In the Matter of Dennis Alan Howell
2015 Ind. LEXIS 203
| Ind. | 2015Background
- Debtor Dennis Howell filed Chapter 7 and listed an Adjustable Complife life-insurance policy with cash-surrender value of $14,692.88, naming his adult son as beneficiary.
- Debtor claimed the policy value as exempt under I.C. § 27-1-12-14(e); the Bankruptcy Trustee objected because the named beneficiary (an adult son) is not "dependent upon" the debtor.
- The statute exempts policies that name as beneficiary "the spouse, children, or any relative dependent upon such person, or any creditor." The parties disputed whether the phrase "dependent upon such person" modifies only "any relative" or also "spouse" and "children."
- Bankruptcy courts in Indiana were split on the issue (conflicting decisions including Vaiano and Spears/Wandrey), so the Northern District of Indiana certified the question to the Indiana Supreme Court.
- The Indiana Supreme Court resolved the ambiguity by applying textual canons (avoidance of surplusage, liberal construction of exemptions in favor of debtors, and the last-antecedent rule) and held that "dependent upon such person" modifies only "any relative."
- The Court rejected the Trustee’s facial constitutional challenge under Indiana Const. art. 1, § 22, explaining potential as-applied constitutional problems (e.g., large, closeted cash value) should be addressed case-by-case per Foster.
Issues
| Issue | Plaintiff's Argument (Howell) | Defendant's Argument (Trustee) | Held |
|---|---|---|---|
| Does "dependent upon such person" modify only "any relative" or also "spouse" and "children" under I.C. § 27-1-12-14(e)? | Phrase modifies only "any relative"; "spouse" and "children" are separate categories and need not be dependents. | Phrase modifies all three categories; beneficiaries must be dependents for the exemption to apply. | Phrase modifies only "any relative." Spouses and children need not be dependents for the exemption. |
| Does applying the exemption to non-dependent spouses/children violate Art. 1 § 22 (unlimited exemption)? | Statutory text governs; facial constitutional concerns can be handled case-by-case. | Allowing non-dependent spouses/children exempts potentially unlimited sums, violating § 22. | No facial violation; as-applied constitutional issues to be decided individually under Foster. |
Key Cases Cited
- Ballard v. Lewis, 8 N.E.3d 190 (Ind. 2014) (statutory-interpretation standard and ambiguity principles)
- Zumbrun v. ? (In re Zumbrun), 626 N.E.2d 452 (Ind. 1993) (exemption statutes must be liberally construed for debtors; limits on "unlimited" exemptions)
- Citizens Nat’l Bank of Evansville v. Foster, 668 N.E.2d 1236 (Ind. 1996) (as-applied analysis under Art. 1 § 22; assess "reasonable necessity")
- McNary v. Haitian Refugee Ctr., Inc., 498 U.S. 479 (1991) (presumption legislature acts with knowledge of interpretive canons)
- United States v. Tohono O’Odham Nation, 563 U.S. 307 (2011) (courts must respect statutory text over policy-based overrides)
- AlliedSignal, Inc. v. Ott, 785 N.E.2d 1068 (Ind. 2003) (give effect to each statutory word; avoid surplusage)