Decker & Mattison Co. v. Wilson

• Decision Date: 19 April 2002
• Docket Number: No. 86,433.,86,433.
• Citation: 44 P.3d 341,273 Kan. 402
• Parties: DECKER & MATTISON CO., INC., Plaintiff/Appellant, v. CHARLES WILSON, d/b/a/ BROWN, WILSON HEATING & AIR CONDITIONING, Defendant/Appellee, and FIRST COMMERCIAL BANK, N.A., Garnishee.
• Court: Kansas Supreme Court

273 Kan. 402

44 P.3d 341

DECKER & MATTISON CO., INC., Plaintiff/Appellant, v. CHARLES WILSON, d/b/a/ BROWN, WILSON HEATING & AIR CONDITIONING, Defendant/Appellee, and FIRST COMMERCIAL BANK, N.A., Garnishee.

No. 86,433.

Supreme Court of Kansas.

Opinion filed April 19, 2002.

E. Dexter Galloway, of Hutchinson, argued the cause and was on the brief for appellant.

James M. Holmberg, of Kansas City, argued the cause, and Thomas D. Arnhold, of Thomas D. Arnhold, P.A., of Hutchinson, was on the brief for appellee.

The opinion of the court was delivered by

BRAZIL, J.:

Decker & Mattison Co., Inc., (D & M) appeals the district court's decision to quash the garnishment of Charles Wilson's certificate of deposit (CD). D & M argues the court erred when it determined that proceeds from a workers compensation settlement used to purchase the CD were exempt from garnishment under K.S.A. 2001 Supp. 60-2313(a)(3) and K.S.A. 44-514.

The facts in this case are straightforward. On February 9, 1999, Charles Wilson received $77,449.44 after settling his workers compensation case. Wilson opened a joint savings account in First Commercial Bank in Humboldt with his wife, Janeen, on February 10, 1999, and deposited all but $4000 of the settlement. On April 9, 1999, Wilson withdrew $5,000 from the account and purchased a CD at the same bank. The only deposit in the account prior to the April 9, 1999, withdrawal was the workers compensation settlement.

D & M filed a petition on January 13, 1999, against Wilson and Randy Brown in connection with their business, Brown, Wilson Heating & Air Conditioning. D & M alleged a debt against Wilson and Brown in the amount of $5,851.89, plus interest of $269.36. The district court eventually entered judgment in D & M's favor against Wilson, but not Brown, in the amount of $3,968.20 on July 27, 1999. The certified copy of the appearance docket indicates Brown was dismissed from the case.

D & M requested that the district court serve the First Commercial Bank a garnishment order in the amount of $6,518.92 on September 25, 2000. The First Commercial Bank, the garnishee, stated in its answer that it was indebted to Wilson in the amount of $5,327.31. Wilson requested a hearing to dispute the garnishment on the grounds that the funds were exempt from seizure and sale pursuant to K.S.A. 2001 Supp. 60-2313(a)(3) and K.S.A. 44-514. A hearing was held and the district court quashed D & M's order of garnishment, holding the CD to be exempt property.

D & M timely appealed the case to the Court of Appeals. This court transferred the case pursuant to K.S.A. 20-3018(c).

D & M argues the district court erred in finding Wilson's CD was exempt from seizure and sale under K.S.A. 2001 Supp. 60-2313(a)(3) and K.S.A. 44-514. The interpretation of a statute is a question of law, and this court's review is unlimited. Hartford Cas. Ins. Co. v. Credit Union 1 of Kansas, 268 Kan. 121, 124, 992 P.2d 800 (1999).

Workers compensation benefits are generally exempted from seizure and sale to satisfy a judgment as provided in K.S.A. 2001 Supp. 60-2313:

"(a) Except to the extent otherwise provided by law, every person residing in this state shall have exempt from seizure and sale upon any attachment, execution or other process issued from any court in this state:

....

(3) Any workers' compensation exempt from process pursuant to K.S.A. 44-514 and amendments thereto."

K.S.A. 44-514 provides:

"(a) Except as provided in subsection (b), K.S.A 23-4,146 or the income withholding act and amendments thereto, no claim for compensation, or compensation agreed upon, awarded, adjudged, or paid, shall be assignable or subject to levy, execution, attachment, garnishment, or any other remedy or procedure for the recovery or collection of a debt, and this exemption cannot be waived." (Emphasis added.)

D & M's argument can be broken into three elements. D & M argues Wilson is not protected from the exemption because the nature of the workers compensation settlement was changed by: (1) the mere establishment of a savings account, which created a creditor/debtor relationship between Wilson and the bank; (2) the establishment of joint ownership with his wife over the savings account; and (3) the purchase of a CD. A review of Kansas law shows none of these events were sufficient to make the exemption inapplicable.

This court in McGhee v. Sinclair Refining Co., 146 Kan. 653, 659-60, 73 P.2d 39 (1937), used strong language to characterize the language in K.S.A. 44-514: "This certainly indicates the intention on the part of the legislature that compensation should go to the injured workman or his dependents, and to no one else." The court in Egy v. United States Fidelity & Guaranty Co., 8 Kan. App. 2d 144, 148-49, 651 P.2d 954 (1982), aff'd 233 Kan. 234 (1983), held: "In short, and excepting only liens for attorney fees (K.S.A. 44-536; Graham v. Elevator Co., 115 Kan. 143, 145-146, 222 Pac. 89 [1924]), workers' compensation can only be paid to the claimant and no creditor can reach workers' compensation paid, being paid or to be paid. (See, for example, McGhee v. Sinclair Refining Co., 146 Kan. 653, 659-660, 73 P.2d 39 [1937].)"

The law governing the exemption of workers compensation benefits is not uniform across states. See Annot., Validity, Construction, and Effect of Statutory Exemptions of Proceeds of Workers' Compensation Awards, 48 A.L.R.5th 473, 534-53. The following factors are cited by courts as relevant: (1) the particular statutory language granting the exemption; (2) how easily the funds are identified as stemming from the workers compensation award; and (3) whether the character of the award has changed. In Kansas, the statutory language supports extending the exemption protection until after the employee has received the compensation. Further, the funds in this case are easily identifiable. Last, as discussed below, this court has held, albeit in a slightly different context, that holding exempt funds in a CD does not sufficiently change the nature of money such that an exemption is inapplicable.

Statutory Language

As resolution of this case turns on the interpretation of a statute, it is natural to begin with the language of the statute. The subject of the exemption statute in K.S.A. 44-514(a), which is quoted above, is "claim," which is modified by the prepositional phrase, "for compensation, or compensation agreed upon, awarded, adjudged or paid." (Emphasis added.) K.S.A. 44-514. With the use of the emphasized words, the Kansas statute clearly contemplates continued protection of the exemption until after the compensation has reached the hands of the employee.

The contrast between the language in the Kansas statute and other states is instructive. There is authority in other states that an exemption of workers compensation benefits from seizure and sale no longer protects the workers compensation check once the claimant is in actual possession of the check. The Ohio Supreme Court explained the distinction succinctly in Ohio Bell Tel. Co. v. Antonelli, 29 Ohio St.3d 9, 10, 504 N.E.2d 717 (1987):

"Under R.C. 2329.66, workers' compensation benefits are expressly exempt from attachment but only as limited by the provisions of R.C. 4123.67. R.C. 4123.67 expressly exempts workers' compensation benefits only `before payment' is made to claimant. There is no exemption of benefits from attachment provided for under either statute after the award has been paid to the claimant."

The Antonelli court further noted the state legislature provides for the exemption, and it is up to the legislature to change the extent of protection provided in the exemption. 29 Ohio St. at 11. Oregon and Nevada reach the same conclusion considering not only the statutory language, but also statutory amendments omitting language which could have been used for a more extensive exemption. See McCabe v. Fee, 279 Or. 437, 440, 568 P.2d 661 (1977) ("The legislature has deliberately removed an exemption which applied to `all moneys paid.'"); Hardy & Hardy v. Wills, 114 Nev. 585, 589, 958 P.2d 78 (1998) ("Given the language and history of the exemption statute, we are unable to construe it to exempt compensation once it has been paid to a worker. It is well settled that words in a statute will be given their plain meaning unless doing so violates the spirit of the act.").

To contrast the approach of the Ohio court, which was dictated by specific statutory language, the analysis of statutory language involving the words "payment" or "paid" leads us to conclude the Kansas statutes exempt funds already in the hands of the worker. See East Moline Works Credit Union v. Linn, 51 Ill. App.2d 97, 100-01, 200 N.E.2d 910 (1964). As noted above, the Kansas exemption extends to compensation paid. D & M argues the creation of the debtor/creditor relationship in connection with the savings account ends the protection of the exemption statute. We disagree.

Because K.S.A. 44-514 exempts funds paid, it is consistent with the legislative intent to extend such exemption until after the funds have been deposited in a bank account. D & M suggests Wilson could have avoided the standard debtor/creditor relationship by establishing a "cestui que trust." D & M cites Bloomheart v. Bank Commissioner, 114 Kan. 786, 221 Pac. 279 (1923). However, Bloomheart merely stands for the proposition that there is a distinction between a standard deposit of funds, in which case the depositor does not expect to receive later the exact thing deposited, and a bailment, in which case the depositor expects to receive the identical thing left, although in altered form. See 114 Kan. at 794-95. The distinction was important in Bloomheart to determine whether the depositor could seek the benefit of the "bank depositors' guaranty fund" after the bank had closed its doors. 114 Kan. at 787-88.

D & M's suggestion of a "cestui que trust" is not persuasive. The use of bank accounts, savings accounts,...