Shanks v. Lowe

• Decision Date: 25 June 2001
• Docket Number: No. 103,103
• Citation: 364 Md. 538,774 A.2d 411
• Parties: Laura J. SHANKS, v. Susan LOWE n/k/a Dolle and Kibby's Restaurant & Lounge.
• Court: Maryland Court of Appeals

774 A.2d 411

364 Md. 538

Laura J. SHANKS, v. Susan LOWE n/k/a Dolle and Kibby's Restaurant & Lounge.

No. 103, Sept. Term, 2000.

Court of Appeals of Maryland.

June 25, 2001.

Stephen J. Kleeman, Baltimore, for petitioner.

Arnold R. Silbiger (Silbiger & Silbiger, P.A., on brief), Baltimore, for respondents.

Argued before BELL, C.J., and ELDRIDGE, RAKER, WILNER, CATHELL, HARRELL and BATTAGLIA, JJ.

WILNER, Judge.

The issue before us is whether tips earned by a waitress (or other person who earns tips) constitute "wages" for purposes of the Maryland wage garnishment law, Maryland Code, §§ 15-601 through 15-607 of the Commercial Law Article. Principally at issue is whether tips fall within the definition of "wages" in § 15-601(c): "all monetary remuneration paid to any employee for his employment." The District Court of Maryland, sitting in Baltimore County, and, on appeal, the Circuit Court for Baltimore County held that tips paid to the waitress directly by restaurant customers did not constitute wages under that definition and were therefore not to be included in the calculation of attachable wages for purposes of a garnishment served upon the restaurant. With one important caveat, we disagree with that conclusion.

The relevant facts are undisputed. In January, 1995, petitioner, Laura Shanks, recovered a judgment for $6,000 against Susan Dolle, in the District Court. In April, 1998, Ms. Shanks caused a wage garnishment to be issued by the District Court and served on Kibby's Restaurant & Lounge, Dolle's employer. The writ of garnishment directed Kibby's to withhold Dolle's "attachable wages" for any work week until either the judgment, interest, and other charges and costs specified in the attachment were satisfied or Kibby's was otherwise notified by the court. The writ also stated, in relevant part, that exempt from the garnishment was the greater of (1) the product of $154.50 multiplied by the number of weeks in which "the wages due were earned," or (2) 75% of "the disposable wages due."¹ The term "disposable wages" was defined to mean "the part of wages that remain after deduction of any amount required to be withheld by law."

On June 5, 1998, Kibby's sent the writ of garnishment back to the court with a hand-written note stating that Dolle's "disposable income average per week is approx $35 $40," which fell below the allowable exemption of $154.50. Kibby's said that, if that situation changed, it would comply with the court order, but it requested that the garnishment action be dismissed. It does not appear that any further proceedings were held with respect to that garnishment and response. In November, 1998, another wage garnishment was served on Kibby's. Through her lawyer, Dolle instructed Kibby's not to garnish any of her wages because the attachable wages were less than the $154.50 exemption. Kibby's response to the writ stated that Dolle's gross wages averaged $95/week.

On February 10, 1999, petitioner filed a motion to cite Kibby's for contempt, and a show cause order was issued.² Kibby's moved to quash the show cause order, contending that it held no attachable wages of Dolle—no wages in excess of the allowable exemption. Kibby's acknowledged that, in addition to the money that it paid to her, Dolle earned tips, but, because those tips were paid directly to her by restaurant patrons, it denied that they constituted "wages" for purposes of the wage garnishment law. In that regard, it claimed that Kibby's only obligation to Dolle was to pay the agreed—upon hourly wage, that it had no obligation to pay her the tips she earned directly from customers, and that, even if the tips did constitute attachable wages for purposes of § 15-601, Kibby's could not comply with the duty to withhold because it never had possession of them. After a hearing, the District Court found merit in Kibby's response. It quashed the show cause order and held that Kibby's was "not responsible for the collection of any tips paid directly to its employee...." (Emphasis added).

Petitioner appealed that decision to the Circuit Court, which affirmed, holding that, as tips were not controlled by the employer but were a form of gratuity from the customer, they did not constitute wages under § 15-601. Some greater detail regarding Dolle's gross and net earnings was revealed at the Circuit Court level through payroll and Federal tax records attached to Shanks's memorandum of law. The gross weekly wage paid by Kibby's to Dolle was truly minimal—generally around $100. That amount was at least matched, and usually exceeded, each week by the tips Dolle earned. Both Federal and Maryland tax law treat tips as taxable wages and require that the amount of tips received by an employee be reported to the employer for withholding and reporting purposes. Thus, in calculating the amount of withholding each week, Kibby's listed the amount of wages it owed, the amount of tips reported by Dolle, and the aggregate, which it designated as Taxable Wages. The amounts withheld for Federal and State income taxes and for FICA were based on that aggregate amount. After listing and subtracting those deductions, a small amount of net pay owed by Kibby's was left, and that was the amount actually paid to Dolle. This can be easily illustrated by looking at one representative week—that of November 27, 1998. In that week, Kibby's reported $92.44 in wages due Dolle and $153.50 in tips, for a total taxable wage of $245.94. From that amount, it deducted $29.25 in Federal taxes, $18.82 FICA, and $13.87 in State taxes, leaving a net pay, from the $92.44 it owed Dolle, of $30.50.

Kibby's never had possession of the tips paid to Dolle; she received and retained the full gross amount of those tips. What Kibby's did, however, was to withhold from the wage that it owed to Dolle the Federal, State, and FICA taxes attributable to the tips, which served to reduce the net pay owing to Dolle below what it would have been had the withholdings been based solely on the amount of wage payable by Kibby's.

We granted certiorari to consider "whether or not the tips and [Ms. Dolle's] salary can be aggregated for purposes of applying the mandatory deductions of the Maryland Wage Garnishment Law [or][s]tated somewhat differently, [whether] the tips count as remuneration for purposes of calculating the total wages paid?"

DISCUSSION

We described the nature and function of a garnishment proceeding in Fico, Inc. v. Ghingher, 287 Md. 150, 411 A.2d 430 (1980). We noted that a garnishment proceeding "is, in essence, an action by the judgment debtor for the benefit of the judgment creditor which is brought against a third party, the garnishee, who holds assets of the judgment debtor " and that "[t]he sole purpose of the garnishment proceeding therefore is to determine whether the garnishee has any funds, property or credits which belong to the judgment debtor." Id. at 159, 411 A.2d at 436 (emphasis added). That principle applies as well to the garnishment of wages. Bendix Radio Corp. v. Hoy, 207 Md. 225, 229, 114 A.2d 45, 47 (1955). It is clear, then, that a garnishment can reach only those funds (or other property) that belong to the judgment debtor and are actually held by the garnishee at and after the time the writ of garnishment is served on the garnishee.

The argument made by Shanks, that, for purposes of the garnishment, Dolle's salary and tips must be aggregated, is susceptible to positing either that Kibby's was under some obligation actually to take possession of the tips and hold them in order to satisfy the garnishment or that Kibby's was responsible for paying over to the judgment creditor money that was never in its possession. That suggestion seemed to concern the District Court. Clearly, that is not the case. A garnishee is under no obligation to collect anything from the judgment debtor, or anyone else, in order to satisfy a garnishment; nor is it responsible for turning over any funds or property of the judgment debtor that it does not have in its possession. It must report and, subject to allowable exemptions, withhold only property in, or coming into, its possession during the period covered by the writ.

The issue concerns only that small amount of money left over each week from the wages due by Kibby's, after it has made the deductions required by law—the $30.50 for the week of November 27—and it arises because of the exemption allowed under § 15-601.1, which, as noted, the parties agree is $154.50 per week. If, as Dolle contends, the wages subject to the garnishment are only those payable by Kibby's for the services she performs for it, the exemption would cover the entire net pay due her, and no part of that net pay would therefore be attachable. Under Shanks's view, the wages subject to garnishment are the total taxable wages, including the tips, and that, when the $154.50 is deducted from that amount, the net pay due by Kibby's would be attachable. Using the November 27 week, for example, Shanks would argue that the gross figure should be the $245.94 in total taxable wages, from which Kibby's would deduct the $61.97 for Federal and State taxes and FICA, leaving $183.97, that it would then deduct the allowable exemption of $154.50, leaving a net of $29.47. As it had in its possession $30.50 owing to Dolle, it should have paid over the $29.47 under the garnishment. Under this theory, Shanks would not be attempting to garnish any of the tips not in the possession of Kibby's, but only to count them for purposes of applying the exemption.³

The issue is one of statutory construction. As noted, § 15-601(c) defines "wages" as "all monetary remuneration paid to any employee for his employment." Is this limited, as Dolle insists, to remuneration paid to an employee by that employee's employer, or does it include any remuneration paid to the employee for the employment, which, in Shanks's view, would include tips paid by the restaurant patrons?⁴ On its face, the...