Leroy Stocklin, Jr. v. Karen R. Lord

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
June 18, 2014 Session
LEROY STOCKLIN, JR. v. KAREN R. LORD ET AL.
Appeal from the Circuit Court for Hamilton County
No. 13C606 L. Marie Williams, Judge
No. E2013-02320-COA-R3-CV-FILED-SEPTEMBER 29, 2014
Plaintiff Leroy Stocklin, Jr., served a non-wage garnishment on Carol Dean, in her capacity
as executrix of her mother’s estate, in an attempt to reach the interest of an estate beneficiary,
Karen R. Lord. Lord, who is Dean’s sister, is a $10,348 judgment debtor of Stocklin by
virtue of a general sessions court judgment. Dean’s attorney acknowledged proper service
of the garnishment and represented that it would be satisfied from Lord’s portion of the
estate. Dean failed to timely answer the garnishment as required by statute. She later filed
an answer denying that she, as executrix, had in her possession or control any property, debts
or effects belonging to Lord. Between (a) the date of service of the garnishment and (b)
Dean’s answer, Dean distributed monies to Lord, as a portion of her inheritance, well in
excess of the garnishment amount. The trial court entered judgment against Dean under
Tenn. Code Ann. § 29-7-112 (2012), which provides for a judgment against a garnishee “[i]f
it appears that the garnishee . . . has property and effects of the defendant [debtor] subject to
the attachment.” Dean appeals. We affirm.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court
Affirmed; Case Remanded
C HARLES D. S USANO, J R., C.J., delivered the opinion of the Court, in which D. M ICHAEL
S WINEY and T HOMAS R. F RIERSON, II, JJ., joined.
Buddy B. Presley, Jr., Chattanooga, Tennessee, for the appellants, Karen R. Lord and Carol
Dean.
Allison Ulin Lynch, Chattanooga, Tennessee, for the appellee, Leroy Stocklin, Jr.
OPINION
I.
On June 1, 2012, Dean filed a petition for probate of the last will and testament of her
mother, Frances R. Ostreika. The will designated Dean as executrix. The beneficiaries of
the estate were Ms. Ostreika’s three children – Dean, Lord, and their brother, Fred R. Ritchie
– each of whom was to receive one-third of the estate. The estimated value of the gross
estate was $170,000. The primary asset was Ms. Ostreika’s residence.
On June 19, 2012, Stocklin caused a garnishment to be served on Dean in care of the
estate’s attorney, Buddy Presley. The garnishment notice stated it was directed at the
“distribution from the Estate of Frances R. Ostreika.” The trial court found that “[i]n his
capacity as attorney for the estate, Mr. Presley acknowledged that the garnishment had been
served and would be honored.” However, Dean did not file a timely answer to the
garnishment, thereby triggering Tenn. Code Ann. § 29-7-114, which provides that “[i]f, when
duly summoned, the garnishee fail[s] to appear and answer the garnishment, the garnishee
shall be presumed to be indebted to the defendant to the full amount of the plaintiff’s
demand, and a conditional judgment shall be entered up against the garnishee accordingly.”
See also Tenn. Code Ann. § 26-2-209 (2000) (“If the garnishee fails to appear or answer, a
conditional judgment may be entered against the garnishee for the plaintiff’s debt, upon
which a notice shall issue to the garnishee returnable at such time as the court may require,
to show cause why judgment final should not be rendered against the garnishee. On failure
of the garnishee to appear and show cause, the conditional judgment shall be made final, and
execution awarded for the plaintiff’s entire debt and costs.”).
Conditional judgment was entered against Dean. A scire facias, i.e., a “show cause,”
writ issued in accordance with Tenn. Code Ann. § 29-7-115, which states that “[u]pon this
conditional judgment, a scire facias shall issue to the garnishee . . . to show cause why final
judgment should not be entered against the garnishee.” On the date of the hearing on the
scire facias, April 8, 2013, Dean filed an answer, alleging in pertinent part that “[a]s of the
date of service of this garnishment, Carol Dean, in her capacity as Executrix for the Estate
of Frances R. Ostreika[,] does not have in her possession or control any property, debts, or
effects belonging to the Defendant.”
Following the scire facias hearing, the trial court entered judgment against Dean in
accordance with Tenn. Code Ann. § 29-7-112, which provides:
If it appears that the garnishee is indebted to the defendant, or
has property and effects of the defendant subject to the
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attachment, the court may, in case recovery is had by the
plaintiff against the defendant, give judgment against the
garnishee for the amount of the recovery or of the indebtedness
and property.
The trial court held and reasoned as follows:
In his capacity as attorney for the estate, Mr. Presley
acknowledged that the garnishment had been served and would
be honored. He was the estate attorney and represented Carol
Dean in her capacity as an executor, not personally. He
represented funds would be due to Karen Lord from the estate
which was valued at $170,000 on the probate petition. No
written answer was made to the garnishment until the hearing
date of April 8, 2013. Between the date the garnishment was
filed and the date of the filing of the answer, monies well in
excess of the garnishment amount were distributed to Karen
Lord by Carol Dean. It is the position of Ms. Dean that a
garnishment issued against her not naming her as an executrix
is served upon her only in her individual capacity and she at no
time held anything of value owing to Ms. Lord in her individual
capacity. The manner in which the garnishment is styled makes
it clear she was being served in her capacity as an executrix and
the actions of the attorney for the estate in acknowledging the
garnishment would be paid out of the proceeds of the estate
make this argument invalid. . . .
Ms. Dean further contends she only would be responsible for
anything in her hands at the time the garnishment was served.
While it is true the house itself was not sold so there were not
liquid funds in her hands at that time, the garnishment statutes
apply to things of value as well as liquidated monetary amounts.
This is not a contingent liability such as a contract of insurance
not yet due and payable. The house was a thing of value in
which the judgment debtor held an interest at the time the
garnishment was served. The contingency which vested a
property interest in the debtor was the death of her mother and
the resulting application of the Will executed by her mother to
the property to be inherited.
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Although real estate normally vests in individuals immediately
upon the death of the decedent, T.C.A. 31-2-103 [(2007)], the
language of the Will before the Court makes it clear the real
estate was in the hands of the estate pursuant to the terms of the
Will. . . . No answer was filed so a conditional judgment was
entered. At the scire facias hearing, there was no showing why
the conditional judgment should not be made final.
An answer was filed but it did not meet the requirements of the
statute as it was incomplete. However, those insufficiencies do
not void the filing of an answer, which answer was not timely
filed. The statutes intend the conditional judgment to be a
“wake-up call.” The statutes do not contain language indicating
that if the answer is not timely or sufficient, a conditional
judgment will be entered. The conditional judgment gives
notice that a defense to the statutorily imposed presumption that
it is indebted to the plaintiff to the full extent of the plaintiff’s
demand must be filed. Smith v. Smith, 165 S.W.3d 185 (Tenn.
[Ct. App.] 2004).
The answer was late filed and did not provide an adequate
defense to overcome the statutory presumption of indebtedness.
Therefore, final judgment was appropriately entered for
$11,091.21 plus court costs against Carol Dean.
Dean timely filed a notice of appeal.
II.
The issue is whether the trial court erred in holding Dean, the garnishee, liable for
failure to honor the garnishment by distributing funds from the estate to Lord, the judgment
debtor, after Dean had been properly served notice of the garnishment and her attorney had
assured Stocklin, the plaintiff and judgment creditor, that his judgment would be paid from
Lord’s share of the estate.
There are no material facts in dispute. The issue involves the interpretation and
application of the garnishment statutes, a question of law, that we review de novo. Lipscomb
v. Doe, 32 S.W.3d 840, 843-44 (Tenn. 2000).
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III.
The Tennessee statutes governing garnishment are codified at Tenn. Code Ann. §§ 26-
2-201 through -225, and §§ 29-7-101 through -119. As this Court has observed on several
occasions:
Garnishment is in the nature of an attachment of a debt due the
judgment debtor from the garnishee; and, service of the
garnishment upon the garnishee is a warning to the garnishee
not to pay the debt but to answer the garnishment and hold the
fund subject to the orders of the Court.
Dexter Ridge Shopping Ctr., LLC v. Little, 358 S.W.3d 597, 605 (Tenn. Ct. App. 2010)
(quoting Meadows v. Meadows, No. 88–135–II, 1988 WL 116382 at *3 (Tenn. Ct. App.
M.S., filed Nov. 2, 1988)); accord Stonecipher v. Knoxville Savs. & Loan Assoc., 298
S.W.2d 785, 787 (Tenn. Ct. App. 1956) (emphasis added). The proper means of attaching
the debtor’s property is prescribed by Tenn. Code Ann. § 29-7-103(a) as follows:
Attachment by garnishment is effected by informing the debtor
of the defendant, or person holding the property of the
defendant, that the property in the defendant’s hands, or the
hands of the person holding the property of the defendant, is
attached, and by leaving with the defendant or such other person
a written notice that the defendant or such other person is
required to appear at the return term of the attachment, or before
a judge of the court of general sessions, at a time and place
fixed, to answer such questions as may be asked the defendant
or such other person touching the property and effects of the
defendant.
Further, “[t]he notice should also require the defendant not to pay any debt due by the
defendant, or thereafter to become due, and to retain possession of all property of the
defendant, then or thereafter in defendant’s custody or under defendant’s control, to answer
the garnishment.” Tenn. Code Ann. § 29-7-104 (emphasis added). In the present case, the
garnishee Dean has raised no issue regarding either the propriety of the notice given or the
content of the garnishment notice.
As we stated in Dexter Ridge,
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If the garnishment is properly served, the garnishee must answer
the garnishment, indicating any assets the garnishee holds that
belong to the debtor. “If the garnishee answers the garnishment
and admits a certain indebtedness to the judgment debtor, then
a judgment against the garnishee in the amount of the admitted
debt may be entered.” Smith v. Smith, 165 S.W.3d 285, 293
(Tenn. Ct. App. 2004) (citing T.C.A. § 29-7-112). If there is
any dispute as to the amount of the garnishee’s indebtedness to
the judgment debtor, or as to whether there is any such
indebtedness, the trial court may receive evidence on the
indebtedness of the garnishee to the debtor. If, after proper
service, the garnishee fails to answer, there is a presumption that
the garnishee is indebted to the debtor “to the full amount of the
plaintiff’s demand, and a conditional judgment shall be entered”
against the garnishee. T.C.A. § 29-7-114 (2000); see Meadows,
1988 WL 116382, at *3.
A conditional judgment has been described as a “peculiar
remedy,” because it is similar to a default judgment, but it does
not establish any enforceable rights. See First Tenn. Bank
Nat’l Assn. v. Warner (In re Warner), 191 B.R. 705, 710
(Bankr. W.D. Tenn. 1996) (applying Tennessee law in the
context of a bankruptcy); see also Meadows, 1988 WL 116382,
at *3-4. Rather, it is a threat of judgment, designed to induce
the garnishee to respond to the garnishment . . . . The purpose of
a conditional judgment is to give the garnishee additional time
or another opportunity to answer the garnishment. Meadows,
1988 WL 116382, at *4. As noted by the trial court below, the
conditional judgment is not intended to be punitive, but is
intended to be an enforcement tool.
Upon the entry of a conditional judgment, “a scire facias shall
issue to the garnishee . . . to show cause why final judgment
should not be entered against the garnishee.” T.C.A. § 29-7-115
(2000); see In re Warner, 191 B.R. at 709. If, after proper
service, the garnishee fails to appear at the scire facias hearing,
a final judgment for the debtor’s entire indebtedness may be
entered against the garnishee. See T.C.A. § 29-7-114. In sum,
the garnishee is “required to respond or risk total liability.” In
re Warner, 191 B.R. at 709. “While these procedures may yield
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harsh results as to the garnishee, the harshness is ameliorated by
the ease with which the garnishee may respond to the
garnishment, including by a written answer.” Id. (citing T.C.A.
§ 29-7-103(b)).
358 S.W.3d at 606-07.
In this case, as the trial court noted, Dean ultimately filed an answer, but not until after
the conditional judgment was entered and the day of the scire facias hearing had arrived.
Contrary to Dean’s argument, however, a careful reading of the trial court’s order persuades
us that the trial court did not base its judgment upon the fact that the answer was untimely.
Rather, the trial court considered the merits of the case and concluded that under the statutory
scheme, Stocklin effectively attached the assets of the estate to which the debtor Lord was
entitled as her inheritance, by properly serving the garnishment, and that Dean wrongfully
disregarded the garnishment by distributing monies from the estate to Lord.
Dean argues that her answer to the garnishment stating that “[a]s of the date of service
of this garnishment, Carol Dean, in her capacity as Executrix, . . . does not have in her
possession or control any property, debts, or effects belonging to [Lord]” was technically
correct. Dean relies on Tenn. Code Ann. § 31-2-103 (2007) for the proposition that Lord’s
interest in the decedent’s real property technically remained in the estate, and was not
“belonging to” Lord at the time of the service of the garnishment. That statute provides:
The real property of a testate decedent vests immediately upon
death in the beneficiaries named in the will, unless the will
contains a specific provision directing the real property to be
administered as part of the estate subject to the control of the
personal representative.
The trial court, applying this statute, found that “the language of the Will before the Court
makes it clear the real estate was in the hands of the estate pursuant to the terms of the Will.”
This is undisputed. Under the applicable statutory scheme, whether Lord’s interest in the real
property as a beneficiary vested immediately upon death or remained to be administered as
part of the estate, the interest was attached by the garnishment, and Dean was aware of her
duty “not to pay the debt but to answer the garnishment and hold the fund subject to the
orders of the Court.” Dexter Ridge, 358 S.W.3d at 605.
According to Tenn. Code Ann. § 29-7-101, “[w]here property, choses in action, or
effects of the debtor are in the hands of third persons, or third persons are indebted to such
debtor, the attachment may be by garnishment.” Under Tenn. Code Ann. § 26-2-202,
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All property, debts and effects of the defendant in the possession
or under the control of the garnishee shall be liable to satisfy the
plaintiff’s judgment, from the service of the notice, or from the
time they came into the plaintiff’s hands, if acquired subsequent
to the service of notice, and before judgment.
“Property, debts and effects” is defined at Tenn. Code Ann. § 26-2-201(3) to “include real
estate and choses in action, whether due or not, and judgments before a court; also money
or stocks in an incorporated company.” In McKee-Livingston v. Livingston, No. M2009-
00892-COA-R3-CV, 2010 WL 204089 at *2-3 (Tenn. Ct. App. M.S., filed Jan. 21, 2010),
this Court addressed “the issue of what property is attached by a garnishment,” and provided
the following pertinent principles:
This definition [found at Tenn. Code Ann. § 26-2-201(3)]
indicates that a debt need not be due in order to be covered by
a garnishment. Similarly, Tenn. Code Ann. § 26-2-213
provides:
If upon disclosure made on oath by the debtor it
appears that the garnishee is indebted to the
defendant, but that the debt is not payable and
will not become due until some future time, then
such judgment as the plaintiff may recover shall
constitute a lien upon the debt until and at the
time it becomes due and payable.
(Emphasis added). Under Tenn. Code Ann. § 26-2-211,
“[e]xecution of the garnishment judgment may be stayed until
the choses in action fall due. . . .”
While the garnishment statutes do not require that a debt be due
and payable prior to judgment against the garnishee, the law
does require that there be some existing liability or obligation,
not just a contingent liability. Garnishment “can reach only
debts absolutely existing, and those not subject to the happening
of a future event, rendering it uncertain whether the garnishee
will or will not be indebted to the defendant.” [Gray v.] Houck,
68 S.W.2d [117,] at 118 [Tenn. 1934]. When an obligation is
contingent, its very existence depends upon future events. The
rule has been stated: “While obligations that are certain,
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although not presently due, are subject to garnishment,
obligations that are contingent, in that they may never become
due, are not.” Overman v. Overman, 570 S.W.2d 857, 858
(Tenn. 1978). Thus, for purposes of garnishment, “there is a
distinction between a claim that is uncertain or contingent in the
sense that it may never become due and one in which something
will be due, the only contingency being the exact amount due.”
In the Matter of Anderson, 345 F. Supp. 840, 842 (E.D. Tenn.
1972).
. . . Although we find no Tennessee law expressly addressing
the issue, we consider the following general principles to be
consistent with Tennessee garnishment statutes and caselaw:
Where there is no contingency as to the
garnishee’s liability, the only contingency being
as to the amount thereof, and where the amount of
the liability is capable of definite ascertainment in
the future, there is no such contingency as
prevents garnishment of the claim, even
though . . . it may be that eventually it will be
found that nothing is due.
Moreover, a “garnishee’s otherwise certain liability is not made
uncertain because the obligation may be diminished or defeated
by a condition subsequent.”
(Footnote and internal citations omitted.)
Under the will, Lord’s inheritance was one-third of the estate, the total amount of
which was valued by the probate petition at approximately $170,000. Dean filed the probate
petition on June 1, 2012, 19 days before the garnishment notice was served upon her. The
primary asset of the estate was the deceased’s real property, a residence that sold for
$136,000 on October 10, 2012. Although the precise amount of Lord’s inheritance was
uncertain, there was no contingency or uncertainty about Lord’s claim and entitlement to her
interest in the estate. Consequently, Lord’s interest was attached by the garnishment.
Despite this, Dean undisputedly distributed monies from the estate to Lord between the time
of the garnishment notice and Dean’s answer. The distributions easily exceeded the amount
of Stocklin’s valid judgment against Lord.
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Dean has no claim of surprise or ignorance of the garnishment. It is undisputed, and
apparently was stipulated to the trial court, that Dean’s attorney, Buddy Presley, Jr.,
acknowledged receiving the notice and told Stocklin’s attorney that the estate had sufficient
funds to satisfy Stocklin’s judgment and would pay it. In Dean’s answer to Stocklin’s
interrogatories, responding to the question “[w]hat did Buddy Presley tell you about the
garnishment?” Dean stated: “He informed Karen [Lord] and I [sic] upon receipt. Karen
agreed to pay when house sold. By oversight, simply forgot to take out of Karen’s share of
inheritance.” (Emphasis added.) We hold that the trial court properly applied the
garnishment statutes and correctly entered judgment against Dean.
IV.
The judgment of the trial court is affirmed. Costs on appeal are assessed to the
appellant, Carol Dean. The case is remanded to the trial court for enforcement of the
judgment and collection of costs assessed below.
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CHARLES D. SUSANO, JR., CHIEF JUDGE
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