In re Sedillo

476 B.R. 619

In re Pamela Sue SEDILLO, Debtor.

No. 11–31982 MER.

United States Bankruptcy Court, D. Colorado.

June 5, 2012.

Stephen E. Berken, Denver, CO, for Debtor.

John Smiley, Denver, CO, for Trustee.

ORDER

MICHAEL E. ROMERO, Bankruptcy Judge.

This matter comes before the Court on the Objection to Property Claimed as Exempt (Docket No. 13) (the “Objection”) filed by the Chapter 7 Trustee in this case, John Smiley (the “Trustee”) and the Response to the Trustee's Objection (Docket No. 19) filed by the Debtor, Pamela Sue Sedillo (the “Debtor”). The instant matter arose from the Debtor's claimed “tool of the trade” exemption for a motor vehicle used by the Debtor to transport foster children to necessary everyday activities. The issue before the Court is whether foster parenting may be classified as a “gainful occupation” under Colo.Rev.Stat. § 13–54–102(1)(i), based upon the facts of this case. The Court has considered the evidence and the legal arguments presented by the parties at the hearing held April 24, 2012, and hereby makes the following findings of fact and conclusions of law.

JURISDICTION

The Court has jurisdiction over this matter under 28 U.S.C. §§ 1334(a) and (b) and 157(a) and (b). This is a core proceeding under 28 U.S.C. § 157(b)(2)(A) and (B), as it concerns the administration of the estate, and allowance or disallowance of exemptions from the estate.

BACKGROUND FACTS

The Debtor filed for relief under Chapter 7 of the Bankruptcy Code on September, 15, 2011 (the “Petition Date”). Prior to her petition, the Debtor was, and continues to be, engaged in caring for minor children as a foster parent. Her duties in this role include transporting the foster children to school, medical appointments, social activities and other destinations. The size of her household fluctuates from month to month, but she cares for her one biological child, her two adopted children, and between two and four foster children at any given time.

On the Petition Date, the Debtor was caring for two foster children approved and placed with her through a county foster care program. Through the program, the Debtor receives approximately $3,434 per month in reimbursement funds to defray the cost of caring for foster children.¹ There is no evidence in the record indicating the reimbursement funds the Debtor receives in connection with the foster care program constitute compensation. It is undisputed the reimbursement funds are not income and the funds are not included in the Debtor's taxable income.² The Debtor testified she is not reimbursed for mileage incurred for transporting the foster children. The Debtor generates gross income in the approximate amount of $1,782.54 per month through her employment as a cosmetologist.

On her initial Schedule C dated September 15, 2011, the Debtor claimed a tool of the trade exemption pursuant to Colo.Rev.Stat. § 13–54–102(1)(i), in the amount of $9,175 ³ for her only vehicle, a 2003 Nissan Murano. ⁴ The Debtor indicates the vehicle is used to transport foster children and is necessary for the Debtor's duties as a foster parent.⁵ On October 24, 2011, the Trustee timely filed an Objection disputing this claimed exemption.

The Debtor argues her role parenting foster children is a “gainful occupation” and, therefore, her motor vehicle is a tool of the trade within the scope of the exemption statute. The Debtor asserts her vehicle is a tool used and kept for the purpose of carrying on the “business of caring for minor children ( i.e., being a foster parent)....” ⁶ While the Debtor admits she is involved in the foster child program to provide the children with a normal home and not to make a profit, she characterizes caring for her foster children as her business or occupation. She argues occupations falling within the exemption statute do not need to generate profit or reportable income to be considered “gainful” occupations, nor does “gainful” require a taxable event.

By contrast, the Trustee argues no legal authority supports the Debtor's propositionthat foster parenting (or parenting in general) is a gainful occupation qualifying a motor vehicle used to transport children for a tool of the trade exemption. The thrust of the Trustee's argument is that foster parenting is not a “gainful occupation” because the Debtor does not earn a profit from her role as a foster parent. By analogy, the Trustee argues a parent receiving child support may not claim parenting is a gainful occupation. In addition, it is undisputed the Debtor works as a cosmetologist to earn income. As a foster parent, she is not an employee of the State, and pays no taxes on the reimbursement funds received. The Trustee also points out the Debtor could claim a regular motor vehicle exemption for the vehicle at issue, rather than claiming a vehicle exemption to which no other parent is entitled.

DISCUSSION

A. The Colorado “tool of the trade” exemption as applied to motor vehicles.

Colo.Rev.Stat. § 13–54–102 exempts various categories of property from levy and sale under a writ of attachment or a writ of execution. Colo.Rev.Stat. § 13–54–102(1)(i) provides a specific exemption for:

[t]he stock in trade, supplies, fixtures, maps, machines, tools, electronics, equipment, books and business materials of any debtor used and kept for the purpose of carrying on any gainful occupation in the aggregate value of twenty thousand dollars; except that exempt property described in this paragraph (i) may not also be claimed as exempt pursuant to paragraph (j) of this subsection (1).⁷

With respect to the “tools of the trade” exemption, the Court has previously explained:

the purpose of the Bankruptcy Code and the Colorado exemption statutes are to provide a debtor with a “fresh start.” The “fresh start” includes a discharge of debts and a means by which a debtor can continue on in a trade or profession—i.e., preservation of essential “stock in trade, supplies, fixtures, maps, machines, tools, equipment, books, and business materials ...” See, e.g., In re Keyworth, 47 B.R. 966, 974 (D.Colo.1985).⁸

Colorado exemption laws are to be liberally construed in favor of debtors.⁹ Based upon the facts of a specific case, a debtor may claim a motor vehicle as exempt under the tool of the trade exemption versus the standard motor vehicle exemption so long as the vehicle qualifies for the exemption.¹⁰ A debtor qualifies for the tool of the trade exemption if the debtor's motor vehicle is used and kept for the purpose of carrying on any gainful occupation.¹¹ The Court recognizes there are several prior decisions from this district permitting debtors to claim a “tool of the trade” exemption for a motor vehicle.

Following the year 2000 amendments to Colorado's exemption statute, in In re Van Winkle, Judge Donald E. Cordova held a debtor was entitled to claim an exemption for his truck as a tool of the trade because the “truck is maintained and used in the Debtor's business and is impractical for any other purpose. The Debtor could not carry on his occupation as a contract truck driver without the Kenworth truck.” ¹² However, not all motor vehicles fall within the scope of this exemption. As noted by Judge A. Bruce Campbell of this Court, “[t]he mere use of a vehicle for transportation to and from work is not “use for carrying on a gainful occupation,” as intended by the Colorado legislature in the exemption of section” 13–54–102(1)(i).¹³

In Black, Judge Campbell analyzed the issue of use of a motor vehicle for carrying on a gainful occupation on a continuum. On one end, he placed the facts of Van Winkle. A truck driver using his rig in his business may claim his truck as a tool of the trade. On the other end, he provided the example of a lawyer hauling his briefcase in his BMW as a use of a motor vehicle which would not qualify for the exemption.¹⁴ Judge Campbell went on to hold a self-employed building contractor was entitled to claim a tool of the trade exemption for his pick-up truck. The debtor's use of the pick-up truck was close enough to the trucker's end of the continuum and far enough from the lawyer's end of the continuum to allow the vehicle to qualify for the exemption.¹⁵

Similarly, in the case of In re Sackett, Judge Sidney B. Brooks of this Court determined a debtor's car was a tool of the trade in a case where the debtor was a nurse and health care consultant who was required to travel as part of her employment for a company.¹⁶ Judge Brooks examined whether the debtor's vehicle might be considered a “tool of the trade” under the applicable exemption statute by addressing the following five questions:

1. Is the vehicle “kept for the purpose of carrying on any gainful occupation?”

2. Is there a suitable alternative available to the debtor for the purpose of carrying on the debtor's gainful occupation?

3. Is there evidence of “actual use” of the vehicle by a debtor for his or her gainful occupation?

4. What is the debtor's prior employment history, present employment situation, and future prospects of employment?

5. Is a “fresh start” attainable without the motor vehicle? ¹⁷

Thus, under Sackett, the issue turns on whether the vehicle is used conventionally for personal use or used for the purpose of carrying on any gainful occupation or business.¹⁸

B. Based upon the facts of this case, the Debtor's role as a foster parent does not qualify as a “gainful occupation” under the Colorado exemption statute.

In the case at hand and as a matter of first impression, this Court must address the plain language of the exemption statute because the Debtor puts the phrase “gainful occupation” squarely at issue by arguing foster parenting is a gainful occupation under Colo.Rev.Stat. § 13–54–102(1)(i). The Trustee argues the Debtor's claim of exemption for her motor vehicle does not meet the definition of the statute. The Court agrees.

Neither the Bankruptcy Code nor the Colorado statute define the term “gainful occupation.” As a matter of...