McFeeley Maryland Opinions et al v. Rubenstein et al

94-5-5523SD 	SCOTT F. LIPPERT
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
In re: 	*
SCOTT F. LIPPERT, 	* 	Case No. 94-5-5523-SD
(Chapter 7)
Debtor. 	*
* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	*
MEMORANDUM OPINION
THIS MATTER came before the Court upon the objections to exemption filed by
the trustee and by creditors Plitkin, Sack & Karlen, P.A., Stanley Freidler, M.D., Daniel
L. Bartell, D.D.S., and Doris Clear. The Court having heard the arguments of counsel,
examined the pleadings, and being otherwise fully informed, overrules the objections.
FACTS
Debtor filed a voluntary petition for chapter 7 relief on August 26, 1994. Debtor
claimed as exempt a personal injury recovery in the amount of $200,000. Debtor had
suffered injuries in an automobile accident, filed a complaint for damages, and
ultimately had agreed to submit the case to arbitration. Prior to arbitration, the parties
agreed the minimum recovery would be $200,000, and the actual arbitration award of
$183,300 was accordingly increased to that amount. 	At a hearing on October 3, 1995,
the trustee and various creditors raised objections to the claimed exemption, taking the
position that any portion of the arbitration award attributable to past medical expenses
or lost earnings was not within the scope the statute. The Court held to be exempt that
portion of the arbitration award attributed to pain and suffering and to future medical
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expenses ($77,200) as well as an equivalent percentage of the $16,700 which had been
added to the award to reach the agreed minimum of $200,000. The Court took under
advisement the question of what portion, if any, of the remaining recovery is exempt.
DISCUSSION
Maryland, pursuant to Md. Cts. and Jud. Proc. Code Ann. §11-504(g)(1989), has
opted out of the federal exemption provided at 11 U.S.C. §522(b)(1) and (d). Thus, a
debtor filing in Maryland may exempt property only in accordance with Maryland law.
The debtor in the instant case claims his exemption under Md. Cts. & Jud. Proc. Code
Ann. §11-504(b)(2)(1995), which provides:
§11-504. Exemptions from execution.
(b) In general. -- The following items are exempt from execution on a
judgment:
. . . (2) Money payable in the event of sickness, accident, injury, or death
of any person, including compensation for loss of future earnings. This
exemption includes but is not limited to money payable on account of
judgments, arbitrations, compromises, insurance, benefits, compensation,
and relief. Disability income benefits are not exempt if the judgment is for
necessities contracted for after the disability is incurred.
The task of this Court is to determine, using Maryland laws of statutory construction,
whether the portions of the debtor's claimed exemption which represent compensation
for past medical expenses and lost earnings fall within the scope of the statute.
The goal of statutory construction is to ascertain and effectuate actual legislative
intent. 	The court first looks to the plain meaning of the language of the statute to
discern legislative intent. Oaks v. Conners, 660 A.2d 423 (Md. 1995); Jones v. State,
647 A.2d 1204 (Md. 1994); Condon v. State of Maryland -- University of Maryland, 632
A.2d 753 (Md. 1993). To ascertain and effectuate the actual legislative intention in
enacting any statute is, of course, the cardinal rule of statutory interpretation, the
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primary source of which is the language of the statute itself. Curry v. Department of
Public Safety and Correctional Services, 651 A.2d 390 (Md. 1994).
The language of §11-504 is unambiguous: 	"[m]oney payable in the event of . . .
injury . . . of any person" is exempt. Money payable on account of "arbitrations" and
"compromises" is specifically named. The statute also contains the inclusory phrase
"includes but is not limited to" in reference to the categories listed. While the legislature
made the particular effort to exclude certain disability income benefits, no other
limitations appear, a pattern which strongly suggests no other limitations were intended.
Exemptions in Maryland are to be liberally construed, In re Taylor, 537 A.2d 1179 (Md.
1988), and the plain language of the statute seems to include the Lippert personal injury
award in its entirety.
In Robinson v. Shell Oil Company, 70 F.3d 325, 1995 WL 700550 (4th cir. Md.),
decided November 29, 1995, the Fourth Circuit Court of Appeals has emphasized the
importance of strict adherence to rules of statutory interpretation, stating that words are
to be given their common usage, and courts are "not free to read into the language what
is not there, but rather should apply the statute as written." Id. at 3, quoting with favor
from United States v. Murphy, 35 F.3d 143, 145 (4th Cir. 1994), cert. denied, --- U.S. ---,
115 S.Ct. 954, 130 L.Ed.2d 897 (1995) (citing K Mart Corp. v. Cartier, Inc., 486 U.S.
281, 291, 108 S.Ct. 1811, 1817, 100 L.Ed.2d 313 (1988). According to the Robinson
court, straying beyond the plain language of unambiguous statutes is permissible only
where a literal application of statutory language would lead to an absurd result so gross
as to shock general moral or common sense, and there must be something to make
plain legislative intent that the letter of the statute is not to prevail. Robinson at 4.
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Nothing in the instant case rises to the level of absurdity or moral shock required
by Robinson. Nor do the objectors provide any evidence the legislature did not intend
for the plain meaning of the statute to apply. The trustee and objecting creditors'
concern is that Mr. Lippert, by exempting the portion of the arbitration award intended
for payment of past medical expenses and simultaneously discharging in bankruptcy
those same debts, will receive a windfall. The trustee also points out that an exemption
for lost earnings would amount to a windfall to the debtor, since such lost earnings
would have been, if not lost, property of the estate and not entitled to exemption. This
Court finds the probability of a windfall to the debtor insufficient justification for
disregarding the unambiguous language of the exemption statute.
The Court is urged to rely on the holding in Niedermayer v. Adelman, 90 B.R.
146 (Bankr. D. Md. 1988) to find these windfalls impermissible. The Niedermayer case
involved a claim of exemption for a pending civil action in which damages were sought
for a variety of tort claims and for punitive damages. The court refused to allow an
exemption for the punitive damages since such an award would be intended as a
punishment and deterrent rather than as compensation and would thus constitute a
windfall to the debtor. The present case is easily distinguished from Niedermayer
merely by the fact that the disputed portion of the exemption claimed by Mr. Lippert is
not for punitive damages. Niedermayer does not stand for the proposition that any
windfall to a debtor is impermissible under the statute. Even if Mr. Lippert's claimed
exemptions are examined using the analysis in Niedermayer, the exemptions stand.
The Niedermayer court's test for determining whether a claim for injury of the person
properly falls within the exemption of §11-504 is whether the claim is for injury to "the
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person proper," as opposed to injury to the property of the debtor. Niedermayer at 149.
While punitive damages do not satisfy the Niedermayer test, medical expenses and lost
earnings are a direct consequence of injury to the person proper.
In the present case, the debtor probably will not receive a windfall from the
award for past medical expenses, because an assignment of proceeds in favor of the
medical professionals to whom he is indebted will prevent that result. In future cases,
however, it seems clear a windfall might and probably will occur with respect to awards
for both medical payments and lost earnings. This prospect does not change the plain
language of the statute, and it does not negate this Court's obligation to rely on the
Maryland legislature to make whatever changes are required.
In re Butcher, --- B.R. ---, 1995 WL 703942 (Bankr. D. Md.), decided November
28, 1995, applies the rules of statutory construction to the same personal injury
exemption statute which is the subject of this opinion. 	The Butcher case involved a
debtor who had sustained horrendous burn injuries from an explosion and had received
in consequence a multimillion dollar settlement payable over the course of his lifetime.
When the debtor filed bankruptcy and claimed the settlement as an exemption, creditors
objected to the large amount as unreasonable. Rejecting argument that the personal
injury exemption should be limited, the Butcher court stated it would not "arbitrarily
impose a limitation that is found neither in the statute nor in the Constitution." Id. at 4.
This Court also declines to do so.
CONCLUSION
For the foregoing reasons, the objections of the trustee and creditors Plitkin,
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Sack & Karlen, P.A., Stanley Freidler, M.D., Daniel L. Bartell, D.D.S., and Doris Clear
are overruled. This opinion constitutes the Court's findings of fact and conclusions of
law pursuant to Rule 7052 of the Federal Rules of Bankruptcy Procedure. An Order
shall be entered accordingly.
_________________________________
MARK B. McFEELEY
United States Bankruptcy Judge
Sitting by Designation
I certify that on the above stamped date I mailed a copy of the above to:
Marc R. Kivitz
201 N. Charles Street - Suite 1330
Baltimore, Maryland 21201
(410) 625-2300
Karen H. Moore, Esq.
Asst. U.S. Trustee
300 W. Pratt St. - Suite 350
Baltimore, MD 21201
Harry L. Chase, Esq.
1190 W. Northern Parkway - Suite 124
Baltimore, MD 21210
Deborah Skillman, Esq.
Post Office Box 400
Bel Air, MD 21014
Eugene Seidel, Esq.
7 East Franklin St. - 2nd Floor
Baltimore, MD 21202
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David Thomas, Esq.
3677 Park Avenue
Ellicott City, MD 21043
Joel I. Sher, Esq.
Shapiro & Olander
36 South Charles Street
Baltimore, MD 21201
Michael G. Rinn, Esq.
111 Warren Road - Suite 4
Cockeysville, MD 21030
______________________________
Case Administrator
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