Cite as: [Unpublished]
re Edward Wundrow and Pamela Wundrow,
d/b/a Wundrow Family Farm, Debtors
Bankruptcy Case No. 91-12895-7
In re Christina Wundrow, d/b/a Wundrow Family
Bankruptcy Case No. 91-12896-7
In re Alan Wundrow and Darlene Wundrow,
d/b/a Wundrow Family Farm, Debtors
Bankruptcy Case No. 91-12899-7
United States Bankruptcy Court
W.D. Wisconsin, Eau Claire Division
January 24, 1992
Terrence J. Byrne, for the debtors.
Christa A. Reisterer, for Farmers Home Administration.
Thomas S. Utschig, United States Bankruptcy Judge.
MEMORANDUM OPINION, FINDINGS OF FACT,
AND CONCLUSIONS OF LAW
This matter comes before the Court on motions by the debtors to avoid liens of Farmers
Home Administration in farm machinery and equipment. Three separate motions in three
bankruptcy cases are involved here. The Court will consider these motions together since
the parties are related and the motions are grounded on identical factual bases. The
debtors in each of the three cases are Christine Wundrow, Alan and Darlene Wundrow, and
Edward and Pamela Wundrow, respectively. They are represented by Terrence J. Byrne.
Farmers Home Administration (FmHA) has filed an objection to each of the three motions; it
is represented by Christa A. Reisterer.
The relevant facts can be briefly summarized. The five debtors involved here, as well
as Arnold Wundrow (Christina Wundrow's husband, now deceased), were partners in the
"Wundrow Family Farm" partnership. Edward and Alan Wundrow are the sons of
Arnold and Christina Wundrow. Arnold Wundrow's death on March 13, 1991, effected a
dissolution of the partnership under Wisconsin law. See WIS. STAT. ANN. §
178.26(4) (West 1989). In the months following the dissolution, the debtors discussed
dividing the partnership assets and also considered the possibility that Alan and Darlene
Wundrow would continue to operate the farm alone. The debtors applied to FmHA for a loan
restructuring in June of 1991, but were denied servicing due to the dissolution of the
partnership. The FmHA is a secured creditor in this action and part of its collateral is
the farm machinery and equipment at issue in the debtors' lien avoidance motions.
The five remaining partners in the Wundrow Family Farm partnership signed a
"Partnership Dissolution Agreement" on June 30, 1991, which by its terms was to
take effect retroactively -- on March 13, 1991. The agreement provided that the
partnership assets would be held under joint ownership and the ownership interest of the
respective parties was stipulated to be as follows: Christina Wundrow - 1/3; Edward
Wundrow - 1/6; Pamela Wundrow - 1/6; Alan Wundrow - 1/6; Darlene Wundrow - 1/6. The
agreement further provided for the retroactive termination of the partnership as of March
13, 1991 -- the date of Arnold's death. The debtors each filed individual bankruptcies
under Chapter 7 of the Bankruptcy Code on August 26, 1991. Alan and Darlene Wundrow and
Edward and Pamela Wundrow each filed jointly as husband and wife. The three lien-avoidance
motions at issue here were filed on September 12, 1991.
11 U.S.C. § 522(f) is the provision granting debtors in bankruptcy the right to avoid
certain liens on otherwise exempt property. It provides:
(f) Notwithstanding any waiver of exemptions,
the debtor may avoid the fixing of a lien on an interest of the debtor in property to the
extent that such lien impairs an exemption to which the debtor would have been entitled
under subsection (b) of this section, if such lien is--
(1) a judicial lien; or
(2) a nonpossessory, nonpurchase-money
security interest in any--
(A) household furnishings, household goods,
wearing apparel, appliances, books, animals, crops, musical instruments, or jewelry that
are held primarily for the personal, family, or household use of the debtor or a dependent
of the debtor;
(B) implements, professional books, or tools,
of the trade of the debtor or the trade of a dependent of the debtor; or
(C) professionally prescribed health aids for
the debtor or a dependent of the debtor.
11 U.S.C. § 522(f) (West 1991).
The relevant Wisconsin exemption provision to which the debtors are claiming
entitlement is § 815.18(3)(b), which provides:
(3) Exempt property. The debtor's interest in
or right to receive the following property is exempt, except as specifically provided in
this section and ss. 70.20(2), 71.91(5m) and (6), 74.55(2) and 102.28(5):
(a) . . .
(b) Business and farm property.
Equipment, inventory, farm products and professional books used in the business of the
debtor or the business of a dependent of the debtor, not to exceed $7,500 in aggregate
WIS. STAT. ANN. § 815.18(3)(b) (West. Supp. 1991). Each of the five
debtors is claiming $7,500 in farm machinery of the former Wundrow Family Farm partnership
The objection of the FmHA is twofold. First, it asserts that the debtors are not
entitled to the exemptions because they are a partnership. This argument is grounded on
the definition of "debtor" contained in the Wisconsin exemption statute:
"`[d]ebtor' means an individual. `Debtor' does not include an association,
corporation, partnership, cooperative or political body." See WIS. STAT. ANN.
§ 815.18(2)(b) (West Supp. 1991). In support of its assertion that the Wundrow Family
Farm partnership is still in existence, the FmHA cites WIS. STAT. § 178.25(2): "[o]n
dissolution the partnership is not terminated, but continues until the winding up of
partnership affairs is completed." WIS. STAT. ANN. § 178.25(2) (West 1989). Finally
as to this first ground, the FmHA cites WIS. STAT. 178.35 which provides in relevant part:
[i]n settling accounts between the partners
after dissolution, the following rules shall be observed, subject to any agreement to the
(1) The assets of the partnership are (a) the
partnership property, (b) the contributions of the partners necessary for the payment of
all the liabilities specified in sub. (2).
(2) The liabilities of the partnership shall
rank in order of payment, as follows: (a) those owing to creditors other than partners . .
(3) The assets shall be applied in the order
of their declaration in sub. (1) to the satisfaction of the liabilities.
WIS. STAT. ANN. § 178.35 (West 1989). The FmHA argues that, since
liquidation as provided in this provision has not occurred, the winding up is not
completed and the partnership is thus not terminated. Since they are still a partnership,
the argument concludes, the debtors are not entitled to any exemptions under Wisconsin
The FmHA's second ground for its objection is that the debtors are no longer farmers.
It bases this argument on the fact that Edward, Pamela, and Christina Wundrow sought to be
removed from the FmHA loan so the farm could be operated solely by Alan and Darlene. This
fact was noted in the debtors' brief. This argument presumably applies only to the
exemptions claimed by Edward, Pamela, and Christina Wundrow.
The Court has considered the arguments upon which both grounds for the FmHA's objection
are based and finds them to be without merit. As to the first ground, the debtors
correctly point out that a complete liquidation of partnership assets is not required in
order for winding up and termination to occur. As cited by the debtors, the case of In
re Trust Estate of Schaefer states that "[p]artners, or those claiming through a
deceased partner, may agree to settle the partnership affairs without a liquidation of the
assets (by agreeing to a cash settlement or in-kind distribution)." In re Trust
Estate of Schaefer, 91 Wis. 2d 360, 375, 283 N.W.2d 410, 418 (1979). Wisconsin
statutory law supports this option of terminating a partnership without liquidation as
well. The aforementioned Wisconsin statute pertaining to settlement and distribution on
dissolution expressly states that "[t]he following rules shall be observed, subject
to any agreement to the contrary . . . ." See WIS. STAT. ANN. § 178.35
(West 1989) (emphasis added).
Here, there is just such an agreement -- the "Partnership Dissolution
Agreement" signed by the debtors on June 30, 1991, nearly two months before the
bankruptcy filing. The agreement delineated the respective proportional interests of the
five former partners in the partnership assets and provided for joint ownership of those
assets. The former partners each remain liable for the debts of the terminated
partnership. The Court finds, therefore, that the debtors' agreement of June 30, 1991,
constituted a "winding up" of the partnership so as to effect a termination of
it for purposes of WIS. STAT. § 178.25(2). Each of the five former partners, therefore,
qualifies as a "debtor" for purposes of the Wisconsin exemption statute.
As to FmHA's second ground for its objection, the debtors point out in their reply
brief that they have all continued farming since the date of Arnold's death and hope to
continue to do so. This Court has previously held that exemption rights are determined
based on the circumstances present at the time of filing. See In re Brzezinski,
65 B.R. 336, 339 (Bankr. W.D. Wis. 1985). Each of the debtors was engaged in farming as of
the filing date of August 26, 1991. They each hope to be able to continue farming. These
factors were found sufficient to entitle the Brzezinski debtors to an exemption in
farm machinery. See In re Brzezinski, 65 B.R. at 339. The Court finds them
to be sufficient to entitle the current debtors to an exemption in farm machinery as well.
Having found both of the FmHA's grounds for objection to the debtors' lien-avoidance
motions to be without merit, the debtors are each entitled to the Wisconsin exemption for
farm machinery contained in § 815.18(3)(b).
Accordingly, the debtors' motions for lien avoidance pursuant to 11 U.S.C. S 522(f) are
This decision shall constitute findings of fact and conclusions of law pursuant to
Bankruptcy Rule 7052 and Rule 52 of the Federal Rules of Civil Procedure.