A recent published decision from the Michigan Court of Appeals affects our clients in two different categories—employers and creditors.
First, a basic refresher. A writ of garnishment is a tool under Michigan law that a creditor can use to collect after a judgment has been entered in its favor (with minor exceptions not relevant here). The writ is issued by the court and then served on the garnishee defendant, which is the person or entity that owes money to or holds money for the debtor. That includes, but is not limited to, employers, banks, other financial institutions, and the Michigan Treasury for income tax refunds.
In Velocity MRS Fund IV v. Nextgen Pain Associates & Rehabilitation, ___ N.W.2d ___, 2023 WL 2542469, and for the first time in a published opinion, the Court of Appeals confirmed that a garnishee defendant has no standing to object to a writ of garnishment. In this case, Auto-Owners insurance maintained it did not owe any money to the judgment debtor, Nextgen, and it took it upon itself to file an objection and motion to quash the writ. The court considered and analyzed the history of the Court Rule, from a more direct provision (that itself was contradictory) to the passive voice of the current rule, MCR 3.101(K)(1).
The court did acknowledge that a garnishee defendant may have other arguments to make in the lower court, but objecting to the writ of garnishment is not one of them. Only the judgment debtor may object to a garnishment in Michigan.
This is important information for employers, no matter how big your business is. Read the directions on the writ carefully, and complete and file the garnishee disclosure that comes with it within fourteen days of service. Timely compliance is extremely important because a garnishee defendant can be held liable for the debt if it fails to respond. Speak with your attorneys about it if you have any questions or doubts at all. Don’t attempt to object to a writ of garnishment, and certainly don’t tell your employee that you’ll object for him or her.
The lesson here for a creditor, whether a bank, credit union, other financial institution, debt buyer, or an individual, is twofold. First, if you receive a non-periodic garnishment that seeks funds you hold for the judgment debtor, follow the advice provided to employers above. Follow the directions, complete and file the disclosure, and talk to your attorneys. No matter what type of relationship you have with the debtor, do not attempt to object to the garnishment. On the other hand, if you are the judgment creditor, the party seeking the garnishment, keep this case on hand. It provides a useful tool to defeat a misplaced objection from the garnishee defendant.
The attorneys of Dalton & Tomich counsel employers and financial institutions every day. Contact us today to discuss any questions you have about employment law, responding to garnishments, or to collect funds you are owed.