United States Court of Appeals,
Eleventh Circuit.
No. 95-5144.
In re Fred Paul SOLOMON, Debtor.
GUARDIAN LIFE INSURANCE COMPANY, Plaintiff-Appellant,
v.
Fred Paul SOLOMON, Defendant-Appellee.
Sept. 23, 1996.
Appeal from the United States District Court for the Southern
District of Florida. (No. 94-1137-CIV), Sidney M. Aronovitz, Judge.
Before TJOFLAT, Chief Judge, COX, Circuit Judge, and HANCOCK*,
District Judge.
PER CURIAM:
Guardian Life Insurance Company appeals an order of the
district court concluding that Fred Paul Solomon's interest in a
settlement agreement resolving a 1984 lawsuit is exempt, under
Florida law, from Solomon's bankruptcy estate. We reverse and
remand for further proceedings.
BACKGROUND
The relevant facts are discussed in the opinions of the
district court, Solomon v. Guardian Life Ins. Co. of America, 186
B.R. 535, 535-36 (S.D.Fla.1995), and the bankruptcy court, In re
Solomon, 166 B.R. 998, 998-99 (Bankr.S.D.Fla.1994). We summarize
them here only as pertinent to this appeal. In December 1985,
Solomon settled a lawsuit against Union Mutual Life Insurance
Company. The settlement agreement required Union Mutual to pay
*
Honorable James H. Hancock, U.S. District Judge for the
Middle District of Alabama, sitting by designation.
Solomon $50,000, followed by monthly payments of $6,507.97 for ten
years and a lump-sum payment of $450,000, payable January 1, 1996.
Union Mutual also agreed to pay Solomon's attorney's fees, which
totaled $344,250. Union Mutual was required by the settlement
agreement to purchase a commercial annuity contract from
Transamerica Annuity Service Corporation to ensure that the
agreement's payment schedule was complied with. Union Mutual was
named as the payee under the Transamerica annuity contract;
Solomon is not a party to that annuity contract.
Solomon filed a Chapter 7 bankruptcy petition in December
1993. Solomon listed the settlement agreement as property exempt
from his bankruptcy estate as an annuity under Fla.Stat. § 222.14
(West 1989), which provides, in relevant part:
the proceeds of annuity contracts issued to citizens or
residents of the state, upon whatever form, shall not in any
case be liable to attachment, garnishment or legal process in
favor ... of any creditor of the person who is the beneficiary
of such annuity contract....
Guardian Life, a creditor, objected to the claimed exemption.
After a hearing, the bankruptcy court sustained the objection,
concluding that the "Florida exemption applies only to annuity
contracts issued to citizens or residents of the state and of which
the debtor is the beneficiary." Solomon, 166 B.R. at 999. The
bankruptcy court held that Solomon's settlement agreement was not
exempt, both because of its payment structure and because Solomon
had no interest in the Transamerica annuity. Id.
The district court affirmed in part and reversed in part. The
court agreed with the bankruptcy court that the payment earmarked
as attorney's fees by the agreement did not qualify under section
222.14 for an exemption. But the court concluded that, under the
broad definition of "annuity" provided by the Florida Supreme
Court, see LeCroy v. McCollam (In re McCollam ), 612 So.2d 572
(Fla.1993), answering question certified in 955 F.2d 678 (11th
Cir.1992), answer conformed to, 986 F.2d 436 (11th Cir.1993), it
was bound to hold that the payments other than the attorney's fees
required by the settlement agreement constituted an annuity
contract, exempt under section 222.14 from Solomon's bankruptcy
estate. Guardian Life, 186 B.R. at 538. Guardian Life appeals the
district court's order to the extent that it reversed the
bankruptcy court.
DISCUSSION
On appeal, we are presented with the same issue addressed by
the district court: whether Solomon's settlement agreement with
Union Mutual constitutes an annuity contract within the meaning of
Fla.Stat. § 222.14, so that it is exempt from Solomon's bankruptcy
estate. We review de novo determinations of law, whether made by
the bankruptcy court or the district court. Reider v. Federal
Deposit Ins. Corp. (In re Reider ), 31 F.3d 1102, 1104 (11th
Cir.1994) (citing Equitable Life Assurance Soc. v. Sublett (In re
Sublett ), 895 F.2d 1381 (11th Cir.1990)).
Guardian Life contends that the district court erred in
concluding that the settlement agreement is an annuity contract
exempt from Solomon's bankruptcy estate.1 Guardian Life asserts
1
Guardian Life also argues that the Transamerica annuity
purchased by Union Mutual to ensure adequate funding of the
agreement does not qualify for an exemption under § 222.14. But
Solomon concedes that the Transamerica annuity cannot be the
basis for an exemption, because he has never had a legal or
that the agreement is not exempt because it is not an annuity
contract at all. Guardian Life alleges that neither Solomon nor
Union Mutual intended for the agreement to be considered an annuity
contract, and it asserts that, except for the monthly payments,
none of the agreement's other provisions bear any similarity to an
annuity. By contrast, Solomon urges that we affirm the district
court, arguing that the court correctly relied upon McCollam 's
broad definition of "annuity" to conclude that the settlement
agreement qualifies for the section 222.14 exemption.
We conclude that the agreement between Union Mutual and
Solomon does not qualify for the exemption provided by section
222.14. We recognize that the Florida Supreme Court has broadly
defined section 222.14 to include "all annuity contracts," stating
that "had the legislature intended to limit the exemption to
particular annuity contracts, it would have included such
restrictive language [in the statute]." McCollam, 986 F.2d at 437-
38 (quoting Florida Supreme Court's opinion with regard to question
certified). But the statute does not shield all debts or "accounts
receivable" structured to resemble annuities from a debtor's
bankruptcy estate. We read McCollam to require the existence of an
equitable interest in that annuity contract. See In re Pizzi,
153 B.R. 357, 360-61 (Bankr.S.D.Fla.1993) (construing § 222.14 to
require that debtor be the beneficiary of annuity contract in
question in order to qualify for exemption). In this appeal,
then, we address only the character of the settlement agreement
between Solomon and Union Mutual.
Guardian Life contends that, even if we conclude that
the monthly payments constitute an exempt annuity, in no
event can the lump-sum payment of $450,000 be classified as
an annuity. Because of our disposition of this case, it is
unnecessary for us to address separately this contention.
actual annuity contract before a series of payments may be exempt
under section 222.14. Accord In re Conner, 172 B.R. 119, 121
(Bankr.M.D.Fla.1994) (stating that "[i]f all that is required to
establish an annuity contract is a stream of payments over time,
all installment contracts would qualify as an annuity and that is
clearly not what the McCollam decision requires").
The district court concluded that, because McCollam 's broad
definition of "annuity" includes "debts structured as annuities,"
"the settlement agreement in this case constitutes proceeds of an
annuity contract exempt under Fla.Stat. § 222.14." Solomon, 186
B.R. at 538. The district court read McCollam too broadly; the
fact that Solomon received a series of payments under the
settlement agreement does not necessarily transform the agreement
into an annuity contract exempted by section 222.14. To qualify
for the exemption, the parties to the agreement must have intended
to create an annuity contract. See Conner, 172 B.R. at 121; In re
Dillon, 166 B.R. 766, 769 (Bankr.S.D.Fla.1994).
The language of the agreement between Solomon and Union Mutual
reveals that the parties did not intend to create such a contract.
See Conner, 172 B.R. at 121 (agreement must be identified as an
annuity within four corners of the contract); Dillon, 166 B.R. at
768 ("Had the Debtor intended the settlement payments to be paid
under an annuity contract, he had the ability to create such a
document."); Pizzi, 153 B.R. at 362 (lottery winnings never termed
proceeds of an annuity; winner never called "beneficiary" or
"payee"). The settlement agreement wholly concerns itself with
resolving Solomon's 1984 claims against Union Mutual; it is a
garden variety release of liability. The district court therefore
erred by concluding that section 222.14 applies to exempt the
payments made under the agreement from Solomon's bankruptcy estate.
CONCLUSION
We reverse the district court's order overruling Guardian
Life's objection to the claimed exemption and remand to the
district court for further proceedings consistent with this
opinion.
REVERSED and REMANDED.