3 ABR 101 UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ALASKA

In re:	)
	)
MICHAEL O. BRADY,	)	Case No. A92-00369-DMD
	)	Chapter 7
Debtor.	)
_________________________________	)

ORDER GRANTING OBJECTION TO DEBTOR'S CLAIM
OF EXEMPTIONS, AND DISALLOWING EXEMPTIONS

     Creditor William L. McNall has filed an objection to debtor's claim of exemptions in this case. The trustee has joined in this objection. The objection pertains to three parcels of real property in which debtor has claimed exemptions, specifically, a house in Ireland and two six-plexes in Eagle River. McNall's objection as to the six-plex located at 11434 Heritage Court, Eagle River, Alaska (Lot 12, Block 1, Regional Park Subdivision) is moot, because debtor's amended Schedule C (Docket No. 36) does not list this property as exempt. Debtor has also indicated he will withdraw his claim for a homestead exemption in the house in Ireland. Accordingly, this exemption will be disallowed. The remaining issue is whether debtor may claim an exemption in a six-plex located at 11527 Heritage Court, Eagle River, Alaska.

     Debtor and McNall hold this six-plex as tenants in common. Debtor resides in one of the units of the six-plex. Debtor has scheduled this asset, on both his original and amended schedule A, as "6-plex owned by partnership - debtor owns 1/2 interest (McBrady Partnership)." Debtor describes the nature of his interest in this real property as "1/2 interest in partnership." Debtor also lists his interest in this asset as personal property on Schedule B, saying his interest is "1/2 net of partnership." On his amended Schedule C, Debtor claims this interest exempt, to the extent of $27,000, under AS 09.38.010(a) and AS 09.38.100(b).

The Six-Plex is Partnership Property.

     McNall contends debtor cannot claim an exemption in the six-plex because it is a partnership asset rather than an asset of debtor's estate. Debtor concedes the parties discussed forming a partnership in connection 3 ABR 102

   with the six-plex, but claims the parties actually intended "an informal tenants-in-common profit sharing relationship." [See Debtor's Supplemental Response to Homestead Exemption, pp. 1-2, Docket No. 72]

     Alaska has adopted the Uniform Partnership Act, AS 32.05.010 et seq. AS 32.05.010 defines a partnership as "an association of two or more persons to carry on as co-owners a business for profit." AS 32.05.020 establishes rules for determining the existence of a partnership, and includes factors such as holding property as tenants in common, the sharing of gross returns and the receipt of a share of profits from a business. As noted above, the parties hold the property as tenants in common. Debtor concedes he and McNall intended to share profits from the six-plex. In his petition, debtor describes the nature of his debts as "business/partnership." Debtor's schedules and statements contain other indicia which reflect the existence of a partnership: both the six-plex and debtor's interest in it are scheduled as partnership property; debtor and McNall had a joint checking account for revenues derived from the six-plex; McNall is listed as a co-debtor for the six-plex liabilities, including the mortgage and the utilities. Debtor's unsuccessful Chapter 13 plan, which proposed dividing his creditors into personal and partnership creditors, stated, "The debtor is in a partnership with William McNall owning a six-plex in which debtor resides . . . This partnership has been known as the McBrady Partnership." [See Chapter 13 Plan, Docket No. 34, p. 1] Based on the record before me, I conclude McNall and debtor held the six-plex as a partnership.

     Debtor argues that the partnership was never formalized, because a written partnership agreement was never prepared and partnership tax returns were never filed. However, neither of these factors will preclude a finding that a partnership existed. "The existence of [a partnership] may be proven by transactions, conduct and declarations, where no writing is available." Innes v. Beauchene, 370 P.2d 174, 176 (Ak. 1962). A partnership's existence is not defeated by the failure to file partnership tax returns. Chocknok v. State of Alaska, Commercial Fisheries Entry Commission, 696 P.2d 669, 674 (Ak. 1985).

     In this case, debtor has scheduled the six-plex as belonging to the partnership. The parties hold the property as tenants in common and agree that they planned to share profits. I find a partnership existed between McNall and debtor, and that the six-plex is partnership property.

3 ABR 103

   Debtor's Claimed Exemptions in Six-Plex.

     Debtor contends he may claim a homestead exemption in the six-plex, which is partnership property, under AS 09.38.010 and AS 09.38.100(b). Debtor's rights in the partnership property are determined by the Uniform Partnership Act as adopted in Alaska. A partner's rights in specific partnership property are defined in AS 32.05. 200, which gives partners equal rights to possess specific partnership property for partnership purposes, but denies an individual partner the right to possess the property for other than partnership purposes without the consent of the other partners. I find debtor's contention that he is entitled to claim a homestead exemption in the six-plex inconsistent with the conceded purpose of the partnership, which was to share profits from the six-plex. Granting debtor a homestead exemption in this property, without a clear indication of McNall's consent to allow this, would provide an unintended windfall to debtor at the expense of his partner.

     Further, "[i]t is generally recognized that individual partners cannot exempt partnership property in a bankruptcy proceeding." In re Johnson, 19 B.R. 371, 374 (Bankr. D. Kansas 1982), citing 3 Collier on Bankruptcy, 15th Ed., § 522.05&$91;3&$93;. Courts in Vermont and Texas, two other states which have adopted the Uniform Partnership Act, have concluded that an individual debtor may not claim a homestead exemption in partnership real property. See In re Cooper, 128 B.R. 632, 636 (Bankr. E.D. Tex. 1991); In re Brooks, 103 B.R. 123, 125 (Bankr. S.D. Tex. 1988); In re Gorman, 82 B.R. 253, 256 (D. Vt. 1987); In re Russell, 80 B.R. 662, 665 (Bankr. D. Vt. 1987). In Brooks and Russell, the courts considered identical provisions of their respective state's Uniform Partnership Act which provided:

A partner's right in specific partnership property is not subject to attachment or execution, except on a claim against the partnership. When partnership property is attached for a partnership debt the partners, or any of them, or the representatives of a deceased partner, cannot claim any right under the homestead or exemption laws.

Brooks, 103 B.R. at 125; Russell, 80 B.R. at 665. The above provision is almost identical to AS 09.38.100(b), which provides:

(b) A partner's right in specific partnership 3 ABR 104 property is exempt except on a claim against the partnership. If partnership property is attached for a partnership debt, the partners or any of them or the representatives of a deceased partner may not claim an exemption for that property under this chapter.

Debtor contends AS 09.38.100(b) is distinguishable from the statutes evaluated in Brooks and Russell, because the Alaska version does not specifically preclude a partner from claiming an exemption under homestead laws. AS 09.38.100 (b) simply states that a partner cannot claim an exemption "under this chapter." The homestead exemption contained in AS 09.38. 010 is in the same chapter of the Alaska Statutes as AS 09.38.100(b), and is therefore one of the exemptions "under this chapter" which a partner may not claim. The Alaska statute is not distinguishable from the provisions evaluated by the courts in Brooks and Russell, and I find the reasoning of these courts persuasive.

Specifically, in Law of Partnership it is stated that: "Under the [Uniform Partnership Act] there is no right in partners to exemption or homestead in specific partnership property." The authors go on to point out that when partnership property is seized for a partnership debt that no partners . . . are permitted to claim any homestead rights in the partnership property. The section further emphasizes that a homestead exemption is denied only when partnership property is involved. Bromberg, Law of Partnership, § 44 at 251 (1968), See J. Grimes, Thompson on Property § 1937 at 220 (1979).

Brooks, 103 B.R. at 125.

The purpose of denying a partner any specific property rights . . . comes from the principle that partnership property is used for the benefit of the partnership as a whole and to pay partnership debts, and not for the benefit of the individual partner.

Russell, 80 B.R. at 665.

Having concluded that the six-plex is partnership property, I find that debtor cannot claim a homestead exemption in this property. However, debtor maybe able to claiman exemption for his interest in the partnership itself, which is personal property (AS 32.05.190, 32.05.210), provided he has not previously exhausted his state personal property exemptions. Therefore,

3 ABR 105

     IT IS ORDERED:
     1. Debtor's claim of homestead exemption in the house in Ireland is disallowed;
     2. Debtor's claim of homestead exemption in the six-plex located at 11527 Heritage Court, Eagle River, Alaska (Lot 19, Block 1, Regional Park Subdivision) is disallowed.

          DATED: March 12, 1993

	BY THE COURT
	DONALD MacDONALD IV
	United States Bankruptcy Judge