Gutterman v. First Nat. Bank of Anchorage
| Decision Date | 13 July 1979 |
| Docket Number | No. 3996,3996 |
| Parties | Michael GUTTERMAN, Appellant, v. The FIRST NATIONAL BANK OF ANCHORAGE, Appellee. |
| Court | Alaska Supreme Court |
Before RABINOWITZ, C. J., and CONNOR, BOOCHEVER, BURKE and MATTHEWS, JJ.
The First National Bank of Anchorage obtained a default judgment against Michael Gutterman. That judgment provided that three paintings owned by Gutterman, then in the possession of an art dealer, were to be delivered to the custody of the clerk of the superior court and sold at an execution sale, with the proceeds to be applied toward satisfaction of the judgment.
Prior to the execution sale, Gutterman notified the court of his claim, under AS 09.35.080(a)(2), of an exemption from execution in the paintings in the amount of $300. The sale of the paintings was postponed at the Bank's request, and the Bank subsequently filed a motion to disallow the claim of exemption in the superior court.
The relevant statutory section, AS 09.35.080(a)(2), provides:
Exemptions (a) The following property is exempt from execution, except as otherwise specifically provided when selected and reserved by the judgment debtor or his agent at the time of the levy, or as soon after levy and before sale as the existence of the levy becomes known to him:
(2) books, pictures, and musical instruments belonging to the judgment debtor not to exceed $300 in value . . . .
The parties stipulated that each of the paintings in question was worth more than the $300 exemption provided in the statute. The question thus presented to the superior court was whether Gutterman was entitled to the benefit of the exemption provision and to receive $300 from the proceeds of the sale of the paintings. The superior court held that "pictures" exceeding $300 in value are not property exempt from execution by the terms of the statute and that Gutterman therefore had no exemption right in the proceeds of the execution sale. 1 It is from this decision of the superior court that Gutterman brings this appeal. 2
In order to properly discuss the question raised by Gutterman as to the nature of the exemption granted by AS 09.35.080(a)(2), it is necessary to briefly place exemption laws in their social and historical context. 3 Exemption laws emerged from bankruptcy law policies concerned with both maintaining a certain basic level of economic vitality in individual debtors and reasonably protecting creditors' rights to satisfaction of legally incurred debt.
In order to protect debtors and their families from pauperism and to facilitate rehabilitation, state laws universally provide for the exemption of certain property, or a certain value of property, from seizure for general debts. The laws range in liberality from the most spartan subsistence standard to the extremes reflected in unlimited exemptions for homesteads and life insurance. 4
A debtor's property which is not exempted from execution in satisfaction of debt by applicable state or federal laws is subject to the rights of creditors. 5
While the scope of state exemption laws varies considerably among the states, certain categories of debtors' property are provided some degree of exemption in most states. Prominent among state exemptions is the homestead or residence exemption, which exempts the debtor's homestead from execution sale either entirely or to the extent of a certain specified value. 6 Among the other forms of debtors' property provided varying degrees of protection from creditors are life insurance policies and proceeds; earnings and subsistence allowances; and various types of non-wage income, including welfare payments, retirement income, alimony and child support, or other compensation payments. 7 In addition to these exemptions, some states, though not Alaska, provide general dollar amount exemptions, with the particular assets to be included in the dollar amount left to the debtor's choice. 8
The exemption which is the subject of this appeal is one of the specific personal property exemptions provided for in AS 09.35.080(a). 9 Personal and household property exemptions such as those provided in AS 09.35.080(a)(2)
are designed to ensure that debtors will have necessary items for living in reasonable comfort and for earning a living. The statutes vary as to the types of items that are exempt and as to the amount of their exempt value. . . .
In addition to useful household items, the exemption statutes also commonly apply to more personalized, arguably less necessary, items such as family pictures, Bibles, wedding rings and other jewelry, books, historical and scientific collections, guns, church pews, and cemetery lots. The states also allow debtors and members of their families to keep all of their clothing or such as is necessary. 10
Alaska's limited value exemption for "pictures" thus represents a legislative judgment that such items are among the amenities of life in which a debtor may preserve at least a limited investment. 11
Gutterman does not assert a right to preserve the paintings themselves, which have in fact been sold, but argues that he nonetheless should retain the benefit of the $300 exemption granted to debtors owning "pictures." Resolution of this issue rests on an interpretation of the statutory phrase in AS 09.35.080(a)(2) granting an exemption for "pictures . . . belonging to the judgment debtor not to exceed $300 in value." As the superior court's order denying an exemption recognized, the meaning of this statutory phrase is neither clear nor unambiguous. 12
It is an accepted general rule that "exemption laws are remedial in character and should be liberally construed in favor of the debtor." 13 We therefore conclude that the statute should not be interpreted in a way which completely eliminates a debtor's exemption rights in an item of property within an exempt category because that item's value exceeds the statutory allowance. Instead, we agree with the reasoning and conclusion advanced by one commentator on exemption laws:
The few statutes which regulate the forced sale of exempt personalty worth more than the statutory maximum provide that the exempt amount is to be paid to the debtor from the proceeds of sale prior to any payment to the execution creditor. The exemption clearly should extend to the proceeds of an involuntary sale of personalty. Otherwise, the exemption is meaningless whenever the value of the personalty exceeds the statutory allowance, since the levying creditor immediately could order the sheriff to pay the total amount to him. Moreover, if the sheriff is forced to sell exempt property, it is likely that the debtor has no nonexempt property. This is a situation where the protection of the exemption laws is needed and appropriate. Accordingly, the courts should afford the debtor a reasonable time to purchase other property with the proceeds. 14
This is the approach adopted by the Uniform Exemptions Act. The comment to that Act's provision defining a debtor's personal property exemptions, Section 8, makes it
clear that if an item within any of the categories listed has a value exceeding $500, the individual is nonetheless entitled to an exemption in the items to the extent of $500, and the creditor is entitled to levy only on the excess value.
However, in both the Uniform Exemptions Act and the revised federal Bankruptcy Act the statutory language employed more clearly reveals the intention to extend the benefit of limited value exemptions to debtors possessing "excess value" items 15 than does the more ambiguous language of AS 09.35.080(a) (2).
More helpful to the precise question of statutory interpretation presented here is Levin v. Mauro, 16 interpreting a Massachusetts exemption statute worded much like AS 09.35.080(a)(2). The Massachusetts statute provided an exemption in an automobile "not exceeding seven hundred dollars in value;" 17 the Alaska statute provides an exemption in pictures "not to exceed $300 in value." The Levin court, after noting the ambiguity of this language 18 and the remedial purpose of exemption statutes, concluded that the Massachusetts statute should be construed to allow "a debtor owning a car in excess of the limit . . . to turn it over to the trustee for liquidation . . . (and) to purchase another vehicle with $700 derived from liquidation proceeds." 19 In reaching this conclusion, the court rejected as "legitimate, but by no means conclusive," the argument that the Massachusetts legislature had expressly provided setoff schemes with regard to other exemptions and that "if the legislature wanted a setoff it knew how to write one." 20
We find this analysis and authority persuasive and hold that Gutterman should receive the $300 amount of the exemption from the proceeds of the sale of the paintings. A contrary result would be unreasonable because it would provide no exemption for a debtor whose picture has a value of $300.01 and a full exemption for a debtor whose picture has a value of $300.01 and a full exemption for a debtor owning the same type of property worth just one penny less. 21 We think our resolution of this question fairly balances the rights of debtors and creditors, since their respective interests in such exempt categories of property will be uniform and not dependent on very small differences in the value of such items of property.
The $300 exemption benefit provided by AS 09.35.080(a)(2) does not, however, confer an unrestricted right to that portion of the proceeds from the execution sale. The terms of AS 09.35.080(a)(7) provide that "in the event the article of property has been sold or exchanged the proceeds of the sale or the article for which it was exchanged is not exempt from execution." Thus, the $300 in proceeds to which Gutterman is entitled is not in itself...
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