Greening Donald Co., Ltd. v. Oklahoma Wire Rope Products, Inc., 67039
| Decision Date | 08 November 1988 |
| Docket Number | No. 67039,67039 |
| Citation | 766 P.2d 970 |
| Parties | GREENING DONALD CO., LTD., a Canadian corporation, Appellant, v. OKLAHOMA WIRE ROPE PRODUCTS, INC. an Oklahoma corporation, and C.J. Anderson dba Oklahoma Wirerope Products, Appellees. |
| Court | Oklahoma Supreme Court |
Appeal from District Court of Oklahoma County; Charles L. Owens, District Judge.
Appellant (a judgment creditor) attempted to satisfy a portion of the outstanding debt by garnishing the appellee's Individual Retirement Account ("IRA"). The Bank/Trustee of the IRA responded with a claim of exemption and requesting a hearing. The trial court ruled that the Bank's claim of exemption was valid and that the IRA was exempt from the claims of creditors under Oklahoma law.
C. Craig Cole, Cole, Huff & Davila, Oklahoma City, for appellant.
Mark T. Koss, Hamilton & Koss, Oklahoma City, for appellees.
The appellant, Greening Donald Co., Ltd. is a judgment creditor of appellee, C.J. Anderson. In an attempt to collect a portion of the outstanding judgment of $28,550.00, the appellant issued a garnishment summons to Union Bank and Trust Company of Oklahoma City, the custodian of the appellee's Individual Retirement Account (IRA). The garnishee bank responded with a claim for exemption, alleging that the IRA was exempt from garnishment under 60 O.S.1981 § 328, and requesting a hearing.
The trial court, over the appellant's objection, ruled that the IRA in question was in fact exempt under "Oklahoma statutory and case law" and granted the claim for exemption. This appeal followed. The appeal was first assigned to the Oklahoma Court of Appeals, Oklahoma City Division, for resolution. Pursuant to Rule 1.204(III) Rules of Appellate Procedure, 12 O.S.1987 Supp., Ch. 15, App. 2, the case was retransferred to this Court because it presents an issue of significant public interest "concerning the applicability of statutory exemptions from execution to Individual Retirement Accounts."
The tax code provision at issue, 26 U.S.C. § 408, makes no prohibition on attachment or garnishment of IRA's. Other jurisdictions addressing similar issues have recognized that creditors are not precluded, by federal law, from reaching these assets. See e.g.: Bartlett Co-op. Ass'n. v. Patton, 239 Kan. 628, 722 P.2d 551, 555 (1986). The United States Supreme Court has recognized that exemptions from attachment and garnishment are purely questions of state law. Huron Holding Corp. v. Lincoln Mine Operating Co., 312 U.S. 183, 61 S.Ct. 513, 517, 85 L.Ed. 725 (1941). That rule has never been changed.
There can be no question that under 60 O.S.1981 § 327 et seq., an IRA may be created which is exempt from the claims of creditors. The IRA must, however, conform to certain requirements in order to be so protected. The pertinent portions of Title 60 state:
§ 328. Power to alienate or encumber--Exemption from process and claims
"Any person having an interest in any such plan, trust or contract, containing the provisions [in § 327], or provisions of substantially the same force and effect, shall have no right to alienate or encumber such right or interest in any manner contrary thereto, AND THE INTEREST of any such person in any plan, trust or contract, or in any property or any right subject to any such plan, trust or contract, SHALL BE EXEMPT FROM GARNISHMENT, attachment, execution of the claims of creditors." (emphasis added).
Plainly, any IRA or similar plan which conforms to the statutes is protected from the claims of creditors. The narrow question to be answered in this case becomes whether or not the IRA at issue does comport with the statutory requirements.
There are two primary requirements contained in these statutes. First, that the IRA be tax exempt under the current Federal Tax Laws. 60 O.S.1981 § 326. Second, the IRA must contain provisions indicating the parties' intent that the IRA be inalienable and protected. 60 O.S.1981 § 328. Section 327 merely creates the option of declaring an IRA as exempt.
Certain facts relating to the IRA at issue here are undisputed by the parties. First, this, as any other IRA, is a form of trust. See: 26 U.S.C. § 408(a). That trust must meet certain requirements to qualify as a tax exempt IRA. 1 Significantly, the appellants here do not dispute the tax exempt status of this IRA. We can presume therefore, for purposes of this decision, that the first requirement under our statutes is met. 2
The IRA instrument at issue is part of the record. Article 9.15 of that instrument is a provision prohibiting the assignment, pledge or alienation of the account and providing that the account is not subject to the claims of creditors. This article meets the requirements of 60 O.S.1981 § 327.
The appellant, however, argues that the above provision is a nullity. The appellant states that, despite the language of Article 9.15, because the IRA instrument contains a provision which authorizes the appellee to terminate the IRA and cause the assets to be distributed according to his wishes, it is, in fact, alienable. We disagree with the appellant's definition of alienation.
The common, legal, definition of "alienate" is: "to convey; to transfer the title to property." Black's Law Dictionary, 5th Ed. at 66 (emphasis added). Similarly, "alienability" is defined as "the quality or attribute of being transferrable; ..." Id. Article 9.15 of appellee's IRA specifically states that "No interest, right or claim in or to any part of the Custodial Account or any payment therefrom shall be assignable, transferrable or subject to sale, mortgage, pledge, ..." This IRA account, as long as it is maintained, is not alienable.
As appellant points out, the IRA does provide, in Article 9.11(b), that "The Depositor may remove the Custodian or terminate the...
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In re Jacobs
...meets the initial threshold for §§ 326-28 of Title 60 to apply for exclusion.72 The Oklahoma Supreme Court, in Greening Donald Co., Ltd. v. Oklahoma Wire Rope Products, Inc. ,73 read the statute to require the plan: 1) be exempt from taxation under "current Federal Tax Laws," citing § 326 o......
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BANK v. BOLANDER, 94
...administered in Oklahoma as well. The Trust claims that IRAs are exempt from garnishment in Oklahoma. See Greening Donald v. Okla. Wire Rope Prod., 766 P.2d 970, 972 (Okla.1988) (IRAs are exempt from creditors, but the case does not address exemption after death of settlor); Matter of Estat......
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