IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________________________
No. 98-31008
_______________________________
In The Matter Of: PAUL WILLIAM ORSO,
Debtor.
VALERIE CANFIELD,
Appellant,
versus
PAUL WILLIAM ORSO; MARTIN A. SCHOTT,
Appellees.
_________________________________________________
Appeal from the United States District Court
for the Middle District of Louisiana
_________________________________________________
February 25, 2002
Before KING, Chief Judge, JOLLY, HIGGINBOTHAM, DAVIS, JONES, SMITH,
WIENER, BARKSDALE, EMILIO M. GARZA, DeMOSS, BENAVIDES, STEWART,
PARKER, and DENNIS, Circuit Judges.*
WIENER and DENNIS, Circuit Judges:
In this appeal we decide whether, under the laws of Louisiana
that establish exemptions from seizure, the proceeds of annuity
contracts purchased by obligors to fulfill a personal injury
*
Judge Edith Brown Clement did not participate in this appeal.
settlement structured to comply with 26 U.S.C. §§ 104(a)(2) and
1301 are exempt from claims of creditors of the payee who is a
debtor in bankruptcy. A divided panel of this court2 concluded
that our opinion in Young v. Adler3 required it to hold the instant
annuity payments are not exempt under the Louisiana exemption
statute as it existed when bankruptcy proceedings were commenced,
and that a post-petition, expressly-interpretive amendment of that
statute could not be considered when ascertaining its meaning as of
the date of filing for bankruptcy protection. A majority of the
judges in active service voted to rehear the case en banc.4
Disagreeing with the panel majority, we affirm the bankruptcy and
district courts’ conclusion that the annuity payments in question
are exempt from seizure, and thus exempt from claims asserted by
1
The Periodic Payment Settlement Act of 1982 amended the
Internal Revenue Code of 1954 to allow claimants to receive
periodic payments tax free if the payments are paid to settle a
personal injury claim. See Pub. L. No. 97-473, Title K, §
101(b)(1), Jan. 12, 1983, 96 Stat. 2605 (1982)(codifying the tax-
free status of such structured settlements provided by Revenue
Rulings 77-230,79-220 and 79-313). The Act also added § 130 of the
Internal Revenue Code, which allows a third person assignee to
defer from its gross income the amount it received for accepting
assignment of a liability to make periodic payments as damages. If
the assignee uses a qualified annuity to fund the periodic
payments, the basis of such asset shall be reduced by the amount
initially excluded from gross income by reason of the purchase of
such asset, and any gain recognized on a disposition of such asset
shall be treated as ordinary income. See Paul J. Lesti, Structured
Settlements, § 16:4 (2d ed. 1993).
2
214 F.3d 637 (5th Cir. 2000).
3
806 F.2d 1303 (5th Cir. 1987).
4
242 F.3d 534 (5th Cir. 2001).
2
Creditor-Appellant Valerie Canfield in Debtor-Appellee Paul William
Orso’s bankruptcy proceedings.
I.
FACTS AND PROCEEDINGS
Orso suffered serious injuries in an automobile accident in
November 1986, a few months after he and Canfield were wed. The
closed-head injuries Orso sustained in the accident left him
permanently and severely brain damaged, rendering him mildly
mentally retarded, with an I.Q. of less than 70. In November 1987,
Canfield and Orso sued for damages resulting from his injuries.
In September 1989, Orso and Canfield entered into a consent
judgment with the defendants in the tort litigation. On the same
day, the parties executed a settlement agreement, the pertinent
provision of which specified that Orso would receive two payments
each month for the longer of thirty years or his lifetime, one such
payment for $1,180 and another for $850.
To ensure Orso’s full and timely receipt of these periodic
payments, annuity contracts (“the Annuities”) were purchased. Orso
is the named payee or annuitant in both contracts, but is not the
owner of either; the defendant tortfeasors’ insurers obtained the
policies and retained ownership. The annuity contract that pays
$1,180 per month was issued by Liberty Life Assurance Company of
Boston in connection with Orso’s settlement with one of the
tortfeasors, Cook Construction Co., Inc., and its insurer, Liberty
Mutual Insurance Co. The annuity contract that pays Orso $850 per
3
month was issued by Western National Life Insurance Company in
connection with his settlement with the State of Louisiana, having
been purchased by the Conseco Annuity Guarantee Company, the
company to which the State had assigned the obligation to make the
periodic payments. The tortfeasors and their respective insurers
were released from further tort liability but remained obligated
for the periodic payments to Orso, who presumably could thereafter
look to his original judgment debtors and their insurers in the
unlikely event that the issuers of the Annuities should be unable
or unwilling to continue making the specified monthly payments.
Orso and Canfield divorced in 1991. They entered into a
property settlement under which Orso, who also receives U.S. Navy
and Social Security disability benefits, agreed to pay Canfield
$1,250 per month from September 1990 to August 1993 and $1,000 per
month for the ensuing nine months. Orso defaulted; Canfield filed
suit in state court late in 1990; Orso’s mother, Janice Orso, filed
interdiction proceedings in May of 1992 and was appointed as her
son’s curatrix in September; and, in July 1994, a state court
rendered a judgment in favor of Canfield for Orso’s arrearages
under their property settlement agreement.
On December 24, 1994, Orso’s mother, acting in her capacity as
curatrix of her interdicted son, filed a Chapter 7 bankruptcy
petition on his behalf. The annuity payments were listed as assets
of the estate but were claimed to be exempt under La. Rev. Stat.
Ann. § 22:647, which in relevant part shields payments under
4
annuity contracts from seizure. Canfield, who filed a $53,494.92
claim in Orso’s bankruptcy for the arrearages under their property
settlement agreement, objected to Orso’s efforts to exempt the
annuity payments, but the trustee supported Orso’s claim of
exemption. Almost three years later, the bankruptcy court rendered
a lengthy opinion denying Canfield’s objection. The district court
affirmed.
A divided three-judge panel of this court reversed the
district court, concluding that Orso’s payments from the Annuities
should not be exempt in his bankruptcy proceedings.5 The panel
majority’s judgment was then vacated when we voted to rehear the
case en banc.6
II.
ANALYSIS
A. Standard of Review
The bankruptcy court’s denial of an objection to a debtor’s
claim of exemption is a final order, subject to immediate appeal.7
We have jurisdiction to hear this appeal of the district court’s
affirmance of the bankruptcy judgment.8 In a bankruptcy case, we
review the decision of the district court in its capacity as an
5
214 F.3d 637 (5th Cir. 2000).
6
242 F.3d 534 (5th Cir. 2001).
7
England v. FDIC (In re England), 975 F.2d 1168, 1171 (5th
Cir. 1992).
8
28 U.S.C.A. § 158(d) (West 2001).
5
appellate court. We review the bankruptcy court’s findings of fact
affirmed by the district court for clear error, but review the
district court’s conclusions of law de novo.9
B. Framework
Reduced to its essentials, this case requires us to interpret
a state statute in the context of bankruptcy. The elements that
frame this inquiry are (1) interests in property owned by the
debtor (2) on the date that his petition in bankruptcy was filed,
(3) which property interests the debtor contends are exempt from
the claims of his creditors (4) by virtue of exemptions specified
in the applicable state statutes. The state law question requiring
statutory interpretation within this framework is whether the
property interests for which exemption is claimed —— here, periodic
payments from annuities obtained in a structured settlement of
personal injury claims —— come within the ambit of the subject
state exemption statute, § 647 of the Louisiana Insurance Code
(“§ 22:647”).10
1. Bankruptcy Context
It is axiomatic that when a petition in bankruptcy is filed,
thereby commencing bankruptcy proceedings, all property in which
9
HECI Exploration Co., Employees’ Profit Sharing Plan v.
Holloway (In re HECI Exploration Co.), 862 F.2d 513, 518 (5th Cir.
1988) (citing In re Missionary Baptist Found. of Am., 818 F.2d
1135, 1142 (5th Cir.1987)).
10
La. Rev. Stat. Ann. § 22:647 (West 2001). We refer to the
statute as § 22:647 rather than simply § 647 to avoid confusion
with references to sections of the Bankruptcy Code.
6
the debtor has a legal or equitable interest becomes property of
the bankruptcy estate.11 The debtor then may exempt property that
is protected from creditors by applicable state or federal law.12
Like the Bankruptcy Act before it, the Bankruptcy Code gives each
state an option: A state may allow debtors to (1) exempt from
their bankruptcy estates property included in the federal “laundry
list” of exemptions,13 or (2) rely on state law and federal law
other than the laundry list for allowable exemptions.14 Louisiana
has chosen the latter course,15 so our decision today turns on
interpretation of Louisiana law.16
Whether a particular property or interest in property of a
debtor’s bankruptcy estate is eligible for exemption is, like so
many other questions in bankruptcy, determined strictly “as of” the
11
11 U.S.C.A. § 541 (West 2001).
12
The 1898 Bankruptcy Act, § 6 (formerly 11 U.S.C.A. § 24),
provided that it “shall not affect the allowance to bankrupts of
the exemptions which are prescribed . . . by the State laws in
force at the time of the filing of the petition.” See Taylor v.
Knostman (In re John Taylor Co.), 935 F.2d 75, 78 (5th Cir. 1991).
13
11 U.S.C.A. § 522(d) (West 2001).
14
11 U.S.C.A. § 522(b)(2)(A) (stating that a debtor may
choose to exempt “any property that is exempt under Federal law,
other than subsection (d) of this section, or [under] State or
local law . . .”.).
15
See La. Rev. Stat. Ann. § 13:3881(B)(1) (West 2001).
16
FDIC v. Abraham, 137 F.3d 264, 267 (5th Cir. 1998)(quoting
Ladue v. Chevron, U.S.A., Inc., 920 F.2d 272, 274 (5th Cir), reh’g
denied 925 F.2d 1461 (1991), citing Commissioner of Internal
Revenue v. Estate of Bosch, 387 U.S. 456, 465 (1967)).
7
date on which the petition in bankruptcy is filed. Regarding non-
laundry list exemptions, § 522(b)(2)(A) specifies that the property
for which exemption is claimed must be exempt under a federal,
state, or local law “that is applicable on the date of the filing
of the petition.”17 We cannot emphasize too strongly that the day
on which the bankruptcy petition is filed is the “as of” date for
determining the applicability of exemption provisions. Even
though, of necessity, the judicial decision-making process on
exemption issues takes place subsequent to the filing of the
petition, the court must take a retrospective “snapshot” of the law
and the facts as they stood on the day the petition was filed. The
Supreme Court’s pronouncement on this point more than seventy-five
years ago continues to be good law today:
When the law speaks of property which is
exempt and of rights to exemptions, it of
course refers to some point of time. In our
opinion this point of time is the one as of
which the general estate passes out of the
bankrupt’s control, and with respect to which
the status and rights of the bankrupt, the
creditors and the trustee in other particulars
are fixed . . . . [O]ne common point of time
is intended and that [] is the date of the
filing of the petition.18
For purposes of substantive state law effecting exemptions from
seizure, then, any changes that occur after the filing of the
bankruptcy petition —— including any changes designated as being
17
11 U.S.C.A. § 522(b)(2)(A).
18
White v. Stumpf, 266 U.S. 310, 313 (1924).
8
retroactive —— can have no direct effect on the court’s
determinations concerning exemption.19
2. Interpretation of Applicable State Law
For Orso to prevail, he must demonstrate that the payments
produced by the particular annuities purchased by or on behalf of
his tort debtors in the structured settlement of their consent
judgment are covered by § 22:647. In determining whether the
proceeds and avails of the structured settlement annuities fall
within the Louisiana exemption, we resort to the acts of the state
legislature and to the pronouncements of the state’s courts as well.
Having established the applicable framework for resolution of
the question whether Orso’s proceeds from the Annuities are exempt,
we now examine the Louisiana annuity exemption statute, § 22:647.
C. Construction of the Louisiana Statute
As noted, Orso contends that his property right in the stream
of annuity payments from his structured settlement comes within the
purview of the version of § 22:647, specifically subsection (B),
that existed on the day his bankruptcy petition was filed. For the
following reasons, we agree.
When, in 1948, the Louisiana Legislature enacted that state’s
Insurance Code, it specified that the proceeds and avails of annuity
contracts are exempt from all debt liability. The language of that
enactment is largely retained in the current version of the
19
See id.; 11 U.S.C.A. § 522(b)(2)(A).
9
statute.20 The term “annuity contract” was not modified; neither
was it limited to particular types, classes, or categories of
annuity. That being the case, the term’s grasp is co-extensive with
its reach.
By Act 125 of 1958, the legislature transferred the annuity
exemption, essentially verbatim and without substantive change, into
Title 22, Section 647 of the Louisiana revised statutes. It has
remained there ever since, without any real alteration, even though
over the years, new provisions not relevant to this case were added,
and some of the section’s provisions were rearranged. Thus, the
substance of § 22:647's annuity exemption has remained constant.
The title and substance of Louisiana’s annuity exemption
statute reads now, as it did at the time Orso filed bankruptcy:
§ 647. Exemption of proceeds; . . . annuity
* * *
B.[] The lawful beneficiary . . .or payee . .
. of an annuity contract . . . shall be
entitled to the proceeds and avails of the
contract against the creditors and
representatives of the annuitant . . . and such
proceeds and avails shall also be exempt from
all liability for any debt of such beneficiary,
payee . . . existing at the time the proceeds
or avails are made available for his own use .
. . .
All concede that this exemption is controlling in bankruptcy just
as it is outside bankruptcy. And this provision of Louisiana law
is the one on which Orso relies, as he must, in arguing that his
monthly annuity payments are exempt from his creditors’ claims in
20
1948 La. Acts 195, § 14.37.
10
bankruptcy, specifically from his ex-spouse. We are satisfied that
the quoted provision does just that and does so unambiguously.
A plain reading of the annuity exemption statute leads
naturally to the conclusion that the proceeds that Orso is entitled
to receive from the structured settlements constitute proceeds and
avails declared exempt from liability and seizure by his creditors.
As the record is devoid of any evidence of fraud or wrongdoing by
Orso or on his behalf, the exemption must be given full effect in
his case.
Starting, as we always must, with the plain wording of the
statute, we see initially that there is nothing ambiguous about it;
and we know that when a statute is unambiguous we do not go behind
its terms to ascertain the intent of the Legislature. Tracking
§ 22:647, the title of which foretells that it deals with exemption
of proceeds from, inter alia, annuities, we see that under
subsection (B) as it existed when he filed his bankruptcy petition,
Orso was a “lawful beneficiary” who was the “payee . . . of an
annuity contract . . . .” The statute next tells us that in this
capacity Orso is “entitled to the proceeds and all avails of the
contract” and that “such proceeds and avails shall also be exempt
from all liability for any debt of such . . . payee,” namely Orso
in this case.
Consequently, Orso’s claim of exemption should prevail under
§ 22:647 unless some extraneous legal impediment prevents the
financial products that produce this stream of monthly proceeds from
11
being “annuity contracts” within the intendment of the statute. As
we shall explain, we conclude that these products, i.e., the
Annuities, acquired as they were by or for the tortfeasors in
compliance with their structured settlement with Orso, indeed are
free from any legal impediment to being annuity contracts for
purposes of § 22:647.
In its reversal of the bankruptcy and district courts’ holdings
that the Annuities are “annuity contracts” for purposes of the
statute, the panel majority agreed with Canfield that a “piercing
of the annuity” in the context of Orso’s structured settlements
mandates a determination that, as of the petition date, the
Annuities were not “annuity contracts” for purposes of § 22:647.
In so doing, the majority relied largely on our decision in Young
v. Adler (In re Young).21
D. Young v. Adler (In re Young); McGovern v. First National Bank
of Jefferson Parish (In re McGovern)
In Young, we rejected an attempt by a debtor, who was an
attorney-at-law, to claim as exempt the proceeds from an annuity
purchased for his benefit and at his direction, in payment of legal
fees owed to him by his client. We wrote that, “[w]hile the
payments Debtor [the attorney] claims to be exempt are, strictly
speaking, an ‘annuity,’ they are also accounts receivable. We must,
therefore, pierce the veil of this arrangement to determine its true
21
806 F.2d 1303 (5th Cir. 1987).
12
nature.”22 Thus in Young we “pierced” the “veil of this
arrangement,” but did not find fault with the annuity contract
itself; that is, we did not parse the contractual provisions of the
annuity but rather the transaction that produced it. In other
words, in Young we did not invalidate the annuity on its face but
disregarded it as having been based on an impermissible underlying
transaction. Under Louisiana law at the time of Young, there were
three actions through which a creditor could “pierce,” avoid, or
disregard his debtor’s fraudulent transfers: the revocatory
action,23 the oblique action,24 and the action in declaration of a
simulation.25 We are not, however, required to decide whether the
Louisiana courts would, in any such action, “pierce” either a
contract meeting the definition of annuity under § 22:647 or the
underlying transaction that produced such a contract. This is
because, in Young, neither our opinion nor that of the district
court contains an overt application of any of these actions or a
clear finding of fraud. Although it is true that there are many
distinguishing features between the arrangement or transaction in
Young and Orso’s structured settlements, in the end the legal
principles governing the two situations are indistinguishable. We
22
Id. at 1306 (emphasis added).
23
See La. Civ. Code Ann. arts. 1969-94 (1870).
24
See La. Civ. Code Ann. art. 1990 (1870).
25
See La. Civ. Code Ann. art. 2239 (1870); see also In re
Orso, 214 F.3d at 653 (Dennis, J., dissenting).
13
cannot, therefore, reverse the panel majority here without
overruling Young.
A distinction is even more difficult to draw between Orso’s
situation and the one considered in our unpublished but precedential
opinion in In re McGovern.26 There, expressing reliance on Young,
we held that periodic payments received by a debtor in the
structured settlement of his personal injury lawsuit were in fact
installment payments on an underlying debt, not proceeds of an
annuity, and therefore were non-exempt under Louisiana law.
Sitting en banc today, we conclude that Young and McGovern are
basically indistinguishable from the instant case. Consequently,
a literal interpretation and application of Young as precedent
cannot properly control either case. Thus, for the foregoing
reasons we today reverse the panel majority and reinstate the
bankruptcy court’s recognition of Orso’s annuity contract proceeds
as exempt; and we expressly overrule Young and McGovern.
Annuities of Orso’s kind, purchased pursuant to structured
personal injury settlements that comply with federal income tax
requirements, are certainly within the contemplation of the
Louisiana exemption as it existed on Orso’s petition date. The
defendants with whom Orso (and, for that matter, Canfield) settled
delivered to the insurance companies “a sum of money, and agree[d]
26
918 F.2d 175, No. 89-3849 (5th Cir. Oct. 25, 1990)
(unpublished table decision). Before 1996, our unpublished
opinions were as equally binding precedent as were our published
opinions. See 5th Cir. R. 47.5.3.
14
not to reclaim it so long as the receiver pays the rent agreed
upon,”27 bringing the Annuities squarely within the classic
definition of an annuity contract under Louisiana law as it existed
when Orso filed for bankruptcy protection. Funded or fixed annuity
contracts, like those that produce Orso’s periodic payments, are and
have always been stereotypical Louisiana annuity contracts under any
definition of the term.
E. Exemption of All Annuities
As should be obvious by now, our recognition that Orso’s
periodic payments are exempt under § 22:647 is grounded in the
conclusion that the Annuities, which produce those payments, are
“annuity contracts” under the version of that statute that was in
effect on the date Orso’s bankruptcy petition was filed. The
reasoning that leads us to this conclusion is diametrically opposed
to the reasoning of the panel majority, to wit: (1) the Annuities
were not “annuity contracts” under the version of § 22:647 that was
in effect on the petition date, (2) to enjoy exemption, then, the
Annuities would have to be “annuity contracts” under the statute as
amended by Act 63 of 199928 (“the 1999 Amendment”), and (3) the
Annuities are not entitled to benefit from the 1999 Amendment
because, as they postdated the filing of Orso’s petition, any
retroactive effect of such a post-petition enactment could not be
27
La. Civ. Code Ann. art. 2793 (West 2001).
28
1999 La. Acts 63.
15
applicable under the “snapshot” of the law and facts as of the
petition date. The panel majority also erred in treating the 1999
Amendment as a retroactive change in the law. It was, instead,
purely interpretive of the way the law had always been —— before,
on, and after the petition date.
Because Louisiana stands alone among the 50 states as a hybrid
Civil Law/common law jurisdiction, its situation is unique: The
State’s constitution, its codes and its statutes, are the primary
sources of law; court decisions are treated as secondary sources of
law, without stare decisis precedential effect.29 When interpreting
the law of Louisiana, as we do today, we are bound to honor, among
other things, Louisiana’s distinction between substantive and
interpretive laws, recognizing that:
The character of interpretive legislation is
evident in a civil law system such as
Louisiana. “Judicial opinions, although
invaluable interpretations of the law, are
merely that; interpretations of the legislative
will. The supreme expression of legislative
will in Louisiana is of course the codes and
29
Louisiana courts do, however, honor “jurisprudence
constante,” giving judicial deference to a rule established in a
solid line of cases. See Doerr v. Mobil Oil Corp., 774 So. 2d 119,
128-29 (La. 12/19/00) (stating that “a long line of cases following
the same reasoning within this state forms jurisprudence constante”
and distinguishing stare decisis); see also Prytania Park Hotel,
Ltd. v. Gen. Star Indem. Co., 179 F.3d 169, 175 (5th Cir. 1999)
(“It is axiomatic that in Louisiana, courts must begin every legal
analysis by examining primary sources of law: the State’s
Constitution, codes, and statutes. Jurisprudence, even when it
rises to the level of jurisprudence constante, is a secondary law
source in Louisiana.”) (citing Alvin B. Rubin, Hazards of a
Civilian Venturer in Federal Court: Travel and Travail on the Erie
Railroad, 48 La. L. Rev. 1369, 1372 (1988)).
16
statutes.” Interpretive laws provide the
Legislature with the opportunity to pronounce
the “correct” interpretation to be given to
existing laws.’30
The Louisiana Legislature expressly characterized the 1999
Amendment as interpretive, meaning that it is not new law and not
a retroactive change, but is the correct construction of existing
law. In Louisiana, “interpretative legislation does not create new
rules, but merely establishes the meaning that the interpreted
statute had from the time of its enactment. It is the original
statute, not the interpretive one, that establishes the rights and
duties.”31 Although other states allot similar interpretive roles
to the judiciary alone, the Louisiana approach is within the broad
latitudes states enjoy in choosing which roles are performed by
which state institutions.32 When, as here, federal courts must
30
Pierce v. Hobart Corp., 939 F.2d 1305, 1308-09 (5th Cir.
1991) (quoting Winstead v. Ed’s Live Catfish & Seafood, 554 So. 2d
1237, 1242 (La. App. 1989), cert. denied, 558 So.2d 570 (La.
1990)); circuit precedent in accord: Harrison v. Otis Elevator
Co., 935 F.2d 714, 719 (5th Cir.1991); Louisiana World Exposition
v. Federal Ins. Co., 858 F.2d 233, 244-45 (5th Cir.1988); Laubie v.
Sonesta Int'l Hotel Corp., 752 F.2d 165, 167-68 (5th Cir.1985).
“The general rule in this Circuit is that one panel cannot overrule
another panel. This rule applies with equal force to cases in which
state law supplies the substantive rule of decision[.]” Broussard
v. Southern Pac. Transp. Co., 665 F.2d 1387, 1389 (5th Cir.
1982)(en banc)(internal citations and quotations omitted).
31
Ardoin v. Hartford Accident & Indem. Co., 360 So.2d 1331,
1338-39 (La. 1978).
32
See Dreyer v. Illinois, 187 U.S. 71, 84 (1902) (“Whether the
legislative, executive, and judicial powers of a state shall be
kept altogether distinct and separate, or whether persons or
collections of persons belonging to one department may, in respect
to some matters, exert powers which, strictly speaking, pertain to
17
interpret a state statute that is functioning under a congressional
delegation of exclusive authority to declare the law, we properly
include in our consideration and treat as instructive, legislative
enactments and judicial decisions of the State that postdate filing
of the bankruptcy petition yet properly bear on our construction of
the statute in question to conform with the way the State interprets
it. This is especially true of unmistakably interpretive
declarations of the Louisiana Legislature.33
When we view the 1999 Amendment in this framework, we see that
its interpretation, relating to § 22:647 as it has always existed,
strongly reinforces the conclusion that the statute’s exemption was
applicable to Orso’s receipts on the day he filed for bankruptcy
protection. Even though the subsequent enactment of the 1999
Amendment might have been precipitated in part by our analysis in
Farm Credit Bank of Texas v. Guidry,34 the wording of that purely
interpretive addition is broader than required merely to ensure the
another department of government, is for the determination of the
state.”).
33
Thus, we need not revisit our opinion in Taylor v.
Knostman (In re John Taylor Co.), 935 F.2d 75 (5th Cir. 1991), in
which we held that the Texas homestead exemption in place at the
time of the filing of the bankruptcy petition, and not a subsequent
amendment, must be used to determine the scope of the applicable
exemption. Although retroactive, the Taylor amendment could not
operate to change the debtor’s post-bankruptcy rights, which are
determined under federal law. Id. at 78. Orso’s case is
distinguishable because his periodic payments under the Annuities
were exempt under Louisiana law as it existed at the time he filed
for bankruptcy.
34
110 F.3d 1147 (5th Cir. 1997).
18
inclusion of the subset of variable annuities among the set of all
annuity contracts exempted by § 22:647. We find implicit in the
wording of the 1999 Amendment, which is the Louisiana Legislature’s
interpretation of the statute ab initio, that periodic payments
generated by an annuity contract —— any annuity contract —— are
exempt from claims of creditors, whether within bankruptcy or
outside bankruptcy. The 1999 Amendment underscores Louisiana’s
consistent stance that courts are to construe annuity contracts
liberally, in favor of their preservation and enforcement. Although
nothing in § 22:647 expressly prohibits courts from entertaining
timely-brought, code-authorized challenges to the underlying
transaction that generates the annuity contract —— as, for example,
under Louisiana’s revocatory action or action to declare a
simulation —— the case we address today does not invoke any such
action; thus the question is not before us and we intimate no
opinion on that issue. What is clear under § 22:647, however, is
that courts are not authorized (1) to “pierce” annuities or the
underlying transactions that produce them except by actions
expressly provided for that purpose by Louisiana law, or (2) to
parse the annuity contract itself for qualification of the proceeds
as exempt.
III.
CONCLUSION
We hold that the periodic payments to Orso under his structured
settlement, flowing as they do from annuity contracts, are exempt
19
from his bankruptcy creditors under Louisiana law, a conclusion
bolstered by (but not wholly reliant on) the 1999 Amendment to §
22:647. Because they are proceeds of annuity contracts, the payments
to Orso are exempt from his bankruptcy estate under clearly
established Louisiana law extant on the day that his petition in
bankruptcy was filed. And, as today we are rehearing this case en
banc, we expressly overrule Young and McGovern, as well as anything
in Guidry that conflicts with the foregoing. The judgment of the
bankruptcy court, as affirmed by the district court, recognizing the
exemption of the monthly annuity payments to Orso, is
AFFIRMED.
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