TRUSTEE, PRO SE                             ATTORNEY FOR DEBTOR
Rebecca H. Fischer                          Christopher Schimke
Laderer & Fischer, P.C.                     Glaser & Ebbs
South Bend, IN                              Warsaw, IN
__________________________________________________________________________________


                                             In the
                         Indiana Supreme Court
                             _________________________________

                                     No. 94S00-1405-CQ-321
                                                                             Mar 20 2015, 11:25 am
IN THE MATTER OF DENNIS ALAN HOWELL,

Debtor.

                             _________________________________

 Certified Question from the United States Bankruptcy Court for the Northern District of Indiana
                                      No. 14-30094 HCD
                            The Honorable Harry C. Dees, Jr., Judge
                            _________________________________

                                          March 20, 2015
Rush, Chief Justice.

       Indiana law exempts life insurance policies from debtors’ bankruptcy estates when the named
beneficiary is “the spouse, children, or any relative dependent upon” the debtor. That language
undisputedly requires that relatives other than spouses and children must be dependent on the debtor
for the exemption to apply, but whether that requirement also applies to spouses and children is less
clear. We accepted a certified question asking us to construe whether the “dependent upon” phrase
modifies only “any relative,” or also “spouse” and “children.” The statutory language and structure
standing alone are inconclusive, but all of the relevant interpretive canons indicate that we should
construe “dependent upon” to modify only “any relative.” Accordingly, spouses and children need
not be the debtor’s dependents for the exemption to apply.

                                           Background

       Dennis Howell filed for Chapter 7 bankruptcy protection in the Northern District of Indiana
Bankruptcy Court. He listed an Adjustable Complife Insurance Policy with Northwestern Mutual
(“the Policy”) as an asset on his bankruptcy schedules. Debtor claimed the Policy’s entire cash
surrender value of $14,692.88 as exempt property because his son is the beneficiary, but Bank-
ruptcy Trustee Rebecca Fischer objected because Debtor’s son is an adult and not “dependent
upon” him. Both parties relied on the same phrase in Indiana Code section 27-1-12-14(e) (2012):

                 [A]ll policies of life insurance upon the life of any person, which
                 name as beneficiary . . . the spouse, children, or any relative
                 dependent upon such person, or any creditor, shall be held . . . for the
                 benefit of such spouse, children, other relative or creditor, free and
                 clear from all claims of the creditors of such insured person or of the
                 person’s spouse; and the proceeds or avails of all such life insurance
                 shall be exempt from all liabilities from any debt or debts of such
                 insured person or of the person’s spouse.

(Emphasis added).

        The parties’ arguments reflected opposing views of which beneficiaries the phrase “depen-
dent upon such person” modifies. In Debtor’s view, that provision modifies only “any relative”—so
that the three categories of beneficiaries are a debtor’s “spouse,” the debtor’s “children,” and “any
relative dependent upon” the debtor. By contrast, the Trustee says “dependent” modifies all three
categories, so that any beneficiary—“spouses,” “children,” and “any relative” alike—must be the
debtor’s dependent for the exemption to apply.

        Bankruptcy Courts in the Northern and Southern Districts of Indiana have issued conflicting
opinions about the proper interpretation of the statute. Compare In re Vaiano, No. 09-2703-FJO-7
(Bankr. S.D. Ind. Sept. 3, 2010) (interpreting dependency to be required for all types of beneficiaries)
with In re Spears, No. 13-11972, 2014 WL 295172 (Bankr. N.D. Ind. Jan. 9, 2014) (holding that
dependency unambiguously applies only to “any relative”) and In re Wandrey, 334 B.R. 427
(Bankr. N.D. Ind. 2005) (holding statute ambiguous, but construing dependency as applying only
to “any relative”). Therefore, the Bankruptcy Court for the Northern District of Indiana certified 1 the
following question:




1
  Indiana Appellate Rule 64 contemplates certified questions from “[t]he United States Supreme Court, any
federal circuit court of appeals, or any federal district court,” but does not expressly include bankruptcy courts.
We nevertheless exercised our discretion under Rule 1 to deviate from Rule 64 and accept the question. In re
Howell, 9 N.E.3d 145 (Ind. 2014).


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               Under Indiana Code [section] 27-1-12-14(e), does the phrase “depen-
               dent upon such person” modify only “any relative,” or does the phrase
               modify “spouse,” “children,” and “any relative”?

We conclude that “dependent upon such person” modifies only “any relative.”

                                        Standard of Review

       The Bankruptcy Court’s question presents a pure question of statutory interpretation. “Ques-
tions of statutory interpretation are questions of law and are reviewed de novo.” In re Carroll Cnty.
2013 Tax Sale, 21 N.E.3d 832, 834 (Ind. 2014).

                                     Discussion and Decision

       Even though bankruptcy is generally a federal matter, see U.S. Const. art. I, § 8, cl. 4, federal
bankruptcy statutes permit individual States to enact their own exemptions, see 11 U.S.C.
§ 522(b)(2), (3)(A) (2012). Indiana has done so, codifying the life-insurance exemption statute at
issue here. I.C. § 27-1-12-14(e). Indiana Constitution article 1, section 22 requires that “[t]he
privilege of the debtor to enjoy the necessary comforts of life, shall be recognized by wholesome
laws, exempting a reasonable amount of property from seizure or sale, for the payment of any debt
or liability,” and Indiana’s exemption statutes are enacted to carry out that mandate. In re Zumbrun,
626 N.E.2d 452, 454–55 (Ind. 1993); Pomeroy v. Beach, 149 Ind. 511, 515, 49 N.E. 370, 372 (1898);
Green v. Aker, 11 Ind. 223, 224–25 (1858). To that constitutional end, we have long recognized that
exemption statutes “should be liberally construed” in favor of the debtor. Zumbrun, 626 N.E.2d at
455 (quoting Pomeroy, 149 Ind. at 515, 49 N.E. at 372 and citing Union Nat’l Bank of Muncie v.
Finley, 180 Ind. 470, 103 N.E. 110 (1913)).

I. Statutory Interpretation

       We begin from the principle that “[c]lear and unambiguous statutes leave no room for
judicial construction, but when a statute is susceptible to more than one interpretation, it is deemed
ambiguous and is thus open to judicial construction.” Ballard v. Lewis, 8 N.E.3d 190, 194 (Ind. 2014)
(per curiam) (citing Thatcher v. City of Kokomo, 962 N.E.2d 1224, 1227 (Ind. 2012)). Differing
judicial opinions about the meaning of a provision are not conclusive of ambiguity, but they are
evidence that an ambiguity may exist. Allgood v. Meridian Sec. Ins. Co., 836 N.E.2d 243, 248 (Ind.
2005) (finding contractual provision unambiguous despite disagreement between jurisdictions). As



                                                      3
stated above, Indiana bankruptcy decisions—Spears, Vaiano, and Wandrey—indicate not only
opposing interpretations of the statute, but even disagreement about whether it is ambiguous in the
first place.

        In this case, those conflicting opinions persuade us that the statute is ambiguous and
requires construction—but settled canons of construction conclusively resolve the ambiguity. Our
General Assembly, like Congress, “presumabl[y] . . . legislates with knowledge of our basic rules
of statutory construction,” McNary v. Haitian Refugee Ctr., Inc., 498 U.S. 479, 496 (1991). And that
presumption holds true here, since every relevant canon points in Debtor’s favor.

        First and most compelling in this case, we “generally presume that all statutory language
is used intentionally,” so that “[e]ach word should be given effect and meaning where possible,”
AlliedSignal, Inc. v. Ott, 785 N.E.2d 1068, 1079 (Ind. 2003) (internal quotation marks omitted),
and not treated as “mere surplusage,” Martin v. Martin, 495 N.E.2d 523, 524–25 (Ind. 1986). And
here, a “spouse” or “child” is always a “relative” of the debtor—so if they, too, were meant to be
“dependent upon” the debtor, there would be no need to identify them separately in the statute
because they are already subsumed by the general term “any relative.” In other words, if a spouse or
child needed to be a dependent for the exemption to apply, the general phrase “any relative dependent
upon” would suffice to encompass those scenarios; the specific terms “spouse” or “child” would
simply be unnecessary. Avoiding surplusage therefore strongly favors Debtor’s view.

        Second, this Court has a long-established rule of construing exemption statutes liberally in
favor of the debtor. Zumbrun, 626 N.E.2d at 455. And here, limiting “dependent upon” to “any
relative,” and not spouses or children, is more favorable to the debtor because it makes the
exemption more broadly available. This canon, too, strongly favors Debtor’s view.

        And a third canon points in the same direction. The “last antecedent rule” is a textual princi-
ple stating “that where one phrase of a statute modifies another, the modifying phrase applies only
to the phrase immediately preceding it,” unless there is a comma between the modifier and the
preceding phrase. Wandrey, 334 B.R. at 430–31 (quoting O’Kane v. Apfel, 224 F.3d 686, 690 (7th
Cir. 2000) and 73 Am. Jur. 2d Statutes §§ 137–39 (2005)). See also City of Ft. Wayne v. Consol.
Elec. Distribs., Inc., 998 N.E.2d 733, 737 (Ind. Ct. App. 2013) (quoting FLM, LLC v. Cincinnati Ins.
Co., 973 N.E.2d 1167, 1176 (Ind. Ct. App. 2012) (“the descriptive words in a phrase should, in the



                                                      4
absence of punctuation, be referred to their nearest antecedent”), trans. denied. Under that rule, the
absence of a comma between “spouse, child, or any relative” and “dependent upon such person”
means that the dependency language modifies only “any relative” instead of the entire phrase. As
the Bankruptcy Court recognized in Wandrey, this rule is not a “clearly defined term[] of proper
grammar” and is therefore of “limited utility.” 334 B.R. at 430 n.1, 432. But its weight, “limited”
or not, nevertheless favors Debtor.

        Not only do those textual canons readily resolve any ambiguity in Debtor’s favor, limiting
the dependency requirement to “any relative” reflects the likeliest legislative intent. Given the
structure of the sentence, the “dependent upon” requirement must either apply to all three benefi-
ciaries—spouses, children, and any other relatives—or else apply to only “any relative.” As to a
“child,” either view is plausible, since a “child” may be either “[a]n unemancipated person under the
age of majority” and thus dependent, or simply “[a] son or daughter” regardless of age or
dependency. Black’s Law Dictionary 290 (10th ed. 2014). But a “spouse,” by contrast, is simply
“[o]ne’s husband or wife by lawful marriage,” id. at 1621, without regard to dependency. So if the
General Assembly nevertheless meant to require that spouses be dependent for the exemption to
apply, we believe it would have spoken much more clearly. 2 And in turn, if the requirement does
not apply to spouses, it also cannot apply to children as the statute is written. Even apart from the
statutory text, then, we would find Debtor’s view more plausible.

        We do not mean to suggest that the opposing view, as expressed in the unpublished Vaiano
decision referenced above, is implausible. But Vaiano’s only textual analysis was to state that “[t]he
trend of Indiana Courts has been to apply a narrower view of exemptions,” Vaiano, at *3—relying
instead on a policy concern that permitting the exemption for non-dependent spouses and children
would protect more than needed to meet a debtor’s “reasonable necessities” or the dependents’
“reasonable essentials.” Id. at *4. But a “narrower view of exemptions” is inconsistent with



2
  As a counter-example, Illinois exempts the cash value of life-insurance policies “payable to a wife or
husband of the insured, or to a child, parent, or other person dependent upon the insured.” 735 Ill. Comp.
Stat. Ann. 5/12-1001(f) (emphasis added). There, the structure of the statute unambiguously breaks into two
separate series—placing “a wife or husband” in its own category, and placing children and parents “in the
same class as ‘other person dependent upon the insured.’” In re Schriar, 284 F.2d 471, 474 (7th Cir. 1960)
(interpreting identical predecessor statute). In that grammatical structure, the “dependent upon” language
“modif[ies] child and parent, as well as ‘other person.’” Id. That two-part structure distinguishes the Illinois
statute from ours, and thus makes the Trustee’s reliance on Schriar misplaced.


                                                           5
Zumbrun. 626 N.E.2d at 455. And when the statutory terms—or at least textual canons—are
dispositive, “considerations of policy divorced from the statute’s text and purpose [can] not over-
ride its meaning.” United States v. Tohono O’Odham Nation, __ U.S. __, __, 131 S. Ct. 1723, 1731
(2011). Those policy considerations may become relevant in particular cases, as we discuss below,
but they do not change our reading of the statute in general.

       The answer to the certified question, then, is that Indiana Code section 27-1-12-14(e)’s
phrase “dependent upon such person” modifies only “any relative.” That is, a debtor’s spouse or
children need not be dependents for the exemption to apply.

II. Constitutional Claim

       The Trustee further argues that regardless of what the statutory language might otherwise
suggest, exempting life insurance in favor of non-dependent spouses and children would violate
Article 1, Section 22 by creating an “unlimited exemption.” This argument relies on Zumbrun,
which held, 3–2, that Section 22 “commands the legislature to enact exemptions,” but also requires
them to be “define[d] . . . in reasonably tangible ways so as to balance the interests of lenders and
creditors”—so that “statutes which create unlimited exemptions are inconsistent with the directive
of Section 22 and the balanced policy underlying it.” 626 N.E.2d at 455. Based on those principles,
the Trustee hypothesizes a debtor who gradually accumulates $1,000,000 in cash-value life insurance
naming a wealthy adult child as beneficiary, then later becomes insolvent and obtains a bankruptcy
discharge, but immediately thereafter cashes in the policy and uses the proceeds for personal bene-
fit. Trustee’s Br. at 16–17.

       But our existing constitutional caselaw is sufficient to address such situations on an as-applied
basis, without overriding the statutory text. We have already recognized that “strict Zumbrun analy-
sis” made a prior version of this life-insurance exemption “constitutionally suspect,” because the
statute contained no express upper limit. Citizens Nat’l Bank of Evansville v. Foster, 668 N.E.2d
1236, 1242 (Ind. 1996). But we also recognized that Zumbrun’s “bright-line rule . . . is not consistent
with our preference for reviewing the constitutional validity of statutes as they are applied to
particular parties in a case before us.” Id. We therefore concluded instead that Article 1, Section
22 violations must be determined as applied on a case-by-case basis:

               [A] minor amount of cash value (like the $3600 in Zumbrun) built
               up over time in a life insurance policy cannot be said to violate


                                                      6
               Section 22 as “never being capable of constitutional application.”
               By contrast, substantial sums closeted in anticipation of bankruptcy
               do not fit with the “necessary comforts of life” purpose of the
               Indiana Constitution . . . .

Id. Ultimately, then, “courts must delve into [the] admittedly murkier waters of reasonable
necessity” under the particulars of each case as it arises. Id.

       The Trustee’s hypothetical falls between Foster’s two extremes—cash value amassed over
time and not “closeted in anticipation of bankruptcy,” but certainly more than a “minor amount” and
almost certainly exceeding the “necessary comforts of life.” But the facts here are much closer to
Zumbrun’s end of the spectrum—the cash value at stake is greater, but hardly inconsistent with the
“necessary comforts of life,” and the Trustee has not claimed that the cash value was “closeted in
anticipation of bankruptcy.” Foster entrusts bankruptcy courts with assessing “reasonable necessity”
case by case under Section 22—and as the Trustee discussed at oral argument, the meeting of
creditors, see 11 U.S.C. § 341, provides an early opportunity to identify such cases so that the
Trustee may raise the question for the bankruptcy court’s review. We therefore need not deviate from
the statute’s actual language to avoid a hypothetical problem.

                                             Conclusion

       We conclude that under Indiana Code section 27-1-12-14(e), the statutory phrase “dependent
upon such person” does not modify “spouse” or “children,” but only “any relative” named as
beneficiary of a life-insurance policy. Any potential as-applied constitutional problems arising from
that statutory directive may be addressed case by case, as Foster contemplates.

Dickson, Rucker, David, and Massa, JJ., concur.




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