Moore, In re, 89-1555

CourtUnited States Courts of Appeals. United States Court of Appeals (4th Circuit)
Citation907 F.2d 1476
Docket NumberNo. 89-1555,89-1555
Parties, 23 Collier Bankr.Cas.2d 390, 20 Bankr.Ct.Dec. 1380, Bankr. L. Rep. P 73,536, 12 Employee Benefits Ca 2152 In re: Richard Allen MOORE; Johnsie Dianne Moore; Stephen M. Haynes; Donna Haynes; and Judy Dianne Thomason, Debtors. Robert F. ANDERSON, Trustee, Plaintiff-Appellant, v. Joseph S. RAINE, Jr., Plan Administrator for the Springs Industries, Inc. Employees' Profit Sharing and Pension Plans; and, Northern Trust Company, Plan Trustee, Defendants-Appellees.
Decision Date12 July 1990

Robert Frank Anderson, Anderson, Lowder & Strait, P.A., Columbia, S.C. (Cecelia A. Clark, Anderson, Lowder & Strait, P.A., on the brief, Columbia, S.C.), for plaintiff-appellant.

Joe Wayne Underwood, Rogers, Thomas, Cleveland, Koon, Waters & Tally, Columbia, S.C. (Sherwood M. Cleveland, Rogers, Thomas, Cleveland, Koon, Waters & Tally, on the brief, Columbia, S.C.), for defendants-appellees.

Before WIDENER, PHILLIPS, and WILKINSON, Circuit Judges.

WILKINSON, Circuit Judge:

Here we must decide whether the interests of several debtors in an ERISA-qualified profit-sharing and pension plan are the property of their bankruptcy estates. The trustee in bankruptcy brought this suit seeking turnover of those interests. The plan administrator maintains, however, that the debtors' interests in the plan are not subject to turnover because they are protected by an enforceable restriction of transfer under ERISA which the Bankruptcy Code recognizes as dispositive "applicable nonbankruptcy law." 11 U.S.C. Sec. 541(c)(2).

We agree with the plan administrator that the debtors' interests in the plan are not the property of their bankruptcy estates and thus are not subject to turnover to the trustee in bankruptcy.


Appellant Robert F. Anderson is the trustee for the estates of a number of Chapter 7 debtors who are employees of Springs Industries, Inc. The debtors participate in Springs Industries' comprehensive retirement program. The retirement program consists of a Profit-Sharing and Pension Plan and Trust and a Retirement Plan and Trust. The plans contain anti-assignment provisions that prohibit alienation of employees' interests in them. The plans must include these anti-assignment provisions in order to qualify as ERISA funds, 29 U.S.C. Sec. 1056(d)(1), and to maintain their tax-exempt status, 26 U.S.C. Sec. 501. The plans provide for distribution of vested interests to a beneficiary only upon retirement, disability, or termination of service. The debtors have thus far received no distribution under the plans and will not be eligible to do so in the near future.

The trustee in bankruptcy brought this suit against the administrator of the Springs Industries plans. The trustee sought turnover of the bankrupts' interests in the profit-sharing and pension plan. In his view, this plan was not a spendthrift trust under South Carolina law and thus the interests in it were not subject to an enforceable restriction of transfer. The bankruptcy court did not reach the question of the status of the plan under South Carolina law, for it held that because the plan was ERISA-qualified, the interests in it were non-alienable and thus were excluded from the bankruptcy estates and not subject to turnover to the trustee. The district court affirmed this judgment, and the trustee in bankruptcy now appeals.


The Bankruptcy Code broadly defines the property of an estate as "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. Sec. 541(a)(1). However, the Code excludes the debtor's interests in certain trusts from the bankruptcy estate by recognizing restrictions on the transfer of such interests:

A restriction on the 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.

11 U.S.C. Sec. 541(c)(2). Thus, if "applicable nonbankruptcy law" enforces a restriction on the transfer of a debtor's interest in a trust, that interest will not be considered part of the bankrupt's estate.

At issue here is the meaning of the term "applicable nonbankruptcy law." The plan administrator argues that the restrictions on alienation of plan benefits in ERISA, 29 U.S.C. Sec. 1056(d)(1), constitute "applicable nonbankruptcy law" which operates under Sec. 541(c)(2) to exclude the debtors' interests in this ERISA-qualified plan from their bankruptcy estates. The bankruptcy trustee disagrees, arguing that the term "applicable nonbankruptcy law" does not include ERISA. He maintains that the term "applicable nonbankruptcy law" should be read narrowly to refer only to plans with transfer restrictions enforceable under state spendthrift trust law. We reject the trustee in bankruptcy's overly restrictive interpretation of Sec. 541(c)(2) and hold that the term "applicable nonbankruptcy law" is not limited to state spendthrift trust law. In light of this disposition, we need not reach the question whether the plan constitutes a spendthrift trust under South Carolina law.


The trustee in bankruptcy's narrow interpretation of Sec. 541(c)(2) cannot be squared with the section's broad language. "Applicable nonbankruptcy law" means precisely what it says: all laws, state and federal, under which a transfer restriction is enforceable. Nothing in the phrase "applicable nonbankruptcy law" or in the remainder of Sec. 541(c)(2) suggests that the phrase refers exclusively to state law, much less to state spendthrift trust law.

In addition to violating the plain language of Sec. 541(c)(2), the trustee's interpretation of "applicable nonbankruptcy law" is not consistent with other uses of the identical phrase throughout the Bankruptcy Code. In numerous places in the Bankruptcy Code, the term "applicable nonbankruptcy law" is used to refer to federal as well as state law. For example, 11 U.S.C. Sec. 1125(d) states that whether postpetition disclosure statements contain adequate information is "not governed by any otherwise applicable nonbankruptcy law," which includes, inter alia, federal securities law. See In re Stanley Hotel, Inc., 13 B.R. 926, 931 (Bkrtcy.D.Colo.1981). Again, 11 U.S.C. Sec. 108(a) extends the time in which a trustee can pursue a cause of action which the debtor could have pursued in accordance with the tolling provisions of "applicable nonbankruptcy law," which includes, inter alia, the Racketeer Influenced and Corrupt Organization Act. See In re Ahead By a Length, Inc., 100 B.R. 157, 162-63 (Bkrtcy.S.D.N.Y.1989).

"[A] word is presumed to have the same meaning in all subsections of the same statute." Morrison-Knudsen Constr. Co v. Director, OWCP, 461 U.S. 624, 633, 103 S.Ct. 2045, 2050, 76 L.Ed.2d 194 (1983). See also Barnson v. United States, 816 F.2d 549, 554 (10th Cir.1987) ("[W]hen the same words are used in different sections of the law, they will be given the same meaning."). It is incongruous to give the same phrase in Sec. 541(c)(2) a narrower construction than the identical phrase in other parts of the Bankruptcy Code, particularly since the disparate sections of the Bankruptcy Code were enacted together in a single comprehensive statute.

In further support of our reading of the plain language of Sec. 541(c)(2), other provisions of the Bankruptcy Code demonstrate that when Congress intended to refer to state law, it did so explicitly. For example: 11 U.S.C. Sec. 109(c)(2) limits Chapter 9 filings to entities authorized to be such debtors under "State law"; 11 U.S.C. Sec. 522(b)(1) & (2) ties certain debtor's exemptions to "State law that is applicable"; and 11 U.S.C. Sec. 523(a)(5) denies discharge of any debt for support pursuant to an order "made in accordance with State or territorial law." See also 11 U.S.C. Secs. 362(b)(12), 903(1), and 1145(a).

Our refusal to narrow the phrase "applicable nonbankruptcy law" is consistent with our decision in McLean v. Central States, Southeast & Southwest Areas Pension Fund, 762 F.2d 1204 (4th Cir.1985). Although McLean did not consider whether ERISA constitutes "applicable nonbankruptcy law," it declined to follow the restrictive mode of statutory analysis suggested here. Specifically, because "[t]he language of Sec. 541(c)(2) d[id] not suggest such a limitation," the McLean court rejected the contention that "Sec. 541(c)(2) should be confined in its recognition of enforceable transfer restrictions to those found in 'traditional' spendthrift trusts." Id. at 1207 n. 1. "[I]f Congress had intended Sec. 541(c)(2) to only apply to state spendthrift trusts, the term 'spendthrift trust' would have appeared in the statute, rather than the phrase 'applicable nonbankruptcy law.' " In re Ralstin, 61 B.R. 502, 503 (Bkrtcy.D.Kan.1986). The term "applicable nonbankruptcy law" suggests no limitation to state spendthrift trust law, and we refuse to read such a limitation into the statute. See In re Mosley, 42 B.R. 181, 191 (Bkrtcy.D.N.J.1984); Warren v. G.M. Scott & Sons, 34 B.R. 543, 544 (Bkrtcy.S.D.Ohio 1983); In re Threewitt, 24 B.R. 927, 929 (D.Kan.1982).


We acknowledge that several circuit courts have read the term "applicable nonbankruptcy law" in Sec. 541(c)(2) narrowly to refer only to state spendthrift trust law. See In re Daniel, 771 F.2d 1352 (9th Cir.1985); In re Lichstrahl, 750 F.2d 1488 (11th Cir.1985); In re Graham, 726 F.2d 1268 (8th Cir.1984); In re Goff, 706 F.2d 574 (5th Cir.1983). These decisions have, in the main, involved self-settled trusts in which the settlor is the beneficiary with the power to amend or to terminate the trust without penalty, whereas here the beneficiaries do not control the plan, cannot make unrestricted withdrawals from it, cannot borrow against it, and cannot amend it. The decisions have reached the conclusion that "applicable nonbankruptcy law" refers solely to state spendthrift trust law based on the...

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