*1 143 v State Treasurer STATE TREASURER ABBOTT Argued (Calendar 14). Docket No. 120803. November 2002 No. May 14, Decided brought The State Treasurer an action in the Clinton Circuit Court Body Abbott, Union, Thomas K. Auto Credit A. and Joann Abbott, pension seeking requiring an order Thomas Abbott’s bene- paid Department fits to be to his account with the of Corrections allowing appropriation application and and in account to reimburse the state for the cost of his confinement Facility with the accordance State Correctional Reimbursement Act seq. court, Randy Tahvonen, MCL 800.401 eí The circuit L. (SCFRA), J., granted order, allowing the warden to receive funds for the account of defendant and to distribute those funds with approximately going reimbursement, one-third to the state for two- Abbott, going $20 thirds to Joann and to Thomas Abbott for his Appeals, Fitzgerald, P.J., use. The Court of and Hoekstra and JJ., remanded, holding reversed and that the lower court’s Markey, preempted by pro- order with conflicted and was the antialienation Employee Security vision of the Retirement Income Act (erisa), 1056(d)(1). App (2001). plaintiff appealed. USC 249 Mich opinion by joined by In an Chief Justice Justices Corrigan, Supreme Taylor, and Court held: Young, Weaver, account, After funds have been in an inmate’s provision protect the erisa does not those proceeds, they may bé distributed the state to the extent permitted under the scfra. any assignment Erisa forbids the alienation or of the benefits of plan. assignment retirement Both and alienation involve the trans- person. court, ordering fer of assets to another The trial prison address, defendant to receive his benefits at did not order the defendant to have his benefits transferred another person. protect pension beneficiary Erisa does not funds after the and, thus, preclude pursuant receives them does not distribution scfra. Reversed; circuit court order reinstated. Cavanagh joined by Justice Justices dissent- Kelly, Markman, employer
ing, requiring stated trial that the court’s scheme of [May- Mich Opinion the Court prisoner’s pension prison’s deliver defendant benefits to the warden promptly receiver, withdrawing and the warden funds from that pursuant Facility account to the State Correctional Reimbursement Act, seq., thinly 800.401 et is a scheme that MCL constitutes Employee veiled order of in violation of the Retirement *2 Security Act, seq., particular Income 29 USC 1001 et in provision 1056(d)(1). antialienation of 29 USC This scheme is indis- tinguishable arrangement from an struck down a federal court attempted gain in another case where the state to restitution from prisoner Michigan. Moreover, a because the warden is able to control the defendant’s benefits before the defendant received them, affecting benefits, thus his interest in the the restitution scheme is similar to and no less onerous than the constructive arrangement garnishment trust struck down in other cases attempting gain restitution from erisa beneficiaries. — Facility 1. Prisons and Prisoners State Correctional Reimbursement Act — — Employee Security Pensions Retirement Income Act. may pension A trial court order an inmate to his receive benefits at prison deposit prison address for his account without violat- ing Employee Security Retirement Income Act antialienation provision (29 1056[d][l]; seg.). USC MCL 800.401 et — Facility Prisons Prisoners State Correctional Reimbursement Act — — Employee Security Pensions Retirement Income Act. prison Pension have funds that been in an inmate’s account protected by Employee Security are not Retirement Income Act provision may be distributed the state to the permitted Facility extent under the State Correctional Reimburse- (29 1056[d][l]; seq.). ment Act USC MCL 800.401 et Cox, Attorney Michael A. L. Thomas General, Casey, and Daniel M. Levy, Assis- General, Solicitor Attorney tant General, plaintiff-appellant. for the propria Thomas K. Abbott persona. C.J. We granted appeal leave to to con-
Corrigan, sider whether an order reimbursing the state for the cost defendant, prison caring inmate, violates Employee Security Retirement Income Act (erisa), seq. et 29 USC 1001 The trial court ordered defendant pension to receive his prison at his address State Treasurer Opinion of the Court appropriate and directed the warden to the funds from defendant’s account under the State Cor- Facility rectional Reimbursement Act (scfra), MCL seq. 800.401 et Appeals The Court of reversed because subsection 1056(d)(1) prohibits of ERISA an assign- ment alienation of benefits.
We hold that the trial court’s order did not violate prisoner federal statute. An order requiring receive his benefits at his current address is an assignment or alienation of those benefits. Moreover, once the funds are in the account, inmate’s may the warden distribute them under the scfra. federal ban on alienation or assignment funds does not extend to pensioner benefits that the already has received. We thus reverse the judgment of of Appeals Court and reinstate the trial court’s judgment.
I. FACTUAL BACKGROUND AND PROCEDURAL POSTURE The State Treasurer filed a complaint under seeking recover the costs of confining defen- scfra dant K. Abbott,1 prisoner Thomas jurisdic- under the tion of the Michigan Department of Corrections. Plaintiff submitted documentation of the costs it has expects incurred and to incur in for caring defendant his incarceration.2 during Plaintiff argued defen- monthly pension dant’s payments should be sent to prison address, deposited prison in his account, 1 We will refer to Thomas Abbott as “defendant.” The other defendants appeal. in this case are not involved in this expects approxi The documentation reflects that the state to incur mately $479,490 caring during in for defendant his incarceration. Defen began serving possible dant in his sentence 1996. His earliest release date is in 2015. Opinion of the Court appropriated trial the warden. The court why cause the funds defendant to show ordered appropriated. respon- Defendant filed a should not be pleading. sive pleadings, reviewing the trial court
After
monthly
pro-
defendant to direct his
ordered
prison
further ordered
to his
address.
court
ceeds
payment
provide $20 of each
to defen-
the warden to
dant, with the remainder divided between defendant’s
(thirty-three
(sixty-seven percent) and the state
wife
percent).
addition,
the court ordered
plan
payments
to send the benefit
to defendant’s
prison
“new address of record”
the event that
failed to direct the
to do so.
defendant
subsequently
pleading
filed a
entitled a
Defendant
“writ of mandamus.” The trial court treated the “writ
mandamus” as a motion for reconsideration and
delayed application
denied it. Defendant filed a
Appeals
appeal,
leave to
which the Court of
denied
presented.3
grounds
for lack of merit in the
Defendant
applied
appeal
then
for leave to
to this Court. In lieu
granting
appeal,
leave to
we remanded the case to
Appeals
the Court of
for consideration as on leave
published opinion,
Appeals
granted.4 In a
the Court of
deposit
held that
of funds
ERISA barred
into defen-
application
dant’s
Plaintiff filed an
account.5
appeal
granted.6
for leave to
to this
which
Court,
3 Unpublished order,
(Docket
209836).
entered December
No.
*4
4
(1999).
Mich 911
461
App 107;
(2001).
249 Mich
II. THE COURT OF APPEALS OPINION In that concluding trial court’s order violates antialienation provision, Appeals Court of erisa’s relied on State Baugh, Treasurer v F Supp (ED Mich, 1997). Baugh, the State Treasurer sought an order under the SCFRA pension directing plan to deposit benefits into an inmate-beneficiary’s prison account. The federal district court held that preempted such an order: erisa agrees pension The Court placed that once benefits are personal account, longer operates protect erisa no However, those case, funds. in the instant defendant Chrysler Corp. voluntarily would not be depositing pen- personal sion prisoner funds into [the account but inmate’s] only by doing would be so involuntary court order. Such an clearly transfer assignment. constitutes an (cita- at 1077 [Id. deleted).] tion Appeals Court of followed Baugh: dispute directly There is no garnishing defendant’s pension benefits to reimburse the state would violate the provision. Baugh, supra. Plaintiff erisa’s attempts distinguish Baugh by plaintiff asserting that did against pension plan not make a claim in this case and did not seek an compelling order anything. to do argues ordering Plaintiff pen- defendant to direct his prison sion to be sent to his address is consistent with Baugh and does argument not violate the erisa. This fails First, voluntarily for two reasons. defendant change did not prison address to his address and did not volun- tarily personal have the into his prisoner account, but rather was ordered the court to do effectively required so. The court’s order fund pension payment to make the to defendant’s account involuntary defendant’s will. Such an transfer clearly constitutes an and conflicts with the *5 Mich 143
Opinion the Court Second, provision. if defendant refuses erisa’s prison pay to his pension the benefits the fund to direct only ensuring account, that the benefits method of the prison reliance on the order account is reach the just money prison, the to the directing fund to send 107, 113; (2001).] App Baugh. 640 NW2d [249 REVIEW III. STANDARD OF an alien- trial court’s order effectuates Whether the under 29 USC or assignment ation questions of law. We review question is a 1056(d)(1) School v Mooney High law de novo. Cardinal 80; Ass’n, 437 Mich School Athletic Michigan High 21 (1991). 467 NW2d OF INTERPRETATION
IV. PRINCIPLES interpret a federal statu- requires us to This case clearly Where a federal statute tory provision. hand, the statute as apply issue at addresses the ambiguous is silent or If, however, the text written. Court, we must defer the issue before regarding if it is on a interpretation based to a federal agency’s of the statute. Chevron USA permissible construction Council, 467 US Inc, Inc v Natural Resources Defense L 2d 2778; (1984). S Ct 81 Ed 837; 104
V. DISCUSSION requires that defendant (1) The trial court’s order monthly payments prison at his receive after warden distribute the funds address and (2) We con- account. deposit their defendant’s alienate or this does not arrangement clude that pension proceeds in violation of assign the ERISA. State Treasurer Opinion of the Court initially permits We note trial SCFRA provide court to reimbursement to the state from by prisoner expenses “assets” owned incurred in prisoner. caring 800.404(3). for the MCL The statute payments defines “assets” to include “income prisoner . such from . . . .” benefits . . MCL 800.401a. disputed
It is not trial court’s order was proper question presented under scfra. prohibition *6 whether erisa’s and aliena- supersedes tion of the scfra in this case.
A. RECEIPT THE OF FUNDS AT DEFENDANT’S PRISON ADDRESS provision plan states: “Each Erisa’s provide provided plan shall that benefits under the may assigned not be or alienated.” 29 USC 1056(d)(1).7 requiring To determine whether the order defendant to receive benefits at his assigns address alienates or those benefits, must meanings statutory discern the of the terms. not does define the terms “alienate” and Erisa “assign.” Because the federal is statute silent on the question presented, agency’s we defer to a federal supra. Treasury Department Chevron, definition. “assignment” “[a]ny has defined the term direct or arrangement (whether indirect revocable or irrevoca- ble) whereby party acquires participant a from a or beneficiary right against a or interest enforceable plan any part plan pay- in, to, or all or of a benefit may payable partici- is, become, ment which or to the 7 It not that defendant’s is disputed covered pension plan erisa. 143 468 Mich
Opinion the Court This beneficiary.” 1.401(a)-13(c)(l). 26 CFR pant or inter- a of the plainly contemplates transfer definition person other than i.e., a person, another est to a payment Sending beneficiary himself it in address, depositing beneficiary at his own payment. assign account, his own does any person third nor other the warden Neither enforceable or interest acquires right defen- are sent pension proceeds when the at his current address.8 dant meanings Moreover, accepted legal the terms that the we note Treasury Depart “assignment” are consistent with “alienation” Dictionary (6th ed) “assignment.” Law defines Black’s ment definition of “assignment” as: property, transferring part all or of one’s The act of another making interest, rights. A or over to another or transfer action, any personal, possession property, real or whole of or any right of all kinds of or therein. It includes transfers or of estate added; including negotiable [Emphasis
property,
cita-
instruments.
tion omitted.]
Dart,
642, 644-645;
(1939):
Allardyce
NW
See also
Jur, p 229,
assignment in law
as “Atransfer
In 4 Am
is defined
therein,
setting
property,
right
over
some
or interest
from
prop-
way
another,
qualified,
person to
and unless in some
it is
one
*7
estate,
erly
chattel,
or
one’s
interest in an
or
the transfer of
whole
another,
by
person
thing. It is the act which one
to
other
transfers
another,
night
property
to
or interest
causes
vest in
or
of
then-ein.”
assignment
right
a
Law Institute has defined an
of
The American
171,
Contracts, p
149(1),
§
the Law of
as “[a]
in its Restatement of
person
right
the owner of the
indicat-
manifestation to another
transfer,
ing
or
without further action manifesta-
his intention to
intention,
right
person or
to such
to a third
tion of
the
other
person.”
“assignment”
language
in the
of
defined the word
This court has
another,"
meaning
in
make
to
as
“to
or
oven*
Webster
transfer
Dictionary
language
or set
Burrill’s Law
as “to malte oven
the
Sloan,
another,
Aultman,
v
transfer.”
Miller & Co
over to
to
(1897)]. [Emphasis
We follow decline to the federal district opinion in Baugh. The Baugh court held that court’s “an order this forcing Court plan] [a deposit pension funds into an prison] [inmate’s account from which may withdraw monies [the state] clearly operates as an assignment.” Baugh, supra at 1077. The Baugh court characterized the transfer of prison funds to the inmate’s account as assign- ment it “involuntary.” involuntary because was deposit nature a does not establish an person beneficiary acquires unless other than the right or interest plan. enforceable An similarly “conveyance The term “alienation” to a refers or transfer ” property Dictionary (7th ed) (emphasis another. Black’s Law added). property The dissent asserts that the warden obtains a interest in the depositing before them defendant’s account. The trial order, however, compels deposit court’s the warden to the funds in defen prison account, ensuring dant’s thus that defendant receives the funds essentially before are distributed under the scfra. The warden acts deposit must upon a bank teller —he the funds defendant’s account receipt. Thus, any in, to, the warden does not obtain title interest depositing funds before them in defendant’s account and has no right discretion to use the funds. *8 Mich 143 Opinion of the Court pro- the where does not occur assignment address and pensioner’s to current sent the ceeds are account. deposited into his own or alienation argues assignment that an The dissent was directed fund itself the occurred because defendant’s payments to to the benefit send ask not the that defendant did in the event address ignores the argument so. The dissent’s fund to do the “assign- definition of term Treasury Department’s if be violated the federal statute would ment.” The to payments fund send the ordered the to court had person to a other than person, i.e., another defen- a enforcea- thereby or interest dant, granted right and if Thus, the person. the to that third ble to the the fund distribute court had ordered directly assign- an payments Michigan, to the state of Here, however, would result. ment or alienation to him- the funds be sent court ordered defendant deposited in own at his current address and self funds, receives the account. Because defendant thus no or alienation occurs.10 assignment order to the warden observes that trial court’s refers dissent language in the not alter our conclusion as a This order does “receiver.” an has occurred. that not separate Fundamentally, assignee. not an The terms have a receiver is Dictionary ed) legal mganings. (7th defines a “receiver” as Black’s Law court, by corporation person appointed by a or disinterested “[a] property person, protection or collection of sub- other is bankrupt (for example, belongs ject it to a or is claims because diverse By contrast, “assignee” being litigated).” to whom “[o]ne otherwise by property powers rights another.” Erisa does not are transferred Id. subject may protect preserve are state that a court dispute. deposits Moreover, not act receiver when he the warden does as a are label used We not bound funds in defendant’s account. describing the warden’s role. trial court when preserves prop- protects the court who A receiver is an officer of 2d, erty parties pending lawsuit. 65 Am Jur Receiv- behalf State Treasurer Opinion of the Court B. APPROPRIATIONOF THE FUNDS AFTER DEPOSIT IN
DEFENDANT’SACCOUNT We pen- next consider whether the distribution of they deposited sion funds are in after defendant’s account contravenes prevailing ERISA. The view is that protect pension erisa does not funds after the benefi- ciary adopt receives them. We this view and hold that ers, 1, p purpose receivership protect parties’ § 654. The of a is to the rights property disposition Id., 6, p to the a § until final of the issues. 657. may manage property. Michigan A receiver also control and Law & Receivers, (1957), 1, p § Practice receivership present The characteristics of a are not here. The warden control, preserve manage, duty legal does not or even the funds. His is to place the benefits in defendant’s account. receiver, acquire property If the warden were a he still would not a interest: may general property possession aAs rule it be stated that in the custody law, posses- aof receiver is in the of the and the receiver’s possession is sion the of court the the for benefit of those ulti-
mately entitled.
possession
A receiver’s
of chattels does not
itself
confer title
receiver,
give
receiver,
distinguished
on the
or
the
from the
appointing him,
right
possession,
court
an absolute
or
determine
rights
parties except
preserves
or even
the
affect
of the
so far as it
property
judgment.
and retains control
the
final
answer the
A
purely
right, being
purposes
suit,
receiver’s
cannot
any purpose
justified thereby.
outlast the
suit
be used for
not
[19
Michigan
Practice, supra,
41, p
&
§
Law
382.]
Also,
appointed
persons
“is
receiver
subserve
interests of all
subject-matter
receiver, by
interested in the
appointment,
committed to his
A
care.
litigant
to,
in,
party
does not become a
in
suit which
appointed.” Id.,
51, p
appointment
he is
§
388. The
aof
receiver does not
parties’
rights.
Co,
affect
contractual
Rowe v William Ford &
257 Mich
646, 650;
(1932).
Opinion of the Court pursuant to the distribution preclude erisa does in an inmate’s funds are SCFRAafter the account. subject v Sheet Guidry leading case this
The
1993) (Guidry II),
(CA 10,
F3d 700
Workers,
Metal
III).11
10, 1994) (Guidry
(CA
reh
On the district court remedy: the benefits garnishment of after The United deposit beneficiary’s their in the account. the Circuit affirmed Appeals Court of Tenth States did the order and held that it not violate garnishment supra court determined Guidry II, ERISA. at The now subsection 206(d)(1), that the text of subsection pension plan provide that shall 1056(d)(1), (“[e]ach plan may assigned not provided benefits under the be alienated”) ambigu- The statute was or was unclear. term refers to ous whether the “benefits” regarding money paid payment or the actual “the future right by beneficiary.” Gui- plan the under the received dry II, supra at 708. opinion rehearing III did not The modification of the Guidry regarding original panel’s holding the erisa issue.
affect the State Treasurer Opinion the Court light ambiguity, Guidry of this II the court Department Treasury’s
deferred
reasonable
interpretation
department’s
of the statute. The
ERISA
regulations
“assignment”
define
and “alienation” as
“ ‘any
arrangement (whether
direct or indirect
revoca-
whereby
irrevocable)
party acquires
ble or
a
from
participant
beneficiary right
or
or interest enforce-
plan
against
any part
able
in,
to,
or
all or
aof
payment
may
paya-
is,
benefit
which
become,
or
”
participant
beneficiary.’ Guidry
ble to the
or
II,
supra
quoting
1.401(a)-13(c)(l)(ii)
at
26 CFR
(emphasis added).
regulations
right
The
to a
.refer
or
against
plan.
interest enforceable
only
judgment against
seeks
to enforce a
[The union]
Mr.
Guidry
garnishing
containing pension
his bank account
paid
received;
does
seek
[the union]
right against
plan.
an
or
gar-
enforce
interest
Because
Guidry’s
nishment of Mr.
received retirement
income is not
plan,
prohibited
action
it
conclude
is not
206(d)(1)
implemented by
Regulations.
the ERISA
erisa
[Guidry II, supra at 710.]
opined
Treasury
II court
Departmént’s interpretation was reasonable. The
expressly protect
court rioted that other statutes
ben-
example,
efits
are received. For
the Social
after
Security
407(a), provides
Act, 42 USC
“none
moneys paid
payable
rights existing
under
subchapter
subject
levy,
this
shall be
to execution,'
*11
garnishment,
legal process,
attachment,
or other
or to
operation
any bankruptcy
insolvency
the
of
law.”
(Emphasis added.) Also, the
Act,
Veterans’ Benefits
expressly precludes
5301(a),
38 USC
attachment or
receipt by
seizure of benefits “either
before
after
concluded;
beneficiary.”
Guidry
the
The
II court
143
468 Mich
156
Opinion of
Court
explicit lan-
Congress
not
similar
did
include
Because
in
protecting
in the related context
guage
benefits
erisa,
decision
retirement
Congress made a deliberate
infer
[that]
protected
paid
not
and received was
thereafter
income
argument
made
then
garnishment.
was
A similar
from
denying
Kennedy
in
Judge
writing for the Ninth Circuit
provision
anti-garnishment
of the Con-
application
of
paid.
wages
had
Act to
that
been
Protection
sumer Credit
Arizona,
107,
(CA
586 F2d
111
Usery
Nat’l
First
Bank
[v
of
explicit
conclusive,
9, 1978)]. Although
not
absence
supports
extending
paid
Reg-
language
the erisa
to
benefits
II, supra
[Guidry
at
ulations.
712.12]
Guidry
II deci
have followed
Several courts
Jersey
North
See,
Trucking Employees
e.g.,
sion.
3,
Colville,
Fund,
(CA
Inc v
F3d
Welfare
Treasury
II
Guidry
with
that
1994) (agreeing
reasonably
the stat
Department regulation
“construes
payments,
to
rights
alienation of
future
ute
forbid
money paid out”),
of the actual
rather than alienation
356;
NJ
Accordingly, follow and Tenth the lead Third Treasury regulation’s] Circuits. We conclude that inter [the pretation capri 206(d)(1) arbitrary, of is not [subsection] cious, manifestly contrary hold, to the statute and based interpretation regulation’s 206(d)(1), the on of [subsection] preclude Department not from that this section does pursuant deducting Washington] of Stat funds to the [state ERISA-qualified pension ute from benefits received from plans. supra Wright, at [ 921.13] prefer approach adopted by We also the over- majority of courts. Once whelming federal in an does account, are inmate’s erisa protect agree them. We with the II court Guidry address 206(d)(1) that text of subsection does not already pensioner whether benefits has this protected. The statute’s on received are silence provisions anti-alienation See also anno: of [erisa] Effect creditors, rights judgment (collecting ALR Fed 427-463 authorities).
Opinion of the Court requires interpreta issue deference to the reasonable Treasury Department regulation. forth in tion set supra; supra. regulation II, Chevron, That protects against clarifies the statute the aliena rights tion or itself. statutory Security including schemes, Other Social *13 clearly protect receipt. Act, their Con benefits after gress expansive language did not include such in ERISA. Appeals
The Ninth Court Circuit decision Wright directly supports expressly our decision. It rejected challenge per- an erisa to a state statute that pension mitted deduction of from an inmate’s pay account to for costs the of incarceration. may exceptions
While courts not create to ERISA’s prohibition Guidry assignment alienation, and II progeny exceptions. They and its do not create hold merely statutory prohibition apply that the does not after the funds have been received. The dissent any apparent asserts without basis that we cre- have exception. merely pre- truth, ated follow the vailing appropria- federal authorities hold that the tion of funds that have been received does not alien- assign ate or those funds. Where no alienation assignment statutory prohibition occurred, has apply. does not have We no occasion or need exceptions” statutory prohibition “carve to a out apply. does not pension
Defendant received the funds when were sent to his current address and in his prison point, protect account. At that did erisa funds, and the state was free to seize and distribute v Abbott State Treasurer Opinion of the Court procedures with set forth in accordance
the funds trial court’s order this case.14 in the SCFRA
VI. CONCLUSION
Michi-
procedures to reimburse
The
sets forth
SCFRA
caring
costs
for the
gan taxpayers
Department of
jurisdiction
under
inmates
in his
An
inmate’s
Corrections.
The
subject
are
to the SCFRA.
account are “assets” that
on alienation and
prohibition
federal
not violated where an inmate
pension benefits is
own
pension benefits
at his
directed to receive
Further,
federal authorities estab-
prevailing
address.
suggests
trial
order is
to the
that the
court’s
similar
dissent
Guidry
Supreme
I.
down
the United States
Court in
scheme struck
imposed
however,
I,
involved a constructive trust
on the
Guid'ry
progeny
are
fund
II and its
make clear
funds that
itself.
protected
appropriated
beneficiary
longer
are no
receives them
after
case,
In this
is not
erisa’s antialienation clause.
fund itself
imposed
Rather,
garnished,
*14
trust
the
the
nor is
constructive
fund.
merely required
is
the
funds to
at
fund
to send
defendant himself
address,
deposited directly
funds are
his current
where the
then
defen
funds, and,
point,
At
dant’s
account.
defendant has received the
own
majority
held,
overwhelming
federal
have
funds are
as the
of
courts
the
longer protected
no
erisa.
Supreme
Guidry
supports
reasoning in
the
The United States
Court’s
I
garnishments
plans and
federal courts
from
distinction drawn
between
beneficiary
already
appropriation of funds that the
has
received. The Gui-
policy
dry
underlying
is
I
noted that the
the antialienation clause
Court
pensioners
I, supra
safeguard
. . . .”
at
“to
a stream of income for
received,
safely
stream of income has
376. Once the benefits are
the
pensioner.
light
language,
this
the Tenth
Court of
reached the
Circuit
Appeals Guidry
preclude
II
that the law of the case
determined
did
beneficiary’s
deposited
garnishment
in the
bank account: “As
the
only
received,
[Guidry
and
to
that must
refers
a ‘stream income’
be
I\
received,
disposition
fail to see
not to
of the income after it was
pay-
garnishment
the case’
of received income. The
how
‘law of
bars
they
are used to sat-
ments
not lose their character
income because
do
every
isfy
Guidry II, supra
Nearly
has
at 706.
federal court
debts.”
view.
adhered to this
Dissenting Opinion by Kelly, J. protect pension proceeds lish that erisa does not may already has inmate received. The state dis- tribute the funds after are in the permitted inmate’s account to the extent under the Accordingly, judgment we reverse the scfra. Appeals
Court of reinstate trial court’s decision. JJ., concurred with
Weaver, Young, Taylor, Corrigan, C.J. (dissenting). J. The issue in this case
Kelly, Employee Security whether the Retirement Income prevents imple- Act (erisa)1 the State Treasurer from menting its restitutive scheme under the State Correc- Facility tional Reimbursement Act MCL (scfra). seq. 800.401et The restitutive scheme in this case has object require as its to defendant, an inmate at a state facility, correctional reimburse state Through cost of his incarceration. court order, defen- employer dant’s former was directed to send defen- dant’s checks defendant’s account rather than to his credit union. The warden was made empowered deposit receiver for the checks and part pro- them in account, then disburse of ceeds to the state.
I conclude that the scheme effects an violating of defendant’s benefits under erisa, provision. 1056(d)(1). that act’s antialienation 29 USC Consequently, I would affirm the decision of the Appeals. Court of 29 USC 1001 et *15 seq. 161 v Abbott Treasurer State Dissenting Opinion Kelly, J. background procedural
I. factual & implemented court the restitutive After the circuit Appeals, petitioned Court scheme, of defendant appeal. to that to We remanded which denied leave granted. remand, On the Court Court on leave Appeals that the trial court orders reversed held they provision because violate ERISA’s assignment bene- of defendant’s constitute an App (2001). 888 The 107; 249 NW2d fits. 640 grounded in the United States District decision was Supp opinion Baugh, in State v 986 F Court Treasurer (ED 1997). Mich, 1074 majority now reverses decision Appeals and the trial orders
Court of holds that court provisions are not an under the erisa.
n. discussion interpret We a federal in such manner as statute purpose give Congress to the for which drafted effect Supreme it. If the States Court has construed United interpretations. language, More- we defer to its any given over, we construction defer reasonable empowered by agency Con- the statute a federal interpret Transportation, gress it. Yellow Inc Michigan, L 36, 44-45; 371, 377; US 123 S Ct citing (2002), USA Natural Ed 2d 377 Chevron Inc v 842-843; Council, Inc, 467 US Resources Defense (1984); 2778; Ct L Ed 2d 694 Barnhart v Wal- 104 S 1265; Ed 2d ton, 212, 217-218; 122 S Ct 152 L US binding although (2002). addition, are not respectful give to the deci- us, consideration Sys, Freight Inc federal courts. Yellow sions lower *16 162 468 Mich 143
Dissenting Opinion by J. Kelly, v Michigan, 21, 10; 464 Mich 29 n 627 NW2d 236 (2001).
A. DEFINING ERISA’S ANTIALIENATION PROVISION expansively regulates employee pro- benefit Erisa grams. Shaw v Air Lines, Inc, 85, Delta 463 90; US 2890; 103 S Ct 77 L Ed 2d (1983); 490 Baugh, 986 F Supp (1997). “any 1076 In so doing, preempts it all state laws” that “relate program to” a covered erisa. 29 USC 1144(a).
1. FEDERAL OF INTERPRETATION ERISA’S ANTIALIENATION PROVISION subsection 206(d)(1), USC 29 1056(d)(1), Erisa requires plan provide shall “[e]ach provided plan may under not be assigned or alienated.” Secretary Treasury has “assignment” defined as:
(ii) Any arrangement (whether direct or indirect revocable irrevocable) whereby party acquires or participant from a beneficiary right or or interest enforceable plan in, to, any part plan or all payment of a benefit may is, become, payable which participant to the or ben- eficiary. CFR 1.401(a)-13(c)(l).] [26 Supreme The United States Court has gar- held that of nishment benefits from a plan covered constitutes an assignment the purpose subsection 206(d)(1)2 Guidry v Sheet Metal Workers Fund, 493 generally, Black’s Law Dictionary over the [2] A garnishment property MCL 600.4011; ais another legal (7th ed); Ward Detroit device that allows a while it v Ballentine’s Law Dictionary Automobile Inter-Ins the hands of a person third obtain control (3d ed). Exch, party. See, See [115] Treasurer State Dissenting Opinion J. Kelly, L 2d 782 680; (1990) S 107 Ed 371-372; 110 Ct 365,
US Agency Lanier Collection Mackey v (Guidry I), citing 2182; Ct 108 S 825, 836-837; US Service, Inc, & Metal Prod also United 2d see (1988); L Ed F2d 297 Detroit, (CA Corp v Nat’l Bank ucts prohibition Thus, in order to avoid 1987). any court 206(d)(1), in subsection assignments be to an erisa must remedy that relates ordered garnish a court ordered from meaningfully distinct a federal dis Baugh, 493 US I, ment. meaningful no distinc Michigan court found trict by the plain used the restitutive scheme tion between *17 plans invalidated garnishment tiff in this case and F Supp I Products. 986 Guidry in and United Metal 1076-1078. THE ERISA’S
2. MAJORITY’S INTERPRETATION OF
ANTIALIENATION PROVISION that this Court must defer majority recognizes The a federal stat- interpretation to a federal agency’s it Nonetheless, properly at fails ute. Ante 148. expounded by “assignment” the definition of apply Treasury Department. Instead, it the United States no distinction meaningful concludes that there is treasury “assignment” in the between definition of meanings of the accepted legal and other regulation term. 3 definitions, majority reviewing legal
After some “plainly con treasury regulation concludes that person, of the interest to another templates transfer Freight Mich App Ante at 150-151 Lines, Inc, 30, 35; 320 NW2d n 8. 254; [280] [98] (1982), NW2d 586 citing (1959). Johnson v Kramer Bros Mich Dissenting Opinion J. Kelly, person i.e., other than the beneficiary himself” Ante at 150 (emphasis original). Thus, reasons, it property interest assigned alienated when it “[a] has person.” been transferred to another Ante at 151. Applying this majority understanding, concludes plaintiffs restitutive scheme does not effect an assignment because the warden never obtains title or an interest in defendant’s benefits. at Ante majority The asserts that there are two bases for its conclusion that the trial court orders do consti- tute or alienation: (1) court ordered defendant to receive prison, benefits at the which is his current address, (2) title the bene- pass fits does not under the orders after until defen- dant receives them his account. However, as show, I will these conclusions rest aon misunder- standing treasury regulation.
B. APPLICATION
1. GARNISHMENT
majority
claims
II4
Wright
support
Riveland5
its
plaintiff’s
conclusions that
resti
tutive scheme does not violate ERISA’s
*18
provision.
In Guidry II, the United States Court of
Appeals for the Tenth Circuit held that subsection
206(d)(1)
apply
does not
to benefits
once
benefici
ary receives
II,
them. Guidry
garnish voluntarily deposited personal into his bank account. Id.
Wright concerned a inmate the state of provided: A statute Washington. Washington any When inmate addition to his . . . receives wages gratuities, the additional funds be sub- or her shall ject 72.09.111(l)(a). . . to the deductions in ROW . [Wash 72.09.480(2).] Rev Code Department
The
of
Washington
Corrections
took
thirty-five
of
percent
pension pay-
the defendant’s
pursuant
Wash
ments
Rev Code 72.09.111. The
Appeals
United States Court of
for the Ninth Circuit
found no violation of ERISA because the department
had
prisoner’s
only
obtained control over the
prisoner
after the
had received them. Wright, 219 F3d
These cases are inapplicable here. The restitutive
at issue in
programs
Wright
II lack two
fundamental components
plaintiff’s
scheme. First,
no one was made a
receiver
the defendants’ bene-
they
fits before
were
into the defendants’
Second,
accounts.6
the courts did not order the defen-
majority argues
that the warden is not a receiver because he does
manage
or exercise control over defendant’s
funds. Ante at
disagree
152-153n 10. I
with this characterization of the warden’s role in
this scheme.
Dictionary
College
(2000)
Random House Webster’s
states that “man-
of; supervise.”
age”
charge
means:
take
“to
To “control” is “to exercise
charge
restraint or direction over.” Id. The trial court orders
the warden
responsibility
supervising
directing
deposit
with the
of defen-
Thus,
dant’s
benefits.
it is evident that the warden retains these
characteristics of a receiver.
Moreover,
warden
also fulfills the ultimate function of a receiver. In
capacity
receiver,
he collects defendant’s
benefits to ensure
satisfy
remain available to
the diverse claims on them created
*19
case as requiring that: defendant receive his “(1) monthly pension payments prison at his address and deposit the warden distribute the funds after (2) their prison in defendant’s account.” However, Ante at 148. majority fails to acknowledge one of the requires orders does much more. It General Motors to disburse prison defendant’s benefits to his .7 address in the event defendant request refuses to it fact, without awaiting defendant’s compliance, on day primary the same entered, order was the trial court entered a second order directing: litigation. purpose scheme, If tins assurance were not the this I see why plaintiff simply no reason would not attach the funds after were Although into defendant’s credit union account. we are not function, bound the trial court’s characterization of the warden’s evaluating should not abandon the dictates of common sense in function. A March 1997 order states:
* * immediately 3. Defendant Thomas K. Abbott shall direct General Corporation, subsidiary designee, any Motors it’s or to cause [sic] pension payments due Defendant Thomas K. Abbott to be made payable at: K. prison “[defendant]” Thomas Abbott’s address, then current address. If defendant should refuse to so direct, this order shall be treated as the direction of the defendant pension payments to General Motors that the shall be made as Payments directed above. shall be made in this manner until Defen- physical custody dant Thomas K. Abbott is released from the of Department Corrections, or until further order of this Court. separate directing 4. This Court shall issue a Order General paragraph Motors to distribute the described in 3 above refuse, any should defendant Thomas K. Abbott other reason fail, comply provisions paragraphs with the 3 above. State Treasurer Dissenting Opinion by Kelly, J. pension proceeds pay- Motors shall send all General K. new to Thomas K. Abbott ... to Thomas Abbott’s able address of record .... *20 implicate a
These orders factor overlooked any majority: prohibits 206(d)(1) indirect, subsection assignment of direct, as well as benefits. The orders’ provisions making the warden receiver for defendant directing benefits and General Motors of to send defendant’s checks to the warden assignment. make them an indirect Contrary majority’s assertion, to the the fact that the warden is made receiver of defendant’s benefits is majority’s dispositive. “ analysis, According to the own property possession . . in the of a receiver is in the custody possession law, and the receiver’s is possession the ultimately for the court benefit of those ” quoting at 153 n 10, entitled.’ Ante Michigan p § Law Practice, Receivers, 41, majority The claims that this definition of a receiver- ship prohibi- takes this case out of the reach of erisa’s assignments. tion plaintiff’s
At a minimum,
restitutive scheme must
meaningfully
garnish-
be
distinct from an order of
supra.
ment.
A
I,
constructive trust is not
meaningfully
garnishment.
distinct from an order of
Id.
“ ‘ “[t]rusts,”
We have held that
in the broadest
only
definition, embrace,
sense of the
technical
obligations arising
trusts, but also
from numerous
fiduciary relationships,
agents, partners,
such as
bail-
”
ees,
Greene,
et cetera.’ Fox v
Under the trial court’s orders, defendant is never allowed to exercise control over his benefits.8 majority finds this irrelevant, fact but it is the determining factor that renders the trial court orders *21 a violation of subsection pos- 206(d)(1). Transferring session and control of defendant’s benefits to the warden before the are in defendant’s strips account defendant of the ability to exercise the interests he has his benefits.
Plaintiff’s restitutive scheme is no less onerous than the constructive trust arrangement garnish ment struck down in Guidry I and United Metal practical Products.9 The effect of the trial court 8 The first order directs that: Upon receipt any pension check, such the Warden of the capacity continuing deposit institution in the as receiver shall
pension check into the account of Defendant Thomas K. Abbott .... The funds from that check shall be distributed as fol- lows .... opinion, In her overwhelming the Chief Justice asserts that “the majority pro- of federal longer courts have held the funds are no [that] State Treasurer Dissenting Opinion Kelly, J.
orders is that the warden is able to control defen dant’s benefits before defendant receives them. The court, circuit on behalf the Department of Correc tions, obtained control of the benefits while possession were still of defendant’s employer, party. third This is a garnishment prohibited by and is provision.10 antialienation erisa’s 2. ASSIGNMENTOF A RIGHT ENFORCEABLEAGAINSTTHE PLAN I find that Although plaintiff’s restitutive scheme is not meaningfully distinct from an order of garnish- ment, the finding necessary my is not ultimate con- clusion that the prohibi- scheme violates erisa. Erisa’s tion on alienation payments. is not limited to Erisa prohibits also any separate alienation of from right, the right payment, that is enforceable against the plan.
Under the Uniform Commercial Code, defendant never becomes a holder of the instruments used to deliver his benefits. MCL 440.1201(20). Rather, warden acquires a right enforceable when he takes control of defendant’s check. However, only tected erisa.” Ante at 159 n 14. federal court that put thought specific presented has into the issues in this case concluded plaintiff’s assignment. Baugh, supra. that fore, restitutive scheme is an There- presented all federal courts that have considered the issues in this disagreement majority. case are in with the 10 majority’s reading focus on transfer of title evidences its limited treasury regulation. noted, majority recognizes, As I have and the prohibited by provision. constructive trusts are erisa’s Gui dry I, supra. However, pass Rather, title does not in a constructive trust. “ through equity a constructive trust is a ‘formula which the conscience of ” expression.’ Klein, 652, 656; (1958), *22 finds Kent v 352 Mich 91 11 NW2d quoting Beatty Guggenhein Exploration Co, 380, 386; 225 NY 122 NE (1919). original gives possession It leaves title in the holder but Thus, control to another. the fact that title to defendant’s pass distinguish Guidry does not to the warden does not this case from I.
Dissenting Opinion by J. Kelly, orders the warden the give This is because court authority to enforce the withdrawal of funds from the plan. MCL 440.3301(ii). authority
This transfer of
constitutes
an “assign
Department of Trea
ment” under the United States
sury’s
It
after
that,
definition of the term.
is irrelevant
ward,
deposits
the warden
the funds into defendant’s
account,
account. Before the funds reach the
rights that defendant
entitled to
is
enforce
plan are
to the warden in
assigned
contravention
erisa. See, generally,
Guerin,
Shinehouse v
20 E B C
(ED Pa,
aff 'd
CONCLUSION Plaintiff’s accomplishes by restitutive scheme indi- rection what it cannot do It direction. indi- prohibited rect benefits that is Guidry I, In Supreme United States erisa. Court held that a restitutive scheme could not over- express protect come Congress’s employee intent retirement benefits. This was true even where the employee’s embezzlement had caused harm to the plan’s beneficiaries.
In United Products, Metal the United States Court of Appeals for the Sixth Circuit held that there was exception no provision to ERISA’s fraud Baugh, or criminal conduct. In the United States District Court for the Eastern District of Michi- gan, I and United Metal relying Products, plaintiff’s concluded that restitutive scheme consti- tuted an assignment under subsection 206(d)(1). case, flatly each the court refuted the contention may exceptions that courts carve out to erisa’s *23 State Treasurer Opinion by Dissenting Kelly, J. provision public when it would serve majority policy. exception by Yet the carves out an this decision. portion
The trial court’s orders transfer a of defen- pension plan dant’s benefits from the to the accomplish by acting state. The orders this on defen- dant’s benefits before he receives them. That the through run orders defendant’s prison legal significance. account is of no Defendant possession receipt at no time has of the benefits. They might through as well be run the warden’s benefits, account. As receiver for the the warden con- according trols them until he distributes them to the provision requiring placed orders. The the funds to be thinly in defendant’s account is a veiled device provisions to defeat the of ERISA. plaintiff majority provided
Neither nor the has meaningful plaintiff’s distinction between the restitu- garnishment. tive scheme and an order of Moreover, goes the scheme because, too far rather than con- straining acting itself to on defendant’s benefits them- usurps only right selves, it defendant is entitled to plan. Consequently, enforce scheme prohibited by ERISA. Appeals.
I would affirm the decision of the Court of JJ., concurred Cavanagh and Markman, Kelly, with J.