In the Matter of: Fred Lieberman

• Decision Date: 13 April 2001
• Docket Number: No. 00-15006,00-15006
• Citation: 245 F.3d 1090
• Parties: (9th Cir. 2001) In the Matter of: FRED LIEBERMAN (Deceased) and FLORANCE LIEBERMAN, Debtors. FLORANCE LIEBERMAN, Appellant, v. ROBERT HAWKINS, Chapter 7 Trustee, Appellee
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1090

245 F.3d 1090 (9th Cir. 2001)

In the Matter of: FRED LIEBERMAN (Deceased) and FLORANCE LIEBERMAN, Debtors.

FLORANCE LIEBERMAN, Appellant, v. ROBERT HAWKINS, Chapter 7 Trustee, Appellee.

No. 00-15006

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted Feb. 5, 2001

Filed April 13, 2001

David R. Jenkins, Fresno, California, for the appellant.

Jeffrey Wall, Fresno, California, for the appellee.

Appeal from the United States District Court for the Eastern District of California Anthony W. Ishii, District Judge, Presiding. D.C. No. CV-99-6053-AWI.

Before: Harry Pregerson, William C. Canby, Jr., and David R. Thompson, Circuit Judges.

THOMPSON, Circuit Judge:

When Fred Lieberman reached 65 years of age, he sold his business. The buyer agreed, in part, to pay him $ 13,600 per calendar quarter over a ten-year period for his three-year covenant not to compete. When the sale closed, Lieberman retired.

Several years later, the Liebermans filed a Chapter 7 bankruptcy petition. They contended the quarterly payments were exempt from claims of their creditors, pursuant to California Code of Civil Procedure (Cal. Civ. Proc. Code) 704.115(a)(1), which provides an exemption for "private retirement plans." The bankruptcy court denied the exemption claim, the district court affirmed, and this appeal followed. ¹

We have jurisdiction pursuant to 28 U.S.C. 158(d), and we affirm. We conclude the California legislature intended the exemption provided by Cal. Civ. Proc. Code 704.115(a)(1) to apply to a retirement plan created by a private employer or employee organization, as opposed to an arrangement by an individual to use specified assets for retirement purposes. Accordingly, we agree with the bankruptcy and district courts, and hold that the quarterly payments are not exempt as a "private retirement plan" under Cal. Civ. Proc. Code 704.115(a)(1).

FACTS

In 1991, when Fred Lieberman sold his business and retired, he had no investments, no retirement accounts, and no annuities. He planned that he and his wife would use the ten-year income stream from the non-competition agreement, and their social security benefits, to support them in their retirement. They had no other source of income.

The Liebermans' golden years turned out to be quite different from what they expected. Their daughter died giving birth to their granddaughter. Their son-in-law turned the care of the granddaughter over to his parents. In 1996, the granddaughter's welfare was placed in jeopardy, and the Liebermans took legal steps to gain her custody. They incurred substantial expense for travel, attorney fees, counseling and support, all for their grandchild. Mr. Lieberman also had hip-replacement surgery. Between medical expenses for the hip replacement, and expenses related to their granddaughter, the Liebermans found themselves unable to pay their bills, and they filed for Chapter 7 bankruptcy.

In their amended schedules filed in the bankruptcy proceeding, the Liebermans claimed that the payments from the non-competition agreement, which they valued at $ 272,000, were exempt from inclusion in their bankruptcy estate, because the payments constituted a "private retirement plan "under Cal. Civ. Proc. Code 704.115(a)(1). The bankruptcy court disallowed the exemption, and the district court affirmed that ruling.

DISCUSSION

The scope of an exemption under Cal. Civ. Proc. Code 704.115 is a question of law, which we review de novo. See Bloom v. Robinson (In re Bloom), 839 F.2d 1376, 1378 (9th Cir. 1988). The statute provides in relevant part:

(a) As used in this section, "private retirement plan"means:

(1) Private retirement plans, including, but notlimited to, union retirement plans.

(2) Profit-sharing plans designed and used forretirement purposes.

(3) Self-employed retirement plans and individualretirement annuities or accounts provided for in theInternal Revenue Code of 1986, as amended, includingindividual retirement accounts qualified under Section408 or 408A of that code, to the extent the amounts heldin the plans, annuities, or accounts do not exceed themaximum amounts exempt from federal income taxation under that code.

(b) All amounts held, controlled, or in process ofdistribution by a private retirement plan, for thepayment of benefits as an annuity, pension, retirementallowance, disability payment, or death benefit from aprivate retirement plan are exempt.

....

(d) After payment, the amounts described in subdivision(b) and all contributions and interest thereon returnedto any member of a private retirement plan are exempt.

(e) Notwithstanding subdivisions (b) and (d), except asprovided in subdivision (f), the amounts described inparagraph (3) of subdivision (a) are exempt only to theextent necessary to provide for the support of thejudgment debtor when the judgment debtor retiresor for the support of the spouse and dependents of thejudgment debtor, taking into account all resources thatare likely to be available for the support of thejudgment debtor when the judgment debtor retires. ...

Cal. Civ. Proc. Code 704.115 (2000).

Mrs. Lieberman contends that the ten-year stream of income from the non-competition agreement qualifies as a "private retirement plan" under 704.115(a)(1) because it was designed and used to support her and her husband in their retirement. See Bloom, 839 F.2d at 1378 (stating that the fundamental inquiry in determining whether a private retirement plan qualifies for exemption is whether the plan was designed and used for a retirement purpose); DeMassa v. MacIntyre (In re MacIntyre), 74 F.3d 186, 188 (9th Cir. 1996) (stating that the purpose of 704.115 "is to safeguard a stream of income for retirees at the expense of bankruptcy creditors.").

According to Mrs. Lieberman, "the language of 704.115(a)(1) is reasonably susceptible to an interpretation that, regardless of its label, any device by which a debtor, in good faith, establishes a stream of income for receipt and use to support himself or herself and his or her dependents in his or her retirement years, is an exempt 'private retirement plan. '"Because exemption statutes are to be liberally construed for the benefit of the debtor, see Schwartzman v. Wilshinsky, 50 Cal. App. 4th 619, 57 Cal. Rptr. 2d 790, 797 (Cal. Ct. App. 1996), Mrs. Lieberman contends we should interpret Cal. Civ. Proc. Code 704.115(a)(1) as she suggests.

In interpreting the statute, we apply California rules of construction. See Lares v. West Bank One (In re Lares), 188 F.3d 1166, 1168 (9th Cir. 1999). Under California law, the cardinal rule of statutory construction is to determine the intent of the legislature. See Drouet v. Superior Court, 86 Cal. App. 4th 1237, 104 Cal. Rptr. 2d 159, 169 (Cal. Ct. App. 2001). To determine that intent, a court looks first to the language of the statute and gives effect to its plain meaning. See Hale v. Southern Cal. IPA Med. Group, Inc., 86 Cal. App. 4th 919, 103 Cal. Rptr. 2d 773, 776 (Cal. Ct. App. 2001). If the intent of the legislature is not clear from the language of the statute, legislative history may be considered. See id.

As other courts have recognized, the intent of the California legislature in enacting 704.115(a)(1) is not clear from the face of the statute. See In re Rogers, 222 B.R. 348, 351 (Bank. S.D. Cal. 1998) ("C.C.P. 704.115(a)(1) is vague and undefined."); In re Phillips, 206 B.R. 196, 200 (Bank. N.D. Cal. 1997) (stating that 704.115(a)(1) "curiously and unhelpfully defines 'private retirement plan' as a 'Private retirement plan' "); id. at 202 ("The California Legislature has not defined a 'private retirement plan' as the term is used in Section 704.115 in any meaningful way."). ² The legislative history, however, indicates that 704.115(a)(1) was intended to exempt retirement plans established or maintained by private employers or employee organizations, not arrangements by individuals to use specified assets for retirement purposes.

Prior to 1970, the California Code of Civil Procedure exempted only money held for, or received by, members of public retirement plans. The relevant provisions read:

690.22. All money received by any person, a resident ofthe State, as a pension, or retirement or disability ordeath or other benefit, from the United StatesGovernment, or from the State, or any county, city, orcity and county, or other political subdivision of theState, or any public trust, or public corporation, orfrom the governing body of any of them, or from anypublic board or boards, whether the same shall be in theactual possession of such pensioner or beneficiary, ordeposited, loaned or invested by him, is exempt fromexecution or attachment.

690.23. All money held, controlled or in process ofdistribution by the State or a city, city and county orother political subdivision of the State, or any publictrust, or public corporation, or by the governing bodyof any of them, or by any public board or boards,derived from the contributions by the State or suchcity, county, city and county, or other politicalsubdivision, or such public trust, public corporation,governing body, or public board or boards, or byany officer or employee thereof for retirement orpension purposes or the payment of disability, death orother benefits, or benefits payable under the provisionsof "An act to establish a system of unemploymentreserves for this State, and making an appropriationtherefore," approved June 25, 1935, are exempt fromattachment or execution.

Cal. Civ. Proc. Code 690.22 and 690.23 (1937); see also Ogle v. Heim, 69 Cal. 2d 7, 69 Cal. Rptr. 579, 579, 442 P.2d 659 (1968) ("Pensions of public employees are exempted by statute from the claims of their creditors.").

In 1970, the California legislature renumbered Cal. Civ. Proc. Code 690.22 and 690.23 as Cal. Civ. Proc. Code 690.18(a) and (b) (1970), and added to the statute an exemption for a "private retirement plan" and a "profit-sharing plan designed...