City of St. Francis v. Mary Sarazin Timmons , 128 F.3d 1209 ( 1997 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
____________
No. 96-1200
____________
George Deretich, *
*
Plaintiff, *
*
v. *
*
City of St. Francis; St. *
Francis City Council Members *
from 1980 until the present; *
Steven Braastad; Robert *
Patterson; Raymond Steinke; *
D a l e Frederikson; Carol Berg ;
*
W a l t Hiller; Williams Hawkins ,
*
i n d i v i d u a *l l y and in his
Appeal from the United States
representative capacity of St .
* District Court for the
Francis City Attorney; Mateff y
* District of Minnesota
Engineering & Associates, Inc. ,
*
individually and in its *
representative capacity of St .
*
F r a n c i s City Engineer; Sharo n
*
Fulkerson, individually and i n
*
h e r representative capacity o f
*
St. Francis City Clerk; *
Stephen M. Klein, individuall y
*
and in his representative *
capacity of St. Francis City
*
P l a n n e r ; Marvin E. Gustafson;
*
Burke and Hawkins; Barna, Guzy
*
M e r r i l l , Hynes, and Giancolo,
*
Ltd.; Ric hard Merrill; Steffen,
*
M u n s t e n t e i g e r , B e a r s e , B e e n s ,
*
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Parta, and Peterson; Ronald *
Peterson: Lester Mateffy; First
*
National Bank, of Anoka; Steve
*
Schmitt, individually and in his
*
representative capacity of First
*
National Bank of Anoka *
Commercial Loan Officer; *
Gramont Corporation, a Minnesota
*
corporation,
*
*
D e f e n d a n t s - A p p e l l e e s ,
*
*
v. *
*
Deretich & Timmons, P.A.; *
George Deretich, *
*
T h i r d P a r t y D e f e n d a n t s ,
*
*
Mary Sarazin Timmons, *
*
Third Party Defendant-Appellant.
*
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Submitted: December 13, 1996
Filed: October 27, 1997
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Before McMILLIAN and MAGILL, Circuit Judges, and WEBBER,*
District Judge.
*The Honorable E. Richard Webber, United States District
Judge for the Eastern District of Missouri, sitting by
designation.
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____________
McMILLIAN, Circuit Judge.
Appellant Mary Sarazin Timmons (Sarazin) appeals from
a final order entered in the United States District Court1
for the District of Minnesota, affirming the order of the
United States Magistrate Judge,2 in favor of Sarazin’s
judgment creditors (appellees) on their post-judgment
motion pursuant to Fed. R. Civ. P. 69(a)3 for a transfer
of Sarazin’s rights, title, and interest in employee
benefits earned by her former husband, Martin Timmons
(Timmons), which Sarazin received in a property
settlement upon the dissolution of their marriage. City
of St. Francis v. Deretich, No. 3-83-942 (D. Minn. Dec.
20, 1995) (district court order), aff’g id. (Aug. 11,
1995) (magistrate judge’s order) (hereinafter “slip
op.”). For reversal, Sarazin argues that the district
1
The Honorable David S. Doty, United States District Judge for the District of
Minnesota.
2
The Honorable Franklin L. Noel, United States Magistrate Judge for the District
of Minnesota.
3
Rule 69(a) provides in relevant part:
Process to enforce a judgment for the payment of money shall be
a writ of execution, unless the court directs otherwise. The procedure on
execution, in proceedings supplementary to and in aid of a judgment, and
in proceedings on and in aid of execution shall be in accordance with the
practice and procedure of the state in which the district court is held,
existing at the time the remedy is sought, except that any statute of the
United States governs to the extent that it is applicable.
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court erred in holding that the employee benefits are not
exempt from garnishment under Minnesota state law. Upon
careful consideration and for the reasons discussed
below, we affirm the order of the district court.
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The district court’s jurisdiction in the present
action, as it was originally filed in 1983 by George
Deretich (by and through his attorney, Sarazin), was
based upon 28 U.S.C. § 1343. Jurisdiction on appeal is
proper based upon 28 U.S.C. § 1291. The notice of appeal
was timely filed under Fed. R. App. P. 4(a).
The procedural background of this case is as follows.
In 1983, George Deretich, an attorney, filed this civil
rights action pursuant to 42 U.S.C. §§ 1983 and 1985,
against appellees (the City of St. Francis, Minnesota,
and numerous other entities and individuals), alleging
that appellees had conspired to deprive him of his
constitutional rights. Deretich also asserted various
pendent state law claims. Deretich was represented by
Sarazin, who was then his law partner. The district
4
court granted summary judgment in favor of appellees on
Deretich’s constitutional claims and dismissed his
pendent state law claims. On appeal, this court affirmed
the judgment of the district court and, upon determining
that the appeal was frivolous, assessed double costs
against Deretich and attorney’s fees on appeal.
Deretich v. City of St. Francis, No. 85-5283, slip op. at
3 (8th Cir. 1986) (unpublished) (per curiam) (reported at
802 F.2d 463) (table). The case was then remanded to the
district court for a determination of the appropriate
amounts to be awarded. Id. On remand, the district
court found that Deretich had litigated frivolously and
in bad faith. Id., slip op. at 5-8 (D. Minn. Dec. 23,
1986). The district court further found that Sarazin had
4
The Honorable Edward L. Devitt, deceased, United States District Judge for the
District of Minnesota.
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“assisted [Deretich] in pursuing this litigation after it
had clearly become frivolous,” and “[i]n so doing, she
multiplied the proceedings unreasonably and vexatiously
and abused the judicial process.” Id. at 8. The
district court granted appellees’ motions for attorney’s
fees and costs and entered judgment accordingly,
specifically holding Sarazin jointly liable for one-third
of the amounts awarded. Id. at 8-10.
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In April 1995, Sarazin and her husband, Timmons, were
divorced. The parties agreed to a property settlement
which became part of a final judgment and decree entered
in state court. In re Timmons, No. DW 190111 (Minn.
Dist. Ct. Apr. 11, 1995). The property settlement
granted Sarazin the right to designate beneficiaries for
$228,000.00 in death benefits on term life insurance
policies maintained through Timmons’s employer, formerly
known as Control Data Corporation (CDC), and also awarded
Sarazin a 40% interest in Timmons’s current and future
long-term disability benefits payable under CDC’s
disability plan (which, at that time, equalled $1,282.36
per month for her share). Id. at 4, 12-13.
In June 1995, appellees filed in the district court
the Rule 69(a) motion that is presently on appeal.
Appellees requested an order requiring Sarazin to
designate them as beneficiaries under Timmons’s life
insurance policies and requiring Timmons to pay Sarazin’s
40% share of his monthly disability benefits directly to
them. Sarazin opposed the motion on the ground that the
disability benefits and life insurance proceeds were
employee benefits and therefore exempt from garnishment
under Minn. Stat. § 550.37, subd. 24, which exempts:
The debtor’s right to receive present or
future payments, or payments received by
the debtor, under a stock bonus, pension,
profit sharing, annuity, individual
retirement account, individual retirement
annuity, simplified employee pension, or
similar plan or contract on account of
illness, disability, death, age, or length
of service
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. . . .
(2) to the extent of the debtor’s aggregate
interest under all plans and contracts up
to the present value of $30,000 and
additional amounts under all the plans and
contracts to the extent reasonably
necessary for the support of the debtor and
any spouse or dependent of the debtor.
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With respect to the disability benefits, Sarazin
argued that the entire 40% interest is reasonably
necessary for her support. Sarazin -- who is employed
part-time by the Minnesota Department of Health, where
she earns approximately $1,000 per month after taxes --
argued that her 40% share of Timmons’s disability
benefits amounts to more than one-half of her net income.
Therefore, she maintained, if appellees were to garnish
those benefits, she would be forced to live on less than
$10,000 per year.5
The magistrate judge held that, although the
disability benefits and life insurance proceeds are
employee benefits, the exemption in Minn. Stat. § 550.37,
subd. 24, nevertheless does not apply under the facts of
the present case because there is no employment
relationship between the debtor (Sarazin) and the
employer (CDC). Slip op. at 6-7, citing In re Raymond,
71 B.R. 628, 630 (Bankr. D. Minn. 1987) (concluding that
Minn. Stat. § 550.37, subd. 24, was intended by the state
legislature to exempt only those listed assets which the
debtor derived directly from an employment relationship
or self-employment endeavors). However, with respect to
the life insurance proceeds, the magistrate judge
concluded, as conceded by appellees, that the first
$32,000 in death benefits would be exempt pursuant to
Minn. Stat. § 550.37, subd. 10 (exempting all money
received by or payable to a surviving spouse from
insurance proceeds payable at the death of a spouse not
exceeding $32,000). Id. at 8. Accordingly, the
5
Sarazin also argued in the district court that ERISA preempts the applicable
state law on garnishment. However, she has abandoned that argument on appeal.
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magistrate judge ordered Sarazin and CDC to take the
necessary steps to designate appellees as the
beneficiaries of Timmons’s life insurance policies,
except the first $32,000 to which Sarazin is entitled,
and ordered Timmons, as garnishee, to pay Sarazin’s past,6
present, and future 40% share of his disability benefits
to
6
Timmons had placed Sarazin’s past payments in an escrow trust account
pending resolution of this matter.
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appellees. The district court affirmed the magistrate
judge’s order, and this appeal followed.
We have carefully examined each of the contentions
raised by Sarazin on appeal and find them to be without
merit. We review the district court’s construction of
state law de novo. The district court did not err in
construing the state statute governing garnishment and
attachment to require that assets be directly derived
from the debtor’s employment in order for the employee
benefits exemption to apply. Westinghouse Credit Corp.
v. J. Reiter Sales, Inc., 443 N.W.2d 837, 839 (Minn. Ct.
App. 1989) (“Benefits which are exempt under subdivision
24 are those derived from an employment relationship or
from self-employment endeavors.”), citing In re Raymond,
71 B.R. at 630. Sarazin’s rights, title, and interest in
Timmons’s disability benefits and life insurance proceeds
are not exempt from garnishment under Minn. Stat. §
550.37, subd. 24, because Sarazin obtained an interest in
those assets through her divorce settlement and has no
employment relationship with CDC. We therefore hold that
the district court did not err in concluding that
appellees may garnish her entire 40% share of Timmons’s
disability benefits as well as any death benefits
exceeding $32,000. Slip op. at 6-7. The order of the
district court is affirmed.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS,
EIGHTH CIRCUIT.
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