In re Kapsinow

• Decision Date: 11 December 2019
• Docket Number: No. 2018-94-M.P. (BK 16-11859),2018-94-M.P. (BK 16-11859)
• Citation: 220 A.3d 1231
• Parties: IN RE: Lynette KAPSINOW
• Court: Rhode Island Supreme Court

220 A.3d 1231

IN RE: Lynette KAPSINOW

No. 2018-94-M.P. (BK 16-11859)

Supreme Court of Rhode Island.

December 11, 2019

Justice Robinson, for the Court.

This case comes before us pursuant to an April 12, 2018 order of the United States Bankruptcy Court for the District of Rhode Island (the Bankruptcy Court) certifying a question to this Court in accordance with Article I, Rule 6(a) of the Supreme Court Rules of Appellate Procedure.¹ The certified question reads as follows:

"Whether a debtor may claim an exemption in an inherited Individual Retirement Annuity [IRA], including one inherited from a non-spouse, pursuant to R.I. Gen. Laws § 9-26-4(11)."

For the reasons set forth in this opinion, we answer the certified question in the affirmative— G.L. 1956 § 9-26-4(11) does permit a debtor to claim an exemption for an inherited Individual Retirement Annuity (IRA).²

IFacts and Travel³

The parties reached an agreed statement of facts, which was attached to and incorporated in the Certification Order transmitted to this Court from the Bankruptcy Court. The parties further stipulated that "there are no outstanding issues of disputed fact before the Court." Accordingly, in relating the facts of this case, we rely solely on the agreed statement of facts.

The debtor, Lynette Kapsinow, "filed a voluntary Chapter 7 [bankruptcy petition] on October 31, 2016 * * *." Stacy B. Ferrara (the Trustee) was appointed as the trustee for that matter. As is permitted by 11 U.S.C. § 522(b), the debtor in this case opted for state exemptions. See In re Strandberg , 253 B.R. 584, 586 (Bankr. D.R.I. 2000) (discussing the fact that Rhode Island has not opted out of the federal bankruptcy exemption scheme and that, consequently, a debtor in Rhode Island may choose either state or federal exemptions). The debtor's bankruptcy petition sought, under Rhode Island law, to exempt an IRA held by American Century Investments in the sum of $84,962.88 (the inherited IRA) pursuant to Rhode Island state statute § 9-26-4(11). The Trustee objected.

The inherited IRA in question was inherited by the debtor from her late mother, Miriam Kapsinow. At the time of her death, Miriam Kapsinow "owned an Individual Retirement Annuity with Aviva Life and Annuity Company" (Aviva), of which the debtor was the beneficiary. Miriam Kapsinow's account was a "qualified retirement account as defined under 408 of the Internal Revenue Code." On April 15, 2010, following her mother's death, the debtor "executed an Annuity Claim Form seeking claim to [Miriam Kapsinow's IRA] and requested that the proceeds be ‘moved to an Inherited IRA.’ " Aviva then opened an Inherited Annuity Account for the debtor.

On June 7, 2012, the debtor directed Aviva to "surrender and transfer all of her beneficial interest in and to" the inherited IRA to American Century Investments. American Century Investments invested half of the balance in an "Ultra Fund" and half in a "Select Fund" with the account titled as follows: "SSBT&T Cust for the IRA Bene of Lynette S. Kapsinow as Bene of Miriam Kapsinow."

Since the death of the debtor's mother, the debtor has "had access to all of the funds in the Inherited IRA for any reason, without penalty; could not make any further contributions into the Inherited IRA; was required to take minimum distributions from the Inherited IRA Account; and must keep the Inherited IRA separate from any other accounts she has, if any." Additionally, the agreed statement of facts noted that "[t]he [d]ebtor has never made any contributions to the Inherited IRA." As of March 31, 2017, the value of the inherited IRA was $94,421.87.

On April 12, 2018, the Bankruptcy Court certified to this Court the question about the availability of an exemption in bankruptcy with respect to the inherited IRA with which we now contend. We are limited in our review to the legal question which was certified to us.

IIThe Certified Question

"Whether a debtor may claim an exemption in an inherited Individual Retirement Annuity, including one inherited from a non-spouse, pursuant to R.I. Gen. Laws § 9-26-4(11)."

IIIStandard of Review

Certified questions are questions of law; and, consequently, this Court reviews them in a de novo manner. Mancini v. City of Providence , 155 A.3d 159, 161 (R.I. 2017) ; see also In re Tetreault , 11 A.3d 635, 639 (R.I. 2011). What is more, as we have consistently stated, "this Court adheres to the de novo standard when reviewing issues of statutory construction." Mancini , 155 A.3d at 161 ; see also DeMarco v. Travelers Insurance Co. , 26 A.3d 585, 616 (R.I. 2011).

IVAnalysis

It has long been a cornerstone of our statutory construction jurisprudence that "[i]f a statute is clear and unambiguous we are bound to ascribe the plain and ordinary meaning of the words of the statute and our inquiry is at an end." Olsen v. DeMayo , 210 A.3d 431, 435 (R.I. 2019) (internal quotation marks omitted). Only when we determine that a statute is "susceptible of more than one meaning, [do] we employ our well-established maxims of statutory construction in an effort to glean the intent of the Legislature." Id. (internal quotation marks omitted). We also note that "under no circumstances will this Court construe a statute to reach an absurd result." Mendes v. Factor , 41 A.3d 994, 1002 (R.I. 2012) (internal quotation marks omitted).

We begin our inquiry with the statutory section at issue. Section 9-26-4(11) provides as follows:

"The following goods and property shall be exempt from attachment on any warrant of distress or on any other writ, original, mesne, or judicial:

"* * *

"An individual retirement account or individual retirement annuity as defined in the Internal Revenue Code, 26 U.S.C. §§ 408 and 408A,^[4] and the payments or distributions from such an account or annuity, except that this exemption does not apply to any of the following:

(i) An order of a court pursuant to a judgment of divorce or separate maintenance.

(ii) An order of a court concerning child support.

(iii) Contributions to an individual retirement account, or premiums on an individual retirement annuity, including the earnings or benefits from those contributions or premiums that constitute an excess contribution within the meaning of Section 4973 of the Internal Revenue Code, [ 26 U.S.C. § 4973 ]." (Emphasis added.)

In our judgment, the language of § 9-26-4(11) clearly and unambiguously provides an exemption for an IRA "as defined in * * * 26 U.S.C. § * * * 408." Accordingly, the question we must ask ourselves is whether an inherited IRA is defined in § 408.

When we turn our attention to § 408, we find that § 408(a) defines "individual retirement account," and § 408(b) defines "individual retirement annuity." Later, in § 408(d)(3)(C)(ii), which deals with the rollover treatment of IRAs for tax purposes, it is provided as follows:

"Inherited individual retirement account or annuity. --An individual retirement account or individual retirement annuity shall be treated as inherited if--

(I ) the individual for whose benefit the account or annuity is maintained acquired such account by reason of the death of another individual, and

(II ) such individual was not the surviving spouse of such other individual."

Thus, we are tasked with determining whether the just-quoted language is a definition.

After a painstaking review of the statutory scheme at issue and after thoughtful consideration of the arguments of the parties, we simply have not been swayed from our considered judgment that the language of both § 9-26-4(11) and § 408 is clear and unambiguous. Section 408 clearly defines both individual retirement annuities and individual retirement accounts. Then said section goes further and, in the opinion of this Court, clearly defines an inherited IRA as well. See § 408(d)(3)(C)(ii). For the purposes of this case, it matters not that the term inherited IRA is defined in a statutory section devoted to the rollover treatment of IRAs for tax purposes. It is clear that the General Assembly included IRAs as defined in any and all parts of § 408, not just § 408(a) and/or (b). The General Assembly was certainly free to restrict exemptions to IRAs as defined in § 408(a) and/or (b). However, in this case, it chose not to do so. Consequently, we are constrained to interpreting the language of the statute before us. See Powers v. Warwick Public Schools , 204 A.3d 1078, 1089 (R.I. 2019) ("If the General Assembly had intended to include work-sharing benefits in the average weekly wage calculation it would certainly have been free to do so (and it remains free to choose to do so prospectively), but we are constrained by the statute before us."); see also State v. LeFebvre , 198 A.3d 521, 527 (R.I. 2019) ("It is not for this Court to determine whether a statute enacted by the General Assembly ‘comports with our [own] ideas of justice, expediency or sound public policy.’ "); Felix Frankfurter, Some Reflections on the Reading of Statutes , 47 Colum. L. Rev. 527, 545 (1947) ("In a democracy the legislative impulse and its expression should come from those popularly chosen to legislate, and equipped to devise policy, as courts are not.").⁵

Since it is readily apparent to this Court that the statutory sections at issue are clear and unambiguous, our inquiry is at an end. We need only apply the plain and ordinary meaning of the words in the statute.⁶ See Olsen , 210 A.3d at 435. We need not involve ourselves in this case with the venerable maxims of statutory construction or with weighing policy arguments for or against the appropriateness of an exemption in this case. Rather, we look solely to the pellucid dictates of the General Assembly. Accordingly, under the plain and ordinary meaning of the language in § 9-26-4(11) and § 408, an inherited IRA is defined under § 408, and it is, therefore, exempt under § 9-26-4(11).⁷

That being said, we will briefly comment on the possible relevance of the United States Supreme Court's opinion in Clark v. Rameker , 573 U.S....