Opinion
Bankruptcy No. 99-02428-C Chapter 13; Adversary No. 00-9050-C
July 27, 2000
ORDER RE: EXEMPT STATUS OF HOMESTEAD AND ENFORCEABILITY OF MORTGAGES
On June 15, 2000, the above captioned matter came on for hearing pursuant to assignment. Plaintiffs/Debtors John and Debra Wagner were represented by attorney Thomas Fiegen. Defendant Chelsea Savings Bank (the "Bank") was represented by attorney H.Raymond Terpstra II. After the presentation of evidence and argument, the Court took the matter under advisement. The time for filing briefs has passed and this matter is ready for resolution. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B),(K).
STATEMENT OF THE CASE
Debtors seek a determination of the validity of the Bank's mortgages against their homestead. They assert the mortgages are unenforceable due to the absence of the homestead exemption waiver language required by Iowa Code sec. 561.22. The Bank asserts that Iowa Code sec. 561.22 does not apply to mortgages. Alternatively, the Bank asserts the mortgages are enforceable under Iowa Code sec. 561.21(2). It also argues that Debtors' outbuildings are not exempt pursuant to Iowa Code sec. 561.3.
FINDINGS OF FACT
Debtors live on an acreage outside the city limits of Chelsea, Iowa which is between four and five acres in size. The acreage contains a house and six outbuildings including a garage, a corn crib, sheds, and a barn. Mr. Wagner testified that the outbuildings are worth more than $300 each. Debtors conduct farming operations on the acreage. Originally, they raised hogs and calves and grew row crops. Presently, Debtors have a cattle herd consisting of 22 cows and 18 calves, and they raise hay on the acreage. Debtors also lease 300 acres off-site for row crops.
Debtors' relationship with Chelsea Savings Bank began in 1987 when they bought their acreage. To purchase the acreage, Debtors obtained a $60,000 mortgage from the Bank. Subsequently, Debtors refinanced with Farmers Savings Bank in Garwin, paying the Bank's mortgage in full. Facing foreclosure by the Garwin bank, Debtors returned to Chelsea Savings Bank to refinance.
The Bank granted Debtors an $82,000 mortgage on August 28, 1996. This mortgage was subject to an FSA guarantee. The FSA agreement indicated that Debtors were currently farming and it required them to raise livestock on their acreage. Bank's Exhibit 3. Debtors used the mortgage funds to pay operating expenses and mortgage debts owed to the Garwin bank. This mortgage was secured by Debtors' acreage and a blanket lien on their farm products and equipment. Bank's Exhibit 5. The total amount due on the first mortgage, as of June 15, 2000, was $87,183.15.
The Bank granted Debtors a $38,000 second mortgage on January 27, 1997. Debtors used the money as a farm operating loan. Debtors' acreage and a blanket lien also secured the second mortgage. Bank's Exhibit 6. The total amount due on June15, 2000 was $23,539.95.
The 1996 and 1997 mortgages are on identical forms. Paragraph 23 of both mortgages addresses "Waivers". It states: "Borrower relinquishes all right of dower and waives all right of homestead and distributive share in and to the property. Borrower waives any right of exemption as to the Property." This paragraph is in the same size type as the remainder of the document and is not set out in bold.
CONCLUSIONS OF LAW
The homestead right in Iowa is peculiarly favored. Gustafson v. Fogleman, 551 N.W.2d 312, 314 (Iowa 1996). "Iowa provides an extraordinarily expansive interpretation of the homestead exemption consistent with the societal purposes stated in the case law." In re Knode, No. 97-01814-C, slip op. at 3 (Bankr.N.D.Iowa Nov. 24, 1997). Courts liberally construe homestead exemptions in favor of debtors. See, e.g., In re Johnson, 880 F.2d 78, 83 (8th Cir. 1989); In re Linman, No. 98-03770-S, slip op. at 3 (Bankr.N.D.Iowa Aug. 20, 1999). However, the Court must take care not to depart from the express language of an exemption statute. In re Hahn, 5 B.R. 242, 244 (Bankr.S.D.Iowa 1980).
A homestead may be sold to satisfy debts in limited circumstances. Iowa Code sec. 561.21(2) allows the sale of a homestead to satisfy debts created by written contracts which expressly stipulate that the homestead is liable. This may occur only if some deficiency remains after exhausting debtor's other property pledged on the same contract. Iowa Code sec. 561.22 provides further protection of homestead rights for agricultural land, stating:
If a homestead exemption waiver is contained in a written contract affecting agricultural land as defined in section 9H.1, or dwellings, buildings, or other appurtenances located on the land, the contract must contain a statement in substantially the following form, in boldface type of a minimum size of ten points, and be signed and dated by the person waiving the exemption at the time of the execution of the contract: "I understand that homestead property is in many cases protected from the claims of creditors and exempt from judicial sale; and that by signing this contract, I voluntarily give up my right to this protection for this property with respect to claims based upon this contract."
For sec. 561.22 to be relevant, Debtors must use their homestead for agricultural purposes. Iowa Code sec. 9H.1(2) defines agricultural land as "land suitable for farming." Iowa Code sec. 9H.1(11) defines farming as "the cultivation of land for the production of agricultural crops . . ., grazing or production of livestock." This term has been discussed by the Iowa Court of Appeals in Qualley v. State Federal Savings Loan, 487 N.W.2d 353 (Iowa App. 1992). In Qualley, plaintiffs brought an action seeking to set aside a forfeiture of a real estate contract. Id.at 354. The court decided whether a portion of the land contained in the real estate contract was agricultural and subject to the farm mediation statute. Id. The court held that the land in question was agricultural land because it was used for raising alfalfa and taxed subject to the agricultural tax credit. Id. at 357.
Debtors use their acreage for raising livestock and growing hay. The definition of farming includes raising livestock and producing crops. Thus, Debtors are engaged in farming on their acreage which is land suitable for farming. The acreage is agricultural land and Iowa Code sec. 561.22 applies.
Sec. 561.22 was enacted in 1986 in response to the farm crisis in Iowa. 1986 Iowa Acts ch. 1214 § 8. The purpose of this legislation was to give extra protection to agricultural land. This heightened protection for agricultural land is evidenced by the 1987 amendment, about which the Iowa Senate stated:
This bill provides that only when agricultural land is affected by contract with a clause waiving a homestead exemption, must a statement explaining the consequences of the waiver be included in the contract and signed by the person waiving the exemption. A written contract affecting land that is not agricultural may be enforced as any other contract.
1987 Iowa Acts ch. 67 § 1. The legislature expressly intended to treat contracts affecting agricultural land differently from contracts affecting non-agricultural land. To waive the homestead exemption in a contract affecting agricultural land, the contract must contain the homestead exemption waiver language required by sec. 561.22.
The Bank contends that a mortgage does not fall under sec. 561.22 because a mortgage is not a contract. Mortgages are subject to the rules of contractual interpretation and construction. Freese Leasing, Inc. v. Union Trust Savings Bank, 253 N.W.2d 921, 924 (Iowa 1977) (holding that the object of interpreting a mortgage is "to learn the meaning of the words used in the contract"). The U.S. Supreme Court refers to mortgages as "mortgage contracts."See, e.g., Nobleman v. American Savings Bank, 508 U.S. 324 (1993); Fidelity Fed. Savings Loan Ass'n v. de la Cuesta 458 U.S. 141 (1982); Home Bldg. Loan Ass'n v. Blaisdell, 290 U.S. 398 (1934). Moreover, three cases discussing sec. 561.22 assume that sec. 561.22 applies to mortgages. West Des Moines State Bank v. Mills, 482 N.W.2d 432, 433-34 (Iowa 1992); Peoples Bank Trust Co. v. Lala, 392 N.W.2d 179, 190-91 (Iowa App. 1986); In re Morris, No. L88-00597C, slip op. at 5 (Bankr.N.D.Iowa Jan. 19, 1989). Finally, the security agreements incorporated into the mortgages are contracts. See, e.g., In re Phillips, 882 F.2d 302, 305 (8th Cir. 1989); In re Long, 774 F.2d 875, 882 (8th Cir. 1985).
A "contract" is defined as "an agreement between two or more parties creating obligations that are enforceable or otherwise recognizable at law." Black's Law Dictionary 318 (7th ed. 1999). The Bank's mortgages encompass the characteristics of a contract. The Bank and Debtors agreed to the mortgages and each side incurred obligations. The Bank loaned money to Debtors in exchange for security interests in Debtors' real and personal property. Further, case law refers to mortgages as contracts and applies sec. 561.22 to mortgages. The only conclusion which is tenable is that mortgages are contracts. The Bank's mortgages affect Debtors' agricultural land. Therefore, sec. 561.22 is applicable to this case as the mortgages are contracts affecting agricultural land.
Sec. 561.22 has been addressed in three cases in Iowa, once in the Bankruptcy Court and twice in the state courts. In Morris, No. L88-00597C, slip op. at 5, this Court discussed the lack of the statutorily mandated homestead waiver language in promissory notes. A mortgage executed in 1983 contained a homestead exemption waiver, and the promissory notes referenced the 1983 mortgage. Id. at 5-6. The court held the mortgage was valid because sec. 561.22 did not apply to mortgages executed before 1986, the effective date of the statute. Id. at 8.
In West Des Moines State Bank v. Mills, 482 N.W.2d 432, 433-34 (Iowa 1992), the Iowa Supreme Court held sec. 561.22 applied only to agricultural land. It did not apply to defendants who took out a commercial loan encumbered by a mortgage on non-agricultural property. Mills, 482 N.W.2d at 434. The court was satisfied that the mortgage on non-agricultural land contained a sufficient homestead exemption waiver. Id. at 434. The court interpreted sec. 561.22 as intending to remind the person signing the waiver that the homestead exemption is important. Id. Mills does not provide guidance how sec. 561.22 applies in the present context.
In Peoples Bank Trust Co. v. Lala, 392 N.W.2d 179, 190-91 (Iowa App. 1986), the court discussed the seriousness of the homestead waiver in agricultural property mortgages. It stated that "Peoples Bank had a duty to disclose the full legal effects of the mortgage on the Lala homestead and failed to present clear and convincing evidence to rebut the presumptive invalidity of the note and mortgage." Id. at 191. The court also discussed Iowa Code sec. 561.22. Id. at 190 n. 2. In dicta, the court stated:
Section 561.22, which became effective May 30, 1986, further strengthens the longstanding special recognition which the legislature has given to the homestead. Section 561.22 was not in place at the time the trial court entered judgment against the Lalas. However, it codifies the concern we have that mortgages must make mortgagors fully aware of the legal effects of a note and mortgage on ordinarily exempt homesteads.
This interpretation of sec. 561.22 suggests that agricultural mortgages lacking the homestead exemption waiver language are presumptively invalid in Iowa.
A North Dakota case discussed the effect of a similar statute requiring a homestead waiver. Red River State Bank v. Reierson, 533 N.W.2d 683 (N.D. 1995). Debtors borrowed money to pay for farm operating expenses and granted the bank a mortgage on their homestead to secure the debt. Id.at 685. After failing to make payments on the mortgage, the bank began a foreclosure action. Id. at 685-86. Debtors asserted the bank did not comply with N.D.C.C. § 47-18-05.1(1), which states:
All mortgages on homesteads executed after June 30, 1987, which are not purchase money agreements must contain the following statement printed in a conspicuous manner and must be signed and dated by the person waiving the exemption at the time the contract is executed: "I understand that homestead property is in many cases protected from the claims of creditors and exempt from judicial sale and that, by signing this contract, I voluntarily give up my right to this protection for this property with respect to claims based upon this contract.
Id. at 686. The court held that by failing to strictly comply with the homestead waiver statute, the mortgage was unenforceable against debtors' homestead exemption. Id. at 688. Although the homestead waiver contained the exact language required by the North Dakota Statute, the waiver was not conspicuous. Id. at 687. Absent strict compliance with the homestead waiver statute, debtors did not knowingly waive their homestead exemption. Id.
The Iowa legislature passed sec. 561.22 to give extra protection to farmers and agricultural land. The legislature determined that contracts affecting agricultural land must contain the homestead exemption waiver language set out in sec. 561.22. For sec. 561.22 to have any practical effect, lack of compliance must result in the mortgage being unenforceable against the exempt homestead. To suggest any other outcome ignores the intent of the legislature or assumes that the legislature passed a law with no intended consequences. To give full effect to the legislative intent, sec. 561.22 requires strict compliance to obtain a valid homestead waiver in contracts affecting agricultural land.
In summary, the mortgages and security agreements entered into by Debtor and the Bank are contracts affecting agricultural land subject to the requirements of Iowa Code sec. 561.22. Neither of the Bank's mortgages contain the homestead exemption waiver language required by sec. 561.22. Consequently, Debtors did not waive their homestead exemption. Debtors properly claimed the homestead exemption in their bankruptcy schedules. The Bank's mortgages are unenforceable against Debtors' exempt homestead.
APPURTENANCES
The Bank argues that Debtors' outbuildings are not included in Debtors' exempt homestead. Iowa Code sec. 561.1 states a "homestead" embraces the house used as a home by the owner and may contain other appurtenances thereon, "habitually and in good faith used as part of the same homestead." Iowa Code sec. 561.3, titled "Dwelling and appurtenances", states:
[The homestead] must not embrace more than one dwelling house, or any other buildings except such as are properly appurtenant thereto, but a shop or other building situated thereon, actually used and occupied by the owner in the prosecution of the owner's ordinary business, and not exceeding three hundred dollars in value is appurtenant thereto.
The Iowa Supreme Court considered whether farm buildings were appurtenances included in a homestead exemption in In re Sueppel's Estate, 124 N.W.2d 154, 156 (Iowa 1963). The Court found that farm buildings including a barn, corn crib, machine shed, feed house and farrowing house were correctly included in the exemption as appurtenant to the use of the farm as a homestead. Id.at 157. It found that sec. 561.3 addressing exemption of an appurtenant building used in business was not applicable where the appurtenant buildings are used as part of a farm homestead. Id.
In Shaffer Bros. v. Chernyk, 107 N.W. 801, 802 (Iowa 1906), the court stated that improvements included in the homestead exemption as appurtenances are those necessary for the convenience of and suitableness for homestead occupation. This is part of the historical right that an owner may maintain a homestead in a reasonable manner for its capacity and convenience as a home for the family. Ebersole v. Moot, 84 N.W. 696, 697 (Iowa 1900).
The court in In re Sears, 246 B.R. 881, 883 (Bankr.S.D.Iowa 2000), recently considered whether buildings the debtors used in their business were included as appurtenances to their homestead. The court distinguishes Sueppel's Estate on its facts. Id.at 888. In Sears, the debtors claimed one-half acre within city limits exempt, including buildings the debtors used in their repair and salvage business. Id.at 883. In Sueppel's Estate, a widow was setting off 40 acres of farmland including her dwelling and farm buildings as a homestead. 124 N.W.2d at 155. The Sears court perceived there may be a distinction between farming as a self-sufficient way of life and farming as a business in application of the homestead statute. 246 B.R. at 888.
The question the Court must answer here is whether Debtors' outbuildings are properly appurtenant to their homestead as opposed to used and occupied by them in the prosecution of their ordinary business. Under secs. 561.1 and 561.3, if the outbuildings are reasonably necessary and suitable for Debtors' use of the acreage as a farm homestead, they are included in the homestead exemption. If they are, instead, used in Debtors' business, one of them is exempt to the extent of three hundred dollars in value.
The outbuildings are located on Debtors' four to five-acre tract. Debtors conduct farming operations on this acreage. They use the barn to operate their cattle operation, the corn crib to store grain, the sheds to store machinery and farm equipment, and the garage to store their cars. The garage is exempt as an appurtenance used habitually and in good faith as part of the exempt homestead dwelling. Debtors use the barn, corn crib and sheds to conduct farming operations. Under Sueppel's Estate, these buildings used for farming in connection with the homestead are exempt under sec. 561.1. The $300 limitation of sec. 561.3 is not applicable in this case because the buildings are necessary for the convenience and suitability of Debtors' homestead occupation on their acreage where they live and conduct farming.
CONCLUSION
Debtors' acreage is agricultural land and subject to sec. 561.22. The mortgages are contracts affecting agricultural land that require the statutory homestead exemption waiver. Neither of the mortgages contain the homestead exemption waiver required by sec. 561.22. Debtors did not waive their homestead exemption. Debtors' acreage, including the house and outbuildings, is exempt as their farm homestead.
WHEREFORE, for all the reasons set out herein, the Bank's mortgages are unenforceable against Debtors' exempt homestead.
SO ORDERED this 27th day of July, 2000.
ORDER RE MOTION TO AVOID LIENS
On June 15, 2000, the above captioned matter came on for hearing on Debtors' Motion to Avoid Liens. Debtors John and Debra Wagner were represented by attorney Thomas Fiegen. Creditor Chelsea Savings Bank ("the Bank") was represented by attorney H. Raymond Terpstra II. After the presentation of evidence and argument, the Court took the matter under advisement. The time for filing briefs has passed and this matter is ready for resolution. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(K).
STATEMENT OF THE CASE
Debtors seek to avoid the Bank's liens on exempt farm machinery. They assert the liens are avoidable pursuant to 11 U.S.C. § 522 (f)(2)(B) and are non-purchase money security interests. The Bank asserts purchase money security interests in items claimed exempt because the most recent loan enabled Debtors to repurchase the machinery at their auction.
FINDINGS OF FACT
Debtors received loans from Chelsea Savings Bank, secured by liens in their machinery and equipment. Prepetition, Debtors and the Bank agreed that Debtors would auction their farm equipment and machinery to pay operating loans. All of the machinery was to be sold. Debtors are listed as owners in all pre-auction advertising. Debtors' Exhibit B. The Bank did not take possession of the machinery at any time. The Bank does not allege that title to the machinery changed hands.
Before the March 27, 1999 auction, Debtors informed the Bank that they wanted to buy back some machinery. The Bank agreed and established prices that Debtors could bid on certain items at the auction. If a bid went higher than the set price, Debtors agreed to let the item of machinery sell. Debtors asked an acquaintance, Steve Schuette, to bid for them at the sale. Mr. Schuette was provided a list of the machinery and the prices set by the Bank. Mr. Schuette was successful in buying back five pieces of machinery on Debtors' behalf:
1) John Deere 4020 Tractor $ 8,500
2) 1990 Kiefer Trailer 2,600
3) Mustang skid loader SN4611 2,600
4) Gehl Rake SN4498 1,400
5) John Deere 40 Manure Spreader 1,050
Total $ 16,150
Bank's Exhibit 5.
On April 1, 1999, Debtors wrote a check to the auctioneer for $16,150 to pay for the machinery. On April 6, 1999, the auctioneer wrote a check to the Bank for the auction proceeds totaling $45,885.11. On April 7, 1999, the Bank loaned Debtors $16,150 to cover their check to the auctioneer. The loan was secured by the machinery Debtors repurchased at the auction. The new note had a different interest rate, amortization and maturity date than the original notes. Without the Bank loan, Debtors would have been unable to pay for the repurchased machinery.
The Bank presented testimony that it had a purchase money security interest in the Gehl Rake before the auction. Neither party is certain of the purchase money status of the Bank's security interests in other machinery before the auction. In their post-hearing brief, Debtors state they are not trying to avoid the Bank's lien on a baler and the Kiefer trailer. Their Motion states they seek to avoid liens on all pieces of equipment except a baler and a manure spreader.
From the record as a whole, the Court concludes that, of the machinery Debtors repurchased at the auction, Debtors concede the Bank's lien on the Kiefer trailer is not avoidable. Debtors also concede the Bank has a nonavoidable, purchase money security interest in the John Deere 336 square baler. There is insufficient evidence in the record to find the Bank holds a pre-auction, purchase money security interest in the Gehl rake. Thus, the Court will consider whether the Bank's loan for Debtors' purchase of their equipment at their auction gave rise to purchase money security interests. The specific items of equipment in controversy are: 1) John Deere 4020 Tractor, 2) Mustang skid loader SN4611, 3) Gehl Rake SN4498, and 4) John Deere 40 Manure Spreader.
PURCHASE MONEY SECURITY INTEREST
Debtors may avoid a lien if the lien impairs an exemption and it is a nonpossessory, nonpurchase money security interest in tools of the trade. 11 U.S.C. § 522(f)(1)(B)(ii). Debtors claim exempt the four above-listed items of machinery which they repurchased at their auction as tools of the trade which they use for farming. The Bank does not have a possessory interest in the machinery. In order for Debtors to avoid the Bank's liens, they must also be nonpurchase money security interests.
The Bankruptcy Code does not define "purchase money security interest." In re Hansen, 85 B.R. 821, 824 (Bankr.N.D.Iowa 1988). Therefore, Iowa law determines if one exists. Id.at 824. A purchase money security interest is a security interest "taken by a person who by making advances or incurring an obligation gives value to enable the debtor to acquire rights in or the use of collateral if such value is in fact so used." Iowa Code sec. 554.9107(b). Debtors bear the burden of proof on all lien avoidance issues. In re Indvik, 118 B.R. 993, 1005 (Bankr.N.D.Iowa 1990).
The Uniform Commercial Code does not define "`rights in collateral,' leaving it to the courts to do so." Equip. Finance Group, Inc. v. Traverse Computer Brokers, 973 F.2d 345, 348 (4th Cir. 1992). "Rights in the collateral" include debtor's possession and title to the goods. In re Standard Foundry Products, Inc., 206 B.R. 475, 478-79 (Bankr.N.D.Ill. 1997). The timing of the transaction must be examined to determine whether the Bank's loan was "so used". In Corim, Inc. v. Belvin, 414 S.E.2d 491 (Ga.Ct.App. 1991), the parties discussed a loan to purchase a cotton picker before an auction. Id.at 492. The debtor purchased the cotton picker at the auction and received the bank's loan ten days later. Id. The opinion holds that although ten days passed between the purchase and the loan, the loan and the purchase were a single transaction and a purchase money security interest was created.Id.; see also, 2 G. Gilmore, Security Interests in Personal Property 782 (1965) (stating "if the loan transaction appears to be closely allied to the purchase transaction, that should suffice").
ANALYSIS
To satisfy sec. 554.9107(b), the Bank's loan must enable Debtors to acquire rights in or the use of the machinery, and the loan must be "so used." To determine whether the Bank's loan was "so used," the timing of the Bank's loan must be examined. Debtors paid for the machinery six days before receiving the Bank's loan. After determining how much Debtors spent at the auction, the Bank issued a loan to Debtors. Debtors could not have paid the auctioneer without the Bank's loan. These facts establish that the Bank's loan and Debtors' check were "closely allied" and constituted one transaction. Therefore, the Bank's loan was "so used" as it enabled Debtors to pay for the machinery.
The Bank's loan created a security interest in Debtors' machinery. While the Bank's loan enabled Debtors to pay for the machinery and created a security interest, the loan gives the Bank a purchase money security interest only if Debtors acquired rights in or use of the machinery.
Debtors repurchased their machinery at their auction. The auctioneer sold the machinery as Debtors' agent. In re Rine Rine Auctioneers, Inc., 74 F.3d 848, 850 (8th Cir. 1996). The auctioneer did not acquire rights in Debtors' machinery. Therefore, Debtors could not acquire any rights from the auctioneer by paying him for the machinery. Mr. Schuette was the highest bidder on Debtors' machinery. He bid on behalf of Debtors, acting as their agent. Immediately after the auction, Debtors informed the auctioneer that Schuette had bid on their behalf. Schuette's involvement with Debtors' machinery ended at that time. Schuette did not intend to take and did not take possession of or title to Debtors' machinery at any time. Consequently, he did not acquire rights in Debtors' machinery. As Schuette acquired no rights, he had none to convey and Debtors could not acquire rights in the machinery from him.
In summary, the auction did not affect Debtors' rights in the machinery in any way. Debtors did not give up any rights in their machinery during the auction process, nor did the auctioneer or Mr. Schuette convey any rights to Debtors. Further, the machinery remained on Debtors' acreage. The Bank did not take possession or affect Debtors' use of the machinery. Debtors did not acquire use of the machinery as they had use of the machinery at all times, before and after the auction.
Although the Bank's loan enabled Debtors to pay the auctioneer for the machinery, it did not enable Debtors to acquire additional rights in or use of their machinery. Before the auction, the Bank did not have a purchase money security interest in the John Deere 4020 Tractor, Mustang skid loader SN4611, Gehl Rake SN4498, or John Deere 40 Manure Spreader. Through the auction, the Bank gained merely nonpurchase money security interests in these items. These liens impair Debtors' tools of the trade exemptions. Pursuant to § 522(f)(2)(B), Debtors may avoid the Bank's liens on these four items of machinery.
CONCLUSION
Pursuant to § 522(f)(1)(B), Debtors may avoid the Bank's nonpurchase money security interest in exempt tools of the trade. The Bank's liens on the John Deere 4020 Tractor, Mustang skid loader SN4611, Gehl Rake SN4498, and John Deere 40 Manure Spreader which Debtors repurchased at their auction are nonpurchase money security interests. To the extent these items are exempt, the liens are avoidable.
WHEREFORE, the Bank's liens on the items of machinery and equipment Debtors bought at their auction, the John Deere 4020 Tractor, Mustang skid loader SN4611, Gehl Rake SN4498, and John Deere 40 Manure Spreader, are nonpurchase money security interests.
FURTHER, to the extent Debtors have properly claimed these items exempt as tools of the trade, the Bank's liens are avoided.
SO ORDERED this 27th day of July, 2000.