No. _______________

Supreme Court of the United States

NOW COMES Kenneth R. Smoot, Pro Se, Petitioner in this cause, and files his Petition for Writ of Certiorari, requesting that the Supreme Court reverse the judgment(s) of the United States Court of Appeals for the Fourth Circuit below in favor of Respondent and determine that exempt property may not be subject to avoidance under 11 U.S.C. '548, 11 U.S.C. '522, nor may it be fraudulently conveyed and avoided pursuant to the Bankruptcy Code and discharge Petitioner=s debt.

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This petition for writ of certiorari is filed because the above opinion has denied plaintiff an absolute exemption pursuant to Virginia Code '34-28.1 that was not recoverable under bankruptcy code '548 under any circumstance. In addition, the determinations of the Opinion are inconsistent with fact, reason, and well established law.

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The United States Bankruptcy Court, Eastern District of Virginia, Richmond Division had original jurisdiction pursuant to 11 U.S.C. ' 544(b), 548(a), 550, 727(a)(2) and (3) and Virginia Code '' 55-80 and 55-81.

The United States Court of Appeals for the Fourth Circuit had general subject matter jurisdiction pursuant to Title 28 U.S.C. ' 158 et seq.

This petition for writ of certiorari is timely filed within 90 days of denial of the Suggestion for Rehearing En Banc dated August 17 2001 (Appendix D). The Supreme Court=s jurisdiction is founded on 28 U.S.C. ' 1254.

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This is a Bankruptcy Case brought on by a judgment in the Northern District of Ohio which has been affirmed by the Sixth Circuit and currently sits before this Honorable Court as Case No. 01-6040. It was a Duty of Fair Representation case in which Petitioner herein filed a hybrid 301 case also seeking to overturn the decision of Public Law Board 3882, Case No. 155 for lack of jurisdiction and fraud. Respondents (United Transportation Union and CSX Transportation, Inc) filed counterclaims of violation of the Federal Wiretap Act. Significant monetary damages were originally found against Petitioner and UTU filed to enforce the judgment by freezing assets of petitioner=s Company and forcing bankruptcy. The principal parties are:

2. Brief Factual History of Case

Petitioner Kenneth Smoot was hired by CSX Transportation, Inc., (CSXT) on June 10, 1978. As a condition of my employment, I was a dues paying member of the United Transportation Union (UTU). To supplement my income during periods of unemployment or lay offs from CSXT, in the early 1980s I established an unincorporated entity known as Ken=s Home Repair under which I performed various handiwork and odd jobs around people's homes.

On March 30, 1998, the United States District Court for the Northern District of Ohio entered an order finding me liable to CSXT and UTU for violations of the Federal Wiretapping Act; however, the court took the amount of damages and attorneys' fees, IF ANY, to be awarded under advisement.

On June 5, 1998, I and CSXT entered into a $250,000.00 settlement and release of claims that the I had or might have as a result of my on duty injury pursuant to the Federal Employers Liability Act (FELA). After deducting amounts for advances and other outstanding indebtedness, a net amount of $217,059.25 was deposited into the joint bank account held by my wife and I at the CanDo Credit Union in Walbridge,Ohio. On the same date, I wire transferred $210,000.00 from the joint account at the CanDo Credit Union to Glass Apple's Home Check Services' account at the People's Bank of Virginia (currently, F&M Bank), where I was currently residing.

The Ohio district court entered judgment on August 7, 1998, two months after I had received my personal injury settlement with CSXT. The judgment was immediately appealed to the Sixth Circuit Court of Appeals and they subsequently overturned the District Court=s statutory damages and remanded punitive damages for reconsideration. See Smoot v. UTU and CSXT, (246 F.3d 633(6^th Cir. 2001)

Before a hearing on the circuit court's writ of attachment could be held and on the advice of counsel, I filed this Chapter 7 bankruptcy petition on December 23, 1998. The schedules, as amended, claimed an exemption in the amount of $217,000 for "funds received pursuant to workmen's compensation suit (FELA injury settlement)" under Va. Code '34-28.1 and an exemption in the amount of $233,333.00 for anticipated proceeds from a legal malpractice suit under same Va. Code ' 34-28.1.

In my original schedules, filed pro-se, I listed all liabilities as joint debts of my wife and I. The amended Schedules of Assets and Liabilities, filed with the Bankruptcy Court, prepared by counsel, on December 31, 1998,and September 2, 1999, respectively, pursuant to Code ' 521, asserted exemptions in the amount of $217,00.00 in certain "[f]unds received pursuant to (FELA injury settlement)", and in the amount of $233,333.00 on a claim for malpractice, against an Ohio attorney, as a personal injury lawsuit under Va. Code ' 34-28.1.

Respondent Lynn Tavenner was appointed interim chapter 7 trustee of debtor's chapter 7 case and now serves as trustee. On January 19, 1999, the trustee, through counsel, which happened to be the same as CSXT=s counsel in the suit against me (the debtor) in the county suit, filed a adversary proceeding to avoid and recover fraudulent transfers' and objecting to the debtor's discharge. Included was an attempt to dismiss the malpractice actions in Ohio. On February 3, 1999, the Bankruptcy Court entered an order pursuant to Bankruptcy Code ' 105(a) granting the trustee's motion for preliminary injunction against specified property of the defendants but denying the Trustee the right to dismiss the malpractice action..

On February 12, 1999, I filed a motion to voluntarily dismiss Bankruptcy. No creditor objected except the Trustee. On March 18, 1999, my attorney filed to expedite the hearing on the motion to dismiss and that was subsequently denied on March 23, 1999. After the Bankrucptcy Court decision was appealed to the Fourth Circuit, the motion to dismiss the bankruptcy was denied.

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I. REVIEW SHOULD BE GRANTED BECAUSE THE COURT OF APPEALS FOR THE FOURTH CIRCUIT HAS ENTERED A DECISION IN CONFLICT WITH THE DECISION OF ANOTHER UNITED STATES COURT OF APPEALS ON THE SAME IMPORTANT MATTER; AND HAS SANCTIONED LOWER COURT ACTIONS THAT HAVE SO FAR DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS, AS TO CALL FOR THIS COURT=S SUPERVISORY POWER.

AAs the bankrucptcy court noted, in its thouroughand well-reasoned opinion, courts hold >divergent views regarding whether transfers of exemptible property can be avoided by trustees.= Kapila v. Fornabaio (In re Fornabaio), 187 B.R. 780, 782 (Bankr. S.S. Fla. 1995). Some courts have followed the so-called >no harm, no foul= approach, holding that the trustee cannot avoid the transfer because, absent the transfer, creditors could not have reached the property, and thus the transfer did not harm them in any way. See id. At 782-83; Jarboe v. Trieber (In re Treiber), 92 B.R. 930, 932 (Bankr. N.D. Okla. 1988). A majority of Courts have rejected this approach, however, noting that under the bankruptcy laws, as revised in 1978, all property, including potentially exempt property, is part of the bankruptcy estate until the debtor claims an exemption for it; consequently, a transfer of potentially exempt property could harm creditors because it might not have actually been exempted from the bankruptcy estate. See, e.g., Lasich v. Wickstrom (In re Wickstrom), 113 B.R. 339, 350 (Bankr. W.D. Mich. 1990).@

This quote is directly from the Fourth Circuit decision on page 6 which then goes on the explain it=s rational relative to the two reasons they believe the Amajority position@ is better reasoned. At first glance, a reasonable person would agree that the Circuits are in conflict and the matter should be cleared up by this Honorable Court.

Yes, and Judge Tice readily admits as much in the clear and unambiguous language of footnote 12 on page 22 of his decision (Appendix B), to wit:

AThe court expressly declines to decide the trustees alter ego/reverse veil piercing claim. However, the court notes that what the trustee seeks in essence is to subject the corporate assets to claims of the debtor=s creditors by having the court disregard the corporate entity. If the court were to disregard the corporated entity the treat Glass Apple and Kenneth Smoot as one and the same person, I believe that in this limited situation the debtor would still be entitled to claim the assets on hand on the bankruptcy petition filing date as exempt under Virginia Code '34-28.1. Thus, it is doubtful that judgment in the trustee=s favor on this count would benefit the estate.@

While that is certainly true for the Trustee, it would certainly benefit my case immeasurably. Indeed, there would no longer be any question of what did I receive in return from the Corporation as it would be evident that all the monies transferred were never out of my immediate and direct control. And the record of checks clearly shows this. I believe in any reasonable man=s opinion, the above footnote indicates the Judge didn=t rule on this matter in order that the Trustee could prevail.

The court failed to treat certain debts as either those that were joint, but primarily weighted towards my wife, in its insolvency calculation. As such, the court=s determination that I was insolvent at the time of the transfer of my personal injury proceed was erroneous. I was, in fact, solvent.

1c.Did the Court err in ruling that converted personal injury proceeds are subject to avoidance under '548?

The Trustee relied upon Bankruptcy Code ' 548, which sets forth the powers of a trustee in bankruptcy to avoid fraudulent transfers. The section provides for the setting aside not only of transfers infected by actual fraud but some other transfers as well - - so-called constructively fraudulent transfers.

The Bankruptcy Court held that is possible for a fraudulent transfer of potentially exempt property, whether infected by actual fraud or a constructive fraudulent transfer, to be subject to avoidance pursuant to ' 548. It reasoned that ' 522(g) seemed to contemplate this result and referenced the Supremacy Clause of the U.S. Constitution as a basis for '522(g) voiding Virginia Code ' 34.28.1 exemptions. This is the source of the Bankruptcy Court=s error.

Bankruptcy Code '522(g) addresses property that the trustee recovers and how the debtor can exempt that property if it was property he could have exempted. Indeed, See the legislative history of 522(g) to wit:

A HISTORICAL, REVISION NOTES, and LEGISLATIVE STATEMENTS, Senate Report No. 95-989;

As under current law, the debtor will be permitted to convert

Nonexempt property into exempt property before filing a bankruptcy

petition. The practice is not fraudulent as to creditors, and

permits the debtor to make full use of the exemptions to which he

is entitled under the law. (Emphasis added)

2.) Is it the intent of Congress for the Trustee to use 522(g) to void a transfer of exempt property under Federal and State exemption laws then be ruled Debtor, if collected, cannot exempt it?

Subsection (g) provides that if the trustee does not exercise an avoiding power to recover a transfer of property that would be exempt, the debtor may exercise it and exempt the property, if the transfer was involuntary and the debtor did not conceal the property. If the debtor wishes to preserve his right to pursue any action under this provision, then he must intervene in any action

brought by the trustee based on the same cause of action. It is not intended that the debtor be given an additional opportunity to avoid a transfer or that the transferee should have to defend the same action twice. Rather, the section is primarily designed to give the debtor the rights the trustee could have, but has not, pursued. The debtor is given no greater rights under this provision than the trustee, and thus, the debtor's avoiding powers under proposed sections 544, 545, 547, and 548, are subject to proposed 546, as are the trustee's powers. These subsections are cumulative. The debtor is not required to choose which he will use to gain an exemption. Instead, he may use more than one in any particular instance, just as the trustee's avoiding powers are cumulative.(emphasis added)@

There is no issue as to whether or not the personal injury proceed was exempt under state law. The property, thus, was not Apotentially@ exempt, it was exempt as an undisputed matter of law, thus there is no conflict between state and federal law and further, '522(g) in not controlling in any event.

Bankruptcy Code ' 522(b) specifically authorizes state exemptions within the bankruptcy scheme. As such, I assert the Virginia Code ' 34-28.1 is, as a matter of the Bankruptcy Code, part of that Code and, thus, has the same standing as any other federal exemption or law. For this reason, the Supremacy Clause cannot function to have one federal statute void another federal statue that is on equal footing. As such, this issue becomes one of substantive law. Substantive law in a federal district is to be interpreted according to the laws of the state in which it is located. As such, the Bankruptcy Court=s ruling with regard to the state law issue should be enforced in the same manner with the Bankruptcy Court and this Court. Therefore, exempt property under Virginia Code '34-28.1 is not recoverable under bankruptcy Code ' 548 under any circumstance.

ARGUMENT AND LAW

There is little to any question concerning the intent or application of Virginia Law, at ' 34-28.1, in pertinent part:

Aall causes of action for personal injury or wrongful death and proceeds derived from court award or settlement shall be exempt from creditor process against the injured person or statutory beneficiaryY It shall not be required that a householder designate any property exempt under this section in a deed in order to secure such exemption. The provisions of this section shall not be construed to affect any voluntary assignment of the proceeds or anticipated proceeds of a personal injury or wrongful death award or settlement as permitted by ' 8.01-26@.

Proceeds of the personal injury settlement are exempt from creditor process, more so than in the case of homestead property.

In RE Graziadei, 32 F.3d 1408(9^th Cir. 1994), affirming a judgment that vacates the bankruptcy court judgment the 9^th Circuit stated; AWe have clearly held that a bankruptcy court has Ano jurisdiction@ over homestead property and that such property @cannot be administered by the bankruptcy court.@, referencing In re Brown, 462 F.2d 129, 132 (9^th Cir. 1972); 28U.S.C. 1334(b)

AThis is because a bankruptcy court only has jurisdiction over matters that could >conceivably have any effect= on the estate. See Fritz, 852 F.2d 455, 457 (9^th Cir. 1988) (applying 28 U.S.C. 1334 (b)). An action relating to a homestead property could not Aconceivably have any effect on the estate because such property is exempt from the estate. Accordingly, the bankruptcy court lacks jurisdiction over such property. See also In re Turner, 724 F.2d 338, 341 (2^nd Cir. 1983) (Friendly, J.) (same)@, In Re Graziadei, 32, F.3d 1408 (9^th Cir. 1994.

Furthermore, courts construing the statues concluded that personal injury actions not reduced to judgment or settled before the filing of the bankruptcy petition were not subject to creditor process. See King v. Webb USDC, 4^th, 214 B.R. 553, (1997).

In Webb, personal injury settlement proceeds ($165,000) received two years preceding petition ruled still exempt. With only $25,000 remaining, there was not any inquiry into where the balance of the proceeds went, only that they were exempt. The court stated; Ain interpreting Virginia exemption statues, a court must do so liberally in favor of the debtor, with any doubts to be resolved in favor of allowing the exemption.@ (exemption statues are to be Aliberally construed so as to afford the relief which the legislature intended the debtor to enjoy@)

Personal injury proceeds, unlike homestead, are further protected pursuant to '8.01-26 (Code of Virginia) Assignment of causes of action; A[O]nly those causes of action for damage to real or personal property, whether such damage be direct or indirect, and causes of action ex contractu are assignable. The provisions of this section shall not prohibit any injured party or his estate from making a voluntary assignment of the proceeds or anticipated proceeds of any court award or settlement as security for new value given in consideration of such voluntary assignment.@ This assured that a creditor would not have a right to the personal injury award compensating a debtor for the loss of his hand where the creditor had no right to levy the hand. See Krippendorf v. Cassell, 151 B.R. 78, USBC, VA. (1993)

In general, S.D.Cal.,1989, AWhen debtor elects to claim exemption under state law, bankruptcy court looks only to state law to determine scope of that exemption.@ Haaland v. Corporate Management, Inc., 172 B.R. 74

There is a significant difference in personal injury exemptions than others. In referring to personal injury exemptions, sighted in many cases, The Minnesota Supreme Court stated: AThese policies [of protecting debtors from Aabsolute want@] apply with even more force to personal injury right of action exemption because it deals not so much with the debtor=s property, but with the debtor=s human capital. ...The debtor who suffers serious personal injury is deprived of using his or her human capital in getting a fresh start.@ See Medill v. State, 477 N.W. 2d (Minn. 1991).

Medill stated: AWe can find no reason why the creditor should be able to attach a structured settlement any more than a homestead. To allow it is to place the burden on the tax-paying public while the creditors benefit from the award, ...Here, the social policy to exempt the recovery is even stronger [than in the case of homestead].@ (Emphasis added)

In Governor Plaza v. Butcher, USCA, 4th, Case No. 96-2637, sighting Medill, the court confirmed the distinction between personal injury exemptions compared with exemptions for certain retirement plans, stating; A...the Minnesota Supreme Court held unconstitutional under a reasonableness requirement an unlimited exemption for certain retirement plans. But that same court also held that an unlimited exemption for personal injury compensation was constitutional.@

The definition of Aexemption@ in Black=s Law Dictionary is A[a] privilege allowed by law to a judgment debtor, by which he may retain property to a certain amount or certain classes of property, free from all liability to levy and sale on execution, attachment, or bankruptcy.@ Black=s Law Dictionary 571 (6th ed. 1990).

A An exemption for proceeds arising from a personal injury is designed to shield from creditors process something that the creditors never could attach in the first place.@ See King v. Webb, USDC, 4th, 214 B.R. 553, (1997). There AConveyance will not be considered fraudulent if debtor merely transferred property which is otherwise exempt from liability for debts.@ AA fraudulent conveyance is a transfer by the debtor of property to a third person undertaken with the intent to prevent a creditor from reaching that interest to satisfy its claim. However, a conveyance will not be considered fraudulent if the debtor merely transfers property, which is otherwise exempt from liability for debts. That is, because the theory of the law is that it is fraudulent for a judgment debtor to divest himself of assets against which the creditor could execute, if execution by the creditor would be barred while the property is in the possession of the debtor, then the debtor=s conveyance of that exempt property to a third person is not fraudulent.@ See Yaesu v. Tamura, cited as; 28 Cal. App. 4th 8 (1994).

ADebtors have the legal right to convey exempt property regardless of their motive.@ and ACreditors cannot claim property that would have been exempt had it remained in the hands of the debtor.@ See Benson v. Richardson, cited as; 537 N. W. 2d 748 (1995).

A careful review of the statutes, along with supporting case law and Congressional intent, clearly show that the moving motivation in the passage of '522 et seq. was to permit debtors moving non-exempt property to an exempt status prior to filing a petition for bankruptcy and would not be considered fraudulent. The Assumption that one could or would intentionally, willfully, and fraudulently move exempt property beyond the reach of creditors is simply inane. A . . . occurrence is an offense so unlikely that no common prohibition has ever been thought nescessary to guard against it. 9 Cf. Owen v. Owen, 500 U.S. 305, 313 (1991) (declining to Acreate a distinction [between state and federal exemptions] that the words of the statute do not contain);@

In re Whitcomb, 140 B.R. 396 (Bankr.E.D.Va. 1992), involved a debtor that transferred her interest in entireties property on the eve of her bankruptcy. The complainant in the case attempted to have the bankruptcy court deny the debtor=s discharge based upon the transfer being characterized as fraudulent. The court held that the transfer was not fraudulent because the entireties property would have been exempt from the Plaintiff=s claim had it come into the debtor=s estate under '522(b)(2)(B). Thus the actual exemption was relevant, not the issue of value.

Furthermore, even in the unpublished case submitted by the trustee; In re Carlos M. Sandoval, 153 F.3d 722, 1998 WL 497475 (4^th Cir. Md.), who happens to be an attorney, they held AYThe facts of this case are materially different from those in Whitcomb. That is, in Whitcomb the debtor transferred property that was already exempt,@ and they then went on ASandoval=s transfer of his residence and automobile was done with the actual intent of defrauding his creditors under section 727 by converting nonexempt property to exempt property."

The personal injury proceeds was not part of the estate at the time the case was filed. They are automatically exempt under the Code of Virginia ' 34-28.1, continue to be exempt under state and federal exempting them from creditor process including Bankruptcy even if recovered pursuant to ' 522(b)(e)(f)(g)(h)(i). The transfer of the personal injury proceeds was completely lawful pursuant to VA. Code '' 34-28.1, 8.01-26, 55-80, 55-81, and 11 U.S.C 522, 11 U.S.C. 548.

The intent of fraudulent transfer provisions in ''11 U.S.C. 548, 727 was to prevent concealment of non-exempt property, not to punish citizens for transferring exempt assets protected under Federal and State laws. Nor were the laws passed to impair an exemption simply because the debtor did not know they were exempt.

The Congressional intent of 11 U.S.C '522, is to make unenforceable any lien or action that would impair an exemption provided and protected by Federal or State laws. They are not intended to force a waiver of such exemption.

CONCLUSION

The bankruptcy Court=s Final Judgment should have been reversed and vacated by the Fourth Circuit. The Bankruptcy Court erred in holding a trustee is empowered to avoid transfers of active exempt assets pursuant to Section 548. The Bankruptcy Court erred in holding Section 548 preempted Virginia Code Section 34.28.1. The Bankruptcy Court erred in holding the Debtor fraudulently transferred assets which could not be reached by his creditors. The Bankruptcy Court further erred by denying the Debtor his discharge. Finally, the Bankruptcy Court erred by holding Debtor failed to receive reasonably equivalent value for his exempt assests when all bank records clearly showed he continued to have complete control and access of the assets. The Fourth Circuit ignored all of these errors on the misguided theory that the exemption was Apotential@ rather than actual. In so doing, the Bankruptcy Court with the consent of the Fourth Circuit, has changed the very language and intent of Congress relative to Bankruptcy Law as regards exemptions.

PRAYER

It is noted that some case law appears in this brief that does not appear in the filings to date. While these cases were given to my attorneys, they were never used for whatever reason. Several are recent Fourth Circuit cases wherein the current decision is in direct conflict. It is the position of this Petitioner that the Honorable Court may entertain any issues it deems appropriate in the interest of justice.

WHEREFORE, PREMISES CONSIDERED, Petitioner Kenneth R. Smoot, Pro Se, respectfully prays the the Supreme Court grant his Petition for Writ of Certiorari; that the Court reverse the decisions of the Federal Courts below; that the Court allow his personal injury exemption as the law intended; that the Court discharge his debt; and that the Court allow whatever other relief it may deem just.

Respectfully submitted,

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Kenneth R. Smoot, Pro se

314 Brickland Road

Chesterfield, VA 23236

(804) 594-0097