DocketNumber: No. 57773-1
Citation Numbers: 118 Wash. 2d 99, 821 P.2d 1198, 1991 Wash. LEXIS 437
Judges: Andersen
Filed Date: 12/19/1991
Status: Precedential
Modified Date: 11/16/2024
Facts op Case
This case is before us on a question certified to us by a federal court.
Under R.C.W. 48.18.410(1), does a defendant's liability on a debt arising from an alleged violation of the Racketeer Influenced and Corrupt Organizations Act exist (1) at the time the alleged violation occurs, or (b) at the time judgment is entered against the defendant for violation of the Racketeer Influenced and Corrupt Organizations Act?
Although the federal court provided a detailed set of facts and the parties have offered to provide additional ones, the facts necessary for resolution of this narrow question are quite elemental and are in the record presented. A chronological time line is perhaps the clearest method to describe these relevant facts.
Between August 1983 and April 1984 certain events occurred
In February 1986, the health center served a complaint on Sharon Codispoti and her then husband, Carl Codispoti. In May 1988, Sharon and Carl Codispoti were divorced. In January 1989, Carl Codispoti died in an automobile accident. The estate of Carl Codispoti was substituted as a defendant in the federal civil case.
In May 1989, Sharon Codispoti received $205,726.04 as the named beneficiary of her former husband's life insurance policy.
In July 1989, trial in the federal court civil RICO action commenced.
In August 1989, the trial concluded with a jury verdict against Sharon Codispoti but in favor of the estate of Carl Codispoti. Hereafter, Ms. Codispoti will be referred to as the debtor or the judgment debtor and thé7 health care center will be referred to as the creditor or the judgment creditor.
In September 1990, the judgment creditor filed a motion for writ of execution on the judgment debtor's bank account containing the proceeds of the life insurance policy. The debtor then moved to certify to this court the legal issue regarding the applicability of Washington's life insurance exemption proceeds statute3
The statute at issue in this case is thé life insurance proceeds exemption statute, RCW 48.18.410 (henceforth the Act), which provides in relevant part:
(1) The lawful beneficiary ... of a life insurance policy . . . shall be entitled to the proceeds and avails of the policy against the creditors ... of the insured . . . and such proceeds and avails shall also be exempt from all liability for any debt of such beneficiary, existing at the time the proceeds or avails are made available for his own use.
At the heart of this exemption issue is the definition which should be applied to the word "debt" as used in the Act. When used in a statute, the word "debt" has no one fixed meaning and may vary according to the context in which it is used.
Debt has been given a very narrow meaning in some contexts. For example, under the debt limitation provision of article 8 of the Washington Constitution, "debt" means only certain borrowed money.
(A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or
(B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured;
11 U.S.C. § 101(4). Conversely, this broad definition of "debt" serves to protect the debtor seeking bankruptcy.
It follows from the foregoing that the proper definition of the concept of "debt" will depend upon the intent and purpose of the statute in which the word is used.
The creditors in the instant case rely heavily on Caplan v. Sullivan, 37 Wn. App. 289, 679 P.2d 949 (1984). The issue in Caplan was whether, under RCW 26.16.200, a tortfeasor's community property earnings were subject to garnishment for a tort committed prior to marriage. In order to give a liberal construction to the exemption in the "marital bankruptcy statute", our Court of Appeals defined debt to mean only an obligation arising from contract or a sum of money owed which is fixed and certain.
Since the term "liability for any debt" is not defined in the insurance proceeds exemption statute, it is presumed that it is to be accorded its ordinary meaning.
Therefore, in order to determine the meaning of "debt" within the context of the life insurance exemption proceeds statute, it is useful to consider the construction this Act is usually accorded, the purpose behind the Act and the history of the Act.
Virtually all states have some form of exemption statute which applies to life insurance proceeds.
The purpose of the life insurance exemption statute is to secure, after the death of the insured, pecuniary assistance to the beneficiary who is usually someone who was dependent upon the insured for support.
One writer explains that life insurance is the best means which average individuals have for providing economic income to their families after their death. Often, life insurance is the only means by which the average family can be supported in the event of the untimely death of a breadwinner, and therefore it is appropriate that such insurance be protected from creditors.
Professor Appleman in his text suggests that the purpose of insurance proceeds exemption statutes is to afford the fullest protection possible to the beneficiary except where the effect would invoke constitutional inhibitions.
The history of Washington's statute also sheds some light on the present issue. The first statute exempting proceeds of life insurance was contained in the Laws of 1895, ch. 125, § 1, p. 336 and provided:
That the proceeds or avails of all life insurance shall be exempt from all liability for any debt.
In 1914, this court held that property acquired out of the proceeds of a life insurance policy was not exempt from the "after incurred debts" of the beneficiary. Reiff v. Armour & Co., 79 Wash. 48, 49, 139 P. 633 (1914). The court explained that the theory upon which insurance moneys are exempt from creditors' claims was that "the creditor can claim no equity in a fund that had been in no way used as a basis for the credit".
In 1927, the Legislature amended the insurance exemption statute and added virtually the same language used by
That the proceeds or avails of life insurance . . . shall be exempt... for any debt of the beneficiary existing at the time the policy is made available for his use . . .
Compare this to the language in Reiff, 79 Wash, at 51, holding the intent of the law is to exempt proceeds of an insurance policy from the debts of the insured and "from the debts of the beneficiary existing at the time the policy is made available for his use".
This portion of the 1927 statute is essentially unchanged in the present insurance proceeds exemption statute
proceeds and avails shall also be exempt from all liability for any debt of such beneficiary, existing at the time the proceeds or avails are made available for his own use.
This history tends to show that the Legislature narrowed the exemption to include only debts existing at the time the beneficiary received the proceeds because otherwise a beneficiary could obtain credit based upon ownership of such proceeds and yet refuse to meet such obligations. An amended statute is interpreted in the light of court decisions that may have prompted the amendment.
The judgment creditors argue that a "wrongdoing" beneficiary should not be accorded the statutorily created exemption for life insurance proceeds. No law was cited, and none has been located, to support such a judicial amendment to this exemption statute. The Act itself discusses certain kinds of wrongful action and limits the scope of the exemption based on such conduct. For example,
Given the liberal construction accorded to the exemption provided in the insurance proceeds exemption statute (RCW 48.18.410), the purpose of the Act to afford protection to life insurance beneficiaries, and the history of the statute, we conclude that the term "liability on any debt" must be given a broad construction.
In this case, assuming that the civil claim is in fact valid, that claim "existed" prior to the entry of the judgment. The judgment confirmed the existence of the liability and established the amount of the debt; the obligation or responsibility, however, arose at the time the acts giving rise to the liability were committed.
This court has held that the life insurance exemption statute should not he construed so as to wipe out the protective benefits of the policy or defeat the carefully considered and deliberately enacted statutory purpose of the Act.
Thus, we answer the certified question from the federal court as follows: for purposes of the application of Washington's life insurance proceeds exemption statute, RCW 48.18.410, a defendant's liability on a debt is created at the time the alleged wrongful conduct occurred and not at the time the judgment was entered.
Attorneys' Fees
The judgment debtor requests that in the event this court determines that the insurance proceeds are exempt property, attorneys' fees attributable to the certified question proceeding be awarded to her.
After the federal court certified the exemption question to this court, the creditors instituted a garnishment proceeding in the Superior Court of the State of Washington for Snohomish County. The debtor now argues that she should be entitled to attorneys' fees in this court because this is in actuality a determination of the garnishment proceedings. Alternatively, the debtor asks this court to direct the Superior Court for Snohomish County to award attorneys' fees in that action. These arguments are not well taken.
Generally, attorneys' fees are recoverable only if specifically authorized by statute, by agreement of the parties or upon a recognized equitable ground.
The debtor asks, in the alternative, that this court order the Superior Court to award attorneys' fees in the state court garnishment proceeding. Our review powers are instituted upon acceptance of jurisdiction and the garnishment action in Snohomish County is not before this court. We decline to decide an issue in a case which is not before us.
This opinion shall be certified to the United States District Court as provided in RAP 16.16(g).
Dore, C.J., and Utter, Brachtenbach, Dolliver, Durham, Smith, Guy, and Johnson, JJ., concur.
It is not entirely clear from the jury verdict in the federal case what specific acts were performed by Ms. Codispoti which gave rise to liability to the health center. However, it is unnecessary for this court to inquire further since the only facts relevant to the insurance exemption issue presented here are the date of the federal judgment, the time of the events giving rise to the liability and the date the life insurance proceeds were received by the beneficiary.
The underlying judgment which creditors are seeking to satisfy is a civil judgment obtained under the civil remedies section of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1964. Whether or not the use of civil RICO remedies against antiabortion activists is a proper utilization of that statute is a hotly debated issue. Yonover, Fighting Fire with Fire: Civil RICO and Anti-Abortion Activists, 12 Women's Rights L. Rep. 153 (1990-1991); Note, Using Civil RICO to Battle Anti-Abortion Violence: Is the Last Weapon in the Arsenal a Sword of Damocles?, 25 New Eng. L. Rev. 1363 (1990-1991). However, that issue is not before this court, though it apparently is before the Ninth Circuit Court of Appeals of the United States in an appeal from the federal action. The question certified to this court does not in any way concern the merits of the federal case. We note only that the character of the RICO action is civil and not criminal in nature. The question before this court relates only to the scope of this state's life insurance proceeds exemption statute.
Sharon Codispoti has remarried and is now known as Sharon Codispoti Jurkovich.
RCW 48.18.410.
Caplan v. Sullivan, 37 Wn. App. 289, 292, 679 P.2d 949 (1984); Community Property — Antenuptial Debts — Eliminating Immunity of Earnings and Accumulations of Debtor Spouse, 45 Wash. L. Rev. 191, 194 (1970).
Department of Ecology v. State Fin. Comm., 116 Wn.2d 246, 254, 804 P.2d 1241 (1991).
RCW 19.40.011(3), (5).
See also Uniform Fraudulent Conveyance Act, former RCW 19.40.010.
11 U.S.C. § 101(11).
Caplan, 37 Wn. App. at 292-93.
Caplan, 37 Wn. App. at 293.
The correctness of the Caplan decision is not before this court in this case.
American Legion Post 32 v. Walla Walla, 116 Wn.2d 1, 8, 802 P.2d 784 (1991); North Coast Air Servs., Ltd. v. Grumman Corp., 111 Wn.2d 315, 320-21, 759 P.2d 405 (1988).
S. Schwarzschild, Rights of Creditors in Life Insurance Policies 277-351 (1963).
RCW 48.18.410; S. Schwarzschild, at 184, 187, 196, 198-99.
In re Elliott, 74 Wn.2d 600, 620, 446 P.2d 347 (1968); Northern Sav. & Loan Ass'n v. Kneisley, 193 Wash. 372, 378, 387, 76 P.2d 297 (1938); Holden v. Stratton, 198 U.S. 202, 210, 49 L. Ed. 1018, 25 S. Ct. 656 (1905); S. Schwarzschild, at 200; 5 G. Couch, Insurance § 29:118, at 425 (2d ed. 1984).
Elliott, 74 Wn.2d at 621; 2A J. & J. Appleman, Insurance § 1341, at 567 (1966); Aetna Life Ins. Co. v. Bunt, 110 Wn.2d 368, 377-78, 754 P.2d 993 (1988).
Elliott, 74 Wn.2d at 621; G. Couch, at 426 n.6.
S. Schwarzschild, at 259, 273.
Kneisley, 193 Wash, at 378.
Burlingham v. Crouse, 228 U.S. 459, 472, 57 L. Ed. 920, 33 S. Ct. 564 (1913).
J. & J. Appleman § 1342, at 576.
Reiff v. Armour & Co., 79 Wash. 48, 52, 139 P. 633 (1914).
RCW 48.18.410(1).
State v. Dubois, 58 Wn. App. 299, 303, 793 P.2d 439 (1990) (citing 1A C. Sands, Statutory Construction § 22.29 (4th ed. 1985)).
RCW 48.18.410(3)(b), (c).
Elliott, 74 Wn.2d at 620.
Clark v. Horse Racing Comm'n, 106 Wn.2d 84, 92, 720 P.2d 831 (1986).
RCW 2.60.030(3). See RAP 16.16(f).