Long Island Trust Co. v. U.S. Postal Service, 721

• Decision Date: 23 April 1981
• Docket Number: D,No. 721,721
• Parties: LONG ISLAND TRUST COMPANY, Plaintiff-Appellant, v. UNITED STATES POSTAL SERVICE, Defendant-Appellee. ocket 80-6187.
• Court: U.S. Court of Appeals — Second Circuit

Page 336

647 F.2d 336

LONG ISLAND TRUST COMPANY, Plaintiff-Appellant, v. UNITED STATES POSTAL SERVICE, Defendant-Appellee.

No. 721, Docket 80-6187.

United States Court of Appeals Second Circuit.

Argued Feb. 5, 1981.

Decided April 23, 1981.

Elliot Phillips, Mineola, N. Y. (Halpern, Halpern & Axelrod, Mineola, N. Y., of counsel), for plaintiff-appellant.

Abraham Skoff, Asst. U. S. Atty., Eastern District of New York, Brooklyn, N. Y. (Edward R. Korman, U. S. Atty., for the Eastern District, and Miles M. Tepper, Asst. U. S. Atty., Brooklyn, N. Y., of counsel), for defendant-appellee.

Before WATERMAN, MANSFIELD, and KEARSE, Circuit Judges.

KEARSE, Circuit Judge:

Plaintiff-appellant Long Island Trust Company ("Long Island Trust") appeals from a judgment of the United States District Court for the Eastern District of New York, George C. Pratt, Judge, dismissing its complaint against defendant-appellee United States Postal Service ("USPS") challenging USPS's refusal to honor an income garnishment served by Long Island Trust with respect to a USPS employee. The district court granted summary judgment on the ground that the employee's wages were already subject to garnishment for family support in excess of 25 percent of his weekly disposable earnings, and the Consumer Credit Protection Act of 1970 (the "Act"), 15 U.S.C. § 1671 et seq. (1976 and Supp. III 1979), prohibits further garnishment by a judgment creditor. We affirm.

FACTS

The facts are not in dispute. On August 15, 1978, Long Island Trust recovered a judgment in the amount of $914.38 against one Donald Cheshire, Jr. On October 20, the judgment remained unsatisfied to the extent of $607.50, and Long Island Trust caused an income execution to be served on USPS, Cheshire's employer, directing that 10 percent of Cheshire's bi-weekly wages be paid to the country sheriff for the benefit of Long Island Trust. USPS refused to comply with the income execution, claiming that more than 25 percent of Cheshire's disposable income was already being withheld for court ordered support payments under New York Pers.Prop. Law § 49-b (McKinney Supp.1980), and that any further deductions from Cheshire's wages were barred under the Consumer Credit Protection Act.

Long Island Trust commenced the present proceeding ¹ pursuant to N.Y.C.P.L.R. § 5231(e) (McKinney 1978) to recover the accrued installments from USPS. ²

                USPS moved for summary judgment on the basis of the fact that $214 of Cheshire's bi-weekly disposable income of $508, or 42 percent, was already being garnished pursuant to orders of support issued by the Nassau County Family Court.  3  It argued that the Consumer Credit Protection Act prohibits garnishment on behalf of a judgment creditor where the employee's disposable income is already garnished to the extent of 25 percent or more.  Long Island Trust did not dispute the facts, but argued that both New York law and the Act allow simultaneous garnishment for family support and payment of judgment creditors, even when the amount of the support garnishment exceeds 25 percent
                

The district court adopted the interpretation of the Act pressed by USPS, and entered judgment dismissing the action.

DISCUSSION

The cardinal provision of the Act is 15 U.S.C. § 1673, which, as amended in 1977, provides in pertinent part as follows:

§ 1673. Restriction on garnishment

(a) Maximum allowable garnishment

Except as provided in subsection (b) of this section and in section 1675 of this title, the maximum part of the aggregate disposable earnings of an individual for any workweek which is subjected to garnishment may not exceed

(1) 25 per centum of his disposable earnings for that week

(b) Exceptions

(1) The restrictions of subsection (a) of this section do not apply in the case of

(A) any order for the support of any person issued by a court of competent jurisdiction or in accordance with an administrative procedure, which is established by State law, which affords substantial due process, and which is subject to judicial review.

(2) The maximum part of the aggregate disposable earnings of an individual for any workweek which is subject to garnishment to enforce any order for the support of any person shall not exceed

(A) where such individual is supporting his spouse or dependent child (other than a spouse or child with respect to whose support such order is used), 50 per centum of such individual's disposable earnings for that week; and

(B) where such individual is not supporting such a spouse or dependent child described in clause (A), 60 per centum of such individual's disposable earnings for that week;

except that, with respect to the disposable earnings of any individual for any workweek, the 50 per centum specified in clause (A) shall be deemed to be 55 per centum and the 60 per centum specified in clause (B) shall be deemed to be 65 per centum, if and to the extent that such earnings are subject to garnishment to enforce a support order with respect to a period which is prior to the twelve-week period which ends with the beginning of such workweek.

"Disposable earnings" is defined in §§ 1672(a) and (b) as that part of an individual's gross compensation for personal services that remains after deduction of amounts required by law to be withheld. "Garnishment" is defined in § 1672(c) as "any legal or equitable procedure through which the earnings of any individual are required to be withheld for payment of any debt."

Preliminarily we note that the Act does not seek to establish any order of priority among garnishments. There being no other federal statutory provision setting priorities as between support order garnishments and creditor garnishments, the matter of priority is thus to be determined by state law. 29 C.F.R. § 870.11(a)(2) (1980); Marshall v. District Court for the Forty-First-b Judicial District, 444 F.Supp. 1110, 1116 (E.D.Mich.1978); Liedka v. Liedka, 101 Misc.2d 305, 423 N.Y.S.2d 788 (Family Ct.Onon.Co.1979). New York law provides that as between garnishments of the same type, the prior in time is to be satisfied first. N.Y.C.P.L.R. § 5231(h) (McKinney 1978). As between creditor garnishments and support order garnishments, New York gives priority to those for support, regardless of the timing of those garnishments. N.Y.Pers.Prop. Law § 49-b; Liedka v. Liedka, supra; General Motors Acceptance Corp. v. Metropolitan Opera Ass'n, 98 Misc.2d 307, 413 N.Y.S.2d 818 (App.Term, 1st Dep't 1978); Gertz v. Massapequa Public Schools, N.Y.L.J., Nov. 17, 1980, at 17 (Sup.Ct.Nas.Co.1980). On either basis in the present case, the support order garnishments of Cheshire's wages have priority over Long Island Trust's income execution.

Turning to the language of the Act, we read § 1673 as placing a ceiling of 25 percent on the amount of an employee's disposable earnings that is subject to garnishment, with the exception that the ceiling may be raised as high as 65 percent if the garnishment is to enforce family support orders. ⁴ Thus, when garnishments are sought only by creditors, no more than 25 percent of disposable earnings may be withheld for that purpose; when the garnishments are sought only to enforce support orders, as much as 65 percent of disposable earnings may be withheld for that purpose. The interrelationship, however, between the general rule and the exception, when both creditor and support garnishments are sought, is less clear. Long Island Trust contends that the Act was designed to promote the "orderly payment of consumer debts," H.R.Rep.No.1040, 90th Cong., 2d Sess. (1968), reprinted in 2 (1968) U.S.Code Cong. & Ad.News 1962, 1979 ("H.R.Rep.Reprint"). It argues, from this premise, that support garnishments should be considered entirely independently of creditor garnishments, and that the Act should be construed as reserving 25 percent of the employee's earnings for attachment by creditors and leaving 75 percent for personal and family expenses, including the satisfaction of family support orders. We find no basis for this argument either in the language of the statute or in its legislative history.

To begin with, Long Island Trust's notion of the principal purpose of the Act is untenable. In passing the Consumer Credit Protection Act, Congress acted principally not to protect the rights of creditors, but to limit the ills that flowed from the unrestricted garnishment of wages. ⁵ It was concerned with the burgeoning number of personal bankruptcies (208,000 in 1967, as contrasted with 18,000 in 1950), which it felt put an undue burden on interstate commerce. And it observed that the number of personal bankruptcies was vastly higher in states that had harsh garnishment laws than in states that did not allow garnishment, ⁶ a disparity that tended to destroy the uniformity of the bankruptcy laws. The Act was thus designed to curtail sharply the rights of creditors to garnish employee wages, and the above reference to the "orderly payment of consumer debts" was, as Long Island Trust recognizes, made in the context of the following overview which reveals Congress's principal concern with the welfare of the debtor:

The limitations on the garnishment of wages adopted by your committee, while permitting the continued orderly payment of consumer debts, will relieve countless honest debtors driven by economic desperation from plunging into bankruptcy in order to preserve their employment and insure a continued means of support for themselves and their families.

Id. at 1979. Indeed, as originally introduced, the House bill contained a blanket prohibition against all garnishment of wages. See id. at 1978; Hodgson v. Hamilton Municipal Court, 349 F.Supp. 1125, 1130 n.3 (S.D.Ohio 1972). Later, yielding to the argument that a complete ban on garnishment "would unduly restrict honest and ethical creditors, while permitting those fully capable of paying just debts to escape such responsibilities," H.R.Rep.Reprint at 1978, the bill was amended, initially...