Note to Myself: Can a Garnishee Defendant Object to Venue?

I want to write this down so that I don't forget it, but it is not a question that I wish to answer. Can a garnishee defendant object to venue?

Kentucky law has elaborate statutory venue provisions which control the permitted location for civil action of various types. See: William H. Fortune, Venue of Civil Actions in Kentucky, 60 Ky. L.J. 497 (1972).

KRS 425.501 – Proceedings for obtaining order of garnishment, provides:

 "(1) Any person in whose favor a final judgment in personam has been entered in any court of record of this state may, upon the filing of an affidavit by him or his agent or attorney in the office of the clerk of the court in which the judgment was entered, and in the same cause in which said judgment was obtained showing the date of the judgment and the amount due thereon, and that one (1) or more named persons hold property belonging to, or are indebted to, the judgment debtor, obtain an order of garnishment to be served in accordance with the Rules of Civil Procedure." [emphasis added]

Garnishment was not known in the common law. Rather it is a statutory invention.See, generally, Rood, John R., A Treatise on the Law of Garnishment, West Publishing Co. (1896).

"Garnishment is a special auxiliary remedy for the more effectual recovery of debts. It is always ancillary to the main action under which it is prosecuted, and therefore necessarily goes down with it. It is not a new suit, and necessarily before the same court as the main action . . . it is essentially and in effect a suit or action against the garnishee by the defendant, in the name and for the benefit of the plaintiff. "  Ibid p. 3 - 4 [footnotes omitted]

 In effect, KRS 425.501 makes service of a garnishment order upon a garnishee defendant the commencement of a civil action against the garnishee, which is subject to the same defenses the garnishee could assert against the judgment debtor if the suit had been brought directly. [citations omitted]

In theory, if not in actual practice, Kentucky's garnishment statute places no obvious limits upon the nature of the garnishee's indebtedness to the judgment debtor that is subject to a garnishment proceeding. Thus, in theory, a judgment creditor could garnish a judgment debtor's cause of action in rem or for personal injury, against a third party garnishee defendant. It would be similar to a subrogation by operation of law. [research omitted]

Clearly, a garnishee defendant may waive any objection to venue in such a case, but also it could be asserted. What a court might do in this instance is anyone's guess. KRS 425.501 makes it clear that the garnishment must be brought in the original action, but doing so might work a substantial unfairness upon the garnishee defendant.

The whole issue fails my basic test for practicality, but there it is nonetheless.

The Complexity of Kentucky Garnishment Procedure In a Nutshell

Kentucky's garnishment procedures, principally contained in KRS §425.501, et seq.,  KRCP Rule 69.02 and various local rules of court, attempt to accommodate a wide variety of factual circumstances, most of which never present in actual practice.

• There are different rules for wage and non-wage garnishments;
• There are different rules for wage garnishments of support payments, taxes, student loans and other types of debt;
• The same rules apply to garnishment of debts owed to the judgment debtor and personal property owned by the judgment debtor currently in the possession of a third party;
• Debts owed to the judgment debtor might or might not be for a specified fixed amount. For example, there are types of bank accounts that are tied to various markets that may fluctuate from day to day;
• Debts owed to the judgment debtor might or might not be due on demand. A third party may owe money to a judgment debtor, but it is not due and payable right now;
• Third parties may have superior claims to to property sought to be garnished;
• A vast array of federal or state non-bankruptcy exemptions may apply to the property potentially subject to garnishment. Some of these exemption require the judgment debtor to affirmatively claim the exemption and some do not;
• A garnishee defendant may be uncooperative and not respond to a garnishment order or may not serve notice of the garnishment order upon the judgment debtor, as required;
• Garnishment orders may be one-shot deals or they may be continuing;
• Multiple garnishments from different judgment creditors may descend at virtually the same time;
• Enforcement of foreign judgments may present unique problems;
• Seeking to garnish against an out-of-state garnishee defendant via Kentucky's long-arm statutes can be fun; 
• With costs, post judgment interest and the costs of the garnishment added in, it may be difficult to know when the judgment creditor's judgment is satisfied and the garnishment lien is released; 
• The garnishment may be barred by the time limit on judgments imposed by KRS 413.090;
• The property sought to be garnished may be jointly owned, and;
• . . . .more that I haven't considered yet.

Time Allowed to Claim a Kentucky Garnishment Exemption

How much time does Kentucky civil procedure allow a judgment debtor to object to a garnishment or to claim an exemption? It is a question without an easy answer.

Typically, it seems, many Kentucky garnishments proceed quite summarily, and without ever landing upon any judge's desk. A judgment creditor files a form AOC-145 (Affidavit for Writ of Non-Wage Garnishment), the court clerk issues a form AOC-150.1 (Order of Non-wage Garnishment), the garnishee defendant is served, the judgment debtor is notified and nothing happens until the garnishee delivers the money to the creditor's attorney. End of story.

I have read that form AOC-150.1 (Order of Non-wage Garnishment) expressly states the judgment debtor has ten days within which to present objections or exemptions, but there is nothing in KRS 425.501(4) or the Kentucky Rules of Civil Procedure, CR 69.02, to give that ten day limit an authoritative foundation. In an unpublished opinion, MGM Collection Agency, Inc. v. Barger , 1999-CA-001848-DG, the Kentucky Court of Appeals stated that there was no time limit for claiming an exemption in a garnishment action. I believe this to be a bit of judicial hyperbolic dicta. There has to be some limit, even if that limit is ambiguous or unspecified.

The decisive factors in MGM Collection Agency, Inc. v. Barger seem to have been that; (1) A non-party joint account owner promptly presented a meritorious objection to the bank garnishment (i.e. it wasn't the judgment debtor's money) before any sum was delivered by the bank to the judgment creditor, and; (2) Although we know when the bank itself was served with the garnishment order, there is nothing in the Appellate Court's opinion showing when the judgment debtor first received notice of the garnishment.

In short, the judgment creditor's whole appeal hinged upon the thinnest technicality.

The fog surrounding this issue is so dense, it is difficult to clearly and succinctly describe its contours. With the written law being so indefinite,  it should be sufficient to assume the timeliness of a judgment debtor's objection to a garnishment or a claim of exemption is a matter within the trial court's discretion, based upon a multiplicity of relevant factors, including any claim of excusable neglect.

But, that's just me talking.

Rage Against Junk Debt Collectors

I awoke this morning in a feisty mood with the intent to guzzle coffee and to conceive a monkey wrench. Here is the outline for my monkey wrench: Throw with caution.

1. Credit card companies avoid state usury laws by operating as National Banks or other federally chartered institutions.
2. Federal law preempts state law for National Banks, etc. Thus, state usury laws do not apply to most credit card transactions.
3. Upon a credit card debtor's default, these debts are frequently sold to junk debt collectors for a fraction of the amount owed.
4. Upon the assignment of the debt from a National Bank, etc., to a junk debt collector that is not a National Bank, state usury laws become applicable to the debt in the hands of the junk debt collector.
5. In the event a junk debt collector attempts to claim prejudgment interest at the prior credit card interest rate, which sometimes happens, the mere attempt may result in the forfeiture of all interest on the debt, and other civil penalties.
6. KRS § 360.020 provides, in part, "The taking, receiving, reserving, or charging a rate of interest greater than is allowed by KRS 360.010, when knowingly done, shall be deemed a forfeiture of the entire interest which the note, bill, or other evidence of debt carries with it . . . . "

It's something to think about on a cold Saturday morning.

Inventing a Kentucky Wage Garnishment Hardship Exemption

I have found at least one state that provides for a discretionary exemption in a wage garnishment based upon the debtor's claim of economic hardship. I have located nothing in Kentucky law that is expressly similar.

Oklahoma Statutes §31-1.1.provides, in part:

"Earnings from personal services - Exemption from process - Order.

"A. Following the issuance of [a] . . . garnishment . . . the debtor may file with the court an application requesting a hearing to exempt from such process by reason of undue hardship that portion of any earnings from personal services necessary for the maintenance of a family or other dependents supported wholly or partially by the labor of the debtor. A debtor with no family or other dependents may not claim an exemption under this section. . .

"B. In determining the existence of an undue hardship, the court should consider the income and expenses of the family and other dependents, and the standard of living created by the income and expenses. The court should also consider the standard of living in relationship to the minimal subsistence needs of the debtor’s family and other dependents, with comparison to the minimal subsistence standards in the community, in regard to basic shelter, food, clothing, personal necessities and transportation. The court should then determine if the lack of the funds sought to be exempt would be an undue hardship by creating less than a minimal level of subsistence. If deprivation of these earnings would create an undue hardship on the debtor and the family or other dependents the debtor supports, the court may:

"1. Order all or a portion of the personal earnings exempt . . . . 

[emphasis added]

Kentucky's exemption statutes do embody the concept of reasonably necessary support as being an essential factor for claiming particular types of exemptions. For example:

KRS § 427.150(1);

"To the extent reasonably necessary for the support of an individual and his dependents . . .  rights to receive money or property for alimony, support, or separate maintenance." [emphasis added]  

KRS § 427.150(2)(b);

"A payment on account of the wrongful death . . .  to the extent reasonably necessary for the support of the debtor and any dependent of the debtor;"  [emphasis added]

KRS § 427.150(2)(d);

"A payment in compensation of loss of future earnings . . .  to the extent reasonably necessary for the support of the debtor and any dependent of the debtor;"  [emphasis added]  

The Kentucky statutory limit on wage garnishment in KRS § 427.010(2), which is not a true "exemption" according to the Kentucky Court of Appeals in Brown v. Commonwealth, 40 S.W.3d 873 (1999), provides, in relevant part:

". . . . the maximum part of the aggregate disposable earnings of an individual for any workweek which is subjected to garnishment may not exceed the lesser of . . . . " [emphasis added]

The language of KRS § 427.010(2) suggests the determination of an individual debtor's wages subject to garnishment is not a mechanical calculation, and there is a space from within which the debtor can reasonably argue the financial circumstances of his or her specific case justify the court to limit a wage garnishment to less than the maximum allowed by statute, down to and including zero, within the court's sound exercise of discretion.