Summary
In Blow, 134 Mich App at 409, the plaintiff pursued garnishment proceedings against the principal defendant for child support arrearages by serving two writs and affidavits of garnishment on the garnishee defendant, the defendant's employer.
Summary of this case from Asher v. Shiawassee Invs., LLCOpinion
Docket No. 70083.
Decided May 1, 1984.
Randolph McCarthy, Jr., P.C. (by Kenneth Kobayashi), for plaintiff.
Plaintiff filed this garnishment action in circuit court seeking to enforce a consent judgment against the principal defendant (defendant) for child support arrearages. The garnishee-defendant had twice disclaimed liability after being served with writs and affidavits of garnishment on November 24, 1982, and on November 29, 1982. Following a bench trial, the court found that garnishee-defendant was not in possession or control of any property, money, goods or chattels belonging to the defendant at the time of service and the garnishee-defendant, in any event, had a right of setoff against defendant's commissions for loans or monies previously advanced. Plaintiff appeals as of right. Neither defendant nor garnishee-defendant has filed a brief on appeal and we affirm.
Defendant is employed with garnishee-defendant as a "designer salesperson" on a commission basis, receiving 6% of his gross developed sales. To offset the fluctuation in furniture sales, garnishee-defendant implements an advance payment system whereby an employee is paid weekly advances which are then added together on a monthly basis and compared to the commission earned by that employee that month. If the commissions exceed the amount advanced, the employee receives a check for the difference. If the advances exceed the commissions, the difference is carried forward. A written agreement entered into between the garnishee-defendant and the employee provides that the employee's monthly commissions are to be first applied toward any deficit owed the garnishee-defendant. The advances are viewed as "loans" to the employee for necessary living expenses.
Under this agreement, defendant received weekly advancements of $488. At the time of trial, he had been employed by garnishee-defendant for a period of approximately one year and three months during which his commission never exceeded the monthly total of his weekly advances. Defendant owed garnishee-defendant in excess of $3,195.20, the difference between loans or advances made by garnishee-defendant and commissions earned.
While we recognize the potential for abuse that may accompany such a payment system regarding creditors' rights, we find that a reasonable construction of the relevant statutes and court rules supports the result reached by the trial court in this case, particularly in light of the rule that exemptions to garnishment provided by court rules and statutes will be construed to maximize protection of the principal debtor. Sears, Roebuck Co, v A T G Co, Inc, 66 Mich. App. 359, 369; 239 N.W.2d 614 (1976).
GCR 1963, 738.6 clearly permits a garnishee-defendant to claim any setoffs available to the garnishee-defendant against the principal defendant when determining its liability to that defendant. Renshaw v Samuels, 117 Mich. App. 649, 658-659; 324 N.W.2d 117 (1982). Thus, a garnishee-defendant's claim against the defendant will have priority over the plaintiff's claim with regard to property being garnished. Sears, Roebuck Co v A T G Co, supra, p 368.
In Sears, Roebuck Co v A T G Co, Sears attempted to garnish the earnings of an employee of A T G. In the disclaimer filed by A T G, the employee's gross earnings were listed at $189.88 and his mandatory deductions at $26.30, leaving him a disposable income of $163.58. Out of this disposable income, A T G claimed a deduction of $40.89 as a weekly installment payment on loans of $5,957.32 made by A T G to the employee. A T G claimed that this deduction, being 25% of the debtor's disposable income, barred any payment to Sears because of federal law limiting garnishments to 25% of a debtor's disposable income. See 15 U.S.C. § 1671-1677. The Court concluded that a garnishee-defendant is entitled to deduct from disposable income whatever sum was agreed upon by the debtor, with no limitation. The plaintiff can then claim the difference, if any, between 25% of disposable income and the garnishee-defendant's deduction. If the garnishee-defendant's deduction is more than 25% of the debtor's disposable income, the plaintiff will recover nothing.
In this case, defendant entered into an agreement with garnishee-defendant allowing garnishee-defendant to deduct defendant's entire disposable income in commissions, if necessary, and apply it toward the debt accrued by the defendant in advances. Garnishee-defendant thus had a right to apply defendant's entire monthly commission to the debt owed. The trial court did not err in concluding that garnishee-defendant had no liability to plaintiff. We note that, in this case, there is no argument or evidence to suggest that the payment system worked out between defendant and garnishee-defendant was fraudulently designed to avoid defendant's obligation to his creditors.
Affirmed.