E.W. v. Hall

• Court: Kansas Supreme Court
• Writing for the Court: McFARLAND; ABBOTT
• Citation: E.W. v. Hall, 260 Kan. 99, 917 P.2d 854 (Kan. 1996)
• Decision Date: 31 May 1996
• Docket Number: No. 74531,74531
• Parties: , 51 Soc.Sec.Rep.Ser. 102, Unempl.Ins.Rep. (CCH) P 15532B E. W., as Natural Guardian and next friend of J.R. W., a minor, Appellee, v. Jimmy Dean HALL, Appellant.

Page 854

917 P.2d 854

260 Kan. 99, 51 Soc.Sec.Rep.Ser. 102,

Unempl.Ins.Rep. (CCH) P 15532B

E. W., as Natural Guardian and next friend of J.R. W., a minor, Appellee, v. Jimmy Dean HALL, Appellant.

No. 74531.

Supreme Court of Kansas.

May 31, 1996.

Syllabus by the Court

1. Social security benefits are exempt from attachment/garnishment pursuant to 42 U.S.C. § 407 (1994) except as otherwise provided by federal law.

2. Social security benefits deposited in a certificate of deposit are held not to have become permanent investments or to have lost the quality of money so as to lose their federally mandated exempt status.

Philip J. Bernhart, Coffeyville, argued the cause and was on the brief, for appellant.

Frederick R. Smith, Pittsburg, argued the cause and was on the brief, for appellee.

McFARLAND, Chief Justice:

The single issue in this case is whether the district court erred in allowing the plaintiff, a judgment creditor, to attach/garnish a savings account and certificate of deposit owned by defendant. Defendant contends that the bulk of the funds are social security benefits awarded retroactively and are exempt under federal law.

The facts may be summarized as follows. In December 1991, J.R.W. resided with her mother, siblings, and defendant, Jimmy Dean Hall. Defendant severely injured the child by tearing her vagina with his finger. Defendant was charged with, and pled nolo contendere to, the crime of rape. He has been an inmate in the Kansas prison system at all pertinent subsequent times, serving a 15-year to life sentence.

On December 15, 1993, the present action was filed seeking damages for the child's injuries. Simultaneously, a petition was filed seeking prejudgment attachment of funds belonging to defendant which were being held in a bank. Pursuant to K.S.A. 60-706, the order of attachment was issued, directing the bank to reply as garnishee. The bank replied that it held the following funds belonging to defendant:

Certificate of deposit               $19,772.16
                Savings account                        4,364.35
                                                     ----------
                     Total                           $24,136.51
                

Defendant filed an affidavit asserting "[t]hat all monies except for institutional pay of nine dollars per month are monies received as social security benefits" retroactively awarded. The district court held the funds were not exempt. Subsequently, the plaintiff was awarded a judgment against defendant in the amount of $23,156.54. Defendant was given credit for $2,156.54 restitution previously paid, which left a judgment of $21,000 plus costs and judgment interest. There is no issue before us challenging the personal injury judgment or the attachment garnishment procedure itself. The issue is whether the monies defendant received from social security are exempt.

Resolution of the issue depends upon interpretation of 42 U.S.C. §§ 407 and 659 (1994). Interpretation of a statute is a question of law over which this court has unlimited review. See Mariche v. Mariche, 243 Kan. 547, 552, 758 P.2d 745 (1988); Gillespie v. Seymour, 250 Kan. 123, 129, 823 P.2d 782 (1991).

Defendant argues that the district court erred in deciding that an implied exception to the statutory exemption allows attachment of these social security funds. Plaintiff contends that public policy compels an interpretation of the federal statutes to allow this attachment.

A concise summary and history of the relevant federal statutes can be found in Mariche, 243 Kan. 547, 758 P.2d 745. There, we considered whether the district court erred in finding that the defendant's social security disability benefits were not exempt from garnishment to pay past-due child support under K.S.A. 60-2308(a). We first noted that the issue was governed by the federal statutes pertaining to social security benefits, specifically 42 U.S.C. § 407 and § 659. In reaching the conclusion that Mariche's benefits were not exempt, we set out the following history of the federal statutes, still applicable today:

"Prior to 1975, 42 U.S.C. § 407 (1970) provided that social security payments of all types were not transferable or assignable or subject to execution, levy, attachment, garnishment, or other legal process:

'The right of any person to any future payment under this subchapter shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.'

"Aware of the importance of the right of a spouse and children to receive support from an absent parent, Congress in 1975 enacted § 459 of the Social Security Act (42 U.S.C. § 659 [1982] ), which waived the sovereign immunity previously enjoyed by the United States and specified that wages of government employees and also social security benefits are subject to garnishment in child support and alimony cases. A 1983 amendment to 42 U.S.C. § 407 included a provision that no other law enacted before, on, or after a certain date could be construed to limit, supersede, or otherwise modify the provisions of § 407 except to the extent it does so by express reference to that section. 42 U.S.C. § 407 (Supp. III 1985). Currently, 42 U.S.C. § 659 (Supp. III 1985) provides:

'Notwithstanding any other provision of law, (including section 407 of this title ) effective January 1, 1975, moneys (the entitlement to which is based upon remuneration for employment ) due from, or payable by, the United States or the District of Columbia (including any agency, subdivision, or instrumentality thereof) to any individual, including members of the armed services, shall be subject, in like manner and to the same extent as if the United States or the District of Columbia were a private person, to legal process brought for the enforcement, against such individual of his legal obligations to provide child support or make alimony payments.' (Emphasis supplied.)

"42 U.S.C. § 662(f) (Supp. III 1985) defines 'remuneration for employment' to include 'periodic benefits ... or other payments to such individual under the insurance system established by subchapter II of this chapter.' (Emphasis supplied.) 42 U.S.C. § 423 (1982 and Supp. III 1985) provides for social security disability benefits and is included in subchapter II of the Social Security Act. Thus, under the federal statutes, the garnishment of social security disability benefits is authorized in order to permit recovery of past due child support or alimony payments. The Code of Federal Regulations (5 C.F.R. § 581.103 et seq. [1988] ) interprets the federal statutes to authorize the garnishment of federal disability payments to pay child support and alimony payments." 243 Kan. at 548-49, 758 P.2d 745.

The language in these federal statutes is unchanged. See 42 U.S.C. §§ 407, 659 (1994).

In another Kansas case, Younger v. Mitchell, 245 Kan. 204, 777 P.2d 789 (1989), this court considered whether a judgment creditor could garnish Mitchell's bank accounts which contained his veteran's administration (VA) benefits and his social security disability benefits, as well as his wife's social security disability benefits. The trial court held that Mitchell's VA benefits were not exempt, that his wife's social security disability benefits were not subject to garnishment for Mitchell's debt, that Mitchell's social security benefits were exempt from garnishment, and that any carryover amounts were not exempt pursuant to K.S.A. 60-2308(a). 245 Kan. at 205-06, 777 P.2d 789.

Addressing the merits of Mitchell's appeal, we first noted that, although not properly before the court, the trial court was correct in finding that the social security benefits were exempt pursuant to 42 U.S.C § 407(a). 245 Kan. at 209-10, 777 P.2d 789. Although the facts vary slightly, the case before the court here asks basically the same question as was before this court in the dicta portion of Mitchell. The court also held the VA benefits were exempt.

The United States Supreme Court has addressed these statutes at least twice: Philpott v. Essex County Welfare Board, 409 U.S. 413, 93 S.Ct. 590, 34 L.Ed.2d 608 (1973), and Bennett v. Arkansas, 485 U.S. 395, 108 S.Ct. 1204, 99 L.Ed.2d 455 (1988). Lower federal appellate courts have also interpreted these statutes.

In Philpott, the welfare board sued its welfare recipient and his trustee to reach a bank account in which the recipient's trustee had deposited a check for 6 months' retroactive social security disability benefits. The state Supreme Court allowed the attachment based upon an agreement executed by the recipient with the welfare board. In this agreement, signed at the time of application for welfare, the recipient agreed to reimburse the welfare board for all payments received. The United States Supreme Court reversed, disallowing the attachment. 409 U.S. at 417, 93 S.Ct. at 592-93.

In reaching its decision, the Court interpreted 42 U.S.C. § 407, stating:

"On its face, the Social Security Act in § 407 bars the State of New Jersey from reaching the federal disability payments paid to [the recipient]. The language is all-inclusive: '[N]one of the moneys paid or payable ... under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process....' The moneys paid as retroactive benefits were 'moneys paid ... under this subchapter'; and the suit brought was an attempt to subject the money to 'levy, attachment ... or other legal process.' " 409 U.S. at 415-16, 93 S.Ct. at 592.

Although the welfare board argued that there was an implied exception to the § 407 exemption in that the state welfare benefits could have been reduced by the amount of the federal grant had the social security payments been received monthly, the Court refused to find such an implied exception. The Court found that "the funds on...