Court Opinion

ID: 9730817
Source: CourtListenerOpinion
Date Created: 2023-08-26 15:24:52.279052+00
Date Added: 2024-06-11T18:26:09.580792
License: Public Domain

TOM GRAY, Chief Justice,
concurring.
This concurring opinion will address (1) those portions of the majority opinion which are unnecessary and therefore do not constitute binding authority of this Court, and (2) those portions of the opinion that are simply erroneous but do not impact the ultimate result of the judgment. It will then comment on some other matters in the majority opinion before I conclude, concurring only in the Court’s judgment.
PURE Dicta
The entirety of the section “Exempt Status of IRA Under Bankruptcy Plan” in the majority opinion is pure dicta. It is dicta because it is completely unnecessary to the disposition of the appeal and, thus, no holding relies upon it for the effect of the judgment. The reason this section is unnecessary to the disposition of the appeal is because, for the majority opinion, the section “Exempt Status of IRA Under Internal Revenue Code” is the section which actually answers the question of whether or not the assets held by the IRA are exempted. Accordingly, this entire section should be omitted from the majority opinion and no reliance should be put upon it by those who come after us.
Erroneous Statements
Within the section “Exempt Status of IRA Under Bankruptcy Plan” there are various erroneous statements and this section, thus, reaches an unsupportable result. The majority cites Leibman v. Grand, 981 S.W.2d 426, 435 (Tex.App.-El Paso 1998, no pet.) with a parenthetical noting “Texas law does ‘not provide an exemption for currency, checks, or negotiable instruments.’ ” The linchpin of this section, which is based upon this authority, is the statement “It is undisputed that the secured claim would not have been an exempt asset if Delp had acquired it before filing the bankruptcy petition.” This statement is not only wrong because the issue is not undisputed; the law is, in fact, contrary to the inference being made by the majority. Of course, the statement is true of anything that is not exempt, but the statement of the majority, in the literal sense of its truth, is totally irrelevant. The question, if necessary to be asked in any context at all, would be: “Would the secured claim [the note] have been an exempt asset if Delp’s IRA had acquired it before filing the bankruptcy petition?” If the asset is owned by an IRA, and the IRA is exempt, the asset owned by the IRA is exempt. And an IRA can, under normal circumstances, own negotiable instruments such as the note.
The majority’s error in this regard cascades down to a holding that the purchase of an asset which would not be exempt for the individual, Delp, with exempt assets from an IRA subjects the newly acquired “non-exempt” asset to seizure/turnover. I could readily distinguish the cases cited by the majority to back into this position, but there is no constructive purpose to be accomplished by doing so.
The IRA apparently had cash to purchase the note. The cash was exempt because it was cash in the IRA, not Delp’s *686cash. But under the majority’s theory, the cash, before the purchase, could not have been an exempt asset under Texas law. This is because they attribute the same rules regarding what can be owned by an exempt asset, the IRA, as they do to what assets cannot be exempt if owned by the individual debtor, Delp. Under the majority’s theory, any “currency, checks, or negotiable instruments,” held by an IRA would be a non-exempt asset of the bankruptcy debtor. This is simply not the law.
The dicta of the majority should be frightening to anyone who owns an IRA. What it essentially means is that if the assets within an IRA contain or change from one form of currency, check, or negotiable instrument to another form of currency, check or negotiable instrument still owned by the IRA, the assets have nevertheless lost their exempt status in a bankruptcy proceeding. But the truth is that just because the assets within the IRA plan change from one form, like cash, to another form, like stock, the exempt character of the asset does not change. This is because the exempt asset is the IRA, not the individual instruments within the IRA. There has to be some action or transaction other than the ownership or purchase of the type assets we normally expect IRAs to own that causes an IRA to lose its exempt status.
Prohibited Transactions
The majority discusses two prohibited transactions. The first is whether or not a measurable benefit received by a guarantor of debt due to a transaction involving an IRA is a prohibited transaction. The second is the question of whether or not the payment of attorney’s fees from the IRA assets is a prohibited transaction. I will discuss only the second.
In footnote 6, the majority concludes that Delp has engaged in a prohibited transaction by having paid the attorney’s fees in defense of the IRA corpus against Nu-Wa^s efforts to have their lien asserted against them. For this proposition, they cite O’Malley v. Commissioner, 972 F.2d 150, 153 (7th Cir.1992). The attorney’s fees paid in O’Malley that were determined to be a prohibited transaction were not payments made to defend and protect the IRA’s exempt status. The attorney’s fees paid were owed by a disqualified person and the payment using IRA funds was, therefore, a prohibited transaction leading to defeating the IRA status of the entire fund. In this case, however, the payments were made to an attorney for the express purpose of defending and protecting the IRA’s exempt status. Payment of attorney’s fees out of the IRA for the defense of the IRA exempt status is entirely appropriate. If the majority’s view is the law, an IRA could never protect itself from creditors and all defense of the IRA would have to be paid by the owner of the IRA which assumes they would be able to pay for it out of their other assets.
Other Questions
Because, according to the majority, the IRA did not exist at the time the bankruptcy plan was confirmed, but it is undisputed that over a million dollars in assets in the IRA’s name did exist, there are some interesting issues raised that no one has addressed.
1. How will the IRS’s (that is all taxpayer’s) claim for taxes and penalty on the premature distribution of the IRA be collected?
2. Does Nu-Way even have standing to assert a violation of the Tax Code in the management, operation, and transactions within an IRA?
3. Does a state court have jurisdiction to resolve questions about the continued vitality of an IRA or are *687these claims preempted under ERISA?
Standard op Review
The standard of review in this case is not a de novo determination on stipulated facts as stated by the majority. This was a trial before the court. Some facts were stipulated. But the parties also submitted depositions, affidavits, and numerous exhibits. No live testimony was received. The trial court was, nevertheless, required to make some factual determinations and did so in extensive findings of fact.
This causes me to ask an additional question: Has the majority improperly ignored the trial court’s findings or implied findings in support of the judgment?
Concurring in the Judgment
This case, due to its complexity as exhibited by the presence of a half dozen briefs as well as the submission of other legal authorities, has consumed an inordinate amount of my time. It involves areas of the law that state courts do not deal with frequently. I have studied the briefs and authorities provided by both parties as well as the majority opinion. While I have real concerns over many of the statements, findings, holdings, and conclusions in the majority opinion, I, nevertheless, have concluded from my independent analysis that the result the majority has reached is a proper one under the law and the facts of this case. To document this, I could further delay the disposition of this appeal by writing a detailed concurring opinion. That would be my preference, and I would do so if I had more time and other resources. But I do not have that luxury, so I will simply conclude by stating that, although I cannot join the majority opinion for the reasons stated and others, I do, nevertheless, concur in the Court’s judgment.