Guardian Life Insurance v. Solomon

United States Court of Appeals,

Eleventh Circuit.

No. 95-5144.

In re Fred Paul SOLOMON, Debtor.

GUARDIAN LIFE INSURANCE COMPANY, Plaintiff-Appellant,

v.

Fred Paul SOLOMON, Defendant-Appellee.

Sept. 23, 1996.

Appeal from the United States District Court for the Southern

District of Florida. (No. 94-1137-CIV), Sidney M. Aronovitz, Judge.

Before TJOFLAT, Chief Judge, COX, Circuit Judge, and HANCOCK*,

District Judge.

PER CURIAM:

Guardian Life Insurance Company appeals an order of the

district court concluding that Fred Paul Solomon's interest in a

settlement agreement resolving a 1984 lawsuit is exempt, under

Florida law, from Solomon's bankruptcy estate. We reverse and

remand for further proceedings.

BACKGROUND

The relevant facts are discussed in the opinions of the

district court, Solomon v. Guardian Life Ins. Co. of America, 186

B.R. 535, 535-36 (S.D.Fla.1995), and the bankruptcy court, In re

Solomon, 166 B.R. 998, 998-99 (Bankr.S.D.Fla.1994). We summarize

them here only as pertinent to this appeal. In December 1985,

Solomon settled a lawsuit against Union Mutual Life Insurance

Company. The settlement agreement required Union Mutual to pay

*

Honorable James H. Hancock, U.S. District Judge for the

Middle District of Alabama, sitting by designation.

Solomon $50,000, followed by monthly payments of $6,507.97 for ten

years and a lump-sum payment of $450,000, payable January 1, 1996.

Union Mutual also agreed to pay Solomon's attorney's fees, which

totaled $344,250. Union Mutual was required by the settlement

agreement to purchase a commercial annuity contract from

Transamerica Annuity Service Corporation to ensure that the

agreement's payment schedule was complied with. Union Mutual was

named as the payee under the Transamerica annuity contract;

Solomon is not a party to that annuity contract.

Solomon filed a Chapter 7 bankruptcy petition in December

1993. Solomon listed the settlement agreement as property exempt

from his bankruptcy estate as an annuity under Fla.Stat. § 222.14

(West 1989), which provides, in relevant part:

the proceeds of annuity contracts issued to citizens or

residents of the state, upon whatever form, shall not in any

case be liable to attachment, garnishment or legal process in

favor ... of any creditor of the person who is the beneficiary

of such annuity contract....

Guardian Life, a creditor, objected to the claimed exemption.

After a hearing, the bankruptcy court sustained the objection,

concluding that the "Florida exemption applies only to annuity

contracts issued to citizens or residents of the state and of which

the debtor is the beneficiary." Solomon, 166 B.R. at 999. The

bankruptcy court held that Solomon's settlement agreement was not

exempt, both because of its payment structure and because Solomon

had no interest in the Transamerica annuity. Id.

The district court affirmed in part and reversed in part. The

court agreed with the bankruptcy court that the payment earmarked

as attorney's fees by the agreement did not qualify under section

222.14 for an exemption. But the court concluded that, under the

broad definition of "annuity" provided by the Florida Supreme

Court, see LeCroy v. McCollam (In re McCollam ), 612 So.2d 572

(Fla.1993), answering question certified in 955 F.2d 678 (11th

Cir.1992), answer conformed to, 986 F.2d 436 (11th Cir.1993), it

was bound to hold that the payments other than the attorney's fees

required by the settlement agreement constituted an annuity

contract, exempt under section 222.14 from Solomon's bankruptcy

estate. Guardian Life, 186 B.R. at 538. Guardian Life appeals the

district court's order to the extent that it reversed the

bankruptcy court.

DISCUSSION

On appeal, we are presented with the same issue addressed by

the district court: whether Solomon's settlement agreement with

Union Mutual constitutes an annuity contract within the meaning of

Fla.Stat. § 222.14, so that it is exempt from Solomon's bankruptcy

estate. We review de novo determinations of law, whether made by

the bankruptcy court or the district court. Reider v. Federal

Deposit Ins. Corp. (In re Reider ), 31 F.3d 1102, 1104 (11th

Cir.1994) (citing Equitable Life Assurance Soc. v. Sublett (In re

Sublett ), 895 F.2d 1381 (11th Cir.1990)).

Guardian Life contends that the district court erred in

concluding that the settlement agreement is an annuity contract

exempt from Solomon's bankruptcy estate.1 Guardian Life asserts

1

Guardian Life also argues that the Transamerica annuity

purchased by Union Mutual to ensure adequate funding of the

agreement does not qualify for an exemption under § 222.14. But

Solomon concedes that the Transamerica annuity cannot be the

basis for an exemption, because he has never had a legal or

that the agreement is not exempt because it is not an annuity

contract at all. Guardian Life alleges that neither Solomon nor

Union Mutual intended for the agreement to be considered an annuity

contract, and it asserts that, except for the monthly payments,

none of the agreement's other provisions bear any similarity to an

annuity. By contrast, Solomon urges that we affirm the district

court, arguing that the court correctly relied upon McCollam 's

broad definition of "annuity" to conclude that the settlement

agreement qualifies for the section 222.14 exemption.

We conclude that the agreement between Union Mutual and

Solomon does not qualify for the exemption provided by section

222.14. We recognize that the Florida Supreme Court has broadly

defined section 222.14 to include "all annuity contracts," stating

that "had the legislature intended to limit the exemption to

particular annuity contracts, it would have included such

restrictive language [in the statute]." McCollam, 986 F.2d at 437-

38 (quoting Florida Supreme Court's opinion with regard to question

certified). But the statute does not shield all debts or "accounts

receivable" structured to resemble annuities from a debtor's

bankruptcy estate. We read McCollam to require the existence of an

equitable interest in that annuity contract. See In re Pizzi,

153 B.R. 357, 360-61 (Bankr.S.D.Fla.1993) (construing § 222.14 to

require that debtor be the beneficiary of annuity contract in

question in order to qualify for exemption). In this appeal,

then, we address only the character of the settlement agreement

between Solomon and Union Mutual.

Guardian Life contends that, even if we conclude that

the monthly payments constitute an exempt annuity, in no

event can the lump-sum payment of $450,000 be classified as

an annuity. Because of our disposition of this case, it is

unnecessary for us to address separately this contention.

actual annuity contract before a series of payments may be exempt

under section 222.14. Accord In re Conner, 172 B.R. 119, 121

(Bankr.M.D.Fla.1994) (stating that "[i]f all that is required to

establish an annuity contract is a stream of payments over time,

all installment contracts would qualify as an annuity and that is

clearly not what the McCollam decision requires").

The district court concluded that, because McCollam 's broad

definition of "annuity" includes "debts structured as annuities,"

"the settlement agreement in this case constitutes proceeds of an

annuity contract exempt under Fla.Stat. § 222.14." Solomon, 186

B.R. at 538. The district court read McCollam too broadly; the

fact that Solomon received a series of payments under the

settlement agreement does not necessarily transform the agreement

into an annuity contract exempted by section 222.14. To qualify

for the exemption, the parties to the agreement must have intended

to create an annuity contract. See Conner, 172 B.R. at 121; In re

Dillon, 166 B.R. 766, 769 (Bankr.S.D.Fla.1994).

The language of the agreement between Solomon and Union Mutual

reveals that the parties did not intend to create such a contract.

See Conner, 172 B.R. at 121 (agreement must be identified as an

annuity within four corners of the contract); Dillon, 166 B.R. at

768 ("Had the Debtor intended the settlement payments to be paid

under an annuity contract, he had the ability to create such a

document."); Pizzi, 153 B.R. at 362 (lottery winnings never termed

proceeds of an annuity; winner never called "beneficiary" or

"payee"). The settlement agreement wholly concerns itself with

resolving Solomon's 1984 claims against Union Mutual; it is a

garden variety release of liability. The district court therefore

erred by concluding that section 222.14 applies to exempt the

payments made under the agreement from Solomon's bankruptcy estate.

CONCLUSION

We reverse the district court's order overruling Guardian

Life's objection to the claimed exemption and remand to the

district court for further proceedings consistent with this

opinion.

REVERSED and REMANDED.