In re Sharp, 12–21611–SBB.

490 B.R. 592

In re Melvin Eugene SHARP, Debtor. Last four digits of SS# : XXXX.

No. 12–21611–SBB.

United States Bankruptcy Court, D. Colorado.

Feb. 22, 2013.

Douglas E. Larson, Grand Junction, CO, pro se.

Michael Jude, JudeLaw, LLC, Denver, CO, for Debtor.

ORDER REGARDING OBJECTION TO EXEMPTIONS AND NOTICE OF EVIDENTIARY HEARING

SIDNEY B. BROOKS, Bankruptcy Judge.

THIS MATTER came before the Court on November 6, 2012, for a non-evidentiary hearing and oral argument related to the Objection to Exemptions filed by Douglas E. Larson, Chapter 7 Trustee (“Trustee”) on August 20, 2012,¹ and the Response thereto filed by Melvin Eugene Sharp, pro se (“Debtor”), on September 7, 2012.² Following a November 6, 2012, hearing, the Court ordered the parties to submit briefs on the legal issues. Both the Trustee and Debtor's counsel each filed a brief on November 26, 2012. ³ The Court, having reviewed the pleadings, the case file, and applicable law, makes the following findings of fact, conclusions of law, and enters the following Order.

I. Summary

The Debtor's principal occupation for the past twenty-seven (27) years has been as an employee of a grocery story in southwestern Colorado. In December of 2009, the Debtor decided to become an entrepreneur and start a hunting and fishing guide business.

On June 1, 2012, the Debtor filed for relief under Chapter 7 of the Bankruptcy Code. Debtor stated in his Bankruptcy Schedules that his occupations included both his hunting and fishing guide business and his employment at the grocery store. Moreover, the Debtor claimed his firearms, sporting goods, ATV, and boats (as specified in section III herein) were tools of the trade as he used them in his guide business.

The Trustee contends that, because the Debtor does not make a profit from his three-plus-year old guide business, the business does not constitute a “gainful occupation” and, therefore, he may not take the “tools of trade” exemption under Colo.Rev.Stat. § 13–54–102(1)(i) (also referred to herein as “Tools of Trade Exemption”). This Court concludes that, although the Debtor does not make a profit at this time, his guide business may be considered a “gainful occupation,” which may warrant the use of the Tools of Trade Exemption. Nevertheless, the Court concludes that this Court must conduct an evidentiary hearing to consider the factors addressed herein, which may, or may not, validate and otherwise support a finding and a conclusion of “gainful occupation” and, thus, the appropriateness of the Tools of Trade Exemption.

II. Jurisdiction

This 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), because this matter concerns the administration of the estate and allowance or disallowance of exemptions from the estate.

III. Background

At the non-evidentiary hearing on November 6, 2012, the parties acknowledge that the facts were, for the most part, not contested. The following background is based on the facts as presented to the Court.

On June 1, 2012, the Debtor filed for relief under Chapter 7 of the Bankruptcy Code. The Debtor indicates in his Bankruptcy Schedules and Statement of Financial Affairs that he is employed as a Customer Relations Manager at Kroger Company in a City Market store. He also states in his Schedules and Statement of Financial Affairs that he owns and is employed by Aspen Place Outfitters, LLC (“Aspen Place”), a hunting and fishing guide business.

At the time of filing, Debtor stated in his Statement of Financial Affairs that Aspen Place had lost $8,868.00 in 2011, and $2,711.82 in 2012 year-to-date.⁴ Meanwhile, Debtor had income of $35,511.00 from Kroger Company in 2011 and $12,611.17 year to date in 2012.

The Debtor filed a Schedule B and a respective Schedule C reflecting certain assets and exemptions related to Aspen Place. The items at issue, which were included in Schedule B and related to the business, and claimed exempt in Schedule C, included:

Two muzzle loader rifles

.22 Marlin rifle

.22 Ruger handgun

Two .22 Ruger rifles

.243 Savage rifle

7 mm Remington rifle

.357 Tarus handgun

.44 Magnum handgun

12 gauge Churchill shotgun

12 gauge shotgun—broken ejector

20 gauge Remington pump shotgun

1963 Starcraft 16 foot boat

1964 Motorcaft 14 foot Aluminum boat

1978 Wilderness Trailer—used as his home while working out of town

1997 Polaris Sportsman 400 ATV

2001 utility trailer

Two horse trailers

fishing poles

The total value listed by the Debtor for the above assets is $5,414.50.

The Debtor did not supply any documentary evidence regarding income from Aspen Place in 2010 in his Statement of Financial Affairs, but he did supply a handwritten Profit and Loss statement demonstrating that Aspen Place also lost $1,264.00 for 2010.⁵

The Debtor states in his Schedule I that he has average monthly income from Aspen Place in the sum of $232.04 a month. In Schedule J, Debtor shows that he has average monthly expenses from Aspen Place in the sum of $594.71. Consequently, his average monthly losses from Aspen Place, as reflected in his schedules, is $362.67 per month.

The Debtor asserts that the business is improving and that a profit is expected at some point in the future. The Trustee asserts that Aspen Place is merely a “hobby” and not a “gainful occupation.”

IV. Issues

There are two issues before the Court:

A. May a debtor claim assets exempt under the Tools of Trade Exemption with respect to an occupation that is not his or her principal occupation at the time of filing bankruptcy?

B. In order to claim an exemption under the Colorado Tools of Trade Exemption, must a debtor's “gainful occupation” be “profitable?” ⁶

As discussed below, the Court concludes that (a) a debtor may claim assets exempt under the Tools of Trade Exemption with respect to an occupation that is not his or her principal occupation at the time of filing bankruptcy and (b) a debtor's “gainful occupation” need not be “profitable” at the time of filing. Because this Court can envision abuses that may arise by these conclusions, this Court sets out two non-exclusive tests herein to help determine the validity of claimed “tools of trade.” The first test looks to the validity of the claimed exemption in context of the non-principal occupation. The second test is designed to help ascertain what may constitute “gainful occupation” so as to validate the claimed exemption.

V. DiscussionA. Burdens of Proof

The matter presented here largely hinges on the parties' respective burdens of proof. Under the Bankruptcy Code, a claimed exemption is presumptively valid unless it is objected to.⁷ Once the exemption is claimed, the party objecting to a claimed exemption has the burden of proving that the exemption is not properly claimed.⁸ The burden of persuasion remains with the objecting party.⁹ However, if the objecting party can produce evidence to rebut the exemption, then the burden of production shifts to the debtor to come forward with unequivocal evidence to demonstrate that the exemption is proper, although the burden of persuasion will remain with the objecting party.¹⁰

In this case, the parties do not dispute the facts set forth above. On the face of the Debtor's Schedules and Statement of Financial Affairs, the Debtor is pursuing two occupations. His principal occupation being a Customer Relations Manager with Kroger Company and his secondary occupation being owner of a hunting and fishing guide company. The parties agree that the question is a matter of law premised on those facts. The Court, however, after having reviewed the parties' pleadings and the case authority on this subject, concludes that the Court must assess (1) the credibility of the Debtor and (2) his intentions with respect to the second occupation and (3) the history and verifiable activity of the claimed second occupation.¹¹ Consequently, an evidentiary hearing is necessary.

B. The Colorado Tools of Trade Exemption

1. Statutory Language

Colo.Rev.Stat. § 13–54–102(1)(i) provides that a debtor may exempt:

The stock in trade, supplies, fixtures, maps, machines, tools, electronics, equipment, books, and business material of any debtor used or kept for the purpose of carrying on any gainful occupation in the aggregate value of twenty thousand dollars ... ¹²

The Constitution of the State of Colorado mandates that the Colorado legislature pass liberal exemption laws.¹³Consequently, exemption laws are also to be liberally construed by the courts in favor of debtors.¹⁴ In interpreting the exemption statutes, the Court must “ ‘ascertain and give effect to the intent of the legislature,’ and that task begins with the ‘language of the statute itself.’ ” ¹⁵ When the language is clear and unambiguous, the Court need not resort to legislative history or other rules of statutory construction.¹⁶ Moreover, the Court must not only look to the statute's plain language to effectuate the intent of the General Assembly, but, the Court must also consider the statutory language “considered within the context of the statute as a whole.” ¹⁷

2. The Plain Meaning of the Word “Any”

The Tools of Trade Exemption specifies that the exemption is available to “any debtor” and “any gainful occupation.” It is an encompassing and expansive, not limiting, term. The Court concludes that “any” is clear and unambiguous. Specifically, the term “any” is defined as:

1: one or some indiscriminately of whatever kind:

a: one or another taken at random

b. EVERY—used to indicate one selected without restriction

2: one, some, or all indiscriminately of whatever quantity:

a: one or more—used to indicate an undetermined number or amount

b. ALL—used to indicate a maximum or whole

3: a: unmeasured or unlimited in amount, number, or extent

b: appreciably large or extended ¹⁸

The term “any” is not restrictive or constraining. That is, the term “ any debtor” does not limit the Tools of Trade Exemption to only one debtor...