Opinion
Bankruptcy No. 00-02486-C; Chapter 7
February 14, 2001.
ORDER RE TRUSTEE'S OBJECTION TO EXEMPTION
This matter came before the undersigned on January 30, 2001 on Trustee's Objection to Exemption. Attorney John Titler appeared for Debtor Robert W. Pepmeyer. Attorney Eric Lam appeared for Trustee Sheryl Youngblut. After hearing arguments of counsel, the Court took the matter under advisement. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B).
STATEMENT OF THE CASE
Debtor claims an IRA exempt under Iowa Code section 627.6(8)(f). Trustee objects that this is an individual retirement annuity which is not exempt, citing In re Kemmerer, 251 B.R. 50 (B.A.P. 8th Cir. 2000). Debtor responds that Kemmerer is not controlling.
FINDINGS OF FACT
The parties filed a Fact Stipulation on January 31, 2001. Debtor was born in 1946. He received a sum of money from his grandmother's estate prior to 1994. In June 1994, Debtor purchased a Northwestern Mutual Life Individual Retirement Annuity ("IRA annuity") with $2,000 from the estate distribution and $2,444.93 which he transferred from an Individual Retirement Account ("IRA") he had maintained at Guaranty Bank Trust Co. Debtor has contributed $2,000 each year to the IRA annuity between 1995 and 1999. He has not withdrawn any funds from the IRA annuity since its inception. The current value of the IRA annuity is approximately $31,000.
Debtor offers to testify that, in 1994 when he partially funded the IRA annuity with his IRA from Guaranty Bank, he believed the two investments devices to be identical. That is, Debtor thought there was no difference between an Individual Retirement Account and an Individual RetirementAnnuity. Trustee objects that such testimony is irrelevant, immaterial, incompetent and without foundation. The Court hereby overrules Trustee's evidentiary objection. The Court accepts Debtor's offer of evidence for the record and will give it whatever weight it deserves.
CONCLUSIONS OF LAW
This Court, in In re Kemmerer, 245 B.R. 335, 340 (Bankr.N.D.Iowa 2000) ("Kemmerer I"), interpreted the language of Iowa Code sec. 627.6(8)(f)(3) and determined that IRA annuities and IRAs are both exempt as included in the term "individual retirement accounts." The Eighth Circuit Bankruptcy Appellate Panel reversed this decision in In re Kemmerer, 251 B.R. 50, 54 (B.A.P. 8th Cir. 2000) ("Kemmerer II"). It concluded: "The Debtor's individual retirement annuity does not fall within the scope of Iowa Code Section 627.6(8)(f)." Id. The BAP determined that an IRA annuity is not the same as an IRA and was not included in the statutory language delineating exempt assets. Id. It is undisputed in this case that the property Debtor claims exempt is an IRA annuity. Under the Eighth Circuit Bankruptcy Appellate Panel's decision in Kemmerer, Debtor's IRA annuity is not exempt.
Debtor attempts to distinguish Kemmerer by pointing out that his IRA annuity was partially funded by an IRA, which he claims is exempt under sec. 627.6(8)(f). Trustee argues that this circumstance is irrelevant to a determination of exemption under that section. The Iowa Code does not make a distinction for IRAs which are transferred to IRA annuities, such a Debtor's, in setting forth the types of assets which are exempt under sec. 627.6(8)(f). Exemption rights in bankruptcy are determined as of the date of filing the bankruptcy petition. In re O'Brien, 67 B.R. 317, 319 (Bankr.N.D.Iowa 1986). On the date of filing, Debtor held the assets he claims exempt in an IRA annuity, not an IRA. The fact that some of the assets were previously transferred from an IRA is irrelevant.
Compare with the Iowa Code's distinction for transfers from ERISA-qualified retirement plans in § 627.6(8)(f)(1).
Debtor also argues that this Court need not follow the BAP's decision in Kemmerer because it is not controlling or binding on this Court. The precedential or stare decisis effect of decisions by U.S. Bankruptcy Appellate Panels is in controversy. See Hon. Henry J. Boroff, The Precedential Effect of Bankruptcy Appellate Panel Decisions, 103 Com. L.J. 212, 213 (1998). It is fairly well settled that the BAP is bound by its previous decisions, at least in the Eighth Circuit. In re Pfleghaar, 215 B.R. 394, 396 (B.A.P. 8th Cir. 1997). BAP decisions, however, are not binding on District Courts within the Circuit. In re Brown, 239 B.R. 204, 210 n. 6 (S.D.Cal. 1999).
The hierarchical dimension of stare decisis requires that decisions by a Court of Appeals for a particular circuit be binding on all lower courts within the circuit. In re Barakat, 173 B.R. 672, 677 (Bankr.C.D.Cal. 1994), aff'd 99 F.3d 1520 (9th Cir. 1996). The court inBarakat concluded that if an initial appeal from the decision of a bankruptcy judge is to the BAP, the rules of stare decisis would require that, likewise, BAP decisions bind all bankruptcy courts in the circuit.Id. Other courts regard BAP opinions as highly persuasive though not binding precedent. In re Carrozzella Richardson, 255 B.R. 267, 273 (Bankr.D.Conn. 2000). The court in In re Williams, ___ B.R. ___, 2001 WL 40752, at *7 n. 5 (Bankr.W.D.Mo. Jan. 12, 2001), recently stated that while the rulings of the BAP are entitled to appropriate respect, those rulings are not binding on the Bankruptcy Court.
This Court in Kemmerer I set out its conclusions regarding exemption of IRA annuities under sec. 627.6(8)(f). The Eighth Circuit BAP reached contrary conclusions in Kemmerer II. While this Court continues to believe IRA annuities should be found exempt under the Iowa Code, the decision of the BAP, if not binding, is at least due appropriate respect and, as such, is highly persuasive on the issue. The issue in Kemmerer II is identical to the issue in this case. Both cases arose in this district and in front of this Judge. If the Court were to rule in favor of Debtor in this case, the ruling would undoubtedly be subject to reversal in the event of an appeal. The Iowa legislature has not amended the statute and the Iowa Supreme Court has not had occasion to address the issue. In these circumstances, although the binding effect of BAP decisions is debatable, this Court concludes that it is inappropriate to maintain a position which would result in a ruling subject to immediate reversal. Judicial respect for this Court's brethrem on the Appellate Panel requires this Court to honor their opinion. As such, the Court must conclude that Debtor's IRA annuity is not exempt under sec. 627.6(8)(f).
WHEREFORE, Trustee's Objection to Exemption is GRANTED.
FURTHER, Debtor Robert W. Pepmeyer's IRA annuity is not exempt.