Donald C. Lewis and Louvonn Lewis

UNITED STATES BANKRUPTCY COURT
FOR THE SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION AT DAYTON
In re: 	DONALD C. LEWIS
LOUVONN L EWIS,
Debtor
Case No. 	04-36219
Judge Waldron
Chapter 7
DECISION ON ORDER GRANTING
DEBTOR’S EXEMPTION IN
GROUP LIFE INSURANCE
PROCEEDS AND DENYING THE
TRUSTEE’S MOTION TO
COMPEL TURNOVER OF
PROPERTY
DATED AT DAYTON, OHIO this 19th Day of July, 2005:
Procedural Background
On July 20, 2004, Donald C. Lewis and Louvonn Lewis filed a joint chapter
7 petition. (Doc. 1) 	On November 8, 2004, Donald C. Lewis died. (See Doc. 36)
This document has been electronically entered in the records of the United
States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
Dated: July 19, 2005
____________________________________________________________
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On February 23, 2005, the Trustee, Ruth Slone, filed a Motion to Compel
Turnover of Property. (Doc.19). The Motion (Doc.19) sought the turnover of
group life insurance proceeds paid to Mrs. Lewis because these proceeds were
acquired 	within 	180 	days 	of 	the 	filing 	of 	the 	petition. 	See 	11 	U.S.C. 	§
541(a)(5)(C).
A lengthy recital of the multiple amendments, objections and procedural
issues in the early stages of this case is not necessary for this decision. Suffice it
to say that after multiple filings by both parties, the creditor filed her final
amended 	Schedule 	C 	adding 	Ohio 	Revised Code §§ 2329.66(A)(6)(c) and
3917.05 to the exemptions previously claimed (Doc. 28), the Trustee filed an
objection to the debtor’s claim of exemptions (Doc. 33) and the Debtor filed a
response. (Doc. 38).
Following a pretrial conference, at which the parties agreed that the issues
presented were issues of law and no evidentiary hearing would be required, the
court entered an order, which fixed the date for the parties to file an agreed
statement of facts and any final memoranda. ( Doc. 42) 	On June 3, 2005, the
parties filed their Stipulation of Facts. (Doc. 44) 	In addition, the parties filed
“Support Documents” – which contain an agreed set of documents related to the
pending issue. (Doc. 59)1
1 For clarity of the record, the court notes the parties moved to withdraw documents 45 – 58.
(Doc. 60). The motion is granted. The parties re-filed these same documents as part of Doc. 59.
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Stipulated Facts
The parties agreed to the following set of facts (Doc.44):
1. Debtors Donald C. Lewis and Louvonn Lewis were, at the time of filing,
husband and wife.
2. Debtors filed a joint Chapter 7 Bankruptcy Petition on July 20, 2004.
3. The Lewis’ only income at the time of filing was Donald C. Lewis’ retirement
pension check from AK Steel Corporation and his Social Security.
4. Louvonn Lewis was not employed outside of the home at the time of filing, nor
has she been employed outside of the home for approximately 15 years.
5. Donald C. Lewis retired from AK Steel Corporation on or about June 30, 2001.
6. As part of that retirement package, Donald C. Lewis was entitled to continue to
benefit from a group life insurance policy on his life in the amount of $26,500.
7. This policy was provided as a benefit of Mr. Lewis’ employment with, and later
retirement from, AK Steel Corporation with a policy from the Equitable Life
Insurance Company, which was later assumed by Connecticut General Life
Insurance Company.
8. 	Louvonn 	Lewis, 	Donald 	Lewis’ 	wife, 	was 	the 	named 	beneficiary 	of 	the
proceeds of this life insurance policy.
9. Donald C. Lewis named Louvonn Lewis as his beneficiary for these life
insurance proceeds on or about May 7, 1969.
10. Donald C. Lewis died November 8, 2004.
11. At all times relevant, Louvonn Lewis was a dependent of Donald C. Lewis.
12. On or about December 22, 2004, Louvonn Lewis received a letter from AK
Steel Corporation with a draft attached in the amount of $26,567.01 from the
Connecticut General Life Insurance Company, which represents final settlement
of the life insurance claim on Mr. Lewis, deceased.
13. At all relevant times, AK Steel was the Policyholder of the subject group life
insurance policy.
(Doc. 44) (underlining added).
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Jurisdiction
The court has jurisdiction pursuant to 28 U.S.C. § 1334 and the Standing
Order of Reference in this District. 	This is a core proceeding pursuant to 28
U.S.C. § 157(b)(2)(A), (B) and (O).
Issue
The issue in this case is whether Ohio Revised Code § 2329.66(A)(6)(c)
and § 3917.05, which provides an exemption for group life insurance proceeds
paid to an employee, the deceased Debtor, Donald C. Lewis, also provides an
exemption for a dependent beneficiary, the surviving Debtor, Louvonn Lewis?
DETERMINATION
The group life insurance proceeds in the initial amount of $26,567.01,
currently being held subject to this Court’s determination, are, pursuant to Ohio
Revised Code §§ 2329.66(A)(6)(c) and 3917.05, a properly claimed and allowed
exemption of the dependent Debtor, Louvonn Lewis, and are not subject to
turnover to the chapter 7 Trustee.
Analysis
Ohio has chosen to “opt-out” of the federal exemptions, and, therefore,
exemptions available to debtors in Ohio are based on Ohio law. In re Young, 93
B.R. 590, 593 (Bankr. S.D. Ohio 1988). 	It is a settled law that Ohio exemption
provisions are to be construed liberally in favor of the debtor and a debtor’s
dependents and any doubt in interpretation should be in favor of granting the
exemption. See In re Peacock, 292 B.R. 593, 595 (Bankr. S.D. Ohio 2002)
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(collecting cases). Against these established exemption principles, the court
considers Mrs. Lewis’ entitlement to exempt the group life insurance proceeds.
Ohio Revised Code § 2329.66(A)(6)(c) states that:
(A) Every person who is domiciled in this state may hold property
exempt from execution, garnishment, attachment, or sale to satisfy
a judgment or order, as follows:
* * * * *
(6)(c) The person's interest in a policy of group insurance or the
proceeds of a policy of group insurance, as exempted by section
3917.05 of the Revised Code[.]
Ohio Revised Code § 3917.05 states that:
No policy of group insurance, nor the proceeds thereof, when paid
to any employee thereunder, is liable to attachment, garnishment,
or other process, or to be seized, taken, appropriated, or applied by
any legal or equitable process or operation of law, to pay any
liability of such employee, his beneficiary, or any other person who
may have a right thereunder, either before or after payment.
The Trustee focuses on the language of § 3917.05 “when paid to any
employee thereunder” and argues that, since Mrs. Lewis is not the “employee”,
she is not entitled to receive proceeds under the group life insurance policy that
Mr. Lewis had with AK Steel. Upon death, the proceeds of a group life insurance
policy would, of course, go to the beneficiary. 	Under the Trustee’s view of the
statute, 	proceeds 	of 	group 	life 	insurance 	could 	never 	be 	exempted 	by 	a
beneficiary upon the death of the employee.
The Trustee’s position reflects the language of the first part of § 3917.05,
but neglects the language in the balance of the same sentence. Ohio Revised
Code § 3917.05 also states that the proceeds of group insurance are not
available “to pay any liability of such employee, his beneficiary, or any other
person who may have a right thereunder, either before or after payment.”
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(underlining 	added) 	Ohio 	principles 	of 	statutory 	construction, 	which 	are
consistent with federal principles of statutory construction, provide guidance in
construing § 3917.05. See The City of Bryan v. Hudson, 77 Ohio St.3d 376, 380,
674 N.E.2d 678, 680 (1997) (“A court must give effect to all words of the statute.”
(citations omitted)); State ex rel. Toledo Edison Co. v. Clyde, 76 Ohio St.3d 508,
513-14, 668 N.E.2d 498, 504 (1996) (An statute is ambiguous if the language is
subject to more than one reasonable interpretation); See also Ohio Revised
Code § 1.49 (Aids in construction of ambiguous statutes); Bailey v. Republic
Eng’g Steels, Inc., 91 Ohio St.3d 38, 40, 741 N.E.2d 121, 123 (2001) (“In
determining legislative intent when faced with an ambiguous statute, the court
may 	consider 	several 	factors, 	including 	the 	object 	sought 	to 	be 	obtained,
circumstances under which the statute was enacted, the legislative history, and
the consequences of a particular construction.”)
Construing the statue in its entirety, a well reasoned decision from this
district examined § 3917.05, and a related exemption statute, Ohio Revised
Code § 3911.10 2 , and found the provisions extend the exemption to a beneficiary
2 Ohio Revised Code § 3911.10 states:
“All contracts of life or endowment insurance or annuities upon the life of any person, or any
interest therein, which may hereafter mature and which have been taken out for the benefit of, or
made payable by change of beneficiary, transfer, or assignment to, the spouse or children, or any
persons dependent upon such person, or an institution or entity described in division (B)(1) of
section 3911.09 of the Revised Code, or any creditor, or to a trustee for the benefit of such
spouse, children, dependent persons, institution or entity, or creditor, shall be held, together with
the proceeds or avails of such contracts, subject to a change of beneficiary if desired, free from
all claims of the creditors of such insured person or annuitant. Subject to the statute of limitations,
the amount of any premium upon such contracts, endowments, or annuities, paid in fraud of
creditors, with interest thereon, shall inure to their benefit from the proceeds of the contracts, but
the company issuing any such contract is discharged of all liability thereon by the payment of its
proceeds in accordance with its terms, unless, before such payment, written notice is given to it
by a creditor, specifying the amount of the claim and the premiums which the creditor alleges
have been fraudulently paid.”
The court notes § 3911.10 was revised in 1992. The revisions broadened the class the statute is
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who is a dependent of the debtor, although in that decision, unlike this case, the
individual was determined to not be a dependent of the debtor:
As both parties have noted, and the Court confirms, there is no
available 	case 	law 	interpreting 	O.R.C. 	§ 	3917.05. 	In 	order 	to
understand this section, it must be read together with § 3911.10,
[FN1] the statute exempting a debtor's individual life insurance
policy and its proceeds, and in the context of § 2329.66's general
exemption scheme.
FN1. The inclusion of § 3917.05 as part of § 2329.66
appears to clarify that group life insurance, as well as
individual life insurance, is granted exempt status.
The purpose of Ohio's general exemption statute, as it applies to
debtors in bankruptcy is "to provide ... the necessary 'fresh start' to
regain self-respect and resume a productive role in the economy."
In re Bloom, 5 B.R. 451, 453 (Bankr.N.D.Ohio 1980). The insurance
exemptions found at § 2329.66(A)(6)(c) & (d), i.e., §§ 3911.10 and
3917.05, when read together, appear to provide protection to a
debtor, a debtor's spouse, child or other dependent relative, or
creditor 	named 	as 	beneficiary, 	thus 	primarily 	evidencing 	a
legislative intent to benefit the insured debtor and those dependent
upon him. When such intended beneficiaries of the exemption no
longer exist, then the purpose of the statute also ceases. As noted
in Hoffman v. Weiland, 64 O.App. 467, 471, 18 O.O. 206, 208, 29
N.E.2d 33, 35 (1940), when "the allowance of the exemption would
protect none and would defeat a creditor, the right ceases to exist."
In the case before us, the trustee objects to the claimed exemption,
asserting that since the proceeds of the policy were paid directly to
the beneficiary and were not "paid to any employee" as required by
§ 3917.05, the debtor is prohibited from claiming the exemption.
The debtor argues that rather than concentrating on the "when paid
to any employee" language the Court should look to the provision
stating that no policy or proceeds thereof shall be "seized, taken,
appropriated, 	or 	applied 	by 	any 	legal 	or 	equitable 	process 	or
operation of law, to pay any liability of such employee, [or] his
beneficiary ..." (emphasis supplied).
intended to protect by including not only dependent “relatives” but also dependent “persons,
institution or entity.”
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The correct focus of the inquiry is whether Mr. Heins is of the class
intended to be protected by the insurance exemption provisions.
Reading these statutes together, we find a clear policy of protecting
an insured debtor, dependents of the insured debtor, and creditors
of the insured debtor for whose benefit the policy or its proceeds
was assigned, from attempts by the creditors of the insured debtor
to pursue the policy or its proceeds in satisfaction of their claims.
Despite the phrase in § 3917.05 indicating that liabilities of the
beneficiary may not be paid out of the proceeds of a life insurance
policy, we do not believe that the legislature intended to give the
same protection to a beneficiary who becomes a debtor as it did to
an insured who becomes a debtor.
In re Heins, 83 B.R. 504, 505-06 (Bankr. S.D. Ohio 1988). 	The reasoning of
Heins was adopted by the only other reported Ohio decision to address this
issue. See White v. North (In re North), 108 B.R. 180, 183 (Bankr. S.D. Ohio
1989) (“The court finds the analysis in Heins to be well reasoned and thorough.
Accordingly, this Court has elected to adopt its conclusions of law as they apply
to the present case.”)
In North, as in Heins, the individual was determined not to be a dependent
of the debtor; however, the rationale of both Heins and North compel the
conclusion that, if the individual claiming the exemption is a dependent, the
claimed exemption must be allowed. In the stipulated facts (Doc. 44), the parties
agreed that Mrs. Lewis was a dependent at “all times relevant” to the exemption
issue. (Doc. 44)
The court agrees with the only reported Ohio decisions that the intent of
Ohio Revised Code § 3917.05 is to protect the dependent beneficiaries of an
employee 	by 	allowing 	an 	exemption 	pursuant 	to 	Ohio 	Revised 	Code 	§§
2329.66(A)(6)(c) and 3917.05. 	The court expresses no opinion on whether any
other provisions of the Ohio Revised Code could provide an exemption for a
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beneficiary of group life insurance proceeds or, what, if any, applicability the
federal exemptions might have in future cases.
Conclusion
The $26,567.01 of group life insurance proceeds from the AK Steel life
insurance policy, received by Mrs. Lewis (the “proceeds”) are exempt pursuant to
Ohio Revised Code §§ 2329.66(A)(6)(c) and 3917.05. 	The Trustee’s Motion to
Compel Turnover of Property (Doc. 19) and the Trustee’s objections to the
Debtor’s claimed exemptions of the proceeds under Ohio Revised Code §§
2329.66(A)(6)(c) and 3917.05 (Doc. 33) are DENIED. 	The Trustee’s objections
to any other claimed basis to exempt the proceeds (Doc. 23) are DENIED AS
MOOT. A separate order will be simultaneously entered.
SO ORDERED.
c:
Louvonn Lewis, 3919 Bonita Dr, Apt G, Middletown, Ohio 45044 (Debtor)
Elizabeth Ann Yauch, Esq., 240 East State Street, Trenton, Ohio 45067-1552
(Atty. for the Debtor)
Ruth A. Slone, Esq.,/ Lee A. Slone, Esq., 22 Brown Street, Post Office Box 3340,
Dayton, Ohio 45401-3340
###
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