The Elkhart Superior Court was within its discretion when it asserted a garnishment exemption on a debtor’s behalf because there are exceptions that allow a debtor to receive the benefit of an exemption without asserting it, the Indiana Court of Appeals decided Tuesday.
In Russell F. Dumka v. Lori Erickson and Edward Jones, 20A03-1605-PL-1178, Russell Dumka and Craig Erickson, who is now deceased, each owned 50 percent of MIKO-Home Machine Co., Inc., with Erickson serving as president, Dumka serving as vice president, Craig’s wife, Lori, serving as secretary and treasurer. All three constituted the board of directors.
In 2014, Dumka filed a stockholder’s derivative action on behalf of MIKO against the Ericksons, alleging that they had stolen company property and requesting that a receiver be appointed for MIKO. The Elkhart Circuit Court entered default judgment in favor of MIKO and against the Ericksons for more than $2 million, plus attorney fees and court costs. Then in January 2015, the trial court conveyed MIKO’s tangible assets to Dumka and assigned part of the judgment to him.
A year later, Dumka filed for proceedings supplemental against Lori Erickson and named Edward Jones as garnishee-defendant, seeking to recover the unpaid balance of nearly $100,000 remaining under the judgment. During a hearing, Dumka submitted affidavits showing that Lori Erickson had inherited her husband’s Individual Retirement Account totaling $51,115.02.
Dumka requested that the trial court order the liquidation of the IRA. Although the trial court instructed Dumka’s attorney to submit a proposed garnishment order, which it would approve, the court instead chose to issue an order denying Dumka’s request in February 2016 on the basis that “IRAs inherited by surviving spouses are exempt” from garnishment.
Dumka moved to correct error, arguing that the trial court erred by asserting exemptions on Lori Erickson’s behalf and acting as her advocate. The Elkhart Circuit Court denied the motion, finding that it took judicial notice of Indiana Code 34-55-10-2(c)(6). Although Dumka conceded on appeal that the IRA is exempt from garnishment under state statute, he also argued that Lori Erickson is not entitled to the exemption because she did not timely assert it.
But Judge Terry Crone wrote for a panel of the Indiana Court of Appeals Tuesday that the Indiana Supreme Court had created exceptions to the exemption assertion requirement in cases such as Branham v. Varble, 952 N.E.2d 744, 746 (Ind. 2011) and Mims v. Commercial Credit Corp., 261 Ind. 591, 596, 307 N.E.2d 867, 870 (1974).
As in those cases, the present case involved an unrepresented debtor, Lori Erickson, Crone wrote. Further, her failure and the court’s failure to recognize the exemption was of no consequence, and trial courts are authorized to take judicial notice on its own at any stage of the proceeding, he said. Thus, the court did not abuse its discretion in denying Dumka’s garnishment request.