This court agrees and refuses to apply such a restrictive definition without express direction from Congress.
A more realistic definition should take into account the intensity of a debtor's past farming activities and the sincerity of his intentions to continue farming, as well as evidence that debtor is legitimately engaged in a trade which currently and regularly uses the specific implements or tools exempted and on which lien avoidance is sought. See Middleton v. Farmers State bank of Fosston, 41 B.R. 953, 955 (D.Minn. 1984); In Re Yoder, 32 B.R. 777 (Bankr.W. D.Pa.1983). In this light, there is ample evidence to support finding that debtors are farmers. They have been engaged in farming at least since 1981 and have invested heavily in land and equipment. Their intent to continue farming is evidenced by Jerome LaFond's testimony to that effect and by the fact that when forced to move from their foreclosed farm in 1983, they moved to another piece of property suitable for cattle raising. Jerome LaFond's part-time employment as a police officer does not necessarily destroy his primary occupational pursuit. See In Re Pommerer, 10 B.R. at 942. Many farmers in his area must work on the side to supplement their farm income. The record amply supports finding that debtors consider farming their primary occupation that they intend to continue farming in the future.
PCA next contends that these items of equipment were not "used" in the debtors' trade. This argument has little merit. The items of equipment on which the LaFonds seek to avoid PCA's lien were found by the Bankruptcy Court to be tools or implements commonly understood as used by farmers in the trade of beef cattle, dairy and crop farming. It matters little that debtors do not currently use this equipment or that they are storing these items on another's property. The evidence shows that they have used this equipment extensively in the past and that they intend to use it in their future farming operations.
Finally, PCA argues that large items of farm equipment were never meant to be considered "implements" or "tools of the trade" within the meaning of 11 U.S.C. § 522(f)(2)(B). In enacting the Bankruptcy Code, Congress provided for the exemption of certain property which would otherwise be distributed to creditors. In this case, debtors seek to avoid a lien on certain property under § 522(f)(2)(B), which provides in pertinent part:
Some courts have held that § 522(f)(2)(B) applies only to hand tools and small implements with nominal commercial resale value: In Re Sweeney, 7 B.R. 814 (E.D.Wisc. 1980); In Re O'Neal, 20 B.R. 13 (Bankr.E. D.Mo.1982); In Re Yparrea, 16 B.R. 33, 35 (Bankr.D.N.M.1981). Other courts have allowed tractors and large farm implements to be subject to the avoiding power of § 522(f)(2)(B): Augustine v. United States, 675 F.2d 582 (3d Cir.1982); In Re Zweibahmer, 25 B.R. 453 (N.D.Ia.1982); In Re Liming, 22 B.R....
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