Hoult v. Hoult

• Decision Date: 22 June 2004
• Docket Number: No. 02-2128.,02-2128.
• Parties: Jennifer HOULT, Plaintiff, Appellee, v. David Parks HOULT, Defendant, Appellant.
• Court: U.S. Court of Appeals — First Circuit

373 F.3d 47

Jennifer HOULT, Plaintiff, Appellee, v. David Parks HOULT, Defendant, Appellant.

No. 02-2128.

United States Court of Appeals, First Circuit.

Heard May 6, 2004.

Decided June 22, 2004.

COPYRIGHT MATERIAL OMITTED

Jordan L. Shapiro, with whom Edward J. Collins, Eric L. Shwartz, and Shapiro & Hender were on brief, for appellant.

Laura D'Amato, with whom Adrienne M. Markham, Kevin P. O'Flaherty, Pamela L. Signorello, Ellen C. Meyer, and Goulston & Storrs, P.C. were on brief, for appellee.

Before TORRUELLA, LYNCH, and LIPEZ, Circuit Judges.

LYNCH, Circuit Judge.

On July 1, 1993, a federal jury in the district of Massachusetts awarded Jennifer Hoult a $500,000 verdict against her father, David Hoult, for sexually abusing her throughout her childhood. The verdict was affirmed on appeal in Hoult v. Hoult, 57 F.3d 1, 2 (1st Cir.1995). This case arises from Jennifer's attempt to collect on that judgment, which, almost eleven years later, has still not been paid in full.

On May 13, 2002, the district court found that David had fraudulently conveyed over $130,000 in assets to avoid paying the judgment. Two weeks later, on May 30, it entered an order requiring him to deposit all his income in a designated Massachusetts bank account and to limit his withdrawals from that account to $2,900 per month, a sum meant to cover his reasonable living expenses. David did not appeal from that order. He later moved in the district court to strike from the order social security benefits and Employee Retirement Income Security Act (ERISA) pension benefits that he receives, arguing principally that federal statutes prohibit the alienation of each of those benefits. See 42 U.S.C. § 407(a) (social security); 29 U.S.C. § 1056(d)(1) (ERISA). The court denied his motion. David, who has since been found in civil and criminal contempt for refusing to comply with the order, now appeals from that denial.

We find that the district court properly denied the motion to strike as to ERISA benefits. ERISA's anti-alienation provision does not apply where, as here, the funds have already been disbursed to the plan beneficiary. In so holding, we join four other circuits and disagree with one.

More difficult questions are raised by the court's refusal to strike social security benefits from the order, but we need not resolve those questions here. The parties stated to the district court that neither had any objection to an arrangement that would exempt David's social security benefits from the order but would reduce his $2,900 monthly withdrawal limit by the amount of his monthly social security check (about $1,400 per month). We confirmed this at oral argument. We affirm the denial of the motion to strike the ERISA pension benefits and remand with instructions to modify the order as to social security benefits.

I.

On July 29, 1993, four weeks after the verdict, Jennifer moved for a preliminary injunction barring David and his current wife (not Jennifer's mother) from transferring David's assets except as necessary for ordinary living expenses. Jennifer alleged that she had discovered that after she had filed suit in July 1988, David had started transferring his assets to protect them from a potential judgment. The district court granted the injunction on August 4. David did not appeal that order.

On September 7, 1994, Jennifer filed a supplemental complaint against David and his wife for fraudulent conveyance and civil contempt. A five-day bench trial was held on the fraudulent conveyance claims in January 1996.¹

In November 1996, before judgment had entered in the fraudulent conveyance trial, Jennifer learned that David had retired from his position as a senior research associate at the Massachusetts Institute of Technology (MIT) and had begun receiving approximately $4,800 in ERISA pension benefits from MIT each month.² On January 27, 1997, she moved to modify the August 4, 1993 preliminary injunction to require, inter alia, that David deposit his monthly ERISA pension check in a designated bank account and limit his withdrawals from that account to $1,700 per month (which, according to his testimony in the fraudulent conveyance trial, was the amount that he contributed each month to his and his wife's living expenses). Her motion did not mention social security benefits. The district court said that it would allow the motion and requested Jennifer's counsel to file a proposed form of order.

Before the order was issued and before judgment entered in the fraudulent conveyance trial, David filed a voluntary petition under Chapter 7 of the Bankruptcy Code, 11 U.S.C. §§ 101 et seq., which automatically stayed the fraudulent conveyance proceedings. See 11 U.S.C. § 362. The bankruptcy court ruled on July 2, 1999 that David's MIT pension was not the property of his bankruptcy estate. It also held on October 29, 1999 that David's judgment debt to Jennifer and interest on that debt were nondischargeable. David appealed both rulings. His appeals were dismissed for lack of prosecution.

On November 22, 1999, Jennifer alerted the district court to the bankruptcy court's rulings and renewed her request to modify the August 4, 1993 order. She again did not mention social security benefits in her motion. David opposed the motion. First, he argued that Florida, not Massachusetts, law applied because he was a Florida resident and maintained a Florida residence in addition to his home in Massachusetts. He contended that Fla. Stat. chs. 222.21(2)(a) and 222.14 exempted his ERISA pension benefits from the claims of all creditors. Second, he argued that the order would effectively be an execution of judgment and that under Fed.R.Civ.P. 4.1, a district court sitting in Massachusetts did not have the authority to execute on the assets of a Florida resident. Finally, he argued that the proposed order would violate ERISA's anti-alienation provision, which states that "[e]ach pension plan shall provide that benefits provided under the plan may not be assigned or alienated." 29 U.S.C. § 1056(d)(1).

On May 13, 2002, the court entered its findings of fact and conclusions of law as to the fraudulent conveyance claims, finding that David had fraudulently conveyed over $130,000 in assets.³ Two weeks later, on May 30, 2002, the court inserted the following language into the August 4, 1993 preliminary injunction:

1. David Hoult shall place all monies, income and funds he receives from any source in a single Massachusetts's [sic] bank account in his name only (the "Account") on or before June 14, 2002;

2. David Hoult shall not make any withdrawals from the Account except for $2,900 per month; and

3. David Hoult shall provide Plaintiff's attorney ... with (i) the name of the bank and the account number of the Account; (ii) a copy of each check or receipt which documents monies or income he receives; and (iii) a copy of the monthly statement of activity (the "Monthly Statement") relative to the Account.

The order made no exception for either David's social security or his ERISA pension benefits. Indeed, social security benefits may have been included without the court being aware that "all income" included social security payments.

David did not appeal the May 30 order. Initially, he simply refused to comply with the order and was held in contempt. After he began to comply on July 3, 2002, the court purged him of that contempt. Then, on July 20, 2002, twenty days after the time for filing an interlocutory appeal from the May 30 order had expired, see Fed. R.App. P. 4(a)(1)(A), David filed a motion with the district court to strike social security and ERISA pension benefits from the order. In that motion, he stated, "The instant motion is directed only to social security and pension benefits. Defendant recognizes that the [May 30 order] remains effective with respect to all other `monies, income or funds' he receives from any other source." As to his ERISA benefits, David reiterated his earlier arguments under Florida law and under ERISA's anti-alienation provision.⁴ He also argued that, as written, the order violated the anti-alienation provision of the Social Security Act, which provides that "none of the moneys paid or payable or rights existing under this title shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law." 42 U.S.C. § 407(a). This was the first time the issue of social security benefits was argued to the court.

Jennifer defended the order as to the ERISA benefits, arguing, inter alia, that ERISA's anti-alienation provision does not prevent alienation of benefits after they have been distributed to beneficiaries and that David's citation to Florida law was inapposite because Massachusetts law, rather than Florida law, applied. As to the social security benefits, Jennifer argued that the order did not violate the Social Security Act's anti-alienation provision because it did not "attach" David's social security income but merely required him to deposit it in a designated bank account for monitoring. She said that she "would not object, however, if concrete proof of the amount of his social security payment is provided, to excluding that amount from the required income deposit and, concomitantly, reducing the monthly amount David may withdraw by that same amount." David's social security payment is about $1,400 per month; the May 30 order allowed him to withdraw $2,900 per month.

At a hearing on David's motion on August 2, 2002, the district court asked David's counsel whether David had any objection to Jennifer's proposal. He said that David did not. In the end, though, the court decided that it was not necessary to adopt Jennifer's proposal and, instead, simply denied David's motion. The court ruled that the order did not need to be altered as to social security benefits, reasoning that David's disposal of his social security benefits was not restrained...