ASSET ACCEPTANCE CORP V GAYLA L HUGHESAnnotate this Case
STATE OF MICHIGAN
COURT OF APPEALS
ASSET ACCEPTANCE CORPORATION,
September 6, 2005
Washtenaw Circuit Court
LC No. 03-000511-AV
GAYLA L. HUGHES,
Official Reported Version
DEPARTMENT OF TREASURY,
Before: Fort Hood, P.J., and Meter and Schuette, JJ.
FORT HOOD, J. (dissenting).
I respectfully dissent. Plaintiff filed a complaint alleging that defendant failed to make
payments on her Montgomery Ward and Saks Fifth Avenue credit cards. Plaintiff alleged that it
purchased the outstanding accounts, and defendant failed to make periodic payments. On May 5,
2000, plaintiff obtained a default judgment against defendant in the amount of $1,738.63 to
cover the outstanding balance, interest, and costs. To recover the judgment amount, plaintiff
sought writs of garnishment directed to Huron River Credit Union and Michigan's Department of
Treasury. Defendant objected to the garnishment, alleging that her only sources of income were
exempt from garnishment. Specifically, defendant alleged that she was disabled, had received
Social Security disability payments since 1984, and the payments were used to pay her rent. Her
other source of income consisted of adoption support subsidies from the state. Defendant alleged
that the funds constituted exempt property and that exempt property did not lose its exempt
status when deposited into a bank account.
The district court held a hearing and denied the objections to the garnishment directed to
the state treasury department.1 On appeal, the circuit court reversed the district court's holding,
concluding that the homestead property tax credit was exempt from garnishment. This Court
granted plaintiff 's application for leave to appeal.
Issues of statutory construction present questions of law that are reviewed de novo. Cruz
v State Farm Mut Auto Ins Co, 466 Mich 588, 594; 648 NW2d 591 (2002). The goal of statutory
construction is to discern and give effect to the intent of the Legislature by examining the most
reliable evidence of its intent, the words of the statute. Neal v Wilkes, 470 Mich 661, 665; 685
NW2d 648 (2004). If the statutory language is unambiguous, appellate courts presume that the
Legislature intended the plainly expressly meaning and further judicial construction is neither
permitted nor required. DiBenedetto v West Shore Hosp, 461 Mich 394, 402; 605 NW2d 300
Federal law limits the transfer and acquisition of disability insurance benefits:
The right of any person to any future payment under this subchapter shall
not be transferable or assignable, at law or in equity, and none of the moneys paid
or payable or rights existing under this subchapter shall be subject to execution,
levy, attachment, garnishment, or other legal process, or to the operation of any
bankruptcy or insolvency law. [42 USC 407(a).]
Despite the federal statute holding that disability insurance benefits are not subject to
garnishment and despite the fact that defendant's rent was paid through receipt of these benefits,
plaintiff alleges that it may garnish the Homestead Property Tax Credit on the basis of the
The state treasurer shall intercept a state tax refund or credit that is subject
to a writ of garnishment served upon the state treasurer pursuant to section 4061.
[MCL 600.4061a(1) . . . . (Emphasis added).]
Although MCL 600.4061a provides that it is applicable to a state refund or credit, the plain
language of the homestead property tax credit statute expressly provides "Only the renter or
lessee shall claim a credit on property that is rented or leased as a homestead." MCL 206.520(5).
See Neal, supra at 665 (The task in construing a statute is to discern and give effect to the intent
of the Legislature.).
The tax credit retains its essence or quality as money only if it was not invested or
utilized for a subsequent purchase. In Lawrence v Shaw, 300 US 245, 246; 57 S Ct 443; 81 L Ed
623 (1937), the petitioner was appointed the guardian of a war veteran with claims against the
United Sates for unpaid compensation and insurance. The petitioner initially listed the property
The parties resolved the writ of garnishment directed to the credit union account, and it is not at
issue on appeal.
of his ward when reporting taxes, but the tax paid was refunded on the basis of a ruling of the
state attorney general. Consequently, the petitioner, in subsequent years, did not list or pay taxes
on property of the ward. After five years, the respondent tax official assessed the ward's property
for that period. The property consisted of deposits in banks and real estate loans, although the
issue of the loans was resolved before appeal. The parties stipulated that the "deposits in bank"
consisted of collections from warrants or checks drawn and issued by the federal government.
Id. at 247. These collections were deposited into the bank by the guardian and constituted
"unexpended and uninvested balances." Id. The petitioner paid the taxes under protest and
demanded a refund, which demand was refused. Id.
The United States Supreme Court reversed the collection of taxes and, in doing so, made
a distinction between a deposit or credit of money and an investment:
The state court found no distinction with respect to taxability "between
stocks and bonds, and notes and bank deposits and other solvent credits."
Amplifying this position, counsel for respondent at this bar, while conceding that
the warrants or checks issued by the Government would be exempt, and that if
they were cashed the moneys thus received would likewise be exempt until they
were invested, contended that if the guardian instead of cashing the warrants or
checks deposited them in bank, the resulting bank credits would be taxable. We
think that this contention is inadmissible. Congress has declared that the
payments of benefits by the Government shall be exempt not only before but
"after receipt by the beneficiary." We cannot conceive that it was the intent of
Congress that the veteran should lose the benefit of this immunity, which would
attach to the moneys in his hands, by depositing the government warrants or
checks in bank to be collected and credited in the usual manner. These payments
are intended primarily for the maintenance and support of the veteran. To that
end neither he nor his guardian is obliged to keep the moneys on his person or
under his roof. As the immunity from taxation is continued after the payments are
received, the usual methods of receipt must be deemed available so that the
amounts paid by the Government may be properly safeguarded and used as the
needs of the veteran may require.
The provision of the [World War Veterans Act as amended in] 1935 that
the exemption should not apply to property purchased out of the moneys received
from the Government shows the intent to deny exemption to investments, as was
ruled in the Trotter case [Trotter v Tennessee, 290 US 354; 54 S Ct 138; 78 L Ed
358 (1933)]. It is of course true that deposits in bank may be made under a
special agreement by which the deposits assume the character of investments and
would lose immunity accordingly. No such agreement is shown here. Nor are the
bank balances shown to be the proceeds of investments. They are stipulated to be
"uninvested balances" of the government payments. Some reference was made at
the bar to the possible effect of an allowance of interest upon bank deposits. It
does not appear that there was such an allowance in this instance and we do not
suggest that a mere allowance of interest upon deposits would be enough to
destroy an immunity where it would otherwise attach. We hold that the immunity
from taxation does attach to bank credits of the veteran or his guardian which do
not represent or flow from his investments but result from the deposit of the
warrants or checks received from the Government when such deposits are made in
the ordinary manner so that the proceeds of the collection are subject to draft upon
demand for the veteran's use. . . . [Lawrence, supra at 249-250 (emphasis added).]
In the present case, defendant utilized her Social Security benefits to pay rent and the
payment of rent resulted in the homestead property tax credit, a credit issued from the state that
was not yet expended by defendant. Defendant did not have other revenue sources with which to
commingle her tax credit. Moreover, plaintiff does not allege any entitlement to the adoption
subsidies. Defendant did not invest the credit. Therefore, she was not required to keep the
money in her hands or under her roof in order to maintain the exemption benefit of 42 USC 407.
Consequently, I would affirm the circuit court decision.
/s/ Karen M. Fort Hood