Galpen v. GalpenGalpen v. Galpen
- Reporters:
- ,
- Before:
- Weiss J.S.C.
Plaintiff-husband and defendant-wife were divorced in 1981. Two children were born of their marriage. In the final judgment of divorce entered on January 5, 1981 a written property settlement agreement (“PSA“) dated December 11, 1980 was incorporated into the judgment. The PSA obligated plaintiff-husband to pay child support of $120 a week for the two children, as well as certain other delineated expenses. In 1979 plaintiff‘s income was $52,317 from his employment in a business controlled by defendant‘s family. In addition to being an employee, plaintiff also became a shareholder in that business.
In March 1986 plaintiff became associated with Total-Tel USA, a division of Mansol Ceramics Company, (“Total-Tel“) as a self-employed independent contractor for Total-Tel‘s long distance service. The uncontradicted record is that plaintiff, as an independent contractor, receives no salary or wages from Total-Tel; he is compensated for his efforts strictly and solely on a commission basis. Total-Tel, in recognition that it would take some time for plaintiff, a new comer to the communication industry, to obtain a large volume of business for it, gave him a weekly advance known as “Chargeable Draw Against (Future) Commissions.” As set forth in certifications filed by Total-Tel‘s officers, this would allow plaintiff to realize predictable personal revenue while at the same time incurring debt to Total-Tel chargeable against future commissions. Plaintiff‘s debt to Total-Tel became his contractual obligation when, during the first week of his association with Total-Tel, plaintiff signed a guarantee to repay his indebtedness out of future commissions. According to Total-Tel this relationship has been and continues on a strictly voluntary basis.
In June 1986 defendant (improperly designated as plaintiff in the moving papers) filed a motion to enforce litigants rights and to compel plaintiff (improperly designated defendant) to comply with his obligation of child support, fix the arrears on account of nonpayment of child support and order income withholding pursuant to
In November 1986 Total-Tel received a notice to “payor” of income withholding from the Essex County Probation Department (“Probation Dept.“). Total-Tel wrote to Probation Department that plaintiff was not an employee but an independent contractor. According to certifications filed on behalf of Total-Tel, it believed that because plaintiff was not an employee, the notice from the Probation Dept. was not applicable to it insofar as the relationship between Total-Tel and plaintiff was concerned. On March 31, 1987 the Essex County Office of Child Support Enforcement filed a motion to compel Total-Tel to make payments pursuant to the income withholding notice served upon it.
Subsequent to the filing of the motion by the Essex County Office of Child Support Enforcement, plaintiff filed a notice of motion for a reduction of child support and the amount of the outstanding arrears. Certifications in support of, and in opposition to, plaintiff‘s motion were filed with the court and, subsequent to oral argument, the court entered an order reducing plaintiff‘s support obligation from $120 a week to $100 a week, effective June 9, 1987, but denied plaintiff‘s motion to reduce the outstanding arrearage on his support obligations. The only issue left open was that of Total-Tel‘s obligation to comply with the income withholding notice served upon it by the Essex County Probation Department. For the calendar year 1986, Total-Tel advanced plaintiff $23,178, while his commissions for the same period were $5,050, leaving a debt due by plaintiff of $18,128. As of June 17, 1987, Total-Tel had made advances totaling $8,302, while commissions earned equalled $7,045, or a difference of $1,257.
Total-Tel first contends that under
Initially, it should be pointed out that Total-Tel misconceives the nature of the claim being asserted against it. The notice of income withholding was not served upon it pursuant to
It was in direct response to CSEA that the 1985 act was adopted. As set forth in the Assembly Judiciary Committee‘s statement to the 1985 act;
As amended by the committee, this bill, entitled the “Support Enforcement Act of 1985“, revises various sections of law in order to ensure New Jersey‘s statutes are in compliance with the recently enacted federal Child Support
Enforcement Amendments of 1984 (Pub.L. 98-378). The bill provides for the following major changes in State law: — Requires that all court orders for alimony, maintenance and child support, including orders issued before the effective date of this bill shall be enforced by income withholding (current law provides that orders may be enforced by income withholding and only applies to orders issued after 1981 when the law was enacted);
— Provides that income withholding shall begin when support payments are 14 days overdue (current law provides for 25 days);
— Provides that an income withholding may be contested by the obligor only on the basis of “mistake of fact” (current law permits additional bases for contesting the withholding);
— Provides that if an employer does not withhold income of an employee as required, the employer is liable for the amount not withheld (current law does not have this provision);
— Authorizes the court to impose a lien on the real and personal property of an obligor to secure payment of overdue support and permits the court to require that the absent parent post a bond or other security to guarantee payment (current law authorizes the court to require the obligor to give “reasonable security” to ensure payment of support);
— Provides that the State may attach an obligor‘s homestead rebate to collect overdue support and that support indebtedness takes precedence over other indebtedness (current law does not specify support indebtedness);
— Extends the State income withholding system to include support orders issued in other states when an obligor has income in New Jersey (current law has no provision for this);
— Authorizes the State to notify the child support enforcement agency of another state when a support order has been issued in New Jersey and the obligor has income from that other state (current law has no provision for this);
— Permits the State IV-D agency (in the Division of Public Welfare) to assess interest or late payment fees on a support order which is 30 days overdue (current law has no provision for this);
— Directs the State IV-D agency to make information about overdue support greater than $1,000.00 available to consumer reporting agencies, upon request, and permits the State to make this information available at the State‘s option when the amount due is less than $1,000.00 (current law has no provision for this); and
— Directs the Supreme Court to adopt by court rule a system for expediting child support cases as required by federal law. [Emphasis supplied]
Under the 1985 act every order of a court for child support payments shall be enforced by an income withholding against “income from any ... source due the obligor” after the obligor has failed to make a required child support payment
The notice of income withholding must include a requirement that a payor withhold the amount specified in the notice.
Total-Tel argues that, even assuming that the notice of income withholding is applicable to it, it was not required to withhold any of the commissions earned by plaintiff because he was indebted to it in amounts in excess of his earned commissions. In essence what Total-Tel is claiming is a right of automatic set-off. A right of set-off exists between two parties each of whom under an independent contract owes an ascertained
Although not in the context of enforcing child support obligations, the question of an employer‘s right to set-off advances made to an employee against earnings has been dealt with in other jurisdictions. Thus, in Coastal Adjustment Bureau, Inc. v. Hutchins, 229 Or. 418, 367 P.2d 430, 93 A.L.R.2d 992 (Sup.Ct. 1961) the Oregon Supreme Court said:
... Where an employer in good faith advances expense money and a drawing account to a salesman in anticipation of future sales and commission, the employer is not liable to creditors of the employee upon a notice of garnishment returned “nothing owning“, so long as the return honestly reflects the state of the account between the parties, and so long as the account between the parties is a bona fide account reflecting transactions directly and necessary connected with the employment relationship. A drawing account is a well recognized modern business method of furnishing the employee with maintenance while he is performing valuable services from which earnings will accrue. [367 P.2d at 432]
See also Anchorage Helicop. Serv. Inc. v. Anchorage W. Hotel, 417 P.2d 903 (Alaska Sup.Ct. 1966); Packard Motors Co. of Alabama v. Tally, 212 Ala. 487, 103 So. 455 (1925); Hoffman Chevrolet v. Washington Cty. Nat. Sav. 297 Md. 691, 467 A.2d 758, 769, (Ct.App. 1983); Annotation, “Garnishment of salary, wages, or commissions where defendant debtor is indebted to garnishee-employer,” 93 A.L.R.2d 995 (???). The general rule stated above is subject to the requirement that the debt owed to the garnishee was made in good faith and not to defeat the rights of creditors. Anchorage Helicop. Serv. Inc. v. Anchorage W. Hotel, 417 P.2d at 907. Lack of good faith
Like all general rules, the rule relating to the right of set-off is subject to exceptions when strong public policy has been demonstrated or when it would be inequitable to permit the right of set-off to be exercised. See Four G. Corp. v. Ruta, 25 N.J. 503, 512 (1958) in which the Supreme Court, one justice dissenting, refused to allow the purchaser, who had acquired the broker‘s right to a commission from the seller, to set-off against the purchase price due the seller the amount of the broker‘s commission on the ground that it would defeat the expectations of the seller.
The Office of Child Support Enforcement argues that to allow Total-Tel to set-off plaintiff‘s earned commissions against any indebtedness owed by him to Total-Tel would run contrary to the strong public policy of enforcing child support obligations. This court agrees with that position. As seen by the enactment by Congress of CSEA in 1984 mandating specified procedures for improving child support enforcement and the enactment of the 1985 act by our Legislature, enforcement of child support obligations has a high priority in the current scheme of things. This recognition of the strong public policy in the enforcement of support obligations was recently referred to by Justice Sandra Day O‘Connor in her concurring opinion in Rose v. Rose, ___ U.S. ___, 107 S.Ct. 2029, 95 L.Ed.2d 599, 55 U.S.L.W. 4630 (1987), a case involving the right of the State of Tennessee to compel a disabled veteran to apply his veteran benefits to pay child support. As pointed out by Justice O‘Connor:
Our Anglo-American tradition accords a special sanctity to the support obligation. Unlike other debts, for example, the obligation to support spouse and child is enforced on threat of contempt. These obligations, moreover, may not be discharged in bankruptcy.
11 U.S.C. § 523(a)(5) . Indeed, even before the bankruptcy laws specifically excepted the support obligation form the discharge, this Court inferred such an exception, explaining the difference between a support obligation and other debts:
`We think the reasoning of [Audubon v. Shufeldt, 181 U.S. 575 [21 S.Ct. 735, 45 L.Ed. 1009] (1901)] recognizes the doctrine that a decree awarding alimony to the wife or children, or both, is not a debt which has been put in the form of a judgment, but is rather a legal means for enforcing the obligation of the husband and father to support and maintain his wife and children. He owes this duty not because of any contractual obligation or as a debt due from him to the wife, but because of the policy of the law which imposes the obligation upon the husband. The law interferes when the husband neglects or refuses to discharge this duty and enforces it against him by means of legal proceedings. ....
The obligation continues after the discharge in bankruptcy as well as before, and is no more than the duty devolved by the law upon the husband to support his children and is not a debt in any just sense. Wetmore v. Markoe, 196 U.S. 68, 74-76 [25 S.Ct. 172, 174-75, 49 L.Ed. 390] (1904)’ Particularly relevant is the fact that the common law generally will not enforce similar anti-attachment provisions against a family-member‘s claim for support.
....
In short, the support obligation has always been granted a special place in our law. [___ U.S. at ___, 107 S.Ct. at 2041]
That society places a high value on the enforcement of support obligations against parents can be seen from the waiver of sovereign immunity by the United States to permit garnishments against monies due from, or payable by, the United States as renumeration to an individual to enforce a parent‘s legal obligation to provide child support or to make alimony payments.
The primary objective of the 1985 act was to improve enforcement of child support obligations. In enacting the 1985 act, our Legislature specifically provided that:
... this income withhold shall have priority over any other withholding without regard to the dates of the other income withholdings. [
N.J.S.A. 2A:17-56.10(b) ; emphasis supplied]
It seems clear that the intent of this provision of the 1985 act was that support indebtedness was to take precedence over a parent‘s other indebtednesses. It can hardly be doubted that
Counsel for the county shall prepare an order to be submitted pursuant to