Court Opinion

ID: 9528472
Source: CourtListenerOpinion
Date Created: 2023-08-07 03:41:28.051196+00
Date Added: 2024-06-11T13:26:53.971134
License: Public Domain

DOOLIN, Justice,
with whom HARGRAVE, Justice, joins, dissenting.
I cannot agree with the majority that a social security recipient is entitled to a discharge of his legal obligation to make monthly payments to a judgment creditor. In my opinion, the authorities cited by Arles and relied upon by the majority, 42 U.S.C. § 407(a) and Philpott v. Essex County Welfare Board, supra, have absolutely nothing to do with the matter in question. There is no evidence in the record which indicates, or even suggests that any legal process has been used to reach Arles’ social security benefits. The Court decides today an issue which is not substantiated in the undisputed facts presented for review. I dissent.
Arles’ social security benefits started in 1979. Nevertheless, Arles had two outstanding loan obligations to bank, and in November, 1981, he consolidated those loan obligations, and received a $8,678.00 cash disbursement. Under the terms of the promissory note, Arles promised to pay bank 30 monthly installments of $289.27, with the first payment due in January, 1982. Arles used a 1975 Chevrolet Monte Carlo and a 1978 Ford Ranger as collateral; however, both vehicles were released and bank took a security interest in a 1974 Plymouth Suburban Station Wagon.
Arles and his son (not a party herein) then executed another promissory note with bank for $2,296.08 in January, 1982. Under the terms of this second note, Arles and his son promised to pay bank 24 monthly installments of $95.67. Arles and his son used a 1977 Ford LTD as collateral. Bank then took a security interest in a 1976 GMC Pickup Truck. After making payments for approximately one year, Arles defaulted on both loans. The amount due on the two notes were $5,936.31 and $1,501.57, respectively. Bank obtained default judgments against Arles. Subsequently, Arles and bank negotiated an agreement, which substantially reduced Arles’ former monthly payments of $289.00 to $60.00. The trial court ordered Arles to answer as to assets, income and property.
During the assets hearing, the trial court determined the parties had previously entered into a post judgment agreement. The trial judge stated: “based upon the facts solicited from the defendants at said hearing that they are capable of making such payments and that the agreement of the parties should be approved.” See, e.g., Dickason v. Dickason, 607 P.2d 674, 677 (Okla.1980). The trial court, undoubtedly gave effect to the parties’ intent at the time of contract formation, and entered an order approving the parties’ installment contract, directing Arles to make monthly payments of $60.00 to bank. Mercury Investment Co. v. F.W. Woolworth Co., 706 P.2d 523, 529 (Okla.1985). The trial court’s order does not require Arles to assign or transfer his social security benefits to bank, nor does it specify or delineate any source for repayment of Arles’ obligation. Arles did not appeal from that order, or the earlier default judgment rendered against him.
As maker of the promissory notes, Arles unconditionally promised and legally committed himself to pay bank a fixed sum of money at a definite time. Price v. Mize, 628 P.2d 705, 706 (Okla.1981). The promissory notes and stipulated installment contract between Arles and bank makes no reference to any particular fund as the means or source of Arles’ repayment. West v. Anderson, 171 Okla. 165, 42 P.2d 543 (1935). There is not one iota of evidence that Arles’ promise to pay bank was involuntary.
Arles made no honest effort to comply with his contractual obligation, incorporated into the trial court’s order. Bank made *543numerous applications for contempt citations and bench warrants against Arles. Almost three years later, Arles was arrested for failure to appear pursuant the trial court’s order.
During this hearing on the trial court’s indirect contempt action, Arles requested court appointed counsel, and was released on his personal recognizance. Subsequently, Arles filed a motion requesting that the trial court “exempt from execution those benefits received under the Social Security Act.”
The trial judge did not conclude that Arles had no other sources of income. At the contempt proceedings, bank asserted, Arles testified, and the district judge believed that Arles had worked temporary jobs performing construction and manual labor for Jackson Roofing Company and one L.G. Kirkland. It can hardly be said that Arles had no other potential sources of income, or that his “only income was social security and disability benefits.” In fact, Arles testified that his monthly living expenses were $532.00. However, he only received $400.00 in social security and disability benefits. The fact finder stated: “the Court feels like that there were means, where be it limited, for payments to be made in this account, ..., but the defendant [Arles] failed to appear before this Court on the Court’s order to show and to establish this.” Moreover, Arles acknowledged that he agreed to pay bank the sum of $60.00 a month, and he testified that he could make monthly payments of $25.00.
The majority’s opinion is premised upon the exaggerated assertion that the trial court has compelled Arles to repay the loan in order “to avoid the threat of a judicial sanction in the form of a contempt citation.” Arles’ arrest and imprisonment was not imposed for his failure to pay the loan. What the majority neglects to mention is that Arles had evaded and ignored the trial court’s orders to appear and report his assets. The power of the district court to enforce judgments and orders carries with it the separate power to make inquiry concerning any failure to obey them. Smith v. Speed, 11 Okla. 95, 66 P. 511 (1901). See also, Dickson v. Dickson, 637 P.2d 110, 113 (Okla.1981). In my opinion, the record before this Court demonstrates rather clearly that bank was attempting to reach supplemental income earned by Arles. This is why bank repeatedly requested Arles to appear and report his assets. However, these crucial facts, clearly reflected in the record, escape the majority’s analysis.
The Court of Appeals found no error in the trial court’s order, and concluded that bank’s action against Arles did not constitute an execution, levy, attachment, garnishment, or “other legal process” directed against Arles’ social security and state assistance benefits. In this regard, the appellate court, citing Tidwell v. Schweiker, 677 F.2d 560, 568 (7th Cir.1982), cert. denied 461 U.S. 905, 103 S.Ct. 1874, 76 L.Ed.2d 806 (1983), as persuasive authority, noted other jurisdictions “have differentiated between the prohibited actions under § 402 and agreements in which the beneficiary became obligated to pay back a loan without any reference to the source of repayment.” See Moore v. Colautti, 483 F.Supp. 357 (E.D.Pa.1979), aff'd mem. 633 F.2d 210 (3d Cir.1980) (federal court upheld as constitutional Pennsylvania Department of Public Welfare’s policy requiring individuals who received state-administered assistance pending federal approval of Supplemental Security Income benefits to sign a repayment/reimbursement agreement providing that state assistance was a loan which must be repaid), and Tunnicliff v. Commonwealth of Pennsylvania Dept. of Public Welfare, 483 Pa. 275, 280, 396 A.2d 1168, 1171 (1979) (Philpott “does not, however, obviate the underlying obligation of the debtor who remains liable for the debt.”). Accord, French v. Director, Michigan Dept. of Social Service, 92 Mich. App. 701, 285 N.W.2d 427 (1979).
I agree with the appellate court’s statement that it was not the intent of Congress or the legislature to deprive Arles of “his right to dispose of his income as he pleases, or to deprive a creditor from enforcing his creditor’s rights against the recipient of social security benefits. (Arles) in signing *544the promissory notes did not subject his social security benefits to any legal process or transfer control of social security benefits to this creditor.” In other words, what Arles does with his money once received is his own business.
It is difficult for me to comprehend the majority’s analysis, which dons a bankruptcy hat, and frustrates the parties’ installment contract, which was put into effect through the district court’s order. Contrary to the majority’s assertion, bank has used no prohibited legal process against Arles in its attempt to enforce the district court’s order which merely approved the stipulated installment contract, voluntarily executed between the parties. Nothing in § 407 prohibited the district court from considering Arles’ social security benefits in determining Arles’ ability to pay bank. See, e.g., Meadows v. Meadows, 619 P.2d 598, 600-601 (Okla.1980). Nothing in § 407 prohibits a creditor from suing and obtaining a judgment against a social security recipient. Philpott is inapposite and factually distinguishable from this case.
In Philpott, the county welfare board filed its reimbursement agreement in the Essex County Court, which under New Jersey law had the binding effect of a final judgment. The welfare agency then sought to garnish Wilkes’ bank account held by Doris Philpott, Wilkes’ trustee. As the majority concedes, a source of repayment, although not delineated in the agreement, was definitely designated and targeted by the welfare board. “Philpott does not suggest that the entry of the New Jersey judgment representing the amount for which the recipient of welfare benefits was liable to make reimbursement constituted a violation of § 407. The Essex County Welfare Board encountered the bar of § 407 when it sought to (garnish) the social security funds on deposit for the benefit of the recipient.” State Central Collection Unit v. Stewart, 292 Md. 255, 438 A.2d 1311, 1313 (1981) [emphasis added].
In the instant case, however, Arles had voluntarily established a debtor-creditor relationship with bank. Arles consolidated his loans, defaulted, and then negotiated an installment contract to repay his debt. For almost three years, bank, after tracking down Arles from county to county, has not attempted to attach Arles’ social security benefits as they are received, nor has bank attempted to garnish Arles’ bank account, if he has one, or reach any social security funds held by Arles’ son, his representative payee. Query: Where’s the legal process? The record does not support the majority’s position that legal process is being used to reach Arles’ social security benefits.
I again emphasize: what Arles does with his social security benefits once received is his own financial affair. In Russo v. Russo, 1 Conn.App. 604, 474 A.2d 473, 476-77 (1984), the Appellate Court of Connecticut observed:
The payment by the (recipient) of his own liabilities out of his own funds, whether those funds consist of social security benefits or other types of income, is not prohibited by federal law. A social security disability benefit is a source of income designed to provide periodic sums from which the recipient can expend funds necessary for his own support or the support of his dependents. Although a creditor may not garnish a bank account in which social security recipient of disability benefits has deposited his checks; nothing in 42 U.S.C. § 407 prevents the use of funds, when received, to pay loans or debts for which the beneficiary is obligated where the agreement to repay does not delineate the source of repayment. Here, the court’s order does not subject the social security benefits to legal process or transfer control of them to anyone else or designate them as the source of the payments. The order, therefore, does not contravene the federal statute, (citations omitted).
The majority’s decision may have a more immediate impact which the majority does not consider. In setting aside the district court’s order, bank cannot enforce the parties’ installment contract. Arles escapes his legal duty to pay his just debts. Through legal theatrics, the majority nullifies Arles’ promise to pay bank, and im*545pairs his contractual capacity. The Court ignores the practical problems posed by its decision, for the court dodges the critical question underlying the collection method used by bank.
When viewed in its full implication, Arles’ commitment to repay bank is no different from any other commercial retail installment contract. Oklahoma citizens with fixed incomes, whether social security, retirement or welfare benefits, should have the right to borrow money, or purchase merchandise by executing installment contracts to repay the debt owed. However, the decision of the majority unobtrusively sanctions a form of invidious economic discrimination against those with fixed incomes. Such recipients can now legally escape liability by contending that their only source of income is exempt from legal process. No rational creditor will extend credit to those with fixed incomes if the debt cannot be enforced in a court of law.
I would conclude that the district court’s order does not violate § 407, or the United States Supreme Court’s decision in Phil-pott.