In re Blount

• Decision Date: 16 November 2020
• Docket Number: Case No. 14-21449 (JNP)
• Citation: 624 B.R. 590
• Parties: IN RE: Robin BLOUNT, Debtor.
• Court: U.S. Bankruptcy Court — District of New Jersey

624 B.R. 590

IN RE: Robin BLOUNT, Debtor.

Case No. 14-21449 (JNP)

United States Bankruptcy Court, D. New Jersey.

Signed November 16, 2020

Filed November 17, 2020

Joseph Marchand, Bridgeton, NJ, Rosner & Tucker, PC, Vineland, NJ, for Trustee.

Seymour Wasserstrum, Law Offices of Seymour Wasserstrum, Vineland, NJ, for Debtor.

MEMORANDUM DECISION RELATED TO TRUSTEE'S OBJECTIONS TO DEBTOR'S EXEMPTIONS

JERROLD N. POSLUSNY, JR., U.S. Bankruptcy Judge

Joseph Marchand, the Chapter 7 Trustee (the "Trustee") filed a motion (the "Motion") objecting to several exemptions claimed by Robin Blount (the "Debtor"). Dkt. No. 104. The Debtor opposed the Motion. Dkt. No. 106. The Court heard argument on the Motion on August 11, 2020. For the reasons discussed below, the Court grants the Motion, finding that the Debtor may exempt assets only up to the statutory limitations, and that all of the assets at issue in this Motion are property of the estate.

Jurisdiction

The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334 and 157(a) and (b)(1). Venue is proper in this Court pursuant to 28 U.S.C. §§ 1408 and 1409. Consideration of this Motion constitutes a core proceeding under 28 U.S.C. § 157(b)(2)(B).

Background

In 2013, the Debtor initiated a personal injury action tied to a vaginal mesh product (the "Vaginal Mesh Case"). Dkt. No. 87. The following year, on June 2, 2014 (the "Petition Date"), the Debtor filed a petition under Chapter 13 of Title 11 of the United States Code (the "Bankruptcy Code"). Dkt. No. 1. In relevant part, the Debtor's schedules disclosed a savings account at Members 1st of NJ Federal Credit Union ("Members 1st") having a balance of $5.00 and a checking account at Susquehanna Bank ("Susquehanna Account") with a balance of $10.00, but did not disclose the Vaginal Mesh Case. Dkt. No. 1. The Debtor exempted the balances listed in both accounts under section 522(d)(5) of the Bankruptcy Code. Id. During the pendency of her Chapter 13 case, the Debtor was involved in an automobile accident (the "Auto Accident Case" and, with the Vaginal Mesh Case, the "Personal Injury Cases"). Dkt. No. 87. The Debtor did not amend her schedules to disclose the Auto Accident Case.

The Debtor voluntarily converted her case to Chapter 7 on July 15, 2016, and the Trustee was appointed. Dkt. No. 55 and 57. The Debtor did not amend her schedules A/B or C to disclose the Personal Injury Cases and when asked during the meeting of creditors if she had the ability to sue anyone for any reason, the Debtor responded "no." Dkt. No. 87. On October 3, 2016, the Trustee issued a final report, stating that there would be no distribution to creditors and that the remaining scheduled assets were being abandoned. The Debtor received her discharge on October 28, 2016, Dkt. No. 68. On June 14, 2017, the Debtor filed the Auto Accident Case as a personal injury action in state court.

On June 26, 2018, the Debtor's state court attorney notified the Trustee of the Vaginal Mesh Case, and the Trustee later learned of the Auto Accident Case. Dkt. No. 87. Both Personal Injury Cases have settled; the Auto Accident Case for a gross amount of $85,000, and the Vaginal Mesh Case for a net amount of $28,325.32 to the Debtor. Dkt. No. 104. The Bankruptcy Case was reopened on May 9, 2019. Dkt. No. 75. The Debtor filed amended schedules (the "Amended Schedules"), which disclosed the Personal Injury Cases, and sought to exempt the award proceeds as follows: Vaginal Mesh Case $22,975 under section 522(d)(l1)(D) and $5,350.32 under section 522(d)(5) ; and Auto Accident Case 100% of the statutory limit under section 522(d)(l1)(D) and $6,909.68 under section 522(d)(5). The Amended Schedules are otherwise substantively identical to the initial schedules. Id.

The Trustee then filed the Motion, which includes attachments showing that the Susquehanna Account held a balance of $1,821.27 on the Petition Date. Dkt. No. 104 Ex. D. Additionally, the Trustee learned that the Debtor received a $4,434 refund on her 2014 tax returns. Id. Ex. B. The Trustee argues that the estate is entitled to 50% of that amount ($2,217)¹ because the Petition Date was June 2, 2014 and the Debtor did not exempt the refund. Id. The Trustee states he learned of the Refund and the true balance of the Susquehanna Account prior to the Debtor's discharge, but did not pursue collection of the unexempted funds at that time because he was not aware of the Personal Injury Cases and believed that if he pursued those assets the Debtor would have amended her exemptions and the case would have remained a no-asset case. In effect, the Trustee concluded requiring the Debtor to amend her exemptions would have been a waste of time. Id.

The Motion raises two objections to the Debtor's claimed exemptions. Dkt. No. 104. First, the Trustee argues the Debtor may only claim an exemption under section 522(d)(l1) for one of the Personal Injury Cases - not both. Second, the Trustee argues that Debtor is exceeding the allowed exemption amount under section 522(d)(5), because she is not accounting for the entire balance in the Susquehanna Account or the Refund. Id. Specifically, the Trustee argues that when adding together the full $1,821.27 balance of the Susquehanna Account, the Refund, and the payout from the Vaginal Mesh Cash and other assets exempted by the debtor under 522(d)(5), the Debtor's attempt to exempt $6,909.68 of the Auto Accident Case exceeds the statutory cap.² Id.

The Debtor's opposition argues that section 522(d)(l1)(D) permits a debtor to exempt multiple payments of the statutory exemption amount if they result from multiple personal injuries. Dkt. No. 106. As to the Trustee's second objection, the Debtor argues that the Trustee abandoned the Refund and the Susquehanna Account under section 554(c) of the Bankruptcy Code when the case was closed and, therefore, they are no longer property of the estate. Id.

Discussion

There are two issues before the Court. The first relates to the statutory cap of $22,975³ under section 522(d)(11)(D) of the Bankruptcy Code. The Court must determine whether section 522(d)(11)(D) permits the Debtor to claim two exemptions of $22,975 for two separate personal injury actions, or whether the Debtor is limited to only a single exemption of up to $22,975, regardless of the number of injuries suffered. The second issue is whether the Trustee may administer the unexempted funds in the Susquehanna Account and the Refund that were not listed on the Debtor's initial schedules, or if these assets were permanently abandoned by the Trustee under section 554(c) upon the closing of the case.⁴

A. Section 522(d)(11)(D) Exemptions

Courts are split on whether a debtor may claim multiple section 522(d)(11)(D) exemptions on account of multiple personal injury recoveries. Some courts have allowed a debtor to claim an exemption for each separate incident while others have limited the exemption to one total amount. Compare Christo v. Yellin (In re Christo), 192 F.3d 36 (1st Cir. 1999), and In re Phillips, 485 B.R. 53 (Bankr. E.D.N.Y. 2012), with In re Comeaux, 305 B.R. 802, 806-07 (Bankr. E.D. Tex. 2003), and In re Daly, 344 B.R. 304 (Bankr. M.D. Pa. 2005).

The Court begins its inquiry by reviewing the language of the statute. See Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 409, 113 S.Ct. 2151, 124 L.Ed.2d 368 (1993). "Courts must presume that a legislature says in a statute what it means and means in a statute what it says there. When the words of a statute are unambiguous, then, the first canon is also the last: ‘judicial inquiry is complete.’ " Connecticut Nat'l Bank v. Germain, 503 U.S. 249, 253-54, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992). Thus, courts apply the plain meaning of a statute, unless the statute is ambiguous or applying the unambiguous plain meaning would yield an absurd result. Hartford Underwriters Ins. Co. v. Union Planters Bank, Nat'l Ass'n, 530 U.S. 1, 6, 120 S.Ct. 1942, 147 L.Ed.2d 1 (2000). Further, "the plainness or ambiguity of statutory language is determined by reference to the language itself, the specific context in which that language is used, and the broader context of the statute as a whole." Robinson v. Shell Oil Co., 519 U.S. 337, 341, 117 S.Ct. 843, 136 L.Ed.2d 808 (1997) (citing Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469, 477, 112 S.Ct. 2589, 120 L.Ed.2d 379 (1992) ). If a statute is ambiguous, courts use canons of statutory construction, and if ambiguity remains may resort to legislative history. United States v. Colasuonno, 697 F.3d 164, 173 (2d Cir. 2012) (citing Daniel v. Am. Bd. of Emergency Med., 428 F.3d 408, 423 (2d Cir. 2005) (citations omitted); see also Florida Dep't of Revenue v. Piccadilly Cafeterias, Inc., 554 U.S. 33, 47, 128 S.Ct. 2326, 171 L.Ed.2d 203 (2008) ). Therefore, the Court begins by reviewing section 522(d)(11)(D) of the Bankruptcy Code, which allows an exemption for:

(11) The debtor's right to receive, or property that is traceable to -

* * *

(D) a payment, not to exceed $22,975, on account of personal bodily injury, not including pain and suffering or compensation for actual pecuniary loss, of the debtor or an individual of whom the debtor is a dependent....

11 U.S.C. § 522(d)(11).

As with other courts that have considered section 522(d)(11)(D), the Court concludes that this section is ambiguous and subject to more than one interpretation. See Christo, 192 F.3d at 38 ; In re Daly, 344 B.R. 304, 314 (Bankr.M.D.Pa.2005) (citing Christo, 192 F.3d at 40-41 (Gibson, J., dissenting)) ("The statute simply does not say whether ‘a payment ... on account of personal bodily injury’ refers to one or more such payment.").

In considering section 522(d)(11)(D), the court in Christo determined that "[w]hile there is some ambiguity, the more natural reading is that there is a single exemption." Christo, 192 F.3d at 38. A portion of the First Circuit's explanation relied on the premise the opposing interpretation would yield an...