954 F.

2d 596
22 Bankr.Ct.Dec. 767, Bankr. L. Rep. P 74,418,
16 UCC Rep.Serv.2d 880

In re James Albert COONES and Cindy Lee Coones, f/k/a

Cindy
Lee Jones, Debtors.
FEDERAL DEPOSIT INSURANCE CORPORATION, as
receiver of
Stockmen's Bank and Trust Company, and liquidator
of First National Bank of Sheridan, Appellee,
v.
James Albert COONES, Cindy Lee Coones, f/k/a Cindy Lee
Jones, Appellants.
Nos. 90-8113, 90-8114.

United States Court of Appeals,

Tenth Circuit.
Jan. 3, 1992.
Rehearing Denied Feb. 14, 1992.

Stephen R. Winship, Casper, Wyo., for appellants.

Jeanne R. Lee, Senior Atty. Bankruptcy, Federal Deposit Ins. Corp.,
Denver, Colo., and Thomas M. Hogan, Casper, Wyo. (Ann S. DuRoss,
Asst. Gen. Counsel, Joan E. Smiley, Senior Counsel, Edward J. O'Meara,
Counsel, Federal Deposit Ins. Corp., Washington, D.C.), for appellee.
Before LOGAN, MOORE and BALDOCK, Circuit Judges.
LOGAN, Circuit Judge.

In these two appeals from Chapter 11 bankruptcy proceedings, debtors appeal

district court decisions (1) determining that the appellee Federal Deposit
Insurance Corporation (FDIC) possessed an enforceable security interest in
debtors' crops (appeal No. 90-8113); and (2) denying debtors' motion, made

pursuant to 11 U.S.C. 522(f), to avoid the FDIC's liens in debtors' post-1986

crops and livestock (appeal No. 90-8114). This court will review the
bankruptcy court's factual findings under a clearly erroneous standard, but we
will review the district court's legal determinations de novo. Dalton Dev.
Project # 1 v. Unsecured Creditors Comm. (In re Unioil), 948 F.2d 678, 681
(10th Cir.1991). Upon careful consideration of debtors' arguments on appeal,
we affirm.1
2

In 1986, debtors and Stockmen's Bank & Trust Company (Stockmen's) entered
into two loan transactions. Along with two promissory notes, debtors executed
security agreements which gave Stockmen's a secured interest in, among other
things,"FARM PRODUCTS: All farm products of the [debtors], whether now
owned or hereafter acquired including but not limited to (i) all poultry and
livestock and their young, products thereof and produce thereof, (ii) all crops,
whether annual or perennial, and the products thereof....

3 addition to any property generally described above, the following Collateral: ALL
In
INVENTORY OF CATTLE, HORSES, AND ALL OTHER LIVESTOCK, ALL
FARM PRODUCTS OF CATTLE, HORSES, AND ALL FARM EQUIPMENT
AND MACHINERY, OTHER EQUIPMENT AND MACHINERY, INVENTORY,
FARM PRODUCTS, HAY, GRAIN, CROPS, CROP INVENTORY AND CROP
FARM PRODUCTS, VEHICLES, ACCOUNTS, CONTRACT RIGHTS, OR
GENERAL INTANGIBLES ARISING FROM THE SALE OR DISPOSITION OF
PRODUCTS THEREOF NOW OWNED OR HEREAFTER ACQUIRED AND
WHEREVER LOCATED."
4

Appellee's Supp.App. at 231; see also id. at 239.

In October 1988, debtors jointly filed for Chapter 11 bankruptcy relief. On their
bankruptcy schedules, debtors listed as exempt property, see generally 11
U.S.C. 522, inter alia, seventy-five percent of their livestock acquired and
their crops grown after 1986. Debtors asserted this property was exempt as
personal service earnings under Wyoming law. No timely objection to the
exemption was filed by any interested party.

In February 1989, the FDIC filed a motion to prohibit debtors' use of cash
collateral. See generally 11 U.S.C. 363(e). Later in February 1989, debtors
filed an application to avoid the FDIC's liens impairing the claimed exempt
property.

Following a hearing, the bankruptcy court denied debtors' claimed exemptions,

despite the lack of a timely objection, ruling the exemptions had no valid state
law basis. See Appellants' App., doc. 1, 9-10. In a subsequent order dated June
26, 1989, the bankruptcy court denied the FDIC's motion to prohibit use of cash
collateral, but only as to the FDIC's interest in debtors' crops, ruling that the
FDIC did not have an enforceable security interest in debtors' crops. See
Appellants' App., doc. 2, 4-7. The bankruptcy court granted the FDIC's motion
to prohibit use of cash collateral insofar as it pertained to "cash collateral which
is not the proceeds of the debtors' crops." Appellee's Supp.App. at 184-85.
8

The parties filed cross-appeals from the bankruptcy court determinations. The
district court certified the question of the validity of debtors' claimed
exemptions under Wyoming law to the Wyoming Supreme Court. See
Appellee's Supp.App., 1-4. The Wyoming Supreme Court determined debtors'
personal service earnings exemption had no valid basis under Wyoming state
law. Coones v. FDIC, 796 P.2d 803, 806 (Wyo.1990).

The district court then determined that, in light of the Wyoming Supreme Court
decision, debtors were not entitled to the personal service earnings exemption,
even though the FDIC had failed to object to that exemption in a timely manner.
Coones v. FDIC, No. C89-243-K, Order on Appellants' Exemption Appeal
(D.Wyo. Dec. 5, 1990). In another order also dated December 5, 1990, the
district court reversed the bankruptcy court determination that the FDIC did not
have an enforceable security interest in debtors' crops. Coones v. FDIC, No.
C89-242-K, Order on Appellant's Crops' Security Interest Appeal (D.Wyo. Dec.
5, 1990). Debtors appeal from both of these district court determinations.

10

* The first issue presented is whether the lack of a timely objection to debtors'
claimed exemption precluded the bankruptcy court from denying that
exemption, even though the exemption has no valid state law basis.2 Section
522, however, contains an implicit requirement that the claimed exemption
have a valid statutory basis. See, e.g., Sherk v. Texas Bankers Life & Loan Ins.
Co. (In re Sherk), 918 F.2d 1170, 1174-75 (5th Cir.1990). The lack of a timely
objection will not preclude the bankruptcy court's exercise of its authority to
deny an exemption that has no legal basis. See, e.g., id. But see Taylor v.
Freeland & Kronz, 938 F.2d 420, 423 (3d Cir.), cert. granted, --- U.S. ----, 112
S.Ct. 632, 116 L.Ed.2d 602 (1991) (lack of timely objection precludes
bankruptcy court's exercise of its authority to deny an exemption).

11

Debtors argue that this court should adopt the Sixth Circuit's conclusion in
Munoz v. Dembs (In re Dembs), 757 F.2d 777 (6th Cir.1985), that failure to
object to a claimed exemption that has a good faith basis in state law will
conclusively establish the debtor's exemption. See id. at 780; see also

Halverson v. Peterson (In re Peterson), 920 F.2d 1389, 1392-94 (8th Cir.1990)
(debtor can overcome late objection only if exemption appeared in good faith to
have been valid). Even under Dembs' good faith analysis, debtors' argument
fails because their claimed exemption lacked a good faith basis under
Wyoming law.
12

In claiming their exemption, debtors relied upon the Wyoming Supreme Court
decision in Lingle State Bank v. Podolak, 740 P.2d 392 (Wyo.1987). Podolak,
however, addressed a prior state statute that did not apply to debtors' claims, see
Coones, 796 P.2d at 804-05, and which has been rewritten so that a "present
comparison is ... impracticable." Podolak, 740 P.2d at 394 n. 1. Recognizing
this, the Podolak court acknowledged that its decision "is consequently
circumscribed in future application." Id. Therefore, debtors' claimed exemption,
based upon the Wyoming Supreme Court's decision in Podolak, did not have a
good faith basis in Wyoming law.

II
13

Debtors next argue that the FDIC did not have an enforceable security interest
in debtors' crops because the security agreements failed to include a description
of the property on which the crops were grown. Wyoming law controls the
determination of the validity of the liens. See In re Martin Grinding & Mach.
Works, Inc., 793 F.2d 592, 594 (7th Cir.1986).

14

To create an enforceable security interest, Wyoming law requires, inter alia, a

security agreement, signed by the debtor, which contains a description of the
collateral. Wyo.Stat. 34.1-9-203(a)(i). If the collateral includes crops,
growing or to be grown, the security agreement must also include a description
of the land concerned. Id.; see also Citizens Nat'l Bank & Trust Co. v. Serelson
(In re Burkart Farm & Livestock), 938 F.2d 1114, 1115 (10th Cir.1991).

15

The security agreements in the instant case did not include a description of the
land upon which debtors' crops were growing or were to be grown. Rather, in
the section on the security agreements designated as "Description of Real Estate
if above Collateral is crops, growing or to be grown," the security agreements
included the language "RECORDED ON FINANCING STATEMENT
DATED MAY 16, 1986." Appellee's Supp.App., 231; see also id. at 239. Thus,
the security agreements did specifically refer to the description of land included
in the financing statements filed by Stockmen's to perfect its liens in these
crops.

16

Debtors argue, however, that the land description must be included in the

16

Debtors argue, however, that the land description must be included in the
security agreement and, therefore, reference to the financing statements cannot
provide the necessary land description. We disagree. A security agreement
need not be evidenced by a single document, but may be established through
consideration of two or more written documents. Looney v. Nuss (In re Miller),
545 F.2d 916, 918 n. 4 (5th Cir.) (applying Texas law), cert. denied, 430 U.S.
987, 97 S.Ct. 1687, 52 L.Ed.2d 382 (1977); see also, e.g., Royal Bank & Trust
Co. v. Pereira (In re Lady Madonna Indus., Inc.), 99 B.R. 536, 542
(S.D.N.Y.1989) (composite document theory of security agreements permits
finding security agreement through various loan documents) (dicta), and cases
cited therein. It is appropriate to refer to other documents to establish the
security interest unless the security agreement is facially complete and does not
refer to any other documents. See In re Lady Madonna Indus., 99 B.R. at 542.

17

The security agreements at issue in these appeals clearly incorporated the land
description included in the financing statements. Reference to the financing
statements to establish the FDIC's security interests, therefore, was not
erroneous. See Longtree, Ltd. v. Resource Control Int'l, Inc., 755 P.2d 195,
203-04 (Wyo.1988) (subsequent, unsigned document describing additional
collateral may be considered in establishing security interest created by original
security agreement, if documents express some internal connection with one
another); cf. Maxl Sales Co. v. Critiques, Inc., 796 F.2d 1293, 1298 (10th
Cir.1986) (applying Kansas law) (security agreement incorporated by reference
consignment agreement); Pontchartrain State Bank v. Poulson, 684 F.2d 704,
707 (10th Cir.1982) (applying Oklahoma law) (documents, considered
separately or taken as a whole, did not satisfy requirements of Oklahoma
U.C.C. 9-203).

18

The authorities debtors cite for the proposition that a security agreement may
not be expanded by reference to the financing statement are inapposite. Those
cases addressed situations where the creditor attempted to correct a deficiency
in the security agreement's description of collateral by referring to the financing
statement, even though the security agreement did not specifically incorporate
the description of the collateral in the financing statement by reference. See,
e.g., Mitchell v. Shepherd Mall State Bank, 458 F.2d 700, 702-04 (10th
Cir.1972) (applying Oklahoma law); In re Martin Grinding, 793 F.2d at 594-95
(applying Illinois law).

19

Debtors next argue that the FDIC's security interest in debtors' crops is not
enforceable because the security agreements' description of the land,
incorporated from the financing statements, was insufficient. "[A]ny
description of ... real estate is sufficient whether or not it is specific if it
reasonably identifies what is described." Wyo.Stat. 34.1-9-110.

"The
20 test of sufficiency of a description laid down by this section is that the
description do the job assigned to it--that it make possible the identification of the
thing described. Under this rule courts should refuse to follow the holdings ... that
descriptions are insufficient unless they are of the most exact and detailed nature...."
21

Wyo.Stat. 34.1-9-110 Official Comment.

22

The financing statements described the land by range, township and section.
See Appellee's Supp.App., 245, 246. Although a legal description of the land is
not required, cf. In re McMannis, 39 B.R. 98, 100 (Bankr.D.Kan.1983)
(applying Kansas U.C.C. 9-110), the Wyoming Supreme Court, in addressing
a similar issue, noted that "[t]he cautious creditor cannot go wrong by using a
section-township legal description, so long as it is accurate." Landen v.
Production Credit Ass'n, 737 P.2d 1325, 1329 (Wyo.1987) (quoting United
States v. Collingwood Grain, Inc., 792 F.2d 972, 975 (10th Cir.1986) (quoting
Kansas Comment to Kan.Stat.Ann. 84-9-402)).

23

Debtors, however, assert that the legal description in the financing statements is
in error because, in addition to describing debtors' property, the legal
description includes land belonging to adjoining land owners. Failure to specify
the particular pieces of a section on which the crops are growing or will be
grown, however, will not destroy an otherwise sufficient land description. Cf.
Collingwood, 792 F.2d at 974-75 (land description indicating crops growing on
160-acre tract in a particular section, but not precisely indicating location of
160-acre tract within that section, was sufficient description of land). The land
descriptions contained in the financing statements are sufficient to identify
debtors' property upon which the crops were grown.

III
24

Finally, debtors argue that, in any event, the FDIC's secured interest in postpetition crops was extinguished by the bankruptcy filing. Debtors rely upon 11
U.S.C. 552(a), which provides that "[e]xcept as provided in subsection (b) of
this section, property acquired by the estate or by the debtor after the
commencement of the case is not subject to any lien resulting from any security
agreement entered into by the debtor before the commencement of the case."
Subsection (b), however, with exceptions not relevant here, provides that

25 the debtor and an entity entered into a security agreement before the
"if
commencement of the case and if the security interest created by such security
agreement extends to property of the debtor acquired before the commencement of
the case and to proceeds, ... then such security interest extends to such proceeds, ...

acquired by the estate after the commencement of the case to the extent provided by
such security agreement and by applicable nonbankruptcy law, except to any extent
that the court, after notice and a hearing and based on the equities of the case, orders
otherwise."
26

11 U.S.C. 552(b).

27

The district court correctly determined that, because the post-petition crops
were produced with the proceeds of debtors' pre-petition crops, proceeds in
which the FDIC's security interest continued after initiation of bankruptcy
proceedings, 552 did not extinguish the FDIC's secured interest in the postpetition crops. See J. Catton Farms, Inc. v. First Nat'l Bank, 779 F.2d 1242,
1244, 1246-47 (7th Cir.1985) (applying 552(b) to use of proceeds of prepetition crop collateral, including government payments not to grow crops, to
produce post-petition crops) (dicta).

28
"[W]hen
a secured party has a pre-petition security interest in a crop in Year 1, its
security interest extends to the post-petition proceeds of that crop as well as to the
post-petition crop in Year 2 and its proceeds if the Year 2 crop is financed with the
proceeds of the Year 1 crop."
29

Unsecured Creditors Comm. v. Marepcon Fin. Corp. (In re Bumper Sales,

Inc.), 907 F.2d 1430, 1439 (4th Cir.1990) (dicta).

30

Debtors argue that "[t]here is no evidence in the appeal record that any
proceeds were ... used ... 'to create the post-petition crops.' ... For the District
Court to rely on such a position, it should have remanded the matter for further
findings." Appellants' Reply Br. at 9. In support of this argument, however,
debtors assert only that "as a practical matter it is rather doubtful that monies
advanced in May, 1986 were used to create a winter wheat crop planted in late
1988." That allegation is not sufficient to compel this court to reverse the
district court's determination.

31

The parties' remaining arguments lack merit. The judgments of the United
States District Court for the District of Wyoming are, therefore, AFFIRMED.

After examining the briefs and appellate record, this panel has determined
unanimously to honor the parties' request for a decision on the briefs without
oral argument. See Fed.R.App.P. 34(f); 10th Cir.R. 34.1.9. The cases are
therefore ordered submitted without oral argument

Bankruptcy Rule 4003(b) requires that any trustee or creditor may file an
objection to a claimed exemption within thirty days after the conclusion of the
meeting of creditors or the filing of any amendment to the listed exemptions.
Rule 4003(b) further provides that the bankruptcy court may only extend the
time to file an objection if the extension is requested within the original time
for filing the objection. See also Clark v. Brayshaw (In re Brayshaw), 912 F.2d
1255, 1256-57 (10th Cir.1990). The parties do not dispute the lack of a timely
filed objection