Today, the Indiana Court of Appeals issued a decision that will be welcome to Indiana residents who are suffering economic distress. In
, 939 N.E.2d 630 (Ind. Ct. App. 2010), Case No. 82A04-1003-SC-177, the Court found that one procedure for enforcing a judgment in the Vanderburgh County Local Rules violated the Indiana Constitution and held that the trial court did not enforce some of the protections provided to debtors from harassing behavior by their creditors.
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In October 2003, Grace Whitney filed a small claims complaint against Carter and, after a trial, received a judgment for $401.60 plus $44.00 in court costs and interest. In March 2004, Grace Whitney filed proceedings supplemental and the small claims court, following local rules, entered a "personal order of garnishment" against Carter that ordered Carter to garnish his own income and send payment to Grace Whitney until his debt was satisfied. Over the course of the next 6 years, Grace Whitney filed 12 informations for contempt against Carter. After a hearing on one of those informations for contempt, the trial court ordered Carter to pay ten dollars a month on the debt. This order was twice reaffirmed after hearings on subsequent informations for contempt.
In June 2009, Grace Whitney caused a writ of attachment to be issued against Carter. Even though Carter told the court that she was disabled and had no money, the small claims court ordered Carter to serve thirty days in jail. The small claims court informed Carter that she could "purge herself of contempt" by paying $110 on the judgment. After Carter filed a motion to correct error, the small claims court "expunge[d]" the sentence.
After the January 2010 information for contempt was filed, Carter's counsel filed a motion to dismiss the information for contempt and a motion to modify the order for payment. Carter's counsel argued that Carter had been disabled since January 29, 2004, that her only source of income was Social Security Disability, that she had no non-exempt income or assets, and that her situation was unlikely to change. The small claims court denied the information for contempt, but also denied Carter's request to modify the order of payment and allowed the personal order of garnishment to remain in effect. It also denied Carter's request that Grace Whitney have a good faith basis for believing that she has non-exempt assets or income before filing another information for contempt. Carter appealed.
On appeal, the Court first addressed whether the use of informations for contempt for failure to pay a judgment pursuant to a personal order of garnishment violated the Indiana Constitution.
Article 1, Section 22 of the Indiana Constitution generally prohibits imprisonment for debt. The Court concluded that the Vanderburgh County Local Rules appeared to contemplate appeared to violate this provision.
The Vanderburgh County Local Rules appear to contemplate the use of contempt to enforce an obligation to pay money even where, as here, the debt does not involve child support or fraud. This threat of contempt and imprisonment has been repeatedly used against Carter. To the extent these local rules have been used as a basis for contempt proceedings for Carter‟s failure to pay the judgment for Grace Whitney Properties, this process is in direct conflict with numerous decisions of our supreme court and this court.
The Court then addressed whether the "personal order of garnishment" was authorized by law. A "personal order of garnishment" requires a judgment debtor, rather than a third-party garnishee, to pay non-exempt income to satisfy a judgment. While the Court found that only Vanderburgh County had a Rule specifically mentioning a "personal order of garnishment," it concluded that such an order was authorized by
I.C. § 34-55-8-7, which authorizes a court to order income not exempt from execution or process in the hands of a judgment debtor to be applied to satisfy the judgment, which appears to be the process used by the small claims court here in entering the personal order of garnishment. However, the use of such an order was improper in this case.
A personal order of garnishment appears to be authorized by Indiana Code Section 34-55-8-7, and we can envision circumstances where such an order would be useful, i.e., where the judgment debtor is self-employed. However, we agree with Carter that, under the circumstances here, the personal order of garnishment was improper. We held in [
Button v. James, 909 N.E.2d 1007, 1009 (Ind. Ct. App. 2009], that "any order requiring [a debtor] to pay the judgment must be based on evidence of his ability to pay." The judgment creditor has the burden of showing that the debtor has property or income that is subject to execution.
Grace Whitney had not presented any evidence of Carter's ability to pay, so the personal order of garnishment was improper.
Finally, the Court addressed whether Grace Whitney could be prevented from enforcing the judgment in the future. The Court described what a creditor must show in order to justify further proceedings supplemental.
Having been made aware repeatedly that Carter is disabled and has no income or property that can be used to satisfy the judgment, Grace Whitney Properties must make a showing that new facts justifying a new order or examination have come to its knowledge in order to justify future proceedings supplemental. Future "fishing expeditions" are improper.
The Court's conclusions on each of these topics was informed by Grace Whitney's decision not to file an appellate brief, which meant that Carter only needed to make a
prima facie showing of error. However, the fact that the Court chose to publish this decision demonstrates it intends this decision not to be limited by that fact. While Vanderburgh County will likely take a close look at its local rules, anyone attempting to collect on a judgment should pay attention to the Court's description of what a creditor must prove in order to collect on that judgment.
