                                                                     F I L E D
                                                               United States Court of Appeals
                                                                       Tenth Circuit
                                   PUBLISH
                                                                      AUG 10 1998
                     UNITED STATES COURT OF APPEALS
                                                                 PATRICK FISHER
                                 TENTH CIRCUIT                             Clerk



 BERTHA TOM,

          Plaintiff-Appellee,

 v.                                                No. 97-2244


 FIRST AMERICAN CREDIT UNION,

          Defendant-Appellant.


             APPEAL FROM THE UNITED STATES DISTRICT COURT
                    FOR THE DISTRICT OF NEW MEXICO
                          (D.C. No. CIV-96-1255)


Thomas Lynn Isaacson (James Jay Mason on the brief), Mason, Isaacson, &
Macik, P.A., Gallup, New Mexico, for Defendant-Appellant.

Samuel D. Gollis, DNA-People’s Legal Services, Inc., Keams Canyon, Arizona,
for Plaintiff-Appellee.


Before BALDOCK , MAGILL , * and HENRY , Circuit Judges.


HENRY , Circuit Judge.




      Honorable Frank J. Magill, Senior Circuit Judge, United States Court of
      *

Appeals for the Eighth Circuit, sitting by designation.
       The district court granted plaintiff Bertha Tom summary judgment on her

claim that defendant First American Credit Union improperly seized the funds in

her bank account, and the Credit Union appeals that decision. We affirm the

district court’s decision with respect to Mrs. Tom’s claims that the Credit Union

violated the Social Security and Civil Service Retirement Acts when it seized the

contents of her account. However, because Mrs. Tom waived her breach of

contract claim by failing to raise it in her summary judgment papers, we reverse

the district court’s ruling that the Credit Union’s seizure of funds constituted a

breach of contract.

                                  BACKGROUND

       In 1989, Mrs. Tom opened an account at what would later become the First

American Credit Union. When she opened this account, she signed a Revolving

Credit Plan Agreement that provided as follows:

       [I] hereby pledge all shares and deposits and payments and earnings
       thereon which [I] have or hereafter may have . . . as security for any
       and all moneys advanced under this plan . . . and authorize the credit
       union to apply such shares, deposits and earnings to payment of said
       obligation. Such application may be pursuant to such pledge or as a
       right of offset.

Aplt’s App. at 55. The Agreement also stated that “[i]n the event payment is not

made when due, then the entire unpaid balance of all advances made plus interest

shall become immediately due and payable without notice at the option of the

credit union.”   Id.

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      In the fall of 1994, Mrs. Tom’s Credit Union account balance was $1,769, a

sum that consisted entirely of funds she had received as payments under the

Social Security and Civil Service Retirement Acts. The Credit Union informed

Mrs. Tom that it intended to deduct funds from her account in order to satisfy an

alleged $2,379.20 debt to the Credit Union. The Credit Union claimed this debt

was attributable to several loans that Mrs. Tom and her late husband had obtained

between 1974 and 1980 but had failed to repay. When Mrs. Tom demanded that

the Credit Union turn over the entire balance of her account to her, the Credit

Union refused. Some months later, the Credit Union, citing its right to use the

funds in her account to offset her alleged $2,379.20 debt, seized the entire $1,769

in Ms. Tom’s account.

      Mrs. Tom sued the Credit Union in federal court, alleging that the Credit

Union’s actions (1) violated § 407(a) of the Social Security Act (Count I), (2)

violated § 8346(a) of the Civil Service Retirement Act (Count II), (3) constituted

a breach of contract (Count III), and (4) violated New Mexico’s Unfair Trade

Practices Act (Count IV). The parties subsequently stipulated to all of the

relevant facts, and both parties moved for summary judgment. The district court

granted Mrs. Tom’s motion with respect to the first three counts of her complaint

and awarded her $1,769 in damages. However, the court ruled for the Credit

Union on Count IV, holding that it had not violated New Mexico’s Unfair Trade


                                          3
Practices Act. The Credit Union appealed the district court’s ruling with respect

to the first three counts. Because Mrs. Tom has not cross-appealed the decision

regarding the Unfair Trade Practices Act claim, we will only examine the district

court’s decision regarding the first three counts.

                                      DISCUSSION

                                  Standard of Review

       We review de novo the district court’s grant of summary judgment,

applying the same legal standard as the district court.        Lowe v. Angelo’s Italian

Foods, Inc. , 87 F.3d 1170, 1173 (10th Cir. 1996). Summary judgment is

appropriate if the evidence, when viewed in the light most favorable to the non-

moving party, demonstrates that no genuine issue of material fact exists and that

the moving party is entitled to judgment as a matter of law.        Seymore v. Shawver

& Sons, Inc. , 111 F.3d 794, 797 (10th Cir.),     cert. denied , 118 S. Ct. 342 (1997).

                   Count I: Social Security Act (42 U.S.C. § 407)

       The district court held that the Credit Union’s actions violated the Social

Security Act’s anti-assignment provision. Under this provision, “none of the

moneys paid or payable or rights existing under this subchapter shall be subject to

execution, levy, attachment, garnishment, or other legal process.” 42 U.S.C. §

407(a). Although the Credit Union argued that § 407 applied only to “legal” (i.e.,

court-ordered) processes, the district court ruled that this anti-assignment


                                              4
provision also applied to an equitable self-help remedy such as the setoff that the

Credit Union employed. On appeal, the Credit Union once again contends that

equitable self-help remedies are not “other legal process[es]” and are, thus,

outside of the aegis of § 407.

      When it passed § 407 of the Social Security Act, Congress “impose[d] a

broad bar against the use of any legal process to reach all social security

benefits.” Philpott v. Essex County Welfare Bd.     , 409 U.S. 413, 417 (1973). The

Supreme Court has affirmed that Social Security benefits, even when converted to

“funds on deposit [that] [a]re readily withdrawable[,] retain[] the quality of

‘moneys’ within the purview of § 407.”      Id. at 416.

      In Philpott , the State of New Jersey required all welfare recipients to sign

agreements promising that if they ever became fiscally capable of doing so, they

would reimburse the county welfare board for all welfare payments they had

received. When one such welfare recipient received retroactive disability benefits

under the Social Security Act, the State sued him in attempt to collect those

funds. The Court, however, ruled that § 407 foreclosed New Jersey from reaching

a debtor’s Social Security payments.     See id. at 417.

      The Credit Union now asks us to distinguish         Philpott because, unlike the

agreement in that case, the Revolving Credit Plan Agreement permitted the Credit

Union to collect its debts without resorting to the court system. However, while


                                            5
Philpott involved an attempt by a creditor to use the court system rather than a

self-help remedy to collect a debt, there is no principled difference between the

agreement the State of New Jersey required welfare recipients to sign and the

Revolving Credit Plan Agreement the Credit Union required Mrs. Tom to sign:

Both were, in effect, contracts of adhesion that creditors attempted to use to get

their hands on Social Security payments.

       We can see no reason why Congress would, on the one hand, choose to

protect Social Security beneficiaries from creditors who utilized the judicial

system, a system that is built upon principles of fairness and protection of the

rights of litigants, yet, on the other hand, leave such beneficiaries exposed to

creditors who devised their own extra-judicial methods of collecting debts.           See

Crawford v. Gould , 56 F.3d 1162, 1166 (9th Cir. 1995) (rejecting a bank’s

argument that setoff is outside the purview of § 407 and stating that such a

“cramped reading of § 407 . . . would enable [creditors] to obtain Social Security

benefits through procedures that afford less protection than judicial process

affords”); but cf. Frazier v. Marine Midland Bank, N.A.        , 702 F. Supp. 1000, 1003

(holding that setoff is not within § 407's definition of “legal process”);    In re

Gillespie , 41 B.R. 810, 812 (Bankr. D. Colo. 1984) (same). Such a construction

of § 407 would run contrary to both logic and the spirit underlying the Social

Security Act. See Helvering v. Davis , 301 U.S. 619, 641 (1937) (“The hope


                                              6
behind [the Social Security Act] is to save men and women from the rigors of the

poor house as well as from the haunting fear that such a lot awaits them when the

journey’s end is near.”). Moreover, if the Supreme Court did not see fit to carve

an exception to § 407 where an important public interest–a state’s need to defray

the costs of supporting indigent individuals–was at stake, we will not create an

exception that would, for the most part, serve very private interests–banks’

desires to cut their bad-debt losses.   See also Bennett v. Arkansas , 485 U.S. 395,

397-98 (1988) (per curiam) (rejecting Arkansas’s argument that § 407 contained

an implied exception that would allow it to recover Social Security payments to

prisoners in order to help offset the costs of imprisonment).

       Although the Credit Union emphasizes that courts have previously

acknowledged banks’ common-law right to setoff,       see, e.g. , United States v.

Butterworth-Judson Corp. , 267 U.S. 387, 394-95 (1925), this fact is of no import

here. As the California Supreme Court recognized, the “right to setoff is not

absolute.” Kruger v. Wells Fargo Bank , 521 P.2d 441, 450 (Cal. 1974). In

Kruger , a bank attempted to exercise its common-law right to setoff against state

disability and unemployment payments that a beneficiary had deposited in her

account. Although a pair of California statutes exempted such funds from

“attachment” and “execution,”      see Cal. Civ. Proc. Code § 690.175 (superseded

1987); Cal. Unemp. Ins. Code § 1342 (amended 1983), the bank contended that


                                            7
setoff, as a common-law self-help remedy, was outside the purview of the

statutes. The court, though, thought otherwise:

       Although the banker’s setoff differs from attachment and execution
       in that it does not require the aid of a state official, there is no
       relevant difference between the two procedures as to the state
       objective of protection of unemployment compensation and disability
       benefits from claims of creditors. The assertion of a banker’s setoff
       has exactly the same effect as a third party’s levy of execution on the
       account–it deprives the depositor of the income which the state
       provided him to meet subsistence expenses, compelling the state
       either to give him additional money or leave him without means of
       physical survival.

521 P.2d at 452-53. We find this reasoning persuasive.

       The Credit Union also stresses the fact that setoff is a remedy that

originated in equity rather than in law.    See Banco Central De Reserva v. Riggs

Nat’l Bank , 919 F. Supp. 13, 17 (D.D.C. 1994). In light of Congress’s clear and

compelling desire to protect retirees’ incomes,    see Bennett , 485 U.S. at 398, we

find it highly implausible that Congress intended for the availability of such

protection to hinge on the subtle distinction between law and equity, a distinction

that can elude even the most capable of attorneys. Furthermore, the Credit Union

has failed to explain why this hoary distinction   should govern the resolution of

this question. Thus, we conclude that the equitable origins of setoff are of no

consequence to our analysis under § 407.

       Finally, the Credit Union argues that without the availability of setoff, it

and other financial institutions will no longer be able to afford to make loans to

                                             8
many Social Security recipients. However, Social Security funds were never

intended to serve as collateral for cars or homes in the first place; they were

intended to provide the elderly with a means of subsistence.   See Act of Dec. 20,

1977, Pub. L. No. 95-216, 1977 U.S.C.C.A.N. (95 Stat.) 4160 (“It has long been

recognized that the primary objective of the social security program [is]

preventing dependency.”). It is up to Congress, not us, to decide that such funds

should be made available for things other than basic subsistence needs.

      When Congress enacted § 407, it intended to exempt Social Security funds

from all creditors, regardless of whether they attempted to reach those funds by

way of the court system or by way of self-help remedies. We thus hold that setoff

constitutes “other legal process” under § 407 and that the Credit Union violated

this section when it seized Mrs. Tom’s Social Security payments. Accordingly,

we affirm the district court’s grant of summary judgment to Mrs. Tom on her

Social Security Act claim.




            Count II: Civil Service Retirement Act (5 U.S.C. § 8346       )

      The district court also held that the Credit Union’s seizure of Mrs. Tom’s

Civil Service pension payments violated § 8346 of the Civil Service Retirement

Act. That section provides that “[t]he money mentioned by this subchapter is not


                                            9
assignable, either in law or equity, . . . or subject to execution, levy, attachment,

garnishment, or other legal process.” 5 U.S.C. § 8346(a). Our analysis in the

foregoing section largely forecloses the Credit Union’s argument that it did not

also violate the Civil Service Retirement Act when it seized the funds in Mrs.

Tom’s account.    However, there is one distinction between the Social Security

Act and the Civil Service Retirement Act that merits a brief discussion.

       The Social Security Act’s anti-assignment provision explicitly protects all

“moneys paid or payable,” 42 U.S.C. § 407(a), thus making clear that its aegis

extends not only to the future right to receive payments but also to any payments

that a beneficiary has already received. The Civil Service Retirement Act, though,

exempts only “[t]he money mentioned by this subchapter.” 5 U.S.C. § 8346(a).

The Credit Union, seizing on the absence of the “paid or payable” language found

in § 407, contends that the Civil Service Retirement Act, unlike the Social Security

Act, does not protect funds that beneficiaries have already received.     See In re

Prestien , 427 F. Supp. 1003, 1008 (S.D. Fla. 1977) (holding that § 8346 “exempts

only future pension amounts and not those already paid and accumulated”);        In re

Estate of McGreevy , 286 A.2d 355, 356-57 (Pa. 1971) (same).

       The Supreme Court has held that Social Security benefits, even when

converted to “funds on deposit [that] [a]re readily withdrawable[,] retain[] the

quality of ‘moneys’ within the purview of § 407.”       Philpott , 409 U.S. at 416. Both


                                             10
§ 407 and § 8346 are designed to guard the elderly from creditors who would

separate them–through whatever means–from the money that they need to survive.

Although not as precisely drafted as § 407, the broad language of § 8346 offers no

hint that its protections are any narrower than those afforded to Social Security

payments or that Congress intended to treat future payments any differently than

payments already received. Moreover, the Credit Union fails to offer any rationale

that would justify treating Civil Service pension payments any differently than

Social Security payments. Accordingly, we conclude that § 8346, like § 407,

protects both a beneficiary’s right to receive future pension payments and any such

payments that she has already received.   See Waggoner v. Games Sales Co. , 702

S.W.2d 808 (Ark. 1986) (reaching same conclusion);    State of Missouri ex rel.

Nixon v. McClure , 1998 WL 261107 (Mo. Ct. App. May 26, 1998) (same);        Joseph

v. Giacalone , 637 N.Y.S.2d 391 (N.Y. App. Div. 1996) (same);    Sears, Roebuck

and Co. v. Harris , 854 P.2d 921 (Okla. Ct. App. 1993) (same).

      In sum, because the Civil Service pension benefits that Mrs. Tom deposited

in her Credit Union account retained the quality of “money[s]” within the purview

of § 8346 and because we have already held that setoff constitutes “other legal

process,” from which such funds are protected, we affirm the district court’s grant

of summary judgment to Mrs. Tom on her Civil Service Retirement Act claim.

                           Count III: Breach of Contract


                                          11
       The district court also granted summary judgment to Mrs. Tom on her

breach of contract claim. However, there is no evidence in the record that Mrs.

Tom ever raised this claim in her motion for summary judgment. Although Mrs.

Tom points to both her motion for summary judgment and her brief in support

thereof in attempt to demonstrate that she did, in fact, raise this argument on

summary judgment, neither of those documents mention her contract claim. In

fact, in the section of her brief to which she directs our attention, Mrs. Tom even

acknowledges that the Credit Union enjoyed a “legitimate contractual right to

setoff.” Aplt’s App. at 33.

       It is axiomatic that an appellate court generally “will not consider an issue

raised for the first time on appeal.”   Hicks v. Gates Rubber Co. , 928 F.2d 966, 970

(10th Cir. 1991). When Mrs. Tom failed to raise her contract claim in her

summary judgment motion or brief, the Credit Union was entitled to presume that

she had abandoned this claim. The fact that the district court may have sua sponte

ruled on the contract claim is of no consequence; the Credit Union never had an

opportunity to present any argument regarding this claim.

       Furthermore, even had Mrs. Tom raised this issue on summary judgment, the

record contains no evidence supporting the district court’s judgment. In her brief,

Mrs. Tom asserts that when she “requested that [the Credit Union] return her

funds, [it] was contractually obligated to do so.” Aple’s Brief at 30. However,


                                            12
neither Mrs. Tom nor the district court identifies any contract that might have

given rise to such a duty. The Revolving Credit Plan Agreement is the only

contract contained in the record before us, and Mrs. Tom has failed to identify any

actions of the Credit Union that ran afoul of that Agreement. And while we agree

with Mrs. Tom that our holding with respect to Counts I and II of her complaint

voids the setoff provisions of the Agreement,    see Capo v. Century Life Ins. Co. ,

610 P.2d 1202, 1207 (N.M. 1980), this conclusion in no way compels a holding

that the Credit Union breached the remainder of the Agreement.

      In order to prevail on her contract claim, Mrs. Tom needed to do two things:

(1) come forward with a contract (such as a depository agreement) that required

the Credit Union to return her funds to her upon request and (2) raise this

argument in her summary judgment motion. However, because she did neither, we

reverse the district court’s grant of summary judgment to Mrs. Tom on her breach

of contract claim.

                                    CONCLUSION

      We hereby AFFIRM the district court’s grant of summary judgment to Mrs.

Tom on her claims that the Credit Union violated the Social Security and Civil

Service Retirement Acts (Counts I and II), REVERSE the grant of summary

judgment to Mrs. Tom on her breach of contract claim (Count III), and REMAND

this case for further proceedings consistent with this opinion.


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