Bartlett Co-op. Ass'n v. Patton

Decision Date18 July 1986
Docket NumberNo. 58679,58679
Citation239 Kan. 628,722 P.2d 551
PartiesBARTLETT COOPERATIVE ASSOCIATION, Appellant, v. Ron PATTON, Appellee, and Coffeyville State Bank, Garnishee.
CourtKansas Supreme Court

Syllabus by the Court

1. A defense that garnisheed property is exempt from garnishment is not subject to the ten-day limitation on replies contained in K.S.A. 60-718(c).

2. An Individual Retirement Account (IRA) is not exempt from garnishment by a creditor under federal law.

3. An Individual Retirement Account (IRA) is not exempt from garnishment under Kansas law unless it comes within the applicability of the 1986 legislative amendments to K.S.A. 60-2308 (L.1986, ch. 220, § 1).

4. In a garnishment proceeding involving an Individual Retirement Account (IRA), the record is examined and it is held the district court: (1) did not err in finding defendant timely raised the issue of exemption of the IRA; and (2) did err in determining the IRA was exempt from garnishment under federal law.

Morris D. Hildreth of Becker, Hildreth, Eastman, Gossard, Bell and Hassenplug, Coffeyville, argued cause and was on briefs, for appellant.

Edward W. Dosh, Parsons, argued cause and was on brief, for appellee.

McFARLAND, Justice:

Plaintiff Bartlett Cooperative Association obtained a judgment against defendant Ron Patton. In attempting to collect the judgment, plaintiff garnished defendant's Individual Retirement Account (IRA) in the Coffeyville State Bank. The district court held the IRA was exempt from garnishment under federal law. Plaintiff appeals from this determination.

The first issue is procedural in nature. Plaintiff contends defendant did not timely raise the defense of exemption. The trial court's findings of fact relative to the mechanics of the garnishment are not challenged and are as follows:

"10. On June 4, 1985, a garnishment summons was issued to the Bank. Thereafter, on June 7, 1985, on a form supplied by the Clerk, the Bank filed an answer with the Court. The pertinent parts of the answer reflected: '$1900 IRA # 653217 plus interest of approximately $25, less 180-day penalty, approximately $79.65, equals $1,845.35. Signed Ted Jones, Sr., Vice President and Cashier.'

"11. There is an unsigned and undated note attached to the Bank's garnishee answer that states 'mailed copy to attorney and defendant.' The Court knows of its own knowledge that the Coffeyville Clerks make such notations on garnishment answers to indicate that they have mailed the answer and to whom. It should be noted that June 7, 1985, was a Friday.

"12. On June 20, 1985, thirteen (13) days after the Bank's answer was filed, Patton objected to the answer of the Bank '--on the basis that said account is of such a nature that it cannot be paid over to the plaintiff at this time and, therefore, the defendant maintains that the garnishee cannot legally pay said account to the plaintiff.' "

Garnishment is governed by the provisions of Article 7 of the Kansas Code of Civil Procedure, K.S.A. 69-701 et seq. It is defined as "either (1) a form of or an aid to attachment, or (2) in lieu of or in aid of execution." K.S.A. 60-714.

Under K.S.A. 60-716, an order of garnishment to aid in the enforcement of a judgment may be obtained against the property of the debtor. The order of garnishment is served on the garnishee, together with two copies of the answer form for the garnishee. K.S.A. 60-717(b). Within ten days of service, the garnishee must file an answer. The answer essentially sets out what of the debtor's property the garnishee has under its control. K.S.A. 60-718(a).

The provision of the Code which is in issue in this case is K.S.A. 60-718(c), which comes into play after the garnishee's answer has been filed. That section states, in pertinent part:

"The clerk shall cause a copy of the answer to be mailed promptly to the plaintiff and the defendant. Within 10 days after the filing of the answer the plaintiff or the defendant or both of them may reply thereto controverting any statement in the answer.... If the garnishee answers as required herein and no reply thereto is filed, the allegations of the answer are deemed to be confessed. If a reply is filed as herein provided, the court shall try the issues joined, the burden being upon the party filing the reply to disprove the sworn statements of the answer...."

The appellant contends the court erred in considering the appellee's response because it constituted a reply under K.S.A. 60-718(c) and was filed thirteen days after the garnishee's answer. The appellee counters that he did not file a "reply" because he was not denying that the garnishee had his property, rather, he was claiming that the property was exempt from garnishment. He also argues that even if bound by the 10-day limit he had three extra days because "service" was by mail. (K.S.A. 60-206[e].)

K.S.A. 60-720 is titled "trial." Paragraph (c) provides as follows:

"Right of defendant to contest garnishment. The defendant may, in addition to controverting the statements in the answer of the garnishee, defend the proceedings against the garnishee, upon the ground that the indebtedness of the garnishee, or any property held by him or her, is exempt from execution against such defendant...." (Emphasis supplied.)

Nowhere does the statute set out an explicit procedure for raising this defense. However, K.S.A. 60-724 explicitly provides that "[n]o judgment shall be rendered in garnishment by reason of the garnishee['s] ... (3) holding moneys or property exempt by law, or the proceeds therefrom."

We conclude the question of exemption was timely raised. The response of the defendant did not controvert any statement contained in the garnishee's answer. Clearly, K.S.A. 60-718(c) does not cover all issues in a garnishment proceeding. A third party claiming ownership in the garnished moneys is not controlled by the statute. The defense of exemption is designated in K.S.A. 60-720 as a defense in addition to any controverting of statements made in the garnishee's answer. The ten-day requirement in K.S.A. 60-718(c) is not applicable to the claim of exemption herein.

We turn now to the merits. Did the district court err in holding that federal law prohibits garnishment of an IRA?

Inasmuch as IRA's have been a fact of life for a number of years, it would be logical to assume this issue would involve a substantial body of case law. Such is not the situation.

In 1974, Congress reacted to the national concern over abuses affecting the stability and accountability of employee benefit plans by the passage of the Employee Retirement Income Security Act of 1974 (ERISA) (88 Stat. 832), codified as 29 U.S.C. § 1001 et seq. (1982). The purpose of ERISA is stated in 29 U.S.C. § 1001 (1982) as follows:

"Congressional findings and declaration of policy.

"(a) Benefit plans as affecting interstate commerce and the Federal taxing power. The Congress finds that the growth in size, scope, and numbers of employee benefit plans in recent years has been rapid and substantial; that the operational scope and economic impact of such plans is increasingly interstate; that the continued well-being and security of millions of employees and their dependents are directly affected by these plans; that they are affected with a national public interest; that they have become an important factor affecting the stability of employment and the successful development of industrial relations; that they have become an important factor in commerce because of the interstate character of their activities, and of the activities of their participants, and the employers, employee organizations, and other entities by which they are established or maintained; that a large volume of the activities of such plans is carried on by means of the mails and instrumentalities of interstate commerce; that owing to the lack of employee information and adequate safeguards concerning their operation, it is desirable in the interests of employees and their beneficiaries, and to provide for the general welfare and the free flow of commerce, that disclosure be made and safeguards be provided with respect to the establishment, operation, and administration of such plans; that they substantially affect the revenues of the United States because they are afforded preferential Federal tax treatment; that despite the enormous growth in such plans many employees with long years of employment are losing anticipated retirement benefits owing to the lack of vesting provisions in such plans; that owing to the inadequacy of current minimum standards, the soundness and stability of plans with respect to adequate funds to pay promised benefits may be endangered; that owing to the termination of plans before requisite funds have been accumulated, employees and their beneficiaries have been deprived of anticipated benefits; and that it is therefore desirable in the interests of employees and their beneficiaries, for the protection of the revenue of the United States, and to provide for the free flow of commerce, that minimum standards be provided assuring the equitable character of such plans and their financial soundness.

"(b) Protection of interstate commerce and beneficiaries by requiring disclosure and reporting, setting standards of...

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12 cases
  • BANK v. BOLANDER, 94
    • United States
    • Kansas Court of Appeals
    • 6 April 2007
    ...“ exempt from any and all claims of creditors of the beneficiary or participant.” K.S.A. 60-2308(b); see Bartlett Cooperative Ass'n v. Patton, 239 Kan. 628, 722 P.2d 551, Syl ¶¶ 2, 3 (1986) (IRAs are precluded from garnishment under Kansas law for proceedings filed on or after July 1, 1986)......
  • Bank v. Bolander
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    • Kansas Court of Appeals
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    ...are statutorily "exempt from any and all claims of creditors of the beneficiary or participant." K.S.A. 60-2308(b); see Bartlett Cooperative Ass'n v. Patton, 239 Kan. 628, Syl.¶¶ 2, 3, 722 P.2d 551 (1986) (IRAs are precluded from garnishment under Kansas law for proceedings filed on or afte......
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    • 30 June 1989
    ...the benefit of employee participants in employer controlled or employee organization controlled pension plans. See Bartlett v. Patton, 239 Kan. 628, 722 P.2d 551 (1986). In large employer controlled plans, the employee typically possessed little, if any, control over his or her interest in ......
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