# United States Court of Appeals **For the Eighth Circuit**

___________________________ No. 14-1365

___________________________ In re: Brandon G. Pierce; Nicole L. Pierce

lllllllllllllllllllllDebtor s

------------------------------ Brandon G. Pierce; Nicole L. Pierce

lllllllllllllllllllll Appellant s

v. Collection Associates, Inc.

lllllllllllllllllllll Appellee

____________ Appeal from the United States Bankruptcy Appellate Panel for the Eighth Circuit

____________ Submitted: October 9, 2014 Filed: March 9, 2015

____________ Before COLLOTON, BRIGHT, and SHEPHERD, Circuit Judges.

____________ SHEPHERD, Circuit Judge.After filing for bankruptcy, Brandon and Nicole Pierce (the “Pierces”) sought to avoid and recover funds Collection Associ ates, Inc. (“Collection Associates”) had garnished from Brandon’s wages during th e pre-petition preference period. The bankruptcy court 1 found the Pierces’ preference action barred by the defense for consumer debtor payments under $600. The Bankruptcy Appellate Panel (“BAP”) affirmed. We agree that the defense app lies because the Pierces sought to avoid the transfer of less than $600, and therefore affirm.

I.

The relevant facts of this case are fe w and undisputed. Collection Associates garnished a total of $858.98 in wages Brandon earned during six pre-petition pay periods. Brandon’s employer sent the first four garnishments, totaling $562.78, to the state court that issued the garnishment orde r, and that court in turn delivered the payments to Collecti on Associates. See Neb. Rev. Stat. § 25-1056(2) (describing garnishment process). But th en the Pierces filed their bankruptcy petition and notified the state court they had done so. When th e state court later received the final two garnishments, totaling $296.20, instead of delivering those funds to Collection Associates, it returned the money to Br andon’s employer, which refunded the money to Brandon.

The Pierces subsequently initiated this adversary proceeding against Collection Associates. They alleged $858.98 was transf erred to Collection Associates during the preference period and sought an order avoi ding the involuntary transfer and requiring Collection Associates to return $562.78. 2The bankruptcy court denied the Pierces’

1 The Honorable Thomas L. Saladino, Un ited States Bankruptcy Judge for the District of Nebraska.

2 The Pierces’ avoidance petition states the amount is $592.40. We use $562.78, the amount the parties later stipulated to.
-2-complaint after “find[ing] that the aggreg ate value of all property affected by the transfer is less than $600.” The BAP a ffirmed. Although the BAP found that “at one time all six wage garnishments . . . cons tituted preferences,” it observed that “when the Pierces brought this preference action the garnishee had already returned $296.20 to them.” Pierce v. Collection Assocs., Inc. (In re Pierce ), 504 B.R. 506, 510 (B.A.P. 8th Cir. 2013). Thus, “[a]s the Pierces r ecognized, the only remedy available to them was avoidance of the wages still in possession of Collection Associates. Accordingly, their requested relief was for the return of $562.78, an amount less than $600.” Id. Therefore, the BAP concluded, the defens e for consumer debtor payments under $600 applied.

II.

As an initial matter, we note that the BAP questioned whether Nicole possesses standing in this adversary proceeding, give n that only Brandon’s wages are at issue. SeeJames v. Planters Bank (In re James ), 257 B.R. 673, 675 n.3 (B.A.P. 8th Cir. 2001) (questioning standing under similar ci rcumstances). Although neither party raised standing as an issue before this c ourt, we may address it sua sponte. See Delorme v. United States , 354 F.3d 810, 815 (8th Cir. 2004). Standing analysis “normally requires an evaluation of (1) inju ry, (2) causation, and (3) redressability.” City of Clarkson Valley v. Mineta , 495 F.3d 567, 569 (8th Cir. 2007). In this case, we find Nicole fails the first of these requi rements and thus lacks standing. We might have reached a different conclusion if th ere were a sufficient showing that Nicole possessed an interest in Brandon’s wage s or that the bankruptcy court had consolidated the Pierces’ estates. See 11 U.S.C. § 302. But in the absence of any such showing, we find Nicole has not met the injury requirement. See Pucket v. Hot Springs Sch. Dist. No. 23-2 , 526 F.3d 1151, 1157 (8th Cir. 2008) (stating that burden is on plaintiff to show standing requirements met). Accordingly, her claim against Collection Associates must be dismissed. Nevertheless, b ecause Brandon possesses standing, we proceed to consid er the merits of the case.

-3-III.

“In an appeal from a decision of the BAP, we sit as a second court of review. We independently review the bankruptcy c ourt’s decision applying the same standard of review as the BAP. Thus, here we review the bankruptcy court’s conclusions of law de novo.” GAF Holdings, LLC v. Rinaldi (In re Farmland Indus., Inc. ), 639 F.3d 402, 405 (8th Cir. 2011) (citations omitted).

The Pierces brought this preference action under 11 U.S.C. § 522(h), which allows the debtor to “avoid a transfer of property of the debtor” if, among other things, the trustee could avoid the transfer under 11 U.S.C. § 547. 11 U.S.C. § 522(h); see Dickson v. Countrywide Home Loans (In re Dickson ), 655 F.3d 585, 591-92 (6th Cir. 2011); Wade v. Midwest Acceptance Corp. (In re Wade ), 219 B.R. 815, 819 (B.A.P. 8th Cir. 1998). Section 547 provides that “the trustee may avoid any transfer of an interest of the debtor in property” that meets the requirements of section 547(b). 11 U.S.C. § 547(b). The parties agree that th ese requirements are met. The trustee’s avoidance power is, however, subject to certain defenses, and the trustee may not avoid a transfer under section 547 “if, in a case filed by an individual debtor whose debts are primarily consumer debts, the aggr egate value of all property that constitutes or is affected by such transfer is less than $600.” Id. § 547(c)(8). The parties disagree about whether the section 547(c)(8) defense applies.

The Pierces argue the defense is inapplicable because all of Brandon’s garnished wages, totaling $858. 98, were transferred to Collection Associates during the preference period. In their view, unde r Nebraska law, garnished wages transfer from the employee (Brandon) to the judgmen t creditor (Collection Associates) when earned. 3 It is therefore irrelevant, they c ontend, that Collection Associates actually

3 This process involves several steps, the Pierces claim: an employee gains an interest in wages when they are earned; that interest passes automatically to the
-4-received less than $600 and that Brandon had been refunded $296.20 by the state court by the time the Pierces brought their preference action. 4We disagree.

We cannot overlook the fact that the state court returned the final two garnishments, totaling $296.20, to Brandon be fore the Pierces filed their preference action. Nor could the Pierces. Their a voidance petition sought the return of only $562.78, an amount corresponding to the first four garnishments, not the return of $858.98, the total amount garnished. We fi nd that the terms of the avoidance petition make clear that the Pierces sought to avoid only the first four garnishments. 5 Because “the aggregate value of all property that c onstitutes or is affected by [the first four garnishments] is less than $600,” th e section 547(c)(8) defense applies. 6

judgment creditor because of the garnishment order; a transfer o ccurs when a property interest passes from one party to another. SeeJames , 257 B.R. at 676-77; Wade , 219 B.R. at 820-23.

4 The Pierces maintain the BAP has held that garnished wages earned during the preference period but paid after filing of the petition may be attributed to the $600 level. SeeJames , 257 B.R. at 677. Whatever the correctness of this proposition may be, it is not dispositive of this appeal.

5 Section 547(c) dictates when “a transfer” may not be avoided. 11 U.S.C. § 547(c). Yet we adopt for purposes of this appeal the parties’ assumption that we may aggregate multiple garnishments (hen ce multiple transfers) when determining whether the $600 threshold has been met. SeeElec. City Merch. Co. v. Hailes (Matter of Hailes ), 77 F.3d 873, 875 (5th Cir. 1996) (“[T]he aggregate value of several transfers should be considered to dete rmine whether a creditor has received $600 in value.”). Even so, we would say that b ecause the Pierces do not seek to avoid the final two already-returned garnishments, they cannot count those garnishments toward the aggregation of transfers they seek to avoid.

6 To the extent it conflicts with our d ecision, we disagree with the reasoning adopted by the court in Harr v. Paradigm Mgmt. Co. , No. 96-1-9160-PM, 1997 WL 441268, at *2 (Bankr. D. Md. July 24, 1997) (finding that the language of section 547(c)(8) “plainly directs the court to look at the value of the initial transfer, and not

-5-IV.

Accordingly, we affirm the bankruptcy court’s order denying the Pierces’ complaint, with the modification that we di smiss Nicole Pierce as a plaintiff in the action.

COLLOTON, Circuit Judge, dissenting.

This appeal concerns a provision of the bankruptcy code, 11 U.S.C. § 522(h), that allows a debtor in bankruptcy to “avoi d a transfer of property of the debtor” in certain circumstances where a trustee coul d avoid the transfer under 11 U.S.C. § 547. The property at issue here, according to debtors Brandon and Nicole Pierce, is $858.98 in wages that Brandon earned from his employer in six pay periods before the Pierces filed for bankruptcy. Collection A ssociates, Inc., a debt collection company, garnished those wages. All agree that th e case comes down to wh ether a trustee would be precluded from avoiding the transfer of Brandon’s wages because “the aggregate value of all property that constitutes or is affected by such transfer is less than $600.” 11 U.S.C. § 547(c)(8). Collection Associates does not dispute that we should consider the value of multiple garnishments to dete rmine the “aggregate value of all property” that constitutes or is affected by the transfer at issue here. See Elec. City Merch. Co. v. Hailes (Matter of Hailes ), 77 F.3d 873, 875 (5th Cir. 1996).

the amount of the transfer that remains out standing at the time of hearing”). See Morris v. Easy Credit Auto Sales, Inc. (In re Bohanon ), No. 12-12582, 2013 WL 6355994, at *3 (Bankr. D. Kan. Dec. 5, 2013) (finding wage withholding not prepetition payment in part because creditor “d id not cash the check but returned it to” debtor).

-6-A “transfer” means, among other things, “ each mode, direct or indirect, absolute or conditional, voluntary or involuntary, of di sposing of or parting with . . . property . . . or . . . an interest in property.” 11 U.S.C. § 101(54)(D). “A transfer is not made until the debtor has acquired rights in the property transferred.” 11 U.S.C. § 547(e)(3). “‘Property’ and ‘interests in pr operty’ are creatures of state law,” where, as here, there is no govern ing federal definition. Barnhill v. Johnson , 503 U.S. 393, 397-98 (1992).

The better view of Nebraska law is that Brandon gained an interest in the wages as soon as he earned them by performing the requisite services for his employer. Under Neb. Rev. Stat. § 25-1558(4)(a), earni ngs are defined as “compensation paid or payable . . . for personal services,” impl ying that an employee gains a right to the earnings or wages once they are earned. See Hogsett v. Credit Bureau of Scottsbluff, Inc. ( In re Hogsett), Case No. BK00-82678, A01- 8034, 2001 Bankr. LEXIS 2149, at *4-5 (Bankr. D. Neb. Oct. 9, 2001). The Nebraska Supreme Court has also held that wages are deemed “payable” for purposes of an unemployment insurance benefits law when the wages are earned, not when remuneration is actually received, as “wages are tied to the week of work and not to the week in which they are paid.” Wadkins v. Lecuona III, 740 N.W.2d 34, 40 (Neb. 2007). Bra ndon’s garnishor gained ownership of those wages as soon as Brandon earned them because a garnishor is “practically an assignee of the claim of his debtor agains t the garnishee,” and thus possesses the same property rights in the wages as Brandon otherwise would. Chamberlain Banking House v. Reliance Ins. Co. , 80 N.W. 822, 824 (Neb. 1899); see also Smith v. Brooks , 47 N.W.2d 389, 394 (Neb. 1951); In re Hogsett , 2001 Bankr. LEXIS 2149, at *5. Brandon’s rights to wages of $858.98 earne d over the six pre-petition wage periods thus transferred to Collection Associates at the time the wages were earned. Cf. Morehead v. State Farm Mut. Auto. Ins. Co. ( In re Morehead), 249 F.3d 445, 448 (6th Cir. 2001) (applying Kentucky law).

-7-The court assumes all of this is true, butrules that the Pierces cannot avoid the transfer because they do not seek to avoid two garnishments—totaling $296.20—that the state court sent back to Brandon’s empl oyer rather than to Collection Associates. The court reasons that the Pierces seek to avoid a transfer of only $562.78 based on the first four garnishments, and that b ecause the aggregate value of all property constituting the transfer is less than $600, the debtors cannot avoid the transfer.

The Pierces’ Petition to Avoid Transfer , however, seeks to avoid the entire transfer of wages totaling $858.98. The Petition alleges in Paragraph 2 that the Pierces involuntarily transferred the fo llowing property to Defendant Collection Associates: (a) “Garnishments of mone y from Debtor, Brandon Pierce’s, paycheck in the amount of $592.40, which was received by the Defendant; and” (b) “Garnishments of money from Debtor, Bra ndon Pierce’s, paycheck in the amount of $296.20, which amount was received by the Court after the filing of the Chapter 13 Petition and returned by the Court to Debto r’s employer.” App. 1 (emphasis added). The Pierces then prayed that the bankruptcy court “enter its Order avoiding the involuntary transfer of property from Debtor to Defendant, and ordering Defendant to return $592.40 to Debtor forthwith.” A pp. 2 (emphases added) . The Petition, fairly read, plainly seeks to avoid the entire invol untary transfer alleged in Paragraph 2, in the amount of $858.98. That the Petition sought the return of only $592.40 merely reflects the fact that $296.20 already was re turned to Brandon. There was no reason for the Pierces to seek “return” of funds in Brandon’s possession, but the Petition did seek to avoid the entire transfer of $858.98.

The aggregate value of all property tran sferred from the Pier ces to Collection Associates was more than $600. The Pierces seek to avoid that transfer. Therefore, the prohibition on avoidance set forth at 11 U.S.C. § 547(c)(8) does not apply, and the debtors may avoid the transfer of Brandon’s wages. The judgment of the bankruptcy court, as affirmed by the Bankrupt cy Appellate Panel, should be reversed.

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