Opinion
Case No. 99-40141
June 25, 1999
Richard D. Vance, Pocatello, Idaho, for Debtors.
L. D. Fitzgerald, Pocatello, Idaho, Trustee.
MEMORANDUM OF DECISION
I. Background
Debtors Arthur Gordon Powell and Lori Ann Powell filed for Chapter 7 relief on January 29, 1999. Debtors claimed a satellite system valued at $300 as exempt pursuant to Idaho Code § 11-605(1)(a). They also claimed a 1985 Dodge Caravan valued at $800 as exempt pursuant to Idaho Code § 11-605(3). The Chapter 7 Trustee L.D. Fitzgerald objects to Debtors' entitlement to an exemption for the satellite system on the grounds that it is not a reasonably necessary household item. Trustee objects to the exemption claim in the Dodge Caravan on the grounds that it is not a tool of the trade, as asserted by Debtors. On May 19, 1999, an evidentiary hearing was conducted on Trustee's Objection to Claim of Exemption and the issues were taken under advisement. This Memorandum constitutes the Court's findings of fact and conclusions of law. F.R.B.P. 7052.
II. Facts.
Debtors live in a rural area. Mr. Powell testified that Debtors are unable in their location to receive "free" television broadcasts, and that they also cannot subscribe to cable television service in their area. Debtor states that while the family has a television receiver in their home, a satellite system is required to receive signals. He further testified that he and members of his family, including his three children, watch television for news, weather and other information, as well as for entertainment and recreation. Mr. Powell is unaware of any method cheaper than his satellite system to receive programs on his television, and asserts that without the satellite system his television would be limited only to use with his VCR to play video recordings.
In addition to the cost of the satellite system, Mr. Powell testified that he pays $12 per month in subscription charges for his satellite service.
Mr. Powell operates a heating and air conditioning business out of his home which is his sole source of income. He testified that he modified the Dodge Caravan by adding shelving for tools and parts used in his work, and that he fashioned and attached a rack to the outside of the van to accommodate a ladder. All of the additions were mounted on the van with screws and could be removed. Mr. Powell testified that the back seats in his van have been removed to accommodate the large air conditioning units he must transport in the course of his work. Debtors own two other vehicles, a 1984 Subaru and a 1986 GMC Jimmy. Mr. Powell does not believe that either of these other vehicles could be adapted to carry the units adequately, even if the seats were removed. Mr. Powell testified that his other vehicles are not suitable for his work and he pointed out that the Dodge Caravan is not suitable for family use. In summary, Debtors assert that Mr. Powell could not conduct his heating and air conditioning business but for his customized Dodge Caravan.
Debtors claimed two motor vehicle exemptions under Idaho Code § 11-605(3) on these vehicles, to which there has been no objection.
While not mentioned in Debtor's testimony, Debtor's attorney represented in argument that in addition to having only the two front seats, the van has no windows in the rear of the vehicle.
III. Discussion.
Because Idaho has opted out of the federal exemption provisions described in 11 U.S.C. § 522(d), exemption issues in this District are controlled by state law. Idaho Code § 11-609. The exemptions set forth in the Idaho Code should be liberally construed in favor of the debtors. In re Leypoldt, 96.2 I.B.C.R. 69; McMillan v. United States Fire Insurance Co., 48 Idaho 163 (1919).
A. Idaho Code § 11-605(1)(a) and the Satellite System.
Section 11-605 provides in relevant part:
(1) An individual is entitled to exemption of the following property to the extent of a value not exceeding five hundred dollars ($500) on any one (1) item of property and not to exceed a total value of four thousand dollars ($4,000) per household for all items exempted under this subsection:
(a) furnishings and appliances reasonably necessary for one (1) household. . . .
Idaho Code § 11-605 has been amended effective July 1, 1999. S.B. 1088, 55th Leg., 1st Reg. Sess. (Idaho 1999). The amended statute will change the value limits for exempt items, as well as the court's role in examining the reasonable necessity of household items. The issues in this matter are, however, controlled by the law in effect at the time of filing for relief by the Debtors.
Although exemptions statutes are to be construed liberally, the language of this statute makes clear that not all furnishings and appliances of a debtor are exempt from the reach of creditors, but only those which are reasonably necessary within the contemplation of the Idaho Legislature. In re Land, 94 I.B.C.R. 225, 226. Determining whether an exemption is reasonably necessary is a factual consideration for this Court and is made on a case by case basis. Id.
The Court has previously found items such as lawn mowers and microwave ovens to be reasonably necessary for the maintenance and operation of a household, and therefore exempt, but has found items such as stereos and recreational equipment not to be reasonably necessary. Id. The distinction in the characterization of these items is that the latter are "luxury items" or "strictly recreational," while the former are common, useful, practical components of a modern functioning household. See generally In re Ackerman, 91 I.B.C.R. 26. A debtor need not show that an item is absolutely indispensable to set it apart from luxury or strictly recreational status, however. It is sufficient to show that an item is fairly or moderately needed in a household to meet the standard of reasonably necessary. Id. at 29, n. 9. Applying this standard, the exemption of a home computer was allowed by this Court, even though the debtor did not show the computer to be essential in the home, but instead only convenient and practical. In re Cox, 98.1 I.B.C.R. 24.
The case by case examination of exemption claims employed by the Court is predicated upon the notion that "times change," and an item which was once thought a luxury may now be such a common addition to local homes that it merits exempt status. In re Ackerman at 27. As with the home computer, and the VCR before it, this was once the circumstance of the television. At one time thought to be an extravagant luxury, the television now enjoys a longstanding history of exempt status.
This Court recognized that the Legislature did not intend to base the allowance of an exemption upon the popularity of the goods in question but rather on the needs of the debtor. However, because of the repeated controversy over exemption claims on the VCR, policy and practicality considerations were also persuasive in the Court's decision to allow the exemption. In re Ackerman, 91 I.B.C.R. 26, 27.
In re Bianacavilla, 94 I.B.C.R. 150; In re Goebel, 88 I.B.C.R. 171.
Arguably, the television satellite system may represent another item in evolution from non-exempt to exempt status based upon its prevalent use in modern households. However, this Court feels that the day has not arrived when as a practical matter a satellite system should be considered an ordinary and necessary feature in Idaho homes. In this Court's opinion, standing alone, a satellite system continues to be a luxury item by today's standards. However, the question in this case is significantly different: is a satellite system a reasonably necessary item for a household which would otherwise be unable to effectively utilize its television?
Debtors live in a rural area where a satellite system is the only method by which they can receive any television programming. Further, Debtors' household uses the television for both informational and recreational purposes. While it may be possible for Debtors to access news and weather reports and other helpful information by newspaper or radio, this Court should not ignore the convenience of the television in this capacity, and acknowledges the general importance that today's society places on the household TV.
Because the television is such a staple in local homes, this Court feels that it is reasonably necessary for a household to own a satellite system if that system enables a debtor to receive otherwise unavailable television programs. Debtors in this case do not seek to enhance their television's capabilities with a satellite system. They need the system as a necessary means to use their television for its normal, important purposes. The Court is confident that the narrow circumstances justifying this decision and the dollar limitations set forth by the Legislature in the statute will prevent abuse of the exemption.
B. Idaho Code § 11-605(3) and the 1985 Dodge Caravan.
Debtors claim the Dodge Caravan exempt as a "tool of the trade" under Idaho Code § 11-605(3), which provides:
An individual is entitled to exemption, not exceeding one thousand dollars ($1,000.00) in aggregate value, of implements, professional books, and tools of the trade; and to an exemption of one (1) motor vehicle to the extent of a value not exceeding one thousand five hundred dollars ($1,500.00).
Mr. and Mrs. Powell have claimed the Jimmy and Subaru as exempt motor vehicles under this section. They characterize both as "family" vehicles. Trustee argues that there is nothing unique about the van to qualify it as anything other than a motor vehicle, and that it is therefore not exempt.
This Court acknowledges the potential for mischief in allowing an item, specifically covered by one provision of the exemption law, to be exempted under another, more generic description contained in the same statute. There is precedent, however, discussing the limited circumstances under which an item may be both a motor vehicle and a tool of the trade. See In re Aguero, 93 I.B.C.R. 65 (holding that a Peterbilt diesel truck, when used for a debtor's trucking business and when impractical for other motor vehicle uses, may be claimed exempt as a tool of the trade). The Court in Aguero notes previous decisions of this Court which did not limit the type of item which may be claimed as a tool of the trade, and which may allow motor vehicles to be exempted tools of the trade when there is a "special showing." The Court determined that a motor vehicle may properly be exempt as a tool of the trade under certain circumstances:
In re Anderson, 85 I.B.C.R. 59, 60 (noting that Section 11-605(3) does not limit "tools of the trade" to include only "hand tools").
In re Fox, 81 I.B.C.R. 123, 123 (holding that a pickup truck could not be exempt "[i]n the absence of some special showing that [it was] uniquely equipped to perform a function other than that of general use as a motor vehicle. . . .").
[A] motor vehicle may be claimed exempt as a tool of trade only if, as demonstrated by the facts [that] its configuration or design is such as to make it uniquely suited for and limited to use in the debtor's business. In addition, the vehicle must be shown to be actually used in, as well as necessary to the continuation of, the debtor's business.
In re Aguero, 93 I.B.C.R. at 66.
Trustee argues that the Dodge Caravan lacks the unique qualities necessary to qualify the van as a tool of the trade. The Court disagrees. The van has been customized to accommodate the special needs of Mr. Powell's heating and air conditioning business. Virtually all the attributes which would accommodate passengers have been removed from the van. Those features have been replaced with shelves for tools and parts, and space for large, cumbersome AC units. Mr. Powell has filled the van, both inside and out, with components necessary for his work. Debtor's work demands that he transport those items to and from job sites, and Trustee does not argue that the Dodge Caravan is suited to other, general uses by Debtor. In its current state of customization, the van is not suited for general motor vehicle purposes, particularly for a household of five.
Trustee argues that the alterations to the van have been made with screws, and the shelves and ladder rack could be removed and installed on another vehicle, such as Debtors' 1986 GMC Jimmy. However, this argument misses the point of whether the Dodge may be claimed as a tool of the trade. If it meets the statutory definition, and Debtors claim the van exempt, it is of no moment that Debtors may have a substite vehicle available for work purposes. Moreover, even if this argument was germane, the Court disagrees as a matter of fact that either of Debtors' other vehicles could be properly adapted for use by Mr. Powell in his business.
Under the particular facts of this case, the Court concludes that Debtors have adequately shown that the Dodge Caravan is uniquely suited for, and limited to use in, Mr. Powell's business, and that but for that vehicle, Debtor's ability to continue his current employment would be jeopardized. This showing distinguishes the van as a tool of the trade. Once again, the Legislature's value limitations on tools of trade will prevent abuse of the exemption.
IV. Conclusion.
For the reasons set forth above, the exemptions claimed by Debtors as to the satellite system and as to the Dodge Caravan will be allowed. A separate order will be entered.
DATED This 25th day of June, 1999.