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01/06/76 SEARS v. A. T. & G. COMPANY

January 6, 1976

SEARS, ROEBUCK & COMPANY
v.
A. T. & G. COMPANY, INC.



Appeal from Wayne, Joseph A. Moynihan, Jr., J.

Bashara, P. J., and J. H. Gillis and M. F. Cavanagh, JJ. J. H. Gillis, J., concurred. Bashara, P. J. (dissenting).

SYLLABUS BY THE COURT

Opinion of the Court

1. Garnishment -- Deductions from Income -- Consumer Credit Protection Act -- Statutes.

A deduction taken from an employee-debtor's pay by the employer-garnishee, for the purpose of repayment of a loan made to the employee by the employer, cannot serve to reduce disposable income for purposes of the Federal Consumer Credit Protection Act because such a payment is not a deduction required by law to be withheld (15 USCA 1672).

2. Garnishment -- Limitations on Garnishment -- Deductions from Income.

An employer may deduct from the disposable income of its employee whatever sum is agreed upon by the employee-debtor where the employee owes sums to the employer, without limitation; a garnisher may then claim the difference, if any, between the employer's deduction and 25% of the debtor's disposable income, and if the employer's deduction is more than 25% of disposable income the garnisher will recover nothing.

3. Garnishment -- Garnishees -- Setoff -- Priority of Claim -- Court Rules.

A court rule which allows a garnishee to claim any setoff of which he could have availed himself against the principal defendant if he had not been garnisheed establishes a priority in favor of the garnishee as opposed to the garnisher where the principal defendant is indebted to both the garnishee and the garnisher (DCR 738.6; GCR 1963, 738.6).

4. Garnishment -- Limitations on Garnishment -- Statutes -- Court Rules -- Reasonable Construction.

Garnishment will be limited whenever possible by reasonable construction of court rules and statutes because it is a harsh remedy.

5. Garnishment -- Exemption of Wages -- Appeal and Error -- Construction of Rules.

A rule which affects the exemption of wages from garnishment is construed by the Court of Appeals in a way that will benefit the debtor.

6. Garnishment -- Consumer Credit Protection Act -- Disposable Income -- Limitations on Garnishment -- Statutes.

The Federal Consumer Credit Protection Act limits garnishments to 25% of the debtor's disposable income, and state laws should be interpreted in a manner that best serves the purpose of the Federal law, which is to ensure that wage earners are able to receive at least 75% of their take-home pay so that they have enough cash to meet basic needs (15 USCA 1601 et seq.).

Dissent by Bashara, P. J.

7. Garnishment -- Consumer Credit Protection Act -- Private Transactions -- Wage Assignments -- Statutes.

The Consumer Credit Protection Act applies only to garnishments and similar transactions enforced by judicial proceeding and does not apply to voluntary private transactions such as wage assignments (15 USCA 1601 et seq.).

8. Garnishment -- Garnishees -- Setoff-Deductions from Income -- Disposable Earnings -- Statutes -- Court Rules.

A garnishee defendant is entitled by court rule to a setoff before the garnisher plaintiff can reach the funds of the principal defendant which are in the hands of the garnishee defendant, and this setoff is not to be deducted in determining disposable earnings under the Consumer Credit Protection Act because it is not a deduction "required by law to be withheld" (DCR 738.6; 15 USCA 1672).

9. Garnishment -- Creditor's Rights -- Loans to Employees -- Deductions from Income.

A ruling which allows an employer who is periodically deducting less than 25% of an employee's disposable income in repayment of a loan to defeat the rights of judgment creditors indefinitely by increasing the deduction to 25% of disposable income when writs of garnishment are served is patently inequitable.

The opinion of the court was delivered by: Cavanagh

Complaint in district court by Sears, Roebuck & Company against A. T. & G. Company, Inc. for payment of sums allegedly due under a writ of garnishment. Judgment for plaintiff. Upon appeal to the circuit court, the case was remanded, disallowing any deduction from the employee-debtor's wages in excess of 25%. Defendant appeals.

We are called upon to determine the rights and priorities of parties to a garnishment proceeding; we must consider novel issues of Federal and ...


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