Case Title: ROYAL v. WALSH

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 2004-08-23T00:00:00Z

Document:
ROYAL v. WALSH2004 WY 9696 P.3d 1Case Number: 03-164Decided: 08/23/2004
APRIL TERM, A.D. 2004

 

                                                                                                                                   

 

IN 
RE:  CLEVE CALVIN WALSH 
and

JENNIFER 
LYNN WALSH, Debtors:

 

RANDY 
ROYAL,

 

Appellant(Trustee/Objector),

 

v.

 

CLEVE 
CALVIN WALSH and

JENNIFER 
LYNN WALSH,

 

Appellees(Debtors/Respondents).

 

 

Representing 
Appellant:

 

            
Randy L. Royal, Greybull, Wyoming.

 

Representing 
Appellees:

 

            
Stephen R. Winship of Winship & Winship, P.C., Casper, 
Wyoming.

 

Before 
HILL, C.J., and GOLDEN, LEHMAN, KITE, and VOIGT, JJ.

 

VOIGT, 
Justice, delivered the opinion of the Court; 
LEHMAN, 
Justice, filed a dissenting opinion with which HILL, Chief Justice, 
joined.

 

            
VOIGT, Justice.

 

[¶1]      In their 
bankruptcy petition, Cleve Calvin Walsh and Jennifer Lynn Walsh (the Walshes) 
claimed an exemption of seventy-five percent of the funds garnished from their 
bank account.  The bankruptcy 
trustee objected to the claimed exemption.  
The United States Bankruptcy Court, for the District of Wyoming, then 
certified to this Court the following questions, which we have agreed to 
answer:

 

1.        
Are 
funds derived from a debtor's wages and deposited into the debtor's bank account 
exempt from garnishment under Wyo. Stat. Ann. § 1-15-408 or § 40-14-505(b) 
(LexisNexis 2003)?

 

2.        
If 
yes, under what circumstances?

 

FACTS

 

[¶2]      On April 29, 
2003, the Walshes filed a Chapter 7 bankruptcy petition.  On the same date, a judgment creditor 
garnished their bank account.  The 
money in the account--$2,541.18was derived solely from Mr. Walsh's personal 
service earnings with his employer.  
The trustee has objected to the Walshes' claim under Wyo. Stat. Ann § 
1-15-408 (LexisNexis 2003) that seventy-five percent of the funds are exempt 
from garnishment.  The pertinent 
portion of that statute reads as follows:

 

(a)       A writ of 
post judgment garnishment attaching earnings for personal services shall attach 
that portion of the defendant's accrued and unpaid disposable earnings, 
specified in subsection (b) of this section.  The writ shall direct the garnishee to 
withhold from the defendant's accrued disposable earnings the amount attached 
pursuant to the writ and to pay the exempted amount to the defendant at the time 
his earnings are normally paid.  
Earnings for personal services shall be deemed to accrue on the last day 
of the period in which they were earned or to which they relate.  If the writ is served before or on the 
date the defendant's earnings accrue and before the same have been paid to the 
defendant, the writ shall be deemed to have been served at the time the periodic 
earnings accrue.  If more than one 
(1) writ is served, the writ first served shall have priority.  Notwithstanding any other provision of 
this subsection, an income withholding order for child support obtained pursuant 
to W.S. 20-6-201 through 20-6-222 shall have priority over any other 
garnishment.

 

STANDARD 
OF REVIEW

 

[¶3]      The certified 
questions require this Court to determine the meaning of Wyo. Stat. Ann. § 
1-15-408.  Our rules of statutory 
construction are well known and we will not repeat them at length.  See Pagel v. Franscell, 2002 WY 
169, ¶ 9, 57 P.3d 1226, 1230 (Wyo. 2002) (quoting Wyoming Community College 
Com'n v. Casper Community College Dist., 2001 WY 86, ¶¶ 16-18, 31 P.3d 1242, 
1249 (Wyo. 2001)).  We will, however, note a few 
particularly pertinent rules of construction.  Our primary concern is legislative 
intent, which intent must be ascertained from the words of the statute.  Id.  Construction is unnecessary where 
statutory language is unambiguous.  
Id.  The intent of an 
unambiguous statute is determined from the ordinary and obvious meaning of the 
words used.  In re Wilson, 
2003 WY 105, ¶ 6, 75 P.3d 669, 672 (Wyo. 2003) (quoting Wyoming Dept. of 
Transp. v. Haglund, 982 P.2d 699, 701 (Wyo. 1999)).  "When the words are clear and 
unambiguous, a court risks an impermissible substitution of its own views, or 
those of others, for the intent of the legislature if any effort is made to 
interpret or construe statutes on any basis other than the language invoked by 
the legislature.'"  Pagel, 
2002 WY 169, ¶ 9, 57 P.3d at 1230 (quoting Wyoming Community College 
Com'n, 2001 WY 86, ¶ 16, 31 P.3d at 1249).  "A statute is clear and unambiguous if 
its wording is such that reasonable persons are able to agree on its meaning 
with consistency and predictability.'"  
Pagel, 2002 WY 169, ¶ 9, 57 P.3d at 1230 (quoting Wyoming Community College 
Com'n, 2001 WY 86, ¶ 17, 31 P.3d at 1249).

 

[¶4]      In addition to 
these general rules of construction, we also note more specifically that courts 
are not free to ignore any word the legislature has used.  Keats v. State, 2003 WY 19, ¶ 28, 
64 P.3d 104, 113 (Wyo. 2003).  And finally, "it is a universal rule 
that courts will not enlarge, stretch, expand or extend a statute to matters not 
falling within its express provisions.'"  
Knowles v. Corkill, 2002 WY 119, ¶ 19, 51 P.3d 859, 865 (Wyo. 
2002) (quoting Lo Sasso v. Braun, 386 P.2d 630, 632 (Wyo. 1963)).

 

DISCUSSION

 

[¶5]      It is impossible 
reasonably to read the words "accrued and unpaid" in Wyo. Stat. Ann. § 
1-15-408(a) as meaning anything other than money the debtor has earned but has 
not yet received.  This is 
especially true inasmuch as the entire subsection is concerned with an 
employer's responsibilities when served with a writ of garnishment.  For example, the garnishee is to 
"withhold" the amount attached before paying the exempted amount "at the time . 
. . earnings are normally paid."  
Wyo. Stat. Ann § 1-15-408(a).  
That is not language directed to a bank holding a debtor's deposits.  Further, the statute requires that 
income withholding orders for child support, which orders attach to "payments" 
due to an obligor, continue to have priority.  See Wyo. Stat. Ann. § 20-6-201 
et seq. (LexisNexis 2003).  
Clearly, this is a statutory construct designed to reach monies not yet 
paid to the debtor.

 

[¶6]      The same is true of 
Wyo. Stat. Ann. § 40-14-505(a)(ii) (LexisNexis 2003), which concerns 
garnishments resulting from consumer credit transactions.  Under that statute, 
certain amounts are exempt from garnishment where "the earnings of an individual 
are required to be withheld for payment of a debt."  (Emphasis 
added.)  The 
legislative intent is clear on the face of both Wyo. Stat. Ann. § 1-15-408(a) 
and Wyo. Stat. Ann. § 40-14-505(a)(ii)these statutes deal with unpaid wages or other 
earnings.  They 
do not deal with wages or other earnings that have made their way into a 
debtor's bank account.

 

[¶7]      While it may seem 
illogical to extend an exemption to a debtor only until such time as he or she 
has earnings "in hand," it is not this Court's job to say that the law should be 
something other than it is.  Rather, it is this Court's job only to 
determine legislative intent from the law as it is.  And as it is, the 
law now clearly limits this exemption to "accrued and unpaid" earnings.

 

CONCLUSION

 

[¶8]      We answer the 
first certified question in the negative, making it unnecessary to answer the 
second question.

LEHMAN, Justice, dissenting, with whom HILL, Chief Justice, joins.

 

[¶9]      I must respectfully 
dissent.  Upon 
consideration of the certified questions, I reach a different conclusion than 
that reached by the majority.  Accordingly, I would hold that disposable 
income derived from a debtor's wages and deposited into the debtor's bank 
account are exempt from garnishment under Wyo. Stat. Ann. §§ 1-15-408 and 
40-14-505(b) (LexisNexis 2003) if the debtor can establish by competent evidence 
that such sums were derived from earnings for personal services. 

 

[¶10]   It is clear that pursuant to Wyoming 
Stat. Ann. § 1-20-109 (LexisNexis 2001), Wyoming has "opted-out" of the federal 
exemptions and has prescribed its own recognized exemption structure as allowed 
by law.  
Section 1-15-408 provides such an exemption.  That statute 
provides:

 

(a)  A writ of post judgment garnishment 
attaching earnings for personal services shall attach that portion of the 
defendant's accrued and unpaid disposable earnings, specified in subsection (b) 
of this section.  
The writ shall direct the garnishee to withhold from the defendant's 
accrued disposable earnings the amount attached pursuant to the writ and to pay 
the exempted amount to the defendant at the time his earnings are normally 
paid.  Earnings 
for personal services shall be deemed to accrue on the last day of the period in 
which they were earned or to which they relate.  If the writ is served before or on the date 
the defendant's earnings accrue and before the same have been paid to the 
defendant, the writ shall be deemed to have been served at the time the periodic 
earnings accrue.  If more than one (1) writ is served, the writ 
first served shall have priority.  Notwithstanding any other provision of this 
subsection, an income withholding order for child support obtained pursuant to 
W.S. 20-6-201 through 20-6-222 shall have priority over any other 
garnishment.

 

(b)  The maximum portion of the aggregate 
disposable earnings of an individual which are subject to garnishment is the 
lesser of:

 

(i)  Twenty-five percent (25%) of defendant's 
disposable earnings for that week; or

 

(ii)  The amount by which defendant's aggregate 
disposable earnings computed for that week exceeds thirty (30) times the federal 
minimum hourly wage prescribed by the Fair Labor Standards Act of 1938, 29 
U.S.C. § 206(a)(1), in effect at the time the earnings are payable, or, in 
case of earnings for any pay period other than a week, any equivalent multiple 
thereof prescribed by the administrator of the Wyoming Uniform Consumer Credit 
Code in the manner provided by W.S. 40-14-505(b)(iii).

 

(c)  Unless a garnishee is specifically informed 
by affidavit of the plaintiff that the defendant has other periodic earnings 
from sources other than from the garnishee and the amount thereof, the garnishee 
shall treat the defendant's earnings becoming due from the garnishee as the 
defendant's entire aggregate earnings for the purpose of computing the sum 
attached by the garnishment.

 

Section 40-14-505 sets forth:

 

(a)  For the purposes of this part:

 

(i) "Disposable earnings" means that part of the earnings 
of an individual remaining after the deduction from those earnings of amounts 
required by law to be withheld; and

 

(ii) "Garnishment" means any legal or equitable procedure 
through which the earnings of an individual are required to be withheld for 
payment of a debt.

 

(b)  The maximum part of the aggregate disposable 
earnings of an individual for any workweek which is subjected to garnishment to 
enforce payment of a judgment arising from a consumer credit sale, consumer 
lease, or consumer loan may not exceed the lesser of:

 

(i) Twenty-five percent (25%) of his disposable earnings 
for that week; or

 

(ii) The amount by which his disposable earnings for that 
week exceed thirty (30) times the federal minimum hourly wage prescribed by 
section (6)(a)(1) of the Fair Labor Standards Act of 1938, U.S.C. tit. 29, § 
206(a)(1), in effect at the time the earnings are payable;

 

(iii) In the case of earnings for a pay period other than a 
week, the administrator shall prescribe by rule a multiple of the federal 
minimum hourly wage equivalent in effect to that set forth in paragraph (b)(ii) 
of this section.

 

(c)  No court may make, execute, or enforce an 
order or process in violation of this section.

 

[¶11]   The majority concludes that when 
periodic earnings for personal services are paid, they lose their character as 
exempt property under Wyoming's statutory exemption scheme.  In support of this 
argument, the majority points out that § 1-15-408 specifically provides that 
wage garnishment applies only to "accrued and unpaid" disposable earnings.  The majority 
surmises, therefore, that with the exception of some limited provisions for 
accounts found in Wyo. Stat. Ann. §§ 1-20-110 and -111 (LexisNexis 2003), there 
is no exemption in Wyoming for cash or bank accounts.1   I feel it is 
improper to determine if the exemption specified within § 1-15-408 should 
apply based upon the vagaries and arbitrariness of where a judgment debtor's 
wages are located at the time of service of a writ of garnishment.  It makes little 
sense to allow a judgment creditor to wait to serve a garnishment until a 
judgment creditor is paid his wages and places such payment into his wallet (or 
his bank account via automatic deposit or otherwise) and thereby receive one 
hundred percent of those wages circumventing the purpose of § 1-15-408. 
 

 

[¶12]   In addition, because § 1-15-408 
refers to "earnings for personal services," the definition for that terminology 
found within Wyo. Stat. Ann. § 1-15-102(a)(vi) (LexisNexis 2003) must be applied 
by this court.  

 

"Earnings" or "earnings from personal services" means compensation paid or payable for personal services, whether 
denominated as wages, salary, commission, bonus, proceeds of any pension or 
retirement benefits or deferred compensation plan or otherwise.

 

Id.  Thus, the majority's ultimate determination 
improperly ignores the legislature's definition of "earnings from personal 
services," specifically that such earnings may also be "paid" and need not be 
simply "accrued and payable."  

 

[¶13]   In a somewhat parallel manner, 
§ 1-15-408 also uses the term "garnishee" rather than the term 
"employer."2  Therefore, this court should recognize that 
Wyo. Stat. Ann. § 1-15-502(a) (LexisNexis 2003), addressing the subject of 
continuing garnishments, is limited to a "garnishee who is an employer of the 
judgment debtor" indicating that the legislature clearly knew how to specify a 
"garnishee employer" had it desired to do so within § 1-15-408.  Hence, the 
legislature's use of the term "garnishee" as opposed to "employer" in 
§ 1-15-408 must infer that the term "garnishee" was meant to include banks 
and other depository institutions.  Furthermore, exemption statutes are to be 
construed liberally in favor of the debtor in order to accomplish their 
beneficial purposes. In re Lindell-Heasler, 154 B.R. 748, 751 (D.Wyo. 1992); 
Johnston v. 
Barney, 842 F.2d 1221, 1223 
(10th Cir. 1988); Lingle State Bank v. 
Podolak, 740 P.2d 392, 393-94 (Wyo. 
1987); In re 
Barker, 
768 F.2d 191, 196 (7th Cir. 1985); and Wright v. Union Central 
Life Ins. Co., 311 U.S. 273, 278-79, 61 S. Ct. 196, 200, 85 L. Ed. 184 (1940).   

 

[¶14]   Upon my review of the applicable 
Wyoming statutes, giving particular attention to § 1-15-408, as well as 
§ 40-14-505, I also conclude that § 1-15-408 is ambiguous.  As evidenced by the 
parties' arguments, a question remains whether disposable earnings/earnings from 
personal services may be attached through garnishment when they are "accrued and 
unpaid" or "paid or payable."  Resort to the ordinary and obvious common 
meaning of the terms "accrued," "payable," and "paid" is of little help.  The American 
Heritage Dictionary (Second College Edition, 1991) defines "accrue" as: "3. 
Law. To 
become an enforceable or permanent right."  That same authority defines the term 
"payable" as: "1. Requiring payment on a certain date; due."  Thus,  "accrued" and 
"payable" have virtually the same meaning.  On the other hand, The American Heritage 
Dictionary defines "paid" as the "[p]ast tense and participle of pay" and the 
word "pay" as:  
"1. To give money to in return for goods or services rendered."  Therefore, it 
appears that any distinction between the words "accrued," "payable," and "paid" 
is one of timing alone, which does not definitively aid us in interpreting 
§ 1-15-408. 

 

[¶15]   The fact that § 1-15-408 uses the 
term "garnishee" and not "employer" does not assist me in my analysis.  It is true that the 
continuing garnishment statute, § 1-15-502(a), limits garnishment to a 
"garnishee who is an employer of the judgment debtor," perhaps implying that the 
legislature meant to include banks and other depository institutions within the 
ambit of § 1-15-408.  However, §§ 1-20-110 and 1-20-111, which 
provide an exemption for retirement fund accounts and contributions to medical 
savings accounts, specifically enumerate that those accounts are "exempt from 
execution, attachment, garnishment or any other process issued by any court."3  Thus, one could similarly argue that the 
legislature knew how to and could have utilized this same language in 
§ 1-15-408 had it desired the exemption for disposable income to continue 
once deposited into a debtor's account.  

 

[¶16]   Nonetheless, we have clearly 
established that when interpreting statutes, our primary consideration must be to determine the 
legislature's intent.   In re 
Winters, 2002 WY 29, ¶6, 40 P.3d 1231, ¶6 (Wyo. 
2002).  While 
there is no formal legislative history suggesting the purpose of the enactment 
of § 1-15-408, the historical purpose of exemption statutes has been to 
protect a debtor by permitting him to retain the basic necessities of life.  Therefore, it was 
intended that after the levy of nonexempt property, the debtor and the debtor's 
family should not be left destitute.  See In re Norris, 203 B.R. 463, 465-66 (D.Nev. 1996); Miller v. Monrean, 
507 P.2d 771, 773-76 (Alaska 1973).  In accord see Pellish Bros. v. 
Cooper, 38 P.2d 607 (Wyo. 
1934).  
Further, this purpose is consistent with our explanation of Wyoming's 
wedding ring exemption.  We said:

 

            
We conclude this limited approach is consistent with the general purposes 
and guide­lines behind allowing debtors to file for bankruptcy 
protection.  4 
Collier on 
Bankruptcy at ¶522.01 (15th rev. ed.) explains:

 

A fundamental component of an individual debtor's fresh 
start in bankruptcy is the debtor's ability to set aside certain property as 
exempt from the claims of creditors.  Exemption of property, together with the 
discharge of claims, lets the debtor maintain an appropriate standard of living 
as he or she goes forward after the bankruptcy case.

 

1 Collier on Bankruptcy at ¶1.03[2][a] also recognizes 
that:

 

Chapter 7 of the Bankruptcy Code is entitled "Liquidation" 
and the title fully expresses the purpose of the chapter's provisions.  Chapter 7 provides 
the mechanism for taking control of the property of the debtor, selling it, and 
distributing the proceeds to creditors in accordance with the distribution 
scheme of the Code.

 

Two ideals underlie chapter 7.  From the creditor's 
viewpoint, chapter 7 establishes the concept of equitable distribution among 
creditors of a debtor's resources which, in most cases, are insufficient to 
permit full payment to all.  From the individ­ual debtor's vantage 
point, chapter 7 permits the honest debtor to obtain a new financial life 
through the discharge of unpaid debts.

 

(Footnotes omitted.)  

 

            
In attempting to balance the above noted basic bankruptcy principles, we 
believe that the better approach is to allow debtors an exemption as to their 
own personal wedding rings thereby not requiring debtors to hand over those 
wedding rings to satisfy claims of their creditors.  As recognized long 
ago in the case of Towns v. Pratt, 66 Am.Dec. 726, 728 (N.H. 1856):

 

            
The object of the [exemption] statute is not to secure to the debtor the 
enjoyment of property of that character at the expense of his creditors, but to 
prevent his being stripped of those arti­cles of utility and convenience, 
under the limited value pre­scribed, requisite for the comfort of himself 
and family in maintaining a household in every condition of life.

 

In re Winters, ¶¶12-13.

 

[¶17]   Furthermore, as pointed out in footnote 
1 of Hancock v. 
Stockmens Bank & Trust Co., 739 P.2d 760, 760 (Wyo. 1987), Wyo. Stat. Ann. § 1-17-411 (Michie Cum.Supp. 1986) 
provided the applicable language concerning garnishment exemption for earnings 
for personal services rendered until it was amended in 1987 by the legislature 
to its present form.  
Wyo. Stat. Ann. § 1-17-411 (Michie Cum.Supp. 1986) provided that:

 

The court may order any property of the judgment debtor or 
money due him in the hands of either himself or another person, not exempt by 
law, to be applied toward the satisfaction of a judgment.  Upon seizure of his 
property or money, a judgment debtor may request a hearing pursuant to W.S. 
1-17-405(c).  
One-half (1/2) of the earnings of the judgment debtor for his personal 
services rendered within sixty (60) days immediately preceding the levy of 
execution or levy of attachment, and due and owing at the time of the levy, are 
exempt when it appears by the debtor's affidavit or otherwise that the earnings 
are necessary for the use of his family residing in this state, supported wholly 
or in part by his labors.  

 

Accordingly, in its previous form, the legislature 
obviously desired to afford the debtor an opportunity to continue to provide for 
his/her family through use of half of his personal services earnings.  This exemption was 
limited, however, merely to personal services earnings due and owing within 
sixty-days prior to levy.  This language clearly infers that the 
legislature then intended to narrow the exemption to the applicable time frame 
and perhaps even implies the legislature's desire to limit the exemption only to 
earnings due and owing and not continue the exemption once these earnings were 
paid and placed into either the debtor's hands or deposited into an 
account.  

 

[¶18]   However, when the legislature modified 
the language to its present form in 1987, it deleted any sixty-day period 
preceding levy of the funds.  This modification surely evidences the 
legislature's intention to apply the exemption to any due and owing personal services earnings of the 
debtor regardless of any prior time frame.  In addition, I 
believe that this change signals the legislature's choice to allow the 
designated portion of these funds to remain exempt even after they were paid. 
    

 

[¶19]   Although this court has not directly 
addressed the issues posed in this case, it has given some limited direction in 
the area.  In 
Hancock v. Stockmens 
Bank & Trust Co., at 761-63, in interpreting § 1-15-408's 
predecessor statute, this court impliedly recognized an exemption for the funds 
within a debtor's bank account insofar as the debtor could provide some 
accounting in the form of tracing that the deposited funds came from disposable 
income.  We 
said:

 

            
The majority rule is that the burden of proving what funds in a bank 
account, held jointly by the judgment debtor and another depositor, are not 
subject to execution is on the depositors. Yakima Adjustment 
Service, Inc. v. Durand, 28 Wash. App. 180, 622 P.2d 408, 411 
(1981).  See 
also Hayden v. 
Gardner, 238 Ark. 351, 381 S.W.2d 752 (1964); Leaf v. McGowan, 13 
Ill.App.2d 58, 141 N.E.2d 67 (1957); Miller v. Clayco State Bank, 10 Kan.App.2d 659, 708 P.2d 997 (1985); Purma v. Stark, 224 Kan. 642, 585 P.2d 991 (1978); Walnut Valley State Bank v. Stovall, 223 Kan. 459, 574 P.2d 1382 (1978); Baker v. Baker, Okl.App., 710 P.2d 129 (1985); Annot., 
Joint Bank Account as Subject to Attachment, Garnishment, or Execution by 
Creditor of One of the Joint Depositors, 11 A.L.R.3d 1465 (1967). This rule is 
in harmony with the "general rule of evidence that the burden of proof lies on 
the person who wishes to support his case by a particular fact which lies more 
peculiarly within his knowledge, or of which he is supposed to be 
cognizant.'  
Principles of Evidence, § 274; 1 Greenl.  Ev. § 79;  Starkie Ev.  § 589."   Selma, Rome and Dalton Railroad Company v. United 
States, 139 U.S. 560, 567-568, 11 S. Ct. 638, 640, 35 L. Ed. 266 (1891).  See also United States v. New 
York, New Haven and Hartford Railroad Company, 355 U.S. 253, 78 S. Ct. 212, 2 L. Ed. 2d 247 (1957); United States v. Denver and Rio Grande Railroad 
Company, 191 U.S. 84, 24 S. Ct. 33, 
48 L. Ed. 106 (1903); Lake v. Callis, 202 Md. 581, 97 A.2d 316 (1953); Skeen v. Stanley 
Company of America, 362 Pa. 174, 66 A.2d 774 (1949); IX Wigmore on Evidence, 
§ 2486 at 290 (1983).

 

            
The majority rule is consistent with a common sense approach, and "is the 
fair and reasonable rule because the depositors are in a much better position 
than the judgment creditor to know the pertinent facts." Hayden v. Gardner, 
supra, 381 S.W.2d  at 754.  This rule also 
conforms to the principle that is well established in Wyoming jurisprudence that 
the burden of proof is on the party who asserts the affirmative of any 
issue.  Osborn v. Manning, 
Wyo., 685 P.2d 1121, 1124 
(1984); Morrison v. 
Reilly, Wyo., 511 P.2d 970, 972 (1973).  
See also Younglove v. Graham and Hill, Wyo., 526 P.2d 689, 693 (1974) 
(affirmative defense); Hawkeye-Security Insurance Company v. Apodaca, Wyo., 524 P.2d 874, 879 (1974) 
(exception to statute of limitationsestoppel); Gonzales v. Personal 
Collection Service, Wyo., 494 P.2d 201, 207 (1972) (affirmative defense); First National Bank at 
Cody v. Fay, 80 Wyo. 245, 257, 341 P.2d 79 (1959) (entitlement to reimbursement); Takahashi v. Pepper 
Tank and Contracting Company, 58 Wyo. 330, 362, 131 P.2d 339 (1942) 
(exception such as license); First National Bank of Morrill v. Ford, 30 Wyo. 110, 216 P. 691, 692, 31 A.L.R. 
1441 (1923).

 

            
The manifest intention of § 1-17-405(c), W.S. 1977, Cum.Supp. 1986, in 
accordance with which Hancock pursued the claimed exemption, is that the debtor 
should assert his right to the exemption.  The statutory exemptions serve to avoid the 
execution or garnishment, and thus are affirmative defenses in accordance with 
Rule 8(c), W.R.C.P.  
See Texas 
Gulf Sulphur Company v. Robles, Wyo., 511 P.2d 963, 965 (1973) 
(An affirmative defense is "a direct or implicit admission of plaintiff's claim 
and assertion of other facts which would defeat a right to recovery * * 
*.").  Hancock 
had the burden of proving which of the garnished funds in the joint bank account 
were exempt from execution.  He acknowledged that burden by failing to 
object in the trial court or to argue on appeal that imposing the burden of 
proof on him was improper.  It follows that, not only under the majority 
rule, but because it became the law of this case, Hancock had the burden of 
proving those amounts in the joint bank account which were exempt from 
execution.  Fife v. State, 
Wyo., 676 P.2d 565, 568 
(1984).

 

(Footnote omitted.)  In accord see S & S Diversified Services, 
L.L.C. v. Taylor, 897 F. Supp. 549, 552 (D.Wyo. 1995).

 

[¶20]   More recently, this court indicated in 
McManaman v. 
McManaman, 2002 WY 128, 53 P.3d 103 (Wyo. 2002), 
dealing with a claimed exemption to garnished proceeds from cattle sales 
deposited in a bank account, that it was not the location of those funds within 
the account but the origin of those funds that was determinative of whether an 
exemption applied.  
This court stated:

 

            
McManaman next contends that the district court erred in determining that 
the statutory exemption for earnings does not apply to proceeds from the sale of 
his cattle.  He 
contends that his ranching operations are his sole source of income and the 
legislature intended to exempt earnings which provide for the basic necessities 
of life.  We 
proceed with our discussion of this issue, but note that a majority of 
jurisdictions now recognize that support orders are exceptions to statutory 
limitations on collection.  Because the parties here did not raise or 
brief the issue whether the garnishment statutory exemptions apply to 
court-ordered child support and arrearages reduced to money judgment, we assume 
without deciding that the statutory exemptions apply to this garnishment 
proceeding.

 

            
Wyo.  
Stat.  
Ann. § 1-15-102 (LexisNexis 2001) defines earnings as follows:

 

(a)  As used in this chapter unless otherwise 
defined:

 

. . .

 

(vi) "Earnings" or "earnings from personal services" means 
compensation paid or payable for personal services, whether denominated as 
wages, salary, commission, bonus, proceeds of any pension or retirement benefits 
or deferred compensation plan or otherwise;

 

 . . .

 

            
McManaman relies upon our decision in Lingle State Bank of 
Lingle v. Podolak, 740 P.2d 392 (Wyo. 1987).  
Podolak considered an earnings exemption available 
under § 1-17-411, now superseded, and decided the legislature intended the 
earnings exemption to apply to income produced by farming and ranch.  Id. at 394.  Because new 
statutory provisions had taken effect at the time of the Podolak decision, 
we noted that the case was consequently circumscribed in future 
application.  
Id. n.1. 
Relying upon this footnote and our decision in Coones v. FDIC, 796 P.2d 803 (Wyo. 1990), the State contends that this Court has already decided 
that proceeds from the sale of cattle are not exempt under § 
1-15-102(a)(vi).

 

            
In Coones, the general exemption statutes, Wyo. Stat.  Ann. § 1-20-101 
through 1-20-110, did not provide any provision for earnings exemption; however, 
the appellants in the case contended that a transferred application of the 
garnishment statute execution, § 1-15-102, provided a basis for allowing a 
rancher or farmer to claim a seventy-five percent exemption of proceeds from the 
sale of non-purchase money livestock and seventy-five percent of the value of 
crops planted and livestock born after the security interest was perfected.  Id. at 805.  Coones rejected 
appellant's contention, first, by noting that Podolak provided no 
precedent because the statute addressed in it no longer existed, and, secondly, 
because the statutory language "earnings for personal services" could not be 
interpreted to include any income other than that periodically payable by a 
third party.  
Specifically, Coones stated:

 

We find from a comparison of the changed phraseology that 
the broadly based rules found in earlier Wyoming law were constricted by the 
1987 definition which itemizes a character of identical rights, e.g., wages, 
salary, commission, bonus and proceeds of any pension or retirement benefit or 
deferred compensation plan.  Statutes are entitled to a reasonable 
interpretation and we consider the character of benefits clearly defined within 
a wage and salary characterization.  Profits and business earnings are outside the 
meaning of wage and salary.  This interpretation gathers support from the 
garnishment statute provision which recognizes an obligation to pay as being 
different from profit or business earnings which involve a right to receive.

 

            
Appellants further contend that the word "otherwise" could suffice to 
provide entitlement for the broad character of rights found in Podolak to result 
from the prior statute.  We cannot accept this thoughtful contention 
since its effect would be to disassociate the structure of the clause when 
relating to one character of exempt funds by adding an almost unlimited 
character of other funds which would have no particular validation within the 
constraints of a continuing wage garnishment statutory system.  We limit any 
application of "otherwise" in W.S. 1-15-102(a)(vi) to a character of third-party 
obligations payable for services rendered by the claimant for exemption.  Intrinsic to the 
meaning of W.S. 1-15-102 are the provisions of W.S. 1-15-408 which are related 
to earnings for personal services periodically payable.  Business profits 
and receipts from crop and livestock simply cannot be logically impressed with 
the garnishment concept.

 

Id. at 805-06.

 

            
Although Coones involved bankruptcy issues, this last holding 
broadly sweeps and does not permit McManaman's argument to prevail.  McManaman's bank 
account funds are not traceable to a third-party obligation payable 
periodically. Additionally, if the exemption did apply when the funds were 
owing, McManaman has not provided any argument or authority that the exemption 
was not extinguished upon payment of the earnings into his bank account.  We, therefore, hold 
that McManaman's bank account funds are not exempt from the writ of garnishment 
and affirm the district court's order.

 

McManaman, ¶¶10-14.  Hence, while this court did not address the 
particular issue raised by this appeal in McManaman, we did recognize the possibility that the 
disposable income exemption might continue after being placed in a debtor's bank 
account. 

 

[¶21]   Courts in other jurisdictions that have 
faced this issue have found that to the extent funds in a bank account can be 
traced to the debtor's wages, that portion is exempt.  I find the 
reasoning used by the bankruptcy court in In re Kobernusz, 160 B.R. 844, 847-48 (D. Colo. 1993) 
(footnote omitted), when interpreting a Colorado statutory scheme very similar 
to that of Wyoming, particularly persuasive.

 

            
Plaintiff's counsel had issued from this Court a writ of garnishment. 
That writ was in accordance with the Colorado state practice as set forth in 
Colo.R.Civ.P. 103. The writ was properly served upon the Bank, which promptly 
responded that it had funds on account in the name of Defendant. At the time of 
the service of the writ of garnishment, Defendant received notice of the 
garnishment and a partial list of exemptions that could be claimed.

 

            
Defendant filed his claim for exemption under Colo.Rev.Stat. § 13-54-104. 
He claims that 75% of his money is exempt, as it constitutes wages earned by 
him. On the other hand, Plaintiff argues that the ability to claim this 
exemption was lost when the money was placed into a joint bank account and 
co-mingled with other monies.

 

            
Colorado law provides that no more than twenty-five percent of the 
aggregate of disposable earnings per week is subject to garnishment. 
Colo.Rev.Stat. § 13-54-104(2)(a). Multiples of the minimum federal wage may also 
be used. That is the case where earnings are paid other than by the week. 
Colo.Rev.Stat. § 13-54-104(2)(b). Plaintiff's claim is that this statute does 
not apply at all, since the money lost its identity as earnings when placed into 
the bank account.

 

            
It is clear from the offer of proof that Defendant was not paid in the 
normal weekly fashion, but was paid as a subcontractor. His pay was not subject 
to deductions for federal income tax or Social Security. By the same token, the 
income falls into the category of "earnings" as defined by Colo.Rev.Stat. § 
13-54-104[(1)](b)(I)(A). The Court is satisfied that the money in the account 
came from Defendant's labor and is, thus, earnings for purposes of claiming an 
exemption.

 

            
Plaintiff's argument is that the character of earnings is lost once funds 
are placed into a bank account. Indeed, there is case law that indicates 
that such a view is appropriate. John O. Melby & Co. v. Anderson, 88 Wis.2d 252, 276 N.W.2d 274 (1979); Edwards v. Henry, 97 Mich.App. 173, 293 N.W.2d 756 
(1980); Dunlop v. 
First Nat. Bank of Arizona, 399 F. Supp. 855 (D.Ariz. 1975).

 

            
On the other hand, Colorado case law has taken the opposite view of the 
law.  In Rutter v. Shumway, 
16 Colo. 95, 26 P. 321 (1891), the Colorado Supreme Court specifically held that earnings did 
not lose such identity when placed into a bank account.  This case has not 
been overruled by the Colorado Supreme Court.  Indeed, it has been followed, though 
admittedly all cases are many years old. The general concept of the sanctity of 
the exemption for wages was upheld in Finance Acceptance Company v. Breaux, 160 Colo. 510, 419 P.2d 955 (1966) 
(refusal to allow set-off for debt owed to employer from wages upheld).  At least one court 
outside of Colorado has questioned the continued vitality of Rutter v. Shumway. 
See Holmes v. Blazer Financial Services, Inc., 369 So. 2d 987, 989 (Fla.App. 1979). 

 

            
Plaintiff does call the Court's attention to Usery v. First Nat. 
Bank of Arizona, 586 F.2d 107 (9th Cir. 1978). This case would appear, at 
first, to fully support Plaintiff's position. Yet a careful reading indicates 
that it deals with a bank's duty to calculate an exemption for a debtor under 
the Consumer Credit Protection Act (CCPA). 15 U.S.C. § 1672, et seq. If this 
case hinged on an interpretation of the CCPA, then Usery would be 
compelling precedent.  
In this case, though, Defendant has chosen to rely upon Colorado law for 
his exemption.

 

            
Defendant has stated through his offer of proof that he was receiving 
earnings for his personal services in construction. Such payment appears to fall 
clearly into the category of "earnings", as indicated by Colo.Rev.Stat. § 
13-54-104(b)(I)(A). The Colorado Supreme Court's decision in Rutter v. Shumway 
stressed that wages should not lose such designation solely on the basis of 
being placed into a bank account. The same could also be said of money being 
held in a defendant's pocket. To follow the logic of Plaintiff, money received 
from an employer, even if exempt at time of payment, would lose such exemption 
when placed into a wallet. Such a result would be absurd and improper. Though 
one hundred and two years old, the decision Rutter v. Shumway 
is still applicable and controlling.

 

[¶22]   Similarly, in In re Norris, 203 B.R.  at 466, that court recognized that in order to permit a wage earner to 
enjoy any benefit from the protection afforded under Nevada law, it was 
necessary to allow the wage earner a reasonable opportunity to negotiate the 
"disposable earnings" and spend the funds, otherwise the exemption would be 
rendered meaningless.  
Thus, that court reasoned that a deposit of earnings, whether by the 
debtor or directly by the employer, should not cause the statutorily exempt 
wages to lose their exempt status as long as the proceeds of the account are 
traceable to those earnings.  In support of this holding, the court 
said:

 

            
Other jurisdictions have recognized that statutorily exempt funds do not 
lose their exempt status when deposited into a personal checking account. See In re Caslavka, 179 B.R. 141, 147 (Bankr.N.D.Iowa 1995) 
(construing Iowa law that "protection afforded by the exemption would be 
rendered meaningless if exempt status is lost by negotiating the paycheck") 
(citing MidAmerica 
Savs. Bank v. Miehe, 438 N.W.2d 837, 839 (Iowa 1989); In re Arnold, 193 B.R. 897 (Bankr.W.D.Mo. 1996) ("[I]t elevates form over substance to claim that 
the [paycheck in debtor's] hand was wages, but the check in his checking account 
was not); In re 
Frazier, 116 B.R. 675 (Bankr.W.D.Wis. 1990) (exempt disability benefits 
check deposited into bank account with other exempt funds retained exempt 
status; benefits were "readily identifiable").

 

            
At least two United States Supreme Court opinions have also recognized 
that exempt funds do not lose their exempt status upon deposit if the funds in 
the account can be traced to exempt funds. See Porter v. Aetna 
Casualty & Sur. Co., 370 U.S. 159, 8 L. Ed. 2d 407, 82 S. Ct. 1231 (1962) (veterans' benefits) and Philpott v. Essex 
County Welfare Bd., 409 U.S. 413, 34 L. Ed. 2d 608, 93 S. Ct. 590 (1973) (welfare benefits). In Porter, 370 U.S. 
at 159, the United States Supreme Court held that veterans' benefits retained 
their exempt status after being deposited in a savings account, reasoning 
that:

 

Since legislation of this type should be liberally 
construed, to protect funds granted by the Congress for the maintenance and 
support of the beneficiaries thereof, we feel that deposits such as are involved 
here should remain inviolate. The Congress we believe, intended that veterans in 
the safekeeping of their benefits should be able to utilize those normal modes 
adopted by the community for that purposeprovided the benefit funds, regardless 
of the technicalities of title and other formalities, are readily available as 
needed for support and maintenance, actually retain the qualities of moneys, and 
have not been converted into permanent investments.

 

Id. at 162 (citations omitted). And 31 Am.Jur.2d Exemptions § 224 (1989) states:

 

There is authority that a deposit of exempt funds in a bank 
does not affect a debtor's exemption, nor change the exempt character of the 
fund, so long as the source of the exempt funds is reasonably traceable. If it 
is impossible to separate out exempt from nonexempt funds, the general rule is 
that an exemption cannot lie. This rule has been applied, though not without 
exception, to a deposit of exempt wages, exempt compensation awards, exempt 
veterans' benefits, and exempt insurance proceeds or funds.

 

Id. at 467.

 

[¶23]   The trustee counters by citing Usery v. First Nat'l 
Bank of Arizona, 586 F.2d 107 (9th Cir. 1978) and In re Adcock, 264 B.R. 708 (D.Kan 2000).  I am not persuaded 
by the reasoning within the Usery case for those same reasons expressed by the court 
in In re 
Kobernusz, at 847.  Additionally, I find the case of In re Adcock to be 
distinguishable to the instant case.  The facts presented by In re Adcock dealt 
with a bankruptcy trustee's avoidance powers as opposed to an actual 
garnishment.  I 
recognize that there exists a split in case law authority.  See In re 
Kobernusz, at 847-48.  However, I do not find the contradictory 
reasoning within those cases to be convincing and, thus, I would not adopt the 
holdings therein.

 

[¶24]   The trustee also complains that if the 
exemption provided by § 1-15-408 is allowed to continue after such monies 
are placed into a debtor's bank account, there will be no end to the exemption 
because the debtor may always argue that his earnings were used to purchase his 
residence, vehicles, or other tangible assets.  I do not agree.  I believe that the 
legislature's intent is served only insofar as such monies are traceable from 
the debtor's earnings into an account and does not continue once the debtor 
chooses to spend such monies for the purchase of tangible assets, unless such 
assets may qualify for their own independent exemption. 

 

[¶25]   The trustee further expresses that in 
situations where a garnishment is served on a bank, a bank does not have the 
ability to calculate a wage earner's exemption because it will not know if the 
amount deposited into the account comes from earnings and if proper withholdings 
have been made from those amounts.  However, the process provided by the Wyoming 
garnishment scheme does not require a bank to determine the exempt status of the 
monies held in bank accounts.  Rather, it is the debtor's responsibility to 
affirmatively assert any exemption that he may have in the subject assets.  

 

[¶26]   Thus, having carefully considered the 
parties' arguments and reviewed Wyoming's statutory exemption scheme and 
applicable authority, I would hold that disposable income derived from a 
debtor's wages and deposited into the debtor's bank account are exempt from 
garnishment under §§ 1-15-408 and 40-14-505(b) insofar as the debtor can by 
competent evidence establish that such monies were derived from earnings for 
personal services.

 

FOOTNOTES

 

1Wyo. Stat. Ann. 
§ 1-20-110 exempts retirement, pension, and annuity accounts from execution, 
attachment, garnishment or any other judicial process while Wyo. Stat. Ann. § 
1-20-111 does the same for contributions to medical savings accounts. 

 

2Wyo. Stat. Ann. § 1-15-102(a)(vii) (LexisNexis 2003) sets 
forth:

 

"Garnishee" means a person other than a plaintiff or 
defendant who is in possession of earnings or property of the defendant and who 
is subject to garnishment in accordance with the provisions of this 
chapter.

 

3Likewise, the language used within Section 407 of the 
Social Security Act (42 U.S.C. § 407) provides: "none of the monies paid or 
payable . . . under the [the Social Security Act] shall be subject to execution, 
levy, attachment, garnishment, or other legal process."  See also S & S Diversified 
Services, L.L.C. v. Taylor, 897 F. Supp. 549 (D.Wyo. 1995).