256 B.R. 555 (Bkrtcy.D.N.J. 2000), 00-56308, In re Mays

• Citation: 256 B.R. 555
• Party Name: In re Marjorie MAYS, Debtor.
• Case Date: December 19, 2000
• Court: United States Bankruptcy Courts, Third Circuit

Page 555

256 B.R. 555 (Bkrtcy.D.N.J. 2000)

In re Marjorie MAYS, Debtor.

No. 00-56308 RTL.

United States Bankruptcy Court, D. New Jersey.

December 19, 2000

Page 556

Michael I. Okechukwu, Garces & Gabler, P.C., New Brunswick, NJ, Attorney for Debtor.

Lawrence J. McDermott, Jr., Pressler & Pressler, East Hanover, NJ, Attorney for Creditor New Century Financial Services.

OPINION

RAYMOND T. LYONS, Bankruptcy Judge.

This chapter 7 case addresses a procedural and a substantive legal issue. The first issue is three-fold and considers whether attorneys may rely on unpublished opinions decided in this district, whether these opinions are binding, and finally whether they have precedential effect. The second issue deals with whether funds garnished from a debtor's wages within ninety days prior to the filing of the debtor's petition, and pursuant to a garnishment order issued more than ninety days before the petition filing, constitute a voidable preference under 11 U.S.C. §§ 522(h)(1) and 547(b) (West 2000). ¹ This court has jurisdiction under 28 U.S.C. § 1334(a), 28 U.S.C. §§ 157(a), (b)(1), and the Standing Order of Reference from the United States District Court for the District of New Jersey dated July 23, 1984

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referring all cases under Title 11 of the United States Code to the bankruptcy court. Additionally, this is a core proceeding under 28 U.S.C.§ 157(b)(2)(F).

For the following reasons, this court concludes that: (1) in the absence of any bankruptcy or district court rule prohibiting otherwise, attorneys may rely on unpublished opinions. Although these opinions are not binding, there is an underlying presumption that they have precedential effect; (2) a "transfer" for purposes of a voidable preference under 11 U.S.C. § 547(e)(3) is not made until a debtor has acquired rights in the property transferred--therefore, although the garnishment order was issued outside the ninety-day preference period, the debtor did not acquire rights in the garnished wages until later, after she earned them; and (3) the wage garnishments which occurred within the ninety-day period pre-petition constitute a voidable preference and may be avoided by the debtor.

FACTS

The facts in this matter are undisputed. The debtor filed a voluntary petition under chapter 7 of the Bankruptcy Code on June 14, 2000. More than ninety days before the petition was filed, on January 28, 2000, the debtor's employer was served with a wage garnishment order relating to New Century Financial Services' ("Creditor") judgment. The wage garnishments began on February 18, 2000 and continued post-petition. The debtor's biweekly paychecks were garnished as follows:

Date Amount

Outside Preference Period 2/18/00 $ 131.34

3/13/00 $ 135.09

---------

Total deducted before

Preference period: $ 266.43

Ninety-day Preference 3/17/00 $ 131.34

Period 3/31/00 $ 146.35

4/14/00 $ 138.84

4/28/00 $ 136.97

5/12/00 $ 169.80

5/26/00 $ 131.34

6/09/00 $ 131.34

---------

Total deducted during

Preference Period: $ 985.98

Petition filed 6/14/00

Post-petition: (FN2) 6/23/00 $ 131.34

---------

---------

TOTAL DEDUCTED: $1,383.75

The debtor filed a motion to avoid an alleged preferential transfer. Specifically, the debtor seeks to avoid the involuntary preferential transfer of the debtor's wages during the ninety-day period preceding the petition filing under 11 U.S.C. §§ 522(h) and 547(b).

In response, the creditor relies on the unpublished decision In re Gomez, No. 97-27459 (Bankr.D.N.J. Dec. 8, 1997). In Gomez, the court addressed the identical issue in this case and determined that the New Jersey statutory scheme for wage garnishment creates a continuing lien. Id. at 10. Relying on several cases decided in the United States Courts of Appeal for the Second, Seventh, and Eleventh Circuits, ³ the court found that if a wage levy is placed outside of the ninety-day preference period under 11 U.S.C. § 547(b), ⁴ all funds

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deducted from the debtor's wages up to the date of filing are considered outside of the preference period. Id.

DISCUSSION

I. The Precedential Value of Unpublished Opinions.

Before addressing the substantive issue, it is necessary to resolve three questions: (1) Can unpublished opinions be relied upon?; (2) Are opinions of one judge binding on another judge of the same court?; and (3) Even if such opinions are not binding, is there an underlying presumption that they should be followed?

Generally, courts treat the reliance on and the precedential value of unreported or unpublished cases somewhat differently than those cases which are published. For example, 3RD CIR. IOP 5.8 (2001) states, "[b]ecause the court historically has not regarded unreported opinions as precedents that bind the court, as such opinions do not circulate to the full court before filing, the court by tradition does not cite to its unreported opinions as authority." While the Third Circuit Rules do not apply to this court, ⁵ and although this rule does not appear to bar a party's reliance on unpublished decisions, it still leaves room for the court to consider these opinions in their decision-making process. By contrast, the United States Court of Appeals for the Eighth Circuit has a local rule which provides:

Unpublished opinions are not precedent and parties generally should not cite them. When relevant to establishing the doctrines of res judicata, collateral estoppel, or the law of the case, however, the parties may cite any unpublished opinion. Parties may also cite an unpublished opinion of this court if the opinion has persuasive value on a material issue and no published opinion of this or another court would serve as well....

8TH CIR. R. 28A(i) (2001).

The local rules of the bankruptcy and district courts in New Jersey presently fail to address unpublished opinions. In the absence of any local rules prohibiting otherwise, attorneys may rely on unpublished opinions. ⁶

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Nevertheless, in the Third Circuit it is clear that a decision by a trial court judge is not binding on other judges within the same court. There is no such thing as "the law of the district." Threadgill v. Armstrong World Indus., 928 F.2d 1366, 1371 (3d Cir.1991) ("Even where the facts of a prior district court case are, for all practical purposes, the same as those presented to a different district court in the same district, the prior resolution of those claims does not bar reconsideration ...."); see also In re Raphael, 230 B.R. 657, 664-65 (Bankr.D.N.J.1999), rev'd, 238 B.R. 69 (D.N.J.1999) (bankruptcy court is not bound by the pronouncement of a single district judge in a multi-judge district); accord In re Shattuc Cable Corp., 138 B.R. 557, 564 (Bankr.N.D.Ill.1992).

Although cases decided within this district are not binding on other judges within this district, there remains an underlying presumption that precedent should be followed. As the court summarized in Anastasoff:

[I]n the late eighteenth century, the doctrine of precedent was well-established in legal practice (despite the absence of a reporting system), regarded as an immemorial custom, and valued for its role in past struggles for liberty. The duty of courts to follow their prior decisions was understood to derive from the nature of the judicial power itself and to separate it from a dangerous union with the legislative power. The statements of the Framers indicate an understanding and acceptance of these principles.

Anastasoff, 223 F.3d 898, at 903. While Judge Arnold's reasoning in Anastasoff relating to the United States Courts of Appeal would seem to apply to trial courts, the rule in the Third Circuit is different. See Threadgill, 928 F.2d at 1371; see also Raphael, 230 B.R. at 664-5. Although the unpublished opinion in Gomez is not binding on this court, stare decisis might suggest that it should be followed.

However, the United States Supreme Court has stated that stare decisis is a "principle of policy, and not an inexorable command." Payne v. Tennessee, 501 U.S. 808, 828, 111 S.Ct. 2597, 115 L.Ed.2d 720 (1991); see also Adarand Constructors, Inc. v. Peña, 515 U.S. 200, 231, 115 S.Ct. 2097, 132 L.Ed.2d 158 (1995) (stare decisis is "[n]ot a mechanical formula of adherence to the latest decision, however recent and questionable, when such adherence involves collision with a prior doctrine more embracing in its scope, intrinsically sounder, and verified by experience."). To the extent that an earlier unreported decision of a bankruptcy court in our district addresses the identical issue in this case, the earlier opinion is precedent which may be persuasive but is not binding and need not be followed.

For the reasons set forth below, t his court disagrees with Gomez's interpretation of when a transfer occurs under 11 U.S.C. § 547(e)(3) and reaches a different result.

II. Is this a voidable preference?

A. The Approach by Three United States Courts of Appeal.

A review of the relevant case law outside the Third Circuit indicates that courts are split on the issue of whether a wage garnishment which occurs within the ninety-day period pre-petition but was issued before the ninety-day period constitutes a voidable preference. Three United States Courts of Appeal have held that such garnishments are not avoidable. See e.g., In re Coppie, 728 F.2d 951, 953 (7th Cir.1984) (per curiam) ("a debtor will not acquire rights in garnished wages."); In re Conner, 733 F.2d 1560, 1562 (11th Cir.1984) (transfer was perfected outside preference period and debtors not entitled to set aside transfer as voidable preference); In re Riddervold, 647 F.2d 342, 346-47 (2d Cir.1981) (garnishment payments made during the preference period were not preferential transfers because the debtor has no property or interest in property

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subject to the levy which can be transferred). ⁷

In re Gomez, No. 97-27459 (Bankr.D.N.J. Dec. 8, 1997) adopted the view of these...