FOR THE NORTHERN DISTRICT OF CALIFORNIA
GENE D. VIGIL No. 1-89-00238
Memorandum of Decision
For several years, debtor Gene Vigil and his wife operated a garage. The debtor worked as
the mechanic, and his wife did the office work and kept the books. Prior to bankruptcy, they
terminated the business and separated. The debtor listed his occupation as "unemployed."
The issue before the court is whether the debtor can exempt $4,450.00 worth of automotive
tools and equipment. He has claimed the exemption pursuant to California Code of Civil
Procedure section 704.060(a)(3), which allows a $5,000.00 exemption for tools of the trade used
by the debtor and his spouse in the same trade or business in which both earn a livelihood. A
single debtor, or a married debtor whose spouse is not involved in the trade or
1business, is entitled to only a $2,500.00 exemption. California law requires
that the statute be liberally construed in favor of the debtor, except where the express provisions
of the statute dictate otherwise. Security-First Bank v. Pierson
(1934) 2 Cal.2d 63, 65, 38 P.2d
The Trustee takes the position that there can be no claim of exemption at all under the statute
where the debtor's business was closed and he was unemployed on the day he filed his
bankruptcy petition. The Court does not adopt this view of the law. The statute exempts tools
and implements used in a "trade, business or profession" by which the debtor earns a livelihood.
The mere fact that a debtor has no business does not mean he has no trade. If the debtor has
special skill or knowledge in an occupation which requires such skill or knowledge, then any
tools necessary to that occupation are exempt under the statute unless there is clear evidence that
the debtor has abandoned that occupation or is incapable of continuing in it. See In re Schuette
(Bkrtcy.D.Minn. 1986) 58 B.R. 417, 420. The Court interprets the phrase "by which the debtor
earns a livelihood" as meaning his principal source of income when he has work, and not a
requirement that he have work when he claims the exemption. To rule otherwise would strip the
debtor of his means of earning a livelihood in the future, when the clear purpose of the statute
is to preserve that ability.
The Trustee next argues that if an exemption is allowed, it can be only the $2,500.00
exemption of a single debtor and not the $5,000.00 allowed to a debtor whose spouse works in
the business with him. The Court agrees with this reading of the statute.
Where both spouses are actively involved in the business, there is no requirement that each
spouse use each tool or implement in order to exempt it; it is sufficient if the tool or implement
is necessary to their joint effort. Thus, the Court would have no difficulty sustaining a $5,000.00
exemption for the tools and equipment used in the garage if the debtor and his wife intended to
continue to earn a livelihood together from them. However, where the debtor and his spouse
have split up, and no longer intend to earn a livelihood together, neither the statute nor the
policies behind it mandate that the debtor enjoy the benefits reserved for spouses who work
together. Since the debtor and his wife were not earning a livelihood together when the debtor
filed his bankruptcy petition, and do not intend to work together in the future, the provisions of
section 704.060(a)(3) do not apply and the debtor is limited to a $2,500.00 exemption pursuant
to section 704.060(a)(1).
The Trustee's objection to the claim of exemption will accordingly be sustained. The debtor
shall file an amended schedule B-4 identifying each tool or implement claimed exempt pursuant
to section 704.060, and its value. The aggregate value of the items claimed as exempt under the
statute shall not exceed $2,500.00.
Counsel for the Trustee shall submit an appropriate form of order.
Dated: June 30, 1989 _______________________