IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
No. 97-31242
In The Matter Of: MARILYN WOODYEAR, Debtor.
MARILYN WOODYEAR, Appellant,
versus
CLARKE INSURANCE INC.; FUNDING CORP.; KEITH A. RODRIGUEZ, Trustee, Appellees.
Appeal from the United States District Court for the Western District of Louisiana USDC No. 97-CV-62
November 5, 1998
Before REYNALDO G. GARZA, STEWART and PARKER, Circuit Judges.
PER CURIAM:*
Marilyn Woodyear appeals the district court’s holding that (1) her interest in her ex-husband’s
PPG Industries Employee Savings Plan (“Savings Plan”) is includable as property of the bankruptcy
estate and (2) her interest in the Savings Plan is not exempt from seizure by the bankruptcy trustee
under Louisiana law.
The standard of appellate review is set forth in Bankruptcy Rule 8013, which provides that
on appeal, “[f]indings of fact . . . shall not be set aside unless clearly erroneous, and due regard shall
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4. be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses.”
Fed.R.Bankr.P. 8013. Further, “[w]hen the district court has affirmed the bankruptcy court’s findings
the review for clear error is strict.” Traina v. Whitney Nat. Bank, 109 F.3d 244, 246 (5th Cir. 1997)
(citing In re Kemp, 52 F.3d 546, 550 (5th Cir.1995)). The bankruptcy court’s conclusions of law,
however, are subject to plenary review on appeal. Matter of Herby’s Foods, Inc., 2 F.3d 128, 131
(5th Cir. 1993) (citing Fabricators, Inc. v. Technical Fabricators, Inc. (In re Fabricators, Inc.), 926
F.2d 1458, 1464 (5th Cir. 1991)).
Woodyear argues that her interest in the Savings Plan is covered by the Employee Retirement
Income Security Act of 1974 (“ERISA”). She further contends that in Patterson v. Shumate, 504
U.S. 753, 765, 112 S.Ct. 2242, 2250, 119 L.Ed.2d 519 (1992), the Supreme Court held that a
debtor’s interest in an ERISA-qualified pension plan is not property of the bankruptcy estate that can
be reached by the trustee. The bankruptcy judge in the instant case, however, determined that
because Woodyear was entitled to receive an immediate distribution of her interest in the Savings
Plan, the funds were no longer subject to ERISA restrictions and thus were property of the debtor’s
estate. This determination was affirmed by the district court.
Bankruptcy Code Article 541 defines property of the bankruptcy estate to include funds that
a debtor becomes entitled to as a result of a divorce either before bankruptcy filing or before 180 days
expire following the bankruptcy filing. 11 U.S.C. § 541(a)(5)(B).2 Article 541 does not include as
property of the bankruptcy estate funds containing a “restriction on the transfer of a beneficial interest
of the debtor in a trust that is enforceable under applicable nonbankruptcy law.” 11 U.S.C. §
541(c)(2). Woodyear claims that the Internal Revenue Service has characterized her ex-husband’s
savings plan as “qualified” under ERISA and that her interest must therefore be ERISA-covered as
well. In interpreting the circumstances in which a retirement account is subject to a restriction within
the meaning of § 541(c)(2), bankruptcy courts have ruled that if a debtor gains unrestricted access
2 The Woodyears’ divorce judgment was rendered on February 8, 1995. Marilyn Woodyear filed a petition for relief under Chapter 13 of the Bankruptcy Code on June 7, 1996.
2 to funds in an ERISA-qualified plan within the time that the debtor’s bankruptcy estate is forced, such
funds are no longer subject to the anti-restriction clause of ERISA and are thus not excludable from
the estate. In re Caslavka, 179 B.R. 141, 143 (Bankr. N.D. Iowa 1995); see also In re Reid, 139 B.R.
19, 21 (Bankr. S.D. Cal 1992). Under this analysis, it is clear that Woodyear’s interest is not
excludable from the estate. In order for Woodyear’s interest in the Savings Plan to be recognized,
she must present a Qualified Domestic Relations Order (“QDRO”) to PPG Industries. This will
entitle her to an immediate distribution of approximately $75,000 which will no longer exist in a trust
or plan. As ERISA no longer applies to these funds, they are not subject to the anti-restriction clause
and therefore must be included as property of the estate.
We find the Supreme Court’s holding in Patterson inapplicable to the instant facts and
circumstances. As the district court noted, Patterson dealt with a retirement “pension” account set
aside for when the debtor himself reached retirement age, as opposed to the savings account at issue
in this case, which was set aside for the debtor’s former husband, not for his retirement account.
Patterson, 504 U.S. at 764-65, 112 S.Ct. at 2250. Perhaps most important to our examination is that
the decision in Patterson does not concern a debtor who possesses an unrestricted right to a cash
distribution at the time of filing a bankruptcy petition as does Woodyear. We conclude that the
district court did not clearly err in affirming the determination of the bankruptcy court.
Second, Woodyear urges that even if her interest in the Savings Plan is considered property
of the bankruptcy estate, she is still entitled to claim the funds as exempt under Louisiana law. Under
Louisiana law, a person may exempt from a bankruptcy estate those contributions to retirement
accounts which are (1) placed into (or “contributed” to) a financial plan itself exempt from federal
income tax, and (2) placed into such a financial plan no less than one year before the person files a
bankruptcy petition. LSA-R.S. 20:33(1). In turn, the Internal Revenue Code offers tax-shelter
treatment for an “employee’s” funds which are “rolled over” from an ERISA-qualified employee
benefit plan into an individual retirement account, so long as the funds are qualified in the retirement
3 account within sixty days of receipt. 26 U.S.C. § 402(c).3 Arguing before the district court,
Woodyear claimed that at some undetermined time in the future she could obtain a QDRO and “roll
over” her interest in her ex-husband’s ERISA-qualified Savings Plan into her own retirement account
pursuant to 26 U.S.C. § 402(c). Woody ear argued that she therefore was entitled to a present
exemption as to those funds in the Savings Plan. The bankruptcy court and the district court, in turn,
rejected the debtor’s interpretation of the interplay between 26 U.S.C. § 402(c) and LSA-R.S. 20:33
because any attempted rollover under 26 U.S.C. § 402(c) into a retirement account would necessarily
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IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
No. 97-31242
In The Matter Of: MARILYN WOODYEAR, Debtor.
MARILYN WOODYEAR, Appellant,
versus
CLARKE INSURANCE INC.; FUNDING CORP.; KEITH A. RODRIGUEZ, Trustee, Appellees.
Appeal from the United States District Court for the Western District of Louisiana USDC No. 97-CV-62
November 5, 1998
Before REYNALDO G. GARZA, STEWART and PARKER, Circuit Judges.
PER CURIAM:*
Marilyn Woodyear appeals the district court’s holding that (1) her interest in her ex-husband’s
PPG Industries Employee Savings Plan (“Savings Plan”) is includable as property of the bankruptcy
estate and (2) her interest in the Savings Plan is not exempt from seizure by the bankruptcy trustee
under Louisiana law.
The standard of appellate review is set forth in Bankruptcy Rule 8013, which provides that
on appeal, “[f]indings of fact . . . shall not be set aside unless clearly erroneous, and due regard shall
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4. be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses.”
Fed.R.Bankr.P. 8013. Further, “[w]hen the district court has affirmed the bankruptcy court’s findings
the review for clear error is strict.” Traina v. Whitney Nat. Bank, 109 F.3d 244, 246 (5th Cir. 1997)
(citing In re Kemp, 52 F.3d 546, 550 (5th Cir.1995)). The bankruptcy court’s conclusions of law,
however, are subject to plenary review on appeal. Matter of Herby’s Foods, Inc., 2 F.3d 128, 131
(5th Cir. 1993) (citing Fabricators, Inc. v. Technical Fabricators, Inc. (In re Fabricators, Inc.), 926
F.2d 1458, 1464 (5th Cir. 1991)).
Woodyear argues that her interest in the Savings Plan is covered by the Employee Retirement
Income Security Act of 1974 (“ERISA”). She further contends that in Patterson v. Shumate, 504
U.S. 753, 765, 112 S.Ct. 2242, 2250, 119 L.Ed.2d 519 (1992), the Supreme Court held that a
debtor’s interest in an ERISA-qualified pension plan is not property of the bankruptcy estate that can
be reached by the trustee. The bankruptcy judge in the instant case, however, determined that
because Woodyear was entitled to receive an immediate distribution of her interest in the Savings
Plan, the funds were no longer subject to ERISA restrictions and thus were property of the debtor’s
estate. This determination was affirmed by the district court.
Bankruptcy Code Article 541 defines property of the bankruptcy estate to include funds that
a debtor becomes entitled to as a result of a divorce either before bankruptcy filing or before 180 days
expire following the bankruptcy filing. 11 U.S.C. § 541(a)(5)(B).2 Article 541 does not include as
property of the bankruptcy estate funds containing a “restriction on the transfer of a beneficial interest
of the debtor in a trust that is enforceable under applicable nonbankruptcy law.” 11 U.S.C. §
541(c)(2). Woodyear claims that the Internal Revenue Service has characterized her ex-husband’s
savings plan as “qualified” under ERISA and that her interest must therefore be ERISA-covered as
well. In interpreting the circumstances in which a retirement account is subject to a restriction within
the meaning of § 541(c)(2), bankruptcy courts have ruled that if a debtor gains unrestricted access
2 The Woodyears’ divorce judgment was rendered on February 8, 1995. Marilyn Woodyear filed a petition for relief under Chapter 13 of the Bankruptcy Code on June 7, 1996.
2 to funds in an ERISA-qualified plan within the time that the debtor’s bankruptcy estate is forced, such
funds are no longer subject to the anti-restriction clause of ERISA and are thus not excludable from
the estate. In re Caslavka, 179 B.R. 141, 143 (Bankr. N.D. Iowa 1995); see also In re Reid, 139 B.R.
19, 21 (Bankr. S.D. Cal 1992). Under this analysis, it is clear that Woodyear’s interest is not
excludable from the estate. In order for Woodyear’s interest in the Savings Plan to be recognized,
she must present a Qualified Domestic Relations Order (“QDRO”) to PPG Industries. This will
entitle her to an immediate distribution of approximately $75,000 which will no longer exist in a trust
or plan. As ERISA no longer applies to these funds, they are not subject to the anti-restriction clause
and therefore must be included as property of the estate.
We find the Supreme Court’s holding in Patterson inapplicable to the instant facts and
circumstances. As the district court noted, Patterson dealt with a retirement “pension” account set
aside for when the debtor himself reached retirement age, as opposed to the savings account at issue
in this case, which was set aside for the debtor’s former husband, not for his retirement account.
Patterson, 504 U.S. at 764-65, 112 S.Ct. at 2250. Perhaps most important to our examination is that
the decision in Patterson does not concern a debtor who possesses an unrestricted right to a cash
distribution at the time of filing a bankruptcy petition as does Woodyear. We conclude that the
district court did not clearly err in affirming the determination of the bankruptcy court.
Second, Woodyear urges that even if her interest in the Savings Plan is considered property
of the bankruptcy estate, she is still entitled to claim the funds as exempt under Louisiana law. Under
Louisiana law, a person may exempt from a bankruptcy estate those contributions to retirement
accounts which are (1) placed into (or “contributed” to) a financial plan itself exempt from federal
income tax, and (2) placed into such a financial plan no less than one year before the person files a
bankruptcy petition. LSA-R.S. 20:33(1). In turn, the Internal Revenue Code offers tax-shelter
treatment for an “employee’s” funds which are “rolled over” from an ERISA-qualified employee
benefit plan into an individual retirement account, so long as the funds are qualified in the retirement
3 account within sixty days of receipt. 26 U.S.C. § 402(c).3 Arguing before the district court,
Woodyear claimed that at some undetermined time in the future she could obtain a QDRO and “roll
over” her interest in her ex-husband’s ERISA-qualified Savings Plan into her own retirement account
pursuant to 26 U.S.C. § 402(c). Woody ear argued that she therefore was entitled to a present
exemption as to those funds in the Savings Plan. The bankruptcy court and the district court, in turn,
rejected the debtor’s interpretation of the interplay between 26 U.S.C. § 402(c) and LSA-R.S. 20:33
because any attempted rollover under 26 U.S.C. § 402(c) into a retirement account would necessarily
be a “contribution” to the retirement account which would not take place at least a year before the
debtor filed her bankruptcy petition.
On appeal, Woodyear argues only that the contributions to the Savings Plan meet the
requirements of LSA-R.S. 20:33 and that the exemption therefore applies. She again reminds us that
Louisiana law makes all individual retirement accounts and all other tax-qualified retirement plans
exempt property in a bankruptcy case unless the contributions were made less than one year before
the filing of bankruptcy. In order for the Louisiana exemption to apply, Woodyear’s interest in the
Savings Plan must be tax-exempt. As the bankruptcy court originally determined and we discussed
above, once the QDRO is issued, Woodyear’s interest in the Savings Plan will no longer exist in a
pension plan, account, or trust. Therefore, Woodyear’s interest in the Savings Plan is not exempt
under LSA-R.S. 20:33. We conclude that the determinations of the bankruptcy court and the district
court to this effect are sound.
For the foregoing reasons, we hereby AFFIRM the decision of the district court.
3 For the purposes of the debtor’s argument, both the bankruptcy court and the district court assumed without ruling that 26 U.S.C. § 402(c) actually applies to the debtor, despite the fact that she, herself, is not the “employee” to which the Internal Revenue Code appears to refer. The district court noted, and we reiterate, that the debtor has not proffered any evidence to the effect that 26 U.S.C. § 402(c) may be utilized by the ex-spouse of an employee.