In re Wandrey

• Decision Date: 22 November 2005
• Docket Number: No. 05-60605 JPK.,05-60605 JPK.
• Citation: 334 B.R. 427
• Parties: In re Ina Ruth WANDREY, Debtor.
• Court: U.S. Bankruptcy Court — Northern District of Indiana

334 B.R. 427

In re Ina Ruth WANDREY, Debtor.

No. 05-60605 JPK.

United States Bankruptcy Court, N.D. Indiana, Hammond Division.

November 22, 2005.

Kenneth A. Manning, Esq., James, James & Manning, P.C., Dyer, IN, for the Chapter 7 Trustee.

George Livarchik, Esq., Livarchik & Farahmand, P.C., Chesterton, IN, for the Debtor.

ORDER REGARDING CLAIM OF EXEMPTION

J. PHILIP KLINGEBERGER, Bankruptcy Judge.

This order concerns a contested matter arising from the objection of the Chapter 7 Trustee to an exemption claimed in Schedule C of the debtor's schedules. The Court has jurisdiction over this contested matter pursuant to 28 U.S.C. § 1334, 28 U.S.C. § 157(a) and N.D.Ind.L.R. 200.1. The matter before the Court is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B).

In section 9 of her Schedule B filed on February 17, 2005, the debtor Ina Ruth Wandrey ("Wandrey") designated property identified as "Western & Southern Life Insurance Policy (children are beneficiaries)", and stated that the value of that property was "unknown". In Schedule C, filed on the same day, the debtor designated property described as "Western & Southern Life Insurance Policy (children are beneficiaries)" as being exempt pursuant to I.C. 27-1-12-14; asserted the value of the claimed exempted as "100%"; and stated the value of the property as "unknown". On May 23, 2005 — in accordance with the provisions of an order granting an extension of time to object to claimed exemptions entered on April 19, 2005 — Kenneth A. Manning, the Chapter 7 Trustee of Wandrey's bankruptcy estate ("Trustee") filed an objection to the foregoing claim of exemption. A pre-hearing conference on the contested matter arising from the Trustee's objection to Wandrey's claim of exemption was held on August 25, 2005, at which Attorney George Livarchik appeared as counsel for the debtor and Trustee Manning appeared personally. As stated in the Court's docket record entry of August 30, 2005, at the pre-hearing conference both counsel and the Court agreed that this contested matter would be determined by the Court based upon the Schedule C claim of exemption; the Trustee's objection thereto; case law designated by the Trustee in support of his position (cited at the pre-hearing conference as 227 B.R. 810, 228 B.R. 674 and 322 B.R. 852); and the materials provided by Attorney Livarchik to Trustee Manning by the former's correspondence of May 19, 2005, a copy of which was provided to the Court. The parties have agreed that the property subject to this contested matter is a policy "of life insurance" within the provisions of I.C. 27-1-12-14(e), and that the beneficiaries of the subject policy are "adult" children of Wandrey.

The issue before the Court depends upon the construction of I.C. 27-1-12-14(e) with respect to the classes of beneficiaries who may be designated by a life insurance policy in order to obtain the exemption provided by that provision. I.C. 27-1-12-14(e) states:

(e) Except as provided in subsection (g), all policies of life insurance upon the life of any person, which name as beneficiary, or are bona fide assigned to, the spouse, children, or any relative dependent upon such person, or any creditor, shall be held, subject to change of beneficiary from time to time, if desired, for the benefit of such spouse, children, other relative or creditor, free and clear from all claims of the creditors of such insured person or of the person's spouse; and the proceeds or avails of all such life insurance shall be exempt from all liabilities from any debt or debts of such insured person or of the person's spouse. (emphasis supplied)

Simply put, the Trustee contends that the phrase "dependent upon such person" modifies each of the three categories of beneficiaries designated in the statute as "spouse", "children", and "any relative"; that because Wandrey's children are adults, they are not dependent upon her; and that therefore, the policy does not qualify for the claimed exemption. Wandrey counters by asserting that the phrase "dependent upon such person" must be limited in its modification to the words "any relative"; that any child, whether or not dependent, may be a beneficiary of a policy in order to qualify that policy for the claimed exemption; and that therefore the policy is exempt as claimed in Schedule C.

The issue before the Court in this contested matter is purely one of statutory construction. There are no reported decisions of any nature which discuss the issue before the Court, or which in any manner address the construction of I.C. 27-1-12-14 in the context of the issue before the Court.

Because Indiana has "opted out" with respect to exemptions applicable in bankruptcy cases in accordance with 11 U.S.C. § 522(b)(1), construction of the statute under which the exemption was claimed is a matter of Indiana law, and not of federal law. However, whether state or federal law were applied to the issues of statutory construction before the Court, the applicable legal principles would be pretty much the same, especially with respect to "ambiguities" in statutory language: the Court deems I.C. 27-1-12-14(e) to indeed be ambiguous with respect to the possible antecedent references in the statute for the phrase "dependent upon such person". Rather than burden this decision with a laundry list of the pronouncements of the courts of the State of Indiana as to the multitudinous principles of statutory construction which have been pronounced over the years to be "aids" or "tools" for construing ambiguous statutes, the Court notes that the ultimate purpose of statutory construction is to ascertain and give meaning to the intent of the legislative body which enacted the statute. As stated by the Indiana Supreme Court in Spaulding v. International Bakers Services, Inc., Ind., 550 N.E.2d 307, 309 (1990):

In reviewing a statute, our foremost objective is to determine and effect legislative intent. Park 100 Dev. v. Indiana Dep't of State Revenue (1981), Ind., 429 N.E.2d 220, 222. Where possible, every word must be given effect and meaning, and no part is to be held meaningless if it can be reconciled with the rest of the statute. Foremost Life Ins. Co. v. Department of Ins. (1980), 274 Ind. 181, 186, 409 N.E.2d 1092, 1096. We examine and interpret a statute as a whole, giving words common and ordinary meaning "and not overemphasizing a strict literal or selective reading of individual words." Id.

Courts have developed a myriad of ancillary rules to aid in determining legislative intent. One of the particularly fascinating rules is that which relates to the manner in which a modifying word or phrase is to be applied when it appears at the end of a string of possible antecedents. However, to give one an idea of how reliable and precise this principle is as a general concept, consider the following general descriptions of that concept as stated in 73 AmJur.2d "Statutes", §§ 137, 138, and 139 (2005) [footnotes omitted]:

§ 137. Relative and qualifying, or modifying expressions

Generally, relative and qualifying or modifying words, phrases, and clauses should be referred to the word, phrase, or clause with which they are grammatically connected. Furthermore, where qualifying words are in the middle of a sentence, and apply to a particular branch of it, they are not to be extended to that which follows.

§ 138. Relative and qualifying, or modifying expressions — Application to last or prior antecedents

Qualifying words, phrases, and clauses are ordinarily confined to the last antecedent, or to the words and phrases immediately preceding. The last antecedent, within the meaning of this rule, has been regarded as the last word which can be made an antecedent without impairing the meaning of the sentence.

This rule of statutory construction, however, is not controlling or inflexible. The rule is not applicable where a further extension or inclusion is clearly required by the intent and meaning of the context, or disclosed by the entire act.

§ 139. Relative and qualifying, or modifying expressions — Effect of punctuation

The presence of a comma separating a modifying clause in a statute from the clause immediately preceding it is an indication that the modifying clause was intended to modify all the preceding clauses and not only the last antecedent one. However, qualifying words may, notwithstanding the absence of a comma after the words which immediately precede them, properly be construed as modifying the earlier portion of the statute as well as the clause immediately preceding them, where such construction accords with the evident purpose of the statute.

As the foregoing recitation illustrates, the rules regarding the manner in which a subsequent modifying word or phrase will be applied to possible antecedent objects is essentially "whatever the court otherwise thinks the statute is supposed to mean".¹ For whatever it's worth — and it isn't worth very much because the following cases announce the federal rule of statutory construction — the United States Court of Appeals for the Seventh Circuit has stated:

Finally, O'Kane argues that the last antecedent rule of statutory construction supports the disability interpretation. This rule states "that where one phrase of a statute modifies another, the modifying phrase applies only to the phrase immediately preceding it." Northwest Forest Resource Council v. Glickman, 82 F.3d 825, 832 (9th Cir.1996); accord Elliot Coal Mining Co. v. United States Dep't of Labor, 17 F.3d 616, 629 (3d Cir.1994); see also Norman J. Singer, Sutherland on Statutory Construction § 47.33 (4th ed.1985) (stating that "qualifying words and phrases, where no contrary intention appears, refer solely to the last antecedent"). Under this rule, "on or after March 29, 1996" modifies disability because "based on disability" immediately precedes "on or after March 29, 1996." While O'Kane correctly applies the last antecedent rule, the result is...