Sawczak v. Goldenberg (In Re Goldenberg) , 218 F.3d 1264 ( 2000 )

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
JULY 17 2000
THOMAS K. KAHN
No. 99-10411 CLERK
________________________
D. C. Docket No. 97-06203-CV-WDF
IN RE: ALAN L. GOLDENBERG, Debtor.
SHIRLEY SAWCZAK,
Plaintiff-Appellee,
Cross-Appellant,
versus
ALAN L. GOLDENBERG,
Defendant-Appellant,
Cross-Appellee.
________________________
Appeals from the United States District Court
for the Southern District of Florida
_________________________
(July 17, 2000)
Before ANDERSON, Chief Judge, CARNES and RONEY, Circuit Judges.
ANDERSON, Chief Judge:
In April of 1992, Dr. Alan Goldenberg performed gall bladder surgery on
Shirley Sawczak. Sawczak subsequently filed suit against Goldenberg in Broward
County, Florida, alleging that during the course of the surgery, Goldenberg completely
transected her common bile duct, causing her life-long injuries. Goldenberg was not
carrying malpractice insurance. Goldenberg filed a petition under Chapter 7 of the
Bankruptcy Code on May 1, 1996, the same day the jury was to start deliberations in
the medical malpractice suit. Later that day, Sawczak filed an emergency motion for
relief from the bankruptcy automatic stay so that the malpractice trial could be
completed. The bankruptcy court granted her motion, and the jury returned a verdict
in favor of Sawczak and against Goldenberg in the amount of $4,000,629.
On May 31, 1996, Goldenberg filed bankruptcy schedules listing assets totaling
$3,791,119, of which he claimed $3,751,678 as exempt. The assets Goldenberg
claimed as exempt included seven annuity contracts, with an aggregate value,
according to Goldenberg’s bankruptcy schedules, of $355,894. The annuities are
single premium deferred annuities; to obtain them, Goldenberg paid a single premium
which accumulates interest until the maturity date. All of the annuities provide for a
commencement or maturity date at which time certain sums become payable to the
annuitant or his survivors under various settlement options. In addition, they all
contain a provision for “surrender” of the contract in exchange for a specified lump
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sum payment, defined as either the “surrender value” or “net surrender value.” The
surrender provisions can apparently be invoked up until the corresponding maturity
dates. According to Sawczak, no maturity date for any of the seven contracts has yet
arrived.1 Goldenberg is both the owner and annuitant of each annuity policy.
Goldenberg also claimed as exempt $2,546,319 in individual retirement accounts
(“IRAs”).
Sawczak filed objections to Goldenberg’s claimed exemptions, including
objections to his claims of exemption of the annuity contracts and of the IRAs.
I. The Annuity Contracts
Sawczak objected to Goldenberg’s claim of exempt status with respect to the
annuities, “to the extent of the surrender value of each.” She argued to the bankruptcy
court that the cash surrender values of the annuity contracts were not exempt under
1
Sawczak claims that the earliest maturity date for these annuities falls in the year 2009.
3
Fla. Stat. Ann. § 222.14 (West 1998).2 Applying Florida law,3 the United States
Bankruptcy Court for the Southern District of Florida concluded that:
Neither the title of [§ 222.14] nor its text distinguishes the proceeds
received from a surrender of the annuity contract from the proceeds
received after the contract is annuitized. . . . [T]he Court does not accept
Sawczak’s suggestion that the legislature intended to treat the surrender
value of an annuity contract differently than that of a life insurance
policy.
Accordingly, the bankruptcy court overruled Sawczak’s objection and upheld
Goldenberg’s exemption.
Sawczak appealed the bankruptcy court’s order to the United States District
Court for the Southern District of Florida. The district court concluded that:
Dr. Goldenberg did not have annuity contracts until the funds in the
annuity account reached maturity. He had, instead, option contracts to
buy annuities at a future date which options could be revoked by him at
anytime prior to the maturity dates. . . . When the judgment was entered
2
Section 222.14 reads:
Exemption of cash surrender value of life insurance policies and annuity contracts from legal
process
The cash surrender values of life insurance policies issued upon the lives of citizens or
residents of the state and the proceeds of annuity contracts issued to citizens or residents of the state,
upon whatever form, shall not in any case be liable to attachment, garnishment or legal process in
favor of any creditor of the person whose life is so insured or of any creditor of the person who is
the beneficiary of such annuity contract, unless the insurance policy or annuity contract was effected
for the benefit of such creditor.
3
Under section 522(b) of the Bankruptcy Code, 11 U.S.C. § 522(b), a state can choose to “opt
out” of the exemptions provided by federal law and provide its own allowable exemptions. Florida
has chosen this option. See Fla.Stat.Ann. § 222.20 (West 1998).
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the funds on deposit were not protected “proceeds of annuity contracts”
as described by statute.
Thus, the district court concluded that there was no exemption as to the $355,894 held
in the “annuity contracts” and that that money was reachable by process to partially
satisfy Sawczak’s judgment.
Dr. Goldenberg appeals to this Court arguing that the contracts at issue are in
fact annuity contracts exempt under § 222.14 and that the cash surrender values of the
annuities are included in the § 222.14 exemption. Sawczak, in turn, makes two
alternative arguments to this Court: 1) that Goldenberg did not have “annuity
contracts” when he filed for bankruptcy, but only options to buy annuities at future
dates which are not exempt under § 222.14, and 2) that § 222.14 exempts only the
proceeds of annuity contracts, which does not include cash surrender value. The
parties have not cited nor have we uncovered any controlling Florida case directly
addressing this important issue of Florida law. Consequently, we seek the assistance
of the Supreme Court of Florida in resolving this issue.
Having concluded that this case involves an unanswered question of state law
that is determinative of this appeal and having found no clear, controlling precedent
in the decisions of the Supreme Court of Florida, we certify the following question of
law to the Supreme Court of Florida for instructions:
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ARE THE CASH SURRENDER VALUES OF DR. GOLDENBERG’S
“ANNUITY CONTRACTS” EXEMPT FROM LEGAL PROCESS
UNDER FLA. STAT. ANN. § 222.14 (WEST 1998)?
In certifying this question, we do not intend the particular phrasing of it to limit
the court in its consideration of the problem posed by the case. In order to assist the
court’s consideration of the case, the entire record, along with the briefs of the parties,
shall be transmitted to the court.4
II. The IRAs
Both the bankruptcy court and the district court upheld Goldenberg’s claimed
exemption of $2,546,319 in IRAs, and Sawczak cross-appealed that issue to this
Court. Sawczak concedes that the IRAs were not acquired by Goldenberg with the
proceeds of a fraud perpetrated upon her, that the IRAs do not represent the transfer
of non-exempt assets into exempt assets on the eve of bankruptcy, and that “on their
face” the IRAs fit the description of assets exempted by Fla. Stat. Ann. § 222.21 (West
1998). Nevertheless, she argues that we should deny Goldenberg’s exemption as to
the IRAs as an “imposition upon creditors,” under a line of Florida cases stating that
4
Pending the response of the Florida Supreme Court, we do not address the parties’ arguments
concerning whether or not Sawczak can reach the post-bankruptcy petition increase in value of the
annuity contracts, if in fact the contracts are not exempt from process under Florida law.
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the Florida homestead exemption “‘should not be so applied as to make it an
instrument of fraud or imposition upon creditors.’” Orange Brevard Plumbing &
Heating Co. v. La Croix, 137 So.2d 201, 204 (Fla. 1962) (quoting Milton v. Milton,
58 So. 718, 719 (Fla. 1912)); see also Palm Beach Savings & Loan Ass’n v. Fishbein,
619 So.2d 267, 269 (Fla. 1993). We reject this argument as meritless. Accordingly,
we affirm the decision of the district court as to this issue.
AFFIRMED IN PART AND QUESTION CERTIFIED.
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