08/16/19- Miami-Seal of the Third District Court of Appeal.

A South Florida lawyer is sounding the alarm bells after an appellate court ruling in a dispute between a lender and borrower. He says debtors who agree to writs of garnishment might also run the risk of losing their wage exemptions.

James D. Silver, a partner at Kelley Kronenberg in Fort Lauderdale, says traditionally enforcing a judgment by obtaining a writ of garnishment has been among the "arsenal of remedies of creditors."

But a Florida appellate court decision shows that this might not be the best practice, said Silver, who is not involved in the litigation but is a bankruptcy expert that the Daily Business Review named "Most Effective Lawyer" in 2013.

Florida's Third District Court of Appeal issued the opinion in Hector M. Castro v. Mercantil Commercebank. The court ruled in favor of the bank, who was represented by Victor K. Rones, a lawyer in private practice in North Miami Beach.

Read the full opinion:

The court found that Castro's guaranty was written in plain language that vested the bank with expansive collection rights. The document included a provision which was capitalized in the guaranty: "Guarantor hereby consents to the attachment or garnishment of his/her/its earnings."

The court ruled that since Castro had signed the guaranty, he not only consented to garnishment, but he also renounced any claim of exemption of his head-of-household earnings. The court pointed out that regardless of the contractual terms, the bank was already "statutorily endowed with the 'right to a writ of garnishment.'"

Castro's lawyer, Lisette Blanco, who has a private practice in Miami Lakes, said that in 2009, Castro, a general contractor, needed a $250,000 loan for his business. The bank required him to personally guarantee the loan.

In the appeal Castro filed with the Third DCA, Blanco pointed out there was a revision to Florida Statute section 222.11(2)(b) in 2010 which required the bank to obtain the guarantor's signature next to any waiver of head-of-household wage exemptions.

"It is important for the ability to know even though it may appear in a one-line sentence that my client waived his garnishments, there was no line next to that waiver, acknowledging he read it," Blanco said. "It was language behind the guarantee. The court should have noted these different factors, and that the statue changed afterwards."

The Third DCA found "no merit" to the claim that Castro could rely on avoiding the garnishment based upon a subsequent modification of the statute, such as the one that now requires that a loan document include the borrower's or guarantor's signature next to the waiver of wage exemption and acknowledging that the bank can obtain a writ of garnishment. Castro's argument was rejected because the court found that the guaranty provided that no future change in the law would affect Castro's liability under the guaranty.

Blanco points out an inherent unfairness with these types of adhesion contracts, such as the one that Castro was forced to execute. Even with an attorney, she says, the borrower is generally unable to make any changes to these loan documents.

"You basically have to accept whatever they have to put there in order to get the funding that you need for whatever reason that it is," Blanco said. "So there are many people this has probably happened to that have signed guarantees or documents where they waive garnishments not knowing they were waiving exemptions."

Based upon the change in the exemption statute in 2010, Silver says lawyers representing borrowers and guarantors need to find out if their clients waived their right to argue that their wages are exempt from garnishment, as a heads of household under Florida law.

"Assuming that you don't file bankruptcy, that could be impactful in a negative way for the person who waives a writ of garnishment," Silver said. "Having said that, if you are dealing with someone who is advancing you a loan and they want that protection waived, unless you have a lot of different lenders willing to make you that same loan, you may not have a whole lot of bargaining power to say, 'Take that out.'"