                 IN THE COURT OF APPEALS OF TENNESSEE
                              AT JACKSON
                                   March 23, 2011 Session

        PATRICIA ANN GHO MASSEY v. GREGORY JOEL CASALS

                Direct Appeal from the Juvenile Court for Shelby County
                        No. F7887   Herbert Lane, Special Judge


                    No. W2010-00284-COA-R3-JV - Filed May 3, 2011


Appellant filed a motion to quash garnishment of his individual retirement accounts to
satisfy an award of attorney’s fees to Appellee, asserting the accounts were exempt pursuant
to Tennessee Code Annotated §§ 26-2-105 and 26-2-111. The trial court denied the motion
to quash. We reverse.

  Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Juvenile Court Reversed
                                  and Remanded

D AVID R. F ARMER, J., delivered the opinion of the Court, in which H OLLY M. K IRBY, J., and
J. S TEVEN S TAFFORD, J., joined.

Linda J. Casals, Memphis, Tennessee, for the appellant, Gregory Joel Casals.

Rachael Emily Putnam, Memphis, Tennessee, for the appellee, Patricia Ann Gho Massey.

                                            OPINION

        This appeal is the latest chapter in a long saga between these parties. In 2005, Appellee
Patricia Ann Gho Massey (Ms. Massey), filed a petition in the Shelby County Juvenile Court to
modify Appellant Gregory Joel Casals’ obligation for support of the parties’ child born in May 1994.
 In July 2008, the Shelby County Juvenile Court entered an order modifying Mr. Casals’ child
support obligation and ordering him to pay Ms. Massey’s attorney’s fees in the amount of $22,214.
Mr. Casals appealed the juvenile court’s order increasing his child support obligation and awarding
attorney’s fees to Ms. Massey. Mr. Casals also filed a motion in the trial court to stay the judgment
pending appeal. The trial court denied Mr. Casals’ motion to stay. We affirmed the judgment of the
juvenile court, including the award of attorney’s fees. Massey v. Casals, 315 S.W.3d 788 (Tenn. Ct.
App. 2009).

       The present appeal concerns the garnishment of accounts held by Mr. Casals with E*Trade
Bank to satisfy the award of attorney’s fees to Ms. Massey. In November 2008, an officer of the
juvenile court caused to be issued a garnishment of Mr. Casals’ accounts with E*Trade Bank in order
to satisfy the award. An amended garnishment was issued in January 2009. On January 27, 2009,
Mr. Casals filed a motion to quash the writ of garnishment on the grounds that the accounts were
exempt from garnishment under Tennessee Code Annotated § 26-2-105 and/or § 26-2-111. He also
asserted that the juvenile court’s order was not a final judgment because the matter was pending in
this Court. Ms. Massey’s legal counsel, Rachael E. Putnam (Ms. Putnam) filed a response in
February 2009. In her response, Ms. Putnam asserted that the court’s July 2008 order became a final
order thirty days after it was entered where the judgment had not been stayed. She further asserted
that Mr. Casals’ accounts were not exempt from garnishment under § 26-2-105 or § 26-2-111.
Following a hearing in March 2009, Referee Sheldon McCall dismissed Mr. Casals’ motion to
quash. Mr. Casals filed a request for a hearing before the judge, and in March 2009 filed a motion
to stay the matter pending appeal of the court’s denial of his motion to quash. In his motion, he
asserted that he would incur a tax penalty in the amount of $5,000 if the garnished funds were not
returned to his E*Trade IRA account. The matter was heard by a special judge in December 2009.
In February 2010, the special judge reconfirmed the referee’s ruling as the decree of the court and
dismissed Mr. Casals’ motion to quash. Mr. Casals filed a notice of appeal to this Court.

                                          Issue Presented

       The determinative issue presented by this appeal, as we perceive it, is whether the trial court
erred by determining that Mr. Casals’ accounts were not exempt from garnishment pursuant to
Tennessee Code Annotated §§ 26-2-105 and 26-2-111.

                                        Standard of Review

        This matter presents both questions of fact and law. We review the trial court’s findings of
fact de novo upon the record, with a presumption of correctness. Tenn. R. App. P. 13(d). We will
not reverse the trial court’s factual findings unless they are contrary to the preponderance of the
evidence. Berryhill v. Rhodes, 21 S.W.3d 188, 190 (Tenn. 2000). To preponderate against a trial
court’s finding of fact, the evidence must support another finding of fact with greater convincing
evidence. Mosley v. McCanless, 207 S.W.3d 247, 251 (Tenn. Ct. App. 2006). We review the trial
court’s determinations on questions of law, and its application of law to the facts, de novo, with no
presumption of correctness. Bowden v. Ward, 27 S.W.3d 913, 916 (Tenn. 2000). Similarly, we
review mixed questions of law and fact de novo, with no presumption of correctness. State v.
Thacker, 164 S.W.3d 208, 248 (Tenn. 2005).

        The construction of a statute also is a question of law which we review de novo, with no
presumption of correctness attached to the determination of the trial court. Waters v. Farr, 291
S.W.3d 873, 881 (Tenn. 2009). When interpreting a statute, we seek to ascertain and effectuate the
legislature’s intent, neither unduly restricting nor expanding the statute beyond its intended scope
in light of the context of the entire statute and the natural and ordinary meaning of the statutory
language. Hathaway v. First Family Fin. Servs., Inc., 1 S.W.3d 634, 640 (Tenn. 1999) (citations


                                                 -2-
omitted); JJ & TK Corp. v. Bd. of Comm’rs, 149 S.W.3d 628, 630-31 (Tenn. Ct. App. 2004)
(citations omitted). When the language of the statute is clear, we must utilize the plain, accepted
meaning of the words used by the legislature to ascertain the statute’s purpose and application. If
the wording is ambiguous, however, we must look to the entire statutory scheme and at the
legislative history to ascertain and effectuate the legislature’s intent and purpose. Eastman Chem.
Co. v. Johnson, 151 S.W.3d 503, 507 (Tenn. 2004) (citations omitted).

                                              Discussion

        We begin our discussion by noting that this appeal concerns the application of the
exemptions from garnishment provided by Tennessee Code Annotated §§ 26-2-105 and 26-2-111
to an award of attorney’s fees in an action to modify child support. It does not concern garnishment
of accounts to satisfy a child support order.

        Tennessee Code Annotated § 26-2-105(b) provides:

        Except as provided in subsection (c), any funds or other assets payable to a
        participant or beneficiary from, or any interest of any participant or beneficiary in, a
        retirement plan which is qualified under §§ 401(a), 403(a), 403(b), 408 and 408A,
        or an Archer medical savings account qualified under § 220 or a health savings
        account qualified under § 223 of the Internal Revenue Code of 1986, as amended, are
        exempt from any and all claims of creditors of the participant or beneficiary, except
        the state of Tennessee. All records of the debtor concerning such plan and of the plan
        concerning the debtor’s participation in the plan, or interest in the plan, are exempt
        from the subpoena process.

Tenn. Code Ann. § 26-2-105 (Supp. 2010). This provision is limited by subsection 105(c), which
provides that, any plan described in subsection 105(b), except a public plan under subsection 105(a),
is not exempt from the claims of an alternate payee under a qualified domestic relations order. Thus,
subject to statutory limitations, Mr. Casals’ accounts with E*Trade are exempt from garnishment
to satisfy a judgment for attorney’s fees if they constitute a retirement plan that is qualified under the
enumerated sections of the Internal Revenue Code.

      In his brief to this Court, Mr. Casals asserts that the undisputed proof in this case is that his
E*Trade accounts qualify as retirement accounts under section 408 of the Internal Revenue Code.
This section currently provides, in pertinent part:

        (a) Individual retirement account.--For purposes of this section, the term “individual
        retirement account” means a trust created or organized in the United States for the
        exclusive benefit of an individual or his beneficiaries, but only if the written
        governing instrument creating the trust meets the following requirements:
                   (1) Except in the case of a rollover contribution described in
             subsection (d)(3) in section 402(c), 403(a)(4), 403(b)(8), or 457(e)(16), no


                                                   -3-
           contribution will be accepted unless it is in cash, and contributions will not
           be accepted for the taxable year on behalf of any individual in excess of the
           amount in effect for such taxable year under section 219(b)(1)(A).
                 (2) The trustee is a bank (as defined in subsection (n)) or such other
           person who demonstrates to the satisfaction of the Secretary that the manner
           in which such other person will administer the trust will be consistent with
           the requirements of this section.
                 (3) No part of the trust funds will be invested in life insurance
           contracts.
                 (4) The interest of an individual in the balance in his account is
           nonforfeitable.
                 (5) The assets of the trust will not be commingled with other property
           except in a common trust fund or common investment fund.
                 (6) Under regulations prescribed by the Secretary, rules similar to the
           rules of section 401(a)(9) and the incidental death benefit requirements of
           section 401(a) shall apply to the distribution of the entire interest of an
           individual for whose benefit the trust is maintained.

26 U.S.C.A. § 408(a).

      In her brief to this Court, Ms. Massey asserts that the accounts at issue are not IRA accounts
that are exempt from garnishment under the statutes. Ms. Massey contends that opinions of the
United States Bankruptcy Court stand for the proposition that, pursuant to Tennessee Code
Annotated § 26-2-111(1)(D), Mr. Casals’ accounts do not qualify for the exemption provided in §
26-2-105.

     Tennessee Code Annotated § 26-2-111 provides:

       In addition to the property exempt under § 26-2-103, the following shall be exempt
       from execution, seizure or attachment in the hands or possession of any person who
       is a bona fide citizen permanently residing in Tennessee:
            (1) The debtor’s right to receive:
                        (A)      A social security benefit, unemployment
                  compensation, a Families First program benefit or a local public
                  assistance benefit;
                        (B) A veterans’ benefit;
                        (C) A disability, illness, or unemployment benefit, or a
                  pension that vests as a result of disability;
                        (D) To the same extent that earnings are exempt pursuant
                  to § 26-2-106, a payment under a stock bonus, pension,
                  profitsharing, annuity, or similar plan or contract on account of
                  death, age or length of service, unless:
                        (i) Such plan or contract was established by or under the


                                                -4-
           auspices of an insider that employed the debtor at the time that
           the debtor's rights under such plan or contract arose;
                  (ii) Such payment is on account of age or length of service; and
                  (iii) Such plan or contract does not qualify under §§
           401(a), 403(a), 403(b), 408, 408A, or 409 of the Internal
           Revenue Code of 1954 [26 U.S.C. §§ 401(a), 403(a), 403(b),
           408, 408A or 409];
                  The assets of the fund or plan from which any such
           payments are made, or are to be made, are exempt only to the
           extent that the debtor has no right or option to receive them
           except as monthly or other periodic payments beginning at or
           after age fifty-eight (58). Assets of such funds or plans are not
           exempt if the debtor may, at the debtor’s option, accelerate
           payment so as to receive payment in a lump sum or in periodic
           payments over a period of sixty (60) months or less;
                  (E) Alimony to the extent that payment becomes due more than
           thirty (30) days after the debtor asserts a claim to such exemption in
           any judicial proceeding; and
                  (F) Child support payments to the extent that payment becomes
           due more than thirty (30) days after the debtor asserts a claim to such
           exemption in any judicial proceeding;
     (2) The debtor’s right not to exceed in the aggregate fifteen thousand dollars
($15,000) to receive or property that is traceable to:
                  (A) An award not to exceed five thousand dollars ($5,000)
           under a crime victim’s reparation law;
                  (B) A payment, not to exceed seven thousand five
           hundred dollars ($7,500) on account of personal bodily injury,
           not including pain and suffering or compensation for actual
           pecuniary loss, of the debtor or an individual of whom the
           debtor is a dependent; or
                  (C) A payment not to exceed ten thousand dollars
           ($10,000) on account of the wrongful death of an individual of
           whom the debtor was a dependent;
     (3) A payment in compensation of loss of future earnings of the debtor or an
individual of whom the debtor is or was a dependent, to the extent reasonably
necessary for the support of the debtor and any dependent of the debtor;
     (4) The debtor’s aggregate interest, not to exceed one thousand nine hundred
dollars ($1,900) in value in any implements, professional books, or tools of the trade
of the debtor or the trade of a dependent of the debtor;
     (5) Professionally prescribed health care aids for the debtor or a dependent of the
debtor; and
     (6) Liquid assets, stocks or bonds, to the extent of the amount of any obligations
owed by the debtor pursuant to any final court order or judgment for child support.


                                          -5-
       The exemption shall be effective as of the date such exemption is claimed by the
       debtor or by an intervening representative of the child or children to whom such
       support is owed. Further, this exemption is only valid if such assets are immediately
       deposited into court by the debtor or immediately executed upon, seized or attached
       on behalf of the child or children for the partial or full satisfaction of child support
       obligations.

Tennessee Code Annotated § 26-2-111(Supp. 2010).

      Ms. Massey cites In Re Peeler, 37 B.R. 517 (Bankr. M.D. Tenn. 1984), In Re Paul Don Elsea,
47 B.R. 142 (Bankr. E.D. Tenn. 1985), and In Re Willie Edward Barrett Cassada v. Westvaco
Corporation, Bankers Trust Company and Willie Edward Barrett Cassada, 86 B.R. 541 (Bankr.
E.D. Tenn. 1988) for the proposition that, under § 26-2-111(1)(D), Mr. Casals’ accounts do not
qualify for the exemption provided by subsection 105(b) because the accounts “were all self-directed
and under the complete control of” Mr. Casals. Ms. Massey contends that a debtor is precluded from
“claiming the exemption of an IRA account when the owner of the account can withdraw the funds
contained in the account at any time.”

      Mr. Casals, on the other hand, asserts that because the unrefuted proof establishes that the
accounts qualify under section 408 of the Internal Revenue Code, they are “absolutely” exempt under
section 2-16-105(b). He contends that Tennessee Code Annotated § 26-2-111 is inapplicable to this
case. Mr. Casals further argues that, although dicta found in In Re Peeler is somewhat confusing
and ambiguous, the cases cited by Ms. Massey are not relevant to this appeal where they do not
implicate the garnishment of IRA accounts.

      Upon review of the record, we observe that there has been some confusion in this case
concerning the adequacy of notice; exactly which of Mr. Casals’ accounts were frozen and/or
liquidated upon garnishment (apparently, the garnishment was amended at least twice), and which
of those are asserted to be IRA accounts; and whether Mr. Casals properly filed a claim for
exemption. The accounts that are the subject of this appeal are two accounts, one which ends in 21
(account 21) and one which ends in 91 (account 91).

       At the December 2009 hearing of the matter, Mr. Casals testified that the accounts were
traditional IRAs, and that account 91 was a rollover IRA. Upon questioning by the juvenile court,
Mr. Casals testified that all his accounts with E*Trade had been liquidated and the funds sent to the
juvenile court, including accounts 21 and 91. Mr. Casals testified that the two accounts had been
opened five or six years ago, when he rolled over a 401k plan. Mr. Casals testified that although he
filed a claim for exemption in “some particular court,” although not the juvenile court, with respect
to some accounts, he did not file a claim of exemptions for accounts 21 and 91 because they are
statutorily exempt. Mr. Casals could not recall in which court he filed a claim of exemption. Mr.
Casals testified that the IRA accounts were “self-directed,” and that the frequency of his trades in
them varied. He testified that in 2008, he traded in the accounts “often.”



                                                 -6-
      The transcript of the hearing before the trial court demonstrates that the court was faced with
four questions in this case: (1) whether accounts 21 and 91 were IRA accounts under § 408 of the
Internal Revenue Code; (2) whether the matter is governed by Tennessee Code Annotated § 26-2-
105(b), § 26-2-111(1)(D), or both; (3) if the accounts were IRA accounts qualified under § 408, were
they exempt from garnishment under the Tennessee exemption statutes; (4) if the accounts are
exempt under the Tennessee statutes, whether a claim of exemption must be filed in order to exempt
them from garnishment.
      The transcript reflects that the trial court determined that account 21 and account 91 were IRA
accounts; that section 26-2-105(b) and section 26-2-111(1)(D) are both applicable to this matter; and
that IRA accounts generally are exempt under the Code. The court also determined that, although
Mr. Casals’ accounts were IRA accounts, they were not exempt under section 26-2-111(1)(D) where
they were self-directed accounts in which Mr. Casals could trade at will, and where Mr. Casals could
access and withdraw funds from the account, albeit by incurring a tax penalty. The trial court
concluded that the funds therefore were not exempt from garnishment under the Tennessee
exemption statutes. The trial court appears to have pretermitted the question of whether Mr. Casals
was required to file a claim of exemption as unnecessary in light of the court’s construction and
application of the statutes.

      We first turn to the trial court’s determination that accounts 21 and 91 were IRA accounts.
Despite Ms. Massey’s assertion that the accounts did not qualify as IRA accounts, there is nothing
in the record to preponderate against the trial court’s finding. We are not insensitive to Ms.
Massey’s assertions with respect to the credibility of Mr. Casals regarding his financial status
throughout this long dispute. See Massey v. Casals, 315 S.W.3d at 792. However, the only evidence
contained in the record regarding the nature of the accounts was Mr. Casals’ testimony that the
accounts were traditional IRA accounts, and that they were established by rollover funds from a
401(k) account. Ms. Massey’s argument that the accounts are not IRA accounts qualified under
section 408 of the Internal Revenue Code for the purpose of the exemption provided by section 26-2-
105(b) is predicated only on the fact that the investments in the accounts were self-directed by Mr.
Casals. Additionally, Mr. Casals’ testimony that the funds could not be accessed without
considerable tax penalties is not disputed by any evidence in the record.

       We next turn to Mr. Casals’ assertion that the trial court erred by concluding that the accounts
were not “absolutely” exempt under section 2-26-105(b) in light of section 26-2-111(1)(D). At the
oral argument of this matter before this Court, counsel for Mr. Casals asserted section 26-2-111 is
irrelevant to this case, and that the matter is governed exclusively by section 26-2-105(b). Mr.
Casals’ brief reflects this assertion where it does not address the implications of the limiting
language in section 26-2-111(1)(D). Ms. Massey’s argument, on the other hand, as we perceive it,
is that the trial court’s conclusion is correct because, under bankruptcy case law interpreting IRA
accounts in light section 26-2-111, the accounts are not exempt where the investments in the funds
were directed by Mr. Casals and where the assets can be accessed notwithstanding tax penalties.

      The statutes providing exemptions from garnishment are to be liberally construed in favor of
the debtor. Wright v. Brooks, 49 S.W. 828 829 (Tenn. 1899); Newark Ins. Co. v. Seyfert, 392 S.W.2d

                                                 -7-
336, 345 (Tenn. Ct. App. 1964). Additionally, we note that opinions of the bankruptcy court,
although persuasive, are not binding on this Court. Tennessee, moreover, has “opted out” of the
exemptions scheme provided by the Bankruptcy Reform Act of 1978, 11 U.S.C. 522; the only
exemptions available to the citizens of Tennessee are those provided by the Tennessee Code.
Tennessee Code Annotated § 26-2-112 (2000); In re Lenore Berry Ross Storey v. Bradford Furniture
Co., Inc., 910 S.W.2d 857, 859 (Tenn. 1995). With these observations in mind, we turn first to the
plain language of the Code and then to the case law relied on by the parties.

      As noted above, Tennessee Code Annotated § 26-2-105(b) provides an exemption from
garnishment for retirement plans qualified under §§ 401(a), 403(a), 403(b), 408, and 408A of the
Internal Revenue Code. This exemption is in addition to the personal property exemptions afforded
by sections 26-2-103 and 104; the disposable earnings exemption provided by section 26-2-106; the
exemptions for dependent children provided by section 26-2-107; and the insurance benefits
exemption afforded by section 26-2-110. Section 26-2-111 provides “additional exemptions” for
“certain benefit payments - awards - tools of trade - health care aids - child support obligations.”
Section 26-2-111(1)(D) states that, in addition to the exemption provided by section 26-2-103, the
debtor shall be entitled to an exemption of his right to receive a payment under, inter alia, a pension
or “similar plan” to the same extent that earnings are exempt pursuant to section 26-2-106. The
exemption is available unless, inter alia, the plan or contract does not qualify under §§ 401(a),
403(a), 403(b), 408, 408A or 409 of the Internal Revenue Code. Thus, the plain language of the
section applies to the rights to receive payments from a pension or similar plan.

      Subsection 111(1)(D) further provides, however,

      [t]he assets of the fund or plan from which any such payments are made, or are to be
      made, are exempt only to the extent that the debtor has no right or option to receive them
      except as monthly or other periodic payments beginning at or after age fifty-eight (58).
      Assets of such funds or plans are not exempt if the debtor may, at the debtor’s option,
      accelerate payment so as to receive payment in a lump sum or in periodic payments over
      a period of sixty (60) months or less[.]

Tennessee Code Annotated § 20-2-111(1)(D)(iii)(2000 & Supp. 2010). Therefore, construing the
statutory sections together to effectuate the intent of the legislature in light of the entire statutory
scheme, we must disagree with Mr. Casals’ assertion that the exemption provided to an IRA account
is governed exclusively by the plain language of section 26-2-105(b), and that section 26-2-
111(1)(D) is irrelevant. Section 26-2-111, by its title, provides “additional exemptions” applicable
to, inter alia, “[c]ertain benefit payments.” Among the payments enumerated by the section are
payments under a pension or “similar plan.” These payment are exempt to “the same extent that
earnings are exempt pursuant to § 26-2-106” if the plan or contract qualifies under § § 401(a),
403(a), 403(b), 408, or 409. Tennessee Code Annotated § 26-2-111(1)(D)(iii). This subsection
also provides that the assets of the fund or plan from which the payments are received or “are to be
made, are exempt only to the extent that the debtor has no right or option to receive them except as
monthly or other periodic payments beginning at or after age fifty-eight (58).” It also provides that


                                                  -8-
the assets are not exempt where “the debtor may, at the debtor’s option, accelerate payment so as to
receive payment in a lump sum or in periodic payments over a period of sixty (60) months or less[.]”

      We are not insensitive to the fact that this subsection appears somewhat out of context with
the remainder of the section where it pertains to the assets of the fund rather than only payments
from the fund. However, the plain language of the subsection applies to the assets of funds from
which payments are to be made, in addition to those from which payments are being received. Thus,
we cannot agree with Mr. Casals that the subsection is irrelevant.

      We also do not agree that the case law relied upon by Mr. Casals in his brief, In re Martin, 102
B.R. 639 (Bankr. E.D. Tenn. 1989); In re Bowman, 109 B.R. 789 (Bankr. E.D. Tenn. 1990); and In
re Vandenberg, 276 B.R. 581 (Bankr. E.D. Tenn. 2001), stands for the proposition that IRA accounts
are “absolutely exempt” under the statutes. The Martin court determined that ERISA did not
preempt the Tennessee statutes and that an IRA that qualified under section 408(a) of the Internal
Revenue Code constituted a “retirement account” for the purpose of the Tennessee statutes. In re
Martin, 102 B.R. at 645. The Bowman court concluded that a “retirement plan” as referenced in
section 26-2-105(b) (then codified at 26-2-104(b)) included a plan established by an agency of the
United States, and was not limited to private sector plans. In re Bowman, 109 B.R. at 792. The
Vandenberg court concluded that from the time they were established by section 408A of the Internal
Revenue Code, Roth IRAs fell within the exemption provided by section 26-2-105(b) despite the
legislatures’ delay in amending the section until 2000 to explicitly include plans that qualify under
section 408A. In re Vandenberg, 276 B.R. at 586. The Vandenberg court opined that “[t]he
structure and purpose of traditional and Roth IRAs are analogous and it is inconceivable that the
Tennessee legislature would consciously chose to protect one and not the other.” Id. The court
further noted that Roth IRAs did not exist when the statute originally was enacted, and that to
conclude otherwise would defeat the purpose of the exemption. Id.

      The historical purpose behind the statutory exemptions is to preserve the debtor’s ability to
support himself and his family. In re Storey v. Bradford Furniture Co., Inc., 910 S.W.2d 857, 859
(Tenn. 1995)(quoting Jones v. Williams, 32 Tenn. 105, 106 (Tenn. 1852): the exemptions “secure
the poor in the possession and use of the means necessary for their subsistence.”). As the Vandeberg
court noted, the Attorney General of Tennessee has “identified two primary goals in the legislative
history of § 26–2–105.” Vandeberg, 276 B.R. at 586. First, the legislature intended to protect private
retirement plans in order to “benefit and encourage people who are saving money for their
retirement.” Id. (quoting Tenn. Att’y Gen. Op. 98–184). Second, the legislature extended the
exemption to private plans protected by federal law. Id. (citing Tenn. Att’y Gen. Op. 98–184).

      “[S]tatutes must be construed ‘with the saving grace of common sense.’” State ex rel. Maner
v. Leech, 588 S.W.2d 534, 540 (Tenn. 1979). The most important and compelling rule of statutory
construction “is that the law be rendered intelligible and absurdities avoided.” Roberts v. Cahill
Forge & Foundry Co., 184 S.W.2d 29, 31 (Tenn. 1944). The courts must avoid a construction that
would defeat or frustrate the purpose of the statute or that “would work to the prejudice of the public
interest.” Maner, 588 S.W.2d at 540 (citations omitted). Construing sections 2-26-105(b) and 2-26-


                                                 -9-
111(1)(D)(iii) together in light of the purpose of the statutory exemption scheme, we agree with the
Attorney General that the legislature intended to encourage the citizens of Tennessee to save for their
retirement and to protect retirement plans that qualify under the enumerated sections of the Internal
Revenue Code. We believe the legislature also intended to limit the exemption to retirement plans
that cannot, at the option of the debtor and without an involuntary penalty, such as a federally
mandated tax penalty, be accessed by the debtor before 58-years of age, as a lump sum, or
accelerated such that payments may be received over a period of 60 months or fewer.

       Notwithstanding language in Peeler which suggests that “typical” IRAs established by the
debtor are not exempt because they can be accessed by paying a tax penalty, we do not believe the
legislature intended to eviscerate rather than limit the exemption provided in section 26-105(b).
Virtually all IRA accounts may be accessed upon the payment of the penalty, and we cannot agree
with Ms. Massey that the ability to encroach upon an IRA only by incurring a substantial tax penalty
amounts to a “right” to receive funds. If, however, the debtor may, without a penalty prescribed by
law, receive the assets as a lump-sum payment, in periodic payments over a period of 60 months or
less, or before 58-years of age, the pension or retirement plan is not exempt. This interpretation is
supported by the purpose of the exemption, the logical interplay between the statutory sections, and
the majority of applicable case law.

       Further, we do not agree with Ms. Massey that the cases relied upon in her brief, In re Elsea,
47 B.R. 142 (Bankr. E.D. Tenn. 1985) and In re Casada, 86 B.R. 541 (Bankr. E.D. Tenn. 1988),
support the proposition that an IRA is not exempt from garnishment for the purposes of the
Tennessee Code if the debtor controls and trades the investments within the funds. In Elsea, the
bankruptcy court addressed whether debtor’s plans, which were qualified as tax-exempt under the
Employee Retirement Income Security Act (ERISA) and Internal Revenue Code 401(a), were
exempt under the Tennessee Code. The pension plans in that case consisted of group annuity
contracts under which the debtor had a right only to the income. Contributions to the plans were
made entirely by the debtor’s employer, and the debtor in Elsea did not have access to the funds prior
to retirement. The Elsea court noted that the provision in section 26-2-111(1)(D)(iii) “can be
confusing in its treatment of assets as something different from a right to payment[,]” but determined
that it “effectively denies the debtor any exemption of his right to payment” under the plans in that
case. Id. at 146. The court concluded, however, that the Tennessee courts would consider the
pension plans to meet the requirements of a spendthrift trust, and held that they were exempt from
the bankruptcy estate. In re Paul Don Elsea, Sr., 47 B.R. 142 (Bankr. E.D. Tenn. 1985). The Elsea
court specifically “[left] open” whether the same determination would be made in a case wherein the
debtor had contributed to the funds or had “unrestricted access” to them before retirement. Id. at
149.

      In Cassada, the bankruptcy court considered the debtor’s stock ownership plan and deferred
income plan. In re Willie Edward Barrett Cassada v. Westvaco Corp., Bankers Trust Co. and Willie
Edward Barrett Cassada, 86 B.R. 541 (1988) (Bankr. E.D. Tenn. 1988). The debtor’s employer
established both plans, all of the assets in the plans consisted of voluntary contributions made by the
debtor plus interest or dividends, and the plans were qualified under federal law. Id. at 542-543.


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The court determined that neither plan was exempt under section 26-2-111(1)(D), however, because
the debtor was entitled to receive the money in both plans in a lump sum upon termination of
employment. The court reasoned that the debtor’s voluntary termination of employment would not
amount to a penalty, and that the plans were not exempt where the debtor had the right to receive
payment in a lump sum of the total in either account upon voluntary as well as involuntary
termination of employment. Id. at 543. The court further noted that, under the statute, the account
would not be exempt if the debtor could withdraw the total in a lump sum, or in periodic payments
over 60 or fewer months. Id.

      There is nothing in the statutes that limits or restricts who may direct or control the way in
which the assets which comprise a retirement fund are managed. In this case, Mr. Casals may self-
direct the funds with respect to the way in which the assets are invested. He cannot alter the terms
under which payments from the funds are received. As noted above, the trial court found that
accounts 21 and 91 are IRAs. Accordingly, Mr. Casals’ right to receive payment from the accounts
are limited to the provisions of Internal Revenue Code regardless of how the assets are invested.

      We finally address Ms. Massey’s assertion that to exempt an IRA from garnishment would
allow a debtor to shield his income from child support. Section 26-2-108 specifically provides that
a debtor’s “personal earnings shall not be exempt from an order” of child support or alimony.
Although section 26-2-102 defines “earnings” to include payments pursuant to a retirement plan, the
courts have long held that it was not the legislature’s intent to shield property from court-ordered
child support. Edwards v. Edwards, 713 S.W.2d 642, 649 (Tenn. 1986). (Tenn. Ct. App. Sep. 8,
2005). Tennessee courts “have reasoned that the purpose behind such exemptions is to preserve a
means of support for the debtor’s family.” Ausley v. Ausley, No. M2004-01360-COA-R3-CV, 2005
WL 2205922, at *4 (quoting State ex rel Baker v. Tolliver, No. 03A01-9710-JV-00041, 1997 WL
367200, at *1 (Tenn. Ct. App. June 30, 1997)). The exemption does not provide a device through
which one may be relieved of one’s obligation to support one’s children. Id. (citations omitted).
This argument is without merit.

       We finally turn to Ms. Massey’s assertion before the trial court that Mr. Casals had failed to
file a timely claim of exemption to the garnishment, and to Mr. Casals’ assertion that he first
received notice of the garnishment of account 21 and account 91 while attempting to trade
investments in the accounts in January 2009, and that he was not served with notice of the
garnishments. Upon review of the record, we note that the November 2008 writ garnished other
accounts belonging to Mr. Casals, and not accounts 21 and 91. Accounts 21 and 91 were added on
January 21, 2009. The January 21, 2009, writ also purported to garnish “all accounts solely or
jointly” in Mr. Casals’ name. On January 27, 2009, Mr. Casals filed a motion to “quash writ of
garnishment” and specifically referenced the November 2008 writ and the two accounts referenced
in it. In his motion, however, he asserted that those accounts were exempt under Tennessee Code
Annotated § 26-2-105 and or Tennessee Code Annotated 26-2-111. Additionally, the record does
not include anything to evidence when Mr. Casals received notice of the garnishment of accounts
21 and 91. The hearing of Mr. Casals’ motion to quash in the trial court, however, pertained entirely
to accounts 21 and 91, and the parties clearly had actual notice of the exemptions asserted. Without


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adopting Mr. Casals’ assertion that the exemption is “absolute” and that no claim of exemption must
be filed, we are satisfied that the exemption was sufficiently asserted in this case.

                                              Holding

       The unrefuted proof in this case is that Mr. Casals’ accounts ending in 21 and 91 were IRA
accounts that qualify under section 408 of the Internal Revenue Code, and that Mr. Casals had no
right to access the assets in the accounts other than by incurring a substantial federal tax penalty.
Accordingly, the accounts were exempt from garnishment under Tennessee Code Annotated § 26-2-
105(b) and Tennessee Code Annotated § 26-2-111(1)(D). In light of the foregoing, the judgment
of the trial court is reversed. Ms. Massey’s request for attorney’s fees on appeal is denied. Costs
of this appeal are taxed to the Appellee, Patricia Ann Gho Massey.




                                                       _________________________________
                                                       DAVID R. FARMER, JUDGE




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