In re Stewart
| Decision Date | 24 July 1983 |
| Docket Number | Bankruptcy No. 82C-00011,82C-00159. |
| Parties | In re William Joseph STEWART and Janice Ilene Stewart, Debtors. In re Courtney B. FAIRBOURNE and Ileen R. Fairbourne, Debtors. |
| Court | United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of Utah |
Duane H. Gillman, Boulden & Gillman, Salt Lake City, Utah, for trustee in Fairbourne.
Stephen W. Rupp, McKay, Burton, Thurman & Condie, Salt Lake City, Utah, for debtors in Fairbourne.
George H. Searle, Salt Lake City, Utah, for debtors in Stewart.
Sharon Peacock, Asst. Atty. Gen., for the State of Utah.
Debtors in these chapter 7 cases claim exemptions in wages earned but not paid on the filing dates of their petitions. Utah law, effective May 12, 1981, see 9A Utah Code Ann. §§ 78-23-1 to 78-23-15 (Utah Exemptions Act), prohibits Utah debtors from claiming exemptions under 11 U.S.C. § 522(d). Thus, debtors claim exemptions in wages under both state and federal law found in 7B Utah Code Ann. § 70B-5-105 and 15 U.S.C. §§ 1671-1677. See 11 U.S.C. § 522(b)(2)(A).
The trustee in each case objected to the claimed exemptions in wages based on rulings made in In re Olsen, Bankr. No. 81-02999 (), In re Lane, Bankr. No. 81-03205 (), and In re Collins, Bankr. No. 81-03200 (). In those cases it was held that neither Section 70B-5-105 of the Utah Uniform Consumer Credit Code nor 15 U.S.C. §§ 1671 to 1677 provides a bankruptcy exemption for pre-petition wages.
Debtors contend that the Utah Exemptions Act, insofar as it denies them an exemption in wages, is unconstitutional for various reasons. The court's reconsideration of the rulings in Olsen, Lane, and Collins makes a determination of these constitutional issues unnecessary. On June 21, 1983, Judge Mabey reversed the rulings in Olsen, Lane, and Collins. In re Hughes, Bankr. No. 82M-00409; In re Wienhauser, Bankr. No. 82M-00334; In re Thurgood, Bankr. No. 82M-00439; In re Tarver, Bankr. No. 82M-00495; In re Darr, Bankr. No. 82M-00505; In re Adams, Bankr. No. 82M-00543.
Laws of Utah, Chapter LXXI, Sec. 3429 s. 570(7) (1896) (emphasis in original).
In 1898, that statute was amended to read as follows:
One-half of the earnings of the judgment debtor for his personal services, rendered at any time within sixty days next preceding the levy of execution; provided, that in no case when the earnings are one dollar a day or less, shall any part thereof be liable to execution or garnishment.
Revised Statutes of Utah, Sec. 3245(7) (1898) (emphasis in original).
The wage exemption statute was amended again in 1899 as follows:
The earnings of the judgment debtor for personal services rendered within sixty days next preceding the levy of the execution, by garnishment or otherwise, if the judgment debtor be a married man, or with a family dependent upon him for support are exempt from execution.
Laws of Utah, Chapter 66, Sec. 3245(7) (1899).
In 1900, the Utah Supreme Court reviewed the changes in the Utah wage exemption law between 1896 and 1899 and explained the reason for increasing the amount of the exemption:
It is a matter of common knowledge that, at the time and previous to the passage of the act limiting the remedy by garnishment, many . . . citizens of the state had families to support . . . and that, owing to the financial crisis which prevailed, it was a difficult task for the laborer to earn sufficient to properly support his family.
Kirkman v. Bird, 22 Utah 100, 61 P. 338 (1900).
Laws of Utah, Chapter 58, Sec. 1 (1951) (former Section 78-23-1(7) Utah Code Ann. (1953)).
The Bankruptcy Act of 1898 incorporated the state wage exemption statute as a bankruptcy exemption in wages in Section 6 of the Bankruptcy Act, former 11 U.S.C. § 24. The long-standing practice of the referees in bankruptcy in this district was to apply the Utah wage exemption to allow a bankrupt to retain one-half of the gross monies earned within the thirty day period preceding bankruptcy and to require the bankrupt to account to the trustee for the other one-half for the benefit of creditors. See In re Cornelius Workman. Bankr. No. B-432-67 ().
In 1969, the Utah Legislature enacted the Utah Uniform Consumer Credit Code. Sections 70B-5-105 and 5-106 of that statute respecting garnishment took effect on July 1, 1970 in order to coincide with Title III of the federal Consumer Credit Protection Act, Pub.L. No. 90-321, 82 Stat. 146, § 504(c), 90th Cong. (May 29, 1968). See Section 70B-9-101(4); Bennett, "The Political History of the U3C in Utah," 23 PERS. FIN.L.Q.REP. 75 n. 2 (1969). The federal Consumer Credit Protection Act defers to any state law with garnishment limitations more generous to debtors than those provided by the federal law. See 15 U.S.C. § 1677. But the garnishment provisions of the Utah Uniform Consumer Credit Code are both more and less generous to debtors than the federal law. Section 70B-5-105 is more generous to debtors than the federal statute, as far as it goes, because it uses a multiplier of forty times the federal minimum wage to calculate the exemption while 15 U.S.C. § 1673 uses a multiplier of thirty. Section 70B-5-105 is less generous to debtors than the federal statute because it applies only to garnishments to enforce judgments "arising from a consumer credit sale, consumer lease, or consumer loan." § 70B-5-105(2). Thus, after July 1, 1970, there was some confusion in Utah over the applicability of either Section 70B-5-105 or 15 U.S.C. § 1673. Confusion was compounded by the legislature's failure to repeal Section 78-23-1(7), which exempted one-half of the earnings of the judgment debtor for personal services rendered within thirty days preceding the garnishment.
Uncertainty led to legal controversy. See, for example, Opinion No. 70-058 of the Attorney General for the State of Utah (October 1, 1970). The State of Utah applied for, but was denied, an exemption from enforcement of the federal statute. See Opinion of Wage-Hour Administration, U.S. Dept. of Labor, No. 1168 (WH-121) (Feb. 5, 1971), cited in Comment, "Utah's UCCC: Boon, Boondoggle, or Just Plain Doggle," 1972 UTAH L.REV. 133, 146 n. 79. Differences between the Utah and federal statutes led to court challenges of the Utah garnishment rules. See King v. City Court of Murray, Civ. No. 12425 () (petition dismissed June 7, 1971 without opinion); King v. City Court of Murray, Civ. No. 199978 () (dismissed for lack of prosecution Sept. 3, 1980); Comment, supra. In the King cases, petitioners asked the Utah Supreme Court and the Third Judicial District Court to amend the Utah Rules of Civil Procedure relating to garnishments. Both cases, however, were dismissed.
Legal doubt surrounding Utah's garnishment rules lessened after the Utah Supreme Court amended Rule 64D(e)(v) of the Utah Rules of Civil Procedure effective November 1, 1972. The amendment provided that all garnishments in Utah would be limited by the amounts fixed in Section 70B-5-105 of the Utah Uniform Consumer Credit Code.
Thus, at the time of the consideration and passage of the Utah Exemptions Act, wage exemptions in Utah were governed by Section 70B-5-105 of the Utah Uniform Consumer Credit Code and by Rule 64D, which incorporates Section 70B-5-105. Chapter III, Section 1, of the Laws of Utah, 1981, which enacted the Utah Exemptions Act, repealed former Section 78-23-1(7). The legislature, however, demonstrated no intent to repeal or replace Rule 64D or Section 70B-5-105.
An initial reading of Section 78-23-15 may prompt the conclusion that it says Utah debtors in bankruptcy may exempt only such property as is expressly mentioned in chapter 23 of title 78. That conclusion, however, may be questioned. Section 78-23-15 is composed of two parts: a rule and an exception to that rule. The rule is that...
To continue reading
Request your trial