In re Butcher, Bankruptcy No. 93-5-2122-JS.
| Decision Date | 28 November 1995 |
| Docket Number | Bankruptcy No. 93-5-2122-JS. |
| Citation | 189 BR 357 |
| Parties | In re Patrick and Lisa BUTCHER, Debtors. |
| Court | U.S. Bankruptcy Court — District of Maryland |
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Joel I. Sher, Shapiro & Olander, Baltimore, MD, for Debtors.
Michael J. Schwarz, Baltimore, MD, for Governor Plaza Associates.
Edmund A. Goldberg, Office of the U.S. Trustee, Baltimore, MD, for U.S. Trustee.
Susan Griisser, Asst. Attorney General, Baltimore, MD, for State of Maryland.
Bradley H. Blower, U.S. Department of Justice, Civil Division, Washington, DC, for U.S.
AMENDED MEMORANDUM OPINION OVERRULING OBJECTIONS TO CLAIM OF EXEMPTIONS
This matter came on for hearing before the U.S. Bankruptcy Court for the District of Maryland at Baltimore on April 12-13, 1995, upon objections to the debtors' exemption of monies payable on account of a settlement of personal injury claims. The objections were filed by a creditor, Governor Plaza Associates ("Governor Plaza"), and by the United States Trustee.
There are five bases for the objections: (1) that the Maryland personal injury exemption statute, Md.Cts. & Jud.Proc.Code Ann. § 11-504(b)(2), which contains no monetary limitation, violates the "reasonableness" requirement of the Maryland Constitution; (2) that the application of the state exemption statute to the facts of this case violates the "reasonableness" requirement of the Maryland Constitution; (3) that the state exemption statute violates the Supremacy Clause of the U.S. Constitution; (4) that the state exemption statute and Section 522(b) of the Bankruptcy Code violate the requirement of uniformity found in the Bankruptcy Clause of the U.S. Constitution; and (5) that Section 522(b) of the Bankruptcy Code violates the Due Process Clause of the Fifth Amendment of the United States Constitution.
For the reasons stated, the objections will be OVERRULED and the debtors' exemptions will be ALLOWED.
1. In August, 1980, some twelve and one-half years before Patrick and Lisa Butcher filed the instant voluntary Chapter 11 bankruptcy petition in this Court on March 25, 1993, Mr. Butcher was severely burned in an explosion of a hot water heater, for which he and Mrs. Butcher received a monetary settlement.
2. Among the debtors' elected exemptions was an exemption for "money payable from Traveler's Indemnity Company on account of a compromise of claims against Robertshaw Controls Company, pursuant to Settlement Agreement and Release of All Claims executed in January, 1983," between the debtors and Liberty Mutual Insurance Company, ("the Settlement Agreement"). Supplemental Amended Schedule C, P. 1291
3. Under the Settlement Agreement, Travelers agreed to pay to the Butchers a lifetime, tax-free income on a monthly basis amounting to approximately $250,000 per year. The present value of the settlement agreement, based upon actuarial tables, is estimated to be $4,513,728.00. Id.
4. In the prayer for relief in their suit filed in the United States District Court for the District of Maryland by the Butchers against Robertshaw Controls Company, Rheem Manufacturing Company, and Arundel Gas and Water Conditioning Company, the Butchers sought $25 million in compensatory damages and $50 million in punitive damages in Counts I-V; and $1 million in compensatory damages and $2 million in punitive damages in Counts VI and VII. Plaintiffs' Exhibit No. 3.
5. The Settlement Agreement, P. 176, Ex. B, did not allocate the proceeds of settlement between compensatory and punitive damages. The agreement simply stated that "it is understood and agreed that this settlement is a compromise of a disputed claim, and that the payment made is not to be construed as an admission of liability on the part of ROBERTSHAW and that ROBERTSHAW denies liability and intends merely to avoid litigation." P. 176, Ex. B, pp. 4-5 The Settlement Agreement was executed in January of 1983.
6. In 1985, the Butchers made investments in several health clubs located in Anne Arundel County, Maryland, that were owned and operated by one Bernard Caplan. In addition to making such investments, they also executed personal guaranties of the health clubs' obligations. Financial problems resulted in the closing of the health clubs.
7. The basis for Governor Plaza's claim in this case is a personal guaranty executed by the Butchers for a health club that was operated in the creditor's shopping center in Glen Burnie, Maryland. Governor Plaza filed suit against the Butchers on their guaranty and a judgment was entered against them on November 11, 1992, in the amount of $421,393.80, after the Butchers failed to defend the suit.
8. At the hearing before this Court, Mr. and Mrs. Butcher described the injuries to Mr. Butcher that formed the basis of the Settlement Agreement. On August 20, 1980, Mrs. Butcher was unable to draw hot water for her two-year-old son's bath. Mr. Butcher went into the basement of their home to attend to the problem, and as he was examining a propane hot water heater, a sudden explosion occurred. As a result, Mr. Butcher suffered second and third degree burns over 85 percent of his body. His face and torso ablaze, Mr. Butcher rushed from the basement and rolled on the ground to extinguish the flames. Alarmed by the loud explosion, Mrs. Butcher and their son ran outside and witnessed the terrible effect of the explosion on Mr. Butcher as he emerged from the basement, his person in flames. Mrs. Butcher testified that she was pregnant at the time of the accident.
Patrick Butcher spent nine weeks in the hospital under heavy sedation. During his hospitalization and subsequent convalescence, he endured numerous medical procedures for the treatment of his injuries. His burns required washing in a large tank to prevent infection. He underwent physical therapy to relearn basic skills, including how to walk and feed himself, because of his difficulty in flexing his fingers and joints. He could not walk independently for seven months after the accident. For eighteen months following the accident, he was required to wear a special suit for twenty-three to twenty-four hours each day, the purpose of which was to provide uniform pressure on the burned areas of his body. He testified that the suit, which covered him from head to toe, was painful.
Mrs. Butcher was the primary caregiver for her husband upon his release from the hospital. She testified that the accident produced severe emotional distress for her husband, herself, and their son. The complaint filed in the U.S. District Court alleged a loss of consortium.
As a result of the accident, Mr. Butcher was permanently scarred and disfigured. He has undergone plastic surgery on numerous occasions and will continue to require operations and treatment in the future. As an example, he testified at the hearing that he will require the removal of restrictive scar tissue that has built up around his left eye, preventing full closure of his eyelids and affecting his vision. Scar tissue prevents him from being able to fully open his mouth. He will continue to require reconstructive surgery. He has suffered arthritis and cannot tolerate hot or cold temperatures as a result of his burns. He continues to experience pain. Both debtors testified that Mr. Butcher has suffered psychological damage as a result of his disfiguring injuries. Mrs. Butcher testified that she continues to provide care as required after ongoing surgery.
9. In argument before this Court on April 12, 1995, counsel for Governor Plaza Associates acknowledged that "there is no amount of money that will make them Patrick and Lisa Butcher whole."
1. Section 11-504(b)(2) of the Maryland Courts and Judicial Proceedings Code is constitutional under the Maryland Constitution.
2. Maryland has "opted out" of the federal bankruptcy exemption scheme, as permitted by Section 522(b) of the Bankruptcy Code.2 Md.Cts. & Jud.Proc.Code Ann. § 11-504(g) (1995).
3. The Maryland exemption provision at issue is Md.Cts. & Jud.Proc.Code Ann. § 11-504(b)(2) (1995), which provides:
4. The Constitution of the State of Maryland provides in pertinent part, as follows:
5. The Maryland statutory provisions for certification of a question of state law to the Maryland Court of Appeals do not provide for certification by a United States Bankruptcy Court. Md.Cts. and Jud.Proc.Code Ann. § 12-601 (1989),3 In re Chapman, 68 B.R. 745, 747 n. 3 (Bankr.D.Md.1986). Accordingly, this Court shall proceed to determine whether the Maryland statute in...
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