Deal v. First & Farmers National Bank, Inc.
518 S.W.3d 159
| Ky. Ct. App. | 2017Background
- Cindy Deal obtained a $64,600 money judgment against her ex-husband James and served a post-judgment garnishment on First & Farmers National Bank (the Bank) after James’s deposition suggested he had accounts there.
- The Bank answered the garnishment form stating it held "NONE" and forwarded $0, generating inconsistencies with James’s deposition testimony.
- Deal’s counsel emailed the Bank asking it to investigate; the Bank replied it had no garnishable funds and suggested James may have been mistaken about the bank name or account ownership.
- Later, James produced bank statements showing an account at the Bank, but the deposits consisted solely of Social Security and veterans’ benefits, which federal law exempts from garnishment.
- Deal sued under KRS 425.526 for an unsatisfactory garnishee disclosure and alternatively for fraudulent misrepresentation/omission; the Bank moved for summary judgment asserting federal regulations (31 C.F.R. § 212) preempted state garnishment duties and justified its response.
- The circuit court granted summary judgment for the Bank, finding (1) the Bank’s failure to disclose was a technical breach but did not cause recoverable damages because the funds were federally exempt, and (2) Deal’s tort claims were barred by the judicial statements privilege.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether federal regs preempt state garnishment duties | Deal: Bank violated KRS garnishment requirements by not disclosing account info and cannot rely on federal regs to avoid liability | Bank: 31 C.F.R. § 212 required it to identify protected federal benefits and not turn them over; complying with federal regs made certain state duties impossible | Federal regs preempt to the extent of direct conflict, but they do not prohibit disclosure to creditor; preemption does not excuse technical breach of KRS 425.511 but limits relief when funds are exempt |
| Whether Bank was required to disclose the existence of James’s account | Deal: Bank should have disclosed the account even if funds were exempt | Bank: regs focus on protecting access to exempt benefits and do not require notice to creditors; confidentiality and regulatory compliance justified limited disclosure | Bank could have disclosed existence and exempt status without violating federal regs; its failure to do so was a technical violation of KRS 425.511 |
| Whether KRS 425.526 entitles Deal to full judgment against the garnishee | Deal: Statute and precedent entitle creditor to recover full judgment amount from a garnishee who fails to disclose | Bank: Statute limits recovery to what the garnishee actually owed the judgment debtor; cannot recover more than actual damages | Recovery under KRS 425.526 is limited to actual damages caused by garnishee’s failure (i.e., amount the garnishee wrongfully withheld); not an automatic award of the full underlying judgment |
| Whether tort claims (fraudulent misrepresentation/omission) survive | Deal: Alternative common-law fraud claims entitle her to damages (including fees) despite statutory issues | Bank: Statements were made in the course of judicial proceedings and are privileged; also no causation or recoverable damages (attorney’s fees not authorized) | Tort claims fail: judicial-statements privilege bars reliance on those statements, Deal cannot prove actual damages or recoverable attorney’s fees |
Key Cases Cited
- Steelvest, Inc. v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476 (Ky. 1991) (summary judgment standard; resolve doubts for nonmoving party)
- Perkins v. Hausladen, 828 S.W.2d 652 (Ky. 1992) (interpretation of summary judgment standard)
- 3D Enters. Contracting Corp. v. Louisville & Jefferson Cty. Metro. Sewer Dist., 174 S.W.3d 440 (Ky. 2005) (de novo review of summary judgment)
- Cent. Supply of Virginia, Inc. v. Commonwealth Life Ins. Co., 787 S.W.2d 273 (Ky. App. 1990) (garnishee lacks standing to assert debtor exemptions)
- Wade v. Poma Glass & Specialty Windows, Inc., 394 S.W.3d 886 (Ky. 2012) (procedure for pursuing action against garnishee)
- Holbrook v. Fyffe, 175 S.W. 977 (Ky. 1915) (bank negligent payment after garnishment; liability for amount wrongfully paid)
- McMahan & Co. v. Po Folks, Inc., 206 F.3d 627 (6th Cir. 2000) (interpreting Kentucky garnishment law; held bank liable for full judgment in prior case)
- Ferguson Enter., Inc. v. Main Supply, Inc., 868 S.W.2d 98 (Ky. App. 1993) (recovery against bank limited to amount in account at attachment time)