State Treasurer v. Abbott
| Decision Date | 14 May 2003 |
| Docket Number | Docket No. 120803, Calendar No. 14. |
| Citation | 660 N.W.2d 714,468 Mich. 143 |
| Parties | STATE TREASURER, Plaintiff-Appellant, v. Thomas K. ABBOTT, Defendant-Appellee, and Auto Body Credit Union and Joann A. Abbott, Defendants. |
| Court | Michigan Supreme Court |
Michael A. Cox, Attorney General, Thomas L. Casey, Solicitor General, and Daniel M. Levy, Assistant Attorney General, Detroit, for plaintiff-appellant.
Thomas K. Abbott in propria persona.
We granted leave to appeal to consider whether an order reimbursing the state for the cost of caring for defendant, a prison inmate, violates the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq. The trial court ordered defendant to receive his pension benefits at his prison address and directed the warden to appropriate the funds from defendant's prison account under the State Correctional Facility Reimbursement Act (SCFRA), M.C.L. § 800.401 et seq. The Court of Appeals reversed because subsection 1056(d)(1) of ERISA prohibits an assignment or alienation of pension benefits.
We hold that the trial court's order did not violate the federal statute. An order requiring a prisoner to receive his pension benefits at his current address is not an assignment or alienation of those benefits. Moreover, once the funds are in the inmate's account, the warden may distribute them under the SCFRA. The federal ban on alienation or assignment of pension funds does not extend to benefits that the pensioner has already received. We thus reverse the judgment of the Court of Appeals and reinstate the trial court's judgment.
The State Treasurer filed a complaint under the SCFRA seeking to recover the costs of confining defendant Thomas K. Abbott,1 a prisoner under the jurisdiction of the Michigan Department of Corrections. Plaintiff submitted documentation of the costs it has incurred and expects to incur in caring for defendant during his incarceration.2 Plaintiff argued that defendant's monthly pension payments should be sent to his prison address, deposited in his prison account, and appropriated by the warden. The trial court ordered defendant to show cause why the funds should not be appropriated. Defendant filed a responsive pleading.
After reviewing the pleadings, the trial court ordered defendant to direct his monthly pension proceeds to his prison address. The court further ordered the warden to provide $20 of each payment to defendant, with the remainder divided between defendant's wife (sixty-seven percent) and the state (thirty-three percent). In addition, the court ordered the pension plan to send the benefit payments to defendant's "new address of record" in prison in the event that defendant failed to direct the plan to do so.
Defendant subsequently filed a pleading entitled a "writ of mandamus." The trial court treated the "writ of mandamus" as a motion for reconsideration and denied it. Defendant filed a delayed application for leave to appeal, which the Court of Appeals denied for lack of merit in the grounds presented.3 Defendant then applied for leave to appeal to this Court. In lieu of granting leave to appeal, we remanded the case to the Court of Appeals for consideration as on leave granted.4 In a published opinion, the Court of Appeals held that ERISA barred the deposit of funds into defendant's prison account.5 Plaintiff filed an application for leave to appeal to this Court, which we granted.6
In concluding that the trial court's order violates ERISA's antialienation provision, the Court of Appeals relied on State Treasurer v. Baugh, 986 F.Supp. 1074 (E.D.Mich, 1997). In Baugh, the State Treasurer sought an order under the SCFRA directing a pension plan to deposit benefits into an inmate-beneficiary's prison account. The federal district court held that ERISA preempted such an order:
The Court agrees that once pension benefits are placed in a personal account, ERISA no longer operates to protect those funds. However, in the instant case, defendant Chrysler Corp. would not be voluntarily depositing the pension funds into [the inmate's] personal prisoner account but would be doing so only by court order. Such an involuntary transfer clearly constitutes an assignment. [Id. at 1077 (citation deleted).]
The Court of Appeals followed Baugh:
There is no dispute that directly garnishing defendant's pension benefits to reimburse the state would violate the ERISA's antialienation provision. Baugh, supra. Plaintiff attempts to distinguish Baugh by asserting that plaintiff did not make a claim against the pension plan in this case and did not seek an order compelling the plan to do anything. Plaintiff argues that ordering defendant to direct his pension to be sent to his prison address is consistent with Baugh and does not violate the ERISA. This argument fails for two reasons. First, defendant did not voluntarily change his pension address to his prison address and did not voluntarily have the pension funds deposited into his personal prisoner account, but rather was ordered by the court to do so. The court's order effectively required the pension fund to make the pension payment to defendant's prison account against defendant's will. Such an involuntary transfer clearly constitutes an assignment and conflicts with the ERISA's antialienation provision.
Second, if defendant refuses to direct the pension fund to pay the benefits to his prison account, the only method of ensuring that the benefits reach the prison account is by reliance on the order directing the fund to send the money to the prison, just as in Baugh. [249 Mich.App. 107, 113, 640 N.W.2d 888 (2001).]
Whether the trial court's order effectuates an alienation or assignment of pension funds under 29 U.S.C. § 1056(d)(1) is a question of law. We review questions of law de novo. Cardinal Mooney High School v. Michigan High School Athletic Ass'n, 437 Mich. 75, 80, 467 N.W.2d 21 (1991).
This case requires us to interpret a federal statutory provision. Where a federal statute clearly addresses the issue at hand, we apply the statute as written. If, however, the text is silent or ambiguous regarding the issue before the Court, we must defer to a federal agency's interpretation if it is based on a permissible construction of the statute. Chevron USA Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984).
The trial court's order requires that (1) defendant receive his monthly pension payments at his prison address and (2) the warden distribute the funds after their deposit in defendant's prison account. We conclude that this arrangement does not alienate or assign the pension proceeds in violation of ERISA.
We note initially that the SCFRA permits the trial court to provide reimbursement to the state from "assets" owned by a prisoner for expenses incurred in caring for the prisoner. M.C.L. § 800.404(3). The statute defines "assets" to include "income or payments to such prisoner from ... pension benefits...." M.C.L. § 800.401a.
It is not disputed that the trial court's order was proper under the SCFRA. The question presented is whether ERISA's prohibition on assignment and alienation of pension benefits supersedes the SCFRA in this case.
ERISA's antialienation provision states: "Each plan shall provide that benefits provided under the plan may not be assigned or alienated." 29 U.S.C. § 1056(d)(1).7 To determine whether the order requiring defendant to receive pension benefits at his prison address alienates or assigns those benefits, we must discern the meanings of the statutory terms.
ERISA does not define the terms "alienate" and "assign." Because the federal statute is silent on the question presented, we defer to a federal agency's definition. Chevron, supra.
The Treasury Department has defined the term "assignment" as "[a]ny direct or indirect arrangement (whether revocable or irrevocable) whereby a party acquires from a participant or beneficiary a right or interest enforceable against the plan in, or to, all or any part of a plan benefit payment which is, or may become, payable to the participant or beneficiary." 26 CFR 1.401(a)-13(c)(1). This definition plainly contemplates a transfer of the interest to another person, i.e., a person other than the beneficiary himself. Sending a pension payment to a beneficiary at his own address, and depositing it in his own account, does not assign that payment. Neither the warden nor any other third person acquires a right or interest enforceable against the plan when the pension proceeds are sent to defendant at his current address.8
A property interest is assigned or alienated when it has been transferred to another person. The trial court here did not order defendant to have his pension proceeds sent to another person's address. On the contrary, the court ordered defendant to receive the benefits at his own address. Moreover, the deposit of the funds into defendant's prison account did not transfer any legal title to, or interest in, the funds to another person. The warden's access to defendant's account does not alter the fact that the account is in defendant's name. Legal title was not conveyed to the warden or to any other person when the funds were deposited in defendant's account.9
We respectfully decline to follow the federal district court's opinion in Baugh. The Baugh court held that "an order by this Court forcing [a pension plan] to deposit pension funds into an [inmate's prison] account from which [the state] may withdraw monies clearly operates as an assignment." Baugh, supra at 1077. The Baugh court characterized the transfer of the funds to the inmate's prison account as an assignment because it was "involuntary." The...
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