In re Haga
| Decision Date | 04 April 1985 |
| Docket Number | Bankruptcy No. 3-84-01267. |
| Citation | 48 BR 492 |
| Parties | In re David Clyde HAGA, Sr., Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Tennessee |
Peter C. Kral, Knoxville, Tenn., for debtor.
Jenkins & Jenkins, Michael H. Fitzpatrick, Knoxville, Tenn., for trustee.
MEMORANDUM AND ORDER ON TRUSTEE'S OBJECTION TO DEBTOR'S CLAIM OF EXEMPTION
At issue is the debtor's claim to exemptions, 11 U.S.C.A. § 522(b)(1) (1979); Tenn. Code Ann. § 26-2-111 (1980). The facts may be summarized as follows.
On March 1, 1980, Mr. Haga was injured on the premises of Blanc and West Lumber Company, Inc., in Jefferson County, Tennessee. On December 22, 1980, Mr. Haga sued Blanc and West Lumber Company and Adrian Blanc in the Circuit Court for Jefferson County, Docket No. 6398. The complaint sought damages for personal injury, associated medical expenses, and loss of profits. Ex. 1. The jury returned a general verdict in favor of Mr. Haga in the amount of $30,000.00. The judgment was entered October 12, 1981.
The defendants appealed the judgment. The Supreme Court of Tennessee affirmed the judgment on March 5, 1984, and thereafter the defendants tendered $37,500.00 to the Jefferson County Circuit Court in satisfaction of the judgment and accrued interest. The attorney of record for Mr. Haga was allowed to withdraw $9,375.00 from the total judgment as his fee.
Subsequent to the trial of the Haga case in 1981, a creditors' bill was filed in the Chancery Court for Jefferson County against Jefferson Building, Inc., a corporation owned by Haga and his son. A receiver was appointed, and it was ultimately determined that the corporation had no assets. A suit was then brought in the Chancery Court alleging that Haga and his son should be held personally liable for their failure to properly follow corporate law. After the Supreme Court decision on March 5, 1984, plaintiffs in the Chancery Court action filed with the Clerk of the Circuit Court a certified copy of the judgment holding Haga and his son personally liable for the debts of Jefferson Builders, Inc.
Mr. Haga made a claim for certain exemptions in the Circuit Court and was permitted to withdraw $3,085.00 by order of March 29, 1984. A later order granted Mr. Haga an exemption in the entire balance of the judgment proceeds. Intervening creditors appealed the order, and the appeal was pending when Haga filed a Chapter 7 petition in this court on August 6, 1984, claiming as part of his exemptions the following:
TYPE OF VALUE CLAIMED
PROPERTY DESCRIPTION STATUTE EXEMPTED
Personal Judgments T.C.A. § 26-2-111 $ 7,500.00
(Schedule B 2.q.) $18,540.00
He listed $75,856.06 in debts, of which $4,500.00 is non-dischargeable as taxes owing to the United States. He received a discharge December 12, 1984.
The debtor, by counsel, has stipulated that $4,267.69 (Haga's actual pecuniary loss), plus associated interest, of the Circuit Court judgment is not exempt.
The debtor's asserted exemptions regarding the balance of the judgment involve Tenn.Code Ann. § 26-2-111(2)(B) and (3) (1980).1 The debtor initially claimed $7,500.00 as exempt under Tenn.Code Ann. § 26-2-111(2)(B) and the balance of $18,540.00 under Tenn.Code Ann. § 26-2-111(3). However, as noted, the debtor has since acknowledged that $4,267.69 of the total claimed (plus associated interest thereon) is not exempt.
The debtor's last employment before filing his petition was as an employee of a construction corporation in which he held an equity interest.
The debtor has two dependents at the present time, his spouse and a 16-year-old daughter.
The family's monthly living expenses are as follows:
DEBT AMOUNT
Rent $450.00
Utilities 118.62
Telephone 82.45
Food 280.00
School supplies 20.00
Gasoline 25.00
_______
TOTAL $976.07
The monthly income for the family unit consists of $481.00 received by Mr. Haga and $255.00 received by his daughter under Social Security. The deficiency in the family budget is $240.07 per month, which is made up at the present time by two grown children of the debtor.
The debtor is a carpenter by trade. He is presently unable to work because of his injuries and is rated 100% disabled for construction work. He had surgery in November 1984 and will have surgery in the future which will continue his disability for 9 to 12 months.
The debtor currently receives medical insurance through Medicare. He is qualified to receive Medicaid benefits but, for unexplained reasons, did not apply until recently therefor. Medicare and Medicaid will pay most of the debtor's medical bills in the future, as long as he is disabled.
The debtor's spouse has an earning capacity of $3.75 per hour but is not presently employed.
The debtor's other exempt assets consist of $2,000.00 in household goods and $100.00 in clothing.
The debtor has a life expectancy of 24.32 years.
The trustee's position is summarized in his brief as follows:
Post-Trial Brief on Behalf of William T. Watson, Trustee, at 10-11 (filed February 19, 1985).
In his bankruptcy schedules, the debtor has claimed as exempt a total of $26,040.00, that portion of the judgment and post-judgment interest apparently remaining intact on the date of the debtor's bankruptcy petition. Of that total amount, $4,267.69 represents damages for debtor's actual pecuniary loss (in the form of medical expenses) as of the time of the state court trial. In addition, $1,066.92 represents the portion of the post-judgment interest which accrued on this $4,267.69. In short, $5,334.61 (i.e. $4,267.69 + $1,066.92) of the total amount constitutes damages (and interest thereon) for debtor's actual pecuniary loss.
Thus, the debtor may not exempt $5,334.61 of the $26,040.00. Tennessee has opted out of the federal bankruptcy exemptions. 11 U.S.C.A. § 522(b)(1) (1979); Tenn.Code Ann. § 26-2-112 (1980). Under the applicable state statute, the debtor may exempt "a payment, not to exceed seven thousand five hundred dollars ($7,500) 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. . . ." Tenn.Code Ann. § 26-2-111(2)(B) (1980). The $5,334.61 in damages for actual pecuniary loss (and interest thereon) is clearly not exempt under the statute.2
However, of the rest of the judgment proceeds, the debtor is entitled to a $7,500.00 exemption under the statute. The debtor's state court judgment was a general verdict. There was no allocation by the jury of specific amounts to specific types of damages. The Tennessee exemption under § 26-2-111(2)(B) is virtually identical to the federal exemption set forth in 11 U.S.C.A. § 522(d)(11)(D) (1979). The legislative history to the federal exemption indicates that the provision "is designed to cover payments in compensation of actual bodily injury, such as the loss of a limb, and is not intended to include the attendant costs that accompany such a loss, such as medical payments, pain and suffering, or loss of earnings." H.R.Rep. No. 595, 95th Cong., 1st. Sess. 362, reprinted in 1978 U.S.Code Cong. & Ad.News 5787, 5963, 6318.
In Ford Motor Credit Co. v. Territo, 36 B.R. 667 (Bankr.E.D.N.Y.1984) the debtor had received $25,000.00 in settlement of a personal injury and property damage claim. Most of the proceeds had been disbursed. As here, the debtor sought to exempt the still undisbursed balance. The stipulation of settlement failed to specify what portion of the settlement was allocated to personal injury, property damage, pain and suffering, or lost earnings. The court concluded that, of the proceeds claimed as exempt, an amount equal to the actual property damage to the debtor's vehicle was not exempt under § 522(d)(11)(D). However, the court found the rest of the undisbursed settlement proceeds to be exempt. Pointing to the existence of a back injury resulting in prolonged hospitalization and rehabilitation, the court concluded "that despite any pain and suffering that presumably accompanied that injury, the injury alone was extensive enough to account for all of the money received in settlement of his state court action less that amount attributable to damage to the vehicle." Territo, 36 B.R. at 670.
In the instant case, the debtor's state court judgment was rendered by general verdict. Obviously, this court cannot now reconvene the state court jury...
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