In 2007, I wrote that “Jail Time Is Not An Available Remedy In Collection Actions In Indiana.” That principle is alive and well in Indiana as explained by the Indiana Court of Appeals in Carter v. Grace Whitney Properties, 2010 Ind. App. LEXIS 2172. Perhaps to the chagrin of lenders who want paid, when it comes to judgment enforcement, Indiana places certain limits on how far courts can go.
The history. The plaintiff obtained a money judgment against the defendant and filed proceedings supplemental. The court ordered the defendant to make periodic payments to satisfy the judgment. Presumably because the defendant failed to make payments, the plaintiff filed, on at least twelve occasions over a five-year period, “informations for contempt” against the defendant. At one point, the plaintiff convinced the court to sentence the defendant to thirty days in jail, although the court later expunged the sentence. After some procedural maneuvering by the parties and the court, the court entered a modified order – coined a “personal order of garnishment” – to compel the defendant to make payments. The defendant appealed that order.
“Personal order of garnishment.” The phrase “personal order of garnishment” is not a term of art in Indiana, but the Court of Appeals concluded that Ind. Code § 34-55-8-7 covers the concept. (Typically, “garnishment” relates to third parties, not the defendant/judgment debtor.) Trial courts may order income, not exempt from execution, to be applied to satisfy a judgment. As such, a “personal order of garnishment” (against a defendant) is an applicable and proper mechanism of collection under the right circumstances. In Carter, the order issued by the trial court was not proper because the defendant had no ability to pay. “The judgment creditor has the burden of showing that the debtor has property or income that is subject to execution.” No such evidence existed in Carter. Translation: courts can’t order defendants to pay money that they don’t have and then punish such defendants for not paying.
No contempt powers. Ind. Trial Rule 69(E) and a handful of statutes, including Ind. Code § 34-55-8, govern Indiana proceedings supplemental. Article 1, Section 22 of the Indiana Constitution provides the foundation upon which all Indiana collection laws are based:
The privilege of the debtor to enjoy the necessary comforts of life, shall be recognized by wholesome laws, exempting a reasonable amount of property from seizure or sale, for the payment of any debt or liability hereafter contracted; and there shall be no imprisonment for debt, except in case of fraud.
One issue in Carter was whether the use of contempt powers to force payment for a debt violates the Indiana Constitution. (Black’s defines “contempt power” as a court’s “inherent power to punish one for contempt of its judgments or decrees . . ..” One such form of punishment is jail time.) Money judgments generally are enforced by execution and various auxiliary remedies. As the Court noted in Carter, however, “contempt of court is not one of these.” The mere threat of imprisonment is improper too. Carter held that, to the extent Vanderburgh County’s local rules provided a basis for contempt proceedings for a defendant’s failure to pay a judgment, such rules are contrary to Indiana law.
Future proceedings? Another question in Carter was whether the trial court should limit future proceedings supplemental in the absence of a good faith belief that the defendant had property or income subject to court process. In Indiana, the general rule is that “a creditor cannot require a debtor to attend ongoing proceedings supplemental hearings and be reexamined continuously as to whether the debtor has acquired any new assets or income.” In other words, “future ‘fishing expeditions’ are improper.” The exception to that rule is if the plaintiff makes a showing that new facts justify a new order for examination. The Court held in Carter that any future proceedings supplemental against the defendant “must be supported by new facts justifying a new order or examination.”
The Carter decision, together with the recent Branham case addressed in my July 14 and September 23, 2011 posts, illustrates some of the boundaries to proceedings supplemental specifically and the collection of debts generally.