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Texas turnover exception to wage garnishment exemption

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In Texas, current wages are exempt from garnishment.  Texas Constitution – Article 16 Sec. 28. Garnishment of wages. “No current wages for personal service shall ever be subject to garnishment, except for the enforcement of court-ordered: (1) child support payments; or (2) spousal maintenance.”

However,  garnishment is only one of many procedural methods by which a judgment creditor can collect a judgment debt in Texas. Another method is the turnover, which is a broad statutory collection remedy that allows Texas courts to assist creditors in their collection efforts.  The court may also order the turnover of a debtor’s property. Tex. Civ. Prac. & Rem.Code Ann. § 31.002 (Vernon 1997); see Schmerbeck v. River Oaks Bank, 786 S.W.2d 521, 521-22 (Tex. App.-Texarkana 1990, no writ); see generally Greiner v. Jameson, 865 S.W.2d 493, 498 (Tex. App.-Dallas 1993, writ denied).

The collection remedy of garnishment applies to debts owed to or property of the judgment debtor in the hands of third parties. The Texas turnover process extends to property or assets in the hands of the debtor herself.

Once current wages are paid to the debtor, they not only fall outsider the reach of a garnishment proceeding, they also cease to be “current wages.”  Wages cease to be “current” within the meaning of Texas exemption laws immediately on being paid to and received by the wage earner. Sutherland v. Young, 292 S.W. 581, 583 (Tex.Civ.App.—Waco 1927, no writ). Wages are no longer current, or exempt from execution to satisfy a judgment debt, when the paycheck is received by the employee.

Thus, once in the hands of the employee debtor, the money received as wages can be seized by court order.

However, the court’s order to require the turnover of money received as wages is a matter of the court’s discretion. Barlow v. Lane, 745 SW2d 451 (Tex.App. – Waco [10th Dist.] 1988, writ denied)

“Nevertheless, it is also our view and holding that the granting or not of appellant’s application for the turnover order under section 31.002 was addressed to the sound discretion of the trial judge. The statute provides in subparagraph (b) that the court (1) may order the judgment debtor to turn over nonexempt property to a designated sheriff or constable for satisfaction of the judgment; or (2) may otherwise apply the property to the satisfaction of the judgment; or (3) may appoint a receiver with the authority to take possession of the nonexempt property toward satisfaction of the judgment. The word “may” in a statute is sometimes construed as if it were “shall,” but it is not to be denied its primary and ordinary signification as a word of permission rather than a word of command unless there is something either in the subject-matter or the context of the statute to indicate a legislative intention that it was used as a word of command. American Mortgage Corporation v. Samuell, 130 Tex. 107, 108 S.W.2d 193, 198-99 (1937).

* * *

“The purpose of current wages being exempt from garnishment and execution is to protect the employee in meeting and defraying the current expenses of his living. Bell v. Indian Live-Stock Co., 11 S.W. 344, 346 (Tex.1889); Sloan v. Douglass, 713 S.W.2d 436, 440 (Tex.App.—Fort Worth 1986, no writ). In light of the use of the permissive word “may” in section 31.002 in setting forth relief that might be allowed a creditor by the court, and the predicate for entitlement for relief required to be proven by the judgment creditor, we cannot believe the Legislature intended to mandate relief in any case of proof of qualification by the creditor regardless of hardship resulting to the debtor. Appellee’s undisputed testimony in her deposition established that her paychecks are used solely and fully to provide food, shelter and other necessities for her family. We believe the trial judge was entitled to consider these facts and decide against granting the turnover relief sought where there was no showing of wages received in excess of current living expenses. Furthermore, in light of these facts, we hold there was no abuse of discretion in the court’s denial of the application.”

Barlow v. Lane, supra.

Davis v. Raborn, 754 SW2d 481 (Tex.App.— Houston [1st Dist.] 1988, writ granted) took a different path, holding that a debtor could not presently be ordered to turn over future wages not yet paid.

Subsequently, the Texas Legislature amended section 31.002 to add the following subpart (f):

A court may not enter or enforce an order under this section that requires the turnover of the proceeds of, or the disbursement of, property exempt under any statute, including Section 42.0021, Property Code. This subsection does not apply to the enforcement of a child support obligation or a judgment for past due child support.

The new section was intended to specifically exempt paychecks, retirement checks, individual retirement accounts and other such property exempted under the bankruptcy code. House Committee On The Judiciary, Bill Analysis, Tex.H.B. 1029, 71st Leg., R.S. (1989). See: Caulley v. Caulley, 806 SW2d 795 (Tex.1991)

“By prohibiting the turnover of the proceeds of property exempt under any statute, this section necessarily prohibits the turnover of the proceeds of current wages. Tex.Prop.Code § 42.002(8) (listing current wages as one of the personal property items exempt from attachment, execution, and seizure by creditors).”

Caulley v. Caulley, supra

Written by Tom Fox

June 6, 2014 at 6:36 am

Posted in Uncategorized

The Form of a Kentucky Pleading: Basic

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Amazon Kindle Edition – $0.99

Legal information how-to booklet for Kentucky civil pleadings. This covers the basics of formatting for the essential parts of Kentucky pleadings, motions and other court papers. From the type and size of paper required by the Kentucky Rules of Civil Procedure, to necessary margins, case captions, signatures and proof of service, this show you what a Kentucky civil pleading should look like and how the different parts are arranged.

Written by Tom Fox

April 24, 2014 at 10:53 am

Posted in Uncategorized

Powerful and free legal research tool

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I’ve written about it here: Are lawyers idiots? It’s an introduction to Google Scholar, a very powerful and free way to access U.S. court opinions in all jurisdictions.

Written by Tom Fox

April 8, 2014 at 9:46 am

Posted in Legal, Legal research

Texas Wage Garnishment Casebook Reader

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This is a collection of links to Texas appellate opinions touching on various aspects of wage garnishment. All links are to Google Scholar. Cases arranged by date. The Texas court system has fourteen Courts of Appeals that review both civil and criminal appeals, except for death penalty cases, a Court of Criminal Appeals that has the final appellate jurisdiction in criminal cases, and a Supreme Court which has the final appellate jurisdiction in civil and juvenile cases.

  1. Southwestern Warehouse Corporation v. Wee Tote, Inc., 504 SW 2d 592 – Tex: Court of Civil Appeals 1974
    Issue: Constitutional Due Process of pre- judgment garnishment. Not specifically wage garnishment.
  2. Prewitt v. Smith, 528 SW 2d 893 – Tex: Court of Civil Appeals, 3rd Dist. 1975
    Held that funds of the State’s retirement system are “a part of a member’s compensation or wages which are not subject to garnishment,” citing Byrd v. City of Dallas, 118 Tex. 28, 6 S.W.2d 738, 741 (1928); Tex. Const. Art. XVI, Sec. 28. Sydnor v. City of Galveston, 15 S.W. 202 (Tex.App.1890), holds that amounts due a physician for professional services for a specific sum per day are not subject to garnishment. Bonus or commissions payable to a salesman at year’s end in addition to his regular salary is exempt as current wages for personal service. J.M. Radford Grocery Co. v. McKean, 41 S.W.2d 639 (Tex.Civ.App.1931, no writ). Commissions on the sale of gasoline and oil, payable monthly to a service station operator, were exempt. Alemite Co. of North Texas v. Magnolia Pet. Co., 50 S.W.2d 369 (Tex.Civ.App.1932, no writ).
  3. King v. Floyd, 538 SW 2d 166 – Tex: Court of Civil Appeals 1976
    Money owed by Houston Oilers to former player for breach of an employment contract constituted current wages and therefore exempt from garnishment.
  4. United States v. Stelter, 553 SW 2d 227 – Tex: Court of Civil Appeals, 8th Dist. 1977
    Issue: Can the ex-wife in a Texas divorce, who has been awarded a portion of the military retirement pay of her ex-husband as her share of the community property, garnish the United States under 42 U.S.C. Sec. 659. Answer: Yes. REVERSED by Texas Supreme Court in United States v. Stelter, 567 SW 2d 797 on grounds of sovereign immunity.
  5. United States v. Fleming, 565 SW 2d 87 – Tex: Court of Civil Appeals, 8th Dist. 1978
    Military retirement pay is not “current wages,” but is property and it is not exempt from garnishment. Case reversed on other grounds.  The procedure followed was in violation of  due process rights in that it was a prejudgment garnishment; also, it was carried out under an unconstitutional statute.
  6. United States v. Stelter, 567 SW 2d 797 – Tex: Supreme Court 1978
    At the time of this case 42 USC 659 gave consent to suits for “legal obligations to provide child support or make alimony payments,” but 42 USC 662(c) specifically excluded “community property settlement, equitable distribution of property, or other division of property between spouses or former spouses” from the meaning of alimony. 42 USC 662(c) has since been repealed.
  7. United States v. Wakefield, 572 SW 2d 569 – Tex: Court of Civil Appeals, 2nd Dist. 1978
    (1) “[G]arnishment of military pay involves suit against the United States and raises the issue of sovereign immunity. An order for an allotment does not involve suing the United States. It merely requires LeMaster to direct the United States Air Force to pay the retirement benefits to Mrs. Wakefield. No issue of sovereign immunity is raised.”
    (2) “It is well settled that garnishment should be in the amount of the debt absolutely owed at the time the garnishee files his answer. Burkitt v. Glenney, 371 S.W.2d 412 (Tex.Civ.App.—Houston 1963, writ ref. n.r.e.). For LeMaster’s retirement pay to accrue he must remain alive. Therefore, the debt being garnished is contingently but not absolutely owed. The trial court erred in ordering garnishment of future accruing military retirement pay.”
  8. Texaco, Inc. v. LeFevre, 610 SW 2d 173 – Tex: Court of Civil Appeals 1980
    A New York court ordered Texaco to withhold wages. A Texas court ordered Texaco to not withhold wages. Texaco sought to resolve the conflicting court orders by way of interpleader in federal court. The Federal District Court ruled the New York wage garnishment should prevail. The Texas Court of Appeals decided the federal court judgment  should be honored.

    We hold that Texaco was entitled to submit the cause to the federal district court, that that court was empowered under the above mentioned statutes to determine the questions involved and that our state court was bound to follow the decision of the federal district court even if the effect would be to allow the garnishment of wages, which our state court could not do because of the prohibition of art. 3836 and art. 4099, V.A.C.S., and art. 16, § 28 Constitution of the State of Texas.

  9. Benton v. Wilmer-Hutchins Ind. Sch. Dist., 662 SW 2d 696 – Tex: Court of Appeals, 5th Dist. 1983
    A school district decided it had overpaid its teachers by mistake one year and that it would simply deduct the over-payments from salary the next year. The Texas Court of Appeals ruled this to be improper.

    The district contends that since it has a duty to recover public funds paid out under a mistake of fact, it may resort to self-help by deducting the overpayments from current salaries due. We do not agree. By such action the district is treating current salaries as already paid to the extent of the previous overpayments, contrary to the common-law rule that mutual debts do not extinguish each other in the absence of agreement or judicial action.

    The teachers could either agree to the repayment or the school district could sue the teachers and prove the claim. But, the school district could not just withhold the money.
  10. Davidson Texas, Inc. v. Garcia, 664 SW 2d 791 – Tex: Court of Appeals, 3rd Dist. 1984
    A creditor sought to garnish money owed by Santa Fe Energy to debtor, who was not an employee. Debtor  provided personal service as a leasing agent and real estate title examiner for Santa Fe Energy’s oil and gas business without being on Santa Fe Energy’s payroll. He was paid $200 per day for his services, plus expenses. He did no work for any business other than Santa Fe Energy. He worked for Santa Fe Energy full time. Santa Fe did not withhold taxes or pay any share of debtor’s Social Security. Although the debtor’s daily activity was self-supervised, he was very specifically directed by Santa Fe Energy to the oil and gas lands they were interested in. The creditor argued that as an independent contractor, and not an employee, the debtor’s payments from Santa Fe Energy were not “wages” exempt from garnishment.
    The Texas Court of Appeals stated, “The garnishment exception for current wages applies without regard to whether compensation is denominated as “wages” or “salary,” the controlling issue being whether it is compensation for personal service.” citing King v. Floyd, 538 S.W.2d 166 Tex.Civ.App.1976. Additionally,

    In Prewitt v. Smith, 528 S.W.2d 893, 896 (Tex.Civ.App.1975, no writ) this Court held that funds of the State’s retirement system are “a part of a member’s compensation or wages which are not subject to garnishment,” citing Byrd v. City of Dallas, 118 Tex. 28, 6 S.W.2d 738, 741 (1928); Tex. Const. Art. XVI, Sec. 28. Sydnor v. City of Galveston, 15 S.W. 202 (Tex.App.1890), holds that amounts due a physician for professional services for a specific sum per day are not subject to garnishment. Bonus or commissions payable to a salesman at year’s end in addition to his regular salary is exempt as current wages for personal service. J.M. Radford Grocery Co. v. McKean, 41 S.W.2d 639 (Tex.Civ.App.1931, no writ). Commissions on the sale of gasoline and oil, payable monthly to a service station operator, were exempt. Alemite Co. of North Texas v. Magnolia Pet. Co., 50 S.W.2d 369 (Tex.Civ.App.1932, no writ).

    Under the specific facts of this case, the court held that the money owed was for personal services and therefore exempt from a garnishment.
  11. Hennigan v. Hennigan, 666 SW 2d 322 – Tex: Court of Appeals 1984

    The Texas Turnover and do an attorney’s receivables have the characteristics of ‘wages’ exempt from execution? This is the case to look to for some answers. If garnishment is not an effective method for collecting a judgment from canny uncooperative debtors, like lawyers, Texas has Civil Practice &. Remedies Code § 31.002 (former TEX.REV.CIV.STAT.ANN. art. 3827a), the Texas Turnover Statute, which allows courts to assist creditors collect judgments by digging a little deeper.

    The question of whether attorney fees constitute current wages, thus being exempt from garnishment, was answered negatively in First National Bank of Cleburne v. Graham, 22 S.W. 1101 (Tex.Civ. App.1889, no writ). Almost as if it were anticipating our question, that court stated:

    “Can an attorney’s fee for legal services rendered or to be rendered in a single case, or in the transaction of a single matter, or in the transaction of any amount of legal business, in any manner be correctly termed “current wages,” where he has not been hired for his services by the day, week, or month, to be paid at the expiration of the time for which he was hired, and not in proportion to the business done? We think not.”
  12. City of Houston v. Nelius, 693 SW 2d 567 – Tex: Court of Appeals 1985
    This is another case where an employer (City of Houston) withheld pay from an employee (a police officer) who owed the city money, along the lines of Benton v. Wilmer-Hutchins Ind. Sch. Dist.. Like the Benton case, the employer lost.
  13. Sloan v. Douglass, 713 SW 2d 436 – Tex: Court of Appeals, 2nd Dist. 1986
    x
  14. Barlow v. Lane, 745 SW 2d 451 – Tex: Court of Appeals, 10th Dist. 1988
    x
  15. Cain v. Cain, 746 SW 2d 861 – Tex: Court of Appeals, 8th Dist. 1988
    x
  16. Davis v. Raborn, 754 SW 2d 481 – Tex: Court of Appeals 1988
    x
  17. Schmerbeck v. River Oaks Bank, 786 SW 2d 521 – Tex: Court of Appeals, 6th Dist. 1990
    x
  18. Caulley v. Caulley, 806 SW 2d 795 – Tex: Supreme Court 1991
    x
  19. Orange County v. Ware, 819 SW 2d 472 – Tex: Supreme Court 1991
    x
  20. Tamez v. Tamez, 822 SW 2d 688 – Tex: Court of Appeals, 13th Dist. 1991
    x
  21. AMERICAN EXP. v. Harris, 831 SW 2d 531 – Tex: Court of Appeals 1992
    x
  22. Knighton v. IBM, 856 SW 2d 206 – Tex: Court of Appeals 1993
    x
  23. Bergman v. Bergman, 888 SW 2d 580 – Tex: Court of Appeals, 8th Dist. 1994
    x
  24. Foreness v. Hexamer, 971 SW 2d 525 – Tex: Court of Appeals, 5th Dist. 1997
    x
  25. General Elec. Capital Corp. v. ICO, INC., 230 SW 3d 702 – Tex: Court of Appeals 2007
    x
  26. TEXAS WORKFORCE COMMISSION v. BUSKE LINES, INC., Tex: Court of Appeals, 12th Dist. 2010
    x
  27. Stanley v. Reef Securities, Inc., 314 SW 3d 659 – Tex: Court of Appeals, 5th Dist. 2010
    x
  28. Marrs v. Marrs, 401 SW 3d 122 – Tex: Court of Appeals 2011
    x
  29. Heller v. Heller, 359 SW 3d 902 – Tex: Court of Appeals, 9th Dist. 2012
    x
  30. Stephens v. DYCK O’NEAL, INC., Tex: Court of Appeals, 1st Dist. 2012
    x
  31. Palmer v. Palmer, Tex: Court of Appeals, 2nd Dist. 2012
    x
  32. Free v. Lewis, Tex: Court of Appeals, 13th Dist. 2012
    x
  33. Spencer v. GC Services Limited Partnership, Tex: Court of Appeals, 1st Dist. 2013
    x

Written by Tom Fox

April 4, 2014 at 7:28 am

A Kentucky Motion to Intervene – Cases Cited

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Kentucky appellate decisions cited:

  1. Fugate v. Creech, 271 Ky. 3, 111 S.W.2d 402. 1937
  2. Monticello Electric Plant Board v. Board of Education, 310 S.W.2d 272 (Ky. 1958)
    This case involved the sale of a privately owned power plant to a municipal agency. The sale closed on January 20, 1954. Subsequently a civil action was brought to collect a franchise tax that was assessed effective January 1, 1954 when the plant was still owned privately. The tax assessment was for a whole year and the sales contract possibly obligated the new municipal owner to reimburse the seller for most of the tax assessment, pro rata. Judgment was entered against the prior owner on January 15, 1957. About one month after the judgment was entered, the new municipal owner sought to intervene in the action to question the imposition of the tax.
    The motion to intervene was denied and the denial of the motion was affirmed on appeal.
    The Court of Appeals observed that the applicant for intervention: (1) Failed to allege or prove the existing parties to the action would not adequately protect its interest regarding the imposition of the tax. (2) The applicant for intervention offered no justification for delaying until after judgment was entered before seeking to intervene. The court stated, “While intervention after judgment may be permitted under some circumstances . . . we think that in making a motion for intervention after judgment the applicant has a special burden of justifying the apparent lack of timeliness.” And, (3) the court was of the opinion the new municipal owner would not prevail even if it had been allowed to intervene. Without the court saying so, it is possible to surmise the problem was with the sales contract which was not being litigated, rather than being with the tax. The court did say the existence of a pending sales contract on the assessment date, “was of no concern of the taxing authorities, and furnished no basis for assessing less than the full tax against the company.
  3. City of Henderson v. Todd, Ky., 314 S.W.2d 948, 951 (1958)
    The City of Henderson sought to issue municipal bonds to finance the purchase of an industrial property for the purpose of economic development. To test the legal sufficiency of the plan, the city filed a ‘reverse taxpayer suit’ for declaratory judgment. Other taxpayers sought to intervene in the action. The motion to intervene was denied and Notice of Appeal was filed immediately. Nonetheless, the declaratory action proceeded to judgment, which was adverse to the bond issue and the city appealed. The city’s appeal and the appeal of the unsuccessful intervenors were consolidated.
    Although the Court agreed that an appeal may be taken from the denial of a motion to intervene as a matter of right, citing Fugate v. Creech, 271 Ky. 3, 111 S.W.2d 402. (1937), since the court affirmed the judgment below adverse to the bond issue, the matter of intervention was essentially moot. The intervenors got what they wanted.
  4. Stewart v. Burks, Ky., 384 S.W.2d 316 (1964)
    This case was a voter suit brought to challenge the nominating petition of a candidate in a local school board election. Another candidate in the same election sought to intervene as a party plaintiff. The original plaintiffs were dismissed for lack of statutory standing, the motion to intervene was granted, the intervening plaintiff adopted the complaint of the original plaintiffs and judgment was entered in the intervening plaintiff’s favor, invalidating the nominating petition of the defendant candidate. The judgment was affirmed on appeal. The only objection to allowing the intervention was the ruling was very late in the trial court action, apparently just before judgment was entered.
    Relying on Monticello Electric Plant Board v. Board of Education, Ky., 310 S.W.2d 272, the Court of Appeal dealt with the issue of intervention by saying, “[s]ince the intervenor was presenting no new claim, and was adopting the original complaint in which he had a real interest, the trial court did not commit error in permitting him to be made a party.
    The intervenor sought only to adopt and present a claim which had been timely made by another party.
  5. Webster v. Board of Education of Walton-Verona Independent School District, 437 S.W.2d 956, 957 (Ky 1969)
    A May, 1967 tax referendum was contested by an action filed in October, 1967. Intervention was requested in November, 1967. Summary judgment “under CR 12.03” was entered against both plaintiff and intervening plaintiffs because Kentucky election law required such contests to be commenced within 30 days of the election. Intervening plaintiffs appealed, claiming their intervening complaint asserted claims in addition to the election contest and these additional claims were not addressed by the trial court’s summary judgment. For example, the intervening complaint alleged the tax in question was “arbitrary, capricious, confiscatory and in violation of the Constitution,”
    Although the Court of Appeals discussed the difference between Civil Rule 24.01 (intervention as of right) and Civil Rule 24.02 (permissive intervention), the issue of intervention was not central to the court’s holding. One suspects the Court of Appeals viewed allowing the intervention to have been a mistake, or at least unnecessary. The court decided the intervening plaintiffs’ “additional claims” were “insufficient” and did not amount to “multiple claims.” The judgment was affirmed.
  6. Murphy v. Lexington-Fayette County Airport Board, Ky., 472 S.W.2d 688 (1971)
    A car rental firm obtained a judgment for specific performance of a contract for an airport car rental concession. The airport board announced it did not intend to appeal the judgment and a competing car rental firm sought to intervene with the claim the rental concession of the first firm would adversely affect its own exclusive contract for the airport’s rental car concession. The motion to intervene was denied and an appeal of that denial followed.
    The applicant for intervention argued the airport board’s failure to appeal was evidence its interests were not being adequately represented by the party to the action. The Court of Appeals countered with, “The mere fact that an unfavorable judgment was entered and that the airport board chose not to appeal from that judgment does not establish lack of adequate representation in the trial of the case, which is what CR 24.01 deals with.
    The court recognized that intervention after judgment may be appropriate in some circumstances and that a failure to appeal might also indicate inadequate representation, but this case did not qualify. The court held the post-judgment motion to intervene to be untimely. The court did not discuss the possibility that the applicant for intervention might have an adequate remedy in an action for breach of contract regarding its exclusive rental concession.
  7. Barry v. Keith, Ky., 474 S.W.2d 876 (Decided December 17, 1971)
    This was an original action seeking a Writ of Prohibition regarding the difficult issue of an automobile insurance company asking to intervene in a personal injury action. The court observed there was no consensus of opinion or clear analysis to be gleaned from other jurisdictions, The court stated:

    Without attempting to outline all of the conditions which might be required, we believe intervention should not be allowed except upon the inclusion of the following conditions: (1) It should be established that there is in fact an uninsured motorist. If non-insurance becomes a disputed question of fact, it may be submitted to the court for determination before the trial of the main issue. (2) The intervenor should acknowledge that it will be bound by the judgment subject, of course, to the right of appeal. (3) The intervenor must take the case with the issues as joined, unless it can make a showing to the trial court that justice requires other issues to be joined. (4) The identification of the respective parties and the attorneys should be revealed to the jury. (5) The intervenor should disclose to the insured that the interest of the insured might be in conflict with the interest of the intervenor and that the insured is not required to cooperate with the intervenor. Any information gained by the intervenor from the insured by reason of the insurer insured relationship should not be used adversely to the insured. (6) Other conditions as the trial judge in his reasonable discretion believes are necessary to insure a fair and orderly trial should be invoked.

  8. Dairyland Insurance Company v. Clark, Ky., 476 S.W.2d 202 (1972)
    This was an appeal from a denial of an automobile insurance company to intervene in a personal injury action under the provisions of its uninsured motorist coverage, for the purpose of preserving the insurance company’s defenses. The issue was the timeliness of the motion. Defendant failed to appear and defend the action, Plaintiff moved for default judgment and a hearing on the issue of damages was held. Before default judgment was actually entered, however, the insurance company moved to intervene and objected to the entry of default judgment.
    The motion to intervene was overruled for the reason that it was not timely filed. The court found that the untimeliness of the motion to intervene was not the result of excusable neglect and a default judgment for appellee was entered. On appeal the facts relating to the timeliness of the motion to intervene were closely examined. The court ruled, “The proper application and utilization of the Civil Rules should be left largely to the supervision of the trial judge and we must respect his exercise of sound judicial discretion in their enforcement . . . Under these circumstances we cannot say that the trial court clearly abused its discretionary powers in ruling that the motion to intervene was untimely.” The denial of the motion to intervene was affirmed.
  9. Pearman v. Schlaak, Ky., 575 S.W.2d 462 (1978)
  10. Yocom v. Hi-Flame Coals, Inc., Ky.App., 568 S.W.2d 757 (1978)
    The Commissioner of Labor and Custodian of the Special Fund sought to intervene in the Circuit Court review of a Workers’ Compensation award, under prior law. The provisions of KRS 342.285, which granted a right to appear in the proceedings, have since been substantially amended and the review procedures for Workers’ Compensation changed. This case has little value as precedent today in Worker’s Compensation cases. The court did state, “Our courts, generally, construe CR 24 liberally in order to effect the purpose of intervention.”
  11. Ashland Public Library Board of Trustees v. Scott Ky., 610 S.W.2d 895 (1981)
    The Supreme Court of Kentucky embraced the dictum in City of Henderson v. Todd, Ky., 314 S.W.2d 948, 951 (1958) that an appeal may be taken from the denial of a motion to intervene as a matter of right, Civil Rule 24.01. This is to be distinguished from the denial of a permissive intervention under Civil Rule 24.02 or the grant of any motion to intervene, none of which are final appealable orders in Kentucky practice.
    The court also dismissed the argument that The provisions of Civil Rule 54.02(1)apply to orders denying intervention.

    Applicants for intervention are not parties to an action and do not present claims for relief in an action unless and until they are permitted to intervene. Rather, they seek to become parties so that they may then assert a claim or defense in the action. CR 24.03. Consequently, recitation of a determination that there is no just reason for delay and that the order is final is neither a condition precedent to appellate review of a denial of intervention sought as a matter of right, nor a vehicle to authorize appellate review of a denial of permissive intervention prior to judgment disposing of the whole case.

  12. Ambassador College v. Combs Ky., 636 S.W.2d 305, 307 (1982)
    This was a will contest brought by the heirs of the survivor of a childless couple who executed a new will and deeded several parcels just weeks before his death. The allegations involved issues of undue influence and mental incapacity. Ambassador College, the primary beneficiary of a previously executed, and presumably valid, will sought to intervene in the action. The motion to intervene came after a trial, judgment and reversal on appeal, but before the re-trial. Counsel for the original plaintiffs withdrew from the case and the motion of Ambassador College to intervene was filed. Plaintiffs failed to obtain replacement counsel in the time allotted by the court and the action was dismissed and the motion to intervene was denied, without explanation. The Kentucky Court of Appeals affirmed the dismissal and denial of the motion to intervene and the Kentucky Supreme Court reversed.
    The issue in the second appeal was the timeliness of the motion to intervene. The court recognized “[i]t is well established that persons who are beneficiaries in a prior will have such an interest as entitles them to contest another alleged will of the same testator which would reduce their share in his estate.”
    Timeliness is a question of fact, the determination of which should usually be left to the judge. Dairyland Insurance Company v. Clark, Ky., 476 S.W.2d 202 (1972). In the subject action, however, the trial judge made no finding of timeliness on Ambassador College’s motion to intervene.” The Kentucky Supreme Court observed there had been no re-trial of the matter following remand from the first appeal and timeliness was not a big concern. There would have been no prejudice to the other parties by allowing the intervention. For all practical purposes it looks as if the intervention would have had the effect of substituting Ambassador College for the original plaintiffs, once the prior will had come to light.
  13. Gayner v. Packaging Serv. Corp. of Kentucky, Ky.App., 636 S.W.2d 658, 660 (1982)
    Gemini Laminating was a Kentucky corporation. Packaging Service was the majority owner of Gemini and Chapnick was Gemini’s president. Chapnick and Packaging Services had an agreement that gave Chapnick right of first refusal if Packaging sought to sell any of its Gemini stock. When the time came that Packaging sought to sell stock in Gemini, Chapnick gave notice of his intent to exercise his stock purchase option, but it turned out that Chapnick lacked the funds. Litigation ensued.

    Gayner was an outside investor who was a stranger to the agreements between Chapnick and Packaging, but he was Chapnick’s financial backer with a plan to enable Chapnick’s purchase of the Gemini stock. Gayner sought to intervene in the litigation.

    The Jefferson Circuit Court denied Gayner’s right to intervene because he had not demonstrated a direct, substantial and legally protectable interest in the suit between Packaging and Chapnick sufficient to establish intervention. Later . . . Packaging and Chapnick settled and dismissed the Kentucky suit. This appeal is prosecuted from the order denying intervention in that action.

    The Court of Appeals affirmed the Circuit Court’s denial of intervention, holding that Gaynor’s interest in the litigation was remote, contingent and not permitted by Civil Rule 24.01(b)

    CR 24.01(b), like its federal counterpart, Fed.R.Civ.P. 24, does not permit a contingent interest such as the Gayner claim to be placed in issue by intervention. Gayner’s interest does not qualify as significantly protectable . . . .

    The Court stated the issue was similar to a “real party in interest” question.

  14. Grange Mutual v. McDavid, Ky., 664 S.W.2d 931 (1984)
  15. Donald v. City of Glenview, Ky. App., 723 S.W.2d 861 (1986)
  16. Rosenbalm v. Commercial Bank of Middlesboro, Ky.App., 838 S.W.2d 423, 427 (1992)
    In the early 1980’s the Bell County Waste District devised a plan to convert garbage into electricity and borrowed some $400,000 from the bank for the project. The plan did not work as planned and the bank loan could not be repaid. The bank sued and obtained a default judgment in 1984. The powers that be in Bell County were adamantly and publicly opposed to a tax levy to pay the debt, and the debt remained unpaid.
    In 1989 the bank obtained a court order requiring either a tax levy or the issuance of a municipal bond to pay the judgment debt. When the tax bills with the additional levy went out, taxpayers very promptly sought to intervene, as a matter of right, in the action to contest the constitutionality of the original debt.  The taxpayers also moved to set aside the 1984 default judgment. The court observed that the original lawsuit was well publicized at the time, and the taxpayers should have known. The taxpayers were denied the opportunity to seek relief and this appeal followed. A primary issue was the timeliness of the taxpayers’ intervention.
    The Court of Appeals stated the general rule:

    An attempted intervention clearly must be undertaken in a timely fashion. The timeliness of a motion for intervention is a question of fact, the determination of which ordinarily falls to the presiding judge. Ambassador College v. Combs, Ky.App., 636 S.W.2d 305, 307 (1982). An applicant who moves for intervention after judgment carries a special burden of justifying the apparent lack of timeliness. Monticello Elec. Plant Bd. v. Board of Educ., Ky., 310 S.W.2d 272, 274 (1958).

    Although there is considerable discussion of taxpayer suits, the rights of taxpayers and equitable principles of laches, an important part of the court’s reversal of the Circuit Court’s decision was the fact that taxpayers had no present complaint until the tax was actually imposed, in line with the general rule that intervention will not be allowed for parties with only conditional or contingent interests at stake.
  17. Arnold v. Commonwealth ex rel. Chandler, 62 SW 3d 366(Ky.) 2001 2001-SC-0288-TG
    The Tobacco Master Settlement Agreement (MSA) was entered in November 1998  between the largest United States tobacco companies and the attorneys general of 46 states, including Kentucky. The settlement arose from the states’ claims for reimbursement from the tobacco companies for Medicaid healthcare expenditures resulting from tobacco related illness. Kentucky implemented its portion of the settlement by filing a civil action in the Franklin Circuit Court against the tobacco companies and then immediately dismissing the action, with prejudice, as settled. Subsequently, the following year, the Kentucky Legislature enacted a Bill directing how the settlement proceeds would be allocated and used.
    More than a year after the dismissal of the civil action, some 46 individuals claiming to be Medicaid recipients suffering from smoking-related illness sought to intervene in the action to assert a right to a portion of the settlement. The Circuit Court overruled  the motion to intervene as being untimely.
    The applicants for intervention argued they did not know they would not individually and directly benefit from the settlement until the Kentucky Legislature acted, and that the settlement agreement prejudiced their individual claims for compensation.
    Although the Kentucky Supreme Court spoke to the timeliness issue generally, the crux of the decision to affirm the denial of intervention was the fact the settlement agreement specifically preserved the rights of individual claimants to proceed against the tobacco companies directly. Essentially, without saying it this way, intervention would have done nothing to protect the intervenors’ rights. There was no indication the applicants for intervention had any legitimate claim to the settlement proceeds.
  18. Baker v. Webb, 127 SW 3d 622 – Ky: Supreme Court 2004
    The blood relatives (cousins) of a minor child sought to intervene in an adoption proceeding under Civil Rule 24.01, as of right. The Circuit Court overruled the motion and the Supreme Court of Kentucky reversed.
    Although 922 KAR 1:140 states a preference for adoptions by qualified relatives, there is no absolute priority. The applicants for intervention did not have a right to adopt, but they did have a regulatory expectation that they would be appropriately considered for adoption. This the Cabinet for Families and Children did not do, in apparent violation if its own rules. The court found the Cabinet’s procedural failure provided a sufficient legal interest compelling intervention in the adoption proceeding.
    A strong dissenting opinion from Justice Keller focused upon the fact the motion to intervene was procedurally insufficient in that it was not accompanied by “a pleading setting forth the claim or defense for which intervention is sought,” as required by Civil Rule 24.03.
  19. Carter v. Smith, 170 SW 3d 402 – Ky: Court of Appeals 2004
    A complaint filed on December 2, 2002 alleged violations of Kentucky’s Open Meetings Act by a school board. On December 19, 2002 the school superintendent resigned his position, allegedly contingent upon a one-year consulting contract with the school board. In February, the court allowed Plaintiff to file an amended [sic] complaint to add a claim the December 19, 2002 board meeting also violated the Open Meetings Act with a request to void the consulting contract. Plaintiff also moved for a temporary injunction requiring payments on the consulting contract to be diverted to an escrow account pending final judgment. On April 9 the former superintendent made a motion to intervene in open court, which motion was subsequently reduced to writing.
    The trial court denied the motion to intervene on the grounds the validity of the consulting contract was contingent upon compliance with the Open Meetings Act and therefore too remote from the pending action; and that the application for intervention was untimely. The Kentucky Court of Appeals reversed. As an initial matter the court observed that the motion to intervene was base on both Civil Rule 24.01, interventions of right, and Civil Rule 24.02, permissive intervention. The appeal was limited to the denial of the Civil Rule 24.01 motion. which was a final and appealable order.

    To establish an intervention under Civil Rule 24.01, an applicant must:

    • Make a timely application;
    • Show an interest relating to the subject of the action;
    • Show the ability to protect this interest may be impaired or impeded in the absence of intervention; and
    • Show that none of the existing parties could adequately represent his interests.

    On the issue of timeliness, the court reiterated the five-factor test in Grubbs v. Norris, 870 F.2d 343 (6th Cir.1989). and Triax Co. v. TRW, Inc, 724 F.2d 1224 (6th Cir.1984):

    1. The point to which the suit has progressed;
    2. The purpose for which intervention is sought;
    3. The length of time preceding the application during which the proposed intervenor knew or reasonably should have known of his interest in the case;
    4. The prejudice to the original parties due to the proposed intervenor’s failure, after he or she knew or reasonably should have known of his or her interest in the case, to apply promptly for intervention; and
    5. The existence of unusual circumstances militating against or in favor of intervention.

    The standard of review of the denial of a motion to intervene as untimely is abuse of discretion or clearly erroneous. The court conducted a de novo review of the record and the denial of Carter’s motion to intervene, and held that the decision was clearly erroneous

  20. Commonwealth of Kentucky  v. LJP, 316 SW 3d 871 – Ky: Supreme Court 2010
    The Cabinet for Health and Family Services filed a petition for the involuntary termination of parental rights. Some four months later, while the petition for involuntary termination was pending, the parents filed in the same action a petition for voluntary termination of parental rights conditioned upon the child being placed with the biological grandparents for adoption. Thereupon, the grandparents immediately sought to intervene. The Family Court denied the intervention, reasoning the petition for involuntary termination preempted the petition for voluntary termination. The Court of Appeals reversed and upon discretionary review the Supreme Court of Kentucky reversed the Court of Appeals.
    The Supreme Court held the mere filing of an involuntary termination petition by itself did not deprive the parents of their right to seek voluntary termination or to consent to adoption. The Court also held that the procedures for termination of parental rights and the procedures for adoption could not so easily be collapsed into a single unified proceeding.
    The grandparents were seeking to intervene in an adoption proceeding which did not exist. This was a termination proceeding into which there was no right to intervene. The Family Court denial of intervention was affirmed, but for different reasons.
  21. Hazel Enterprises v. Community Financial Bank, 382 SW 3d 65 – Ky: Court of App. 2012
    This was a foreclosure action. After the Commissioner’s sale of the property and the court’s approval of the sale and the Commissioner’s report for the distribution of the proceeds of the sale, including the payment of past due property taxes, Hazel bought the tax delinquency certificate. Then Hazel moved to intervene in the foreclosure action to claim $1050.62, for interest, attorney fees, and administrative fees in addition to $588.84 in actual taxes.

    The motion to intervene was denied and the Court of Appeals affirmed the denial. In an opinion remarkably devoid of any overt scoffing, the court observed that prejudice to the other parties to an action is an additional consideration in a motion to intervene, particularly with a post-judgment motion to intervene.

    [R]e-opening the litigation to account for Hazel’s late acquired interests clearly would have prejudiced the parties where the circuit court had already made a final determination with respect to the rights of all parties involved. Given that timeliness is a factual issue generally left to the discretion of the trial court and under the facts of this case, we find no abuse of discretion.

  22. Boggs v. Commonwealth of Kentucky, EX REL. BOGGS, Ky: Court of Appeals 2012
    A Kentucky county attorney has a right to intervene in any existing action concerning child support as between the child’s parents. When a county attorney files a motion to intervene for purposes of securing child support, the motion must be granted. However, the county attorney cannot show up one day, change the case caption to include the Commonwealth as a party and start filing motions. There has to be an actual motion to intervene.
  23. Interactive Gaming Council v. Commonwealth, Ky: Court of Appeals 2014
    The Commonwealth of Kentucky commenced an in rem action seeking the forfeiture of numerous internet domain names as being gambling devices. Interactive Gaming Counsel sought to intervene in the action as an association representing online gambling operations, some of which owned domain names subject to forfeiture. The issue is the law of associational standing which just happened to arise in the context of a motion to intervene. The Court of Appeals decision provides an enlightening and scholarly discussion of associational standing in Kentucky, but it does not have much to do with the issues distinctly related to intervention.
  24. Commonwealth of Kentucky v Shepherd Case No. 2011-SC-000482-MR (KY S.Ct., Apr. 26, 2012) http://opinions.kycourts.net/sc/2011-SC-000482-MR.pdf
    Citizen suits to enforce the federal Clean Water Act must be filed in federal District Court. Before filing such a action, 60 day notice must be given of the intention to file, and if state or federal agencies commence an enforcement action prior to the expiration of the 60 days, the citizen plaintiffs are barred from proceeding. That’s what happened here.

    When the Commonwealth of Kentucky’s Energy and Environment Cabinet filed an enforcement action in the Franklin Circuit Court, it also filed a proposed consent decree. The citizen plaintiffs moved to intervene in the action to object to the proposed consent decree. Opposition to the intervention was based upon the idea the presence of the citizen plaintiffs as parties in the state court action would collide with the exclusive jurisdiction of federal courts provided by 33 USC 1365, and it would deprive the Franklin Circuit Court of jurisdiction. The Supreme Court of Kentucky did not agree and allowed the intervention, at least to the extent of commenting upon and criticizing the proposed consent decree.

    In sum, the trial court’s ordinary authority to permit sufficiently interested parties to intervene in a suit properly before it has not been preempted here, at least not completely, by federal law. On the contrary, federal law encourages the states to permit interested citizens to intervene and be heard in state court enforcement proceedings under the state analogs of the federal environmental protection statutes. To the extent, therefore, that the trial court has allowed the Citizen Plaintiffs to intervene in the Cabinet’s enforcement action so as to accord them an opportunity to challenge the proposed consent judgment, it has not trespassed upon the federal courts’ exclusive jurisdiction. Whether the trial court would likewise have jurisdiction to entertain the Citizen Plaintiffs’ own claims under the Clean Water Act is a much harder question, but one we need not address at this time since the trial court has not of yet and may not ever assert that jurisdiction.

    The court did not once mention the possibility that “commencing a civil action” anywhere but in a federal district court (33 USC 1365) may be categorically different from intervening in an action commenced by another.
  25. Ipock v. Ipock, 403 SW 3d 580 – Ky: Court of Appeals 2013

Written by Tom Fox

March 30, 2014 at 12:16 pm

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