USCA1 Opinion

United States Court of Appeals

United States Court of Appeals
For the First Circuit
For the First Circuit
____________________
No. 95-2320

IN RE: ODA JOSEPH CARON AND LORRAINE NORMA CARON,

Debtor.

____________________

ODA JOSEPH CARON, D/B/A CARON & SONS MOBIL,

F/D/B/A WAKEFIELD COUNTRY STORE AND LORRAINE NORMA CARON,

Appellants,

v.

FARMINGTON NATIONAL BANK

AND LAWRENCE P. SUMSKI, CHAPTER 13 TRUSTEE,

Appellees.

____________________

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW HAMPSHIRE

[Hon. Paul J. Barbadoro, U.S. District Judge]

___________________

____________________

Before

Selya, Circuit Judge,

_____________
Aldrich, Senior Circuit Judge,
____________________
and Stahl, Circuit Judge.
_____________
____________________

Grenville Clark, III

____________________

with whom Gray Wendell & Clark, P.C. was

___________________________

brief for appellants.

David P. Azarian with whom Michael, Jones & Wensley was on
________________
_________________________
for appellees.
____________________
April 25, 1996
____________________

STAHL, Circuit Judge.

STAHL, Circuit Judge.

Oda J. Caron and Lorraine N.

br

_____________

Caron

appeal

bankruptcy

the

court's

surrender value

Because we

district

denial

court's

of

affirmance

an exemption

of an insurance policy on

find that the courts

for

of

the

the

cash

Mr. Caron's life.

below correctly interpreted

the applicable New Hampshire statute, we affirm.

Background
Background
__________

Appellants, husband and wife, filed a joint Chapter

13 bankruptcy petition in

for the District

financial

of New

affairs, they

the United States Bankruptcy Court

Hampshire.

listed as

Life Insurance Company policy

they

claimed

the

policy's

In

their statement

an asset

a Metropolitan

on the life of Mr.

$19,260 cash

of

value

Caron, and

as

exempt

property pursuant

to

522(b)(2)(A) of the

Bankruptcy Code.

Because New Hampshire enacted legislation "opting out" of the

federal exemptions, New Hampshire debtors are

only permitted

to exempt property pursuant to state-enacted exemptions,

those specified in

Ann.

11 U.S.C.

522(d).

511:2-a (opting out of

Farmington National

Bank, a

filed

to

an objection

not

See N.H. Rev. Stat.

___

federal exemption scheme).

creditor of the

the exemption

claim,

Carons, timely

in which

the

chapter 13 trustee joined.

which

After a

hearing

before the

copy of

the life

insurance

bankruptcy court,

policy was

at

placed in

evidence, the court ruled that the policy was property of the

-2-

estate

under

11

surrender value of

under

U.S.C.

and

that

the life insurance policy was

New Hampshire law.

the United

541(a)(1)

cash

not exempt

The Carons appealed that ruling to

States District

Hampshire, which affirmed the

This appeal followed.

the

Court

for the

District of

New

order of the bankruptcy court.

The

sole issue

for determination

courts below erred in holding that the

was not exempt property.

factual findings made

time

of the

owned the

change

the

life insurance

beneficiary

Caron) and the contingent

the

life insurance policy

The parties agree with the relevant

by the bankruptcy

filing of

is whether

the

court: that at

bankruptcy petition,

policy and

(his wife

retained the

and

co-debtor

the

Mr. Caron

right to

Lorraine

beneficiaries (their children), as

well as the right to surrender the policy for its cash value.

Thus, for purposes of this appeal,

the

all that is before us

is

legal conclusion that the policy was not exempt, and our

standard of review is de novo.

__ ____

See T I Federal Credit Union

___ ________________________

v. DelBonis, 72 F.3d 921, 928 (1st Cir. 1995).

________

Discussion
Discussion
__________

In order to determine whether the cash value of the

policy is exempt,

we begin with

N.H. Rev. Stat. Ann.

If
insurance

the New Hampshire

408:2, which provides:

a policy

of

is effected

life or

endowment

by any

person on

his own life or on another life, in favor

of a person other than

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himself having an

statute,

insurable

interest

therein, the

lawful

beneficiary thereof other than himself or

his

legal

entitled

representatives,

to its

benefits

against

representatives
the

proceeds and

shall

all other

creditors

of the

be

and

person effecting

same; provided, that, subject to the

statute of limitations, the amount of any

premiums for said insurance paid in fraud
of

creditors,

shall

with

enure to

interest

their

thereon,

benefit from

the

proceeds of the policy.

The bankruptcy court ruled

exempt,

incorporating

by

that the policy was not

reference its

discussion

issue in In re Monahan, 171 B.R. 710, 715-21

______________

1994)

where

exemption

it

claims

decided

under

three

New

separate

Hampshire's

of the

(Bankr. D.N.H.

cases

involving

life

insurance

exemption statute,

Because

rendered any

statute

district

as

408:2.

the New

Hampshire

decisions construing

we think

that court

court agreed

with

Supreme Court

408:2,

would

has not

we interpret the

interpret it.

the bankruptcy

court that

The

the

plain meaning of the statute restricts the exemption right to

the

beneficiary

and

provides

insured/owner of the policy.

provided the

beneficiary with

other benefits of

insured, the

the policy

protection

for

the

Because the policy in this case

no right

to the proceeds

except upon the

death of

or

the

district court ruled that Mrs. Caron, the named

beneficiary, had no right

maintain the

no

policy

during the life of her

for her

benefit

or to

husband to

surrender

the

-44

policy for its cash value, and that her sole

interest was as

the beneficiary in the event of Mr. Caron's demise.

The

Chapter

appellees, Farmington

13 Trustee,

distinguishes between

argue

that the

National

Bank and

New Hampshire

the owner/insured of the

the

statute

policy and a

third

person

beneficiary

person entitled

thereof," not

only

and clearly

to the exemption is

the insured/owner.

specifies

the

"the lawful beneficiary

The appellees

argue that

when the insured has "parted with all of his beneficial

interest

therein" would

from the

insured's creditors, quoting from

In re Bray,
__________

not "parted

policy,

but

a life

insurance policy

8 F. Supp. 761, 763 (D.N.H.

that since Mr. Caron,

had

that

at the time of the

with all

and relying upon

1934).

They reason

bankruptcy filing,

his beneficial

rather retained

be exempt

interest" in

ownership and

the

the concomitant

rights to reach its cash value and to change the beneficiary,

he still

effectively retained all

Mrs. Caron's

interest, they

the beneficial

assert, was both

interest.

defeasible by

Mr. Caron and contingent upon his death.

While the

find the reasoning

statute is

of the bankruptcy court

court to be compelling.

read to exempt the

not a model

We

Mrs.

policy in favor of an

Caron, do

we

and the district

agree that the statute cannot be

only in favor of a beneficiary.

beneficiary,

of clarity,

owner/insured, but

And here, the rights of the

not

-55

arise

until Mr.

Caron's

death,

and

terminated

Caron

filed,

her

prospective

rights can

by him during his lifetime.

was alive at the

diminished

or

As such, because Mr.

time the petition

in bankruptcy was

Mrs. Caron had no rights in the proceeds, cash value,

or other benefits of the policy.

in the policy

rights

be

and

that could be

powers

owner/insured, Mr.

under

Thus, she had no

exempted by

the statute.

The

the

retained

the

policy

Caron, became the property

as of the filing of the petition.

(all legal or equitable

interest

of the estate

See 11 U.S.C.
___

interests of the debtor

by

541(a)(1)

in property

become property of the estate upon commencement of the case).

Accordingly, neither Mr.

Caron nor his wife

are entitled to

the statutory exemption.1

While

we recognize

construe

exemption

remedial

purposes, we

narrow

reading.

statutes

liberally

find reasons

to

here to

courts are

to

reflect

their

afford

a more

While the result that the Carons seek would

apparently obtain under

U.S.C.

that generally

the analogous federal

exemption, 11

522(d)(7), see In re Monahan, 171 B.R. at 716 & n.8,

___ _____________

legislative history indicates that New Hampshire opted out of

____________________

1.

We note, but

is

do not rely upon, the

co-debtor in

therefore that
asset of

this

her creditors if
___

joint bankruptcy,

her interest in

the estate in any

not Mr.

fact that Mrs. Caron

and

it appears

the insurance policy

event, subject to the

Caron's.

At

most, the

was an

claims of
exemption

statute shelters a policy from the creditors of

it

makes no reference

to the creditors

See N.H. Rev. Stat. Ann.

___

the insured;

of the beneficiary.

408:2.

-66

the federal

overly

indulgent of

Even more

the

exemption scheme

because it was

debtors at

the expense

persuasive is legislative

New Hampshire

too "liberal,"

of creditors.2

history indicating that

legislature specifically chose

to delete

language that would have made the Carons' arguments much more

plausible.

The

statute at

issue, as

originally proposed,

provided that the exemption was available "whether or not the

right to change the beneficiary

such

person

struck.

New

Journal of

the

owner/insured],"

Hampshire House

but

Report

the

was

House Bill

224,

on

legislature declined

policies where

to alter

the

the owner/insured

beneficiary.

Of

to

that language

the House, April 29, 1931, at 698.

deletion that

exemption to

power

[the

is reserved or permitted

We infer from

to extend

the

retained the

like import

is

the

legislature's deletion of the provision that "No court and no

trustee or assignee for the benefit of creditors, shall elect

for

the person

effecting

such insurance

to exercise

such

right to change

this deletion

not

the named beneficiary."

a legislative

prevent

a bankruptcy

Id.
___

We infer from

intent that the

statute should

trustee

from

stepping into

the

____________________

2.

See New
___

of

the House, 1981 January

(stating

Hampshire House Judiciary Comm.

that

the proposed

Report, Journal

Session, April 23,

opt-out

statute

1981, at 533
"prevents New

Hampshire residents from filing with the more liberal federal

bankruptcy

law.");

Minutes

of

House

Judiciary

Committee

executive session April 20, 1981, statement of Representative

Eaton

(federal bankruptcy

act

is "very

state exemptions ought to control instead).

-77

liberal" and

that

policy

owner's

shoes to

reaching the cash

exercise

rights, such

value or changing the beneficiary.

the legislative history strongly

New Hampshire's

policy

life insurance

as

Thus,

suggests a narrow scope for

exemption,

and the

Carons'

exemption claim falls outside that scope.

Contrary to the Carons' arguments, we are not bound

to

follow,

and

need

not

overrule,

the

district

decisions in In re Whelpley, 169 F. 1019 (D.N.H.

_______________

In re Bray,
___________

8 F.

Supp. 761

(D.N.H. 1934).

The

court

1909), and

Whelpley
________

decision predates

the enactment

of the present

the aforementioned legislative choices

for

the

exemption.

Moreover,

opinion is devoid of

held

analysis.

the

statute and

to set a narrow scope

two-paragraph Whelpley
________

In Bray, the
____

district court

that the life insurance policy was not exempt under the
___

statute at issue here.

provides more

Bray, 8
____

F. Supp. at 763.

analytical discussion,

aspects of the insurance policy

is just as plausible,

it is not

While Bray
____

clear which

rendered it non-exempt.

in our view,

to read Bray as
____

support

for the appellees' arguments as it is for the Carons'.

having

considered

unpersuasive.

both

Whelpley
________

and Bray,
____

we

It

find

Thus,

them

Because the language of the

exemption statute does

not encompass the insurance policy in this case, the decision

of the district court is affirmed.

________

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