Werther, N. v. FirsTrust Bank, Garrnishee ( 2019 )

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
NORMAN WERTHER : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
FIRSTRUST BANK, GARNISHEE :
:
: No. 1088 EDA 2018
APPEAL OF: ELLEN WERTHER, :
ASSIGNEE OF NORMAN WERTHER :
Appeal from the Order Entered March 9, 2018
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): 1539 April Term, 2001
BEFORE: OTT, J., DUBOW, J., and STEVENS, P.J.E.
MEMORANDUM BY OTT, J.: FILED MAY 1, 2019
Ellen Werther, assignee of Norman Werther, deceased (Werther),
appeals from the order entered March 9, 2018, in the Court of Common Pleas
of Philadelphia County. Along with this order, Werther also appeals a number
of prior orders that supported the March 9, 2018, order. The orders in
question dissolve writs of garnishment filed with FirsTrust Bank (the Bank)
against co-defendant, Craig Rosen.1 The writs were part of an ongoing and
largely futile attempt to collect the underlying judgment from Rosen. Of
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 Former Justice specially assigned to the Superior Court.
1 In the underlying matter, Norman Werther, MD, obtained a $4,999,342.00
judgment against Rosen regarding financial dealings between Werther and
Rosen.
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particular relevance, the order of May 18, 2017, also appealed from, denied
Werther’s motion for partial summary judgment and determined the Bank did
not violate Pa.R.C.P. 3111 by cashing a series of checks payable to Rosen. All
issues raised by Werther in this appeal hinge upon the resolution of the May
18, 2017,2 order that determined the Bank had properly cashed the checks
for Rosen, despite the writs.3 After a thorough review of the submissions by
the parties, relevant law, and the certified record, we reverse, in part, vacate,
in part, and remand for further proceedings.
We relate the underlying facts as taken from the trial Court’s opinion in
response to Werther’s motion for partial summary judgment.
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2 This order was docketed on May 19, 2017.
3 The four issues raised by Werther are (reworded to economize space):
1) Did the Bank violate Pa.R.C.P. 3111 when it repeatedly cashed
checks for Rosen after being served multiple writs of execution.
(Did the trial court misapply Witco Corp. v. Herzog Bros.
Trucking, Inc., 863 A.2d 443 (Pa. 2004)?
2) Did the trial court err in denying Werther partial summary
judgment against Bank in the amount of $188,000, representing
23 checks cashed, after being served with multiple writs of
execution and the Bank having filed multiple Suspicious Activity
Reports with the IRS?
3) Did the trial court err in refusing to grant reconsideration of the
order denying partial summary judgment?
4) Did the trial court err in dissolving the writs, refusing discovery
and refusing to schedule a trial?
See Werther’s Brief at 2-3
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In May, 2008, plaintiff Norman Werther, M.D., obtained a
judgment of almost $5 million against Craig Rosen, which Dr.
Werther has been trying to collect ever since. Mr. Rosen has not
made collection easy, and he deliberately evaded Dr. Werther’s
collection efforts on occasion.
As reflected on this court’s docket, in July 2008, and again in
September, 2008, Dr. Werther caused a Writ of Execution against
Craig Rosen to be served on garnishee FirsTrust Bank
(”FirsTrust”). FirsTrust answered the Interrogatories served with
the first two Writs and identified two bank accounts held by Mr.
Rosen and his wife as tenants by the entireties and therefore
exempt from execution. No other property of the debtor was
identified by FirsTrust, and it does not appear there was any such
property in 2008. FirsTrust requested in its Answers to
Interrogatories that the Writs be dissolved, but they never were.
The second Writ of Execution, which is still in effect, was directed
to “any and all real or personal property of the defendants in the
name of the garnishee.”
In October 2010, a company named Weinerman Pain and
Wellness, LLC (“WPW”) opened an account at FirsTrust. Mr. Rosen
was listed as both an applicant and cosigner on the WPW account.
Mr. Rosen was apparently a 1099 employee of WPW and received
regular paychecks from WPW for approximately two years from
2011-2013.
From September 1, 2013, through December 11, 2013, Mr. Rosen
cashed employment checks drawn on, or withdrew money from,
the WPW account at FirsTrust in a total amount of $196,700.
Many of the checks were in the amount of $9,900, just shy of the
$10,000 cash limit at which FirsTrust would be required to report
such transactions to the IRS. FirsTrust’s tellers handed the cash
over to Mr. Rosen each time he brought in a WPW check made out
to himself, and apparently no thought was given to the
outstanding Writs of Execution lingering somewhere in FirsTrust’s
files.
Both parties would likely agree that what Mr. Rosen did was
wrong, in that he was deliberately evading both judgment
creditors and the IRS. However, the question before this court is
whether FirsTrust did anything wrong, not Mr. Rosen. In Dr.
Werther’s view, FirsTrust should have acted in accord with the
outstanding Writs; each time the teller was asked to convert a
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check to cash, the teller should have seized the check or the cash
on behalf of Dr. Werther, the judgment creditor, rather than
handing the cash over to Mr. Rosen. FirsTrust argues that it was
obligated instead to hand the cash to Mr. Rosen, since it was his
wages, and it would be extremely impractical to require every
bank teller to consult a list of every writ the bank had received
over a five year period whenever the teller cashed a check at
his/her window.
Trial Court Opinion, 5/18/2017, at 1-3.
Although Werther has raised four issues in this appeal, they all revolve
around the first issue, whether the trial court was correct in determining, as
part of Werther’s motion for partial summary judgment, the bank violated no
obligation regarding the Writs of Execution when cashing the checks for Rosen.
Our standard of review of an order granting or denying summary
judgment is well settled:
We view the record in the light most favorable to the nonmoving
party, and all doubts as to the existence of a genuine issue of
material fact must be resolved against the moving party. Only
where there is no genuine issue as to any material fact and it is
clear that the moving party is entitled to a judgment as a matter
of law will summary judgment be entered. Our scope of review of
a trial court's order granting or denying summary judgment is
plenary, and our standard of review is clear: the trial court’s order
will be reversed only where it is established that the court
committed an error of law or abused its discretion.
Siciliano v. Mueller, 149 A.3d 863, 864 (Pa. Super. 2016) (citation omitted).
Instantly, there is no dispute over the factual underpinnings. Werther
obtained a large monetary judgment against Rosen, who has failed to satisfy
that judgment for years. In an effort to obtain satisfaction, Werther served
multiple Writs of Execution against Rosen with the Bank. There is also no
dispute that while the Bank was cashing checks on behalf of Rosen, it was
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filing multiple SARs (suspicious activity report) with the IRS owing to Rosen’s
repeated cashing of checks just below the $10,000 limit required for reporting
cash transactions to the IRS. Despite the existence of the writs, Rosen cashed
multiple checks at the Bank, drawn on an account for which Rosen was a
signatory. What is at issue is the applicability of Witco Corp. v. Herzog
Bros. Trucking, Inc., 863 A.2d 443 (Pa. 2004), to the instant matter.
In Witco, plaintiff/appellant Witco obtained a judgment against Herzog
Brothers for more than $500,000. Herzog Brothers apparently did business
with National City Bank of Pennsylvania. In an effort to collect the judgment,
Witco served a writ of execution upon the bank. While the writs were active,
Gary Herzog, president and sole shareholder of Herzog Brothers, used
personal checks and cash to purchase at least 131 cashier’s checks valued in
excess of $6,000,000 on behalf of Herzog Brothers. There was no dispute
that personal checks and cash used by Gary Herzog were, in fact, Herzog
Brothers’ property. Incidental to these purchases, the bank collected fees of
$22,718.86.
Based upon the foregoing, our Supreme Court determined the bank
possessed the check Gary Herzog presented to the bank and further, had the
power to control Herzog Brothers’ access to those funds and the manner in
which they were disbursed. See Pa.R.C.P. 3101(b)(2). Additionally, the brief
length of the transaction was no bar to the enforcement of the writ of
execution, nor was the fact none of the checks or cash was ever deposited
into a Herzog Brothers account. Of import to the Supreme Court was the fact
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that the bank was on notice, having been served with a writ of execution, that
it possessed property of the debtor, and nevertheless, the bank “processed
more than $6 million in cash and checks exchanged for at least 131 of the
bank’s cashier’s checks – without any consideration for its lawfully imposed
duty as garnishee.” Witco, 863 A.2d at 448.4
We take particular notice of two issues addressed by our Supreme Court
in Witco. The first is the public policy statement.
It is plain that the Bank and Herzog Brothers engaged in an
extended course of conduct that permitted Herzog Brothers to
avoid garnishment of its assets. Whether it was the Bank’s and/or
Herzog Brothers’ deliberate intent to subvert the writ of execution
and subsequent garnishment obligation matters less than the fact
that such was clearly the result. By using cashier’s checks instead
of checks drawn on its own accounts, Herzog Brothers successfully
processed more than $6 million dollars of its funds and used those
funds to pay its obligations to creditors other than Witco without
depositing one penny of those funds into its accounts with the
Bank.
…
[T]he public policy of Pennsylvania prohibits a garnishee bank with
notice of a judgment order from engaging in transactions with the
judgment debtor that it knows or should know will facilitate the
judgment debtor in attempts to avoid the lawful garnishment of
its assets.
Id. at 450-51.
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4We are also aware that the Witco decision discussed Pa.R.C.P. 3111(c) (now
Rule 3111(d)) that speaks of the garnishee being restrained from “paying any
debt to or for the account of the defendant and from delivering any property
which may be attached under these rules to anyone except the sheriff…”.
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Next, and of equal import, is the Supreme Court’s discussion of
possession of the checks.
[Pa.R.C.P.] Rule 3101(b)[5] unambiguously provides that a
garnishee is deemed to be in possession of property of property
of the defendant if the garnishee “has the property of the
defendant in or her custody, possession or control.” Black’s Law
Dictionary (8th Ed. 2004) defines possession as: “The fact of
having or holding property in one’s power; the exercise of
dominion over property.” Here, when Herzog Brothers purchased
cashiers’ checks from the Bank, the Bank came into physical
possession of the personal checks and cash proffered by Gary
Herzog. The Bank then had the power to control Herzog Brothers’
access to those funds and the manner in which those funds were
disbursed. … Thus, applying the common and approved definition
of the term “possession,” we conclude that the Bank was in
possession of the checks and cash once Herzog handed them over
to the Bank’s tellers, for the purposes of Rule 3101(b),
notwithstanding that Herzog did not formally deposit the funds
into Herzog Brothers’ account with the Bank.
Id. at 446-47.
The trial court rejected application of Witco, distinguishing it from the
instant matter in three ways. First, the trial court opined, “the checks
presented by Mr. Rosen … were drawn on a FirsTrust customer’s account, not
a third party bank as in Witco.” Trial Court Opinion, 5/18/2017, at 5. The
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5 Pa.R.C.P. 3101(b)(2) provides the relevant definition of possession of
property to be applied herein. It states:
(b) Any person may be a garnishee and shall be deemed to be in
possession of property of the defendant if the person
(2) has property of the defendant in his or her custody,
possession or control.
Pa.R.C.P. 3101(b)(2).
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bank usually placed a hold on such checks, but did not for Herzog Brothers.
Our Supreme Court noted only that this made the transactions in question
“suspect.” Witco, 863 A.2d at 448. Nonetheless, that suspicion was not
dispositive, as the Witco Court stated, “Even if it was not the Bank’s specific
intent, it appears that the Bank engaged with Herzog Brothers in transactions
patently calculated to thwart the garnishment process.” Id. Frustration of the
garnishment process is the salient point, not the specific method of doing so.
Similarly to Witco, the Bank here was well aware of the garnishment and had
been served multiple writs of execution, not just one as in Witco. Moreover,
as in Witco, the Bank, in the present case, engaged in an extended series of
transactions with the judgment debtor, without apparent concern for the writs
of execution, which, as the trial court stated were “lingering somewhere in
FirsTrust’s files.” Trial Court Opinion, 5/18/2017, at 2. The bank was aware
of the judgment against Rosen, was aware of the writs, was aware that Rosen
was a signatory to the account on which the checks were drawn, was aware
that Rosen was regularly cashing checks in amounts that were only slightly
under the IRS reporting requirement, and repeatedly cautioned Rosen about
those checks. Specific intent or not, the Bank and Rosen engaged in an
extended course of conduct that clearly frustrated Werther’s attempts to
enforce the judgment.
In addition to the foregoing, as in Witco, the judgment debtor has an
account at the Bank. In neither instance, the checks that were presented to
the Bank were not deposited in the accounts. In Witco, the checks were
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converted into cashier’s checks; instantly, the checks were converted into
cash. The Bank in Witco claimed cashier’s checks were a cash equivalent and
not subject to garnishment. Our Supreme Court noted,
The Bank devotes substantial argument to defining a cashier’s
check as a cash equivalent. This argument begs the question
presented here – whether the Bank had possession of Herzog
Brothers’ property during the transaction that culminated in the
issuance of the cashier’s checks.
Witco, at 632, n 3.
Just as in Witco, the salient question is whether the Bank here
possessed the checks that had been presented to it. Just as in Witco, the
Bank here held custody, possession and control of the checks prior to
converting those checks into cash and disbursing that cash to Rosen, the
judgment debtor.
We look at the next two distinguishing arguments together. The trial
court noted that in Witco, the bank violated its own internal policies by not
holding the checks to ensure sufficient funds, and the bank profited from the
transactions. Trial Court Opinion, 5/18/2017, at 5. Instantly, the Bank did
neither. However, there is nothing in the rules that requires the garnishee
deviate from usual business practices or profit from its transactions before
liability attaches for failing to act on a writ of execution. The law imposes an
independent duty on a garnishee to follow the law and honor the writ. This
duty is not conditioned upon or dependent upon the garnishee otherwise
acting with clean hands. In the instant matter, the Bank, aware of its duty
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to act upon the multiple writs of execution, nonetheless, failed to do so,
despite possessing and controlling, even briefly, the property of Rosen.
Finally, in addition to attempting to distinguish Witco from the instant
matter, the trial court noted the impracticality of requiring a bank to consult
a list of writs before transacting over the counter business. Trial Court Opinion
at 7. The methodology of doing such is not before us, although given the
electronic nature of financial transactions, it would not appear too onerous for
a bank to maintain an electronic list of those against whom a writ has been
filed, and to automatically match names. Further, we are unsure that
convenience to the garnishee bank should override the legal duty imposed by
a lawfully served writ of execution. What is clear in this matter is that under
the totality of circumstances, the Bank should have been well aware of the
suspect nature of the Rosen’s transactions, not just in terms of the IRS, but
also in avoiding the writs of execution.
Unlike Witco, which appears to have been a case of first impression
where our Supreme Court nonetheless found the bank liable, the Bank here is
on legal notice that the over the counter transactions may be subject to the
garnishment process. We reiterate what our Supreme Court stated in Witco:
“[T]he public policy of Pennsylvania prohibits a garnishee bank with notice of
a judgment order from engaging in transactions with the judgment debtor that
it knows or should know will facilitate the judgment debtor in attempts to
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avoid the lawful garnishment of its assets.” 6 Despite knowledge of the writs,
the suspect actions by Rosen, and the Witco decision, the Bank neglected its
legal duty.
Because the trial court committed an error of law in failing to apply
Witco to the instant matter, we must vacate the orders denying partial
summary judgment in favor of Werther and dissolving the writs. Because we
have no specific findings of fact regarding damages, we will not grant partial
summary judgment for $188,000.00 in favor of Werther. Rather, we remand
the matter to the trial court for application of Witco, and to proceed thereafter
as the parties deem appropriate.7 We need not address the issue of failure to
grant reconsideration.
Order of November 10, 2016, denying Werther’s motion for partial
summary judgment, and order of March 9, 2018, denying Werther’s motion
for discovery and to set trial date and granting FirsTrust’s motion to dissolve
writs, are vacated. This matter is remanded to the trial court. Jurisdiction
relinquished.
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6 Witco, 863 A.2d at 451.
7 We are essentially returning this matter, procedurally, to that point just prior
to the denial of the motion for partial summary judgment. How the parties
proceed, what path they choose to take, is not before us and we do not
presume to tell them what their next steps should be.
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 5/1/19
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