First Nat. Bank and Trust Co. of Ada v. Arles, 67477
| Decision Date | 30 July 1991 |
| Docket Number | No. 67477,67477 |
| Citation | 816 P.2d 537 |
| Parties | , Unempl.Ins.Rep. (CCH) P 16166A, 1991 OK 78 The FIRST NATIONAL BANK AND TRUST COMPANY OF ADA, a corporation, Appellee, v. Ovie Joe ARLES, Appellant. |
| Court | Oklahoma Supreme Court |
Certiorari to the Court of Appeals, Division No. 2; John D. Miller, Judge.
Petition in Error filed by appellant asking that the Court of Appeals unpublished opinion be reversed. Because the substance of appellant's claim requests that the trial judge be prohibited from enforcing his order, we treat cause as an original proceeding. HELD, that the social security benefits received by appellant are exempt from any legal process including court ordered payment plan in contempt proceeding.
ORIGINAL WRIT GRANTED; COURT OF APPEALS OPINION VACATED; WRIT OF PROHIBITION ISSUED.
T. Walter Newmaster, Benson and Newmaster, Ada, for appellee.
Kerry Glen Spradlin, Becky J. Miles Viers, Steven A. Novick, Gary A. Taylor, Stan L. Foster, Gary W. Dart, Legal Aid of Western Oklahoma, Inc., Shawnee, for appellant.
Kim Savage, Gill Deford, Joel L. Carson, National Sr. Citizens Law Center, Los Angeles, for amicus curiae, Oklahoma Alliance on Aging.
Petition for rehearing filed in this cause is granted and this court's opinion promulgated herein on October 16, 1990 and reported at 61 OBJ 2723 is withdrawn and replaced by the opinion filed this date.
May judicial proceedings in the district court be used to force a judgment debtor to pay money to the plaintiff creditor where the defendant debtor's sole source of income is social security and disability benefits? The question has not been presented before to this Court. Upon review of the applicable federal statute and cases from other jurisdictions we answer in the negative.
The First National Bank of Ada agreed to loan Arles money for an automobile. When Arles failed to make the payments required by the terms of the loan the Bank obtained judgment against him. Arles failed to satisfy the judgment and the court ordered him to appear for a hearing on assets. He appeared and agreed to make payments in the amount of sixty ($60.00) dollars per month. He again failed to make payments, and the Bank filed a contempt action. Upon hearing, the court determined that Arles received social security and disability benefits in the amount of four hundred dollars ($400.00) a month. As to other possible sources of income, the attorney for the Bank made statements implying that Arles had worked for some four months during 1979, but there is no evidence to support these suggestions. The only evidence in the record is that Arles was unemployed and had no income other than the benefits received from Social Security and disability. The trial court found that Arles had wilfully failed to make the required payments, deferred judgment and sentence, and modified the amount of the required payments to fifty ($50.00) dollars per month.
Arles appealed. The Court of Appeals affirmed by unpublished opinion. We have granted certiorari to review the proposition of first instance here.
Before addressing the substance of this case, we first must inquire into our own jurisdiction to resolve the matter. Although the order complained of found that Arles was guilty of contempt, sentence was deferred for six months. A court minute in the record indicates that the parties were concerned about the appealability of such an order. The trial court offered to accelerate the deferred sentence to assure its finality. However, the record does not show such was done.
A deferred sentence in a criminal proceeding is not final order; the district court retains jurisdiction until judgment and sentence is entered pursuant an application to accelerate. Nguyen v. State, 772 P.2d 401, 403 (Okla.Crim.App.1989); 22 O.S.1981 § 991c. We recognize that an indirect contempt action is civil in nature and not governed by the criminal law, Browning v. Ray, 440 P.2d 721, 725 (Okla.1968). However, the proceedings appear analogous in considering the appealability of an order. An order in contempt proceeding is thus not appealable until the judgment and sentence become final. See Hampton v. Hampton, 609 P.2d 772 (Okla.1980). The finding that this was not an appealable order, however, does not necessarily preclude that its substance be reviewed. We customarily look to the content and substance of an instrument filed in this court rather than its form or title, Horizon's, Inc. v. KEO Leasing Co., 681 P.2d 757 (Okl.1984), and sometimes treat a paper entitled "Application to Assume Original Jurisdiction" as a Petition in Error, or vice versa. Amarex, Inc. v. Baker, 655 P.2d 1040 (Okl.1983).
Here, the relief sought by Arles is a ruling by this Court to prohibit the enforcement of the trial judge's order. We do not treat the matter as an appeal (in which case it would be premature), but rather look to its substance, and recast it as an original proceeding asking for a writ of prohibition. We now turn to the substantive issue raised by Arles to determine whether the writ shall issue.
Before us the bank urges the correctness of the trial court's ruling. Arles argues that under the federal statute and case law from other jurisdictions, his social security and disability benefits are not subject to the "legal processes" of the state. In support of his argument, he cites as controlling 42 U.S.C. § 407(a) and Philpott v. Essex County Welfare Board, 409 U.S. 413, 93 S.Ct. 590, 34 L.Ed.2d 608 (1973).
Federal law at 42 U.S.C. § 407(a) specifically exempts social security benefits from certain types of creditor remedies: 1
The right of any person to any future payment under this subchapter shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law. (emphasis ours)
The purpose of the statute is to "preclude beneficiaries from diverting their social security payments away from the statute's seminal goal of furnishing financial, medical, rehabilitative and other services to needy individuals." Dept. of Health v. Davis, 616 F.2d 828, 831 (5th Cir.1980).
In Philpott v. Essex County Welfare Board, supra, the United States Supreme Court addressed Section 407(a) and its restrictions. There, an individual named Wilkes applied for assistance with the Essex County Welfare Board. As a condition to receiving benefits the Board required Wilkes to sign a reimbursement agreement. The agreement had the effect of a judgment, and allowed the Board to obtain reimbursement from property acquired subsequently. Wilkes received benefits from Essex County, and was soon awarded retroactive disability benefits under the Social Security Act. Wilkes refused to repay the money he had received from Essex County, so the Board sued to reach the bank account in which Wilkes had deposited his benefit check. The Supreme Court held that Section 407(a) prevented the Board from reaching these funds because Section 407(a) "imposes a broad bar against the use of any legal process to reach all Social Security benefits." Id., at 417, 93 S.Ct. at 592. (Emphasis ours) In making this ruling, the Court explained that the state of New Jersey was not a "preferred creditor" as compared to any other judgment creditor. See also Bennett v. Arkansas, 485 U.S. 395, 108 S.Ct. 1204, 99 L.Ed.2d 455 (1988).
In interpreting the rule of Philpott, courts have arrived at varying conclusions. The court in Household Corp. v. Chase Manhattan Bank, 91 Misc.2d 141, 397 N.Y.S.2d 564 (N.Y.1977) held that "creditors cannot recover the proceeds of social security payments from a savings or checking account where they have been placed by a judgment debtor." In State Central Collection Unit v. Stewart, 292 Md. 255, 438 A.2d 1311 (1981), the state sought reimbursement for medical care given by the state. The court allowed the state a judgment against only that money which was "non-exempt"; the state was not allowed a judgment against social security benefits.
Reaching a contrary result, the court in Russo v. Russo, 1 Conn.App. 604, 474 A.2d 473, 477 (1984), a case relied on by Bank in its brief, ruled that "nothing in [Section 407(a) ] prevents the use of the funds, when received, to pay loans or debts for which the beneficiary is obligated where the agreement to repay does not delineate the source of the repayment." See also Tidwell v. Schweiker, 677 F.2d 560, 568 (7th Cir.1982), cert. denied, 461 U.S. 905, 103 S.Ct. 1874, 76 L.Ed.2d 806 (1983). Apparently the court found to be determinative the fact that no source was delineated in the agreement. The court there allowed the judgment to be enforced against the defendant's social security benefits, even though this was his only source of income.
The flaw with Russo and Tidwell becomes evident when these cases are examined in light of Philpott. In Philpott no source was designated for repayment in the agreement between Essex County and Wilkes, yet the Supreme Court held that Section 407 barred "legal process" to reach the benefits. Thus, whether a source is delineated by the agreement was not relevant to the High Court; the essential inquiry was whether the funds from which repayment is sought were social security benefits. Hence, the fact that the "agreement" between Arles and the court did not specify the source of the funds is immaterial. Philpott, Id.
In the present case, Arles' only income was the social security and disability benefits. Arles stated that he was unemployed. Specifically, the record states as follows:
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