Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-06-06038/USCOURTS-ca8-06-06038-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 

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United States Bankruptcy Appellate Panel

FOR THE EIGHTH CIRCUIT

_____________________

No. 06-6038ND

____________________

In re: Jeffery A. & Nancy Kukowski *

Debtors *

*

Jeffery A. & Nancy Kukowski * Appeal from the United States

Appellants * Bankruptcy Court for the 

* District of North Dakota

*

*

v. *

*

Michael L. Wagner, Trustee, *

Appellee *

______________________

Submitted: November 24, 2006

Filed: December 21, 2006

______________________

KRESSEL, Chief Judge, VENTERS and McDONALD, Bankruptcy Judges

McDONALD, Bankruptcy Judge

Appellate Case: 06-6038 Page: 1 Date Filed: 12/21/2006 Entry ID: 3261514
1

 The Honorable William A. Hill, Chief Judge, United States Bankruptcy

Court for the District of North Dakota.

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Debtor appeals from the order of the bankruptcy court1 sustaining Trustee’s

objection to Debtor’s claim of exemption of monthly payments he receives pursuant

to an annuity. We affirm. 

I.

The relevant facts are not in dispute. Debtor, a North Dakota resident, was

severely injured in a car accident in 1989 in which he became permanently disabled.

Debtor is unable to work because of the disability. Debtor brought a personal injury

action against the other driver. The other driver’s insurance company, State Farm Fire

and Casualty (“State Farm”), eventually reached a settlement of the tort claim with

Debtor in 1991. (the “Settlement Agreement”). 

Pursuant to the Settlement Agreement, State Farm paid a lump sum of

$20,000.00 to Debtor and also purchased an annuity from Prudential Insurance

Company (“Prudential”) in favor of Debtor. (the “Annuity”). Under the terms of the

Annuity, beginning in January 1992, Debtor receives $290.00 per month until he dies.

The Annuity, however, also provides that Prudential will pay Debtor or his beneficiary

the $290.00 monthly payment for 360 months beginning in January 1992 regardless

of whether Debtor dies within that time period. Thus, the payments under the Annuity

will be payable to Debtor’s beneficiaries upon Debtor’s death only if Debtor dies

before January 1, 2022. 

 Debtor and his wife filed a joint petition for relief under Chapter 7 of the

Bankruptcy Code on October 9, 2005. Debtor claimed his interest in the payments

under the Annuity as exempt under N.D. CENT. CODE §28-22-03.1(3). Trustee

objected, arguing that §28-22-03.1(3) only exempts annuities that are payable on

Appellate Case: 06-6038 Page: 2 Date Filed: 12/21/2006 Entry ID: 3261514
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account of the annuitant’s death. The bankruptcy court agreed and sustained Trustee’s

objection. This appeal follows.

II.

We review questions of law de novo and findings of fact for clear error. Bankr.

R. 8013. The question of whether the bankruptcy court correctly construed the North

Dakota exemption statute at issue is a question of law. Stuart v. Carter (In re Larsen),

59 F.3d 783, 785 (8th Cir. 1995). Our review of the bankruptcy court’s order,

therefore, is de novo. Id. 

III.

Because North Dakota has opted out of the Code’s exemption scheme, we look

to North Dakota law to determine whether Debtor’s interest in the Annuity is exempt.

Mueller v. Buckley (In re Mueller), 215 B.R 1018, 1022-23 (B.A.P. 8th Cir. 1998).

The North Dakota exemption statute in question, N.D. CENT. CODE §28-22-03.1(3),

provides in relevant part that a resident of North Dakota may exempt: 

“Pensions, annuity policies or plans, and life insurance policies that,

upon the death of the insured, would be payable to the spouse,

children, or any relative of the insured dependent, or likely to be

dependent, upon the insured for support and which have been in

effect for a period of at least one year;...”.

The bankruptcy court held that because the “upon the death of the insured”

qualification modifies the three preceding types of assets, pensions, annuities and life

insurance policies, the Annuity did not fall within the scope of §28-22-03.1(3).

Debtor initially argues that the “upon the death of the insured” language only modifies

the immediately preceding noun, life insurance policies. Given the unique context in

Appellate Case: 06-6038 Page: 3 Date Filed: 12/21/2006 Entry ID: 3261514
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which the North Dakota Legislature amended the statute in 1991, we find that the

bankruptcy court’s construction of the statute is correct.

Prior to 1991, the three types of assets listed in the first part of §28-22-03.1(3),

pensions, annuities and life insurance policies, were separated by semi-colons.

See N.D. CENT. CODE §28-22-03.1(3) (1990). Judge Hill, who also issued the opinion

sub judice, held in 1990 that because the Legislature used semi-colons instead of

commas to separate the three nouns, the modifying phrase beginning with “upon the

death of the insured” only applied to life insurance policies, which is the immediately

preceding noun. In re Smith, 113 B.R. 579, 585 (Bankr. D.N.D. 1990). Judge Hill

expressly stated that if the Legislature had intended for the modifying phrase to apply

to all three of the assets listed, it would have separated the three by commas instead

of semi-colons. Id.

A year after Judge Hill issued the Smith opinion, the North Dakota Legislature

amended §28-22-03.1(3) by separating the three types of assets listed in the statute

with commas instead of semi-colons. 1991 NORTH DAKOTA LAWS CH. 341 (H.B.

1335). This is the only change that the Legislature made to the statute during the 1991

session. Because it is clear that the Legislature enacted the 1991 Amendment in

response to Judge Hill’s opinion in In re Smith, the amendment unequivocally

demonstrates the Legislature’s intent to overrule Judge Hill’s interpretation of §28-22-

03.1(3) contained in In re Smith. 

Under North Dakota’s rules of statutory construction, a court must give

meaning to amendments to statutes. State v. Brossart, 565 N.W.2d 752, 757 (N.D.

1997). Also, it is presumed that the Legislature is aware of prior judicial constructions

of a statute when it amends that same statute. Johnson v. Johnson, 527 N.W.2d 663,

666 (N.D. 1995). Thus, when the Legislature amends a statute that substantively

differs from a prior and recent judicial interpretation of the same statute, a court

should infer that the Legislature intended to overrule the judicial construction of the

Appellate Case: 06-6038 Page: 4 Date Filed: 12/21/2006 Entry ID: 3261514
2

 The dissenting opinion applies a “plain language” construction of the

statute and finds that the modifying phrase beginning with “upon the death of the

insured” only applies to life insurance policies, just as Judge Hill found in Smith. 

The dissenting opinion, therefore, misses the unassailable point that the only

purpose of the 1991 Amendment was to overrule Judge Hill’s construction of the

statute contained in Smith. Accordingly, the dissenting opinion’s construction of

the statute renders the 1991 Amendment entirely superfluous, which obviously

fails to effectuate the intent of the Legislature.

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statute announced in that prior case. Id. at n. 2 (citing Merchant v. Pike, 83 N.W. 18

(N.D. 1900)).

Here, Judge Hill expressly stated in Smith that because the Legislature

separated pensions, annuities and life insurance policies with semi-colons instead of

commas, the modifying clause beginning with “upon the death of the insured” only

applied to life insurance policies. A year later, the North Dakota Legislature amended

§28-22-03.1(3) by replacing the semi-colons with commas. This is the only change

that the Legislature made to §28-22-03.1(3) during the 1991 legislative session. 

Given this context in which the North Dakota Legislature enacted the 1991

Amendment, it is clear that Legislature intended to overrule Judge Hill’s interpretation

of §28-22-03.1(3) contained in Smith. Thus, the 1991 Amendment demonstrates that

Legislature’s intent that the modifying phrase beginning with “upon the death of the

insured” should modify pensions, annuities and life insurance policies. Thus, the

bankruptcy court’s finding that the term “upon the death of the insured” modifies the

noun "annuities" is not erroneous.2

Debtor further argues that because the payments under the Annuity may be

payable to his beneficiaries upon his death, the Annuity does fall within the scope of

§28-22-03.1(3) even if the “payable upon death” clause modifies annuities. Judge Hill

rejected this argument, finding that the Legislature only intended annuities as part of

a death benefit to fall within the ambit of this exemption statute. We agree.

Appellate Case: 06-6038 Page: 5 Date Filed: 12/21/2006 Entry ID: 3261514
3

 The dissenting opinion’s construction of the exemption statute fails to

recognize this important point. The dissenting opinion points out that an annuity is

defined as a financial instrument that yields “a sum of money payable yearly or at

other regular intervals” and concludes that all such instruments are exempt under

the plain language of §28-22-03.1(3). Thus, for example, payments to a debtor

under a promissory note, which are generally made on a regular interval, must be

construed as an “annuity” and would be exempt up to $100,000.00 under the

dissenting opinion’s analysis. Such a result in surely contrary to the intent of the

Legislature and is why the Eighth Circuit requires courts to examine the entire

structure of exemption statute to determine if the financial instrument in question is

truly an “annuity” within the purview of the statute. 

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The term “annuity” is broad and generic and a court should examine the text

and overall structure of the exemption statute in question to glean whether the

legislature intended for the annuity to fall within the scope of that statute.3

 Eilbert v.

Pelican (In re Eilbert), 162 F.3d 523, 527 (8th Cir. 1998) (interpreting 11 U.S.C.

§522(d)(10)(E)). After reviewing the text and structure of §28-22-03.1(3), we believe

that the statute does not encompass an annuity that stems from the settlement of a tort

claim and that may not be payable to the debtor’s beneficiaries upon the debtor’s

death. 

 

First, as illustrated above, the North Dakota Legislature enacted the 1991

Amendment so that annuities are exempt only if they are payable to the insured’s

beneficiaries “upon the death of the insured”. Thus, we believe the Legislature

intended to include only annuities where the annuitant’s beneficiaries have an

unconditional right to receive payment after the annuitant dies to fall within the scope

of §28-22-03.1(3). Here, the payments under the Annuity are payable to Debtor’s

beneficiaries upon his death only if Debtor dies before January 1, 2022. Thus,

Debtor’s beneficiaries only have a conditional right to receive the payments under the

Annuity upon Debtor’s death.

Appellate Case: 06-6038 Page: 6 Date Filed: 12/21/2006 Entry ID: 3261514
4

 The dissenting opinion states that the Annuity was purchased with funds

derived from the Settlement Agreement. The record, however, demonstrates that

State Farm purchased the Annuity from Prudential for the benefit of Debtor as part

of the Settlement Agreement that terminated Debtor’s tort claim. Thus, State

Farm’s purchase of the Annuity itself was integral to the settlement of Debtor’s

personal injury tort claim and falls squarely within the ambit of §28-22-03.1(4)(b). 

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Second, in a later portion of §28-22-03.1(3), the North Dakota Legislature lists

other assets that a debtor may exempt that are payable during the debtor’s life time

and that are not subject to the “payable upon death” qualification. The Legislature’s

omission of a particular provision in one place in a statute when it has included the

provision in another place in the same statute evidences its intent that the provision

should not apply where omitted. Tibor v. Tibor, 623 N.W.2d 12, 23 (N.D. 2001).

Thus, the Legislature’s omission of annuities with the assets listed in the later portion

of §28-22-03.1(3) evidences its intent to exclude from the scope of the section

annuities that are payable to the debtor during the debtor’s lifetime but may not be

payable to the debtor’s beneficiaries upon the debtor’s death.

 

Finally, the Legislature specifically dealt with what portion of the proceeds of

a personal injury tort claim a debtor may exempt in another subsection of §28-22-03.

Section 28-22-03.1(4)(b) provides that a debtor may exempt a payment, not to exceed

seven thousand five hundred dollars, on account of personal bodily injury, not

including pain and suffering and actual pecuniary loss. 

A statute that specifically addresses a topic takes precedence over a statute that

generally addresses the same topic. Case Credit Corp. v. Oppegard’s, Inc., 701

N.W.2d 891, 896-97 (N.D. 2005). There is no question that the payments under the

Annuity are on account of personal bodily injury to Debtor.4

 Thus, §28-22-03.1(4)(b)

specifically addresses what portion of the payments under the Annuity that Debtor

may exempt and must trump the more general treatment of annuities contained in §28-

22-03.1(3). 

Appellate Case: 06-6038 Page: 7 Date Filed: 12/21/2006 Entry ID: 3261514
5

 We also note that Trustee, as the objecting party, would have the burden of

proof in demonstrating by a preponderance of the evidence that the payments under

the Annuity are not on account of pain and suffering or actual pecuniary loss. 

Bankr. R. 4003(c); In re Whitson, 319 B.R. 614, 617 (Bankr. E.D. Ark. 2005). 

6

 It appears from the record that Trustee would not object to Debtor

amending his schedules to exempt at least a portion of the Annuity payments under

§28-22-03.1(4)(b).

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The dissenting opinion suggests that our conclusion that Debtor may exempt

the payments under the Annuity only under §28-22-03.1(4)(b) circumvents the North

Dakota Legislature’s intent to allow its residents to exempt payments that are

necessary for their support. This is too narrow a view of the extent to which Debtor

may exempt the payments from the Annuity under §28-22-03.1(4)(b). The $7,500.00

cap contained in §28-22-03.1(4)(b) does not apply to the portion of the payments

attributable to “pain and suffering and actual pecuniary loss”. Thus, §28-22-

03.1(4)(b) allows Debtor to exempt the entire portion of the payments under the

Annuity that is attributed to either pain and suffering or that constitutes a wage

substitute because of his inability to work. In re Cramer, 130 B.R. 193, 196 (Bankr.

E.D. Pa. 1991) (interpreting §522(d)(11)(E)).5

Given this overall structure of §28-22-03.1, it is clear that the Legislature did

not intend for an annuity that stems from the settlement of a tort claim and that may

not be payable to the annuitant’s beneficiaries upon the annuitant’s death to be exempt

under §28-22-03.1(3). Rather, the Legislature intended for such an annuity to be

exempt to the extent allowed by §28-22-03.1(4)(b).6

 

IV.

The 1991 Amendment to §28-22-03.1(3) and the overall structure and text of

the statute indicate that the North Dakota Legislature did not intend for that subsection

Appellate Case: 06-6038 Page: 8 Date Filed: 12/21/2006 Entry ID: 3261514
7

 I would note that the Annuity appears to be owned by State Farm Fire and Casualty

Company, not Debtor Jeff Kukowski. (Appellant’s App. 44) However, the parties and the

bankruptcy court have treated the Annuity as if it were owned by Kukowski, and I will proceed

on that assumption. 

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to encompass an annuity that is an essential element of a settlement of the debtor’s

personal injury tort claim and that may not be payable to the debtor’s beneficiaries

upon the debtor’s death. Rather, such an annuity is clearly “on account of personal

bodily injury” to the debtor and a debtor may exempt his interest in such an annuity

under §28-22-03.1(4)(b). Debtor’s interest in the payments under the Annuity,

therefore, do not fall within the scope of §28-22-03.1(3). The bankruptcy court,

therefore, did not err in sustaining Trustee’s objection. Accordingly, we affirm the

judgment of the bankruptcy court. 

VENTERS, Bankruptcy Judge, dissenting

I must, respectfully, dissent. The decision of the bankruptcy court should be

reversed and the Trustee’s objection to the Debtors’ claim of an exemption in the

Annuity should be overruled based on the plain language of § 28-22-03.1(3),

regardless of whether the Trustee’s or Debtors’ interpretation of that statute is

adopted.7

 

The language of § 28-22-03.1(3) bears repeating. It provides in pertinent part:

In addition to the exemptions from all attachment or process, levy and

sale upon execution, and any other final process issued from any

court, otherwise provided by law, a resident of the state may select:

***

(3) Pensions, annuity policies or plans, and life insurance policies that,

upon the death of the insured, would be payable to the spouse, children,

or any relative of the insured dependent, or likely to be dependent, upon

the insured for support and which have been in effect for a period of at

least one year; individual retirement accounts; Keogh plans, Roth

Appellate Case: 06-6038 Page: 9 Date Filed: 12/21/2006 Entry ID: 3261514
8 See Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 6, 120

S.Ct. 1942, 147 L.Ed.2d 1 (2000) (“[W]hen the statute's language is plain, the sole function of

the courts – at least where the disposition required by the text is not absurd – is to enforce it

according to its terms.”); N.D. Cent. Code § 1-02-05 (“When the wording of a statute is clear and

free of all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its

spirit.”). See also, In re Smith, 113 B.R. 579, 584-85 (Bankr. D.N.D. 1990) (“The federal case

law as well as the North Dakota Supreme Court hold that in divining the purpose or intent of a

statute, court’s [sic] must resort in the first instance to the language of the statute itself . . . .The

language of the statute itself is regarded as conclusive of legislative intent unless the statute is

clearly ambiguous or creates an irrational result. Legislative history . . . cannot be used to create

the ambiguity or the irrational result.”).

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individual retirement accounts under section 408A of the Internal

Revenue Code . . . , and proceeds, surrender values, payments, and

withdrawals from such pensions, policies, plans, and accounts, up to one

hundred thousand dollars for each pension, policy, plan, and account

with an aggregate limitation of two hundred thousand dollars for all

pensions, policies, plans, and accounts. The dollar limit does not apply

to the extent this property is reasonably necessary for the support of the

resident and that resident's dependents, except that the pensions, policies,

plans, and accounts or proceeds, surrender values, payments, and

withdrawals are not exempt from enforcement of any order to pay

spousal support or child support, or a qualified domestic relations order

under sections 15-39.1-12.2, 39-03.1- 14.2, and 54-52-17.6.

The bankruptcy court held that the Annuity is not exempt under this provision

because, under its interpretation of the statute, the phrase “upon the death of the

insured, would be payable to the spouse, children, or any relative of the insured

dependent” qualifies “annuity,” and the Debtor’s Annuity, it concluded, does not

qualify for the exemption because it (or some portion of it) is payable during

Kukowski’s lifetime. 

The bankruptcy court’s holding is erroneous in two respects. 

First, it misconstrues the plain language of the statute.8

 From a purely

grammatical standpoint, the clause beginning with “upon the death of the insured”

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9

 A pension is defined as a fixed sum paid regularly to a person (who is presumably

alive), a gratuity granted (as by a government) as a favor or reward, or money paid under given

conditions to a person following retirement from service or to surviving dependents. An annuity

is defined as “a sum of money payable yearly or at other regular intervals.” www.websters.com.

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does not, as the bankruptcy court held and the majority affirms, modify “pensions,

annuity policies or plans, and life insurance policies.” Rather, it modifies only “life

insurance policies.” To accomplish the interpretation advanced by the bankruptcy

court and the majority, the statute would have to be rewritten with a comma between

“life insurance policies” and “that,” i.e., “Pensions, annuity policies or plans, and life

insurance policies, that, upon the death of the insured, would be payable to the spouse

. . . and which have been in effect for a period of at least one year." But that isn’t the

way it is written. And until the statute is so rewritten, it does not matter whether there

is a common or semicolon at the end of that list.

The statute’s grammar isn’t the only barrier to the bankruptcy court’s

interpretation of the statute; there are semantic inconsistencies as well. Why would

the phrase “upon the death of the ‘insured’ ” apply to an annuitant and a pensioner?

It is hard to imagine a clearer sign that the phrase only modifies insurance policies.

In fact, the word “insured” appears three times in the questioned phrase, further

reinforcing the conclusion that the phrase applies only to life insurance policies. In

contrast, annuitants and pensioners are generally referred to as “annuitants” and

“pensioners;” they are not called “insureds.” Moreover, it defies logic and common

sense to interpret the statute as applying to pensions and annuities that are only

payable upon the death of the “insured” (pensioner or annuitant). Pensions and

annuities are usually, if not always, paid to pensioners or annuitants while they are

alive, not upon their death, although both pensions and annuities may – like the

annuity in this case – contain survivorship provisions as well.9

 Quite simply, the

bankruptcy court’s (and the majority’s) interpretation of § 28-22-03.1(3) leads to a

grammatically and semantically strained reading of the statute which is at odds with

Appellate Case: 06-6038 Page: 11 Date Filed: 12/21/2006 Entry ID: 3261514
10 See Norwest Bank Nebraska, N.A. v. Tveten, 848 F.2d 871, 875 (8th Cir. 1988) ( “ ‘the

policy of [exemption] statutes is to favor the debtors, at the expense of the creditors . . . such

statutes are construed liberally in favor of the exemption.’ ”) (citing Forsberg v. Security State

Bank, 15 F.2d 499, 501 (8th Cir. 1926)); Murray v. Zuke, 408 F.2d 483, 487 (8th Cir. 1969)

(“exemption laws were manifestly enacted for the relief of a debtor . . . and should be liberally

construed”).

11 108 B.R. 240 (Bankr. D.N.D. 1989).

12 Id. at 242.

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its plain language and unwarranted in light of the policy to construe exemption

statutes liberally in favor of a debtor.10

Second, the Annuity is exempt even if the phrase “upon the death of the insured

. . . and which have been in effect for at least a year” applies to annuities – the Annuity

is payable to Kukowski’s spouse and dependents upon his death (if that occurs within

360 months) and the annuity has been in effect for 15 years – far longer than one year.

The bankruptcy court rejected this argument, citing its earlier decision in In re

Johnson,

11 in which the bankruptcy court found that “it was reasonable to infer that

the North Dakota legislature intended for ‘annuities’ in the context of retirement

instruments be exempted, not annuities based upon tort settlements.”12

With all due respect, I find nothing reasonable in that conclusion. The plain

language of the statute puts no limitation on the exemption based on the annuity’s

purpose or the source of the funds used to purchase it. The conclusion expressed in

Johnson is wholly incompatible with the bankruptcy court’s ultimate holding that 

§ 28-22-03.1(3) only exempts annuities payable to a debtor’s dependents upon the

debtor’s death. I suppose we all retire when we die, but it would appear that an

annuity purchased as a “retirement” instrument is only useful (and the interpretation

Appellate Case: 06-6038 Page: 12 Date Filed: 12/21/2006 Entry ID: 3261514
13 Judge Hill's ruling in the Smith case actually supports a ruling that the debtor's annuity

in this case should be exempt under the statute. On pages 587-88, Judge Hill states:

The creation of the exemption was a means of not only shielding the proceeds from

the claims of the medical providers but was also in furtherance of providing Kyle

(the debtor) with minimal financial security in the future...The annuity was entirely

appropriate as a means of providing Kyle with the means of survival, a way to

rehabilitate himself, and the means of protecting himself as well as his dependent

from improvishment. Seven hundred and twenty-eight dollars per month is not a

great sum and barely places Kyle above the poverty level even in light of his current

employment which is just at minimum wage. The social policy behind the

exemptions has not been violated in this case.

In the instant case, the Settlement Agreement and Release (App., p. 64(a)) expressly

provided that Kukowski was to receive $290.00 a month “commencing on 1-1-92 to continue

as an income for 30 years certain and life.” This is a far cry from the $728.00 a month that

Judge Hill approved as reasonable in the Smith case more than 15 years ago. It was to

provide some minimal level of support for Kukowski and, in the event of his early death, for

his family. 

14 See supra n. 1

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of the statute logical) if the statute applies to annuities payable during an annuitant’s

lifetime. 

I am also unpersuaded by the reasoning set forth by the majority in its opinion

affirming the bankruptcy court’s order. 

The majority places great importance on the fact that the North Dakota

legislature amended § 28-22-03.1(3) to include a semicolon after the “upon the death

of the insured . . . and in effect for a period of at least one year” clause, presumably

in response to the statement in In re Smith that doing so would make that clause apply

to annuities.13 I believe that this importance is misplaced.

Given, there is a canon of statutory interpretation which directs courts to

presume that a legislature is aware of prior judicial constructions of a statute when it

amends that same statute. However, that canon of statutory interpretation does not

override the fundamental rule that a court should look no further than the plain

language of a statute unless doing so would produce an absurd result.14 Limiting the

Appellate Case: 06-6038 Page: 13 Date Filed: 12/21/2006 Entry ID: 3261514
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application of the “upon the death of the insured” clause to life insurance policies does

not produce an absurd result. To the contrary (as noted above), it is the application

of that clause to annuities and pensions which leads to an absurd result. The North

Dakota legislature may have intended to amend the statute to more clearly indicate

that only annuities and pensions payable upon the death of the “insured” are exempt,

but we have no way of knowing that, and the amended text of the statute simply does

not support that interpretation. 

Moreover, I am unsatisfied by the reason given for the majority’s determination

that the Annuity is not exempt even though it is payable to Kukowski’s dependents

upon his death and has been in effect for more than one year. The majority states that

§ 28-22-03.1(3) “requires that there be an unequivocal relationship between the right

of the debtor’s beneficiaries to receive the annuity payments and the debtor’s death.”

I do not know what is meant by “an unequivocal relationship,”and I do not find any

support for this statement in the text of the statute. Nor do I believe that it is logically

accurate to conclude that the requirement that an annuity be payable upon the

annuitant’s death means that it cannot also be payable during his lifetime and still be

exempt. In other words, “if not A, then not B,” cannot be deduced from, “if A, then

B.” Under the majority’s logic, pensions and annuities that are paid to a pensioner and

annuitant before death would be excluded from the purview of the statute, and that

position is untenable and violative of the statute.

Finally, I am troubled by the majority’s position that § 28-22-03.1(3) does not

apply to annuities purchased with funds derived from a personal injury tort claim

because North Dakota has a specific exemption for property traceable to a personal

injury claim. There is nothing in § 28-22-03.1(3) limiting the statute to a particular

type of annuity or preventing a debtor from choosing the most beneficial exemption

available under the statute. In light of the rule that exemption statutes are to be

liberally construed in favor of the debtor, debtors are – and should be – permitted to

select the exemption that is most beneficial to them.

Appellate Case: 06-6038 Page: 14 Date Filed: 12/21/2006 Entry ID: 3261514
15 Johnson, 108 B.R. at 242.

16 “The dollar limit does not apply to the extent this property is reasonably necessary for

the support of the resident and that resident’s dependents . . . .” N.D. Cent. Code § 28-22-

03.1(3).

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It appears to me that the North Dakota bankruptcy court, aided now by the

majority in this case, has engrafted various provisions onto the statute that are

unwarranted and improper. First, the bankruptcy court determined that only annuities

purchased “in the context of retirement instruments...not annuities based upon tort

settlements” could be exempted,15 although there is no such limiting language in the

statute. Now, the bankruptcy court and the majority seem to be saying that pensions

or annuities that are paid during the lifetime of a pensioner or annuitant cannot be

exempted under the statute. Surely, the North Dakota legislature did not intend to

deprive North Dakota residents and their dependents of necessary support payments,

either during the lifetimes of the residents or after the death of the pensioner or

annuitant; in fact, a comprehensive reading of the statute makes it clear that the

legislature intended pensions, annuities, and the other types of investments

enumerated in the statute to be available for the support of residents and their

dependents, without regard to the $200,000 limitation otherwise contained in the

statute.

16

In my estimation, the bankruptcy court’s and the majority’s interpretation and

application of the exemption statute at issue here are unjustifiably narrow, and,

frankly, incorrect. For these reasons, I believe that the Debtors’ Annuity is exempt

under § 28-22-03.1(3) and I would reverse the decision of the bankruptcy court. 

 

 

 

Appellate Case: 06-6038 Page: 15 Date Filed: 12/21/2006 Entry ID: 3261514