Dc Mex Holdings LLC v. Affordable Land LLC
332439
| Mich. Ct. App. | Jul 25, 2017Background
- DC Mex obtained a $2,500,000 joint-and-several judgment against Affordable Land, LLC and Dale B. Fuller; after appeals, DC Mex sought a writ of nonperiodic garnishment against Prudential naming Fuller.
- Prudential disclosed Fuller held an individual universal life policy with an approximate cash value of $73,078.91 and noted life insurance "may be exempt" under MCL 500.2207.
- Fuller objected and moved to quash the garnishment, arguing MCL 500.2207(1) exempts the policy proceeds, including cash value, because the policy was payable to his daughter and Fuller had not demanded surrender or withdrawal.
- DC Mex argued the cash value is not exempt during the insured’s lifetime and that the exemption applies only when proceeds become payable (typically at death); thus cash value could be garnished without Fuller first cashing out the policy.
- The trial court denied Fuller’s motion, relying on federal and state cases permitting garnishment of cash surrender value; Fuller appealed and this Court granted leave.
- The Court of Appeals concluded MCL 500.2207(1) exempts proceeds of life policies payable to spouse/children (including cash value) from creditors during the insured’s lifetime and reversed the denial of the motion to quash; it denied Fuller’s request for fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether MCL 500.2207(1) exempts a life insurance policy’s cash value from garnishment during the insured’s lifetime | Cash value is not protected until proceeds become payable (i.e., at death); exemption applies only post-payment | Statute expressly exempts "proceeds . . . including the cash value" payable to children, so cash value is exempt now even if not yet demanded | Exemption covers proceeds of policies payable to children, including cash value; garnishment improperly allowed |
| Whether prior beneficiary designation to a trust (later changed to daughter) defeats exemption | Trust beneficiary (not a protected class) means cash value was not exempt before change; change was fraudulent | MCL 500.2207(1) expressly covers policies payable to a trustee for benefit of spouse/children and protects subsequent beneficiary designations absent fraud | Exemption applied to the policy while payable to the trust for the daughter; later change to daughter did not constitute fraudulent transfer |
| Whether DC Mex’s garnishment position was frivolous warranting fees under MCL 600.2591 | (Implied) garnishment was a legitimate means to collect judgment | Fuller argued the garnishment was to harass and lacked legal merit | Court found DC Mex’s position had arguable legal merit and the statute was not clear; denial of fees affirmed |
| Standard of statutory interpretation applied | N/A | N/A | Court applied de novo review and interpreted the exemption by its plain language and statutory history |
Key Cases Cited
- Equitable Life Assurance Soc. of U.S. v. Hitchcock, 270 Mich. 72 (Mich. 1935) (interpreting earlier amendment to exempt all proceeds of protected policies, including surrender value)
- Chrysler First Bus. Credit Corp. v. Rotenberg, 789 F. Supp. 870 (E.D. Mich. 1992) (district court view that garnishment of insurance cash value is permissible)
- Baltrusaitis v. Cook, 174 Mich. App. 180 (Mich. Ct. App. 1988) (discussing public policy protecting life insurance for spouse/children)
- Rogers v. Wcisel, 312 Mich. App. 79 (Mich. Ct. App. 2015) (statutory interpretation is reviewed de novo)