IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS

MEMORANDUM AND ORDER

This matter is before the Court on the Chapter 7 Trustee's Objection to Exemptions (Doc. No.

8). The Court has jurisdiction to decide this matter,1 and it is a core proceeding.2 The parties have

stipulated to the relevant facts, and based on those facts and applicable law, the Court sustains the

Trustee's objection to exemptions.

128 U.S.C. § 1334.

228 U.S.C. § 157(b)(2)(B).

1.      FINDINGS OF FACT

   Debtors filed their Chapter 7 petition on February 6, 2004. They claimed a 1996 Nitro boat, 1996

Mercury Motor, and 1996 trailer (hereinafter the “Items”) as exempt tools of the trade pursuant to K.S.A.

§ 60-2304(e). Gregory Cooper claimed the Items as exempt because he intends to work as a fishing guide

in the future to supplement his income. At the filing of the petition, however, Gregory Cooper's sole

occupation was an automobile salesman. He had never previously worked or earned any income as a

fishing guide, although he has the requisite experience to be a fishing guide and applied for a guide license

prior to the filing of the petition. However, a license is no longer required to be a fishing guide in Kansas.

Linda Cooper is unemployed, and has never worked in an occupation that required the Items.

2.     CONCLUSIONS OF LAW

   Under Kansas exemptions laws, Debtors can exempt

   The books, documents, furniture, instruments, tools, implements and equipment, the breeding stock, seed grain or growing plants stock, or the other tangible means of production regularly and reasonably necessary in carrying on the person's profession, trade, business or occupation in an aggregate value not to exceed $7,500.3

“In determining whether a debtor is entitled to claim an exemption, 'the exemption laws are to be construed

liberally in favor of exemption.'”4 “Once a debtor claims an exemption, the objecting party bears the

burden of proving the exemption is not properly claimed.”5

3K.S.A. § 60-2304(e).

4In re Lampe, 331 F.3d 750, 754 (10th Cir. 2003) (quoting In re Ginther, 282 B.R. 16, 19

(Bankr. D. Kan. 2002)).

5Id. See also Fed. R. Bankr. Proc. 4003; In re Robinson, 295 B.R. 147, 152 (10th Cir. B.A.P. 2003).

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The Trustee's objection in this case is two-fold. First, the Trustee claims that Debtors cannot claim

the Items as exempt because neither of them were working as a fishing guide at the time they filed for

bankruptcy, or had ever been so employed. Second, the Trustee claims that Debtors cannot claim the

Items as exempt because neither of Debtors' primary occupation is a fishing guide.

1.     Debtors cannot claim the Items as exempt because neither of them were working as a fishing guide at the time the bankruptcy petition was filed, or had ever been so employed.

The Trustee claims that Debtors cannot claim the Items as exempt because neither of Debtors

were working as a fishing guide at the time they filed their bankruptcy petition. Debtors do not contest that

fact, but claim an entitlement to the exemption because Mr. Cooper planned on becoming a fishing guide

at some point in the future, and because he had taken one step towards ultimately engaging in business as

a fishing guide by seeking a license.

“A debtor's right to an exemption is determined as of the date that the bankruptcy petition is filed.”6

Generally, a debtor must be engaged in the trade or business on the date the petition was filed in order to

claim the tools of the trade as exempt.7 Courts have allowed a narrow exception to this rule where debtors

can demonstrate that they have only temporarily ceased operations in a business, but have the intent to

return to that business in the near future.8 The Court has found no support, however, for Debtors' position

6Lampe v. Iola Bank & Trust (In re Lampe), 278 B.R. 205, 210 (10th Cir. B.A.P. 2002).

7In re Johnson, 19 B.R. 371, 374 (Bankr. D. Kan. 1982).

8See Lampe, 278 B.R. at 211; In re Liming, 797 F.2d 895, 902 (10th Cir. 1986); and

Johnson, 19 B.R. at 374-75.

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that an exception to this rule should be created where a debtor has never been engaged in the trade or

business, but indicates an intent to do so at some time in the future.

Debtors claim that even though Mr. Cooper had not yet performed any work, or earned any money

as a fishing guide, the “business” existed to a sufficient degree to allow the Items to be exempted. As a

preliminary matter, the parties have stipulated that no license is needed to be a fishing guide in Kansas, so

the step was futile. The Court simply does not find that to be adequate evidence to constitute a “profession,

trade, business or occupation.”

Secondly, Debtors rely on Keeler v. C.I.R.9 to support the contention that this Court must simply

trust Debtors' contention that he has the subjective intent to supplement his income by becoming a fishing

guide at some point in the future. In Keeler, the Tenth Circuit held that a taxpayer's intent should be used

to determine whether the taxpayer's activities are aimed at generating a profit, which would show that the

taxpayer was engaged in a trade or business.10 The Court finds Debtors' reliance upon Keeler

unpersuasive.

Keeler is legally distinguishable in that it relates only to whether a taxpayer can properly claim a

deduction on his tax return, not whether a debtor can claim certain property as exempt. However, even

if the holding in Keeler were applicable to this case, it is factually distinguishable, as well. The issue in

Keeler was whether the taxpayer engaged in certain transactions with the intent to be engaged in a

business. In other words, the court was faced with the issue of whether the taxpayer intended to engage

in a business during the preceding tax year in question, not whether he intended to engage in that business

9243 F.3d 1212 (10th Cir. 2001).

10Id. at 1220.

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in the future. In this case, the stipulations of fact make it clear that Mr. Cooper did not have the subjective

intent to be engaged in a fishing guide business at the time the bankruptcy petition was filed, but rather that

he intended on starting that business in the future.11

The Court finds no basis to alter the well established rule that a debtor must be engaged in the trade

on the date the petition was filed in order to claim the tools of that trade as exempt. Mr. Cooper's

intentions of starting a fishing guide business in the future does not entitle him to claim the tools needed for

that business as exempt, because the business did not exist at the time he filed the bankruptcy petition.12

2.     Debtors cannot exempt the Items because their primary occupation was not that of a fishing guide.

The Trustee also claims that even if the Court found that Debtors' efforts to obtain a fishing guide

license prior to filing bankruptcy, or his subjective intent to become a fishing guide in the future, constituted

an occupation at the time of bankruptcy, Debtors still cannot claim the Items as exempt because they were

not used in their primary occupation. Debtors do not dispute the fact that Mr. Cooper's primary

occupation is a car salesman, and that Ms. Cooper is unemployed. They nevertheless claim to be entitled

to the exemption under Kansas law.

Numerous cases have addressed the requirements of the Kansas tools of the trade exemption as

it relates to primary and secondary occupations. The seminal case on this issue is Jenkins v. McNall.13

11Stipulation of Fact No. 11 states “Mr. Cooper claimed the boat, motor and trailer as exempt because he intends to be a fishing guide in the future.” (emphasis added).

12In re Johnson, 19 B.R. at 374-75 (holding prospects for future employment in a trade not engaged in at time of bankruptcy filing too “nebulous and indefinite”).

1327 Kan. 532 (1882).

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In Jenkins, the Kansas Supreme Court set forth the following interpretation of the Kansas tools of the trade

exemption: “If [a debtor] has two separate pursuits, the exempted articles must belong to his main or

principle business. In other words, to the business in which he is primarily engaged.”14 The holding of

Jenkins was recently recognized by the Tenth Circuit Bankruptcy Appellate Panel in In re Lampe,15 where

it held “[i]n Kansas, the tools of the trade exemption applies only to the business or profession in which the

debtor is 'principally engaged.'”16

Debtors claim that this Court should reject the Kansas Supreme Court's interpretation of the tools

of trade statute articulated in Jenkins, and instead substitute its judgment for that of the highest state court.

Debtors contend they should be allowed to claim items that are used in a business in addition to those used

in Debtors' primary occupation. In support of this proposition, Debtors rely on In re Kobs17 and In re

Thompson.18 Both Kobs and Thompson question the Jenkins ruling on the basis that the Kansas Supreme

Court added a restriction to the exemption that was not placed there by the legislature.19 That restriction

14Id. at 534.

15 278 B.R. 205 (10th Cir. B.A.P. 2002).

16Id. at 210 (citing Seel v. Wittman, 173 B.R. 734, 736 (D. Kan. 1994), In re Zink, 177 B.R.

713, 715 (Bankr. D. Kan. 1995), and In re Massoni, 67 B.R. 195, 196-97 (Bankr. D. Kan. 1986)).

17163 B.R. 368 (Bankr. D. Kan. 1994).

18311 B.R. 822 (Bankr. D. Kan. 2004).

19See In re Thompson, 311 B.R. 822 at 825 (noting that the Kansas Supreme Court “stated

that Kansas exemption laws should be liberally construed and, in the same decision, vitiates this mandate by reading into the tools-of-trade exemption a limitation not expressly stated in the statute . . . .”), and In re Kobs, 163 B.R. at 373 (stating that “[w]hether such a test should be applied is problematic since the statute itself contains no language prohibiting outside employment or that indicates a person cannot qualify for exemptions when he or she holds more than one job.”).

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is to interpret the language “profession, trade, business, or occupation” to allow a Debtor to exempt tools

of trade from only his or her primary occupation.

Although the Court understands the issues and concerns raised in Thompson and Kob, this Court

finds it must apply the primary occupation test unless the Kansas Supreme Court alters its long-standing

interpretation of Kansas law. Bankruptcy courts are bound by the interpretation that the state's highest

court gives to its own statutes.20 The Kansas Supreme Court's interpretation of the tools of the trade

exemption, as discussed in Jenkins, requires property to be used in debtor's primary job or occupation

before it qualifies under K.S.A. §60-2304(e).21 The Supreme Court of Kansas has held that tools of the

trade used in a secondary occupation are not exempt under Kansas law, and this Court therefore defers

to that interpretation. Finally, although exemption statutes are to be liberally construed in favor of those

intended by the legislature to be benefitted, “liberal construction” is not a license to enlarge an exemption

or read into it provisions that are not found there.22

20In re Ginther, 282 B.R. at 20 (citing In re Dvorak, 176 B.R. 929, 933 (Bankr. D.

Kan.1994)). See also Clements v. Emery Worldwide Airlines, Inc., 44 F. Supp. 2d 1141, 1148 (D. Kan. 1999) (holding that “[f]ederal courts hearing cases on diversity jurisdiction do not have the authority to ignore a state supreme court's interpretation of its own statute and rule on a case based on how the federal court interprets the statute.”).

21The version of the tools of the trade exemption that the Jenkins court interpreted, Sec. 3, ch. 38, p.437, Comp. Laws of 1879, provides:

“Every person residing in this state, and being the head of a family, shall have exempt from

seizure and sale upon any attachment, execution or other process issued from any court in this state, the following articles of personal property:...8th. The necessary tools and implements of any mechanic, miner or other person, used and kept for the purpose of carrying on his trade or business. ...”

Today's version, although making more generic the kinds of employment, is not significantly different from the 1879 version.

22See In re Hodes, 308 B.R. 61, 65 (10th Cir. B.A.P. 2004).

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This Court also presumes the Kansas legislature is aware that the majority of courts considering

K.S.A. § 60-2304(e) have held debtors cannot “stack” occupations, and only tools of the trade from one's

primary occupation can be exempted. Failure of the legislature to make what would be an exceedingly

simple revision23 to the statute buttresses this Court's opinion that the Legislature is satisfied that the

majority interpretation reflects their will.24

3.    CONCLUSION

   The Court finds the Trustee's objection to exemptions should be sustained. Debtors were not

engaged in the fishing guide business at the time they filed their bankruptcy petition, but rather only had the

intent of starting that business at some time in the future. In addition, even if the business did exist at the

time the petition was filed, neither of Debtors' primary occupation was that of a fishing guide, thus rendering

the Kansas tools of the trade exemption inapplicable to the Items. As the Supreme Court recently said,

“our unwillingness to soften the impact of Congress' [here, the Kansas Legislature's] chosen words even

if we believe the words lead to a harsh outcome is longstanding. It results from “deference to the

23The legislature could merely change the statute to add the underlined parts: “persons , professions, trades, businesses, and occupations in an aggregate value not to exceed $7,500.”

24Central Bank of Denver, N.A. vs. First Interstate Bank of Denver, N.A., 511 U.S. 164, (1994) (dissent) (holding Legislature's failure to reject a consistent judicial construction counsel's hesitation from a court asked to invalidate it); Johnson vs. Transportation Agency, 480 U.S. 616, 629 (1987) (holding that since Congress has not amended relevant statute to reject Court's construction of it, Court may assume interpretation was correct. The Court noted “As one scholar has put it, 'When a court says to a legislature: You (or your predecessor) meant X, it almost invites the legislature to answer: “'We did not.” G. Calabresi, A Common Law for the Age of Statutes 31-32 (1982). Any belief in the notion of a dialogue between the judiciary and legislature must acknowledge that on occasion an invitation declined is as significant as one accepted.”)

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supremacy of the Legislature. . . .”25 This Court will await legislative action before declining to follow this

state's highest court's interpretation of the statute.

IT IS, THEREFORE, BY THIS COURT ORDERED that the Trustee's Objection to

Exemptions (Doc. 8) is sustained. The 1996 Nitro Boat, 1996 Murphy Motor, and 1996 Trailer are not

exempt tools of the trade.

IT IS SO ORDERED this _____ day of September, 2004.

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25Lamie v. U.S. Trustee, __U.S. __, 124 S. Ct. 1023 (2004).

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