In re: LOU ANN CASSELL, Debtor. ROBERT B. SILLIMAN, Chapter 7 Trustee, Plaintiff - Appellant, versus LOU ANN CASSELL, Defendant - Appellee.
No. 11-13115
United States Court of Appeals for the Eleventh Circuit
August 3, 2012
D.C. Docket Nos. 1:11-cv-00136-CAP ; USBC 10-74119-WLH
[PUBLISH]
Appeal from the United States District Court for the Northern District of Georgia
(August 3, 2012)
CARNES, Circuit Judge:
This is an appeal in a bankruptcy case that turns on the interpretation of a Georgia statutory provision exempting certain annuities from bankruptcy estates. The questions presented are sufficiently unsettled, important, and likely to recur that we believe the best course is to certify them to the Georgia Supreme Court, which is the one true and final arbiter of Georgia law. See Mullaney v. Wilbur, 421 U.S. 684, 691, 95 S.Ct. 1881, 1886 (1975) (noting that the United States Supreme Court “repeatedly has held that state courts are the ultimate expositors of state law“); Blue Cross & Blue Shield of Ala., Inc. v. Nielsen, 116 F.3d 1406, 1413 (11th Cir. 1997) (“The final arbiter of state law is the state supreme court . . . .“).
I.
In late 2008, Cassell inherited $220,000 from her aunt. At that time, both Cassell and her wholly owned company, J&L Arborists, LLC, were insolvent. Cassell was still able to pay both her personal debts and the company‘s debts as they came due, at least for a while. After consulting with attorneys and accountants, she used her $220,000 inheritance to purchase a single-premium fixed annuity on May 1, 2009. Cassell was 65 years old at that time. She began receiving monthly payments of $1,389.14 on June 1, 2009, and under the annuity contract she is scheduled to receive those payments for the rest of her
On May 11, 2010, a year after she had purchased the annuity, Cassell filed a Chapter 7 bankruptcy petition (as did her company). She included the annuity as an asset in her Schedule B disclosures, and in her Schedule C filing she listed it as exempt property under
The trustee objected, contending that Cassell‘s annuity is nonexempt because it does not meet the requirements of the statute. The trustee argued that the word “annuity” in the Georgia exemption statute has a special meaning and not every investment or insurance product labeled as an annuity qualifies as one under the statute. The trustee asserted that Cassell‘s annuity does not qualify under
The bankruptcy court held that Cassell‘s annuity was an “annuity” within the meaning of the Georgia bankruptcy exemption statute. The court based that conclusion on findings that: when Cassell purchased it she intended for the payments she would receive to substitute for wages; the payment option she selected reflected her intent to obtain income for the duration of her life; the annuity was not prebankruptcy planning; and she did not have inappropriate control over the corpus. The court also decided that the payments were “on account of age” due to the fact that she had purchased the annuity because of her age. The court did not decide whether the payments were reasonably necessary for Cassell‘s support, believing that it lacked sufficient evidence to make that determination.1
The trustee appealed the bankruptcy court‘s order to the district court, which also concluded that Cassell‘s annuity qualified as an “annuity” for the purposes of the Georgia bankruptcy exemption. The district court agreed with the bankruptcy court that the annuity payments were on account of Cassell‘s age because her age had motivated her to buy the annuity. The district court affirmed as to the issues that the bankruptcy court had addressed
Instead of waiting to litigate the reasonably necessary issue in the bankruptcy court, the trustee appealed to this Court, conceding that the annuity payments are reasonably necessary for Cassell‘s support.2 (Appellant Br. 10). The trustee hangs his appeal on the contentions that Cassell‘s annuity is not an “annuity” within the meaning of the Georgia exemption statute and that, even if it is, the annuity payments are not made “on account of . . . age.”
II.
We review de novo the legal determinations of the bankruptcy court and the district court, In re Garner, 663 F.3d 1218, 1219 (11th Cir. 2011), but we review only for clear error the bankruptcy court‘s factfindings, In re Mitchell, 633 F.3d 1319, 1326 (11th Cir. 2011). The party objecting to an exemption, here the trustee, bears the burden of showing that the exemption is improper. See
The Bankruptcy Code allows a debtor to exempt certain property from the bankruptcy estate, see
Cassell contends that her annuity payments are exempt from inclusion in the bankruptcy estate under this provision of the Georgia exemption statute:
(a) . . . [A]ny debtor who is a natural person may exempt . . . for the purposes of bankruptcy, the following property:
. . .
(2) The debtor‘s right to receive:
. . .
(E) A payment under a pension, annuity, or similar plan or contract on account of illness, disability, death, age, or length of service, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor . . . .
A.
As for the first requirement, neither party points to any decisions of the Georgia courts determining exactly what an “annuity” is for purposes of
Statutory construction under Georgia law starts with the familiar rule that we are required “to construe a statute according to its terms [and] to give words their plain and ordinary meaning.” Slakman v. Cont‘l Cas. Co., 587 S.E.2d 24, 26 (Ga. 2003). The plain meaning of “annuity” is “[a]n obligation to pay a stated sum, usu[ally] monthly or annually, to a stated recipient.” Black‘s Law Dictionary 105 (9th ed. 2009); see also NationsBank of N.C., N.A. v. Variable Annuity Life Ins. Co., 513 U.S. 251, 255, 115 S.Ct. 810, 812 (1995) (“Annuities are contracts under which the purchaser makes one or more premium payments to the issuer in exchange for a series of payments, which continue either for a fixed period or for the life of the purchaser or a designated beneficiary.“). A “fixed annuity” is “[a]n annuity that guarantees fixed payments, either for life or for a specified period.” Black‘s Law Dictionary 105; see also id. (defining “annuity” as alternatively meaning “a right, often acquired under a life-insurance contract, to receive fixed payments periodically for a specified duration“).
Other Georgia statutes define an annuity in that manner. See, e.g.,
When analyzing the analogous federal exemption statute,
(E) a payment under a stock bonus, pension, profitsharing, annuity, or similar plan or contract on account of illness, disability, death, age, or length of service, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor, unless—
(i) such plan or contract was established by or under the auspices of an insider that employed the debtor at the time the debtor‘s rights under such plan or contract arose;
(ii) such payment is on account of age or length of service; and
(iii) such plan or contract does not qualify under section 401(a), 403(a), 403(b), or 408 of the Internal Revenue Code of 1986.
The trustee contends, however, that the word “annuity” in the Georgia exemption statute does not carry its plain meaning. Instead, his position is that to be an exemptible “annuity” within the meaning of that statute the source of the funds used to buy the annuity must be employment-related income, salary, or wages, and not an inheritance. In support of that position, the trustee cites the legislative history of
Both the Georgia and federal exemption statutes refer to a “pension,”
“annuity,” “or similar plan or contract.”5 The Supreme Court held in Rousey that an individual retirement account was a “similar plan or contract” for purposes of the federal statute. 544 U.S. at 334-35, 125 S.Ct. at 1571. The Court reasoned that, like the plans listed in the statute, IRAs “provide a substitute for wages (by wages, for present purposes, we mean compensation earned as hourly or salary income), and are not
The trustee also urges us to follow the In re Eilbert decision. The Eighth Circuit held in that case that an annuity purchased with inherited funds was not a “pension, annuity, or similar plan or contract” within the meaning of
retirement,” however funded, can be exempted under
Bankruptcy courts have generally agreed that not every annuity is an “annuity” for the purposes of the Georgia exemption statute. See, e.g., In re Cassell, 443 B.R. 200, 204 (Bankr. N.D. Ga. 2010); In re Bramlette, 333 B.R. 911, 920-21 (Bankr. N.D. Ga. 2005); In re Michael, 339 B.R. 798, 802-07 (Bankr. N.D. Ga. 2005); see generally In re Green, No. 06-14084, 2007 WL 1031677 (Bankr. E.D. Tenn. Apr. 2, 2007) (unpublished) (applying the Georgia exemption).
Cassell contends, though, that her annuity is an “annuity” within the meaning of
Appellate Panel of the Eighth Circuit laid out six factors to consider when deciding whether a particular annuity qualifies as an “annuity” under the federal exemption statute:
[(1)] Were the payments designed or intended to be a wage substitute?
[(2)] Were the contributions made over time? The longer the period of investment, the more likely the investment falls within the ambit of the statute and is the result of a long standing retirement strategy, not merely a recent change in the nature of the asset.
[(3)] Do multiple contributors exist? Investments purchased in isolation, outside the context of workplace contributions, may be less likely to qualify as exempt.
[(4)] What is the return on investment? An investment which returns only the initial contribution with earned interest or income is more likely to be a nonexempt investment. In contrast, investments which compute payments based upon the participant‘s estimated life span, but which terminate upon the participant‘s death or the actual life span, are akin to a retirement investment plan. That is, will the debtor enjoy a windfall if she outlives her life expectancy? Is she penalized if she dies prematurely?
[(5)] What control may the debtor exercise over the asset? If the debtor has discretion to withdraw from the corpus, then the contract most closely resembles a nonexempt investment.
[(6)] Was the investment a prebankruptcy planning measure? In this regard, the court may examine the timing of the purchase of the contract in relation to the filing of the bankruptcy case.
In re Andersen, 259 B.R. at 691-92.
The trustee argues that the Andersen test conflicts with the analysis used in Rousey and In re Eilbert. The test does, however, include factors that those two decisions and others have considered when deciding whether a particular annuity is an exemptible “annuity” under various statutes. See, e.g., Rousey, 544 U.S. at 329-332, 125 S.Ct. at 1568-1570 (considering whether IRAs provide a substitute for wages, the first In re Andersen factor); In re Eilbert, 162 F.3d at 527 (considering the first, second, third, and sixth In re Andersen factors); In re Huebner, 986 F.2d 1222, 1224 (8th Cir. 1993) (considering the debtor‘s control over the corpus, the fifth In re Andersen factor); In re Bramlette, 333 B.R. at 921 (considering all of the In re Andersen factors); In re Michael, 339 B.R. at 804 (considering the first In re Andersen factor).
Rousey would dictate that we give “annuity” its plain meaning if we were applying the federal exemption statute, but we are not. We are applying the Georgia exemption statute. When the Georgia legislature opted out of the federal statutory list of bankruptcy exemptions and enacted its own, it intended that Georgia debtors be treated differently from federal debtors in at least some circumstances. That cautions against assuming that an interpretation of the federal statute should be followed in a Georgia case, although the caution is lessened in situations like this one where the relevant statutory language is materially identical. We are unsure whether the Georgia Supreme Court
B.
In addition to disagreeing about the meaning of “annuity,” the parties also disagree about whether Cassell‘s annuity gives her a right to receive payments that are “on account of . . . age,” which is another requirement for this exemption. See
The Supreme Court held in Rousey that IRAs do “provide a right to payment on account of age.” 544 U.S. at 328-29, 125 S.Ct. at 1567-68. It reasoned that “on account of” means “because of,” which “require[s] a causal connection between the term that the phrase ‘on account of’ modifies and the factor specified in the statute at issue.”7 Id. at 326, 125 S.Ct. at 1566. The Court concluded that the debtor‘s rights to the IRA payments were causally connected to the debtor‘s age because of a 10% tax penalty for withdrawing funds from an IRA before the age of fifty-nine years and six months. Rousey, 544 U.S. at 327-29, 125 S.Ct. at 1566-68; see also
Cassell argues that for the same reason the Supreme Court found IRA payments to be on account of age, her annuity payments are as well—both types of payments are tax advantaged. An annuitant is permitted to exclude a portion of the payments from her gross income each year until she has recovered all of her investment in the annuity contract. See generally
argues that is irrelevant.
The trustee counters that Cassell‘s annuity does not qualify for favorable tax treatment and insists that the annuity contract itself states that it does not. He argues that the annuity payments do not qualify for favorable tax treatment under the Internal Revenue Code because, he believes, sections 401(a), 403(a), 403(b), and 408 of the Code limit qualifying assets to those purchased with one‘s own earnings. Cassell purchased her annuity with inherited funds instead of earnings. Because of
Cassell argues, as the bankruptcy court and the district court concluded, that the annuity payments meet the “on account of age” requirement for exemption in another way: Cassell purchased the annuity because of her advancing age. The bankruptcy court drew a distinction between a mandatory and a permissible inference. It reasoned that Cassell‘s age when she purchased the annuity did not compel a finding that the payments were on account of age, cf. In re Eilbert, 162
F.3d at 528, but that fact did permit the court to make that finding. And the court made it.
It may be that payments from all fixed life annuities, such as the one in this case, should be considered to be made on account of age under the Georgia statute. Fixed life annuities use the annuitant‘s age at the time the annuity payments begin to calculate the size of the payments,9 and in that way the payments will always be tied to the annuitant‘s age. However, neither the parties nor we have been able to find any decisions of the Georgia courts addressing whether Cassell‘s annuity payments are on account of age as required by
guidance from the Georgia courts on these questions, we are reluctant to hazard a guess.
III.
Fortunately, guessing is not our only option. Where there is a substantial doubt about the correct answer to a dispositive question of state law, a better option is to certify the question to the state supreme court. See World Harvest Church, Inc. v. Guideone Mut. Ins. Co., 586 F.3d 950, 960-61 (11th Cir. 2009) (“[T]he certification procedure [is] a valuable tool for promoting the interests of cooperative federalism . . . . [that] helps save time, energy, and resources and produces authoritative answers to novel or unsettled questions of state law.” (citation and quotation marks omitted)).
issue, we write in faint and disappearing ink, and once the state supreme court speaks the effect of anything we have written vanishes . . . .” (quotation marks omitted)). Absent certification, the question seems unlikely to reach that court. So we refrain from writing to this state law issue in our own faint font and ask for the help of the one court that can write the answer in bold, black letters.
We certify the following questions to the Georgia Supreme Court:
- Is a single-premium fixed annuity purchased with inherited funds an “annuity” for the purposes of
Ga. Code Ann. § 44-13-100(a)(2)(E) ? - Is a debtor‘s right to receive a payment from an annuity “on account of . . . age” for the purposes of
Ga. Code Ann. § 44-13-100(a)(2)(E) if the annuity payments are subject to age-based federal tax treatment, if the annuitant purchased the annuity because of her age, or if the annuity payments are calculated based on the age of the annuitant at the time the annuity was purchased?
Of course, “[o]ur statement of the questions is not designed to limit the inquiry of the” Georgia Supreme Court. Mosher v. Speedstar Div. of AMCA Int‘l, Inc., 52 F.3d 913, 917 (11th Cir. 1995). Instead, as we have stated before:
[T]he particular phrasing used in the certified question is not to restrict the [Georgia] Supreme Court‘s consideration of the problems involved and the issues as the Supreme Court perceives them to be in its analysis of the record certified in this case. This latitude extends to the [Georgia] Supreme Court‘s restatement of the issue or issues and the manner in which the answers are to be given, whether as a comprehensive whole or in subordinate or even contingent parts.
Martinez v. Rodriguez, 394 F.2d 156, 159 n.6 (5th Cir. 1968).10 The entire record on appeal in this case, including copies of the parties’ briefs, is transmitted along with this certification.
QUESTIONS CERTIFIED.