Summary of a Recent
Judicial Development in
Bankruptcy

Horses and Heifers Considered "Tools of the Trade"

Joshua T. Crain
National AgLaw Center Graduate Assistant

Summary of Decision

In In re Gray, 303 B.R. 632 (Bankr. W.D. Mo. 2003), the United States Bankruptcy Court for the Western District of Missouri held that debtors' horses and heifers were exempted as "tools of the trade."

Background

On September 17, 2003, debtors Neyl and Cynthia Gray filed for Chapter 7 bankruptcy and claimed a tools of the trade exemption for four horses and four heifers. See id. The bankruptcy trustee objected to the debtors' claimed exemption, and the court held a hearing to consider the matter. See id.

Analysis and Holdings

The court noted that in In re Eakes, 69 B.R. 497 (8th Cir. 1987) the Eighth Circuit held that cattle were not tools of the trade because animals were addressed elsewhere in the exemption statutes, but that in In re Parrotte, 22 F.3d 472 (2d Cir. 1994) the Second Circuit held that bulls were tools of the trade, regardless of the existence of a separate exemption for animals. See id. Specifically, the court explained that in Parrotte, the Second Circuit found the facts of its case similar to the situation where an automobile is exempted under the tools of the trade exemption even though there is an automobile exemption in the statutes. See id.

The court stated that it agreed with the Second Circuit's analysis and therefore adopted the Second Circuit's "use test." See id. The court explained that the "use test" required an examination of the function or use of the property being claimed as exempt to determine whether it is a tool of the trade. See id. See also id. (discussing In re Stewart, 110 B.R. 11 (Bankr. D. Idaho 1989) (adopting the "use test" to determine whether horses were tools of the trade)). Here, the court explained that the "horses are necessary items for horseback riding lessons, and heifers are reasonable items in order to teach roping and penning." Id. at 634. As such, the court overruled the bankruptcy trustee's objection to the claimed exemption of the horses and heifers as tools of the trade. See id.

The case was decided on December 16, 2003; this summary was posted Sept. 14, 2004.