In re Brown

• Decision Date: 19 January 1989
• Docket Number: 88-03558-C and 88-03057-C.,88-00270-C,88-02365-C,88-02521-C,Bankruptcy No. 88-01563-C,88-03483-C,88-02806-C,88-02748-C,88-03681-C,87-03397-C,88-02916-C
• Citation: 95 BR 216
• Parties: In re Ronald Lee BROWN and Dorothy Lee Brown, Debtors. In re Johnny Darrel CARTWRIGHT and Orvella Rose Cartwright, Debtors. In re Edward Oliver DALTON and Frances Gail Dalton, Debtors. In re Frederick DARLING and Vivian Darling, Debtors. In re Cheryl Ann JOHNSON, Debtor. In re Donna Marie JONES, Debtor. In re Kathryn Elaine McAFEE, Debtor. In re John L. McKNIGHT and Michele McKnight, Debtors. In re Jaydee PARKS and Betty Ann Parks, Debtors. In re Carol Denise SCOTT, Debtor. In re Tim Allen GARRISON and Brenda Kay Garrison, Debtors. In re Burr SEAGRAVES and Gloria Seagraves, Debtors.
• Court: U.S. Bankruptcy Court — Northern District of Oklahoma

95 B.R. 216 (1989)

In re Ronald Lee BROWN and Dorothy Lee Brown, Debtors In re Johnny Darrel CARTWRIGHT and Orvella Rose Cartwright, Debtors In re Edward Oliver DALTON and Frances Gail Dalton, Debtors In re Frederick DARLING and Vivian Darling, Debtors In re Cheryl Ann JOHNSON, Debtor. In re Donna Marie JONES, Debtor. In re Kathryn Elaine McAFEE, Debtor. In re John L. McKNIGHT and Michele McKnight, Debtors. In re Jaydee PARKS and Betty Ann Parks, Debtors. In re Carol Denise SCOTT, Debtor. In re Tim Allen GARRISON and Brenda Kay Garrison, Debtors. In re Burr SEAGRAVES and Gloria Seagraves, Debtors.

Bankruptcy Nos. 88-01563-C, 87-03397-C, 88-02365-C, 88-02748-C, 88-02521-C, 88-00270-C, 88-03681-C, 88-03483-C, 88-02916-C, 88-02806-C, 88-03558-C and 88-03057-C.

United States Bankruptcy Court, N.D. Oklahoma.

January 19, 1989.

David E. Charney, Owasso, Okl., for Donna Marie Jones.

T.H. Wagenblast, Tulsa, Okl., for Ronald Lee Brown, Dorothy Lee Brown, Frederick Darling and Vivian Darling.

Brian W. Huckabee, Tulsa, Okl., for Johnny Darrel Cartwright and Orvella Rose Cartwright.

Scott W. Bradshaw, Tulsa, Okl., for Cheryl Ann Johnson.

David L. Noss, Tulsa, Okl., for Jaydee Parks and Betty Ann Parks.

Ralph Grabel, Tulsa, Okl., for Kathryn Elaine McAfee, Tim Allen Garrison and Brenda Kay Garrison.

Kenneth V. Todd, Tulsa, Okl., for Carol Denise Scott.

Fred W. Woodson, Tulsa, Okl., trustee.

James A. Hogue, Sr., Tulsa, Okl., for trustee, Fred W. Woodson.

Kenneth L. Stainer, trustee, Tulsa, Okl., for Tim Allen Garrison and Brenda Kay Garrison.

Scott P. Kirtley, trustee, Tulsa, Okl., for Burr Seagraves, Gloria Seagraves, Frederick Darling and Vivian Darling.

Emily Kay Bales, Tulsa, Okl., for Burr Seagraves and Gloria Seagraves.

David A. Coulter, Broken Arrow, Okl., for John L. McKnight and Michele McKnight.

Kurt M. Kennedy, Tulsa, Okl., for Edward Oliver Dalton and Frances Gail Dalton.

MEMORANDUM AND OPINION

STEPHEN J. COVEY, Bankruptcy Judge.

The above-named debtors have heretofore filed for relief under Chapter 7 of the Bankruptcy Code. All of the debtors claimed as exempt their interest in pension benefit plans maintained by their employers. It has been stipulated to by all parties that all of the pension benefit plans are qualified under the Employee Retirement Income Security Act of 1974, 29 U.S.C.Ann. § 1001 et seq. ("ERISA"). The trustee has objected to the claims of exemptions.

The issue to be decided is whether the interest of the debtors in these plans are exempt under the exemption statutes of the State of Oklahoma or under nonbankruptcy federal statutes.¹ There are two Oklahoma exemption statutes that apply in the present situation. They are in part as follows:

Okla.Stat.Ann. tit. 31, § 1(A)(20) (1987) Property exempt from attachment, execution or other forced sale — Bankruptcy proceedings

. . . any interest in a retirement plan or arrangement qualified for tax exemption purposes under present or future Acts of Congress; provided, such interest shall be exempt only to the extent that contributions by or on behalf of a participant were not subject to federal income taxation to such participant at the time of such contributions, plus earnings and other additions thereon; provided . . . "Retirement plan or arrangement qualified for tax exemption purposes" shall include without limitation, trusts, custodial accounts, insurance, annuity contracts and other properties and rights constituting a part thereof. By way of example and not by limitation, retirement plans or arrangements qualified for tax exemption purposes permitted under present Acts of Congress include defined contribution plans and defined benefit plans as defined under the Internal Revenue Code ("IRC"), individual retirement accounts, individual retirement annuities, simplified employee pension plan, Keogh plans, IRC Section 403(a) annuity plans, IRC Section 403(b) annuities, and eligible state deferred compensation plans governed under IRC Section 457. . . .

Okla.Stat.Ann. tit. 60, §§ 327 and 328 (1953)

RETIREMENT, PENSION OR PROFIT SHARING PLAN

Provisions against alienation or encumbrance

Any such plan, trust or contract may provide against the alienation or encumbrance of the interest of any person therein and further provide that no interest therein shall be subject to garnishment, attachment, execution or the claims of creditors of the persons having an interest therein.

Power to alienate or encumber — Exemption from process and claims

Any person having an interest in any such plan, trust or contact, or in any property or any right subject to any such plan, trust or contract, containing the provisions set forth in the next preceding section of this Act,1 or provisions of substantially the same force and effect, shall have no right to alienate or encumber such right or interest in any manner contrary thereto, and the interest of any such person in any such plan, trust or contract, or in any property or any right subject to any such plan, trust or contract, shall be exempt from garnishment, attachment, execution or the claims of creditors.

1 Section 327 of this title.

The court holds that the debtor's interest in their ERISA pension plans are exempt under these Oklahoma statutes if said statutes are a valid exercise of state power. In order to decide this question consideration must first be given to the pre-emption provisions of § 514(a) of the ERISA code which provide that the ERISA code "shall supersede any and all state laws insofar as they may now or hereafter relate to any employee benefit plans".

This pre-emption provision and its effect on state law was considered by the United States Supreme Court in the recent case of Mackey v. Lanier, ___ U.S. ___, 108 S.Ct. 2182, 100 L.Ed.2d 836 (1988). The issue in Mackey was whether ERISA pre-empted a Georgia statute protecting ERISA welfare benefit plans from garnishment. A Georgia statute prohibited such garnishments but the United States Supreme Court held that ERISA pre-empts the Georgia statute and since ERISA allowed garnishment of welfare benefit plans the Georgia statute could not prohibit it. The Supreme Court stated as follows:

1b ERISA § 514(a) pre-empts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" covered by the statute. 29 USC 1144(a) 29 USCS § 1144(a). We believe that under our precedents, Ga Code Ann § 18-4-22.1 is such a state law.

The Georgia statute at issue here expressly refers to — indeed, solely applies to — ERISA employee benefit plans. See n 2, supra. "A law `relates to\' an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan." Shaw v. Delta Air Lines, Inc., 463 US 85, 96-97, 77 LEd2d 490, 103 SCt 2890 2899-2900 (1983) (emphasis added). On several occasions since our decision in Shaw, we have reaffirmed this rule, concluding that state laws which make "reference to" ERISA plans are laws that "relate to" those plans within the meaning of § 514(a). See, e.g., Pilot Life Ins. Co. v. Dedeaux, 481 US 41, ____, 95 LEd2d 39, 107 SCt 1549 ____ (1987); Metropolitan Life Ins. Co. v. Massachusetts, 471 US 724, 739, 85 LEd2d 728, 105 SCt 2380 (1985). In fact, we have virtually taken it for granted that state laws which are "specifically designed to affect employee benefit plans" are pre-empted under § 514(a). Cf. Pilot Life Ins. Co. v. Dedeaux, supra, at 481 U.S. 41, 95 LEd2d 39, 107 SCt 1549; Shaw v Delta Air Lines, Inc., supra, 463 U.S. at 98, 77 LEd2d 490, 103 SCt 2890 2900.

. . . "The pre-emption provision of § 514(a) . . . displaces all state laws that fall within its sphere, even including state laws that are consistent with ERISA\'s substantive requirements." Metropolitan Life Ins. Co. v. Massachusetts, supra, 471 U.S. at 739, 85 LEd2d 728, 105 SCt 2380 2389. . . .

While the Mackey decision is concerned only with ERISA qualified welfare benefit plans, the language is so broad and the intent so clear that it is apparent that the rule laid down applies to ERISA qualified pension benefit plans as well. In fact, § 514(a...