Florence Lake Invs., LLC v. Berg

• Decision Date: 12 August 2022
• Docket Number: S-21-350.
• Citation: 312 Neb. 183,978 N.W.2d 308
• Parties: FLORENCE LAKE INVESTMENTS, LLC, appellant, v. Jason BERG and Mary Berg, appellees, David M. Kroeger, intervenor-appellee, and Merrill Lynch, Pierce, Fenner & Smith, Incorporated, and Zoetis, Inc., garnishees-appellees.
• Court: Nebraska Supreme Court

312 Neb. 183
978 N.W.2d 308

FLORENCE LAKE INVESTMENTS, LLC, appellant,
v.
Jason BERG and Mary Berg, appellees,

David M. Kroeger, intervenor-appellee,
and
Merrill Lynch, Pierce, Fenner & Smith, Incorporated, and Zoetis, Inc., garnishees-appellees.

No. S-21-350.

Supreme Court of Nebraska.

Filed August 12, 2022

John F. Zimmer V and Andre R. Barry, of Cline, Williams, Wright, Johnson & Oldfather, L.L.P., Lincoln, for appellant.

Kenneth M. Wentz III and Caitlin J. Ellis, of Jackson Lewis, P.C., Omaha, for garnishee-appellee Zoetis, Inc.

Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, and Freudenberg, JJ., and Derr, District Judge.

Cassel, J.

978 N.W.2d 315

I. INTRODUCTION

312 Neb. 186

A garnishor appeals from an order overruling its application to determine garnishee liability against a plan administrator whose interrogatory answers failed to disclose a judgment debtor's 401K account. The central issue is whether the Employee Retirement Income Security Act of 1974 (ERISA)¹ —particularly, ERISA's anti-alienation statute² —shields the administrator from state garnishment law liability. Because we conclude that it does under the circumstances here, we affirm.

II. BACKGROUND

Florence Lake Investments, LLC (Florence), obtained a judgment against Jason Berg (Berg) and his wife, Mary Berg

312 Neb. 187

(Mary). The judgment totaled over $4 million with postjudgment interest continuing to accrue.

Florence's collection efforts employed numerous postjudgment proceedings for garnishment or execution. We summarize only those events, parties, and filings pertinent to the instant appeal. Many are pertinent only to the discussion of our jurisdiction. We address the merits only as to a single postjudgment garnishment.

1. FLORENCE'S COLLECTION PROCEEDINGS

In attempting to collect the judgment against property that was not subject to Berg's bankruptcy proceeding, Florence utilized two methods: (1) postjudgment garnishments of Berg's wages and financial accounts and (2) executions against Berg and Mary's personal property. These efforts occurred more or less contemporaneously.

Although the timing of the answers to garnishment interrogatories was pertinent to issues before the district court, no error is assigned regarding the court's resolution of timing issues. Thus, we omit unnecessary dates.

(a) Garnishments

Florence sought to garnish Berg's wages and financial accounts. Florence's primary target was Berg's 401K account, which totaled over $1 million.

Florence first served Merrill Lynch, Pierce, Fenner & Smith, Incorporated (Merrill Lynch), with garnishment interrogatories, believing that it administered the 401K account. Merrill Lynch answered the garnishment interrogatories against it by disclosing that the 401K account was exclusively managed by Zoetis, Inc. (Zoetis), as plan administrator. The disposition of the garnishment against Merrill Lynch was not appealed.

After receiving Merrill Lynch's answers, Florence served garnishment interrogatories on "[Zoetis] as 401[K] Plan Administrator." The interrogatories required Zoetis to disclose wages owed to a judgment debtor, if any, and "property belonging to the judgment debtor, or credits or monies

312 Neb. 188

owed to the judgment debtor, whether due or not, other than [wages]." Additionally, the summons attached to the interrogatories stated in part, "You [Zoetis] are obligated to hold the property and credits of every description of [Berg] now in your possession or under your control until further order of this court .... You are required by law to answer the attached Interrogatories .... Penalties may be imposed in the event of willful falsification."

978 N.W.2d 316

In Zoetis’ answers to the garnishment interrogatories, it stated that it owed Berg wages as his employer, but that it did not possess any property belonging to him or owe him any other credits or monies. In other words, Zoetis did not disclose its role regarding Berg's 401K account.

Unsatisfied with Zoetis’ answer regarding the 401K account, Florence filed an application to determine garnishee liability against Zoetis under Neb. Rev. Stat. § 25-1030 (Reissue 2016). Florence alleged that "[Zoetis’] response identifie[d] wages owed to [Berg] but [did] not identify any other property or address the existence of any account funds of [Berg] under [Zoetis’] control as Plan Administrator." At the corresponding hearing, Zoetis explained it did not believe it needed to disclose Berg's 401K account, because the account was protected from garnishment under ERISA.

After an extended period of study, the court issued a written order, "overrul[ing]" Florence's application to determine garnishee liability against Zoetis. The court found that even though Zoetis had failed to strictly comply with the garnishment statutes by not disclosing Berg's 401K account, it was not liable because the account could not be subject to garnishment. Noting the parties’ agreement that ERISA governed the 401K account, the court cited federal statutes and case law prohibiting the assignment or alienation of accounts governed by ERISA.³

312 Neb. 189

(b) Executions

While Florence's application to determine garnishee liability was pending before the court, Florence sought, and the court issued, writs of execution against Berg and Mary's personal property. Berg moved the court to exempt "[one-half] interest in 10 head of cattle" from the executions.

Following a hearing on the matter, the court found that Berg's cattle were not exempt from the executions and ordered them to be sold. After the sale, David M. Kroeger sought to intervene in the execution proceedings, demanding one-half of the sale proceeds because he had owned a one-half interest in the cattle.

The court granted Kroeger's "Complaint to Intervene" and ordered the matter be set for a bench trial once discovery was complete. The record does not show any disposition of the writs of execution.

2. APPEAL

Florence filed a timely appeal from the court's order regarding Zoetis’ garnishee liability. However, at the time of Florence's appeal, its execution against the cattle remained pending before the district court.

Consequently, the Nebraska Court of Appeals initially dismissed the appeal for lack of jurisdiction, citing Neb. Rev. Stat. § 25-1315 (Reissue 2016) in its minute entry. However, Florence filed a motion for rehearing, which the Court of Appeals sustained and ordered the parties to brief "the jurisdictional issue presented." Before the Court of Appeals again addressed the appeal, we moved it to our docket.⁴

III. ASSIGNMENTS OF ERROR

Florence assigns that the district court erred in (1) denying its application against Zoetis, (2) failing to find that Zoetis was in control of Berg's 401K account at the time of garnishment, and (3) excusing Zoetis from disclosure and liability

312 Neb. 190

based on an

978 N.W.2d 317

exception that is personal to Berg and was not properly raised.

IV. STANDARD OF REVIEW

A jurisdictional question that does not involve a factual dispute is determined by an appellate court as a matter of law.⁵ When reviewing questions of law, an appellate court resolves the questions independently of the lower court's conclusions.⁶

Garnishment is a legal proceeding. To the extent factual issues are involved, the findings of the fact finder will not be set aside on appeal unless clearly wrong; however, to the extent issues of law are presented, an appellate court has an obligation to reach independent conclusions irrespective of the determinations made by the court below.⁷

V. ANALYSIS

1. JURISDICTION

Florence and Zoetis agree that we have jurisdiction of this appeal. But parties cannot confer subject matter jurisdiction upon a judicial tribunal by either acquiescence or consent, nor may subject matter jurisdiction be created by waiver, estoppel, consent, or conduct of the parties.⁸ Thus, the parties’ agreement is not dispositive. For that reason, we recall a familiar proposition: Before reaching the legal issues presented for review, it is the duty of an appellate court to determine whether it has jurisdiction over the matter before it.⁹

To perform that duty, we first recite basic principles of appellate jurisdiction, judgments, and final orders. Then, we classify an order determining garnishee liability in a postjudgment

312 Neb. 191

garnishment. Last, we address the only question potentially affecting jurisdiction here: whether the multiple postjudgment garnishments and executions implicate § 25-1315.

(a) Final Order or Judgment

For an appellate court to acquire jurisdiction of an appeal, the party must be appealing from a final order or a judgment.¹⁰ A judgment is the final determination of the rights of the parties in an action.¹¹ Every direction of the court made or entered in writing and not included in a judgment is an order.¹² By comparing these definitions, one can easily recognize that judgments and orders are mutually exclusive. While all judgments not incorrectly designated as such are appealable, an order may be appealed only if a statute expressly makes the order immediately appealable or the order falls within the statutory definition of a final order.¹³

Under our final order statute,¹⁴ to be a final order subject to appellate review, the lower court's order must (1) affect a substantial right and determine the action and prevent a judgment, (2)

978 N.W.2d 318

affect a substantial right and be made during a special proceeding, (3) affect a substantial right and be made on summary application in an action after a judgment is entered, or (4) deny a motion for summary judgment which was based on the assertion of sovereign immunity or the immunity of a government official.¹⁵ Substantial rights under § 25-1902 include those legal rights that a party is entitled to enforce or defend.¹⁶

312 Neb. 192

(b) Postjudgment Garnishment Orders

An order overruling an application to determine garnishee liability in a postjudgment garnishment proceeding is an order affecting a substantial right made on a summary...