Title: STATE TREASURER V THOMAS K ABBOTT

State: michigan

Issuer: Michigan Supreme Court

Document:

____________________________________________________________________________________________ 
____________________________________________________________________________________________________________________________ 
____________________________________ 
Michigan Supreme Court 
Lansing, Michigan 48909 
Chief Justice 
Justices 
Maura D. Corrigan 
Michael F. Cavanagh 
Elizabeth A. Weaver 
Marilyn Kelly 
Clifford W. Taylor 
Robert P. Young, Jr. 
Opinion 
Stephen J. Markman 
FILED MAY 14, 2003  
STATE TREASURER,  
Plaintiff-Appellant,  
v 
No. 120803  
THOMAS K. ABBOTT,  
Defendant-Appellee,  
and  
AUTO BODY CREDIT UNION and JOANN  
A. ABBOTT,  
Defendants.  
BEFORE THE ENTIRE BENCH  
CORRIGAN, C.J.  
We granted leave to appeal to consider whether an order  
reimbursing the state for the cost of caring for defendant, a  
prison inmate, violates the Employee Retirement Income  
Security Act (ERISA), 29 USC 1001 et seq. 
The trial court  
ordered defendant to receive his pension benefits at his  
 
prison address and directed the warden to appropriate the  
funds from defendant’s prison account under the State  
Correctional Facility Reimbursement Act (SCFRA), MCL 800.401  
et seq. 
The Court of Appeals reversed because subsection  
1056(d)(1) of ERISA prohibits an assignment or alienation of  
pension benefits.  
We hold that the trial court’s order did not violate the  
federal statute.  An order requiring a prisoner to receive his  
pension benefits at his current address is not an assignment  
or alienation of those benefits.  Moreover, once the funds are  
in the inmate’s account, the warden may distribute them under  
the SCFRA.  The federal ban on alienation or assignment of  
pension funds does not extend to benefits that the pensioner  
has already received.  We thus reverse the judgment of the  
Court of Appeals and reinstate the trial court’s judgment.  
I. Factual background and procedural posture  
The State Treasurer filed a complaint under the SCFRA  
seeking to recover the costs of confining defendant Thomas K.  
Abbott,1 a prisoner under the jurisdiction of the Michigan  
Department of Corrections.  Plaintiff submitted documentation  
of the costs it has incurred and expects to incur in caring  
1We will refer to Thomas Abbott as “defendant.”  
The 
other defendants in this case are not involved in this appeal. 
2  
 
for defendant during his incarceration.2
 Plaintiff argued  
that defendant’s monthly pension payments should be sent to  
his prison address, deposited in his prison account, and  
appropriated by the warden.  The trial court ordered defendant  
to show cause why the funds should not be appropriated.  
Defendant filed a responsive pleading.  
After reviewing the pleadings, the trial court ordered  
defendant to direct his monthly pension proceeds to his prison  
address.  The court further ordered the warden to provide $20  
of each payment to defendant, with the remainder divided  
between defendant’s wife (sixty-seven percent) and the state  
(thirty-three percent).  In addition, the court ordered the  
pension plan to send the benefit payments to defendant’s “new  
address of record” in prison in the event that defendant  
failed to direct the plan to do so.  
Defendant subsequently filed a pleading entitled a “writ  
of mandamus.”  The trial court treated the “writ of mandamus”  
as a motion for reconsideration and denied it.  Defendant  
filed a delayed application for leave to appeal, which the  
Court of Appeals denied for lack of merit in the grounds  
2The documentation reflects that the state expects to
incur approximately $479,490 in caring for defendant during
his incarceration.  Defendant began serving his sentence in 
1996. His earliest possible release date is in 2015. 
3  
 
presented.3  Defendant then applied for leave to appeal to  
this Court.  In lieu of granting leave to appeal, we remanded  
the case to the Court of Appeals for consideration as on leave  
granted.4  In a published opinion, the Court of Appeals held  
that ERISA barred the deposit of funds into defendant’s prison  
account.5  Plaintiff filed an application for leave to appeal  
to this Court, which we granted.6  
II. The Court of Appeals opinion  
In concluding that the trial court’s order violates  
ERISA’s antialienation provision, the Court of Appeals relied  
on State Treasurer v Baugh, 986 F Supp 1074 (ED Mich, 1997).  
In Baugh, the State Treasurer sought an order under the SCFRA  
directing a pension plan to deposit benefits into an inmate­
beneficiary’s 
prison 
account.  The federal district court held  
that ERISA preempted such an order:  
The Court agrees that once pension benefits 
are placed in a personal account, ERISA no longer 
operates to protect those funds.  However, in the 
instant case, defendant Chrysler Corp. would not be 
voluntarily depositing the pension funds into [the 
inmate’s] personal prisoner account but would be 
doing so only by court order. Such an involuntary 
transfer clearly constitutes an assignment. [Id. at  
3Unpublished order, entered December 4, 1998 (Docket No.
209836). 
4461 Mich 911 (1999). 
5249 Mich App 107; 640 NW2d 888 (2001). 
6466 Mich 860 (2002). 
4 
 
 
1077 (citation deleted).]  
The Court of Appeals followed Baugh:  
There is no dispute that directly garnishing 
defendant’s pension benefits to reimburse the state 
would violate the ERISA’s antialienation provision. 
Baugh, supra. 
Plaintiff attempts to distinguish 
Baugh by asserting that plaintiff did not make a 
claim against the pension plan in this case and did 
not seek an order compelling the plan to do  
anything.  Plaintiff argues that ordering defendant 
to direct his pension to be sent to his prison 
address is consistent with Baugh and does not  
violate the ERISA.  This argument fails for two 
reasons.
 First, defendant did not voluntarily 
change his pension address to his prison address 
and did not voluntarily have the pension funds 
deposited into his personal prisoner account, but 
rather was ordered by the court to do so.  The  
court’s order effectively required the pension fund 
to make the pension payment to defendant’s prison 
account 
against 
defendant’s 
will. 
Such 
an  
involuntary 
transfer 
clearly 
constitutes 
an  
assignment 
and 
conflicts 
with 
the 
ERISA’s  
antialienation provision.  Second, if defendant 
refuses to direct the pension fund to pay the 
benefits to his prison account, the only method of 
ensuring that the benefits reach the prison account 
is by reliance on the order directing the fund to 
send the money to the prison, just as in Baugh.  
[249 Mich App 107, 113; 640 NW2d 888 (2001).]  
III. Standard of review  
Whether 
the 
trial 
court’s 
order 
effectuates 
an 
alienation  
or assignment of pension funds under 29 USC 1056(d)(1) is a  
question of law.  We review questions of law de novo.  
Cardinal Mooney High School v Michigan High School Athletic  
Ass’n, 437 Mich 75, 80; 467 NW2d 21 (1991).  
IV. Principles of interpretation  
This case requires us to interpret a federal statutory  
5  
provision.  Where a federal statute clearly addresses the  
issue at hand, we apply the statute as written.  If, however,  
the text is silent or ambiguous regarding the issue before the  
Court, we must defer to a federal agency’s interpretation if  
it is based on a permissible construction of the statute.  
Chevron USA Inc v Natural Resources Defense Council, Inc, 467  
US 837; 104 S Ct 2778; 81 L Ed 2d 694 (1984).  
V. Discussion  
The trial court’s order requires that (1) defendant  
receive his monthly pension payments at his prison address and  
(2) the warden distribute the funds after their deposit in  
defendant’s 
prison 
account.  We conclude that this arrangement  
does not alienate or assign the pension proceeds in violation  
of ERISA.  
We note initially that the SCFRA permits the trial court  
to provide reimbursement to the state from “assets” owned by  
a prisoner for expenses incurred in caring for the prisoner.  
MCL 800.404(3).  The statute defines “assets” to include  
“income or payments to such prisoner from . . . pension  
benefits . . . .” MCL 800.401a.  
It is not disputed that the trial court’s order was  
proper under the SCFRA.  The question presented is whether  
ERISA’s prohibition on assignment and alienation of pension  
benefits supersedes the SCFRA in this case.  
6  
 
 
 
 
A. Receipt of the funds at defendant’s prison address  
ERISA’s 
antialienation 
provision 
states: 
“Each 
plan 
shall  
provide that benefits provided under the plan may not be  
assigned or alienated.”  29 USC 1056(d)(1).7  To determine  
whether the order requiring defendant to receive pension  
benefits at his prison address alienates or assigns those  
benefits, we must discern the meanings of the statutory terms.  
ERISA does not define the terms “alienate” and “assign.”  
Because the federal statute is silent on the question  
presented, we defer to a federal agency’s definition.  
Chevron, supra.  The Treasury Department has defined the term  
“assignment” 
as 
“[a]ny 
direct 
or 
indirect 
arrangement 
(whether  
revocable or irrevocable) whereby a party acquires from a  
participant or beneficiary a right or interest enforceable  
against the plan in, or to, all or any part of a plan benefit  
payment which is, or may become, payable to the participant or  
beneficiary.”
 26 CFR 1.401(a)-13(c)(1). 
This definition  
plainly contemplates a transfer of the interest to another  
person, i.e., a person other than the beneficiary himself.  
Sending a pension payment to a beneficiary at his own address,  
and depositing it in his own account, does not assign that  
payment.
 Neither the warden nor any other third person  
7It is not disputed that defendant’s pension plan is
covered by ERISA. 
7  
 
acquires a right or interest enforceable against the plan when  
the pension proceeds are sent to defendant at his current  
address.8  
8Moreover, we note that the accepted legal meanings of
the terms “assignment” and “alienation” are consistent with
the Treasury Department definition of “assignment.” Black’s 
Law Dictionary (6th ed) defines “assignment” as: 
The act of transferring to another all or part  
of one’s property, interest, or rights.  A transfer  
or making over to another of the whole of any 
property, real or personal, in possession or in 
action, or of any estate or right therein.  It  
includes transfers of all kinds of property, 
including negotiable instruments. [Emphasis added; 
citation omitted.]  
See also Allardyce v Dart, 291 Mich 642, 644-645; 289 NW 281 
(1939):  
In 4 Am Jur, p 229, an assignment in law is 
defined as “A transfer or setting over of property, 
or some right or interest therein, from one person  
to another, and unless in some way qualified, it is 
properly the transfer of one’s whole interest in an 
estate, or chattel, or other thing. It is the act  
by which one person transfers to another, or causes  
to vest in another, his right of property or  
interest therein.”  
The American Law Institute has defined an  
assignment of a right in its Restatement of the Law 
of 
Contracts, 
p 
171, 
§ 
149(1), 
as 
“[a] 
manifestation to another person by the owner of the  
right indicating his intention to transfer, without 
further action or manifestation of intention, the  
right to such other person or to a third person.”  
This court has defined the word “assignment” 
in the language of Webster as meaning “to transfer  
or make over to another;” and in the language of 
Burrill’s Law Dictionary as “to make over or set  
over to another; to transfer.” Aultman, Miller &  
Co v Sloan, 115 Mich 151, 153 [73 NW 123 (1897)].  
8  
 
 
 
A property interest is assigned or alienated when it has  
been transferred to another person. The trial court here did  
not order defendant to have his pension proceeds sent to  
another person’s address. On the contrary, the court ordered  
defendant to receive the benefits at his own address.  
Moreover, the deposit of the funds into defendant’s prison  
account did not transfer any legal title to, or interest in,  
the funds to another person.  The warden’s 
access to  
defendant’s account does not alter the fact that the account  
is in defendant’s name.  Legal title was not conveyed to the  
warden or to any other person when the funds were deposited in  
defendant’s account.9  
We respectfully decline to follow the federal district  
court’s opinion in Baugh. The Baugh court held that “an order  
by this Court forcing [a pension plan] to deposit pension  
[Emphasis added.]  
The term “alienation” similarly refers to a “conveyance 
or transfer of property to another.” Black’s Law Dictionary 
(7th ed) (emphasis added).  
9 The dissent asserts that the warden obtains a property
interest in the funds before depositing them in defendant’s
prison account.  The trial court’s order, however, compels the 
warden to deposit the funds in defendant’s prison account,
thus ensuring that defendant receives the funds before they
are distributed under the SCFRA.  The warden essentially acts
as a bank teller-
-
-he must deposit the funds in defendant’s 
account upon receipt.  Thus, the warden does not obtain any
interest in, or title to, the pension funds before depositing
them in defendant’s account and has no discretion or right to
use the funds. 
9  
 
 
 
funds into an [inmate’s prison] account from which [the state]  
may withdraw monies clearly operates as an assignment.”  
Baugh, supra at 1077. 
The Baugh court characterized the  
transfer of the funds to the inmate’s prison account as an  
assignment because it was “involuntary.” The involuntary  
nature of a deposit does not establish an assignment unless a  
person other than the beneficiary acquires a right or interest  
enforceable against the plan.  An assignment does not occur  
where the pension proceeds are sent to the pensioner’s current  
address and deposited into his own account.  
The dissent argues that an assignment or alienation  
occurred because the pension fund itself was directed to send  
the benefit payments to defendant’s prison address in the  
event that defendant did not ask the fund to do so.  The  
dissent’s 
argument 
ignores 
the 
Treasury 
Department’s  
definition of the term “assignment.”  
The federal statute  
would be violated if the court had ordered the fund to send  
the payments to another person, i.e., to a person other than  
defendant, 
and 
thereby granted a right or interest enforceable  
against the plan to that third person.  Thus, if the court had  
ordered the pension fund to distribute the payments directly  
to the state of Michigan, an assignment or alienation would  
result.  Here, however, the court ordered the funds to be sent  
to defendant himself at his current address and deposited in  
10  
  
 
his own account. Because defendant thus receives the funds,  
no assignment or alienation occurs.10  
10The 
dissent 
observes that the trial court’s order refers 
to the warden as a “receiver.”  This language in the order
does not alter our conclusion that an assignment has not
occurred. 
Fundamentally, a receiver is not an assignee.  The terms  
have separate legal meanings.  Black’s Law Dictionary (7th ed) 
defines 
a 
“receiver” 
as “[a] disinterested person appointed by 
a court, or by a corporation or other person, for the 
protection or collection of property that is the subject of 
diverse claims (for example, because it belongs to a bankrupt 
or is otherwise being litigated).”  By contrast, an “assignee” 
is “[o]ne to whom property rights or powers are transferred by 
another.” 
Id. 
ERISA does not state that a court may not 
protect and preserve funds that are subject to dispute.  
Moreover, the warden does not act as a receiver when he 
deposits the funds in defendant’s account. We are not bound  
by the label used by the trial court when describing the 
warden’s role.  
A receiver is an officer of the court who protects and 
preserves property on behalf of the parties to a pending 
lawsuit.  65 Am Jur 2d, Receivers, § 1, p 654.  The purpose of 
a receivership is to protect the parties’ rights to the 
property until a final disposition of the issues. Id., § 6, 
p 657. A receiver also may control and manage property. 19  
Michigan Law & Practice (1957), Receivers, § 1, p 351.  
The characteristics of a receivership are not present 
here. The warden does not manage, control, or even preserve 
the funds.  His legal duty is to place the pension benefits in 
defendant’s account.  
If the warden were a receiver, he still would not acquire 
a property interest:  
As a general rule it may be stated that 
property in the possession of a receiver is in the 
custody of the law, and the receiver’s possession 
is the possession of the court for the benefit of 
those ultimately entitled.  
11  
 
B. Appropriation of the funds 
after deposit in defendant’s account  
We next consider whether the distribution of pension  
funds after they are deposited in defendant’s account  
contravenes ERISA.  The prevailing view is that ERISA does not  
protect pension funds after the beneficiary receives them.  We  
adopt this view and hold that ERISA does not preclude  
distribution pursuant to the SCFRA after the funds are  
deposited in an inmate’s account.  
The leading case on this subject is Guidry v Sheet Metal  
A receiver’s possession of chattels does not 
of itself confer title on the receiver, or give the 
receiver, 
as 
distinguished 
from 
the 
court  
appointing him, an absolute right of possession, or 
determine or even affect the rights of the parties 
except so far as it preserves and retains control 
of the property to answer the final judgment.  A  
receiver’s right, being purely for the purposes of 
the suit, cannot outlast the suit or be used for 
any purpose not justified thereby. [19 Michigan Law 
& Practice, supra, § 41, p 382.]  
Also, a receiver “is appointed to subserve the interests of 
all persons interested in the subject-matter committed to his 
care.
 A receiver, by his appointment, does not become a 
litigant in, or party to, the suit in which he is appointed.” 
Id., § 51, p 388.  The appointment of a receiver does not 
affect parties’ contractual rights.  Rowe v William Ford & Co, 
257 Mich 646, 650; 241 NW 889 (1932).  
Assuming the warden were a receiver, he would have no 
greater title or interest than the court itself.  The court’s  
order merely requires the pension fund to mail the checks to 
defendant’s prison address, where the warden deposits the 
funds in defendant’s account. The warden does not acquire a 
property interest in the funds when they arrive at the prison. 
The dissent has not identified any property interest that it 
believes the warden acquires.  
12  
Workers, 10 F3d 700 (CA 10, 1993) (Guidry II), mod on reh 39  
F3d 1078 (CA 10, 1994) (Guidry III).11  In these Guidry cases,  
a former union official pleaded guilty of embezzling funds  
from his union.  The union asserted an interest in the  
embezzler’s pension benefits.  The federal district court  
granted the union a constructive trust against the pension  
plan, thus preventing the beneficiary from receiving the  
funds.  On its review, the United States Supreme Court held  
that this remedy violated ERISA’s prohibition of alienation  
and assignment.  Guidry v Sheet Metal Workers, 493 US 365; 110  
S Ct 680; 107 L Ed 2d 782 (1990) (Guidry I).  
On 
remand, 
the 
district court granted a different remedy:  
garnishment of the pension benefits after their deposit in the  
beneficiary’s account. The United States Court of Appeals for  
the Tenth Circuit affirmed the garnishment order and held that  
it did not violate ERISA.  Guidry II, supra at 716. The court  
determined that the text of subsection 206(d)(1), now  
subsection 1056(d)(1), (“[e]ach pension plan shall provide  
that benefits provided under the plan may not be assigned or  
alienated”) was unclear.  The statute was ambiguous regarding  
whether the term “benefits” refers to “the right to future  
payment or the actual money paid under the plan and received  
11The modification of the opinion on rehearing in Guidry 
III did not affect the original panel’s holding regarding the
ERISA issue. 
13  
 
 
by the beneficiary.” Guidry II, supra at 708.  
In light of this ambiguity, the Guidry II court deferred  
to the Department of Treasury’s reasonable interpretation of  
the statute. 
The department’s ERISA regulations define  
“assignment” and “alienation” as “‘any direct or indirect  
arrangement 
(whether 
revocable 
or 
irrevocable) 
whereby 
a 
party  
acquires from a participant or beneficiary a right or interest  
enforceable against the plan in, or to, all or any part of a  
plan benefit payment which is, or may become, payable to the  
participant or beneficiary.’”  Guidry II, supra at 708,  
quoting 26 CFR 1.401(a)-13(c)(1)(ii) (emphasis added).  The  
regulations refer to a right or interest enforceable against  
the plan.  
[The union] seeks only to enforce a judgment 
against Mr. Guidry by garnishing his bank account 
containing pension benefits paid and received; [the 
union] does not seek to enforce an interest or 
right against the plan.  Because garnishment of Mr.  
Guidry’s received retirement income is not an  
action against the plan, we conclude it is not 
prohibited by ERISA 206(d)(1) as implemented by the 
ERISA Regulations. [Guidry II, supra at 710.]  
The Guidry 
II 
court opined that the Treasury Department’s  
interpretation was reasonable.  The court noted that other  
statutes expressly protect benefits after they are received.  
For example, the Social Security Act, 42 USC 407(a), provides  
that “none of the moneys paid or payable or rights existing  
under this subchapter shall be subject to execution, levy,  
14  
 
 
 
attachment, garnishment, or other legal process, or to the  
operation of any bankruptcy or insolvency law.”  (Emphasis  
added.)  Also, the Veterans’ Benefits Act, 38 USC 5301(a),  
expressly precludes attachment or seizure of benefits “either  
before or after receipt by the beneficiary.” The Guidry II  
court concluded:  
Because Congress did not include similar 
explicit language protecting benefits in the 
related context in ERISA, we infer Congress made a
deliberate decision [that] retirement income paid
and received was not thereafter protected from
garnishment.  A similar argument was made by then
Judge Kennedy writing for the Ninth Circuit in 
denying 
application 
of 
the 
anti-garnishment
provision of the Consumer Credit Protection Act to
wages that had been paid.  Usery [v First Nat’l 
Bank of Arizona, 586 F2d 107, 111 (CA 9, 1978)].
Although not conclusive, the absence of explicit
language extending to paid benefits supports the
ERISA Regulations. [Guidry II, supra at 712.12] 
Several courts have followed the Guidry II decision.  
See, e.g., Trucking Employees of North Jersey Welfare Fund,  
Inc v Colville, 16 F3d 52, 56 (CA 3, 1994) (agreeing with  
12The Guidry II court also noted that the law of the case 
doctrine did not apply.  The Supreme Court’s opinion in Guidry 
I “did not explicitly decide in dicta that its holding with
respect to the constructive trust extended as well to benefits
paid from the plan and received by the participant.” Guidry 
II, supra at 706. 
Also, on rehearing in Guidry III, the Tenth Circuit Court 
of Appeals, sitting en banc, “affirm[ed] the primary holding 
of the Guidry II panel and conclude[d] ERISA section 206(d)(1) 
protects ERISA-qualified pension benefits from garnishment 
only until paid to and received by plan participants or 
beneficiaries.” Guidry III, supra at 1083.  
15  
 
Guidry II that the Treasury Department regulation reasonably  
“construes the statute to forbid alienation of rights to  
future payments, rather than alienation of the actual money  
paid out”), and State v Pulasty, 136 NJ 356; 642 A2d 1392  
(1994) (holding that ERISA did not preempt a state restitution  
order because received pension benefits are subject to  
judgment). But see United States v Smith, 47 F3d 681 (CA 4,  
1995) (declining to follow Guidry II and holding that pension  
benefits that had been received were not subject to  
restitution).  
Of particular interest is the decision in Wright v  
Riveland, 219 F3d 905 (CA 9, 2000).  In Wright, a class of  
inmates sued the state of Washington’s department of  
corrections, challenging the deduction of pension funds from  
the inmates’ accounts to pay for the costs of incarceration  
under a state statute.  The United States Court of Appeals for  
the Ninth Circuit held that ERISA’s antialienation provision  
did not prohibit the deductions.  The court found that  
subsection 206(d)(1) was unclear regarding whether it  
prohibits the alienation or assignment of funds after they are  
distributed to the beneficiary.  The court then discussed the  
Treasury Department regulation and Guidry II, Colville, and  
Smith, and found Guidry II and Colville more persuasive than  
Smith.  
16  
 
 
Accordingly, we follow the lead of the Third 
and Tenth Circuits.  We conclude that [the Treasury  
regulation’s] 
interpretation 
of 
[subsection] 
206(d)(1) 
is 
not 
arbitrary, 
capricious, 
or  
manifestly contrary to the statute and hold, based 
on the regulation’s interpretation of [subsection] 
206(d)(1), that this section does not preclude the 
Department from deducting funds pursuant to the 
[state 
of 
Washington] 
Statute 
from 
benefits  
received 
from 
ERISA-qualified 
pension 
plans. 
[Wright, supra at 921.13]  
We also prefer the approach adopted by the overwhelming  
majority of federal courts. Once pension funds are deposited  
in an inmate’s account, ERISA does not protect them.  We agree  
with the Guidry II court that the text of subsection 206(d)(1)  
does not address whether benefits that the pensioner has  
already received are protected.  The statute’s silence on this  
issue requires deference to the reasonable interpretation set  
forth in the Treasury Department regulation.  Guidry II,  
supra; Chevron, supra.  That regulation clarifies that the  
statute protects against the alienation or assignment of  
rights against the plan itself. 
Other statutory schemes,  
including the Social Security Act, clearly protect benefits  
after their receipt.  Congress did not include such expansive  
language in ERISA.  
The Ninth Circuit Court of Appeals decision in Wright  
directly supports our decision.  It expressly rejected an  
13See also anno: Effect of anti-alienation provisions of
[ERISA] on rights of judgment creditors, 131 ALR Fed 427-463
(collecting authorities). 
17  
 
ERISA challenge to a state statute that permitted deduction of  
pension funds from an inmate’s account to pay for the costs of  
incarceration.  
While courts may not create exceptions to ERISA’s  
prohibition on assignment and alienation, Guidry II and its  
progeny do not create exceptions. They hold merely that the  
statutory prohibition does not apply after the funds have been  
received.  The dissent asserts without any apparent basis that  
we have created an exception. In truth, we merely follow the  
prevailing 
federal 
authorities 
and 
hold 
that 
the 
appropriation  
of funds that have been received does not alienate or assign  
those funds.  Where no alienation or assignment has occurred,  
the statutory prohibition does not apply.  We have no occasion  
or need to “carve out exceptions” to a statutory prohibition  
that does not apply.  
Defendant received the pension funds when they were sent  
to his current address and deposited in his prison account.  
At that point, ERISA did not protect the funds, and the state  
was free to seize and distribute the funds in accordance with  
the procedures set forth in the SCFRA and the trial court’s  
order in this case.14  
14The dissent suggests that the trial court’s order is
similar to the scheme struck down by the United States Supreme
Court in Guidry I. Guidry I, however, involved a constructive
trust imposed on the pension fund itself. Guidry II and its 
progeny make clear that funds that are appropriated after the 
18  
VI. Conclusion  
The SCFRA sets forth procedures to reimburse Michigan  
taxpayers for the costs of caring for prison inmates under the  
jurisdiction of the Department of Corrections.  An inmate’s  
pension benefits in his account are “assets” that are subject  
to the SCFRA.  The federal prohibition on alienation and  
assignment of pension benefits is not violated where an inmate  
is directed to receive pension benefits at his own address.  
Further, prevailing federal authorities establish that ERISA  
beneficiary receives them are no longer protected by ERISA’s 
antialienation clause.  In this case, the pension fund itself 
is not garnished, nor is a constructive trust imposed on the 
fund.  Rather, the fund is merely required to send the pension  
funds to defendant himself at his current address, where the 
funds are then deposited directly in defendant’s own account.  
At that point, defendant has received the funds, and, as the 
overwhelming majority of federal courts have held, the funds 
are no longer protected by ERISA.  
The United States Supreme Court’s reasoning in Guidry I 
supports the distinction drawn by federal courts between 
garnishments from plans and appropriation of funds that the 
beneficiary has already received.  The Guidry I Court noted  
that the policy underlying the antialienation clause is “to 
safeguard a stream of income for pensioners . . . .” Guidry  
I, supra at 376. Once the benefits are received, the stream 
of income has safely reached the pensioner.  In light of this 
language, the Tenth Circuit Court of Appeals in Guidry II 
determined that the law of the case did not preclude the 
garnishment of funds deposited in the beneficiary’s bank 
account: “As [Guidry I] refers only to a ‘stream of income’ 
that must be received, and not to the disposition of the 
income after it was received, we fail to see how the ‘law of 
the case’ bars garnishment of received income. The payments 
do not lose their character as income because they are used to 
satisfy debts.”  Guidry II, supra at 706. 
Nearly every 
federal court has adhered to this view.  
19  
does not protect pension proceeds that an inmate has already  
received. The state may distribute the funds after they are  
deposited in the inmate’s account to the extent permitted  
under the SCFRA.  Accordingly, we reverse the judgment of the  
Court of Appeals and reinstate the trial court’s decision.  
Maura D. Corrigan 
Elizabeth A. Weaver  
Clifford W. Taylor 
Robert P. Young, Jr.  
20  
___________________________________ 
v 
S T A T E O F M I C H I G A N  
SUPREME COURT  
STATE TREASURER,  
Plaintiff-Appellant,  
No. 120803  
THOMAS K. ABBOTT,  
Defendant-Appellee,  
and  
AUTO BODY CREDIT UNION and  
JOANN A. ABBOTT,  
Defendants.  
KELLY, J. (dissenting).  
The issue in this case is whether the Employee Retirement  
Income Security Act (ERISA)1 prevents the State Treasurer from  
implementing 
its 
restitutive 
scheme 
under 
the 
State  
Correctional Facility Reimbursement Act (SCFRA).  MCL 800.401  
et seq. The restitutive scheme in this case has as its object  
to require defendant, an inmate at a state correctional  
129 USC 1001 et seq. 
 
facility, to reimburse the state for the cost of his  
incarceration.
 Through court order, defendant's former  
employer was directed to send defendant's pension checks to  
defendant's prison account rather than to his credit union.  
The warden was made receiver for the checks and empowered to  
deposit them in the account, then disburse part of the  
proceeds to the state.  
I conclude that the scheme effects an assignment of  
defendant's 
pension 
benefits 
under 
ERISA, 
violating 
that 
act’s  
antialienation provision. 29 USC 1056(d)(1). Consequently,  
I would affirm the decision of the Court of Appeals.  
I. Factual & Procedural Background  
After the circuit court implemented the restitutive  
scheme, defendant petitioned the Court of Appeals, which  
denied leave to appeal.  We remanded to that Court as on leave  
granted.  On remand, the Court of Appeals reversed and held  
that the trial court orders violate ERISA's antialienation  
provision 
because 
they 
constitute 
an 
assignment 
of 
defendant's  
pension benefits. 249 Mich App 107; 640 NW2d 888 (2001).  The  
decision was grounded in the United States District Court  
opinion in State Treasurer v Baugh, 986 F Supp 1074 (ED Mich,  
1997).  
The majority now reverses the decision of the Court of  
Appeals and holds that the trial court orders are not an  
2  
assignment under the provisions of ERISA.  
II. Discussion  
We interpret a federal statute in such manner as to give  
effect to the purpose for which Congress drafted it. If the  
United States Supreme Court has construed the language, we  
defer to its interpretations.  Moreover, we defer to any  
reasonable construction given the statute by a federal agency  
empowered 
by 
Congress to interpret it.  Yellow Transportation,  
Inc v Michigan, ___ US ___; 123 S Ct 371, 377; 154 L Ed 2d 377  
(2002), citing Chevron USA Inc v Natural Resources Defense  
Council, Inc, 467 US 837, 842-843; 104 S Ct 2778; 81 L Ed 2d  
694 (1984); Barnhart v Walton, 535 US 212, 217-218; 122 S Ct  
1265; 152 L Ed 2d 330 (2002).  In addition, although they are  
not binding on us, we give respectful consideration to the  
decisions of lower federal courts.  Yellow Freight System, Inc  
v Michigan, 464 Mich 21, 29 n 10; 627 NW2d 236 (2001).  
A. Defining ERISA's antialienation provision  
ERISA expansively regulates employee benefit programs.  
Shaw v Delta Air Lines, Inc, 463 US 85, 90; 103 S Ct 2890; 77  
L Ed 2d 490 (1983); Baugh, 986 F Supp 1076 (1997). 
In so  
doing, it preempts "any and all state laws" that "relate to"  
a program covered by ERISA. 29 USC 1144(a).  
3  
  
1. Federal interpretation of ERISA's antialienation 
provision  
ERISA subsection 206(d)(1), 29 USC 1056(d)(1), requires  
that 
"[e]ach 
pension 
plan shall provide that benefits provided  
under the plan may not be assigned or alienated."  The  
Secretary of the Treasury has defined "assignment" as:  
(ii) Any direct or indirect arrangement 
(whether revocable or irrevocable) whereby a party 
acquires from a participant or beneficiary a right 
or interest enforceable against the plan in, or to, 
all or any part of a plan benefit payment which is, 
or may become, payable to the participant or 
beneficiary. [26 CFR 1.401(a)-13(c)(1).]  
The 
United 
States Supreme Court has held that garnishment  
of benefits from a covered plan constitutes an assignment for  
the purpose of subsection 206(d)(1)2 
Guidry v Sheet Metal  
Workers Fund, 493 US 365, 371-372; 110 S Ct 680; 107 L Ed 2d  
782 
(1990)(Guidry 
I), citing Mackey v Lanier Collection Agency  
& Service, Inc, 486 US 825, 836-837; 108 S Ct 2182; 100 L Ed  
2d 836 (1988); see also United Metal Products Corp v Nat'l  
Bank of Detroit, 811 F2d 297 (CA 6,1987). Thus, in order to  
avoid the prohibition on assignments in subsection 206(d)(1),  
any court ordered remedy that relates to an ERISA plan must be  
2A garnishment is a legal device that allows a person to
obtain control over the property of another while it is in the
hands of a third party.  See Black's Law Dictionary (7th ed);
Ballentine's Law Dictionary (3d ed).  See, generally, MCL 
600.4011; Ward v Detroit Automobile Inter-Ins Exch, 115 Mich
App 30, 35; 320 NW2d 280 (1982), citing Johnson v Kramer Bros 
Freight Lines, Inc, 357 Mich 254; 98 NW2d 586 (1959). 
4  
  
meaningfully distinct from a court ordered garnishment.  
Guidry I, 493 US 372. In Baugh, a federal district court in  
Michigan 
found 
no 
meaningful 
distinction 
between the  
restitutive scheme used by the plaintiff in this case and the  
garnishment plans invalidated in Guidry I and United Metal  
Products. 986 F Supp 1076-1078.  
2. The majority's interpretation of ERISA's antialienation 
provision  
The majority recognizes that this Court must defer to a  
federal agency's interpretation of a federal statute.  Ante at  
6.  Nonetheless, it fails to properly apply the definition of  
"assignment" 
expounded 
by 
the 
United 
States 
Treasury  
Department.  Instead, it concludes that there is no meaningful  
distinction between the definition of "assignment" in the  
treasury regulation and other accepted legal meanings of the  
term.  
After reviewing some legal definitions,3 the majority  
concludes that the treasury regulation "plainly contemplates  
a transfer of the interest to another person, i.e., a person  
other than the beneficiary himself." Ante at 7 (emphasis in  
original).  Thus, it reasons, "[a] property interest is  
assigned or alienated when it has been transferred to another  
person." 
Ante at 9. 
Applying this understanding, the  
3Ante at 8-9 n 8. 
5  
 
 
 
majority concludes that plaintiff’s restitutive scheme does  
not effect an assignment because the warden never obtains  
title to or an interest in defendant's pension benefits.  Ante  
at 9.  
The majority asserts that there are two bases for its  
conclusion that the trial court orders do not constitute an  
assignment or alienation:  (1) the court ordered defendant to  
receive benefits at the prison, which is his current address,  
and (2) title to the benefits does not pass under the orders  
until after defendant receives them in his prison account.  
However, as I will show, these conclusions rest on a  
misunderstanding of the treasury regulation.  
B. Application  
1. Garnishment  
The majority claims that Guidry II4 and Wright v Riveland5  
support its conclusions that plaintiff's restitutive scheme  
does not violate ERISA's antialienation provision.  In Guidry  
II, the United States Court of Appeals for the Tenth Circuit  
held that subsection 206(d)(1) does not apply to benefits once  
a beneficiary receives them. 
Guidry II, 10 F3d 710.  
Accordingly, it found that the defendant's creditors could  
4Guidry v Sheet Metal Workers Fund, 10 F3d 700 (CA 10,
1993) (Guidry II), mod on reh 39 F3d 1078 (CA 10, 1994)(Guidry 
III). 
5219 F3d 905 (CA 9, 2000). 
6  
 
garnish the defendant's pension benefits that he had  
voluntarily deposited into his personal bank account. Id.  
Wright concerned a prison inmate in the state of  
Washington. A Washington statute provided  
When an inmate . . . receives any funds in 
addition to his or her wages or gratuities, the 
additional funds shall be subject to the deductions 
in RCW 72.09.111(1)(a). . . . [Wash Rev Code 
72.09.480(2).]  
The Washington Department of Corrections took thirty-five  
percent of the defendant's pension payments pursuant to Wash  
Rev Code 72.09.111.  The United States Court of Appeals for  
the Ninth Circuit found no violation of ERISA because the  
department had obtained control over the prisoner's benefits  
only after the prisoner had received them.  Wright, 219 F3d  
921.  
These cases are inapplicable here.  The restitutive  
programs at issue in Wright and Guidry II lack two fundamental  
components of plaintiff's scheme.  First, no one was made a  
receiver of the defendants' benefits before they were  
deposited into the defendants' accounts.6  Second, the courts  
6The majority argues that the warden is not a receiver
because he does not manage or exercise control over 
defendant's pension funds.  Ante at 11-12 n 10. I disagree
with this characterization of the warden's role in this 
scheme. 
Random House Webster's College Dictionary (2000) states 
that "manage" means: "to take charge of; supervise."  To  
(continued...) 
7  
 
did not order the defendants' benefit plans to deliver the  
defendants' funds into specified accounts.  
The majority reads the trial court orders in this case as  
requiring that:  "(1) defendant receive his monthly pension  
payments at his prison address and (2) the warden  distribute  
the funds after their deposit in defendant's prison account."  
Ante at 6. However, the majority fails to acknowledge that  
one of the orders does much more.  It requires General Motors  
to 
disburse 
defendant's pension benefits to his prison address  
in the event defendant refuses to request it.7  In fact,  
6(...continued)
"control" is "to exercise restraint or direction over." Id. 
The 
trial 
court 
orders 
charge 
the 
warden 
with 
the 
responsibility of supervising and directing the deposit of
defendant's pension benefits.  Thus, it is evident that the
warden retains these characteristics of a receiver. 
Moreover, the warden also fulfills the ultimate function 
of a receiver.  In his capacity as receiver, he collects 
defendant's pension benefits to ensure that they remain 
available to satisfy the diverse claims on them created by 
this litigation.  If this assurance were not the purpose of 
the scheme, I see no reason why plaintiff would not simply 
attach the funds after they were deposited into defendant's 
credit union account.  Although we are not bound by the trial 
court's characterization of the warden's function, we should 
not abandon the dictates of common sense in evaluating that 
function.  
7A March 10, 1997 order states: 
* * *  
3. 
Defendant 
Thomas 
K. 
Abbott 
shall  
immediately direct General Motors Corporation, it's 
[sic] subsidiary or designee, to cause any pension 
(continued...) 
8  
 
without awaiting defendant's compliance, on the same day the  
primary order was entered, the trial court entered a second  
order directing:  
1. 
General Motors shall send all pension 
proceeds payable to Thoms K. Abbott . . . to Thomas 
K. Abbott's new address of record . . . .  
These orders implicate a factor overlooked by the  
majority:  subsection 206(d)(1) prohibits any indirect, as  
well as direct, assignment of benefits. 
The orders'  
provisions making the warden receiver for defendant of his  
pension benefits and directing General Motors to send  
defendant's pension checks to the warden make them an indirect  
assignment.  
Contrary to the majority's assertion, the fact that the  
7(...continued)
payments due Defendant Thomas K. Abbott to be made 
payable to "[defendant]" at: PRISON ADDRESS, or 
Thomas K. Abbott's then current prison address.  If  
defendant should refuse to so direct, this order 
shall be treated as the direction of the defendant  
to General Motors that the pension payments shall 
be made as directed above. Payments shall be made 
in this manner until Defendant Thomas K. Abbott is  
released 
from 
the 
physical 
custody 
of 
the  
Department of Corrections, or until further order 
of this Court.  
4. 
This Court shall issue a separate Order 
directing General Motors to distribute the funds as 
described in paragraph 3 above should defendant 
Thomas K. Abbott refuse, or for any other reason 
fail, to comply with the provisions of paragraphs 3 
above.  
9  
  
  
warden 
is 
made 
receiver 
of 
defendant's 
benefits 
is  
dispositive.  According to the majority's own analysis, "'. .  
. property in the possession of a receiver is in the custody  
of the law, and the receiver's possession is in the possession  
of the court for the benefit of those entitled.'"  Ante at 11  
n 10, quoting 19 Michigan Law and Practice, Receivers, § 41,  
p 382.  The majority claims that this definition of a  
receivership takes this case out of the reach of ERISA's  
prohibition on assignments.  
At a minimum, plaintiff’s restitutive scheme must be  
meaningfully distinct from an order of garnishment. Guidry I,  
supra.  A constructive trust is not meaningfully distinct from  
an order of garnishment. 
Id.  
We have held that "'"[t]rusts," in the broadest sense of  
the definition, embrace, not only technical trusts, but also  
obligations arising from numerous fiduciary relationships,  
such as agents, partners, bailees, et cetera.'"  Fox v Greene,  
289 Mich 179, 183; 286 NW 203 (1939), quoting Rothschild v  
Dickinson, 169 Mich 200; 134 NW 1035 (1912). Thus, a trustee  
is "'a person in whom some estate, interest, or power in or  
affecting property of any description is vested for the  
benefit of another.'"  Equitable Trust Co v Milton Realty Co,  
263 Mich 673, 676; 249 NW 30 (1933), quoting Jones v Byrne,  
149 F 457, 463 (CC WD Ark, 1906)(emphasis supplied).  We have  
10  
 
also held that possession and control are fundamental  
incidents of ownership.  Orel v Uni-Rak Sales Co, Inc, 454  
Mich 564, 568; 563 NW2d 241 (1997); Merritt v Nickelson, 407  
Mich 544, 552; 287 NW2d 178 (1980); Rassner v Fed Collateral  
Society, Inc, 299 Mich 206, 213; 300 NW 45 (1941); James S  
Holden Co v Connor, 257 Mich 580, 592-594; 241 NW 915  
(1932)(and cases cited therein); Brown v Fifield, 4 Mich 322,  
327, 328 (1856).  
Under the trial court's orders, defendant is never  
allowed to exercise control over his pension benefits.8  The  
majority finds this fact irrelevant, but it is the determining  
factor that renders the trial court orders a violation of  
subsection 206(d)(1).  Transferring possession and control of  
defendant's 
pension 
benefits to the warden before the benefits  
are deposited in defendant's prison account strips defendant  
of the ability to exercise the interests he has in his  
benefits.  
Plaintiff's restitutive scheme is no less onerous than  
the constructive trust arrangement or garnishment struck down  
8The first order directs that: 
5. 
Upon receipt of any such pension check, 
the Warden of the institution in the continuing 
capacity as receiver shall deposit the pension 
check into the account of Defendant Thomas K.  
Abbott . . . .  The funds from that pension check 
shall be distributed as follows . . . .  
11  
 
 
in Guidry I and United Metal Products.9  The practical effect  
of the trial court orders is that the warden is able to  
control defendant's benefits before defendant receives them.  
The circuit court, on behalf of the Department of Corrections,  
obtained control of the benefits while they were still in the  
possession of defendant's employer, a third party.  This is a  
garnishment and is prohibited by ERISA's antialienation  
provision.10  
2. Assignment of a right enforceable against the plan  
Although I find that plaintiff's restitutive scheme is  
not meaningfully distinct from an order of garnishment, the  
finding is not necessary to my ultimate conclusion that the  
9In her opinion, the Chief Justice asserts that "the
overwhelming majority of federal courts have held [that] the
funds are no longer protected by ERISA."  Ante at 21 n 14. 
However,  the only federal court that has put thought into the 
specific issues presented in this case concluded that 
plaintiff’s restitutive scheme is an assignment.  Baugh, 
supra.  Therefore, all federal courts that have considered the 
issues presented in this case are in disagreement with the
majority. 
10The majority's focus on transfer of title evidences its
limited reading of the treasury regulation.  As I have noted,
and 
the 
majority recognizes, 
constructive 
trusts are 
prohibited by ERISA's antialienation provision.  Guidry I, 
supra.  However, title does not pass in a constructive trust.
Rather, a constructive trust is a "'formula through which the
conscience of equity finds expression.'"  Kent v Klein, 352
Mich 652, 656; 91 NW2d 11 (1958), quoting Beatty v Guggenhein 
Exploration Co, 225 NY 380, 386; 122 NE 378 (1919). It leaves 
title in the original holder but gives possession and control
to another.  Thus, the fact that title to defendant's pension
benefits does not pass to the warden does not distinguish this
case from Guidry I. 
12  
 
 
scheme violates ERISA. ERISA's prohibition on alienation is  
not limited to payments. ERISA also prohibits alienation of  
any right, separate from the right to payment, that is  
enforceable against the plan.  
Under the Uniform Commercial Code, defendant never  
becomes a holder of the instruments used to deliver his  
benefits.  MCL 440.1201(20). Rather, the warden acquires a  
right enforceable against the plan when he takes control of  
defendant's pension check  This is because the court orders  
give the warden the authority to enforce the withdrawal of  
funds from the plan. MCL 440.3301(ii).  
This transfer of authority constitutes an "assignment"  
under 
the 
United 
States Department of Treasury's definition of  
the term.  It is irrelevant that, afterward, the warden  
deposits the funds into defendant's prison account.  Before  
the funds reach the account, rights that defendant is entitled  
to enforce against the plan are assigned to the warden in  
contravention of ERISA.  See, generally, Shinehouse v Guerin,  
20 E B C 1302 (ED Pa, 1996), aff'd 107 F3d 8 (CA 3, 1997).  
Conclusion  
Plaintiff's 
restitutive 
scheme 
accomplishes 
by  
indirection what it cannot do by direction.  It is an indirect  
assignment of pension benefits that is prohibited by ERISA.  
In Guidry I, the United States Supreme Court held that a  
13  
 
 
restitutive scheme could not overcome Congress's express  
intent to protect employee retirement benefits. This was true  
even where the employee's embezzlement had caused harm to the  
plan's beneficiaries.  
In United Metal Products, the United States Court of  
Appeals for the Sixth Circuit held that there was no exception  
to ERISA's antialienation provision for fraud or criminal  
conduct. In Baugh, the United States District Court for the  
Eastern District of Michigan, relying on Guidry I and United  
Metal Products, concluded that plaintiff's restitutive scheme  
constituted an assignment under subsection 206(d)(1).  
In each case, the court flatly refuted the contention  
that 
courts 
may 
carve out exceptions to ERISA's antialienation  
provision when it would serve public policy.  Yet the majority  
carves out an exception by this decision.  
The trial court's orders transfer a portion of  
defendant's pension benefits from the pension plan to the  
state.  The orders accomplish this by acting on defendant's  
benefits before he receives them.  That the orders run the  
pension benefits through defendant's prison account is of no  
legal significance.  Defendant at no time has possession or  
receipt of the benefits.  They might as well be run through  
the warden's account.  As receiver for the benefits, the  
warden controls them until he distributes them according to  
14  
the orders.  The provision requiring the funds to be placed in  
defendant's prison account is a thinly veiled device to defeat  
the provisions of ERISA.  
Neither plaintiff nor the majority has provided a  
meaningful distinction between the plaintiff's restitutive  
scheme and an order of garnishment.  Moreover, the scheme goes  
too far because, rather than constraining itself to acting on  
defendant’s benefits themselves, it usurps a right only  
defendant 
is 
entitled 
to 
enforce 
against 
the 
plan.  
Consequently, the scheme is prohibited by ERISA.  
I would affirm the decision of the Court of Appeals.  
Marilyn Kelly 
Michael F. Cavanagh 
Stephen J. Markman  
15