Silliman v. Cassell (In re Cassell)

• Decision Date: 03 August 2012
• Docket Number: No. 11–13115.,11–13115.
• Citation: 23 Fla. L. Weekly Fed. C 1373,688 F.3d 1291
• Parties: In re: Lou Ann CASSELL, Debtor. Robert B. Silliman, Chapter 7 Trustee, Plaintiff–Appellant, v. Lou Ann Cassell, Defendant–Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

688 F.3d 1291

23 Fla. L. Weekly Fed. C 1373

In re: Lou Ann CASSELL, Debtor.

Robert B. Silliman, Chapter 7 Trustee, Plaintiff–Appellant,

v.Lou Ann Cassell, Defendant–Appellee.

No. 11–13115.

United States Court of Appeals,Eleventh Circuit.

Aug. 3, 2012.

Martha A. Miller, Martha A. Miller, PC, Atlanta, GA, for Plaintiff–Appellant.

Eric Edward Thorstenberg, Law Office of Eric Thorstenberg, Atlanta, GA, for Defendant–Appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before CARNES, MARTIN, and JORDAN, Circuit Judges.

CARNES, Circuit Judge:

This is an appeal in a bankruptcy case that turns on the interpretation of a Georgia statutory provision exempting certain annuities from bankruptcy estates. The questions presented are sufficiently unsettled, important, and likely to recur that we believe the best course is to certify them to the Georgia Supreme Court, which is the one true and final arbiter of Georgia law. See Mullaney v. Wilbur, 421 U.S. 684, 691, 95 S.Ct. 1881, 1886, 44 L.Ed.2d 508 (1975) (noting that the United States Supreme Court “repeatedly has held that state courts are the ultimate expositors of state law”); Blue Cross & Blue Shield of Ala., Inc. v. Nielsen, 116 F.3d 1406, 1413 (11th Cir.1997) (“The final arbiter of state law is the state supreme court ....”).

I.

In late 2008, Cassell inherited $220,000 from her aunt. At that time, both Cassell and her wholly owned company, J&L Arborists, LLC, were insolvent. Cassell was still able to pay both her personal debts and the company's debts as they came due, at least for a while. After consulting with attorneys and accountants, she used her $220,000 inheritance to purchase a single-premium fixed annuity on May 1, 2009. Cassell was 65 years old at that time. She began receiving monthly payments of $1,389.14 on June 1, 2009, and under the annuity contract she is scheduled to receive those payments for the rest of her life. The contract also guarantees the payments for ten years regardless of when Cassell dies. She designated her children as the beneficiaries of the payments if she dies within the ten-year guarantee period.

On May 11, 2010, a year after she had purchased the annuity, Cassell filed a Chapter 7 bankruptcy petition (as did her company). She included the annuity as an asset in her Schedule B disclosures, and in her Schedule C filing she listed it as exempt property under Ga.Code Ann. § 44–13–100(a)(2)(E). That Georgia statutory provision permits a debtor to exempt from her bankruptcy estate “annuity” payments if the payments are both “on account of ... age” and “reasonably necessary for the support of the debtor.” Id.

The trustee objected, contending that Cassell's annuity is nonexempt because it does not meet the requirements of the statute. The trustee argued that the word “annuity” in the Georgia exemption statute has a special meaning and not every investment or insurance product labeled as an annuity qualifies as one under the statute. The trustee asserted that Cassell's annuity does not qualify under Ga.Code Ann. § 44–13–100(a)(2)(E) because: (1) Cassell purchased it with funds she inherited instead of with her salary or wages; (2) she did not intend for the payments to substitute for her wages; (3) she exercised too much control over it; and (4) the circumstances suggest she purchased it as a prebankruptcy planning measure. According to the trustee, the payments Cassell receives are not “on account of ... age” because she chose to begin receiving them immediately, and the fact that she was 65 when she purchased the annuity is not enough to make the payments on account of age. Finally, the trustee argued that the payments are not “reasonably necessary” for Cassell's support because she is self-sufficient and was not supported by her aunt.

The bankruptcy court held that Cassell's annuity is an “annuity” within the meaning of the Georgia bankruptcy exemption statute. The court based that conclusion on findings that: when Cassell purchased it she intended for the payments she would receive to substitute for wages; the payment option she selected reflected her intent to obtain income for the duration of her life; the annuity was not prebankruptcy planning; and she did not have inappropriate control over the corpus. The court also decided that the payments were “on account of age” due to the fact that she had purchased ... the annuity because of her age. The court did not decide whether the payments were reasonably necessary for Cassell's support, believing that it lacked sufficient evidence to make that determination.¹

The trustee appealed the bankruptcy court's order to the district court, which also concluded that Cassell's annuity qualified as an “annuity” for the purposes of the Georgia bankruptcy exemption. The district court agreed with the bankruptcy court that the annuity payments are on account of Cassell's age because her age had motivated her to buy the annuity. The district court affirmed as to the issues that the bankruptcy court had addressed but remanded the case, leaving it for the bankruptcy court to decide in the first instance whether the annuity payments are reasonably necessary for Cassell's support.

Instead of waiting to litigate the reasonably necessary issue in the bankruptcy court, the trustee appealed to this Court, conceding that the annuity payments are reasonably necessary for Cassell's support.² Appellant Br. 10. The trustee hangs his appeal on the contentions that Cassell's annuity is not an “annuity” within the meaning of the Georgia exemption statute and that, even if it is, the annuity payments are not made “on account of ... age.”

II.

We review de novo the legal determinations of the bankruptcy court and the district court, In re Garner, 663 F.3d 1218, 1219 (11th Cir.2011), but we review only for clear error the bankruptcy court's factfindings, In re Mitchell, 633 F.3d 1319, 1326 (11th Cir.2011). The party objecting to an exemption, here the trustee, bears the burden of showing that the exemption is improper. SeeFed. R. Bankr.P. 4003(c).

The Bankruptcy Code allows a debtor to exempt certain property from the bankruptcy estate, see11 U.S.C. § 522(b)(1), and it lists categories of property eligible for exemption, see id. § 522(b)(2), (d). Individual states, however, may opt out of the exemptions provided in the Bankruptcy Code and provide their own list of exemptions. See id. § 522(b)(2). Georgia is one of the states that has done that. SeeGa.Code Ann. § 44–13–100.

Cassell contends that her annuity payments are exempt from inclusion in the bankruptcy estate under this provision of the Georgia exemption statute:

(a) ... [A]ny debtor who is a natural person may exempt ... for the purposes of bankruptcy, the following property:

...

(2) The debtor's right to receive:

...

(E) A payment under a pension, annuity, or similar plan or contract on account of illness, disability, death, age, or length of service, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor ....

Id. § 44–13–100(a)(2)(E). To be exempt under that provision Cassell's annuity must meet three requirements. Cf. Rousey v. Jacoway, 544 U.S. 320, 325–26, 125 S.Ct. 1561, 1566, 161 L.Ed.2d 563 (2005). First, it must be an “annuity” as that term is used in the Georgia statute.

Ga.Code Ann. § 44–13–100(a)(2)(E). Second, the annuity payments to Cassell must be “on account of ... age.”³Id. Third, the payments must be “reasonably necessary to the support of the debtor.” Id. Because the trustee concedes that the third requirement is met, we turn to the other two.

A.

As for the first requirement, neither party points to any decisions of the Georgia courts determining exactly what an “annuity” is for purposes of Ga.Code Ann. § 44–13–100(a)(2)(E), and we have found none. So we look to basic principles of statutory construction and decisions analyzing analogous exemptions.

Statutory construction under Georgia law starts with the familiar rule that we are required “to construe a statute according to its terms [and] to give words their plain and ordinary meaning.” Slakman v. Cont'l Cas. Co., 277 Ga. 189, 587 S.E.2d 24, 26 (2003). The plain meaning of “annuity” is “[a]n obligation to pay a stated sum, usu[ally] monthly or annually, to a stated recipient.” Black's Law Dictionary 105 (9th ed.2009); see also NationsBank of N.C., N.A. v. Variable Annuity Life Ins. Co., 513 U.S. 251, 255, 115 S.Ct. 810, 812, 130 L.Ed.2d 740 (1995) (“Annuities are contracts under which the purchaser makes one or more premium payments to the issuer in exchange for a series of payments, which continue either for a fixed period or for the life of the purchaser or a designated beneficiary.”). A “fixed annuity” is “[a]n annuity that guarantees fixed payments, either for life or for a specified period.” Black's Law Dictionary 105; see also id. (defining “annuity” as alternatively meaning “a right, often acquired under a life-insurance contract, to receive fixed payments periodically for a specified duration”).

Other Georgia statutes define “annuity” in a similar way. See, e.g.,Ga.Code Ann. § 33–28–1(1) (“ ‘Annuity’ means a contract by which one party in return for a stipulated payment or payments promises to pay periodic installments for a stated certain period of time or for the life or lives of the person or persons specified in the contract.”); id. § 47–2–1(3) ( “ ‘Annuity’ means annual payments for life derived from the accumulated contributions of a member.”); id. § 47–3–1(3) (same). And at least one Georgia appellate decision has defined “annuity” the same way in another context. See Wolfe v. Breman, 69 Ga.App. 813, 26 S.E.2d 633, 637 (1943) ( “ ‘Annuity’ has been defined in general terms as technically a yearly payment of certain sum or money, granted another in fee for life or years, but in broader sense as fixed sum granted or bequeathed and payable periodically, but not necessarily annually,...