In Re Patrick F. Messing, Nora B. Messing, Debtors.ann Mostoller, Trustee, Plaintiff-appellee, v. Patrick F. Messing, Defendant-appellant,nora B. Messing, Defendant, 944 F.2d 905 (6th Cir. 1991)

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US Court of Appeals for the Sixth Circuit - 944 F.2d 905 (6th Cir. 1991) Sept. 24, 1991

Before KENNEDY and NATHANIEL R. JONES, Circuit Judges, and HARVEY, District Judge.* 


Appellant-Debtors Patrick F. and Nora B. Messing ("Debtor") appeal the district court's order reversing the bankruptcy court's decision granting the debtor an exemption for the proceeds of an employee pension plan. For the reasons that follow, we reverse.

On July 12, 1989, the debtor filed a petition for relief under Chapter 7 of the United States Bankruptcy Code ("the Code"). In their bankruptcy petition, the debtor claimed an exemption of the proceeds of Patrick Messing's ERISA-qualified pension plan in the amount of $6,365.45. On December 17, 1989, the bankruptcy trustee ("the Trustee") filed an objection to the debtor's claim of exemption for Patrick's pension plan proceeds.

On February 7, 1990, the parties filed written stipulations of fact with regard to the debtor's claim of exemption and the trustee's objection. The relevant facts stipulated to included: (i) that the debtor is the beneficiary of an ERISA-qualified pension plan which meets the requirements of §§ 401(a) and 401(k) of the Internal Revenue Code, 26 U.S.C. §§ 401(a) and 401(k); (ii) that the debtor's ERISA-qualified plan contains the anti-assignment and anti-alienation provisions required by 29 U.S.C. § 1056(d) and § 401(a) (13) of the Internal Revenue Code, 26 U.S.C. § 401(a) (13); and (iii) that the balance in the debtor's plan as of the date of filing bankruptcy was $6365.45.

Based upon the aforementioned stipulations of fact and the respective memoranda of law submitted by the parties, the bankruptcy court entered an order granting the debtor's claim of exemption under ERISA § 206(d) and § 522(b) (2) (A) of the Code, 11 U.S.C. § 522(b) (2) (A). The trustee appealed the bankruptcy court's decision to the district court, and on December 13, 1990, the district court reversed, holding that the debtor could not exempt his ERISA plan benefits from the reach of creditors under 11 U.S.C. § 522(b) (2) (A). This timely appeal followed.

The debtor raises two contentions on appeal. The first is that this court's opinion in In re Lucas, 924 F.2d 597, 598 (6th Cir. 1991) is dispositive of this appeal because in that case we determined that ERISA plan benefits were excluded from a debtor's estate under the bankruptcy code, and hence were not subject to the reach of creditors in a bankruptcy. In the alternative, the debtor suggests that even if ERISA benefits are properly considered part of a bankrupt's estate, they are exempt from creditor's reach under 29 U.S.C. § 1056(d) of ERISA and 11 U.S.C. § 522(b) (2) (A) of the bankruptcy code. As we find the debtor is correct in his assertion that Lucas is dispositive of this appeal, we do not reach the question of whether ERISA provides an exemption for pension benefits from a bankrupt's estate.

In Lucas, the debtor claimed an exclusion of some $6000.00 in pension benefits based upon 11 U.S.C. § 541(c) (2) and 29 U.S.C. § 1056(d). The trustee objected and claimed a right to the funds. This court, following the minority interpretation of the relevant law, reasoned as follows. Section 541(c) (2) of the Code provides that " [a] restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable nonbankruptcy law is enforceable in a case under this title." 11 U.S.C. § 541(c) (2) (emphasis added). The court found § 541(c) (2) to be an explicit exception to the broad definition of a bankrupt's estate under § 541(a) (1).1  924 F.2d at 600. The debtor argued, as he does in the instant case, that the non-transfer provision of ERISA, 26 U.S.C. § 1056(d), was an enforceable "applicable nonbankruptcy law" under § 542(c) (2), and therefore ERISA-qualified pension benefits met the requirement for exclusion under § 542(c) (2). This court agreed, rejecting the analysis of four other circuits which had held that "applicable nonbankruptcy law" was not meant to include ERISA. 924 F.2d at 600-02. See, e.g. In re Daniel, 771 F.2d 1352, 1360 (9th Cir. 1985), cert. denied, 475 U.S. 1016 (1986); In re Lichstrahl, 750 F.2d 1488, 1490 (11th Cir. 1985).

In reaching its conclusion this court followed the Fourth Circuit's decision in In re Moore, 907 F.2d 1476 (4th Cir. 1990). In Moore, the court found that the plain language of § 541(c) (2) required the conclusion that it was meant to apply to all "applicable nonbankruptcy laws" and not just state trust law, as the majority of circuits had found. Id. at 1477. The court then went on to conclude that the nonassignment provision of ERISA was an enforceable transfer restriction and thus "applicable nonbankruptcy law" within the meaning of § 541(c) (2). Id. at 1479-81. Thus, the court held that a debtor's ERISA pension benefits were properly excluded from the bankrupt's estate. Id.

We find the question raised by the debtor in this appeal is identical to the issue raised by the debtor in Lucas. Further, as the debtor in the instant case suggests, Lucas is dispositive of the issues before the court because a finding that the proceeds of the pension plan are excluded from the debtor's estate precludes any discussion of whether, if included in the estate, they should be exempted. Nevertheless, the appellees object to our deciding this appeal based upon Lucas.

First, they assert that the issue of an exclusion under § 541(c) (2) was not raised by the debtor below. While there is clearly a policy in the circuit of treating issues not raised below as waived for the purposes of appeal, the issue before us is one of pure law. Thus, deciding this case without reference to Lucas would require us to ignore the controlling law of this circuit on this issue and decide the case on other grounds. Further, were we to treat Lucas as waived and decide the case based upon an "exemption" analysis, it would lead to an absurd conclusion. In essence, we would be deciding that pension proceeds, which we have already decided are not properly part of a bankrupt's estate, nevertheless should be exempted or not when considered as part of the bankrupt's estate. We also find it significant that Lucas had yet not been decided when this case came before the courts below. Thus, we find the debtor's reliance on Lucas to be proper, though he did not raise this argument before the district court.

In the alternative, the appellees argue that Lucas was wrongly decided and invite this panel to reconsider that decision. Essentially, appellees present the same arguments rejected in Lucas and cite no new or controlling precedent which would lead us to question the continuing validity of Lucas. Even if we were so inclined, this court is not at liberty to reconsider its prior decisions except through the mechanism and procedures of en banc review or at the direction of the Supreme Court of the United States. The Supreme Court denied certiorari to the Sixth Circuit in Lucas sub nom. Forbes v. Holiday Corp. Sav. & Ret. Plan, 111 S. Ct. 2275 (1991). Hence, we find Lucas to be still good law and controlling in this case.

Following Lucas, the debtor is entitled to a full exclusion of his ERISA pension benefits from his bankruptcy estate. Therefore, the decision of the district court in this case is REVERSED and the case is REMANDED for further proceedings in accordance with this opinion.


The Honorable James Harvey, United States District Court for the Eastern District of Michigan, sitting by designation


111 U.S.C. § 541(a) (1) defines the bankrupt's estate as "all legal or equitable interests of the debtor in property as of the commencement of the case."