In re Mason

• Decision Date: 05 April 1993
• Docket Number: Bankruptcy No. 93-10359.
• Citation: 153 BR 8
• Parties: In re Wayne J. MASON, Susan P. Mason, Debtors.
• Court: U.S. Bankruptcy Court — District of Rhode Island

153 B.R. 8 (1993)

In re Wayne J. MASON, Susan P. Mason, Debtors.

Bankruptcy No. 93-10359.

United States Bankruptcy Court, D. Rhode Island.

April 5, 1993.

Christopher Lefebvre, Pawtucket, RI, for debtor, Susan P. Mason.

Richard B. Applebaum, Providence, RI, for G.E. Capital Corp.

Louis A. Geremia, Cuzzone, Geremia & Civittolo, Providence, RI, for Chapter 7 Trustee.

DECISION AND ORDER

ARTHUR N. VOTOLATO, Jr., Bankruptcy Judge.

Before the Court is the Debtor's¹ Motion to Avoid Judicial Lien on garnished wages pursuant to 11 U.S.C. § 522(f), and the Objection of creditor G.E. Capital Corporation ("G.E. Capital"). On March 30, 1993, we held a telephonic conference in this matter during which the parties stipulated that the only item remaining in dispute is $663.43, representing wages garnished from August through November 1992.²

The Debtor contends that our holding in In re Nunally, 103 B.R. 376 (Bankr. D.R.I.1989) supports her argument that garnished funds remain the property of the debtor until a valid charging order is entered by an appropriate state court, and that legal title is unaffected by the physical transfer of such funds to the judgment creditor, in the absence of such an order. We agree.

The distinguishing fact in dispute here, which was not present in In re Nunally, 103 B.R. 376 (Bankr.D.R.I.1989) is that instead of the garnishee holding the attached funds until the entry of a valid charging order under R.I.Gen.Laws § 10-17-2 et seq., the Debtor's employer, Hopkins Health Center, periodically turned over the attached wages to G.E. Capital.

In In re Nunally, 103 B.R. at 377 (quoting In re Ford, 29 B.R. 364, 366 (Bankr. W.D.Mo.1983)), we held that "garnished funds are owned by the debtor until the court orders the funds paid over. At that point it would appear that title passes." Consistent with that holding, here, although the debtor lost physical possession of garnished funds through the collection efforts of the creditor, she was not divested of her legal interest in those funds where the requisite state court procedures were not followed to properly transfer legal title to G.E. Capital.

Although G.E. Capital argues that the Debtor's rights should be limited to an action against her employer, notwithstanding its own failure to touch all the procedural bases, it would be legally incorrect and grossly unfair to leave the Debtor with rights only against her employer, who is nothing more than a custodian or stake-holder in the...