KENOSHA HOSPITAL & MEDICAL CENTER, Plaintiff-Respondent, v. Jesus E. GARCIA, Defendant, RICHTER INDUSTRIES, INC., Garnishee-Defendant-Appellant-Petitioner.
No. 02-1727
Supreme Court of Wisconsin
July 8, 2004
2004 WI 105; 683 N.W.2d 425; 274 Wis. 2d 338
Oral argument December 17, 2003.
For the garnishee-defendant-appellant-petitioner there were briefs by Christopher W. Rose and Rose & Rose, Kenosha, and oral argument by Christopher W. Rose.
For the plaintiff-respondent there was a brief by Ronald L. Diersen and Rizzo & Diersen, S.C., Kenosha, and oral argument by Ronald L. Diersen.
¶ 1. SHIRLEY S. ABRAHAMSON, C.J. This is a review of a published decision of the court of appeals affirming the judgment and order of the Circuit Court for Kenosha County, David M. Bastianelli, Judge.1 The circuit court granted a judgment in favor of the creditor, Kenosha Hospital and Medical Center, against the garnishee, Richter Industries, Inc., for the unpaid debt of the debtor, Jesus E. Garcia. The circuit court also entered an order denying Richter Industries’ motion to vacate the judgment.
¶ 2. The court of appeals affirmed the judgment of the circuit court, concluding that the notice of motion for judgment was properly served upon the garnishee, satisfying the requirements of
¶ 3. Three questions are presented by Richter Industries:
- When a creditor (here Kenosha Hospital) commences an earnings garnishment action under
Wis. Stat. § 812.35 , must service of the notice of motion for judgment against the garnishee-employer (here Richter Industries) for liability under§ 812.41 be served on the garnishee under§ 801.11(5) , or may service be made under§ 801.14(2) ? - Did the circuit court err in refusing to vacate the judgment against the employer-garnishee?
- May a circuit court enter a judgment against an employer-garnishee in an earnings garnishment action when the debtor (here Garcia) has filed a petition in bankruptcy and there is an automatic stay under
11 U.S.C. § 362(a) ?
¶ 4. For the reasons set forth, we reverse the decision of the court of appeals and answer the questions presented as follows:
Wisconsin Stat. § 801.11(5) governs service of the notice of motion for judgment under§ 812.41 , and service in the present case did not, on the record before us, satisfy§ 801.11(5) .
Because the circuit court did not apply the proper law relating to service, it erred in refusing to vacate the judgment. - The automatic stay provisions of
11 U.S.C. § 362(a) did not bar a judgment against the garnishee Richter Industries for the amount of the debtor‘s debt.
I
¶ 5. The facts of this case are not in dispute and are set forth here and in the decision of the court of appeals. Jesus E. Garcia became indebted to Kenosha Hospital in the sum of $20,888.85 for unpaid medical services, and Kenosha Hospital filed a judgment against Garcia on August 28, 2001, for the principal of the debt plus costs and disbursements as authorized by law.
¶ 6. On September 25, 2001, Kenosha Hospital commenced an earnings garnishment action against Garcia and the garnishee, Richter Industries, to collect the unsatisfied civil judgment. The notice of the garnishment action was served upon the garnishee‘s payroll department at 4910 70th Avenue, Kenosha, Wisconsin, by certified mail pursuant to
¶ 7. The earnings garnishment form set out the amount that Garcia owed to Kenosha Hospital and instructed Richter Industries how to effect the garnishment. The earnings garnishment form did not advise
¶ 8. On December 19, 2001, the notice of motion for judgment against Richter Industries was served by a process server on Richter Industries at its Kenosha, Wisconsin plant by personal service on a woman who stated that she was a secretary and was the “person in charge.” The woman would not give her name.6
¶ 9. On January 2, 2002, a hearing was held on the motion for a judgment against Richter Industries. Richter Industries did not appear at the hearing, and the minutes of the circuit court reflect that the circuit court held Richter Industries responsible for the amount owed by Garcia. On January 7, 2002, at 1:45 p.m., Garcia filed for bankruptcy. On the same afternoon at 4:00 p.m., the circuit court filed an order of judgment awarding Kenosha Hospital a judgment against Richter Industries for the amount of Kenosha Hospital‘s judgment against Garcia plus post-judgment costs “less the sum of $527.64 paid by the Garnishee.”7
¶ 10. On January 10, 2002, a notice of bankruptcy was filed on behalf of Garcia in the Kenosha County Circuit Court, explaining that Kenosha Hospital had been named as a creditor. The notice stated that “[t]he Bankruptcy Code prohibits further prosecution of this
¶ 11. In a notice of motion filed on May 10, 2002, Richter Industries moved to vacate the judgment. It argued that service of the notice of motion for judgment was improper, claiming that service was made at the plant located in Kenosha, Wisconsin, rather than at Lake Forest, Illinois, where the registered agent and office of the corporation were located. It also argued that pursuant to
¶ 12. The circuit court considered Richter Industries’ motion in a hearing on June 12, 2002. On June 20, 2002, it issued an order denying Richter Industries’ motion to vacate the judgment, stating that the judgment granted in favor of Kenosha Hospital against Richter Industries on January 7, 2002, was to remain in effect. The garnishee, Richter Industries, timely appealed to the court of appeals, which affirmed the judgment and order of the circuit court. We granted review.
II
¶ 13. The first and third issues raised on review are questions of law requiring the interpretation of statutes. The interpretation of statutes is a question of
¶ 14. The second issue involves the circuit court‘s refusal to vacate the judgment against Richter Industries. Richter Industries’ motion to vacate does not cite a statute or rule under which it was proceeding. We assume that the motion was made under
¶ 15. This court has often said that “a discretionary determination must be the product of a rational mental process by which the facts of record and law relied upon are stated and are considered together for the purposes of achieving a reasonable determination.”10 An appellate court will affirm a circuit court‘s discretionary decision as long as the circuit court “examined the relevant facts, applied a proper standard of law, and, using a demonstrated rational process, reached a conclusion that a reasonable judge could reach.”11 Therefore, the record on appeal must “reflect
III
¶ 16. The first question presented is whether service of the notice of motion for judgment complied with the statutes.
¶ 17. To answer this question, we must examine the interplay of the following statutes:
¶ 18. We start with
¶ 19. Under
¶ 20. One of the two statutorily prescribed earnings garnishment forms must be served upon the
¶ 21. The acceptable methods of service for the earnings garnishment form for the garnishee as set forth in
¶ 22. While
¶ 23. The purpose of
Nor do the parties discuss the applicability, if any, of
¶ 25. Two means of service in chapter 801 may be applicable to the present case. The parties dispute which of these means of service should govern service of a notice of motion for judgment on a garnishee. Richter Industries argues that
judgment);
¶ 26. Richter Industries argues that a notice of motion for judgment is a mandate requiring the appearance of a defendant in an action under penalty of having a judgment entered against it for failing to do so. In other words, Richter Industries contends that the notice of motion for judgment should be treated as the equivalent of a summons and argues that the statutes require personal service of that notice. In sum, according to Richter Industries, the notice of motion for judgment must comply with the statutes governing service of summons and personal jurisdiction, and Wisconsin requires strict compliance with rules of statutory service.23
(a) By personally serving the summons upon an officer, director or managing agent of the corporation or limited liability company either within or without this state. In lieu of delivering the copy of the summons to the officer specified, the copy may be left in the office of such officer, director or managing agent with the person who is apparently in charge of the office.
We disagree with Richter Industries that the Bar Code case controls our decision in the present case. Bar Code is not directly applicable to this case. The plaintiff in Bar Code sought to serve a summons and complaint rather than, as in this case, a notice of motion for judgment in an earnings garnishment proceedings.
¶ 28. The record does not show that the secretary served at the Kenosha plant was an officer, director, or managing agent of the corporation or was in charge of the office of an officer, director, or managing agent of the corporation. Nothing in the record allows us to draw an inference, as Kenosha Hospital apparently would like us to do, that because Erik Richter signed the receipt for the initial garnishment form at the Kenosha plant, it was, in fact, his office.
¶ 29. Nor was personal service made on the registered agent of Richter Industries.
¶ 30. This Illinois document does not appear to govern service on the corporation in Wisconsin. According to the records of the Wisconsin Department of Financial Services that this court obtained and exam-
¶ 31. A foreign corporation that has no registered agent or whose certificate has been revoked may, under certain circumstances, be served by registered or certified mail addressed to the foreign corporation at its principal office as shown on the records of the Department of Financial Institutions under
¶ 32.
¶ 33. Service upon a foreign corporation may also be made in any other manner now or hereafter permitted by law.29 Neither party argues that any statute, other than those mentioned above, governs the manner of service.
¶ 34. In contrast, Kenosha Hospital argues that
¶ 36. The question that remains, however, is whether
¶ 37. The court of appeals concluded that service was proper because the earnings garnishment action had been commenced, that
¶ 38. We agree with Richter Industries that
his or her dwelling house or usual place of abode with some person of suitable age and discretion then residing therein. Service by mail is complete upon mailing. Service by facsimile is complete upon transmission. The first sentence of this subsection shall not apply to service of a summons or of any process of court or of any paper to bring a party into contempt of court.
¶ 40. As we explained previously, on the basis of the record before this court it does not appear, as best we can determine, that service of the notice of motion for judgment on a person in charge of one of Richter Industries’ offices was sufficient service under
¶ 41. Richter Industries objects to the service of the notice of motion for judgment in this earnings garnishment case as having been made under the wrong statute. It does not argue that the failure of personal service of the notice of motion for judgment on it (which was commenced by certified mail service) or the failure to give it notice of the amount of the potential liability in the notice of motion for judgment offends due process, that is, that “‘traditional notions of fair play and substantial justice‘” have been offended.33 We therefore do not address any due process issues.
IV
¶ 42. The second issue presented is whether the circuit court erred in refusing to vacate the judgment against Richter Industries. The motion to vacate filed in the circuit court and Richter Industries’ brief in this court do not refer to any rule or statute as authority for the motion to vacate. As best we can determine, Richter
¶ 43. The circuit court declared that service was proper but did not state why. The parties in the circuit court and here did not carefully examine the various statutes involved and apply them to these facts. We have concluded that service of the notice of motion should have complied with
¶ 44. Because the matter is returning to the circuit court, we consider the third issue raised by Richter Industries, namely whether a violation of the automatic bankruptcy stay occurred when Kenosha Hospital moved for judgment against Richter Industries. The parties spent most of their time in the circuit court and in this court debating this issue.
V
¶ 45. The third issue raised is whether Kenosha Hospital violated the automatic stay in bankruptcy provided by
¶ 46. The bankruptcy statute,
¶ 47. Accordingly, we must determine whether a creditor‘s pursuit of a judgment against a garnishee, seeking to hold the garnishee personally liable for all or part of the debtor‘s debt, indirectly violates the bankruptcy stay. In order to answer this question, we first consider the principal purposes of the bankruptcy law and then gauge the positions of the opposing parties in light of these purposes.
¶ 48. One of the underlying principal purposes of bankruptcy law is to discharge a debtor‘s debts and give the debtor a fresh start, free from the weight and pressure of pre-existing debt.37 Another purpose of bankruptcy law is to promote the equal treatment of creditors of equal standing. The automatic stay provides creditors protection by preventing the creditors from engaging in a “disorderly, piecemeal dismemberment of the debtor‘s estate outside the bankruptcy proceedings.”38
¶ 51. The Warren bankruptcy court expressed concern about the potential effect that the judgment against the garnishee-employer would have on the debtor‘s relationship with his employer. The Warren bankruptcy court viewed the debtor‘s right to earn a living as property that is protected from creditors affected by his bankruptcy.
¶ 52. The Warren bankruptcy court held that although the garnishee-employer was culpable for failing to answer the garnishment proceeding, it would not allow the judgment against the garnishee-employer to stand. The judgment, according to the bankruptcy court, would undermine the concept of a “fresh start,”
¶ 56. The Kanipe bankruptcy court concluded that the majority position is the correct one. It reasoned that the prosecution of the conditional judgment was against the employer, not the debtor; that neither the debtor nor property of the estate was implicated; and that the outcome did not directly or indirectly affect the debtor or the property of the estate.
¶ 57. The Kanipe bankruptcy court conceded that it, too, was concerned that its ruling could subject the debtor to retaliation from her employer, although no allegations of threats had been raised in those proceedings. The Kanipe court admonished employers that any employer that sustained corporate liability under the garnishment statutes “should tread lightly before seeking indemnification from the debtor as the employer itself could be in violation of the discharge injunction”43 and in violation of consumer protection laws prohibiting the discharge of an employee because her earnings have been garnished.
¶ 58. We agree with Kenosha Hospital that the reasoning in Kanipe is sound. We therefore conclude that Kenosha Hospital did not violate the automatic stay provisions of
¶ 60. Were we to hold otherwise,
¶ 61. For the reasons set forth, we conclude that Kenosha Hospital did not violate the automatic stay provisions of
¶ 62. For the reasons set forth, we reverse the decision of the court of appeals and answer the questions presented as follows:
Wisconsin Stat. § 801.11(5) governs service of the notice of motion for judgment under§ 812.41 , and service in the present case did not on the record before us satisfy§ 801.11(5) .- Because the circuit court did not apply the
proper law relating to service, it erred in refusing to vacate the judgment. - The automatic stay provisions of
11 U.S.C. § 362(a) did not bar a judgment against the garnishee Richter Industries for the amount of the debtor‘s debt.
By the Court.—The decision of the court of appeals is reversed and the cause is remanded to the circuit court for further proceedings consistent with this opinion.
All work on this opinion was completed on or before June 30, 2004. Justice Diane S. Sykes resigned on July 4, 2004.
¶ 63. JON P. WILCOX, J. (dissenting). I dissent from Parts III and IV of the majority opinion, regarding whether service was proper and whether the circuit court erred in refusing to vacate the judgment against Richter Industries. I conclude that the applicable statute regarding service of a motion for judgment in a garnishment proceeding is
¶ 64. In this case, Kenosha Hospital attempted to serve Erik Richter of Richter Industries with a notice of motion and motion for judgment pursuant to
If the garnishee fails to pay over funds to which the creditor is entitled under this subchapter within the time required under s. 812.39, the creditor may, upon
notice to all of the parties, move the court for judgment against the garnishee in the amount of the unsatisfied judgment plus interest and costs.
(Emphasis added.) The parties do not contest the merits of Kenosha Hospital‘s
¶ 65. Section
¶ 66. As there is no dispute that the earnings garnishment action was properly commenced, majority op., ¶¶ 21, 38, I turn to
Service upon the attorney or upon a party shall be made by delivering a copy or by mailing it to the last-known address, or, if no address is known, by leaving it with the clerk of the court. Delivery of a copy within this section means: handing it to the attorney or to the party; transmitting a copy of the paper by facsimile machine to his or her office; or leaving it at his or her office with a clerk or other person in charge thereof; or, if there is no one in charge, leaving it in a conspicuous place therein; or, if the office is closed or the person to be served has no office, leaving it at his or
her dwelling house or usual place of abode with some person of suitable age and discretion then residing therein.
¶ 68. As I discussed above, because Kenosha Hospital properly commenced the garnishment action in this case and served Richter Industries with a motion for judgment,
¶ 69. Because the majority concludes that
¶ 70. The majority provides no legal authority for the proposition that a motion for judgment against a garnishee in a properly commenced, pending garnishment proceeding must be served as if it were a summons in a completely new action. Under
¶ 71. What troubles me about the majority opinion is that in addition to simply ignoring the explicit language of the relevant statutes in this case, the majority provides little reasoning and no authority to support its conclusion that
¶ 72. The majority summarily concludes that
(a) By personally serving the summons upon an officer, director or managing agent of the corporation or limited liability company either within or without this state. In lieu of delivering the copy of the summons to the officer specified, the copy may be left in the office of such officer, director or managing agent with the person who is apparently in charge of the office.
¶ 74. Case law establishes that when evaluating whether service properly complied with
¶ 76. As to the second factor, the majority concludes that service was proper under
¶ 77. Finally, I cannot understand Part IV of the majority opinion. After determining that service on Richter Industries was improper under
¶ 78. The majority‘s only rationale for concluding that service of a motion for judgment in a garnishment action must be served as a summons is that a motion for judgment is somehow a separate proceeding from the original garnishment action such that the “heightened statutory protections” of
¶ 79. Because the applicable statute regarding service of a motion for judgment in a garnishment proceeding is
Notes
The Plaintiff, by Ronald L. Diersen its Attorney, moves the court for a judgment against the Garnishee, Richter Industries, Inc., in the amount of the judgment against the Defendant, Jesus E. Garcia, plus the cost of the Garnishment and this motion. This motion is based on the Garnishee‘s failure to respond to the garnishment received by the Garnishee on October 2, 2001.
Upon receipt of the notice under sub. (1) and payment of the fee under s. 814.62(1), the clerk of courts shall issue 2 earnings garnishment forms under s. 812.44(3) for each garnishee. Blank earnings garnishment forms may be issued, but they shall carry the court seal. A circuit court may permit, by rule, the clerk to issue earnings garnishment forms after payment of the fee but before the filing of the notice under sub. (1). That circuit court rule shall require the notice to be filed with the court at a later time, but no later than 5 business days after the date the garnishee is served under sub. (3).
(a) Within 60 days after filing the notice under sub. (1) and as specified under sub. (4)(c), the creditor shall serve one of the 2 earnings garnishment forms upon the debtor by one of the following means:
- First class mail.
- Certified mail, return receipt requested.
- Any means permissible for the service of a summons in a civil action, other than publication.
(b) Within 60 days after filing the notice under sub. (1), the creditor shall serve one of the 2 earnings garnishment forms upon the garnishee by one of the means listed under par. (a)1 to 3, or by other means if the garnishee signs an admission of service.
If the garnishee fails to pay over funds to which the creditor is entitled under this subchapter within the time required under s. 812.39, the creditor may, upon notice to all of the parties, move the court for judgment against the garnishee in the amount of the unsatisfied judgment plus interest and costs.
The parties assume that
We cannot determine whether Richter Industries withheld and paid over precisely what it was supposed to pay, too much, or too little. The record is devoid of this information. We cannot reasonably engage, at this stage of the proceedings in this court, in conjecture about what effect this withholding has on the present case. The applicability of
Statutes exist in other jurisdictions imposing liability on the garnishee for a debtor‘s debt that are similar to
(5) Domestic or foreign corporations or limited liability companies, generally. Upon a domestic or foreign corporation or domestic or foreign limited liability company:
Whenever under these statutes, service of pleadings and other papers is required or permitted to be made upon a party represented by an attorney, the service shall be made upon the attorney unless service upon the party in person is ordered by the court. Service upon the attorney or upon a party shall be made by delivering a copy or by mailing it to the last-known address, or, if no address is known, by leaving it with the clerk of the court. Delivery of a copy within this section means: handing it to the attorney or to the party; transmitting a copy of the paper by facsimile machine to his or her office; or leaving it at his or her office with a clerk or other person in charge thereof; or, if there is no one in charge, leaving it in a conspicuous place therein; or, if the office is closed or the person to be served has no office, leaving it at
(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title, or an application filed under section 5(a) (3) of the Securities Investor Protection Act of 1970, operates as a stay, applicable to all entities, of-
(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;
(2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title;
(3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate;
(4) any act to create, perfect, or enforce any lien against property of the property of the estate;
(5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title;
(6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title;
(7) the setoff of any debt owing to the debtor that arose before the commencement of the case under this title against any claim against the debtor; and
The court of appeals distinguished Chase Lumber on the ground that in the present case none of Garcia‘s wages were withheld by Richter Industries. Kenosha Hosp., 265 Wis. 2d 900, ¶¶ 17, 20. The court of appeals was incorrect. Some of Garcia‘s wages were garnished.
Even accepting Richter Industries’ argument that the court of appeals erred on the facts and that Chase Lumber cannot be
According to Chase Lumber, a debtor may claim that his wages that were wrongfully garnished are exempt, that the funds are the property of the estate, and that the automatic bankruptcy stay protected them. Chase Lumber is not applicable because Garcia is no longer a party to this action and has not claimed that his wages were wrongfully garnished.
The facts of O‘Connor are substantially different from those in the present case. In O‘Connor, the writ of garnishment against the wages of the debtor was filed seven days after the debtor filed for bankruptcy. After the filing of the stay and after receiving actual and official notice of the bankruptcy petition, the creditor proceeded with a default judgment against the garnishee.
In the case at bar, the notice of garnishment was filed well in advance of the debtor‘s bankruptcy filing and the oral entry of default judgment against the garnishee was made five days prior to the bankruptcy filing.
In O‘Connor, the bankruptcy court concluded that “[i]t makes no difference whether the garnishment was filed prior or subsequent to the filing of the Chapter 13 petition. At whatever stage the garnishment is, the creditor‘s attorney must do everything he can to halt the proceeding. O‘Connor, 42 B.R. at 392, citing In re Elder, 12 B.R. 491 (Bankr. M.D. Ga. 1981).
In O‘Connor, the creditor proceeded against the debtor and property of the estate. In contrast, Kenosha Hospital proceeded against Richter Industries, the garnishee, for Richter‘s own debt that it incurred by failing to comply with the garnishment statutes.
O‘Connor was similarly distinguished by the bankruptcy court for the Northern District of Illinois in In re Gray, 97 B.R. 930, 937 (Bankr. N.D. Ill. 1989).
See