Electrical Workers, Local No. 1 Credit Union v. IBEW-NECA Holiday Trust Fund, IBEW-NECA

• Decision Date: 27 June 1979
• Docket Number: No. 61018,IBEW-NECA,61018
• Citation: 583 S.W.2d 154
• Parties: 24 Wage & Hour Cas. (BNA) 966 ELECTRICAL WORKERS, LOCAL NO. 1 CREDIT UNION, Respondent, v.HOLIDAY TRUST FUND, Garnishee-Appellant, and Gordon J. Chisholm, Defendant.
• Court: Missouri Supreme Court

Page 154

583 S.W.2d 154

24 Wage & Hour Cas. (BNA) 966

ELECTRICAL WORKERS, LOCAL NO. 1 CREDIT UNION, Respondent, v. IBEW-NECA HOLIDAY TRUST FUND, Garnishee-Appellant, and Gordon J. Chisholm, Defendant.

No. 61018.

Supreme Court of Missouri, En Banc.

June 27, 1979.

Rehearing Denied July 17, 1979.

Christopher T. Hexter, St. Louis, for garnishee-appellant.

Kenneth J. Feld, St. Louis, for respondent.

WELLIVER, Judge.

This appeal involves a determination of whether respondent Electrical Workers Local No. 1 Credit Union can properly garnish the appellant IBEW-NECA Holiday Trust Fund pursuant to a judgment obtained by Credit Union against IBEW member Gordon Chisholm. The trial court ruled that the Trust was a proper subject of garnishment. The Trust appealed to the Missouri Court of Appeals, Eastern District, which reversed. On respondent's motion, we granted transfer of this cause and now decide it as though on original appeal. Mo.Const. art. V, § 10. Although we agree with the trial court and reach a result different from the court of appeals, we use portions of the court of appeals opinion herein without quotation.

The IBEW-NECA Holiday Fund Amended Trust Agreement, originally established in 1966 pursuant to the collective bargaining Agreement between the St. Louis Chapter, National Electrical Contractors Association and Local Union No. 1, International Brotherhood of Electrical Workers, was amended in 1975 to conform to the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 Et seq. The Trust Agreement was continued in the 1976 collective bargaining agreement between the IBEW and the NECA. ¹

The stated purpose of the Holiday Fund Trust Agreement is to provide holiday pay benefits for employees (§ 0.02). (Unless otherwise noted, all section references are to the IBEW-NECA Holiday Fund Amended Trust Agreement). Because of the sporadic nature of the occupation, electrical workers often work for several employer-contractors during a year and therefore frequently do not receive payments for holidays. The Holiday Fund Trust Agreement is designed to provide such payments.

Under the Agreement, for each Plan Year, each employer is to contribute to the fund an amount equal to 81/2% Of his gross monthly labor payroll paid to the employees in the bargaining unit represented by the Union (§ 2.01 and § 6.06 of Agreement between St. Louis Chapter NECA and Local Union No. 1, IBEW, dated June 1, 1976), and also to submit to the trustees, report forms containing the name and social security number of each employee, the hours worked and wages earned by employees for whom contributions are due and the amount of contributions due for the period covered (§ 2.02). Employer contributions to the fund are to be managed and held by a Board of Trustees comprised of three employer (NECA) trustees and three employee (IBEW) trustees (§§ 1.01, 4.01). The trustees also have the authority to invest the funds in their control (§ 4.05). From this fund, eligible employees are to receive both annual and quarterly benefits during any given Plan Year under the Agreement.

To be eligible for these payments, an employee must have worked a minimum of 100 hours during a Plan Year (§ 3.11) and must file a timely application for benefits (§§ 3.15, 3.18). "Each eligible employee shall be entitled to an Annual Benefit in the amount of 4% Of the Employee's gross earnings on which employer contributions have been received In his name by the Trustees for the Plan Year." (§ 3.14) (Emphasis added.)

As outlined in § 3.17 of the Trust Agreement, the formula for the quarterly benefit is somewhat more complex, taking into account all contributions for quarterly and annual benefits for the Plan Year, investment and other income of the fund, all expenses of the fund including tax liabilities, and any gross earnings on which contributions to the fund have been received for all employees. The result is a quarterly benefit to be paid to the employee in four equal installments during the year following the Plan Year (§ 3.19). Nevertheless, under this plan, the amount of the benefits due the eligible employee is based essentially on his gross earnings for and the hours worked during the Plan Year. Between the two types of payments, the entire fund is paid out annually.

On September 10, 1976, respondent Credit Union requested execution and garnishment against the Trust as garnishee of Gordon Chisholm, a member of IBEW, to satisfy a judgment previously obtained against Chisholm. The Summons to Garnishee was served on September 14, 1976, and was returnable on October 11, 1976.

In response to respondent's interrogatories concerning any money or credits of Chisholm in the possession of the garnishee Trust, the garnishee indicated that under § 5.02 of the IBEW-NECA Holiday Fund Amended Trust Agreement, respondent was not entitled to take anything from this fund as a creditor of Chisholm. Section 5.02, which is essentially a standard "spendthrift" provision of the Trust, provides as follows:

Section 5.02 No Creditor Rights. No benefits or money payable from this Fund shall be subject to any manner of anticipation, alienation, sale, transfer, assignment, pledge, encumbrance by any person claiming or entitled to benefits hereunder; nor shall any benefit payment nor the right to any benefit payment or any interest in this Fund be subject to seizure by any creditor of any person entitled to an interest herein under any execution, writ, or proceedings at law or in equity.

In its Denial of Garnishee's Answer, respondent asserted that garnishee was indebted to Chisholm during the garnishment period and that § 5.02 of the Trust Agreement was not a bar to respondent's right of recovery. The circuit court ruled in the garnishment proceeding that the amount of $92.14, representing one installment of Chisholm's quarterly benefit, became due and payable by garnishee to Chisholm during the period of the garnishment and that the provisions of the Holiday Fund Trust Agreement were not a bar to recovery of that amount by respondent. Garnishee appeals from that ruling.

Although the garnishee Trusts devotes the first point of its brief to assessing the general validity of spendthrift trust provisions in Missouri, the specific crucial issue in this case lies elsewhere. Spendthrift provisions in trusts are clearly valid in Missouri, and such provisions may preclude creditors from seizing the interests of the beneficiaries of these trusts. Bixby v. St. Louis Union Trust Co., 323 Mo. 1014, 22 S.W.2d 813, 820 (1929); Mullin v. Trolinger, 237 Mo.App. 939, 179 S.W.2d 484, 488 (1944); Gentemann v. Dyer, 140 S.W.2d 75, 78 (Mo.App.1940). However, the creation and application of spendthrift trusts is not unlimited; the spendthrift provision should be upheld only as long as it contravenes neither a statute nor public policy. Partridge v. Cavender, 96 Mo. 452, 9 S.W. 785, 786 (1888); In re Moorehead's Estate, 289 Pa. 542, 137 A. 802, 806 (1927). Therefore, the crucial question in the instant case is whether the utilization of the spendthrift clause in the Holiday Fund Trust is antagonistic to a statute or public policy of this state.

Before reaching this question we must deal with the garnishee's claim that Missouri statutes and public policy relating to garnishment of payments made under employee benefit plans had been preempted by the enactment of ERISA. We note initially that this is not a situation in which state laws are preempted because of a conflict with federal laws. ERISA clearly preempts the rights of creditors to satisfy a judgment from payments made under an employee Pension benefit plan. ² The Trust in this case is not a pension benefit plan. Therefore, resolution of the preemption issue turns on an interpretation of the general preemption section of ERISA, 29 U.S.C. § 1144, which provides in part:

(a) Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title. This section shall take effect on January 1, 1975.

In support of its claim that state law is preempted by § 1144(a), garnishee cites Azzaro v. Harnett, 414 F.Supp. 473 (S.D.N.Y.1976). In that case the New York State Insurance Department received an inquiry from a participant in a union pension plan as to his benefit status. The trustees of the pension found obtained an injunction to prevent the Superintendent of Insurance from pursuing the Department's inquiry into the matter. The court noted that ERISA contained provisions allowing participants to inquire directly of the plan administrator as to benefit status (29 U.S.C. § 1025) and placing investigatory power in the Secretary of Labor (29 U.S.C. § 1134). The case stands for the proposition that states may not continue to regulate and investigate pension plans when ERISA provides its own regulatory scheme. However, it does not deal with the effect of § 1144 on state laws which do not purport to expressly regulate employee benefit plans. The question we must answer is whether the Missouri state laws and policies we might wish to apply "fall into (the) narrow category of laws which Affect employee benefit plans but which do not Relate to them within the meaning of (§ 1144(a))." Stone v. Stone, 450 F.Supp. 919, 932 (N.D.Cal.1978) (Emphasis supplied.)

Federal courts addressed with the question of what state laws are preempted because they "relate to employee benefit plans" have interpreted 29 U.S.C. § 1144(a) broadly to preempt much state legislation. See National Carriers' Conference Committee v. Heffernan, 454 F.Supp. 914 (D.Conn.1978) (preemption of state tax imposed on employee welfare benefit plans); Standard Oil Company v. Agsalud, 442 F.Supp. 695 (N.D.Cal.1977) (preemption of...