In re Idalski

• Decision Date: 23 January 1991
• Docket Number: Bankruptcy No. 90-11021.
• Parties: In re Timothy Lee IDALSKI and Stephanie Ann Idalski, Debtors.
• Court: United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Eastern District of Michigan

123 B.R. 222 (1991)

In re Timothy Lee IDALSKI and Stephanie Ann Idalski, Debtors.

Bankruptcy No. 90-11021.

United States Bankruptcy Court, E.D. Michigan, Southern Division, Flint.

January 23, 1991.

Michael W. Krellwitz, Flint, Mich., for debtors.

Michael A. Mason, Flint, Mich., Trustee.

MEMORANDUM OPINION ON TRUSTEE'S MOTION FOR TURNOVER

ARTHUR J. SPECTOR, Bankruptcy Judge.

On June 20, 1990, the trustee filed a Motion for Turnover of Non-Exempt Savings and for Extension of Time to File Complaint Objecting to Discharge. In this motion, the trustee seeks an order requiring Timothy and Stephanie Idalski ("Debtors") to turn over $5,166.23 to the estate. According to the trustee, this sum represents the total voluntary pre-petition payments, with interest, paid by Stephanie Idalski to the Genesee County Employees Retirement System, which were subsequently repaid to her when she terminated her employment post-petition. In their answer, the Debtors conceded the relevant factual allegations made by the trustee, but denied that the trustee was entitled to the funds.

The issue before the Court is whether Mrs. Idalski's interest in the retirement plan is excluded from the estate by operation of § 541(c)(2). This section states: "A restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable nonbankruptcy law is enforceable in a case under this title." 11 U.S.C. § 541(c)(2).

At the time the Debtors filed their bankruptcy petition, Mrs. Idalski's interest in the plan was subject to a restriction on transfer; consistent with the requirements of ERISA¹ and the Internal Revenue Code,² the plan contains a clause which prevents the voluntary or involuntary alienation of plan benefits. Under Michigan law, this anti-alienation clause, sometimes referred to as a "spendthrift" clause, may operate to exclude all or some portion of Mrs. Idalski's interest in the plan. Pursuant to Mich.Comp.Laws § 600.6023(1)(l), creditors are precluded from levying on

the right or interest of a person in a pension, profit-sharing, stock bonus, or other plan that is qualified under section 401 of the internal revenue code, or an annuity contract under section 403(b) of the internal revenue code, which plan or annuity is subject to ERISA. This exemption applies to the operation of the federal bankruptcy code, as permitted by section 522(b)(2) of title 11 of the United States code, 11 U.S.C. 522. This exemption does not apply to any amount contributed to such a plan or . . . annuity if the contribution occurs within 120 days before the debtor files for bankruptcy.

Mich.Comp.Laws § 600.6023(1)(l).

The parties have not indicated whether some or all of Mrs. Idalski's contributions to the plan were made within the 120-day period specified in the statute. Even if all of the contributions were made within this time frame, however, it could be argued that Michigan law is preempted by ERISA insofar as it purports to limit the extent to which ERISA-qualified plans are exempt from levy.³ On the other hand, an argument could be made that the foregoing statute does not apply to this plan, which was entirely funded by Mrs. Idalski's voluntary contributions, since Michigan also has a statute providing that "all conveyances . . . transfers or assignments . . . of goods, chattels or things in action, made in trust for the use of the person making the same, shall be void, as against the creditors existing or subsequent, of such person." Mich.Comp.Laws § 566.131.⁴ If Michigan's ERISA exemption statute were partially or totally inapplicable, the Debtors might still prevail if they could establish that the plan's anti-alienation provision is enforceable under Michigan common law.⁵ For the reasons which follow, however, we need not address any of these issues, as we hold that the plan's anti-alienation provision is in any event enforceable under ERISA, and that ERISA constitutes "applicable nonbankruptcy law" for purposes of § 541(c)(2).

It is well-settled that, state law to the contrary notwithstanding, an anti-alienation clause contained in an ERISA-qualified pension plan precludes creditors of a plan beneficiary from levying on the beneficiary's interest in the plan. General Motors v. Buha, 623 F.2d 455, 463 (6th Cir. 1980); see also Guidry v. Sheet Metal Workers Nat'l Pension Fund, 493 U.S. 365, 110 S.Ct. 680, 107 L.Ed.2d 782 (1990) (stating that 29 U.S.C. § 1056(d)(1) "erects a general bar to the garnishment of pension benefits from plans covered by" ERISA, 493 U.S. at ___, 110 S.Ct. at 685, 107 L.Ed.2d at 792, and ruling that the same section likewise prohibits imposition of a constructive trust, a remedy which the court characterized as indistinguishable in substance from a writ of garnishment, id.). Since ERISA is "nonbankruptcy law," and it is clearly "applicable" to the issue in dispute, it would seem that Mrs. Idalski's interest in the plan would accordingly be excluded from the estate in its entirety under § 541(c)(2). Nevertheless, a good number of cases have concluded that, in using the term "applicable nonbankruptcy law," Congress did not mean ERISA. In so holding, these cases have primarily relied on the statute's legislative history. Before launching into an exhaustive analysis of non-statutory material, however, we believe a court must always consider whether reference to such sources is appropriate under the circumstances.

There is support for the proposition that, if a literal construction of an unambiguous statute does not produce an absurd or futile result, then it is inappropriate for a court to examine extrastatutory materials in an effort to determine the "legislative intent" of the statute. See Arbour v. Jenkins, 903 F.2d 416, 421 (6th Cir.1990); Allen v. Secretary of Health & Human Services, 833 F.2d 602, 605 (6th Cir.1987); United Metal Products v. National Bank of Detroit, 811 F.2d 297 (6th Cir.1987); E.E.O.C. v. Wooster Brush Co. Employees Relief Ass'n, 727 F.2d 566, 577 (6th Cir. 1984); Wetter Mfg. Co. v. United States, 458 F.2d 1033, 1035 (6th Cir.1972). Indeed, the Fourth Circuit relied on this so-called "plain meaning rule" in holding that the term "applicable nonbankruptcy law" includes ERISA. In re Moore, 907 F.2d 1476, 1478-79 (4th Cir.1990).

As the court pointed out in Moore, the Supreme Court has explicitly endorsed the plain meaning rule. In Davis v. Michigan Dept. of Treasury, 489 U.S. 803, 109 S.Ct. 1500, 103 L.Ed.2d 891 (1989), the Court stated that "legislative history is irrelevant to the interpretation of an unambiguous statute." 489 U.S. at 809, 109 S.Ct. at 1504 n. 3, 103 L.Ed.2d at 901 n. 3. Other decisions of the Supreme Court attest to the omnipresence of the plain meaning rule. See, e.g., Board of Education of the Westside Community Schools v. Mergens, ___ U.S. ___, ___, 110 S.Ct. 2356, 2365, 110 L.Ed.2d 191, 208 (1990); K-Mart Corp. v. Cartier, Inc., 486 U.S. 281, 293 n. 4, 108 S.Ct. 1811, 1818 n. 4, 100 L.Ed.2d 313 (1988); Blum v. Stenson, 465 U.S. 886, 896, 104 S.Ct. 1541, 1547, 79 L.Ed.2d 891 (1984); TVA v. Hill, 437 U.S. 153, 184 n. 29, 98 S.Ct. 2279, 2296 n. 29, 57 L.Ed.2d 117 (1978).

However, the Supreme Court also explicitly rejected the plain meaning rule on numerous occasions. See, e.g., Public Citizen v. United States Dept. of Justice, 491 U.S. 440, 109 S.Ct. 2558, 105 L.Ed.2d 377, 392 (1989); Edwards v. Aguillard, 482 U.S. 578, 594, 107 S.Ct. 2573, 2583, 96 L.Ed.2d 510 (1987); United States v. James, 478 U.S. 597, 606, 106 S.Ct. 3116, 3121, 92 L.Ed.2d 483 (1986); Watt v. Alaska, 451 U.S. 259, 266, 101 S.Ct. 1673, 1677, 68 L.Ed.2d 80 (1981); Train v. Colorado Public Interest Research Group, 426 U.S. 1, 9-10, 96 S.Ct. 1938, 1942, 48 L.Ed.2d 434 (1976); United States v. American Trucking Associations, 310 U.S. 534, 543-44, 60 S.Ct. 1059, 1063-64, 84 L.Ed. 1345 (1940). Adding to the confusion, at least two other Supreme Court opinions appear to be self-contradictory with regard to this rule of construction.

In United States v. Rutherford, 442 U.S. 544, 99 S.Ct. 2470, 61 L.Ed.2d 68 (1979), the Court stated that "if a legislative purpose is expressed in `plain and unambiguous language, . . . the . . . duty of the courts is to give it effect according to its terms.'" Id. at 551, 99 S.Ct. at 2475 (quoting United States v. Lexington Mill & Elevator Co., 232 U.S. 399, 409, 34 S.Ct. 337, 340, 58 L.Ed. 658 (1914)). In refusing to create an implicit exception to the statute in question, however, the Court in Rutherford cited the statute's legislative history to support its conclusion. Id. 442 U.S. at 552, 99 S.Ct. at 2475. See also United States v. Ron Pair Enterprises, 489 U.S. 235, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989) (where the Court again gave a ringing endorsement of the plain meaning rule, 489 U.S. at 241, 109 S.Ct. at 1030, but proceeded to review the legislative history of a statute whose meaning was "plain" to determine if it was one of those "rare cases in which the literal application of a statute will produce a result demonstrably at odds with the intention of its drafters." Id. at 242, 109 S.Ct. at 1031 (quoting Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571, 102 S.Ct. 3245, 3250, 73 L.Ed.2d 973 (1982)). A number of other decisions rendered by the Supreme Court vividly reflect the court's indecisiveness as to the validity of the plain meaning rule. See California v. American Stores Co., ___ U.S. ___, ___, 110 S.Ct. 1853, 1861, 109 L.Ed.2d 240, 255 (1990) ("Although we do not believe the statutory language is ambiguous, we nonetheless consider the legislative history. . . ."); John Doe Agency v. John Doe Corp., 493 U.S. 146, 110 S.Ct. 471, 107 L.Ed.2d 462 (1989) ("If, despite what we regard as the plain meaning of the statutory language, it were necessary or advisable to examine the legislative history . . . we would reach the same conclusion."); Bourjaily v. United States, 483 U.S. 171, 178-79, 107 S.Ct. 2775, 2780, 97...