Canfield v. Orso

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_______________________________

No. 98-31008

_______________________________

In The Matter Of: PAUL WILLIAM ORSO,

Debtor.

VALERIE CANFIELD,

Appellant,

versus

PAUL WILLIAM ORSO; MARTIN A. SCHOTT,

Appellees.

_________________________________________________

Appeal from the United States District Court

for the Middle District of Louisiana

_________________________________________________

February 25, 2002

Before KING, Chief Judge, JOLLY, HIGGINBOTHAM, DAVIS, JONES, SMITH,

WIENER, BARKSDALE, EMILIO M. GARZA, DeMOSS, BENAVIDES, STEWART,

PARKER, and DENNIS, Circuit Judges.*

WIENER and DENNIS, Circuit Judges:

In this appeal we decide whether, under the laws of Louisiana

that establish exemptions from seizure, the proceeds of annuity

contracts purchased by obligors to fulfill a personal injury

*

Judge Edith Brown Clement did not participate in this appeal.

settlement structured to comply with 26 U.S.C. §§ 104(a)(2) and

1301 are exempt from claims of creditors of the payee who is a

debtor in bankruptcy. A divided panel of this court2 concluded

that our opinion in Young v. Adler3 required it to hold the instant

annuity payments are not exempt under the Louisiana exemption

statute as it existed when bankruptcy proceedings were commenced,

and that a post-petition, expressly-interpretive amendment of that

statute could not be considered when ascertaining its meaning as of

the date of filing for bankruptcy protection. A majority of the

judges in active service voted to rehear the case en banc.4

Disagreeing with the panel majority, we affirm the bankruptcy and

district courts’ conclusion that the annuity payments in question

are exempt from seizure, and thus exempt from claims asserted by

1

The Periodic Payment Settlement Act of 1982 amended the

Internal Revenue Code of 1954 to allow claimants to receive

periodic payments tax free if the payments are paid to settle a

personal injury claim. See Pub. L. No. 97-473, Title K, §

101(b)(1), Jan. 12, 1983, 96 Stat. 2605 (1982)(codifying the tax-

free status of such structured settlements provided by Revenue

Rulings 77-230,79-220 and 79-313). The Act also added § 130 of the

Internal Revenue Code, which allows a third person assignee to

defer from its gross income the amount it received for accepting

assignment of a liability to make periodic payments as damages. If

the assignee uses a qualified annuity to fund the periodic

payments, the basis of such asset shall be reduced by the amount

initially excluded from gross income by reason of the purchase of

such asset, and any gain recognized on a disposition of such asset

shall be treated as ordinary income. See Paul J. Lesti, Structured

Settlements, § 16:4 (2d ed. 1993).

2

214 F.3d 637 (5th Cir. 2000).

3

806 F.2d 1303 (5th Cir. 1987).

4

242 F.3d 534 (5th Cir. 2001).

2

Creditor-Appellant Valerie Canfield in Debtor-Appellee Paul William

Orso’s bankruptcy proceedings.

I.

FACTS AND PROCEEDINGS

Orso suffered serious injuries in an automobile accident in

November 1986, a few months after he and Canfield were wed. The

closed-head injuries Orso sustained in the accident left him

permanently and severely brain damaged, rendering him mildly

mentally retarded, with an I.Q. of less than 70. In November 1987,

Canfield and Orso sued for damages resulting from his injuries.

In September 1989, Orso and Canfield entered into a consent

judgment with the defendants in the tort litigation. On the same

day, the parties executed a settlement agreement, the pertinent

provision of which specified that Orso would receive two payments

each month for the longer of thirty years or his lifetime, one such

payment for $1,180 and another for $850.

To ensure Orso’s full and timely receipt of these periodic

payments, annuity contracts (“the Annuities”) were purchased. Orso

is the named payee or annuitant in both contracts, but is not the

owner of either; the defendant tortfeasors’ insurers obtained the

policies and retained ownership. The annuity contract that pays

$1,180 per month was issued by Liberty Life Assurance Company of

Boston in connection with Orso’s settlement with one of the

tortfeasors, Cook Construction Co., Inc., and its insurer, Liberty

Mutual Insurance Co. The annuity contract that pays Orso $850 per

3

month was issued by Western National Life Insurance Company in

connection with his settlement with the State of Louisiana, having

been purchased by the Conseco Annuity Guarantee Company, the

company to which the State had assigned the obligation to make the

periodic payments. The tortfeasors and their respective insurers

were released from further tort liability but remained obligated

for the periodic payments to Orso, who presumably could thereafter

look to his original judgment debtors and their insurers in the

unlikely event that the issuers of the Annuities should be unable

or unwilling to continue making the specified monthly payments.

Orso and Canfield divorced in 1991. They entered into a

property settlement under which Orso, who also receives U.S. Navy

and Social Security disability benefits, agreed to pay Canfield

$1,250 per month from September 1990 to August 1993 and $1,000 per

month for the ensuing nine months. Orso defaulted; Canfield filed

suit in state court late in 1990; Orso’s mother, Janice Orso, filed

interdiction proceedings in May of 1992 and was appointed as her

son’s curatrix in September; and, in July 1994, a state court

rendered a judgment in favor of Canfield for Orso’s arrearages

under their property settlement agreement.

On December 24, 1994, Orso’s mother, acting in her capacity as

curatrix of her interdicted son, filed a Chapter 7 bankruptcy

petition on his behalf. The annuity payments were listed as assets

of the estate but were claimed to be exempt under La. Rev. Stat.

Ann. § 22:647, which in relevant part shields payments under

4

annuity contracts from seizure. Canfield, who filed a $53,494.92

claim in Orso’s bankruptcy for the arrearages under their property

settlement agreement, objected to Orso’s efforts to exempt the

annuity payments, but the trustee supported Orso’s claim of

exemption. Almost three years later, the bankruptcy court rendered

a lengthy opinion denying Canfield’s objection. The district court

affirmed.

A divided three-judge panel of this court reversed the

district court, concluding that Orso’s payments from the Annuities

should not be exempt in his bankruptcy proceedings.5 The panel

majority’s judgment was then vacated when we voted to rehear the

case en banc.6

II.

ANALYSIS

A. Standard of Review

The bankruptcy court’s denial of an objection to a debtor’s

claim of exemption is a final order, subject to immediate appeal.7

We have jurisdiction to hear this appeal of the district court’s

affirmance of the bankruptcy judgment.8 In a bankruptcy case, we

review the decision of the district court in its capacity as an

5

214 F.3d 637 (5th Cir. 2000).

6

242 F.3d 534 (5th Cir. 2001).

7

England v. FDIC (In re England), 975 F.2d 1168, 1171 (5th

Cir. 1992).

8

28 U.S.C.A. § 158(d) (West 2001).

5

appellate court. We review the bankruptcy court’s findings of fact

affirmed by the district court for clear error, but review the

district court’s conclusions of law de novo.9

B. Framework

Reduced to its essentials, this case requires us to interpret

a state statute in the context of bankruptcy. The elements that

frame this inquiry are (1) interests in property owned by the

debtor (2) on the date that his petition in bankruptcy was filed,

(3) which property interests the debtor contends are exempt from

the claims of his creditors (4) by virtue of exemptions specified

in the applicable state statutes. The state law question requiring

statutory interpretation within this framework is whether the

property interests for which exemption is claimed —— here, periodic

payments from annuities obtained in a structured settlement of

personal injury claims —— come within the ambit of the subject

state exemption statute, § 647 of the Louisiana Insurance Code

(“§ 22:647”).10

1. Bankruptcy Context

It is axiomatic that when a petition in bankruptcy is filed,

thereby commencing bankruptcy proceedings, all property in which

9

HECI Exploration Co., Employees’ Profit Sharing Plan v.

Holloway (In re HECI Exploration Co.), 862 F.2d 513, 518 (5th Cir.

1988) (citing In re Missionary Baptist Found. of Am., 818 F.2d

1135, 1142 (5th Cir.1987)).

10

La. Rev. Stat. Ann. § 22:647 (West 2001). We refer to the

statute as § 22:647 rather than simply § 647 to avoid confusion

with references to sections of the Bankruptcy Code.

6

the debtor has a legal or equitable interest becomes property of

the bankruptcy estate.11 The debtor then may exempt property that

is protected from creditors by applicable state or federal law.12

Like the Bankruptcy Act before it, the Bankruptcy Code gives each

state an option: A state may allow debtors to (1) exempt from

their bankruptcy estates property included in the federal “laundry

list” of exemptions,13 or (2) rely on state law and federal law

other than the laundry list for allowable exemptions.14 Louisiana

has chosen the latter course,15 so our decision today turns on

interpretation of Louisiana law.16

Whether a particular property or interest in property of a

debtor’s bankruptcy estate is eligible for exemption is, like so

many other questions in bankruptcy, determined strictly “as of” the

11

11 U.S.C.A. § 541 (West 2001).

12

The 1898 Bankruptcy Act, § 6 (formerly 11 U.S.C.A. § 24),

provided that it “shall not affect the allowance to bankrupts of

the exemptions which are prescribed . . . by the State laws in

force at the time of the filing of the petition.” See Taylor v.

Knostman (In re John Taylor Co.), 935 F.2d 75, 78 (5th Cir. 1991).

13

11 U.S.C.A. § 522(d) (West 2001).

14

11 U.S.C.A. § 522(b)(2)(A) (stating that a debtor may

choose to exempt “any property that is exempt under Federal law,

other than subsection (d) of this section, or [under] State or

local law . . .”.).

15

See La. Rev. Stat. Ann. § 13:3881(B)(1) (West 2001).

16

FDIC v. Abraham, 137 F.3d 264, 267 (5th Cir. 1998)(quoting

Ladue v. Chevron, U.S.A., Inc., 920 F.2d 272, 274 (5th Cir), reh’g

denied 925 F.2d 1461 (1991), citing Commissioner of Internal

Revenue v. Estate of Bosch, 387 U.S. 456, 465 (1967)).

7

date on which the petition in bankruptcy is filed. Regarding non-

laundry list exemptions, § 522(b)(2)(A) specifies that the property

for which exemption is claimed must be exempt under a federal,

state, or local law “that is applicable on the date of the filing

of the petition.”17 We cannot emphasize too strongly that the day

on which the bankruptcy petition is filed is the “as of” date for

determining the applicability of exemption provisions. Even

though, of necessity, the judicial decision-making process on

exemption issues takes place subsequent to the filing of the

petition, the court must take a retrospective “snapshot” of the law

and the facts as they stood on the day the petition was filed. The

Supreme Court’s pronouncement on this point more than seventy-five

years ago continues to be good law today:

When the law speaks of property which is

exempt and of rights to exemptions, it of

course refers to some point of time. In our

opinion this point of time is the one as of

which the general estate passes out of the

bankrupt’s control, and with respect to which

the status and rights of the bankrupt, the

creditors and the trustee in other particulars

are fixed . . . . [O]ne common point of time

is intended and that [] is the date of the

filing of the petition.18

For purposes of substantive state law effecting exemptions from

seizure, then, any changes that occur after the filing of the

bankruptcy petition —— including any changes designated as being

17

11 U.S.C.A. § 522(b)(2)(A).

18

White v. Stumpf, 266 U.S. 310, 313 (1924).

8

retroactive —— can have no direct effect on the court’s

determinations concerning exemption.19

2. Interpretation of Applicable State Law

For Orso to prevail, he must demonstrate that the payments

produced by the particular annuities purchased by or on behalf of

his tort debtors in the structured settlement of their consent

judgment are covered by § 22:647. In determining whether the

proceeds and avails of the structured settlement annuities fall

within the Louisiana exemption, we resort to the acts of the state

legislature and to the pronouncements of the state’s courts as well.

Having established the applicable framework for resolution of

the question whether Orso’s proceeds from the Annuities are exempt,

we now examine the Louisiana annuity exemption statute, § 22:647.

C. Construction of the Louisiana Statute

As noted, Orso contends that his property right in the stream

of annuity payments from his structured settlement comes within the

purview of the version of § 22:647, specifically subsection (B),

that existed on the day his bankruptcy petition was filed. For the

following reasons, we agree.

When, in 1948, the Louisiana Legislature enacted that state’s

Insurance Code, it specified that the proceeds and avails of annuity

contracts are exempt from all debt liability. The language of that

enactment is largely retained in the current version of the

19

See id.; 11 U.S.C.A. § 522(b)(2)(A).

9

statute.20 The term “annuity contract” was not modified; neither

was it limited to particular types, classes, or categories of

annuity. That being the case, the term’s grasp is co-extensive with

its reach.

By Act 125 of 1958, the legislature transferred the annuity

exemption, essentially verbatim and without substantive change, into

Title 22, Section 647 of the Louisiana revised statutes. It has

remained there ever since, without any real alteration, even though

over the years, new provisions not relevant to this case were added,

and some of the section’s provisions were rearranged. Thus, the

substance of § 22:647's annuity exemption has remained constant.

The title and substance of Louisiana’s annuity exemption

statute reads now, as it did at the time Orso filed bankruptcy:

§ 647. Exemption of proceeds; . . . annuity

* * *

B.[] The lawful beneficiary . . .or payee . .

. of an annuity contract . . . shall be

entitled to the proceeds and avails of the

contract against the creditors and

representatives of the annuitant . . . and such

proceeds and avails shall also be exempt from

all liability for any debt of such beneficiary,

payee . . . existing at the time the proceeds

or avails are made available for his own use .

. . .

All concede that this exemption is controlling in bankruptcy just

as it is outside bankruptcy. And this provision of Louisiana law

is the one on which Orso relies, as he must, in arguing that his

monthly annuity payments are exempt from his creditors’ claims in

20

1948 La. Acts 195, § 14.37.

10

bankruptcy, specifically from his ex-spouse. We are satisfied that

the quoted provision does just that and does so unambiguously.

A plain reading of the annuity exemption statute leads

naturally to the conclusion that the proceeds that Orso is entitled

to receive from the structured settlements constitute proceeds and

avails declared exempt from liability and seizure by his creditors.

As the record is devoid of any evidence of fraud or wrongdoing by

Orso or on his behalf, the exemption must be given full effect in

his case.

Starting, as we always must, with the plain wording of the

statute, we see initially that there is nothing ambiguous about it;

and we know that when a statute is unambiguous we do not go behind

its terms to ascertain the intent of the Legislature. Tracking

§ 22:647, the title of which foretells that it deals with exemption

of proceeds from, inter alia, annuities, we see that under

subsection (B) as it existed when he filed his bankruptcy petition,

Orso was a “lawful beneficiary” who was the “payee . . . of an

annuity contract . . . .” The statute next tells us that in this

capacity Orso is “entitled to the proceeds and all avails of the

contract” and that “such proceeds and avails shall also be exempt

from all liability for any debt of such . . . payee,” namely Orso

in this case.

Consequently, Orso’s claim of exemption should prevail under

§ 22:647 unless some extraneous legal impediment prevents the

financial products that produce this stream of monthly proceeds from

11

being “annuity contracts” within the intendment of the statute. As

we shall explain, we conclude that these products, i.e., the

Annuities, acquired as they were by or for the tortfeasors in

compliance with their structured settlement with Orso, indeed are

free from any legal impediment to being annuity contracts for

purposes of § 22:647.

In its reversal of the bankruptcy and district courts’ holdings

that the Annuities are “annuity contracts” for purposes of the

statute, the panel majority agreed with Canfield that a “piercing

of the annuity” in the context of Orso’s structured settlements

mandates a determination that, as of the petition date, the

Annuities were not “annuity contracts” for purposes of § 22:647.

In so doing, the majority relied largely on our decision in Young

v. Adler (In re Young).21

D. Young v. Adler (In re Young); McGovern v. First National Bank

of Jefferson Parish (In re McGovern)

In Young, we rejected an attempt by a debtor, who was an

attorney-at-law, to claim as exempt the proceeds from an annuity

purchased for his benefit and at his direction, in payment of legal

fees owed to him by his client. We wrote that, “[w]hile the

payments Debtor [the attorney] claims to be exempt are, strictly

speaking, an ‘annuity,’ they are also accounts receivable. We must,

therefore, pierce the veil of this arrangement to determine its true

21

806 F.2d 1303 (5th Cir. 1987).

12

nature.”22 Thus in Young we “pierced” the “veil of this

arrangement,” but did not find fault with the annuity contract

itself; that is, we did not parse the contractual provisions of the

annuity but rather the transaction that produced it. In other

words, in Young we did not invalidate the annuity on its face but

disregarded it as having been based on an impermissible underlying

transaction. Under Louisiana law at the time of Young, there were

three actions through which a creditor could “pierce,” avoid, or

disregard his debtor’s fraudulent transfers: the revocatory

action,23 the oblique action,24 and the action in declaration of a

simulation.25 We are not, however, required to decide whether the

Louisiana courts would, in any such action, “pierce” either a

contract meeting the definition of annuity under § 22:647 or the

underlying transaction that produced such a contract. This is

because, in Young, neither our opinion nor that of the district

court contains an overt application of any of these actions or a

clear finding of fraud. Although it is true that there are many

distinguishing features between the arrangement or transaction in

Young and Orso’s structured settlements, in the end the legal

principles governing the two situations are indistinguishable. We

22

Id. at 1306 (emphasis added).

23

See La. Civ. Code Ann. arts. 1969-94 (1870).

24

See La. Civ. Code Ann. art. 1990 (1870).

25

See La. Civ. Code Ann. art. 2239 (1870); see also In re

Orso, 214 F.3d at 653 (Dennis, J., dissenting).

13

cannot, therefore, reverse the panel majority here without

overruling Young.

A distinction is even more difficult to draw between Orso’s

situation and the one considered in our unpublished but precedential

opinion in In re McGovern.26 There, expressing reliance on Young,

we held that periodic payments received by a debtor in the

structured settlement of his personal injury lawsuit were in fact

installment payments on an underlying debt, not proceeds of an

annuity, and therefore were non-exempt under Louisiana law.

Sitting en banc today, we conclude that Young and McGovern are

basically indistinguishable from the instant case. Consequently,

a literal interpretation and application of Young as precedent

cannot properly control either case. Thus, for the foregoing

reasons we today reverse the panel majority and reinstate the

bankruptcy court’s recognition of Orso’s annuity contract proceeds

as exempt; and we expressly overrule Young and McGovern.

Annuities of Orso’s kind, purchased pursuant to structured

personal injury settlements that comply with federal income tax

requirements, are certainly within the contemplation of the

Louisiana exemption as it existed on Orso’s petition date. The

defendants with whom Orso (and, for that matter, Canfield) settled

delivered to the insurance companies “a sum of money, and agree[d]

26

918 F.2d 175, No. 89-3849 (5th Cir. Oct. 25, 1990)

(unpublished table decision). Before 1996, our unpublished

opinions were as equally binding precedent as were our published

opinions. See 5th Cir. R. 47.5.3.

14

not to reclaim it so long as the receiver pays the rent agreed

upon,”27 bringing the Annuities squarely within the classic

definition of an annuity contract under Louisiana law as it existed

when Orso filed for bankruptcy protection. Funded or fixed annuity

contracts, like those that produce Orso’s periodic payments, are and

have always been stereotypical Louisiana annuity contracts under any

definition of the term.

E. Exemption of All Annuities

As should be obvious by now, our recognition that Orso’s

periodic payments are exempt under § 22:647 is grounded in the

conclusion that the Annuities, which produce those payments, are

“annuity contracts” under the version of that statute that was in

effect on the date Orso’s bankruptcy petition was filed. The

reasoning that leads us to this conclusion is diametrically opposed

to the reasoning of the panel majority, to wit: (1) the Annuities

were not “annuity contracts” under the version of § 22:647 that was

in effect on the petition date, (2) to enjoy exemption, then, the

Annuities would have to be “annuity contracts” under the statute as

amended by Act 63 of 199928 (“the 1999 Amendment”), and (3) the

Annuities are not entitled to benefit from the 1999 Amendment

because, as they postdated the filing of Orso’s petition, any

retroactive effect of such a post-petition enactment could not be

27

La. Civ. Code Ann. art. 2793 (West 2001).

28

1999 La. Acts 63.

15

applicable under the “snapshot” of the law and facts as of the

petition date. The panel majority also erred in treating the 1999

Amendment as a retroactive change in the law. It was, instead,

purely interpretive of the way the law had always been —— before,

on, and after the petition date.

Because Louisiana stands alone among the 50 states as a hybrid

Civil Law/common law jurisdiction, its situation is unique: The

State’s constitution, its codes and its statutes, are the primary

sources of law; court decisions are treated as secondary sources of

law, without stare decisis precedential effect.29 When interpreting

the law of Louisiana, as we do today, we are bound to honor, among

other things, Louisiana’s distinction between substantive and

interpretive laws, recognizing that:

The character of interpretive legislation is

evident in a civil law system such as

Louisiana. “Judicial opinions, although

invaluable interpretations of the law, are

merely that; interpretations of the legislative

will. The supreme expression of legislative

will in Louisiana is of course the codes and

29

Louisiana courts do, however, honor “jurisprudence

constante,” giving judicial deference to a rule established in a

solid line of cases. See Doerr v. Mobil Oil Corp., 774 So. 2d 119,

128-29 (La. 12/19/00) (stating that “a long line of cases following

the same reasoning within this state forms jurisprudence constante”

and distinguishing stare decisis); see also Prytania Park Hotel,

Ltd. v. Gen. Star Indem. Co., 179 F.3d 169, 175 (5th Cir. 1999)

(“It is axiomatic that in Louisiana, courts must begin every legal

analysis by examining primary sources of law: the State’s

Constitution, codes, and statutes. Jurisprudence, even when it

rises to the level of jurisprudence constante, is a secondary law

source in Louisiana.”) (citing Alvin B. Rubin, Hazards of a

Civilian Venturer in Federal Court: Travel and Travail on the Erie

Railroad, 48 La. L. Rev. 1369, 1372 (1988)).

16

statutes.” Interpretive laws provide the

Legislature with the opportunity to pronounce

the “correct” interpretation to be given to

existing laws.’30

The Louisiana Legislature expressly characterized the 1999

Amendment as interpretive, meaning that it is not new law and not

a retroactive change, but is the correct construction of existing

law. In Louisiana, “interpretative legislation does not create new

rules, but merely establishes the meaning that the interpreted

statute had from the time of its enactment. It is the original

statute, not the interpretive one, that establishes the rights and

duties.”31 Although other states allot similar interpretive roles

to the judiciary alone, the Louisiana approach is within the broad

latitudes states enjoy in choosing which roles are performed by

which state institutions.32 When, as here, federal courts must

30

Pierce v. Hobart Corp., 939 F.2d 1305, 1308-09 (5th Cir.

1991) (quoting Winstead v. Ed’s Live Catfish & Seafood, 554 So. 2d

1237, 1242 (La. App. 1989), cert. denied, 558 So.2d 570 (La.

1990)); circuit precedent in accord: Harrison v. Otis Elevator

Co., 935 F.2d 714, 719 (5th Cir.1991); Louisiana World Exposition

v. Federal Ins. Co., 858 F.2d 233, 244-45 (5th Cir.1988); Laubie v.

Sonesta Int'l Hotel Corp., 752 F.2d 165, 167-68 (5th Cir.1985).

“The general rule in this Circuit is that one panel cannot overrule

another panel. This rule applies with equal force to cases in which

state law supplies the substantive rule of decision[.]” Broussard

v. Southern Pac. Transp. Co., 665 F.2d 1387, 1389 (5th Cir.

1982)(en banc)(internal citations and quotations omitted).

31

Ardoin v. Hartford Accident & Indem. Co., 360 So.2d 1331,

1338-39 (La. 1978).

32

See Dreyer v. Illinois, 187 U.S. 71, 84 (1902) (“Whether the

legislative, executive, and judicial powers of a state shall be

kept altogether distinct and separate, or whether persons or

collections of persons belonging to one department may, in respect

to some matters, exert powers which, strictly speaking, pertain to

17

interpret a state statute that is functioning under a congressional

delegation of exclusive authority to declare the law, we properly

include in our consideration and treat as instructive, legislative

enactments and judicial decisions of the State that postdate filing

of the bankruptcy petition yet properly bear on our construction of

the statute in question to conform with the way the State interprets

it. This is especially true of unmistakably interpretive

declarations of the Louisiana Legislature.33

When we view the 1999 Amendment in this framework, we see that

its interpretation, relating to § 22:647 as it has always existed,

strongly reinforces the conclusion that the statute’s exemption was

applicable to Orso’s receipts on the day he filed for bankruptcy

protection. Even though the subsequent enactment of the 1999

Amendment might have been precipitated in part by our analysis in

Farm Credit Bank of Texas v. Guidry,34 the wording of that purely

interpretive addition is broader than required merely to ensure the

another department of government, is for the determination of the

state.”).

33

Thus, we need not revisit our opinion in Taylor v.

Knostman (In re John Taylor Co.), 935 F.2d 75 (5th Cir. 1991), in

which we held that the Texas homestead exemption in place at the

time of the filing of the bankruptcy petition, and not a subsequent

amendment, must be used to determine the scope of the applicable

exemption. Although retroactive, the Taylor amendment could not

operate to change the debtor’s post-bankruptcy rights, which are

determined under federal law. Id. at 78. Orso’s case is

distinguishable because his periodic payments under the Annuities

were exempt under Louisiana law as it existed at the time he filed

for bankruptcy.

34

110 F.3d 1147 (5th Cir. 1997).

18

inclusion of the subset of variable annuities among the set of all

annuity contracts exempted by § 22:647. We find implicit in the

wording of the 1999 Amendment, which is the Louisiana Legislature’s

interpretation of the statute ab initio, that periodic payments

generated by an annuity contract —— any annuity contract —— are

exempt from claims of creditors, whether within bankruptcy or

outside bankruptcy. The 1999 Amendment underscores Louisiana’s

consistent stance that courts are to construe annuity contracts

liberally, in favor of their preservation and enforcement. Although

nothing in § 22:647 expressly prohibits courts from entertaining

timely-brought, code-authorized challenges to the underlying

transaction that generates the annuity contract —— as, for example,

under Louisiana’s revocatory action or action to declare a

simulation —— the case we address today does not invoke any such

action; thus the question is not before us and we intimate no

opinion on that issue. What is clear under § 22:647, however, is

that courts are not authorized (1) to “pierce” annuities or the

underlying transactions that produce them except by actions

expressly provided for that purpose by Louisiana law, or (2) to

parse the annuity contract itself for qualification of the proceeds

as exempt.

III.

CONCLUSION

We hold that the periodic payments to Orso under his structured

settlement, flowing as they do from annuity contracts, are exempt

19

from his bankruptcy creditors under Louisiana law, a conclusion

bolstered by (but not wholly reliant on) the 1999 Amendment to §

22:647. Because they are proceeds of annuity contracts, the payments

to Orso are exempt from his bankruptcy estate under clearly

established Louisiana law extant on the day that his petition in

bankruptcy was filed. And, as today we are rehearing this case en

banc, we expressly overrule Young and McGovern, as well as anything

in Guidry that conflicts with the foregoing. The judgment of the

bankruptcy court, as affirmed by the district court, recognizing the

exemption of the monthly annuity payments to Orso, is

AFFIRMED.

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