In re Wines

• Court: U.S. Bankruptcy Court — Southern District of Florida
• Writing for the Court: SIDNEY M. WEAVER
• Citation: In re Wines, 113 B.R. 787 (Bankr. S.D. Fla. 1990)
• Decision Date: 16 April 1990
• Docket Number: Bankruptcy No. 89-14719-BKC-SMW.
• Parties: In re Fred J. WINES, Debtor.

113 B.R. 787 (1990)

In re Fred J. WINES, Debtor.

Bankruptcy No. 89-14719-BKC-SMW.

United States Bankruptcy Court, S.D. Florida.

April 16, 1990.

Robert C. Meyer, Haley, Sinagra & Perez, P.A., Miami, Fla., for Gui Govaert, trustee.

Arthur S. Weitzner, Weitzner & Co., P.A., Miami, Fla., for Fred Wines, debtor.

Eric J. Taylor, Asst. Atty. Gen. of Florida, Tallahassee, Fla., Brian F. Kidwell, O'Neill, Burke, O'Neill, Leonard and O'Brien, Ltd., St. Paul., Minn., for Objecting Creditor Advance-United Expressways, Inc.

ORDER OVERRULING OBJECTIONS TO CLAIMED EXEMPTION

SIDNEY M. WEAVER, Chief Judge.

This matter came before the Court for hearing on February 8, 1990, at 9:30 a.m. on the objections to a claimed exemption. The Court heard the argument of counsel for Gui Govaert, the trustee, and counsel for the debtor and thereafter studied the memoranda of law submitted by the trustee, the debtor, and an objecting creditor as well as conducted its own additional research.

The central facts of this matter are not in dispute. The debtor has claimed as exempt an annuity which was purchased by his former employer when it terminated a company pension plan upon its bankruptcy. The debtor originally scheduled the property as exempt as "pension disability payments" pursuant to § 222.21, Florida Statutes but, by amendments, has claimed the annuity as exempt under §§ 222.14, 222.18, and 222.201, Florida Statutes. The trustee and a creditor timely objected to the claimed exemption.

The creditor objected to the claimed exemption solely on the argument that § 222.21, Florida Statutes,¹ is unconstitutional under Mackey v. Lanier Collections Agency & Service, Inc., 486 U.S. 825, 108 S.Ct. 2182, 100 L.Ed.2d 836 (1988) and the cases from other jurisdictions which, in reliance upon Mackey, have held similar exemption statutes unconstitutional as being preempted by Section 514(a) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C. § 1144(a). This Court previously has rejected that argument and upheld § 222.21 in In re Bryan, 106 B.R. 749 (Bkrtcy.S.D. Fla.1989) (Britton, C.J.) and in In re Martinez, 107 B.R. 378 (Bkrtcy.S.D.Fla.1989) (Weaver, J.), and there is no need here to repeat the bases for the Court's conclusions.² Furthermore, the debtor has asserted additional, independent grounds for exempting the annuity which, if applicable and valid, would accomplish the result of exempting the annuity without having to decide the more difficult issue of whether an annuity bought when a pension plan described in § 222.21 is terminated is nevertheless entitled to the exemption afforded by § 222.21.

The debtor relies on § 222.18, Florida Statutes.³ However, the annuity in question does not appear to be one provided to the debtor on the basis of his disability, although his ability to receive proceeds of the annuity earlier than his normal retirement age by virtue of his disability does create doubt in the Court's mind. However, given the Court's ruling with respect to § 222.14, Florida Statutes, infra, it is not necessary to decide this issue.

Another statutory basis relied upon by the debtor is § 222.201, Florida Statutes,⁴ which makes exempt property of the type described in 11 U.S.C. § 522(d)(10). The debtor specifically relies upon § 522(d)(10)(E), but that section requires a showing that the property to be exempted is "reasonably necessary for the support of the debtor and any dependent of the debtor." The Court feels that, on the record before it, it cannot conclude that § 222.201 serves to exempt the annuity in question.

The thrust of the trustee's position is that the annuity, while literally protected by § 222.14, Florida Statutes,⁵ is not exempt because, he argues, § 222.14 violates the exemption provisions of the Florida Constitution, found in Article X, Section 4. The debtor's first response is that this Court lacks jurisdiction to rule on the validity under a state constitution of a state law or that, if there is jurisdiction, the Court should abstain. As to jurisdiction, this Court clearly has jurisdiction under 28 U.S.C. § 157(d)(2)(B) of this core proceeding, and the Court cannot imagine anything more central to the granting of a "fresh start" to a debtor than its jurisdiction over exemption and discharge issues. As to abstention, the Court notes that the debtor did not file a motion for abstention as provided by Bankruptcy Rule 5011(b). Nor does it appear that abstention here is appropriate under 28 U.S.C. § 1334(c)(1) and Thompson v. Magnolia Petroleum Co., 309 U.S. 478, 60 S.Ct. 628, 84 L.Ed. 876 (1940). In Thompson, the Supreme Court held that the bankruptcy court should have abstained from deciding a difficult issue of Illinois property law and noted that two Circuit Courts of Appeal had reached different results in attempting to determine that state law. Here, this Court finds no such difficulty in discerning the laws of Florida as spoken by the Supreme Court of Florida, and there have not been differing results reached by different courts on what this Court finds to be the dispositive issue. Thus, this Court feels that its "respect for State law" does not mandate abstention, particularly when the Court's decision results in its upholding a state statute. See 28 U.S.C. § 1334(c)(1).⁶

The trustee's argument is that Article X, Section 4 of the Florida Constitution⁷ limits personal property exemptions to a value of $1,000 and that § 222.14, by exempting an annuity in an unlimited amount, violates that constitutional provision.⁸ Since he is unable to refer to any decisions of Florida courts or of federal courts in Florida to that effect, he relies on the reasoning of bankruptcy courts in Arkansas which have held a statute similar to § 222.14 as invalid under the Arkansas Constitution. In re Williams, 93 B.R. 181 (Bkrtcy.E.D.Ark.1988); In re Hudspeth, 92 B.R. 827 (Bkrtcy.W.D.Ark.1988). In Hudspeth, followed by Williams, the court found that Ark.Code Ann. § 16-66-209⁹ violated Article 9, Section 2 of the Arkansas Constitution¹⁰ because the statutory exemption provided for exempting benefits of unlimited amount while the constitutional provision provided for the exemption of "personal property . . . not exceeding in value the sum of five hundred dollars . . ." The U.S. Court of Appeals for the Eighth Circuit has recently agreed with this analysis of Arkansas law and held § 16-66-209 unconstitutional under the Arkansas Constitution. Federal Savings and Loan Insurance Corp. v. Holt (In re Holt), 894 F.2d 1005 (8th Cir.1990).

This Court is unpersuaded by these decisions. As Chief Judge Britton said, "Hudspeth is not binding on this court. I find the decision neither convincing nor applicable here by analogy as argued by the trustee." In re Bryan, 106 B.R. 749, 751 (Bkrtcy.S.D.Fla.1989). First, the language of the constitutional provision differs: The Florida Constitution states, "There shall be exempt . . . personal property to the value of one thousand dollars." The Arkansas Constitution, however, provides, "The personal property . . . not exceeding in value the sum of five hundred dollars . . . shall be exempt. . . ." (emphasis added) That distinction alone justifies a different result. However, there is far more authority for this Court's conclusion than the verbal differences.

In Milam v. Davis, 97 Fla. 916, 123 So. 668, cert. denied, 280 U.S. 601, 50 S.Ct. 82, 74 L.Ed. 646 (1929), the Florida Supreme Court decided the constitutionality under the state constitution of the predecessor of § 222.13, Florida Statutes,¹¹ the Act of 1872, chapter 1864, which then faced an attack similar to the trustee's assault. The court noted at 123 So. at 689-690:

Sections 1 and 2, article 9, of the Florida Constitution of 1868, provided for an exemption of homestead real estate and the improvements thereon, "owned by the head of a family residing in this State," "together with one thousand dollars\' worth of personal property," and also for the exemption of additional property to be selected by the head of a family, "to the amount of one thousand dollars," which constituted greater property exemptions from debts than those contained in article 10 of the Constitution of 1885; yet the Act of 1872, chapter 1864, enacted while the Constitution of 1868 was in force and providing that the proceeds of life insurance shall not be liable to any legal process in favor of any creditor of the insured unless the insurance policy declares that the policy was effected for the benefit of such creditor, was apparently not regarded as being violative of the exemption article of the Constitution of 1868, even though such proceeds exceed in amount the organic exemptions.

* * * * * *

When the Constitution of 1885 was promulgated and adopted, chapter 1864, Acts 1872, exempting life insurance from the claims of creditors of the insured, where such insurance is not effected for or payable to creditors, was in force, and its validity not challenged. It was evidently not the intent of the Constitution of 1885 that the exemptions provided for therein should supersede or limit the amount of the then existing statutory exemption of the proceeds of life insurance policies made payable by the statute. . . .

In other words, "the organic provision exempting a stated amount of the general personal property of the insured is not exclusive and is not a limitation upon any and all statutory exemptions in property of any kind or nature." Milam v. Davis, 123 So. at 690 (emphasis added).

Section 222.14 as originally enacted in 1925 exempted only the cash surrender values of life insurance policies but was amended in 1978 to add proceeds of annuity contracts. 1925 Fla.Laws, ch. 10154, § 1; 1978 Fla.Laws, ch. 78-76, § 1. When the statute was enacted in 1925, the Florida Constitution of 1885 was in effect and it contained virtually the same language as does the 1968 Constitution in exempting "one thousand dollars worth of personal...