Summary
holding that the Bankruptcy Court correctly found that the statute of limitations was equitably tolled until the Trustee took over because appellant, who used the Debtor's funds for his own self-interest, was the Debtor's president and sole shareholder and thus would not have brought suit against his own interest within the limitations period
Summary of this case from Helms v. Hanson (In re Mollie Enters., Inc.)Opinion
Civil Action No. 3:01-CV-1716-M
February 12, 2002
MEMORANDUM ORDER AND OPINION
Pursuant to 28 U.S.C. § 158(a)(1), Appellants Lynn A. Barringer ("Barringer") and Collins, Norman Basinger, P.C. ("CNB") appeal the Bankruptcy Court's Final Judgment on Garnishment in adversary proceeding number 00-3291, entered on July 18, 2001. Jeffrey Mims, the Chapter 7 Trustee for the debtor-in-interest, Raelyn Sales, of which Barringer was the president and sole shareholder, instituted the proceeding to recoup $82,355.58 given by Barringer to a law firm, CNB, which had represented Barringer in past legal actions. The $82,355.58 given to CNB by Barringer came from Barringer's surrender of two life insurance policies of which he was the insured: a Northwestern Mutual Life Insurance Policy ("the NW policy"), which Barringer cashed in for $75,775.72 on October 3, 2000, and a policy with Business Man's Assurance Company ("the BMA policy"), which Barringer cashed in for $32,355.58 on October 9, 2000. From these funds, Barringer paid CNB $82,355.58 for legal services performed for Barringer. In the Judgment, the Bankruptcy Court ordered CNB to turn over the $82,355.58, which CNB was holding in its trust account.
$50,000 of the $82,355.58 came from the NW policy proceeds, while the other $32,355.58 came from the BMA proceeds.
Although the Trustee filed the garnishment action seeking a garnishment lien on the $82,355.58 in satisfaction of a final judgment against Barringer for $185,325.18 entered in adversary proceeding number 00-3291, the Bankruptcy Court rested its garnishment judgment on the theory that the funds should be disgorged because they were the product of Barringer's unjust enrichment. The Bankruptcy Court found that the facts presented during the garnishment proceeding established that the Debtor, Raelyn Sales, had paid at least a portion of the premiums on the two policies. Thus, the Bankruptcy Court concluded that the funds given by Barringer to CNB constituted a trust fund for the benefit of Raelyn.
In their appeal, Appellants argue that the Bankruptcy Court committed seventeen points of error in its findings of fact. The Court will examine all of Appellants' substantive points of error, only omitting discussion of those points of error that are duplicative of others. In reviewing the Bankruptcy Court's findings of fact, the Court recognizes that it may not set aside the findings unless they are clearly erroneous. FED. R. BANKR. P. 8013. Conclusions of law, in contrast, are subject to de novo review. See, e.g., In re Herby's Foods, Inc., 2 F.3d 128, 131 (5th Cir. 1993).
These include Points of Error 10 through 16.
A . Whether the Bankruptcy Court's finding that Barringer paid premiums on the BMA policy with Raelyn's funds was in error.
In their first point of error, Appellants argue that the Bankruptcy Court's finding that Raelyn paid the premiums on the BMA life insurance policy owned by Lynn Barringer was clearly erroneous. Appellants assert that no evidence in the record supports the Bankruptcy Court's finding that Raelyn paid the premiums on the BMA life insurance policy. In support of their argument, Appellants cite a letter from Barringer to BMA directing the insurance company to take the "contract charges" for the policy "from the cash value." Record at 356. However, in his response, Appellee points out that ledger excerpts attached to Raelyn's 1996 and 1997 tax returns show that Raelyn paid premiums on a BMA life insurance policy for at least those two years. One ledger excerpt shows a payment made to "BMA Univ. Life" for $2,625.00. Record at 163. The other shows a second payment to the same company for the same amount. Record at 179.
Although the ledger excerpts arguably show that Raelyn paid the two premium payments for Barringer (assuming those BMA payments were for the instant BMA policy), Appellee never requested the BMA proceeds under a theory of unjust enrichment; instead, Appellee claimed the BMA proceeds solely because they were Barringer's nonexempt property subject to garnishment. Appellee requested only the NW policy proceeds under its unjust enrichment theory. In light of that pleading, the Court concludes that the Bankruptcy Court committed reversible error in finding that Appellee was entitled to the portion of the BMA policy proceeds given to CNB, which is based on an unjust enrichment theory.
For instance, in Appellee's Amended Motion to Determine Ownership of Insurance Proceeds, filed with the Bankruptcy Court on May 24, 2001, Appellee asserted that only the NW Funds constituted the property of Raelyn's estate under the theory of unjust enrichment. The Motion made no mention of the BMA proceeds, thereby giving Appellants no notice that such a theory would be at issue as to the BMA policy. Additionally, the transcript of the December 18, 2000 motion hearing and June 21, 2001 trial held by the Bankruptcy Court in the garnishment matter centered solely on Raelyn's payment of the NW premiums; no mention was made of Raelyn's payment of the BMA premiums. Thus, the issue of Raelyn's payment of the BMA premiums was not properly before the Bankruptcy Court, and should not have been decided by it.
In fact, during the trial, the Trustee's counsel affirmatively stated that the Trustee was not seeking to have the BMA policy declared a part of Raelyn's estate. Record at 547 (stating that "[t]his policy that they're referring to now [the BMA policy] is not the policy that the [T]rustee is claiming belongs to the estate"); see also Record at 607-08 (statement of Trustee's counsel) (explaining, in answer to the Court's question, "You're not after the BMA policy?", that the Trustee was not after the BMA premiums under an unjust enrichment theory).
Appellee argues that even if this Court finds no unjust enrichment in regard to the BMA policy proceeds, the proceeds are still subject to garnishment because Barringer failed to pay any of the $183,325.18 he owed to the Trustee under the Bankruptcy Court's Final Judgment of October 17, 2000, and the proceeds constitute nonexempt property that can be garnished to satisfy the Judgment. As discussed in Part B, however, this Court finds that, while the NW policy proceeds are not exempt from garnishment, the BMA policy proceeds are exempt and are thus not subject to garnishment.
B . Whether the Bankruptcy Court's finding that the insurance proceeds are not exempt property. that the funds were commingled. that the funds cannot not be traced and that the funds constitute a trust fund for Raelyn's benefit was in error.
In their fifth through eighth points of error, Appellants attack several interrelated findings of the Bankruptcy Court. The Bankruptcy Court found that the insurance proceeds from both policies were subject to garnishment because they were not property exempt from garnishment. Additionally, the Court found that, even if the proceeds were exempt, Barringer eliminated their exempt status by commingling the funds with other contents of Barringer's bank account, so that the funds could not be traced. Appellants put forth a number of arguments as to why these findings are clearly erroneous. Appellants contend that the insurance proceeds constitute property exempt from garnishment, that Barringer did not commingle the funds so as to destroy their exempt status, and that the funds can be traced. Additionally, Appellants argue that, because the Bankruptcy Court erred in not finding the funds to be exempt from garnishment, the Court also erred in determining that the funds constituted a constructive trust for Raelyn's benefit.
Because Appellants' fifth through eighth points of error are also related to their first point of error, the Court has placed its discussion of the fifth through eighth points directly after the Court's discussion of the first point.
Appellants first assert that Article 21.22 of the Texas Insurance Code exempts Barringer's BMA and NW insurance proceeds from garnishment. That statute provides:
Sec. 1. Notwithstanding any provision of this code other than this article, all money or benefits of any kind, including policy proceeds and cash values, to be paid or rendered to the insured or any beneficiary under any policy of insurance or annuity contract issued by a life, health or accident insurance company, including mutual and fraternal insurance, or under any plan or program of annuities and benefits in use by any employer or individual, shall:
. . . .
(2) be fully exempt from execution, attachment, garnishment or other process;
(3) be fully exempt from being seized, taken or appropriated or applied by any legal or equitable process or operation of law to pay any debt or liability of the insured or of any beneficiary, either before or after said money or benefits is or are paid or rendered; and
(4) be fully exempt from all demands in any bankruptcy proceeding of the insured or beneficiary.
. . . .
TEX. INS. CODE ANN. art. 21.22 (Vernon 2001). The statute's plain language protects cash values as well as matured policy proceeds, both before and after the funds are paid. Appellee has cited no persuasive authority to the contrary. Thus, the Court finds that, absent other facts, both the BMA and NW policy cash values would fall within the parameters of Article 21.22's protection. However, because substantial evidence in the record supports Appellee's contention that, for several years, Barringer improperly used Raelyn's funds to pay the NW premiums, the Court must examine whether Article 21.22 can be applied to protect insurance proceeds in such a situation.
Although, as Appellants contend, Texas courts have emphasized that exemptions such as Article 21.22 should be applied liberally, Texas courts have also found that Article 21.22 does not apply to insurance proceeds when the premium payments were procured by fraud or similar wrongdoing. See Hickman v. Hickman, 234 S.W.2d 410, 413-14 (Tex. 1950) ("[O]ur exemption laws should be liberally construed in favor of express exemptions and should never be restricted in their meaning and effect so as to minimize their operation upon the beneficent objects of the statutes. Without doubt the exemption would generally be resolved in favor of the claimant."); Marineau v. Gen. Am. Life Ins. Co., 898 S.W.2d 397 (Tex.App.-Fort Worth 1995, writ denied) (holding that Article 21.22 does not exempt policy proceeds from seizure where the premiums have been paid with embezzled funds). The facts of Marineau, though not identical, are sufficiently similar to those in the case at hand to warrant application of the Texas court's reasoning here. General American Life Insurance Company, the past employer of Appellant Constance Marineau's husband and the company through which Marmneau's husband took out a life insurance policy, filed suit seeking that the insurance proceeds received by Mrs. Marineau after her husband's death be held as a constructive trust in favor of General American. General American alleged that Mr. Marmneau, while employed with the company, had embezzled funds from it and had used at least a portion of those funds to pay the premiums on a General American life insurance policy. After Mr. Marineau died, Constance Marmneau received the proceeds of the insurance policy. Mrs. Marineau conceded the embezzlement, but argued that the insurance proceeds were still exempt from seizure under Texas Insurance Code Article 21.22. The trial court granted summary judgment for General American, finding a constructive trust in the insurance proceeds in General American's favor, and holding that General American could recoup from the trust the portion of the proceeds proportional to the premiums paid with embezzled funds.
The appellate court affirmed the trial court's judgment, first explaining that
[t]he general rule followed by a majority of jurisdictions is that a person who wrongfully uses stolen or fraudulently obtained funds to purchase an insurance policy shall hold that policy and its proceeds in trust for the benefit of the one from whom the funds were stolen or taken. This may be true even where a statute protects the proceeds of insurance policies from actions by creditors.Id. at 401. The court then adopted the majority rule, stating,
[w]e do not believe the language of section 21.22 of the Texas Insurance Code prohibits this result. Section 21.22 only protects insurance policy benefits . . . from the actions of creditors to "pay any debt or liability." This is not an action by an insurance company to recover unpaid premiums, or some other debt owed to the insurance company. The question here is one of ownership of the policy prior to the death of the insured. . . . Appellant does not attack the trial court's finding that Charles Marineau embezzled funds from General American, and that a portion of these funds was used to pay the premiums for the insurance policy in question. Appellate simply argues that [Article 21.22] prohibits us from reaching the equitable result. We hold that when an insurance policy's premiums are paid with funds fraudulently obtained, the beneficiary of the policy holds the future proceeds from that policy in trust for the owner of the defrauded funds.Id.
A recent federal case within this circuit has applied the Marineau court's reasoning to reach the same conclusion. In Sun Life Assurance Co. v. Dunn, 134 F. Supp.2d 827 (S.D. Tex. 2001), the court had to determine the beneficiary to a life insurance policy purchased by one of the defendants, John Dunn. Mr. Dunn was required by a divorce decree to buy and pay premiums on a life insurance policy that would provide proceeds of at least $200,000 upon Mr. Dunn's death. The irrevocable beneficiary of the policies was to be his son, Kelly. However, Mr. Dunn named Kelly only as the primary beneficiary on 37% of the policy, naming his current wife, Gloria, as primary beneficiary of the rest of the policy. This action violated the divorce decree, because Kelly would receive less than $200,000 upon his father's death. Kelly demanded that the entirety of the insurance proceeds be considered a constructive trust in his favor. Gloria objected, contending, inter alia, that Article 21.22 of the Texas Insurance Code prohibited the court from creating a constructive trust. Citing Marineau, the Sun Life court rejected Gloria's argument, explaining that "[c]ontrolling Texas case law . . . establishes that section 21.22 does not apply when used as a shield to fraud. . . . [because] the application of section 21.22 to shield wrongful acts . . . would deprive the rightful owner of [his] property." Id. at 836.
The Marineau and Sun Life courts' holdings are clearly instructive in the case at hand. Although Barringer did not commit embezzlement or fraud, he did act improperly by having Raelyn pay his insurance premiums without reporting the payments as Barringer's income. Because Barringer took Raelyn's funds that were not rightfully his to pay his insurance premiums, principles of equity dictate that Raelyn receive the insurance proceeds. Although, in Marineau, the Court found Mrs. Marineau could keep the portion of the funds she proved had been paid with Mr. Marineau's own money, rather than with funds he embezzled from General American, Appellants have not pointed to any evidence in the record showing the percentage of premiums Barringer with his own funds, rather than Raelyn's. Therefore, the Bankruptcy Court's finding that the entire amount of NW policy proceeds should be held in a constructive trust in favor of Barringer is correct.
In fact, the evidence presented by Appellee at the December 18, 2000 hearing held by the Bankruptcy Court on the motions filed in the garnishment action shows that Raelyn paid all of the premiums on the NW policy. See, e.g., Testimony of Susan Smith, Record at 441 ("Raelyn obviously paid the premiums on this policy at least back as far as the records [provided by Raelyn show]."); Testimony of Lynn A. Barringer, Record at 462 (answering, in response to the question, "[Y]ou did not pay any premiums to Northwest Mutual on the policy that's at issue in this case[?]," "Individually I don't believe I paid any premiums.").
Thus, application of Marineau also warrants this Court's overruling of Appellants' fifteenth point of error, that the Bankruptcy Court erred in awarding to the Trustee more than the total amount of premiums paid by Raelyn, as Marineau dictates that, where an individual wrongfully uses another party's funds to pay that individual's insurance premiums, all proceeds from the insurance policy — not just the amount equal to the premiums paid — be held in a constructive trust in favor of the injured party.
Additionally, the Court overrules Appellants' sixteenth point of error, that the Bankruptcy erred in finding that the total of all premiums paid by Raelyn was $82,355.58, because the point of error is simply incorrect. The Bankruptcy Court did not find the total premiums paid to be $84,355.58. Rather, the Court held that Raelyn was entitled to the total amount of the insurance proceeds that Barringer gave to CNB because the proceeds constituted a constructive trust for Raelyn's benefit.
The disposition of the BMA proceeds is another matter. Appellee did not request the BMA proceeds under an unjust enrichment theory; in fact, during the course of the proceedings, Appellee repeatedly denied that he was requesting the BMA funds under that theory. Thus, the issue of unjust enrichment was not properly before the Bankruptcy Court. Because Appellee did not present the issue of whether the BMA proceeds belonged to Raelyn's estate under an unjust enrichment or similar theory, the Court concludes that the Bankruptcy Court committed reversible error in finding the BMA proceeds subject to a constructive trust and not exempt from garnishment. Article 21.22, as interpreted by this Court, protects insurance funds — even cash values of surrendered policies — from garnishment unless a plaintiff argues and proves that the insured paid the premiums with funds wrongfully obtained from another party. That proof was lacking as to the BMA policy.
Furthermore, the Court finds that the Bankruptcy Court's determination that the BMA funds' exempt status was destroyed by commingling of the funds with other items within Barringer's bank account was clearly erroneous, because no evidence in the record supports Appellee's contention that the insurance funds were commingled with any other monies. Additionally, the Court finds that the Bankruptcy Court erred in finding that the BMA funds cannot be traced, as no evidence in the record supports that conclusion. For these reasons, the Court finds that the BMA proceeds given by Barringer to CNB retain their exempt status and may stay in the possession of CNB, to be applied to Barringer's legal bills.
B . Whether the Bankruptcy Court's finding that Barringer utilized Raelyn as his "hip pocket" was in error.
Appellants argue in their second point of error that the Bankruptcy Court incorrectly found that Barringer used Raelyn as his "hip pocket." Appellants interpret this finding as implying that Barringer was Raelyn's alter ego, and contend that such a finding is improper given that the Trustee lodged "no allegation of alter ego, piercing the corporate veil or use of the Debtor by Barringer as his personal cash register." However, Appellants admit that Judge Abramson distinguished an alter ego situation from the case at hand, stating, "[i]t's akin to an alter ego situation. But it's not that. It's not pled. It's not being decided." Record at 626.
It is clear from the Bankruptcy Court's findings that the Court did not rest its garnishment judgment on a finding that Raelyn was the alter ego of Barringer. Rather, the Bankruptcy Court based its holding on the theory of unjust enrichment — Raelyn paid the NW insurance premiums, and thus was entitled to the proceeds. A review of the record thus places the Bankruptcy Judge's reference to Raelyn as Barringer's "hip pocket" into context; the finding was the Court's way of describing Barringer's use of Raelyn's funds to pay Barringer's insurance premiums without recording the payments as compensation, which the Bankruptcy Judge rightly thought was improper. The Bankruptcy Court's finding that Raelyn was the "hip pocket" of Barringer is therefore of no real significance, other than as a characterization of the relationship between Raelyn and Barringer. Because the Court rested its finding that garnishment was proper on Raelyn's payment of the premiums, and not on a finding of alter ego, any error in the Court's finding is harmless.
C . Whether the Bankruptcy Court's finding that Raelyn became insolvent years before filing its bankruptcy proceeding was in error.
In their third point of error, Appellants assert that the Bankruptcy Court erred in finding that Raelyn Sales "was in financial trouble years before the bankruptcy filing[,] as evidenced by the corporate tax returns." Appellants interpret this finding as stating that Raelyn was insolvent years before the bankruptcy, and argue that such a finding is clearly erroneous, as no evidence in the record supports that finding. However, the Bankruptcy Court did not find that Raelyn was insolvent years before the bankruptcy — only that it was in some financial trouble. The Bankruptcy Court only used the word "insolvent" in referring to Raelyn's condition after the filing of the bankruptcy petition.
Appellants apparently interpret the Bankruptcy Court's statement that Raelyn was in financial trouble years before the bankruptcy as implying the Barringer should not have allowed Raelyn to pay Barringer's insurance premiums in the years preceding the bankruptcy filing because Raelyn was insolvent even then. This is an incorrect interpretation of the Bankruptcy Court's findings. Whether Raelyn was insolvent before it filed bankruptcy is irrelevant to the Bankruptcy Court's findings, which rest on the premise that at no time should Barringer have directed Raelyn to pay his insurance premiums without reporting the payments as income. Because the Bankruptcy Court did not find Raelyn to have been insolvent years before the bankruptcy filing, and because this finding was in any case not material to any legal conclusion, the Court overrules this point of error.
D . Whether the Bankruptcy Court's finding that there was an unjust enrichment of a fiduciary. Lynn Barringer. was in error.
Appellee prevailed in the Bankruptcy Court on its theory that Barringer, as a fiduciary of Raelyn, was unjustly enriched. Appellants, in their fourth point of error, argue that since the Trustee did not plead unjust enrichment of a fiduciary, the Trustee cannot recover on that theory. Although Appellee, in its Application for Writ of Garnishment, did not cite unjust enrichment as a reason for the Court to garnish the bank account of CNB, Appellants were put on notice as to the unjust enrichment argument in the Trustee's Amended Motion to Determine Ownership of Insurance Proceeds. Record at 631-32. In the Motion, the Trustee explained that the NW Mutual policy proceeds constituted the property of the Debtor's bankruptcy estate because "the Debtor paid the premiums for the Policy with funds belonging to the Debtor. . . . At a minimum, the estate has an equitable ownership interest in the Policy because it paid the premiums for the Policy." Id. at 632. This Court finds that this language within the Motion put Appellants on sufficient notice as to the unjust enrichment theory upon which the Trustee proceeded.
Appellants also argue that no evidence in the record supports Appellee's theory of unjust enrichment of a fiduciary. Appellants correctly explain that "[u]njust enrichment allows a plaintiff to recover when the defendant obtains a benefit from the plaintiff by fraud, duress, or the taking of an undue advantage." The Bankruptcy Court rested its finding of unjust enrichment on Barringer's taking undue advantage of the fact that he was the owner and president of Raelyn by making Raelyn pay his insurance premiums without reporting the payments as part of Barringer's income. Appellants do not dispute the Bankruptcy Court's factual finding that Raelyn paid the premiums on Barringer's NW insurance policy and did not report the payments as income to Barringer. The record provides sufficient evidence that Barringer took undue advantage of Raelyn by using his position in the company to siphon off Raelyn's funds for unreported personal gain. Therefore, this point of error is also overruled.
Appellants apparently believe that Barringer did not do anything improper because Raelyn did not pay the insurance premiums after it filed for bankruptcy. They do not understand that it was improper for Raelyn to be paying the premiums before it was insolvent when Raelyn did not report these payments as Barringer's income.
E . Whether the Bankruptcy Court's finding that the statute of limitations is irrelevant to the Trustee's claim to the insurance proceeds was in error .
Citing Texas Civil Practice Remedies Code § 16.004(a)(3), Appellants, in their ninth point of error, argue that an action for recovery of premium payments is subject to a four-year statute of limitations. Section 16.004(a)(3) provides that a "person must bring suit on the following actions not later than four years after the day the cause of action accrues: . . . (3) debt." Appellants contend that this provision, as applied to this case, means that the Trustee can only recover the premium payments made by Raelyn on the insurance premiums from 1996 forward (four years prior to the institution of the bankruptcy filing), for a total of $14,846.09.
In its findings, the Bankruptcy Court found the statute of limitations inapplicable because Barringer was Raelyn's president and sole shareholder and therefore "there was no one to raise the limitations question between the Debtor corporation and Barringer." In this statement, the Bankruptcy Judge was invoking an equitable tolling rule similar to the adverse domination doctrine, which holds that statutes of limitations should be tolled for as long as the wrongdoing agent controls the corporation. See FDIC v. Dawson, 4 F.3d 1303, 1310 (5th Cir. 1993). Quoting Dawson, the Southern District of Texas, in Resolution Trust Corp. v. Holmes, 839 F. Supp. 449 (S.D. Tex. 1993), explained the adverse domination doctrine in the following way:
[In Dawson, the Fifth Circuit] concluded that "[u]nder Texas law, a cause of action by a corporation against its directors does not accrue until a majority of disinterested directors have discovered or are put on notice of the cause of action." [ Dawson, 4 F.3d at 1441.] "`The rationale behind this theory is that the wrongdoers cannot be expected to bring an action against themselves.'" Id. (quoting FDIC v. Hudson, 673 F. Supp. 1039, 1042 (D. Kan. 1987)). For that reason limitations periods are tolled until "`a new entity takes control of the bank, be it a receiver or a new board of directors[, because only then] can suit against the wrongdoers be brought as a practical matter.'" Id.839 F. Supp. at 452. Since Barringer was the president and sole shareholder of Raelyn, he dominated the company so that could not have brought suit within the limitations period. Not until the Trustee took over could Raelyn have filed suit for Barringer's use of the company's funds to pay his life insurance policies. Therefore, under Texas law the Bankruptcy Court's finding that the limitations period did not apply was correct.
F . Whether the Bankruptcy Court's finding that CNB was not entitled to recover attorney fees it had earned for legal work performed for Barringer nor to being served with the writ of garnishment was in error.
Appellants argue in their seventeenth point of error that CNB has a right to the funds superior to that held by Raelyn. This contention rests upon three grounds. First, since the garnishor stands in the shoes of the debtor in the garnishment proceeding, the Trustee's claim to the money as garnishor is subject to CNB's claim to the money. Second, CNB has a valid right of setoff. Third, CNB has an equitable lien in the funds. In its findings of fact, the Bankruptcy Court found that equity outweighed any rights CNB has to the money because CNB, as "lawyers for Raelyn Sales, Inc. when it initially filed a chapter 11 bankruptcy case . . . knew or should have known the source of the Trust Funds," and therefore "should not have taken [the] money at all." This Court concurs with the determination of the Bankruptcy Court. Because CNB, as counsel for Raelyn in the bankruptcy proceeding, was in a position to know the origin of the funds used by Barringer to pay his legal bills, the law firm should not have taken the funds. Therefore, any legal right CNB might have to any portion of the funds is overridden by equitable considerations.
The Bankruptcy Judge's oral rendition of his findings describes the Court's reasoning in more detail than the written version:
I find that the lawyers, who were also the lawyers for the bankruptcy case, knew or should have known the source of the funds and that these are funds of a trust under Texas law and property of the estate.
And I want to point out there's one important finding, that the transactions in the cashing of the policies occurred after the bankruptcy, when the claim of the estate was involved, and therefore, I find that the lawyers should not have taken that money at all.
Record at 627.
G . Conclusion
In conclusion, the Bankruptcy Court's garnishment judgment is AFFIRMED in part and REVERSED in part. Specifically, the Bankruptcy Court's judgment is AFFIRMED insofar as the Judgment awarded the NW policy proceeds in CNB's possession to the Trustee, as those proceeds are not exempt from garnishment. CNB is therefore ordered to surrender the $50,000 in its trust account traceable to the NW policy. The Bankruptcy Court's judgment is REVERSED insofar as the Bankruptcy Court held that the BMA policy proceeds are not exempt from garnishment. This Court finds, contrary to the Bankruptcy Court, that the BMA proceeds are exempt and therefore not subject to a garnishment judgment. Therefore, CNB may keep the $32,355.58 traceable to the BMA policy.
SO ORDERED.