Cummings v. Fingers, 88-92

• Decision Date: 18 July 1988
• Docket Number: No. 88-92,88-92
• Citation: 296 Ark. 276,753 S.W.2d 865
• Parties: Millard CUMMINGS, Appellant, v. Earnest FINGERS, Sr. and Oleitt Fingers, Appellees.
• Court: Arkansas Supreme Court

Page 865

753 S.W.2d 865

296 Ark. 276

Millard CUMMINGS, Appellant, v. Earnest FINGERS, Sr. and Oleitt Fingers, Appellees.

No. 88-92.

Supreme Court of Arkansas.

July 18, 1988.

Lohnes T. Tiner, Harrisburg, for appellant.

John D. Bridgforth, Forrest City, for appellees.

GLAZE, Justice.

This case involves a farm lease which resulted in the appellees, as lessors, obtaining a default judgment in circuit court against appellant, lessee, for past due rental payments in the amount of $5,250.00. After learning the Agriculture Stabilization and Conservation Service (ASCS) was holding deficiency and disaster funds payable to appellant in the sum of $10,000.00, appellees filed a writ of garnishment against ASCS's local office in an effort to obtain satisfaction of their judgment against the appellant. When ASCS ignored the garnishment proceeding, appellees then petitioned the court to compel the appellant to obtain the funds from ASCS and to place them with the registry of the court, so the court could determine the parties respective rights to the funds. Appellant objected, contending that the court had no jurisdiction and that the funds were exempt under federal law. The court agreed the ASCS was not subject to the court's orders and dismissed appellees' writ of garnishment proceeding; however, the judge held the court did have inherent power, including contempt powers, to direct the appellant to deposit the funds, equal to the amount of the judgment, in its registry. After paying those funds into the court, appellant brought this appeal.

Citing 15 U.S.C.A. § 714b(c) (Supp.1988), appellant's primary argument is that neither ASCS nor its property is subject to attachment, injunction, garnishment or similar process and that the trial court's order here was merely a "left-handed" or indirect attempt at a process which is prohibited by federal law. Appellant compares the situation here to the one in Bennett v. Arkansas, 485 U.S. 395, 108 S.Ct. 1204, 99 L.Ed.2d 455 (1988). The Supreme Court in Bennett held that Arkansas's attachment of a prisoner's social security benefits under state law was in direct conflict with the social security statute, 42 U.S.C. § 407(a) (Supp. III 1982), which provides that "none of the moneys paid or payable under the Social Security Act shall be subject to execution, levy, attachment, garnishment, or other legal process."

The Bennett case is clearly dissimilar to the one before us. There, the Social Security Act specifically exempted "moneys paid or payable" under the Act and as the Supreme Court said, "section 407(a) unambiguously rules out any attempt to attach social security benefits." Cf. 38 U.S.C. § 3101(a) (which provides that a beneficiary, of payments of [veteran] benefits due or to become due, shall not be liable to attachment, levy, or seizure by or under any legal or equitable process whatever, either before or after receipt by the beneficiary); see also Rose v. Rose, 481 U.S. 619, 107 S.Ct. 2029, 95 L.Ed.2d 599 (1987).

In the present case, the federal statute in question, 15 U.S.C. § 714b(c), merely codifies ASCS's right to sovereign immunity--a right the trial court acknowledged when it dismissed appellees' garnishment action against ASCS. In sum, unlike the federal laws that specifically exempt veteran and social security benefits from attachment or other similar process, the federal statute applicable here provides that the Community Credit Corporation (ASCS) and its property is not subject to attachment proceedings, but that law does not exempt funds from attachment that are paid to the recipient. See Graves Bros. v. Lasley, 190 Ark. 251, 78 S.W.2d 810 (1935). In Graves Bros., a lease was breached by a tenant who was owed federal funds in return for the tenant having destroyed his cotton crops. As is true in the instant case, the funds in Graves Bros. were held by the local agents of the Secretary of Agriculture. In the Graves Bros. opinion, the court discussed the local agents' right of sovereign immunity, but then held that the impoundment and compulsory assignment of the federal-funds check to the one rightfully entitled thereto did not interfere with the public interest. In so holding, the court reasoned that when the check was issued and delivered to the local agents of the Secretary of Agriculture for delivery to the payee (tenant), or the one entitled to the proceeds under state law, the governmental agencies' interests ended.

As pointed out by appellees, the funds in issue here were made payable to the appellant as a result of his farming appellees' land under the parties' lease, and at the time appellees filed this post-judgment action, the ASCS had no further interest in these funds to which the appellant was entitled except to deliver the appellant his checks. In fact, upon the directive of the trial court, appellant collected his checks from ASCS and paid $5,556.14 into the court's registry; however, he claims he paid these moneys into the court only because he did not wish to be incarcerated for violating the court's order. In this respect, appellant, citing article 2, § 27 of the Arkansas Constitution, claims the trial court's order was unconstitutional because if he had refused to comply with the order, he would have been imprisoned for a debt in a civil action. Appellant's abstract of record fails to reflect that he raised this constitutional issue below, so we need not address it here. See, e.g., Morris v. Garmon, 285 Ark. 259, 686 S.W.2d 396 (1985). Nonetheless, even if such issue had been presented, we see no merit in appellant's argument, since it was the prospect that appellant would willfully violate the trial court's order, not that he was unable to pay the debt, which subjected him to contempt sanctions. See Nooner v. Nooner, 278 Ark. 360, 645 S.W.2d 671 (1983); Harrison v. Harrison, 239 Ark. 756, 394 S.W.2d 128 (1965).

While we conclude the appellant's funds from ASCS are subject to legal process by the appellees, we further hold that appellees' action, under the circumstances in this case, lies in chancery court, not circuit. ¹ In his findings, the trial judge fully recognized that the type order used here, viz., compelling the appellant to obtain the funds from ASCS and deposit them in the court's registry, is normally one cognizable in equity. Even so, the judge deemed it impractical for appellees to bring such an action in equity and decided his court had inherent authority to make such an order. We can not agree.

Appellees' remedy is found in Ark.Code Ann. § 16-66-418 (1987), which in relevant part provides as follows:

(a)(1) [T]he plaintiff in the execution may institute an action, by equitable proceedings, in the court from which the execution issued, or in the court of any county in which the defendant resides or is summoned, for the discovery of any money, chose in action, equitable or legal interest, and all other property to which the defendant is entitled, and for subjecting the money, chose in action, equitable or legal interest, and all other property to which the defendant is entitled to the satisfaction of the judgment.

(2) In such actions, persons indebted to the defendant in the execution or holding the money or property in which he has an interest, or holding the evidences or securities for the same, may be also made defendants.

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(e) The court shall enforce the surrender of the money, or security therefor, or of any other property of the defendant in the execution which may be discovered in the action. For this purpose, the court may commit to jail any defendant or garnishee failing or refusing to make such surrender, until it shall be done, or the court is satisfied that it is out of his power to do so.

Section 16-66-418 was construed by this court in Morgan Utilities, Inc. v. Perry County, 183 Ark. 542, 37 S.W.2d 74 (1931), wherein Perry County previously had obtained a judgment against Morgan Utilities and others (hereinafter Morgans) in Perry County Circuit Court, and then instituted proceedings in Perry County Chancery Court under § 16-66-418 in aid of execution on its circuit court judgment. The Morgans claimed the chancery court had no jurisdiction because the judgment sought to be enforced was rendered by and issued out of the circuit court. In rejecting the Morgans' argument, this court explained that when § 16-66-418 was enacted, Arkansas only had circuit courts, which exercised both law and equity jurisdictions. However, in 1903, the General Assembly divided the circuit jurisdiction by creating a separate court of chancery, and therefore, it devolved on the chancery court whatever powers the circuit court had on its chancery side under § 16-66-418. Morgan Utilities, Inc., 183 Ark. 542, 37 S.W.2d 74. ²

Appellees instituted this action to satisfy their judgment through a remedy which, under the circumstances presented, required an equitable proceeding as authorized under § 16-66-418. Because of the circuit court's lack of jurisdiction to grant and enforce the equitable relief sought by appellees, we reverse and remand with directions to transfer this cause to the Chancery Court of St. Francis County for proceedings to be held consistent with this court's opinion. See Hilburn v. First State Bank of Springdale, 259 Ark. 569, 535 S.W.2d 810 (1976).

NEWBERN, J., concurs.

HICKMAN, PURTLE and HAYS, JJ., dissent.

NEWBERN Justice, concurring.

The majority opinion is correct and fully expresses my views in this case. I write only to point out that in Monette Road Improvement Dist. v. Dudley, 144 Ark. 169, 222 S.W. 59 (1920), this court held that the creation of the chancery courts in this state left no vestige of equity jurisdiction in the circuit courts. Two Arkansas cases have, however, sanctioned the granting of injunctive relief by a circuit court.

In Daley v. Digby, 272 Ark. 267, 613 S.W.2d 589 (1981), this court did so, erroneously relying on a case which noted the granting of an...