Citizens Financial Bank v. Richard Cooper and Peggy Cooper

Pursuant to Ind.Appellate Rule 65(D),
this Memorandum Decision shall not
be regarded as precedent or cited
before any court except for the purpose
of establishing the defense of res Mar 14 2013, 9:15 am
judicata, collateral estoppel, or the law
of the case.
ATTORNEYS FOR APPELLANT: ATTORNEY FOR APPELLEES:
MARK R. WENZEL DANIEL ZAMUDIO
LIBBY Y. GOODNIGHT Zamudio Law Professionals, PC
Krieg DeVault, LLP Griffith, Indiana
Indianapolis, Indiana
PATRICK A. BRENNAN
Krieg DeVault, LLP
Schererville, Indiana
IN THE
COURT OF APPEALS OF INDIANA
CITIZENS FINANCIAL BANK, )
)
Appellant-Defendant, )
)
vs. ) No. 45A04-1208-PL-411
)
RICHARD COOPER and PEGGY COOPER, )
)
Appellees-Plaintiffs. )
APPEAL FROM THE LAKE SUPERIOR COURT
The Honorable Gerald N. Svetanoff, Judge
Cause No. 45D04-1106-PL-62
March 14, 2013
MEMORANDUM DECISION – NOT FOR PUBLICATION
BARNES, Judge
Case Summary
Citizens Financial Bank (“Citizens”) appeals the trial court’s grant of a motion for
garnishment order filed by Richard and Peggy Cooper. We affirm.
Issue
Citizens raises one issue, which we restate as whether the trial court properly
granted the Coopers’ request for a garnishment order.
Facts
In July 2011, the Coopers filed a complaint against Charles Gluth and Son
Roofers, Inc. (“Gluth”). An agreed judgment was entered in March 2012 in favor of the
Coopers and against Gluth in the amount of $85,062.38. In April 2012, the Coopers filed
a motion for proceedings supplemental and requested that Citizens “be summoned and
ordered to appear and answer concerning said non-exempt property or answer the
Interrogatories attached hereto . . . .” App. p. 12. The trial court ordered Citizens to
answer the interrogatories or “appear in this Court in person” on July 18, 2012 “to answer
as to any non-exempt property, income or profits owned by, held for or owing to the
judgment defendant, and subject to execution or proceedings supplemental . . . .” Id. at
22. Citizens responded to the interrogatories and, in particular, answered as follows:
4. If the answer to Interrogatory No. 3 above is in the
affirmative, state the account number and balance for each
account held in favor of the judgment defendant:
ANSWER:
Checking Account #XXX5162 (the “Checking
Account”) contained a balance of $6,608.06 immediately
prior to any deduction of the garnishment fee specified in Ind.
2
Code § 28-9-4-3(b) and the Bank’s exercise of its right of
setoff under certain loan documents and applicable law. The
Bank’s valid, perfected, first-priority security interests in and
rights to set off against the funds held in the Checking
Account are superior to any claims of any other creditor
against the judgment debtor.
Certificate of Deposit # XXX3696 (the “Certificate of
Deposit”) contained a balance of $39,587.21 immediately
prior to any deduction of the garnishment fee specified in Ind.
Code § 28-9-4-3(b) and the bank’s exercise of its right of
setoff under certain loan documents and applicable law. All
of the funds held in the Certificate of Deposit, together with
all interest and any other amounts earned or accrued thereon,
is pledged as collateral in favor of the Bank to secure
obligations of the judgment debtor related to, among other
things, a certain Irrevocable Standby Letter of Credit, and the
Bank’s valid, perfected, first-priority security interests in and
rights to set off against the funds held in the Certificate of
Deposit are superior to any claims of any other creditor
against the judgment debtor.
Id. at 26.
Citizens did not appear at the July 18, 2012 hearing on the proceedings
supplemental. On that same day, the trial court found that the sums held by Citizens were
“subject to execution” and ordered Citizens to pay $46,195.27 to be applied toward
satisfaction of the judgment. Id. at 9. On July 26, 2012, Citizens filed a motion to
reconsider. Citizens argued in part that it held a valid, perfected, first-priority security
interest in and set-off rights against the funds. Citizens also alleged for the first time that
Richard Cooper had personally guaranteed payment to Citizens of $225,000 owed to
Citizens by Gluth and that “pursuant to the terms of the guaranty agreement . . . Richard
Cooper subordinated his claims against Gluth to Citizen’s claims.” Id. at 30. Citizens
3
attached a copy of the guaranty to its motion to reconsider. Citizens’ motion to
reconsider was deemed denied. Citizens filed a notice of appeal on August 16, 2012.
On August 17, 2012, Citizens filed a motion to stay enforcement and execution of
the judgment. The notice of completion of clerk’s record was filed on August 21, 2012.
On August 24, 2012, the trial court partially granted the motion for a stay, and Citizens
deposited $46,499.02 with the clerk of the court pending this appeal. Citizens now
appeals.
Analysis
Citizens argues that the trial court erred when it granted the Coopers’ request for a
garnishment order. “Proceedings supplemental are designed as a remedy where a party
fails to pay a money judgment.” Fifth Third Bank v. Peoples Nat. Bank, 929 N.E.2d 210,
214 (Ind. Ct. App. 2010). The proceedings are merely a continuation of the underlying
claim, initiated under the same cause number for the sole purpose of enforcing a
judgment. Id. These proceedings serve the limited purpose of determining whether an
asset is in the judgment debtor’s possession or subject to the judgment debtor’s control
and can be attached to satisfy the judgment. Id. Trial courts have broad discretion in
conducting proceedings supplemental. Id. We will not disturb a trial court’s judgment
regarding a proceedings supplemental unless the record does not provide sufficient
support for any theory on which the judgment may be sustained. Id. “We will affirm the
trial court’s judgment on any legal theory supported by the evidence most favorable to
the judgment, together with all reasonable inferences to be drawn therefrom.” Id.
4
(quoting Prime Mortg. USA, Inc. v. Nichols, 885 N.E.2d 628, 668-69 (Ind. Ct. App.
2008)).
A garnishment proceeding is a means by which a judgment creditor seeks to reach
property of a judgment debtor in the hands of a third person, so that the property may be
applied in satisfaction of the judgment. Id. A judgment creditor acquires an equitable
lien on funds owed by a third party to the judgment debtor from the time the third party
receives service of process in proceedings supplemental. Id. A judgment creditor has the
burden of proving that funds are available for garnishment. Commercial Credit
Counseling Services, Inc. v. W.W. Grainger, Inc., 840 N.E.2d 843, 847 (Ind. Ct. App.
2006). Once a creditor has made a prima facia showing, the garnishee must demonstrate
a countervailing interest in the property or assert defenses to the garnishment. Id.Citizens argues that its interrogatory answers were sufficient to demonstrate that it
had a security interest in Gluth’s accounts and was entitled to a set off. Indiana
recognizes a right of depositary banks to “set-off” any amounts owed to them with funds
from their indebted depositors’ accounts after receipt of notice of garnishment
proceedings. Fifth Third Bank, 929 N.E.2d at 214. A bank, however, may waive its right
to a set-off. Farmers State Bank of Mentone, Inc. v. U.S., I.R.S., 22 F. Supp. 2d 892, 895
(N.D. Ind. 1998).
The Coopers argue that Citizens’ interrogatory responses were inadequate and that
Citizens did not provide “conclusive evidence as to its rights to the money.” Appellee’s
Br. p. 7. The Coopers point out that Citizens did not produce any documents to support
5
its assertion that it had a security interest in the accounts. Further, Citizens did not
produce any evidence as to the value of its security interest.
We encountered a similar situation in Commercial Credit Counseling Services,
Inc. v. W.W. Grainger, Inc., 840 N.E.2d 843, 847 (Ind. Ct. App. 2006). There,
Commercial Credit Counseling Services (“CCCS”) was served with interrogatories in
two separate proceedings supplemental. In both cases, it submitted late interrogatory
responses and failed to appear at the proceedings supplemental hearings. The trial court
granted both garnishment orders, but CCCS failed to cooperate. At a consolidated rule to
show cause hearing, the trial court found that CCCS did not have a valid security interest
in the assets of either judgment defendant and was in contempt of the garnishment orders.
On appeal, we noted that “CCCS did not submit evidence establishing the
existence and attachment of authenticated security agreements in either of the judgment
defendants’ assets.” Id. at 848. With regard to one of the judgment defendants, we noted
that CCCS’s garnishment interrogatory responses were entered into evidence, but the
responses “did not allege the existence of a security interest, or include relevant
supporting documentation, without which CCCS did not demonstrate a countervailing
interest or defense to garnishment.” Id. With regard to the other judgment defendant,
CCCS submitted a “largely illegible security agreement” and an “unsigned blank
exemplar agreement.” Id. at 849. However, CCCS did not attempt to authenticate these
documents. We concluded that CCCS did not “establish a security agreement” with the
second judgment defendant. Id. In both cases, CCCS “failed to prove a countervailing
interest or defense to the garnishment of funds transferred to it.” Id.6
Similarly, here, although Citizens asserted in its interrogatory response that it had
a “valid, perfected, first-priority security interest” in Gluth’s accounts, Citizens submitted
no loan agreements or documents authorizing setoff or granting a security interest. App.
p. 26. Citizens did not appear at the hearing to present evidence on its defense to the
garnishment and did not present any evidence as to the value of its security interest.
Under these circumstances, we cannot say that the trial court abused its discretion when it
granted the Coopers’ request for a garnishment order. See, e.g., Allstate Ins. Co. v.
Morrison, 146 Ind. App. 497, 511, 256 N.E.2d 918, 927 (1970) (holding, based on a prior
version of the garnishment statutes, that “If the garnishee . . . denies its indebtedness it
has the right under our garnishment statute to appear and show it is not indebted to the
judgment debtor. [Garnishee] had the right to appear and present its defense of
cancellation rather than merely rest on its answers to interrogatories. It obviously chose
not to do so.”).
Citizens also raises issues regarding the denial of its motion to reconsider.1 In the
motion to reconsider, Citizens argued for the first time that Richard Cooper had
personally guaranteed payment to Citizens of $225,000 owed to Citizens by Gluth
“pursuant to the terms of the guaranty agreement . . . Richard Cooper subordinated his
1
The Coopers argue that Citizens appealed only the grant of the garnishment order and that the denial of
the motion to reconsider is not before us. The Coopers also filed a motion to strike the motion to
reconsider from the Appendix. We note that the clerk’s record includes the CCS and “all papers,
pleadings, documents, orders, judgments, and other materials filed in the trial court . . . or listed in the
CCS.” Ind. Appellate Rule 2(E). Citizens properly placed the motion to reconsider in its Appendix and
presented arguments regarding the motion in its briefs, and we have denied the motion in a separate order.
Thus, we will consider the arguments on appeal.
7
claims against Gluth to Citizen’s claims.” App. p. 30. Citizens attached a copy of the
guaranty to its motion to reconsider.
A garnishment order entered in proceedings supplemental to execution directing a
third-party garnishee-defendant to make payment to judgment-plaintiff is a final
judgment. JPMorgan Chase Bank, N.A. v. Brown, 886 N.E.2d 617, 621 n.5 (Ind. Ct.
App. 2008). “The proper vehicle for reconsideration of a final judgment is a motion to
correct error, which may be made on either a party’s or the court’s motion.” Waas v.
Illinois Farmers Ins. Co., 722 N.E.2d 861, 862-63 (Ind. Ct. App. 2000). Accordingly,
“although substantially the same as a motion to reconsider, a motion requesting the court
to revisit its final judgment must be considered a motion to correct error.” Id. at 863. “It
is well established that a party may not raise issues for the first time in a motion to correct
error.” Shepherd Properties Co. v. Int’l Union of Painters & Allied Trades, Dist. Council
91, 972 N.E.2d 845, 849 (Ind. 2012).
Although Citizens described its motion as a motion to reconsider, it was in effect a
motion to correct error. As such, Citizens was not entitled to present a new issue—the
personal guaranty. The trial court did not err by denying the motion.2
Conclusion
Citizens has failed to demonstrate that the trial court erred by granting the motion
for garnishment or by denying its motion to reconsider. We affirm.
2
We express no opinion, however, as to whether Citizens could, in further proceedings in this action or
another action, enforce its alleged personal guaranty.
8
Affirmed.
BAKER, J., and RILEY, J., concur.
9