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In re Galvez12/13/1999
SUMMARY
The sole issue presented to this court is whether an independent contractor's real estate commission is exempt under NRS 21.090(1)(g) in a bankruptcy proceeding. With regard to this issue, we certify to the United States Bankruptcy Court for the District of Nevada that a real estate commission is not exempt under NRS 21.090(1)(g) because this statutory exemption applies solely to periodic payments, and not to lump sum payments of compensation like a real estate commission.
FACTS
The relevant facts of this matter are not in dispute. In 1997, Hugo Galvez ("Hugo") worked as a licensed real estate agent associated with Medallion Real Estate. Hugo was an independent contractor and had no employees working for him. Hugo considered himself self-employed for tax purposes. Indeed, on Hugo's 1995 and 1996 tax returns, he filed a profit and loss statement for his real estate business, paid self-employment tax, took depreciation on his car, and deducted telephone costs, referral fees, dues, and publications as business expenses.
On or about December 5, 1997, Hugo and his wife, Thelma Galvez (collectively hereinafter the "debtors") filed a voluntary petition for bankruptcy seeking relief under Chapter 7, Title 11 of the United States Code (the "petition"). Larry L. Bertsch ("Bertsch") was duly appointed as panel trustee. At the meeting of creditors held pursuant to 11 U.S.C. § 341(a), Bertsch requested that the debtors turn over funds from a real estate commission totaling $3,633.00, which was in escrow at the time the petition was filed.
Believing that a portion of this commission was exempt under NRS 21.090(1)(g), the debtors amended their schedules. On schedule C of the debtors' amended petition, the debtors claimed an exemption for a real estate sales commission of $2,725.00, seventy-five percent of the commission in escrow. This commission was generated entirely through Hugo's personal services and was not earned in whole or in part as a referral or finder's fee.
Bertsch objected to the exemption, arguing that Hugo's commission was properly characterized as an account receivable, and thus was not "disposable earnings" exempt under NRS 21.090(1)(g). Oral argument on this issue was heard by the bankruptcy court on March 25, 1998. Thereafter, the bankruptcy court certified the issue to this court for determination.
DISCUSSION
Whether commissions earned by an independent contractor real estate agent for personal services fall within the wage garnishment exemption set forth in NRS 21.090 is an issue of first impression in Nevada. The wage garnishment exemption has roots in our state constitution, which provides:
"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 payment of any debts . . . ."
Nev. Const. art. 1, § 14 (emphasis added). To achieve this constitutional end, the Nevada Legislature enacted NRS 21.090. See Elder v. Williams, 16 Nev. 416 (1882).
NRS 21.090 provides, in relevant part, as follows:
"1. The following property is exempt from execution, except as otherwise specifically provided in this section:
(g) For any period, 75 percent of the disposable earnings of a judgment debtor during that period, . . . . " isposable earnings" means that part of the earnings of a judgment debtor remaining after the deduction from those earnings of any amounts required by law, to be withheld." (emphasis added).
The legislative purpose of NRS 21.090 is "to secure to the debtor the necessary means of ga
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