Tveten, In re

• Decision Date: 27 March 1987
• Docket Number: No. C7-86-1580,C7-86-1580
• Citation: 402 N.W.2d 551
• Parties: In re Omar A. TVETEN, Debtor.
• Court: Minnesota Supreme Court

Page 551

402 N.W.2d 551

In re Omar A. TVETEN, Debtor.

No. C7-86-1580.

Supreme Court of Minnesota.

March 27, 1987.

Syllabus by the Court

1. A debtor's rights to receive payments under, or a debtor's interests in, property known as annuities or similar plans or contracts purchased for cash from fraternal benefit associations or societies such as Lutheran Brotherhood are exempt under Minn.Stat. §§ 550.37, subd. 11, and 64B.18 (1986).

2. A debtor's rights to receive payments under, or a debtor's interests in, property known as unmatured life insurance contracts purchased for cash from fraternal benefit associations or societies such as Lutheran Brotherhood are exempt under Minn.Stat. §§ 550.37, subd. 11, and 64B.18 (1986).

3. A debtor may liquidate nonexempt assets and purchase annuities, life insurance or similar contracts from a fraternal benefit association or society such as Lutheran Brotherhood and then successfully claim those investments as exempt under Minn.Stat. §§ 550.37, subd. 11, and 64B.18 (1986) so long as the debtor does not violate the Uniform Fraudulent Conveyance Act, Minn.Stat. §§ 513.20-513.32 (1986).

4. Minn.Stat. §§ 550.37, subd. 11, and 64B.18 (1986) violate article 1, section 12, and article 12, section 1, of the Minnesota Constitution.

Gordon B. Conn, Jr., James M. Pfau, Minneapolis, for Norwest Bank Nebraska.

Steven P. Nosek, Kathryn Seebart, Minneapolis, for Committee of Unsecured Creditors.

Cass S. Neil, St. Paul, for Omar A. Tveten.

James S. Simonson, Melvin R. Mooty, Phillip W. Bahl, William J. Fisher, Minneapolis, amicus curiae for Fraternal Benefit Society.

Gary W. Koch, Reed H. Glawe, New Ulm, amicus curiae for PCA of Redwood Falls.

Heard, considered and decided by the court en banc.

OPINION

KELLEY, Justice.

Shortly before filing a petition for voluntary bankruptcy in federal court, a debtor converted significant amounts of nonexempt property into property which under Minnesota law was exempt from attachment or execution. In bankruptcy court, certain creditors filed timely objections to the debtor's assertion of those exemptions. This action resulted from issues arising concerning the applicability of Minnesota's debtor exemption laws. The United States Bankruptcy Court has certified to this court four questions of law involving our state's property exemption statutes. ¹ Specifically, we have been requested to answer the following questions:

1. Are a debtor's rights to receive payments under, or a debtor's interests in, property known as annuities or similar plans or contracts purchased for cash from fraternal benefit associations or societies such as Lutheran Brotherhood, exempt under Minn.Stat. §§ 550.37, subd. 11 (1986) or 64B.18 (1986)?

2. Are a debtor's rights to receive payments under, or a debtor's interests in, property known as unmatured life insurance contracts purchased for cash from fraternal benefit associations or societies such as Lutheran Brotherhood, exempt under Minn.Stat. §§ 550.37, subd. 11 or 64B.18?

3. Can a debtor liquidate nonexempt assets and purchase annuities, life insurance or similar contracts from a fraternal benefit association or society such as Lutheran Brotherhood and then successfully claim those investments as exempt under Minn.Stat. §§ 550.37, subd. 11, or 64B.18?

4. Are Minn.Stat. §§ 550.37, subd. 11, and 64B.18 unconstitutional as violative of article 1, section 12 or article 12, section 1 of the Minnesota Constitution?

We answer each of these four questions in the affirmative.

For the purposes of the case as it is presented to us regarding the certified questions, the facts are not in dispute. Debtor Omar Tveten filed a voluntary Chapter 11 bankruptcy petition in the United States Bankruptcy Court on January 7, 1986, stating that he had $18.92 million in liabilities and only $2,039,900 in assets. In the appropriate schedules of the petition, debtor claimed $776,058.54 as exempt property ² including three annuities purchased from Lutheran Brotherhood, Inc., a fraternal benefit society, valued at $325,774.61, $186,680.66, and $20,487.35, respectively. Debtor also listed as exempt a life insurance policy issued by Lutheran Brotherhood, Inc. with a cash surrender value of $168,683.51. Tveten's creditors made timely objections to his claim to those four specific exemptions.

In the four months immediately before he filed a petition in the bankruptcy court, debtor collected cash from the sale of various nonexempt assets. The cash originated from the sale of four parcels of real property, from his salary and other income, from his checking account, from his retirement plan and from a profit sharing plan. He then invested the cash in three Lutheran Brotherhood annuities and in the Lutheran Brotherhood life insurance policy.

Debtor claims that the life insurance policy and the annuities are exempt under Minn.Stat. § 550.37, subd. 11 and Minn.Stat. § 64B.18. In objecting to his exemption claims, the creditors contend that the statutes do not exempt the annuities or the life insurance policy, but if they do, that the statutes are unconstitutional under Minn. Const. art. 1, § 12 and art. 12, § 1. We conclude that the statutes do exempt debtor's annuities and life insurance policies but that the statutes violate our state constitution.

1-2. We first consider whether the claimed exempt property is made so by Minn.Stat. § 64B.18. ³ Resolution of the issue turns on whether unmatured life insurance benefits and annuities issued by a fraternal benefit society constitute "other benefits" as that phrase is used in section 64B.18.

Minn.Stat. § 64B.16, subd. 1 (1986) provides that "[a] [fraternal benefit] society may provide the following contractual benefits on an individual or nongroup basis: * * * (3) annuity benefits * * * (7) such other benefits as authorized for life insurers and which are not inconsistent with this chapter." The statute includes within the scope of "benefits" both annuities and unmatured life insurance. Therefore, the debtor Tveten claims they are "other benefits" as that phrase is used under Minn.Stat. § 64B.18 and are, therefore, exempt from creditors' collection remedies.

The creditors argue that the life insurance policy fails to fall within the statutory parameters of "benefits" as used in the statute. They rely on In re Perkins, 9 B.R. 809 (Bankr.S.D.Ohio 1981), where the bankruptcy court in the southern district of Ohio interpreted an Ohio statute virtually identical to Minn.Stat. § 64B.18. ⁴ That court held that "[l]ife insurance is not a 'benefit, charity, relief or aid to be paid, provided, or rendered by any society.' " Id. at 814. Although the Ohio statute and Minn.Stat. § 64B.16, subd. 1 are virtually identical, the two statutes do differ in one respect: the Minnesota statute provides that a fraternal benefit society may provide "such other benefits as authorized for life insurers;" Minn.Stat. § 64B.16, subd. 1(7); the Ohio statute contains no similar provision. Whether in Minnesota life insurance is exempt under section 64B.18 appears to turn on the construction of this language not contained in the Ohio statute. Because this phrase seems patently to include life insurance, we conclude the creditors' reliance on the Ohio case to be inapposite. Therefore, under Minn.Stat. § 64B.18 the debtor's annuities and unmatured life insurance are exempt.

We next consider whether Minn.Stat. § 550.37, subd. 11, ⁵ provides the debtor an exemption. Significantly, section 550.37, subd. 11, likewise contains the phrase "other benefits." Does the phrase "other benefits" as used in section 550.37, subd. 11, include annuities and unmatured life insurance? Unlike chapter 64B, Minn.Stat. ch. 550 contains no definition of "other benefits."

When construing statutes relating to the same subject matter, we apply the doctrine of pari materia, as we have previously noted:

Statutes relating to the same subject are presumed to be imbued with the same spirit and to have been passed with deliberation and full knowledge of all existing legislation on the subject and regarded by the lawmakers as being parts of a connected whole.

"Statutes are in pari materia when they relate to same matter or subject even though some are specific and some general and even though they have not been enacted simultaneously and do not refer to each other expressly. * * * Where two acts in pari materia are construed together and one contains provisions omitted from the other, the omitted provisions will be applied in the proceeding under the act not containing such provisions, where not inconsistent with the purpose of the act. * * * " 6 Dunnell, Supp. § 8984.

Kaljuste v. Hennepin County Sanatorium Comm'n, 240 Minn. 407, 414, 61 N.W.2d 757, 762 (1953).

Consideration of alleged distinctions between old-line insurance companies and fraternal benefit societies are unnecessary to the determination of whether annuities and/or unmatured life insurance benefits provided by a fraternal benefit society are exempt under either Minn.Stat. §§ 64B.18 or 550.37, subd. 11.

Because the two statutes contain similar wording and cover the same subject matter, we conclude that they should be similarly construed. Accordingly, we hold that annuities and unmatured life insurance benefits written by fraternal benefit societies are included as "other benefits" as the phrase is used in both exemption statutes.

3. The third question presented to us asks that we determine whether under Minnesota law, a debtor may liquidate nonexempt assets and convert the cash received into exempt property by purchasing annuities, life insurance or similar contracts from a fraternal benefit association thereby protecting that property from the claims of creditors. In the past, in holding that an insolvent debtor may convert nonexempt property into exempt homestead property, we have noted that the debtor's actions in so doing did not in and of themselves constitute a fraud on creditors:...