Tober v. Lang (In re Tober)

2012 WL 3241462 (C.A.9)
Under Arizona state law, a debtor is permitted to exempt the cash surrender value of life insurance policies and an annuity contract even if the beneficiary is not a dependent of the debtor.
Procedural context:
Bankrupcy Court permitted debtors' 522(b) exemptions, thereby overruling the objections of the Chater 7 trustees. Bankruptcy Appellate Panel reversed the Bankruptcy Court, and the Court of Appeals reversed the BAP and remanded for further proceedings consistent with the opinion.
Separate Chapter 7 debtors sought to exempt the cash surrender value of life insurance and an annuity contract from being included in their respective bankruptcy estates. The underlying Arizona statute (Ariz. Rev. Stat 33-1126(A)(6)-(7)) identifies a list of possible beneficiaries for each of these assets and concludes with the phrase ", or any other dependent family member." The Chapter 7 trustees for the estates filed similar objections to the claimed exemptions and argued that the phrase "or any other dependent family member" meant that a child of a debtor who is not also a dependent of the debtor could not be the beneficiary of the property sought to be exempted from the bankruptcy estate. The Ninth Circuit disagreed with the trustees and held that the word "other" was a word of differentiation, which was intended to establish that the beneficiary can either be a listed beneficiary or some "other" family member who is dependent. Moreover, to the extent the phrase is ambiguous, the court will resolve it in the debtor's favor because where the text of a statutory exemption is ambiguous as to whether it applies, the debtor is entitled to the exemption.
Alex Kozinski, Chief Judge, M. Margaret McKeown and N. Randy Smith, Circuit Judges

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