R.K. Grounds Care v. Wilson
Panel: Eyler, Deborah S., Meredith, Arthur, JJ. Eyler, Deborah S., J. 23 In this appeal, we hold that the Workers' Compensation Commission ("Commission") does not have jurisdiction to decide whether money payable in an approved settlement of a claim is subject to garnishment. FACTS AND PROCEEDINGS After suffering an injury at work on December 14, 2012, Kevin D. Wilson, the appellee, brought a workers' compensation claim against his employer, R.K. Grounds Care ("RK"), and RK's insurer, Chesapeake Employers Insurance Company ("Chesapeake"), the appellants. On March 14, 2014, the parties agreed to settle the claim for $3,500, which included an attorneys' fee and a medical evaluation fee.
The settlement was memorialized in an "Agreement of Final Compromise and Settlement" ("Agreement"), which was submitted to the Commission for approval. On March 20, 2014, the Commission issued an order approving the settlement with one 909 small change that is of no consequence to this appeal. 24 At the time of all these events, three child support arrearage cases were pending against Wilson in the Circuit Court for Carroll County. 1 On March 31, 2014, in that court, the Carroll County Bureau of Support Enforcement ("Bureau") filed a "Notice of Child Support Lien" in each child support case, for a total of $ 6,691.69 in child support arrears. As we shall discuss, the child support liens operated as judgments. RK and Chesapeake were notified of the child support liens that same day.
On April 2, 2014, Chesapeake paid the attorneys' fee and medical evaluation fee due under the Agreement. The $2,246.66 balance of the settlement money, i.e. , Wilson's share, was far less than his child support arrearage. Chesapeake advised Wilson's lawyer by email that day that "claimant has a child support lien so his portion is not being sent out." Two days later, it further advised Wilson's lawyer that it was awaiting receipt of writs of garnishment and was planning to send all of Wilson's share of the settlement to the Bureau. By email of May 6, 2014, Wilson's counsel informed Chesapeake that, in his view, the Bureau was not entitled to receive the full amount of Wilson's share of the settlement.
On July 2, 2014, the Circuit Court for Carroll County issued writs of garnishment in two of the child support cases, and, on July 8, 2014, it issued a writ of garnishment in the third case. The writs were served on Chesapeake as garnishee and mailed to Wilson as judgment debtor. Wilson did not file a motion (or any paper) in the garnishment proceedings. On August 5, 2014, Chesapeake issued three checks to the Bureau, judgment creditor, for sums totaling the full amount of Wilson's share of the settlement. 2 On August 14, 2014, Chesapeake filed answers in all three child support cases.
Based on the payments made by Chesapeake, the judgments for child support 25 arrearages in two cases were marked partially satisfied and the judgment in the third case was marked fully satisfied. More than three months later, on November 26, 2014, Wilson filed an "Issues" form with the Commission stating, "COMMISSION APPROVED THE AGREEMENT OF FINAL COMPROMISE AND SETTLEMENT ON 3/18/14, BUT THE CLAIMANT IS STILL AWAITING RECEIPT OF HIS SHARE OF SETTLEMENT PROCEEDS." On April 29, 2015, the Commission held a hearing, which consisted of argument of counsel. Wilson took the position that his share of the settlement money was exempt from garnishment, under Md. Code (1974, 2013 Repl. Vol.), section 11-504 of the Courts and Judicial Proceedings Article ("CJP"), and therefore Chesapeake should have paid it to him, not to the Bureau.
RK and Chesapeake argued that that exemption did not apply. On July 6, 2015, the Commission issued a final order finding that CJP section 11-504(b)(2) applied to exempt Wilson's share from garnishment but that an exception in CJP section 11-504(i)(2) also applied. The Commission determined that, under the exception, 75% of Wilson's share of the settlement money had been subject to garnishment; therefore, Chesapeake should have paid Wilson $421.99 of his share. It further found that the Bureau had $529 in escrow, and that the $421.99 should be paid by the Bureau 910 to Wilson.
It ordered, however, "that in the event no monies remain in escrow, that [RK and Chesapeake] be responsible for paying the amount due [$421.99] to [Wilson]." 3 Unhappy with that outcome, RK and Chesapeake filed a petition for judicial review of the Commission's final order in the Circuit Court for Carroll County. The parties stipulated to the material facts and asked the court to render a decision based on the law. 26 After a hearing, the court issued a memorandum opinion ruling that workers' compensation settlements are subject to garnishment under Title 10 of the Family Law Article; that garnishments under that title are limited by CJP section 11-504(b)(2) ; that CJP section 11-504(b)(2) applied; and that pursuant to CJP section 11-504(i)(2), 25% of Wilson's share of the settlement funds could be garnished. In an accompanying order, the court affirmed in part and reversed in part the final order of the Commission; determined that Wilson was entitled to $1,684.99 (75% of his share of the settlement money); and ordered that "notwithstanding any prior payments which may have been made to the [Bureau], [RK] and [Chesapeake] are responsible for making" the $1,684.99 payment to Wilson. RK and Chesapeake noted this timely appeal, presenting three questions for review, which we have consolidated and reworded: I. Did the circuit court err by ruling that CJP section 11-504(b)(2) applied to Wilson's share of the settlement?
II
If not, did the circuit court err by ruling that under CJP section 11-504(i), 25% of Wilson's share of the settlement was subject to garnishment for unpaid child support? 4 We shall not address either question because, as stated above, we conclude that the Commission lacked subject matter jurisdiction to decide whether Wilson's share of the settlement 27 money (or any part of that share) was exempt from garnishment. For that reason, we shall reverse the judgment of the circuit court. DISCUSSION Before delving into the jurisdictional problem that we see as dispositive, we shall summarize the primary issues the parties present in their briefs, for context. They concern the proper interpretation of three interrelated statutes and statutory schemes that serve varying policy purposes.
First, Md. Code (1999, 2008 Repl. Vol.), section 9-732 of the Labor & Employment Article ("LE"), a provision of the Maryland Workers' Compensation Act ("Act"), states: 911 Except as provided in Title 10 of the Family Law Article , before the issuance and delivery of a check or draft for any money payable under this title, the money may not be assigned, charged, or taken in attachment or execution. (Emphasis added.) Thus, as a general rule, money payable pursuant to the Workers' Compensation Act is protected from garnishment except as provided in Md. Code (1999, 2012 Repl. Vol., 2015 Cum.
Supp.), §§ 10-101 et seq. of the Family Law Article ("FL") ("FL Title 10"), entitled "Support in General." Second, subtitle 1 of FL Title 10, entitled "Civil and Criminal Enforcement," establishes the Child Support Enforcement Administration ("Administration") and grants it and its local surrogates, such as the Bureau, "broad powers to collect overdue child support payments." Kelly v. Montgomery Cty. Office of Child Support Enforcement , 227 Md.App. 106 , 111, 132 A.3d 404 (2016). 5 Pursuant to FL section 10-140(a)(1), "[u]npaid child support due under an order requiring payments through a support enforcement agency, [such as the Bureau,] constitutes a lien in favor of the obligee on all real 28 and personal property of the obligor." The child support lien may be enforced by filing a notice of lien with the clerk of a circuit court. FL § 10-141(a). Once that is done, the child support lien "has the full force and effect of a judgment lien[,]" FL section 10-141(c)(1), and "may be enforced in accordance with the Maryland Rules," FL section 10-141(c)(2).
Among other enforcement mechanisms, the Maryland Rules allow for the garnishment of property. See Md. Rule 2-645. Finally, CJP section 11-504 is one of several laws the General Assembly has enacted to carry out the Maryland constitution's mandate "to protect from execution a reasonable amount of the property of the debtor." Md. Const. art. 3, § 44. In particular, CJP section 11-504(b)(2) provides: (b) The following items are exempt from execution on a judgment: ...
(2) Except as provided in subsection (i) of this section , money payable in the event of sickness, accident, injury, or death of any person, including compensation for loss of future earnings. This exemption includes but is not limited to money payable on account of judgments, arbitrations, compromises, insurance, benefits, compensation, and relief. (Emphasis added.) The referenced exception states, in relevant part: "[t]wenty-five percent of the net recovery by the debtor on a claim for personal injury is subject to execution on a judgment for a child support arrearage." CJP § 11-504(i)(2). That exception was enacted in 2011, in reaction to Rosemann v. Salsbury, Clements, Bekman, Marder & Adkins, LLC , 412 Md. 308 , 987 A.2d 48 (2010).
In that case, the Court of Appeals held that, under CJP section 11-504(b)(2), settlement money obtained by a personal injury plaintiff and deposited in her lawyers' trust account was completely exempt from garnishment for judgments against her for unpaid child support. As the parties see it, the central issue on appeal is whether Wilson's share of his workers' compensation settlement money, which was in the hands of Chesapeake and was payable to him, was fully exempt, partially exempt, or not exempt from 29 garnishment by the Bureau. RK and Chesapeake 912 acknowledge that under LE section 9-732, generally, workers' compensation payments cannot be executed against, but that enforcement mechanisms in FL Title 10 are exceptions to that general prohibition. And, although CJP section 11-504(b)(2) can provide exemptions from execution for child support arrearages, as Rosemann made clear, RK and Chesapeake maintain that the money payable in settlement of a workers' compensation claim is not "money payable in the event of ... injury" within the meaning of that exemption.
Therefore, CJP section 11-504(b)(2) does not protect money payable as a workers' compensation settlement that is in the hands of a third party from being garnished to pay a judgment for child support arrears. They maintain that the circuit court erred as a matter of law in ruling otherwise. Wilson counters that this argument ignores the plain language of CJP section 11-504(b)(2), and the circuit court's ruling in this regard was correct. These arguments are well thought-out and present difficult legal questions.
As we shall explain, however, only a circuit court has subject matter jurisdiction over garnishment proceedings, including the power to decide whether property is exempt from garnishment. Wilson did not raise the exemption question before the circuit court in the garnishment proceeding in the child support cases when he had the opportunity to do so. He raised it before the Commission, which had no power to decide it. "A writ of garnishment is a means of enforcing a judgment.
It allows a judgment creditor to recover property owned by the debtor but held by a third party." Parkville Fed. Sav. Bank v. Maryland Nat'l Bank , 343 Md. 412 , 413, 681 A.2d 521 (1996). In a garnishment proceeding to enforce a judgment, the judgment creditor "steps into the shoes of the [judgment] debtor and ordinarily can only recover to the same extent as could the [judgment] debtor." Bragunier Masonry, Inc. v. Catholic Univ. of America , 368 Md. 608 , 624, 796 A.2d 744 (2002). Therefore, "garnishment proceedings are not designed 30 or intended 'to place the garnishee in a worse position, in reference to the rights and credits attached, than if he had been sued by the defendant [judgment debtor].' " Med.
Mut. Liab. Ins. Soc. of Maryland v. Davis , 389 Md. 95 , 103, 883 A.2d 158 (2005) (quoting Bragunier , 368 Md. at 624 , 796 A.2d 744 ).
In this case, with respect to the settlement money payable to Wilson but in the hands of Chesapeake, the Bureau, as a judgment creditor of Wilson, stood in the same shoes as Wilson. The procedure governing garnishment of property generally is set forth in Rule 2-645. 6 The judgment creditor may obtain a writ of garnishment by filing a request in the same action in which the judgment was entered. Md. Rule 2-645(b). The clerk of court issues the writ, directed to the garnishee, and containing all the information in the request.
Md. Rule 2-645(c). Among other things, the writ directs the garnishee to hold the property of the judgment debtor and, significantly, notifies the judgment debtor "that federal and state exemptions may be available" and "of the right to contest the garnishment by filing a motion asserting a defense or objection." Md. Rule 2-645(c). The writ must be served upon the garnishee, and, once served, must be mailed to the judgment debtor at his or her last known address. Md. Rule 2-645(d).
The garnishee must file a timely answer, or risk entry of a judgment of default. Md. Rule 2-645(e) and (f). 913 Within 30 days after service on the garnishee, and before entry of any judgment, the judgment debtor "may seek release of the garnished property in accordance with Rule 2-643." Md. Rule 2-645(i). One of the grounds for a motion to release property under Rule 2-643 is "the property is exempt from levy[.]" Md. Rule 2-643(c)(2). Thus, in the case at bar, upon receipt of the writ of garnishment, Wilson, as judgment debtor, was entitled to file a motion challenging the garnishment on the ground that the money held by Chesapeake as his
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