Opinion ID: 2221432
Heading Depth: 1
Heading Rank: 6

Heading: federal anti-assignment statutes

Text: The Social Security Act provides: The right of any person to any future payment under this subchapter shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law. 42 U.S.C. § 407(a) (1994). Similarly, the Railroad Retirement Act states in relevant part that no annuity or supplemental annuity shall be assignable or be subject to any tax or to garnishment, attachment, or other legal process under any circumstances whatsoever, nor shall the payment thereof be anticipated. 45 U.S.C. § 231m(a) (1994). This court has held with respect to § 407 that it operate[s] to protect the Social Security benefits, which may be paid to persons such as plaintiffs, from judicial proceedings against persons such as plaintiffs. Judgment creditors in legal proceedings may not use the proceeds of the Social Security system to satisfy private obligations.... .... ... § 407 is concerned only with the protection of Social Security benefits from legal proceedings by creditors. Boersma v. Karnes, 227 Neb. 329, 336-37, 417 N.W.2d 341, 347 (1988). See, also, generally, Bennett v. Arkansas, 485 U.S. 395, 108 S.Ct. 1204, 99 L.Ed.2d 455 (1988); Philpott v. Essex County Welfare Board, 409 U.S. 413, 93 S.Ct. 590, 34 L.Ed.2d 608 (1973); Havelock Bank v. Hog Confinement Systems, 214 Neb. 783, 335 N.W.2d 765 (1983). There is no dispute that the federal benefits received by Charlene in this case are within the scope of §§ 407 and 231m(a). The critical issue presented by the Department's assignment of error, then, is whether the county court's order, in response to the motion made by Compau, constituted legal process within the meaning of §§ 407 and 231m(a). Authority from federal and state courts indicates that § 407 does not apply to voluntary payments made by a recipient of Social Security benefits. See, e.g., Johnson v. Wing, 178 F.3d 611 (2d Cir. 1999), cert. denied ___ U.S. ___, 120 S.Ct. 1177, 145 L.Ed.2d 1085 (2000); Fetterusso v. State of N.Y., 898 F.2d 322 (2d Cir.1990); Moore v. Colautti, 483 F.Supp. 357 (E.D.Pa.1979), affirmed 633 F.2d 210 (3d Cir.1980); C.G.A. v. State, 824 P.2d 1364 (Alaska 1992); Tunnicliff v. Com., Dept. of Public Welfare, 483 Pa. 275, 396 A.2d 1168 (1978); Russo v. Russo, 1 Conn.App. 604, 474 A.2d 473 (1984); French v. Dep't of Soc. Serv., 92 Mich.App. 701, 285 N.W.2d 427 (1979). But see U.S. v. Univ. Hosp. of State Univ. of New York, 575 F.Supp. 607 (E.D.N.Y.1983), affirmed 729 F.2d 144 (2d Cir.1984). The Second Circuit has stated: Congress intended the words or other legal process to embrace not only the use of formal legal machinery but also resort to express or implied threats and sanctions.... Thus, section 407(a) is violated when the state places itself in the position of a preferred creditor or coerces payment from protected benefits. Philpott [ v. Essex County Welfare Board, supra, ] and the statute, however, do not eliminate the underlying debt but merely preclude states from enforcing an obligation against protected federal funds. Fetterusso v. State of N.Y., 898 F.2d at 328. The Second Circuit concluded in that case that § 407 had not been violated by New York's collection of Social Security benefits to pay for the care and treatment of individuals in state institutions, as there was no basis for concluding that any of the appellants did not voluntarily agree to the use of their social security benefits to pay the costs of their care and treatment. Id. This reasoning regarding § 407 is persuasive and applies equally to the interpretation of the similar language of § 231m(a). In the instant case, the payment of Charlene's attorney fees has been volunteered, not by Charlene, but by Compau as Charlene's conservator and guardian. The appointment of a conservator vests in him or her title as trustee to all property of the protected person, presently held or thereafter acquired, including title to any property theretofore held for the protected person by custodians or attorneys in fact. Neb.Rev.Stat. § 30-2649 (Reissue 1995). Neb.Rev.Stat. § 30-2653(c) (Reissue 1995) provides, in relevant part: A conservator, acting reasonably in efforts to accomplish the purpose for which he [or she] was appointed, may act without court authorization or confirmation to .... (19) pay or contest any claim; to settle a claim by or against the estate or the protected person ... by compromise, arbitration, or otherwise. Neb.Rev.Stat. § 30-2654(a) (Reissue 1995) further provides, in relevant part: (2) The conservator is to expend or distribute sums reasonably necessary for the support, education, care or benefit of the protected person with due regard to (i) the size of the estate, the probable duration of the conservatorship and the likelihood that the protected person, at some future time, may be fully able to manage his [or her] affairs and the estate which has been conserved for him [or her]; (ii) the accustomed standard of living of the protected person and members of his [or her] household; (iii) other funds or sources used for the support of the protected person. .... (4) Funds expended under this subsection may be paid by the conservator to any person, including the protected person, to reimburse for expenditures which the conservator might have made, or in advance for services to be rendered to the protected person when it is reasonable to expect that they will be performed and where advance payments are customary or reasonably necessary under the circumstances. The Department has not challenged the propriety of the attorney fees or the payment thereof, nor is there any question presented regarding a breach of Compau's fiduciary duty in allowing payment of the fees. The sole argument advanced by the Department in this regard is that payment of the fees, pursuant to the allowance of the county court, violates §§ 407 and 231m(a). Those sections, however, would not preclude Charlene from paying attorney fees with her federal entitlement income if she chose and was competent to do so. Given that fact, those sections cannot bar Compau, as Charlene's conservator and guardian, from making that determination on her behalf. See Texas Baptist Children's Home v. Corbitt, 321 S.W.2d 610 (Tex.Civ.App.1959). The Department's reliance on Woodall v. Bartolino, 700 F.Supp. 210 (D.N.J.1985), is misplaced. In that case, and in Kriegbaum v. Katz, 909 F.2d 70 (2d Cir.1990), the trial courts ordered payment of debts owed to New Jersey and New York, respectively, from accumulated money in the possession of a guardianship estate. Those cases stand for the principle that § 407 protects income received by a guardian where legal process within the meaning of § 407 is used to obtain payment of a debt. In this case, however, Compau is not resisting payment of the debt. Therefore, no legal process has been utilized within the meaning of §§ 407 and 231m(a). Although the county court in this case entered an order allowing payment of the attorney fees, the court did so at the express request of Compau. Thus, legal process was not used within the meaning of §§ 407 and 231m(a). Compau determined that the debt should be paid and went to the court to secure the approval of the county court in advance for payment of the debt and to obtain an order for the Department to supplement Charlene's income to fully pay Maple Crest for the costs of Charlene's care. The Department is not, in this appeal, challenging that part of the county court's order directing the Department to supplement Charlene's income while her federal entitlement income is being diverted to pay the attorney fees. The Department's assignments of error are limited to the effect of the federal anti-attachment statutes and the application of the doctrine of primary jurisdiction, discussed below. These assignments of error do not address the propriety of ordering the Department to supplement Charlene's income, and we do not comment on that issue. The Department's first assignment of error is without merit. The county court order was not legal process within the meaning of §§ 407 and 231m(a), but was simply a ratification of Compau's determination that Charlene's attorney fees should be paid from her only available source of income. As Charlene's conservator and guardian has volunteered payment of the debt on Charlene's behalf, no coercive legal process has been invoked, and federal law has not been violated.