ORDER SUSTAINING TRUSTEE’S OBJECTION TO DEBTOR’S CLAIM OF EXEMPTION
GREGORY F. KISHEL, Bankruptcy Judge.
This Chapter 7 case came on before the undersigned United States Bankruptcy
Judge on May 14, 1987, upon the Trustee’s objection to Debtor’s claim of exemption in certain federal farm program entitlements. Chapter 7 Trustee Michael J. Farrell appeared
pro se.
Debtor appeared personally and by his attorney, Robert L. Russell (S. Gail Busch on the brief). Upon the objection and responsive documents, arguments of counsel, and the other files and records in this case, the Court makes the following Order.
Debtor filed a voluntary petition under Chapter 7 of the Bankruptcy Code in this Court on February 3, 1987. On his B-2 Schedule, he included an entry for “1986 Deficiency Payment, payable from ASCS, in the value of $1,000.90.”
On his amended Schedule B-4, filed on April 6, 1987, he claimed the deficiency payment as exempt, citing 16 U.S.C. § 590h(g) as the statute creating the exemption claimed.
Debtor has otherwise claimed the Minnesota state exemptions for his homestead and personal property. The Trustee has timely objected to Debtor’s claim of exemption in the 1986 deficiency payment, arguing that the statute cited does not create a true exemption cognizable in bankruptcy and that Minnesota state law does not provide an exemption for an asset of this character. Debtor argues that 11 U.S.C. § 522(b)(2) authorizes him to claim both the Minnesota state exemptions and exemptions under federal law other than those contained in the so-called “federal bankruptcy exemptions” enumerated in 11 U.S.C. § 522(d). He further argues that the limitation in 7 U.S.C. § 1444e(k) and 16 U.S.C. § 590h(g) on as-signability of deficiency payments, combined with the overlay of the sovereign immunity of the United States from liability in suits for garnishment, make the cited statutory provision an “other federal law” exemption allowable under 11 U.S.C. § 522(b)(2)(A), the equivalent of one of the examples of such non-Bankruptcy Code federal statutory exemptions cited in the legislative history.
See
H.R. REP. No. 595, 95th Cong. 1st Sess. 360 (1977); S. REP. No. 989, 95th Cong. 2d Sess. 76 (1978), U.S.Code Cong. & Admin.News 1978, p. 5787.
Debtor’s argument is ingenious, but unavailing.
Under 11 U.S.C. § 522(b)(2), Debtor may of course elect to use the Minnesota State exemptions and additionally may use exemptions available under any federal statute outside of Title 11 to exempt property protected under such non-Bankruptcy Code federal exemptions.
The question posed here is whether the language from Titles 7 and 16 invoked by Debtor is actually a non-Bankruptcy Code federal exemption statute. In the debtor-creditor context, the term “exemption” as been variously defined as:
A privilege allowed by law to a judgment debtor, by which he may hold property to a certain amount for certain classes of property, free from all liability to levy and sale on execution or attachment.
BLACK’S LAW DICTIONARY at 513 (5th Ed.1979);
The freedom of property of debtors from liability to seizure and sale under legal
process for the payment of their debts
35 C.J.S.
Exemptions
§ 1 at 6 (1960);
... a right given by law to a debtor to retain a portion of his personal property free from seizure and sale by his creditors under judicial process.
31 AM.JUR.2d
Exemptions
§ 2 at 329 (1967).
It is noteworthy that
[exemptions are solely creations of constitution or statute and, as the product of legislative bodies, and are in derogation of the general common law rule that all of a debtor’s property is the common pledge of his creditors and may be subjected to the payment of debts if it can be reached in an appropriate proceeding.
35 C.J.S
Exemptions
§ 1 at 7-8 (1960), and cases cited therein. The central and common characteristic of exemption statutes is the shelter they afford from claims of otherwise-unsecured judgment creditors acting under collection process. Because exemptions have no legal existence independent of statute, it perforce follows that one must look to a particular statute’s language to see whether it contains the provisions that make it an exemption statute.
The provision of 16 U.S.C. § 590h(g) upon which Debtor relies simply does not contain language protecting Debt- or’s personal entitlement by shielding the federal agricultural-program payment in question from garnishment, attachment or levy while in the hands of United States Treasury or any of its agents, or even after disbursement to a farmer-beneficiary. To be sure, the anti-assignment provision in the statute limits the extent to which the entitlement to payment may be reached by, or encumbered in favor of, a creditor, by prohibiting assignment to secure pre-exist-ing debt and limiting assignment to new financing for crop inputs, handling, and marketing, or for resource conservation activity. However, anti-assignment provisions only operate to restrict, prohibit, or invalidate consensual assignments by a debtor-beneficiary; they do not prohibit involuntary attachment by collection process. Thus, the mere fact that 16 U.S.C. § 590h(g) contains an anti-assignment provision does not in itself make it an exemption statute, even though all of the other statutes cited as examples by Congress in the legislative history contain anti-assignment provisions. Every single statute cited as an example of a non-Bankruptcy Code federal statutory exemption contains language which specifically prohibits the seizure of the assets in question under collection process.
This is what makes them exemption statutes. The fact that they also contain anti-assignment provisions is a mere fortuity. ■■
The fact that Debtor’s entitlement to a set-aside program payment may not be subject to attachment while in possession of the United States Treasury or one of its agents does not make it exempt in bankruptcy, either alone or in conjunction with an anti-assignment provision.
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ORDER SUSTAINING TRUSTEE’S OBJECTION TO DEBTOR’S CLAIM OF EXEMPTION
GREGORY F. KISHEL, Bankruptcy Judge.
This Chapter 7 case came on before the undersigned United States Bankruptcy
Judge on May 14, 1987, upon the Trustee’s objection to Debtor’s claim of exemption in certain federal farm program entitlements. Chapter 7 Trustee Michael J. Farrell appeared
pro se.
Debtor appeared personally and by his attorney, Robert L. Russell (S. Gail Busch on the brief). Upon the objection and responsive documents, arguments of counsel, and the other files and records in this case, the Court makes the following Order.
Debtor filed a voluntary petition under Chapter 7 of the Bankruptcy Code in this Court on February 3, 1987. On his B-2 Schedule, he included an entry for “1986 Deficiency Payment, payable from ASCS, in the value of $1,000.90.”
On his amended Schedule B-4, filed on April 6, 1987, he claimed the deficiency payment as exempt, citing 16 U.S.C. § 590h(g) as the statute creating the exemption claimed.
Debtor has otherwise claimed the Minnesota state exemptions for his homestead and personal property. The Trustee has timely objected to Debtor’s claim of exemption in the 1986 deficiency payment, arguing that the statute cited does not create a true exemption cognizable in bankruptcy and that Minnesota state law does not provide an exemption for an asset of this character. Debtor argues that 11 U.S.C. § 522(b)(2) authorizes him to claim both the Minnesota state exemptions and exemptions under federal law other than those contained in the so-called “federal bankruptcy exemptions” enumerated in 11 U.S.C. § 522(d). He further argues that the limitation in 7 U.S.C. § 1444e(k) and 16 U.S.C. § 590h(g) on as-signability of deficiency payments, combined with the overlay of the sovereign immunity of the United States from liability in suits for garnishment, make the cited statutory provision an “other federal law” exemption allowable under 11 U.S.C. § 522(b)(2)(A), the equivalent of one of the examples of such non-Bankruptcy Code federal statutory exemptions cited in the legislative history.
See
H.R. REP. No. 595, 95th Cong. 1st Sess. 360 (1977); S. REP. No. 989, 95th Cong. 2d Sess. 76 (1978), U.S.Code Cong. & Admin.News 1978, p. 5787.
Debtor’s argument is ingenious, but unavailing.
Under 11 U.S.C. § 522(b)(2), Debtor may of course elect to use the Minnesota State exemptions and additionally may use exemptions available under any federal statute outside of Title 11 to exempt property protected under such non-Bankruptcy Code federal exemptions.
The question posed here is whether the language from Titles 7 and 16 invoked by Debtor is actually a non-Bankruptcy Code federal exemption statute. In the debtor-creditor context, the term “exemption” as been variously defined as:
A privilege allowed by law to a judgment debtor, by which he may hold property to a certain amount for certain classes of property, free from all liability to levy and sale on execution or attachment.
BLACK’S LAW DICTIONARY at 513 (5th Ed.1979);
The freedom of property of debtors from liability to seizure and sale under legal
process for the payment of their debts
35 C.J.S.
Exemptions
§ 1 at 6 (1960);
... a right given by law to a debtor to retain a portion of his personal property free from seizure and sale by his creditors under judicial process.
31 AM.JUR.2d
Exemptions
§ 2 at 329 (1967).
It is noteworthy that
[exemptions are solely creations of constitution or statute and, as the product of legislative bodies, and are in derogation of the general common law rule that all of a debtor’s property is the common pledge of his creditors and may be subjected to the payment of debts if it can be reached in an appropriate proceeding.
35 C.J.S
Exemptions
§ 1 at 7-8 (1960), and cases cited therein. The central and common characteristic of exemption statutes is the shelter they afford from claims of otherwise-unsecured judgment creditors acting under collection process. Because exemptions have no legal existence independent of statute, it perforce follows that one must look to a particular statute’s language to see whether it contains the provisions that make it an exemption statute.
The provision of 16 U.S.C. § 590h(g) upon which Debtor relies simply does not contain language protecting Debt- or’s personal entitlement by shielding the federal agricultural-program payment in question from garnishment, attachment or levy while in the hands of United States Treasury or any of its agents, or even after disbursement to a farmer-beneficiary. To be sure, the anti-assignment provision in the statute limits the extent to which the entitlement to payment may be reached by, or encumbered in favor of, a creditor, by prohibiting assignment to secure pre-exist-ing debt and limiting assignment to new financing for crop inputs, handling, and marketing, or for resource conservation activity. However, anti-assignment provisions only operate to restrict, prohibit, or invalidate consensual assignments by a debtor-beneficiary; they do not prohibit involuntary attachment by collection process. Thus, the mere fact that 16 U.S.C. § 590h(g) contains an anti-assignment provision does not in itself make it an exemption statute, even though all of the other statutes cited as examples by Congress in the legislative history contain anti-assignment provisions. Every single statute cited as an example of a non-Bankruptcy Code federal statutory exemption contains language which specifically prohibits the seizure of the assets in question under collection process.
This is what makes them exemption statutes. The fact that they also contain anti-assignment provisions is a mere fortuity. ■■
The fact that Debtor’s entitlement to a set-aside program payment may not be subject to attachment while in possession of the United States Treasury or one of its agents does not make it exempt in bankruptcy, either alone or in conjunction with an anti-assignment provision. It must be acknowledged that, under the doctrine of sovereign immunity, the United States is not subject to suit as a third-party garnishee or bailee in attachment or garnishment proceedings in the absence of a statutory waiver of that immunity.
Applegate v. Applegate,
39 F.Supp. 887, 889-90 (E.D.Va.1941).
However, the issue of whether the United States may be compelled in a legal proceeding to withhold payment from a beneficiary of its largess and to account for the sums withheld to a judgment creditor — and be subjected to actual or potential liability in doing so — is completely distinct from the issue of whether the judgment debtor-beneficiary has a personal right to retain those funds free of the claims of creditors.
Applegate,
39 F.Supp. at 890 (“This is not a question of any right of personal exemption on the part of the defendant ... but of the sovereign immunity of the United States from suits to which it has not consented.”). While the sovereign immunity doctrine and the policy underlying exemption statutes may have the common and coincidental effect of preventing attachment under collection process, they spring from two entirely different policies and sources of law. A judgment debtor simply may not invoke sovereign immunity on his own behalf. In the context of a garnishment proceeding the doctrine does not obtain for the benefit and protection of the beneficiary of a government payment, but rather for the protection of the government from the burden of administering responses to collection process for the sole benefit of private parties, from potential liability in connection with the process (whether for alleged wrongful response, for failure to respond, or simply because response is at least in a general sense a drain on the Treasury) and for other public considerations not at all germane to the private debtor-creditor relationship.
Simply stated, 7 U.S.C. § 1444e(k) and 16 U.S.C. § 590h(g) are not exemption statutes; while they may have the effect of protecting a farmer-beneficiary from ultimate loss of an intended benefit on certain occasions by prohibiting the attachment of a lien securing pre-existing indebtedness, their protections extend no further than that. Debtor’s attempt to engraft a shield from involuntary process onto the statute by reference to sovereign immunity, while clever, simply is not appropriate.
IT IS THEREFORE ORDERED:
1. That the Trustee’s objection to Debt- or’s claim of exemption in a “1986 Deficiency Payment, payable from ASCS,” of a value of $1,000.90, is sustained;
2. That the entitlement described in Term 1 of this Order is property of Debt- or’s bankruptcy estate and shall be subject to the Trustee’s administration in this case.