In re Volpe
| Citation | 100 BR 840 |
| Decision Date | 28 April 1989 |
| Docket Number | No. 88-11850.,88-11850. |
| Parties | In re J.A. VOLPE, M.D. and wife, Rita Ann Volpe, Debtor(s). |
| Court | United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Western District of Texas |
William C. Davidson, Austin, Tex., for debtor.
Joanalys Smith, Austin, Tex., for creditor.
Harvey D. Caughey, Austin, Tex., trustee.
On December 12, 1988 came on to be heard the timely filed Objection of NCNB—Texas National Bank ("NCNB") to certain personal property claimed to be exempt by Dr. and Mrs. Volpe ("Debtors"). After considering evidence and argument of counsel this issue was taken under advisement. This Memorandum Opinion is intended to provide Findings of Fact and Conclusions of Law as required by Bankruptcy Rules 9014 and 7052. The Court has jurisdiction over this proceeding as a core matter under 28 U.S.C. § 157(b)(2)(B).
1.01 The Debtors filed this voluntary petition under Chapter 7 of the Bankruptcy Code on June 28, 1988.
1.02 Among the personal property assets listed in the Debtor's schedules were the following:
1.03 The Debtors listed each of these accounts in their Schedule B-4, claiming them as exempt under 11 U.S.C. § 522(b)(2) and Texas Property Code §§ 42.001 and 42.0021 (Vernon 1984 and Vernon Supp. 1989). ("T.P.C. § 42.0021").
1.04 On September 6, 1988, NCNB filed its Objection to the Debtors' Claimed Exemption of these accounts on the grounds that:
1.05 On November 18, 1988, Judge Leif M. Clark of this District encountered a similar objection in a case appearing before him. He rendered an opinion that the Debtor's retirement plan was not exempt because T.P.C. § 42.0021 was preempted by the Employee Retirement Income Security Act of 1974 ("ERISA"), 88 Stat. 829, as amended, 29 U.S.C. § 1001, et seq.1 Although Judge Clark has subsequently withdrawn that opinion pending reconsideration, NCNB at the hearing on its objection broadened the grounds to include an assertion that T.P.C. § 42.0021 is preempted by ERISA.
1.06 The parties stipulated at the hearing that:
1.07 Briefs were submitted after the hearing which further argued in part that the Debtors' interest in the ADC-Plan is or is not property of the estate. However, no stipulations, exhibits, or testimony was introduced at the hearing to inform the Court whether Dr. Volpe was an officer or director of Austin Diagnostic Clinic, a trustee of the ADC-Plan, or had any control over any feature of the Plan or the proceeds at issue. The only "evidence" is the sworn statements contained in Debtors' schedules describing the ADC-Plan and IRA's as being property of the estate.
2.01 Does T.P.C. § 42.0021 "relate" to ERISA so that it is preempted in whole or in part?
2.02 Does T.P.C. § 42.0021 allow a debtor to exempt only one IRA account, one Keough Plan or one profit sharing plan account as contended by NCNB?
2.03 If ERISA preempts T.P.C. § 42.0021, does it also preempt the Texas Spendthrift Trust Statute so as to require 11 U.S.C. § 541(c)(2) to be interpreted in such a way as to keep the ADC-Plan from being considered as "property of the estate"?
3.01 As stated by one court, "The Erisa quicksand is fast swallowing up everything that steps in it or near it."2 After finishing its work on this case, this Court is not sure that quicksand is all that it has stepped into. The issues before the Court are complicated because of the less than clear interplay between certain provisions of ERISA, the Bankruptcy Code, and the Texas Property Code. It is necessary to review certain of these provisions prior to addressing the specific issues in controversy.
3.02 In response to a national concern about loss of private pension benefits resulting from financial difficulties of employers and job mobility of employees,3 Congress enacted ERISA. This Act governs two types of employee benefit plans: (1) "Employee Pension Benefit Plans," which provide retirement or deferred income to employees, and (2) "Employee Welfare Benefit Plans," which provides fringe benefits such as medical and life insurance to Plan participants.
3.03 ERISA imposes upon pension plans a variety of substantive requirements relating to participation, funding, and vesting. 29 U.S.C. § 1051-1086. It also establishes various uniform procedural standards concerning reporting, disclosure, and fiduciary responsibility for both pension and welfare plans. 29 U.S.C. §§ 1021-1031, §§ 1101-1114.
3.04 To eliminate state interference with the accomplishment of ERISA's goals, Congress included preemption language in the statute. There are three provisions relating to the preemptive effect of the federal legislation:
a. "Except as provided in subsection (b) of this section the saving clause, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all state laws insofar as they now or hereafter relate to any employee benefit plan . . . "
§ 514(a), as set forth at 29 U.S.C. § 1144(a) (preemption clause).
b. "Except as provided in sub-paragraph (B) the Deemer Clause, nothing in this subchapter shall be construed to exempt or relieve any person from any law of any state which regulates insurance, banking, or securities."
§ 514(b)(2)(A), as set forth at 29 U.S.C. § 1144(b)(2)(A) (savings clause).
c. "Neither an employee benefit plan . . . nor any trust established under such a plan, shall be deemed to be an insurance company, or investment company or to be engaged in the business of insurance or banking for purposes of any law of any state purporting to regulate insurance companies, insurance contracts, banks, trust companies or investment companies."
§ 514(b)(2)(B), as set forth at 29 U.S.C. § 1144(b)(2)(B) (deemer clause).
3.05 The United States Supreme Court has summarized the "pure mechanics" of these three provisions as follows:
§ 514(b)(2)(B).
Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987).
3.06 ERISA also has a specific provision for pension plans which establishes a prohibition against assignment or alienation of plan benefits. § 401(a) of ERISA as set forth at 29 U.S.C. § 1056(d) provides:
"(1) Each pension plan shall provide that benefits provided under the plan may not be assigned or alienated."
There are certain exceptions contained in subparagraphs (2) and (3) of 29 U.S.C. § 1056(d) which are not pertinent to our inquiry at this time and this provision is not applicable to employee welfare benefit plans.
3.07 Two provisions in the Bankruptcy Code ("Code") are also relevant.
a. Code § 541 provides that upon commencement of an action in bankruptcy, all property of the debtor becomes property of the bankruptcy estate. An exception to this all inclusive language is found in Code § 541(c)(2):
"A restriction on a 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." (emphasis added).
b. Once property is determined to be in the bankruptcy estate, the debtor is allowed to exempt from it certain eligible property. Code § 522(b) provides that individual states are provided with a choice of allowing their debtors two methods of exempting property (state exemptions or federal exemptions) or only one method (state exemptions). Code § 522(b) provides:
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