85 B.R. 518 (W.D.Ark. 1987), 86-5172, In re Johnson

Docket Nº:Civ. No. 86-5172.
Citation:85 B.R. 518
Party Name:In re William E. JOHNSON and Harriet M. Johnson, Debtors. John T. LEE, Trustee, Appellant, v. William E. and Harriet JOHNSON, Debtors, Appellees.
Case Date:January 08, 1987
Court:United States District Courts, 8th Circuit, Western District of Arkansas
 
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Page 518

85 B.R. 518 (W.D.Ark. 1987)

In re William E. JOHNSON and Harriet M. Johnson, Debtors.

John T. LEE, Trustee, Appellant,

v.

William E. and Harriet JOHNSON, Debtors, Appellees.

Civ. No. 86-5172.

United States District Court, W.D. Arkansas, Fayetteville Division.

January 8, 1987

Page 519

John T. Lee, pro. se. Elrod & Lee, Siloam Springs, Ark., for appellant.

Jill R. Jacoway, Fayetteville, Ark., for debtors.

MEMORANDUM OPINION

H. FRANKLIN WATERS, Chief Judge.

The trustee has appealed a ruling of the bankruptcy court holding that the cash surrender values of life insurance policies are exempt from the claims of creditors under Arkansas law. 66 B.R. 39. By way of background, we note that in accordance with the provisions of 11 U.S.C. § 522(b), Arkansas "opted out" of the federal exemptions provided by 11 U.S.C. § 522(a). In 1981 Ark.Acts No. 419 § 2(b)(7), the General Assembly directed that the proceeds of life, health, accident and disability insurance should be exempt from execution under bankruptcy proceedings, all in accordance with Ark.Stat.Ann. § 30-208. That statute, in turn, provides that:

All moneys paid or payable to any resident of this state as the insured or beneficiary designated under any insurance policy or policies providing for the payment of life ... benefits shall be exempt from liability or seizure....

The trustee argues that only "proceeds" of life insurance policies are protected, by which he means the death benefits themselves. The statute, however, does not limit the exemption to such benefits. Rather, it states that all moneys paid or payable to an insured under any insurance policy are exempt. How plain can it be but that "cash surrender values" are amounts "payable" (though not paid) to an insured (not his beneficiary) under a life insurance contract? The court believes that if the statute means what it says, then the court must determine that all such amounts are exempt, without limitation.

The parties have argued the applicability of Cluck v. Mack, 253 Ark. 769, 489 S.W.2d 8 (1973), which decided that special dividends payable to the insured not as a beneficiary, but as an investor, were not properly exempted from the claims of creditors. Interesting in this respect is that the judgment creditor in Cluck v. Mack, supra, made no argument or attempt to recover the "cash surrender value" of the debtor's policies...

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