Mallory v. Mallory

• Decision Date: 14 May 1981
• Citation: 432 A.2d 950,179 N.J.Super. 556
• Parties: , 2 Employee Benefits Cas. 2234 Randi Susan MALLORY, Plaintiff, v. Louis Patrick MALLORY, Defendant.
• Court: New Jersey Superior Court

Page 556

179 N.J.Super. 556

432 A.2d 950, 2 Employee Benefits Cas. 2234

Randi Susan MALLORY, Plaintiff, v. Louis Patrick MALLORY, Defendant.

Superior Court of New Jersey, Chancery Division,

Bergen County.

Decided May 14, 1981.

Blackman & Effron, Hackensack, for plaintiff.

R. M. James Ruscick, Fort Lee, for defendant.

KRAFTE, J. J. D. R. C., (temporarily assigned).

Plaintiff seeks by way of motion pursuant to N.J.S.A. 2A:17-63 to require the United Jersey Bank to turn over to the Bergen County Sheriff the sum of $5,884.51 which it is holding in an Individual Retirement Account ¹ (hereinafter referred to as an IRA account) in the name of defendant. This relief is sought pursuant to a writ of execution. The issue this court is faced with is the ability of a spouse to levy upon the corpus (as opposed to the beneficial payments) of an IRA pension fund created pursuant to 26 U.S.C.A. § 408, to satisfy a judgment for alimony and child support arrears. Research reveals no reported case in any jurisdiction which precisely addresses this issue.

A judgment for $5,375 was entered against defendant in the Chancery Division on December 11, 1979 for arrearages in alimony and child support payments due plaintiff. On January 28, 1980 an abstract of judgment was recorded in the Superior Court Clerk's Office pursuant to N.J.S.A. 2A:16-18 et seq. At the time of the current application no portion of the judgment has been satisfied.

Pursuant to the writ of execution issued by this court on September 29, 1980, the Bergen County Sheriff levied upon defendant's IRA account at the United Jersey Bank's Hackensack Branch in the amount of $5,884.51, which includes the amount of the judgment plus interest and costs.

It is defendant's position that to allow plaintiff to execute upon the corpus of defendant's IRA account to satisfy a judgment based on alimony and child support arrearages is in contravention of federal law. He concedes that there is an exception whereby one may levy upon the benefits flowing from said pension fund to satisfy a judgment of this nature. Western Electric v. Traphagen, 166 N.J.Super. 418, 400 A.2d 66 (App.Div.1979); Ward v. Ward, 164 N.J.Super. 354, 396 A.2d 365 (Ch.Div.1978), and Biles v. Biles, 163 N.J.Super. 49, 394 A.2d 153 (Ch.Div.1978). However, he objects to an extension of this exception with respect to attaching the corpus of pensions created pursuant to federal statute. Defendant contends that to allow plaintiff to execute against his IRA corpus would do "major damage" to the "clear and substantial federal interests" that allow every individual the right to establish a pension fund.

It is most important that this court examine the purpose for which the IRA statute was enacted. Initially it provides employees who are not covered at their place of employment by any other type of retirement account with the opportunity to establish such an account. A second objective is that it defers payment of taxes on higher incomes earned during early, more productive years to a later period which will, presumably, find the taxpayer retired and in a lower tax bracket. At such time as the taxpayer qualifies and elects to receive distribution from his account, the expected benefit derived will be the payment of taxes at a lower rate on the sums so received.

The Congress, in establishing the IRA accounts as part of the comprehensive Employee Retirement Income Security Act (hereinafter ERISA), provided that there was to be no alienation or assignment of benefits, 29 U.S.C.A. § 1056(d) (1). ² Federal and state courts alike have confronted this problem with respect to benefits. The United States Court of Appeals for the Second Circuit, held in Cody v. Riecker, 594 F.2d 314 (1979), that enforcement of family support orders may be by garnishment of benefits regulated by ERISA.

The court in Cartledge v. Miller, 457 F.Supp. 1146 (S.D.N.Y.1978), quoted Judge (later Justice), Rutledge's comments in Schlaefer v. Schlaefer, 71 U.S.App.D.C. 350, 112 F.2d 177 (D.C.Cir.1940), in interpreting the exemption clauses in light of Congressional intent, as follows:

The usual purpose of exemptions is to relieve the person exempted from the pressure of claims hostile to his dependents' essential needs as well as his own personal ones, not to relieve him of familial obligations and destroy what may be the family's last and only security short of public relief. (Id. at 358, 112 F.2d at 185; emphasis supplied)

Judge Weinfeld, speaking for the Cartledge court, continued:

"Rather than intending to undermine the family law rights of dependent spouses and children, the legislature was concerned that employees and their beneficiaries the entire family be protected by ERISA." ⁵³

"Thus the conclusion is warranted that, like the previous congressional exemptions, ERISA's anti-assignment or alienation sections were included only " to protect a person and those dependent upon him from the claims of creditors" ⁵⁴ not to insulate a breadwinner from the valid support claims of spouse and offspring 55." (457 F.Supp. at 1156; emphasis supplied) ³

The court while implying an exception to ERISA, pointed out to other Federal Acts where execution and/or attachment were forbidden such as the Social Security Act, Railway Retirement Act, Veterans Benefits Act and the Bankruptcy Act, all of which either specifically allow for attachment for family support obligations or have had it implied by the courts.

Judge Weinfeld summarizes:

Indeed, an overall congressional purpose not to interfere with the State's power to enforce family support obligations may be gleaned from judicial interpretation of exemption provisions in other federal statutes. Though not exactly in pari passu, they indicate a general congressional intent not to preclude enforcement of family support obligations. Id. at 1155.

The court concluded that it would be absurd to import a contrary intent to ERISA provisions when the purpose of the exemption provisions is to protect the pension fund from claims adverse to the employee and his dependents. ⁴

The case of American Tel. and Tel. Co. v. Merry, 592 F.2d 118 (2nd Cir. 1979), also carved out an implied exception in furtherance of Congress' concern in the ERISA legislation for the well being of employees and their dependents, as follows:

We reject appellants' proffered statutory construction and believe the more reasonable interpretation to be that a garnishment order used to satisfy court ordered family support payments is impliedly excepted from preempted state law relating "to any employee benefits plan...." (at 121)

With this examination of the congressional purpose of the ERISA statute by our federal courts, we now proceed to an analysis of the question this court is faced with herein: whether a former spouse can execute upon the corpus of an IRA (as earlier mentioned, part of the ERISA legislation) to satisfy her judgment based on alimony and child support arrearages. As has been noted, none of the cases heretofore cited refers to an execution upon the corpus of any pension account, but rather only upon the benefits that flow therefrom.

The most nearly analagous case to the issue raised herein is found in Sheehan v. Sheehan, 90 Misc.2d 673, 395 N.Y.S.2d 596 (1977), a New York decision which dealt with a Keogh Plan. ⁵ That court was faced with a similar problem where a former wife moved to compel the bank, as trustee of certain funds of defendant husband, to turn them over to the sheriff to satisfy plaintiff's judgment for alimony and child support arrearages. Under the New York statutes the wife achieved the status of a judgment creditor. The court equated the Keogh Plan to a "self-settled trust," that is, the funds in the Keogh account were voluntarily paid over by a depositor for his own benefit, revocable at will, no other person having any interest in such funds. Therefore, the court ruled that such funds were not insulated from a judgment creditor. The fact that the particular judgment was for family support, however, did not seem to be a factor in the court's decision. Sheehan appears to stand for the proposition that any individual elevated to the status of judgment creditor may satisfy his claim out of the corpus of the funds in a Keogh Plan. As such, Sheehan appears to be at odds with the above federal decisions and appears to be in direct conflict with the clear anti-alienation provisions of the federal acts. This court cannot accept such an expansive doctrine. See, also, Lerner v. Williamsburg Savings Bank, 87 Misc.2d 685, 386 N.Y.S.2d 906 (1976). In the instant matter we are confining ourselves to the narrow question as to whether we may permit attachment of the corpus of an IRA account to satisfy a judgment for alimony and child support. Numerous circumstances and considerations compel this court to answer that question unhesitatingly in the affirmative.

The court is cognizant of the factors surrounding the establishment, maintenance and control of an IRA account as being for the settlor's benefit. The corpus, for all intents and purposes, is totally within the control of the settlor, i. e. he may withdraw the deposits at any time in his absolute discretion. Such premature withdrawal (prior to age 591/2) is subject only to the payment of income tax at the time withdrawals are made together with any interest penalties as provided by law. To hold the corpus to be unattachable would result in this court sanctioning a self-created, totally controllable vehicle for the contrived avoidance of family support responsibility.

The argument has been advanced that to require a turnover of these funds would create severe adverse tax impact consequences for defendant. The fact that there may be such financial hardships created by permitting a premature withdrawal of these funds should not serve as a method by which individuals may intentionally avoid their most basic obligation the support of their family. Such hardship...