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The Cadle Co. v. Fletcher

Supreme Court of Connecticut

December 23, 2016

THE CADLE COMPANY
v.
MARGUERITE FLETCHER ET AL.

          Argued Date: October 12, 2016 [*]

          Paul N. Gilmore, for the appellant (plaintiff).

          Nicholas J. Harding, with whom was Agnes Roman-owska, for the appellees (defendants).

          Rogers, C. J., and Palmer, Zarella, Eveleigh, McDonald and Robinson, Js. [**]

          OPINION

          ZARELLA, J.

         This case, which comes to us on certification from the United States Court of Appeals for the Second Circuit pursuant to General Statutes § 51-199b, requires us to determine whether, and under what circumstances, residual postgarnishment wages (residual wages) are subject to postjudgment execution by a judgment creditor. The plaintiff, The Cadle Company, is the defendant Terry B. Fletcher's judgment creditor pursuant to two state court judgments, under which Fletcher (Terry) owed the plaintiff more than $3 million. To satisfy these judgments, the plaintiff garnished Terry's wages. Since at least 2005, Terry has transferred to the bank account of his wife, the named defendant, Marguerite Fletcher (Marguerite), more than $300, 000 of his residual wages. The plaintiff brought an action against the defendants in the United States District Court for the District of Connecticut, claiming, among other things, that Terry's transfer of his residual wages to his wife violated the Connecticut Uniform Fraudulent Transfer Act (CUFTA), General Statutes § 52-552 et seq. The plaintiff claimed that, as a result of the fraudulent transfer of Terry's residual wages to Marguerite, she was personally liable to the plaintiff for the full amount of the funds that were transferred within the four years preceding the commencement of the action. The defendants filed a motion for partial summary judgment, claiming that, under Connecticut law, after a judgment debtor's wages have been garnished, the remaining wages are exempt from execution, and, therefore, the transfer of those wages to a third party cannot constitute a fraudulent transfer. The plaintiff also filed a motion for partial summary judgment, contending that there was no genuine issue of material fact with respect to Terry's transfer of his residual wages to Marguerite. The District Court denied the defendants' motion for partial summary judgment, granted the plaintiff's motion for partial summary judgment and, after conducting various proceedings related to the plaintiff's other claims, ultimately rendered judgment for the plaintiff in the amount of $401, 426.16 on its CUFTA claim. The defendants appealed from the District Court's judgment to the Second Circuit Court of Appeals. Thereafter, the Second Circuit certified the following question to this court pursuant to § 51-199b: ‘‘Do [General Statutes] §§ 52-361a and 52-367b, read together, exempt [postgarnishment] residual wages held in a third party's bank account from further execution, so that they become freely transferable under [CUFTA] . . . ?'' (Citation omitted.) Cadle Co. v. Fletcher, 804 F.3d 198, 202 (2d Cir. 2015). This court accepted the certified question. We conclude that Terry's residual wages would not have been exempt from execution if he had retained possession of them and, therefore, that they were subject to execution after Terry transferred them to Marguerite's account. Accordingly, we answer the certified question in the negative.

         The certified question requires us to interpret the governing statutory scheme, and our review is therefore plenary. See, e.g., Scholastic Book Clubs, Inc. v. Commissioner of Revenue Services, 304 Conn. 204, 213, 38 A.3d 1183, cert denied, __ U.S. __, 133 S.Ct. 425, 184 L.Ed.2d 255 (2012). ‘‘The principles that govern statutory construction are well established. When construing a statute, [o]ur fundamental objective is to ascertain and give effect to the apparent intent of the legislature. . . . In other words, we seek to determine, in a reasoned manner, the meaning of the statutory language as applied to the facts of [the] case, including the question of whether the language actually does apply. . . . In seeking to determine that meaning, General Statutes § 1-2z directs us first to consider the text of the statute itself and its relationship to other statutes. If, after examining such text and considering such relationship, the meaning of such text is plain and unambiguous and does not yield absurd or unworkable results, extratextual evidence of the meaning of the statute shall not be considered. . . . When a statute is not plain and unambiguous, we also look for interpretive guidance to the legislative history and circumstances surrounding its enactment, to the legislative policy it was designed to implement, and to its relationship to existing legislation and common law principles governing the same general subject matter . . . .'' (Internal quotation marks omitted.) Id., 213-14.

         We begin our analysis with the language of the relevant statutes. Section 52-367b (a) provides in relevant part: ‘‘Execution may be granted pursuant to this section against any debts due from any financial institution to a judgment debtor who is a natural person, except to the extent such debts are protected from execution by . . . section 52-361a . . . .'' Section 52-361a (a) provides in relevant part: ‘‘If a judgment debtor fails to comply with an installment payment order, the judgment creditor may apply to the court for a wage execution. . . .'' Section 52-361a (f) provides in relevant part: ‘‘The maximum part of the aggregate weekly earnings of an individual which may be subject under this section to levy or other withholding for payment of a judgment is the lesser of (1) twenty-five per cent of his disposable earnings for that week, or (2) the amount by which his disposable earnings for that week exceed forty times the higher of (A) the minimum hourly wage prescribed by Section 6 (a) (1) of the Fair Labor Standards Act of 1938, USC Title 29, Section 206 (a) (1), or (B) the full minimum fair wage established by subsection (i) of section 31-58, in effect at the time the earnings are payable. . . .''

         With this statutory background in mind, it is necessary to clarify the claims that the parties are making before addressing the certified question. As it did before the District Court, the plaintiff makes the following alternative claims before this court: (1) § 52-367b does not apply in this case because Terry never deposited his residual wages into his own bank account; and (2) even if he had deposited his residual wages into his own bank account, § 52-367b would not have exempted them from execution. The District Court agreed with the plaintiff's first claim, holding that, ‘‘even if there were some protection for ‘net residual wages, ' once [Terry] transfers those wages to [Marguerite's] account, he can no longer seek protection from execution under the statute.''[1] If the defendants' position that none of Terry's residual wages would have been subject to execution by the plaintiff if they had been in his possession is correct, however, then, even if § 52-367b did not provide any protection of the funds that had been deposited in Marguerite's account, Terry's transfer of his residual wages to Marguerite could not have been made with the intent to deprive the plaintiff of any right to execute against the funds, and the plaintiff would have had no claim to them under CUFTA. See General Statutes § 52-552e (a) (1) (transfer by debtor is fraudulent when it is made ‘‘[w]ith actual intent to hinder, delay or defraud any creditor''). It is clear, therefore, that the plaintiff's claims are not truly claims in the alternative. Rather, the question of whether Terry's residual wages would have been subject to execution by the plaintiff if he had deposited them in his own bank account or otherwise retained possession of them is dispositive. If the answer to that question is ‘‘yes, '' then the residual wages that were transferred to Marguerite's bank account are subject to execution pursuant to CUFTA. If the answer is ‘‘no, '' then the plaintiff would have no claim to the funds in Marguerite's bank account.

         Accordingly, we address the defendants' claim that Terry's residual wages would have been exempt from execution if he had deposited them in his own bank account or otherwise kept possession of them. In support of this claim, the defendants first cite the language of § 52-367b (a) providing that ‘‘[e]xecution may be granted pursuant to this section against any debts due from any financial institution to a judgment debtor who is a natural person, except to the extent such debts are protected from execution by . . . section 52-361a, '' which governs the garnishment of wages. As we have indicated, § 52-361a (f) provides the formula by which the maximum amount of a debtor's wages that may be garnished is to be determined and further provides that ‘‘[o]nly one execution under this section shall be satisfied at one time.'' The defendants contend that the reference to § 52-361a in § 52-367b (a) must mean that, when a judgment debtor has deposited his wages into a bank account, a judgment creditor is entitled to execute against those funds only to the extent that the creditor would have been entitled to garnish the debtor's earnings. The defendants further argue that, if the earnings were subject to garnishment before being deposited, as they were in the present case, the judgment creditor is not entitled to execute against any portion of the deposited funds.

         We are not persuaded. Section 52-361a (f) places limits on only the amount of ‘‘earnings'' that are subject to execution. General Statutes § 52-350a (5) defines ‘‘earnings'' as ‘‘any debt accruing by reason of personal services, including any compensation payable by an employer to an employee for such personal services, whether denominated as wages, salary, commission, bonus or otherwise.'' Because wages that a judgment debtor has deposited into a bank account do not constitute a debt payable by the employer, they do not come within this definition, and § 52-361a does not apply to them. Thus, the most reasonable reading of the language of § 52-367b (a) providing that that debts due from any financial institution are subject to execution ‘‘except to the extent such debts are protected from execution by . . . section 52-361a'' is that the debts due by a financial institution are subject to execution unless the debt is an employee's ‘‘earnings, '' which are subject to § 52-361a. Accordingly, we agree with the District Court's conclusion that this language refers to the earnings of bank employees, and it was intended to prevent judgment creditor banks from using § 52-367b (a) to execute against such earnings instead of proceeding pursuant to § 52-361a.[2]

         We recognize that two trial courts have concluded to the contrary. See Community Investment Corp. v. Sirico Professional Services, Superior Court, judicial district of New Haven, Docket No. NNH-CV-14-6051279-S (July 16, 2015) (60 Conn. L. Rptr. 606); Discover Bank v. Marchetti, Superior Court, judicial district of New Britain, Docket No. HHB-CV-11-6010114-S (June 21, 2012) (54 Conn. L. Rptr. 235). However, both of these courts reasoned that, if the reference to § 52-361a in § 52-367b (a) did not operate to exempt wages deposited in a bank account from execution, it would be meaningless. Community Investment Corp. v. Sirico Professional Services, supra, 608; Discover Bank v. Marchetti, supra, 236. As we have explained, that is not the case. Accordingly, we do not find these cases persuasive.

         The defendants also note that, pursuant to § 52-367b (k), the judges of the Superior Court have adopted an exemption form for financial institution executions that lists § 52-361a as an exemption. See Exemption Claim Form, Financial Institution Execution, Form JD-CV-24A (Revised February, 2015). Although we agree with the defendants that the current form does, in fact, indicate that wages are exempt from execution pursuant to § 52-367b (a), we are compelled to conclude that the form is in error. Before 2006, the judicially created exemption form contained no reference to § 52-361a, even though the reference to the wage garnishment statute had been included in § 52-367b (a) since its enactment in 1981. See Public Acts 1981, No. 81-352, § 2 (P.A. 81-352).[3] The change to the form was instigated by a lawyer employed by the Legal Assistance Resource Center of Connecticut, Inc., who requested in a November 30, 2001 letter to the External Affairs Division of the Judicial Branch that the form be revised to, among other things, include the reference to § 52-361a. Thereafter, a committee was convened by the Law Revision Commission, which, in consultation with representatives of the Court Operations Division of the Judicial Branch (Court Operations) and legal service providers, recommended that certain changes to the form be made, including adding the reference to § 52-361a. In a May 5, 2006 letter from Court Operations to the Chief Court Administrator, Court Operations represented that the ‘‘primary intent of the changes to the form [was] to clarify the form and make it easier to use.'' The letter did not explain the changes, which were shown partially in handwriting and partially in typed inserts in an attached draft form, and gave no indication that the form had been substantively and significantly changed to include an exemption that it previously had not included. Notably, the new reference to § 52-361a was included in a typed insert that also contained handwritten changes, thereby giving the appearance that the only changes were the handwritten ones. Thereafter, the Chief Court Administrator approved the revisions, and the form was printed and distributed. Accordingly, it appears that the inclusion of the exemption for wages in the Exemption Claim Form was simply the result of an oversight.

         In support of their claim that wages in the hands of the judgment debtor are exempt from execution to the same extent that earnings are exempt under § 52-361a, the defendants also rely on the language of General Statutes § 52-352b (n), which exempts from any form of postjudgment process ‘‘[a]limony and support, other than child support, but only to the extent that wages are exempt from execution under section 52-361a . . . .'' The defendants contend that this provision demonstrates that the legislature intended that residual wages would be exempt from any form of execution, including bank executions pursuant to § 52-367b and property executions pursuant to General Statutes § 52-356a. Again, we are not persuaded. If the legislature had intended to exempt residual wages that are in the hands of a judgment debtor from any form of execution, the legislature easily could have provided so expressly, as it did for ‘‘wages earned by a public assistance recipient under an incentive earnings or similar ...


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