Case Title: Alan L. Goldenberg v. Shirley Sawczak

Citation: 

Docket Number: 

State: florida

Court: Florida Supreme Court

Date: 2001-05-03T00:00:00Z

Document:
Supreme 
Court 
of 
Florida
   
_____________
No. SC00-1527
_____________
ALAN L. GOLDENBERG and
ALAN L. GOLDENBERG, M.D., P.A.
Appellants,
vs.
SHIRLEY SAWCZAK and
KENNETH WELT, as Chapter 7 Trustee,
Appellees.
[May 3, 2001]
CORRECTED OPINION
WELLS, C.J.
We have for review a question of Florida law certified by the Eleventh Circuit
Court of Appeals that is determinative of a cause pending in the federal courts and
for which there appears to be no controlling precedent.  We have jurisdiction.  See
art. V, § 3(b)(6), Fla. Const.
The Eleventh Circuit Court of Appeals asks:
ARE THE CASH SURRENDER VALUES OF DR.
GOLDENBERG’S “ANNUITY CONTRACTS” EXEMPT FROM
LEGAL PROCESS UNDER FLA. STAT. ANN. § 222.14 (WEST
1998)?
1At oral argument Sawczak conceded that these contracts were garden-variety
annuity contracts.
2Sawczak argues that all interests in property a debtor holds passes to the
bankruptcy estate upon the debtor’s bankruptcy filing.  See 11 U.S.C. § 541 (1994).
If the cash surrender value of an annuity contract is not exempt from legal process,
according to Sawczak, the contractual right to exercise the surrender provision would
likewise pass to the bankruptcy trustee, who could exercise it for the benefit of the
debtor’s creditors.
-2-
In re Goldenberg, 218 F.3d 1264 (11th Cir. 2000).  We answer the question in the
affirmative.
In 1989, Dr. Alan Goldenberg executed seven contracts with various
institutions.1  The contracts are commonly referred to as single premium deferred
annuities.  These contracts each required Goldenberg to make a one-time premium
payment in 1989, which he did in exchange for the right to receive streams of
monthly payments commencing on the maturity date, the earliest being in 2009. 
Goldenberg is styled as the “owner” and “annuitant” of each of these contracts. 
Under the terms of these contracts, Goldenberg may surrender the contract prior to
the specified maturity date and receive the cash surrender value.2  The surrender
value, in part, is affected by when the contract is surrendered:  the earlier the
contract is surrendered, the higher the surrender penalty.  At maturity, Goldenberg,
as annuitant, is entitled to receive the payment streams.
In 1992, Goldenberg negligently performed gall bladder surgery on Shirley
3There was no finding that Goldenberg fraudulently purchased the contracts to
conceal assets from Sawczak, presumably because Goldenberg purchased the
contracts years prior to the malpractice.  Parenthetically, the bankruptcy court noted
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Sawczak.  Goldenberg completely transacted Sawczak’s common bile duct,
causing her life-long injuries.  Sawczak sued Goldenberg, who carried no
malpractice insurance.  On May 1, 1996, the same day the jury was to begin its
deliberations in the medical malpractice suit, Goldenberg filed bankruptcy.  That 
same day, the bankruptcy court granted Sawczak’s emergency motion to allow the
jury to deliberate.  The jury returned a verdict in Sawczak’s favor against
Goldenberg in the amount of $4,000,629.
On May 31, 1996, in filings before the bankruptcy court, Goldenberg
claimed $3,791,119 in assets, of which amount he claimed $3,751,678 as exempt. 
Of the exempt amount, Goldenberg claimed $355,894 as the current value of the
seven contracts.  Apparently, Sawczak only introduced six of the seven contracts
into evidence in bankruptcy proceedings.  The bankruptcy court referred to the six
contracts in evidence as “annuity contracts.”  Sawczak claimed that the cash
surrender value of these policies were not exempt under section 222.14, Florida
Statutes (1995), because moneys received from the exercise of a surrender
provision are not proceeds.  However, the bankruptcy court found these contracts
exempt from legal process under section 222.14.3  The bankruptcy court also
that the contracts were purchased with exempt pension funds.  We find the source of
funds to be irrelevant for purposes of the application of section 222.14.
-4-
denied the remainder of Sawczak’s exceptions to Goldenberg’s claimed
exemptions, which included:  (1) $2,546,319 in Goldenberg’s IRA accounts; (2)
$4,460 in Goldenberg’s salary account; and (3) $3,259 in Goldenberg’s office
management account.
Sawczak and the bankruptcy trustee appealed to the federal district court. 
The district court reversed as to the annuity contracts but affirmed the bankruptcy
court’s conclusion regarding Goldenberg’s other claimed exemptions.  The district
court found that Goldenberg did not own annuity contracts.  Instead, that court
concluded that Goldenberg owned “options” to purchase annuities when the
contracts matured.  The district court found that the periodic payments to an
annuitant beginning at a fixed date and continuing for a fixed term of years or for
life constitute the “proceeds.”  Thus, the district court found that section 222.14
did not exempt the contracts from legal process prior to the stated maturity date in
the contract.
On appeal, the Eleventh Circuit Court of Appeals expressed no opinion
regarding the conflicting opinions between the district court and bankruptcy court
regarding the contracts; rather, that court certified the question to us.  The Eleventh
4See ch. 10154, § 1, Laws of Fla. (1925).
-5-
Circuit affirmed the district court on the remaining issues.  This petition for review
follows.
The federal bankruptcy code authorizes a state to opt out of the federal
scheme of exemptions in favor of state established exemptions.  See 11 U.S.C. §
522(b) (1994).  Florida, by virtue of section 222.20, Florida Statutes (1995), has
opted out of the federal scheme.  See Owen v. Owen, 500 U.S. 305, 309 (1991). 
The Florida exemption statute at issue, section 222.14, Florida Statutes (1995), and
its caption provide:
Exemption of cash surrender value of life insurance
policies and annuity contracts from legal process.–The cash
surrender values of life insurance policies issued upon the lives of
citizens or residents of the state and 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 whose life is so insured or of any
creditor of the person who is the beneficiary of such annuity contract,
unless the insurance policy or annuity contract was effected for the
benefit of such creditor.
(Emphasis added.)
The Legislature enacted the predecessor of section 222.14 in 1925.4  At that
time, the Legislature provided an exemption from legal process for the cash
surrender values of life insurance policies, but the Legislature did not provide an
5See ch. 78-76, § 1, Laws of Fla.
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exemption for proceeds of annuity contracts.  In 1978, the Legislature amended the
statute, and added the “proceeds of annuity contracts” language to the exemption.5
Goldenberg argues that Florida has a long tradition of broadly construing
exemption statutes.  He notes that the phrase, “upon whatever form,” written in
section 222.14 and other exemption statutes, indicates that the form of payment is
immaterial when determining whether the exemption applies.  Thus, Goldenberg
argues, moneys derived from surrendering an annuity should be exempt as being
only a separate form of payment under the annuity contract.  Further, Goldenberg
argues that legislative history reveals that in 1977 and 1978, the Legislature
specifically intended to provide the same exemption protection for annuities as the
existing protection for life insurance policies.
Conversely, Sawczak argues that section 222.14 distinguishes between
exemptions for “cash surrender values” in the case of life insurance contracts and
“proceeds” in the case of annuities.  No reliance on legislative history is necessary,
Sawczak contends, because the statute is clear.  She argues that the plain meaning
rule applies to the terms “cash surrender value” and “proceeds.”  Sawczak also
contends that the principle of expressio unius est exclusio alterius applies here to
exclude cash surrender value from the definition of proceeds.  Thus, Sawczak
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contends that “annuity” contracts, to the extent of their cash surrender values,
should be subject to legal process.
Florida has a long-standing policy that favors liberally construing exemption
statutes so as to prevent debtors from becoming public charges.  See Killian v.
Lawson, 387 So. 2d 960, 962 (Fla. 1980); Sneed v. Davis, 184 So. 865, 869 (Fla.
1938).  We have construed section 222.14 both prior to and after the 1978
amendment.  The Legislature has not responded to alter our construction in either
case.  Long-term legislative inaction after a court construes a statute amounts to
legislative acceptance or approval of that judicial construction.  See State v. Hall,
641 So. 2d 403, 405 (Fla. 1994); White v. Johnson, 59 So. 2d 532, 533 (Fla. 1952).
In 1934, we had before us a question concerning the application of the
exemption statute to the cash surrender value of a life insurance policy.  See Bank
of Greenwood v. Rawls, 158 So. 173 (Fla. 1934). In Bank of Greenwood, the
husband purchased a life insurance policy on his life and named his wife the
beneficiary of the policy.  See id. at 174.  This policy contained a contractual
provision where the insured husband could surrender the policy in case of disability
and extinguish whatever potential interest his wife had as beneficiary to the policy. 
See id. at 174 (opinion on rehearing).  While insolvent, the insured husband
exercised the disability provision and surrendered the policy.  See id.  The life
6See chapter 10154, § 1, Laws of Fla. (1925); Comp. Gen. Laws § 7066 (1927).
7In Zuckerman, we construed section 222.18, Florida Statutes (1991), which
exempts disability income benefits from legal process.  See Zuckerman, 646 So. 2d
at 188.  Section 222.18 contained the words, “of whatever form” as opposed to “upon
whatever form,” found in section 222.14.  This semantic difference did not preclude
us from using the Bank of Greenwood reasoning in Zuckerman regarding the “upon
whatever form” language.  In Zuckerman, we reasoned that the clarity of the words “of
whatever form” were dispositive in favor of the exemption statute applying to exempt
from process moneys received from settling a lawsuit that concerned whether there
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insurance company sent the husband a settlement check, which he endorsed to his
wife who deposited the check.  See id.
In a garnishment proceeding instituted to attach the moneys derived from the
surrender of the policy, we stated:
[T]he “cash surrender value” of a life insurance policy, as
contemplated by our statute above referred to,[6] includes any cash
value that may be obtained either by means of negotiation or pursuant
to an agreement for surrendering the policy in consideration of a sum
of money to be paid in whole or in part conditioned upon a surrender
of the life insurance feature of the policy . . . .
Id. at 175 (opinion on rehearing).  In reaching this conclusion, we emphasized the
“upon whatever form, shall not in any case” language in the exemption statute.  See
id. at 174-75 (opinion on rehearing) (emphasis added).  As we later explained in
Zuckerman v. Hofrichter & Quiat, P.A., 646 So. 2d 187 (Fla. 1994), the clarity of
these words indicate that the form of payment is not relevant for purposes of
having the exemption apply.7
was coverage under a disability policy.  See Zuckerman, 646 So. 2d at 188.
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The second relevant case construing section 222.14 is In re McCollam, 612
So. 2d 572 (Fla. 1993).  In McCollam, the issue concerned the meaning of “annuity
contracts” in section 222.14.  See id. at 574.  In settling a wrongful death lawsuit,
Travelers Insurance Company (Travelers) entered into a structured payment
agreement with Paula McCollam in 1985, where Travelers became obligated to
make monthly payments to McCollam for a term of years.  In 1987, McCollam was
involved in a traffic accident with Thomas LeCroy over which he sued McCollam. 
In 1989, McCollam filed bankruptcy, but claimed as exempt pursuant to section
222.14 the monthly payments received from Travelers.
In finding the structured payment agreement at issue to be an annuity
contract, we said that “[s]ection 222.14 clearly exempts all annuity contracts from
creditor claims.”  Id.  Further, we stated that, “had the Legislature intended to limit
the exemption to particular annuity contracts, it would have included such
restrictive language when the statute was amended to include annuity contracts.” 
Id.  The Legislature has not added any restrictive language to the statute.
The terms of section 222.14 are clear.  See McCollam, 612 So. 2d at 574. 
No reliance on legislative history is needed to determine intent where the statutory
language is clear.  See id. at 573.  The statutory addition in 1978 simply added
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“annuity contracts” to the existing statute.  Sawczak would have us define the term
“proceeds” to include only those payments that commence at the maturity date of
Goldenberg’s policies.  In other words, Sawczak maintains that moneys received
by surrendering an annuity contract are not proceeds.  We do not find a basis for
such a narrow definition of “proceeds” in the statute or in the commonly accepted
definition of proceeds.  The dictionary definition of proceeds is “the net amount
received after deduction of any discount or charges.”  Merriam Webster’s
Collegiate Dictionary 929 (10th ed. 1994).  The only difference between receiving
payment streams after maturity and a settlement payment before maturity is the
surrender charge.  Thus, we conclude that the “proceeds of annuity contracts”
include moneys received from surrendering an annuity contract prior to maturity.
Accordingly, we answer the certified question in the affirmative and hold that
the proceeds of an annuity contract where there is a surrender penalty are exempt
from legal process by virtue of section 222.14.  We return the case to the Eleventh
Circuit Court of Appeals for further proceedings.
It is so ordered.
SHAW, HARDING, ANSTEAD, PARIENTE, LEWIS and QUINCE, JJ., concur.
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION, AND
IF FILED, DETERMINED.
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Certified Question of Law from the United States Court of Appeals for the Eleventh
Circuit - Case No. 99-10411
Jeanne C. Brady and Frank R. Brady of Brady & Brady, P.A., Boca Raton, Florida,
for Appellants
Herman J. Russomanno of Russomanno & Borrello, P.A., Miami, Florida; and
Timothy J. Norris of Buchanan Ingersoll P.C., Miami, Florida,
for Appellees