General Elec. Capital Corp. v. Ico, Inc.

• Decision Date: 12 June 2007
• Docket Number: No. 14-05-01095-CV.,14-05-01095-CV.
• Citation: 230 S.W.3d 702
• Parties: GENERAL ELECTRIC CAPITAL CORPORATION and Morris Tabak, Appellants v. ICO, INC., Timothy J. Gollin, and Weycer Kaplan Pulaski & Zuber, P.C., Appellees.
• Court: Texas Court of Appeals

230 S.W.3d 702

GENERAL ELECTRIC CAPITAL CORPORATION and Morris Tabak, Appellants v. ICO, INC., Timothy J. Gollin, and Weycer Kaplan Pulaski & Zuber, P.C., Appellees.

No. 14-05-01095-CV.

Court of Appeals of Texas, Houston (14th Dist.).

June 12, 2007.

Morris Tabak, Jamal A. Asafi, Houston, for appellants.

Charlotte Jean Fischer, Richard Kaplan, Tanya Nicole Garrison, Houston, for appellee.

Panel consists of Justices FOWLER, EDELMAN, and FROST.

MAJORITY OPINION

WANDA McKEE FOWLER, Justice.

Appellants, General Electric (GE) and Morris Tabak, appeal the trial court's granting of a motion to dissolve a writ of garnishment in favor of appellees, ICO, Inc. (ICO), Timothy Gollin, and Weycer Kaplan Pulaski & Zuber, P.C. GE and Tabak bring three issues on appeal: 1) whether the trial court erred in granting the motion to dissolve on the basis that the garnished funds were exempt as current wages for personal service; 2) whether it was error to grant attorney's fees in favor of Gollin against GE and Tabak; 3) and whether the court reversibly erred in not filing findings of fact and conclusions of law as requested. We affirm the dissolution of the writ, but reverse the trial court's award of attorney's fees to Gollin.

Factual and Procedural Background

In June of 2001, Gollin began working for ICO as Chief Executive Officer. Gollin's employment agreement stated that he would receive a severance package should his contract not be renewed. The contract stated that Gollin would be entitled to a severance package equal to one time his base salary immediately prior to his non-renewal. The contract did not, however, specify any details of the payment, such as its timing or whether it would be payed in a lump sum or over time. After the end of his contract term, Gollin was unable to reach an agreement with ICO concerning renewal. Gollin and ICO agreed that his nonrenewal entitled Gollin to severance pay. ICO proposed to pay the severance over a full year, but Gollin requested a lump sum payment. The two entered into a compromise agreement, stating that ICO would pay the severance over a six month period.

In the meantime, GE obtained a judgment against Gollin in the United States District Court for the Southern District of Texas in November of 2001 for $389,102. GE pursued a garnishment in state court against ICO, who owed Gollin the severance payment, which was equivalent of one year's salary, or $247,000. The trial court issued a writ of garnishment, and thereafter Gollin filed a motion to dissolve the writ pursuant to Rule 664a of the Texas Rules of Civil Procedure. He argued that the garnished severance payments were current wages and, as such, were exempt under the Texas Constitution, the Texas Civil Practice and Remedies Code, and the Texas Property Code. ICO then answered the writ, admitting its indebtedness, but pleading as a defense that the amount constituted Gollin's current wages.

The trial court entered an order dissolving the writ, stating in its order that it found the motion to dissolve meritorious. The court further ordered that GE and Tabak would pay $3,500 in attorney's fees to Gollin's counsel, Weycer, Kaplan, Pulaski, & Zuber, P.C. Following this order, GE requested findings of fact and conclusions of law. The trial court never responded to this request.¹

Analysis

I. The Writ Was Not Improperly Dissolved

A. Standard of Review

Precedent from this court dictates that we apply an abuse of discretion standard to resolve whether the dissolution of a writ of garnishment was improvidently granted. See Am. Express Travel Related Servs. v. Harris, 831 S.W.2d 531, 533 (Tex. App.-Houston [14th Dist.] 1992, no writ); see also Kyanize Parts, Inc. v. Denton, No. C14-91-00705-CV, 1992 WL 105764, at *5 (Tex.App.-Houston [14th Dist.] May 21, 1992, no writ) (not designated for publication). A trial court abuses its discretion if it acts without reference to guiding rules or principles, or in an arbitrary or unreasonable manner. See Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex.1985).

B. No Abuse of Discretion in Holding Severance Was Current Wages for Personal Services

Under Rule of Civil Procedure 664a, a defendant whose property or account has been garnished may seek to vacate, dissolve, or modify the writ of garnishment for any grounds or cause, extrinsic or intrinsic. One such ground, under Texas law, is the exemption from garnishment for "current wages for personal service." TEX. CONST. art. XVI, § 28; TEX. CIV. PRAC. & REM.CODE § 63.004; see also TEX. PROP. CODE § 42.001.

"The garnishment exception for current wages applies without regard to whether compensation is denominated as `wages' or `salary,' the controlling issue being whether it is compensation for personal service." Davidson Texas, Inc. v. Garcia, 664 S.W.2d 791, 793 (Tex.App.-Austin 1984, no writ). This exception should be liberally construed in favor of the wage earner. Id. (citing J.M. Radford Grocery Co. v. McKean, 41 S.W.2d 639, 640 (Tex.Civ.App.1931, no writ); see also Hickman v. Hickman, 149 Tex. 439, 234 S.W.2d 410, 413 (1950)) (stating "[O]ur exemption laws should be liberally construed in favor of express exemptions, and should never be restricted in their meaning and effect so as to minimize their operation upon the beneficent objects of the statutes. Without doubt the exemption would generally be resolved in favor of the claimant").

The record tells us only that the initial employment agreement between Gollin and ICO required ICO to pay Gollin a severance package if the parties were unable to reach an agreement regarding contract renewal. It was the job of the court below, and it is our job now, to construe whether such an agreement is for "personal services." GE and Tabak point to language in a supplemental agreement between Gollin and ICO, which states that the severance will be owed upon termination of the employment relationship. But this language only states when the severance must be paid, not why the severance was owed. GE and Tabak also cites language from the original employment agreement as proof that the severance package was payment for continuing obligations, such as nondisclosure and agreement not to sue ICO. However, this cited contract provision deals with the severance package that would have been owed had Gollin's employment been terminated other than by non-renewal. The severance package in this case was owed pursuant to different contractual provisions — provisions which did not describe why the severance was owed. Therefore, we look to case law for guidance in construing whether severance payments are for personal services.

In Radford, a grocery store was garnished for an amount owing to its employee, Tinsley. 41 S.W.2d at 639. Tinsley's contract provided that he would earn a set amount of money per month, and if Tinsley met the condition of remaining with the grocery store for more than one year, he would be paid an additional bonus, based on a percentage of his sales. Id. The trial court allowed the garnishment based on the idea that any amount over and above his hourly wage did not constitute "current wages for personal services." Id. The appellate court reversed, relying on the liberal construction to be given exemption statutes. It held that the payment was current wages for personal services within the meaning of the Constitutional and statutory exemptions because the payment was additional consideration for Tinsley's services. Id. at 640.

King v. Floyd extended the Radford line of reasoning. In King, a football player's contract contained a provision that he would be paid while he was injured, so long as the team physician opined that the player was unable to perform due to his injuries. 538 S.W.2d 166, 169 (Tex.Civ. App.-Houston [1st Dist.] 1976, writ ref'd n.r.e.). The court held that the payments made to the player after his injury rendered him unable to compete might be considered additional compensation for the services previously rendered, and construed the continuation of salary to be in the nature of a bonus for satisfactory service. Id.

The liberal construction in favor of express exemptions, as illustrated in Radford and King controls our disposition of this issue. When no contradictory contract language exists, we hold that a severance payment should be liberally construed as a bonus for satisfactory service, since such payments might be considered additional compensation for services previously rendered. Here, although the payment of the severance is an amount over and above Gollin's normal salary, the contract does not state that the money is for something other than services already rendered.

Therefore, because of the general rule that we apply the exemption laws liberally, and because this contract does not clearly state that the severance payment was for something other than personal services, and because courts have found severance agreements to qualify as current wages for personal service, the trial court acted within its discretion when it found that the severance payment was in the nature of current wages for personal service.²

C. No Abuse of Discretion in Holding That Severance Did Not Lose Exempt Status

GE and Tabak argue that even if the severance constituted current wages when it was owed, it lost its exempt status when Gollin agreed to "leave" part of the severance with ICO to be paid over time. While it is true that an exemption may be lost under certain circumstances, those circumstances are not present here.

1. Current Wages Exemption May Be Lost

The protection of the constitutional exemption may be lost when the wages are under the control of the employee and the employee voluntarily leaves them with his employer or collects and deposits them with someone else. Davidson v. F.H. Logeman Chair Co., 41 S.W. 824, 825 (Tex. Civ.App.1897, no writ); see also Sloan v. Douglass, 713 S.W.2d 436, 440 (Tex.App.-Fort Worth 1986, writ ref'd n.r.e.) (statin...