Ladd v. Motor City Plastics Co.
303 Mich. App. 83
Mich. Ct. App.2013Background
- Judgment entered against Motor City for $113,200 plus interest; garnishment issued on UBT on Jan 22, 2010 stating total due was $119,555.23.
- UBT filed garnishee disclosure Jan 29, 2010 stating no indebtedness and claimed a setoff against Motor City’s deposits due to loan defaults.
- Motor City’s president testified at debtor’s exam that UBT never exercised a setoff and funds remained accessible.
- UBT affidavit claimed Motor City owed it more than deposits; Wanke declined to disclose exact amount due to policy; records showed deposits on Jan 29, 2010.
- Writ service showed deposits remained; later balance in Motor City’s accounts was modest; loans later discounted and sold.
- Circuit court found no intentional misstatement, held UBT followed procedures, and declined contempt; held setoff need not be actually exercised to deny garnishment release; denied fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Must garnishee actually exercise setoff? | Ladd argues setoff must be exercised to validly deny garnishment. | UBT contends disclosure claiming setoff suffices under rules. | Garnishee may rely on setoff without actual exercise. |
| Was garnishee disclosure proper and not misleading? | Disclosure falsely claimed no property/control; misleading. | Form MC14 was confusing; no intent to mislead; followed procedures. | Disclosures were proper despite confusion; no contempt. |
| Waiver of setoff or security interest by permissive use of funds? | Continued access to accounts waived setoff/right and security interest. | No waiver; rights preserved; continued use does not defeat rights. | No waiver; perfected security interest valid defense; waiver not shown. |
| Can costs and attorney fees be awarded for frivolous action? | Fees warranted due to frivolous conduct in garnishment. | No frivolous action; no fee entitlement; form misleading but not intentional. | Not awarded; issue not properly preserved or not frivolous. |
| Did the circuit court errs in ruling UBT followed proper procedures? | Procedures undermined; contempt should follow. | Procedures complied; no contempt; trial evidence supported. | Court did not err; procedures followed; contempt not warranted. |
Key Cases Cited
- Sears, Roebuck & Co v AT&G Co, Inc., 66 Mich App 359 (1976) (setoff rights and garnishment rules; cited for setoff interpretation)
- Carpenters South California Admin Corp v Mfr Nat’l Bank of Detroit, 910 F2d 1339 (CA 6th Cir. 1990) (setoff rights; interpreting need to exercise setoff)
- Nationsbanc Mortgage Corp of Georgia v Luptak, 243 Mich App 560 (2000) (garnishment proceedings governed by MCR 3.101)
- Hansman v Imlay City State Bank, 121 Mich App 424 (1982) (setoff conditions and bank deposits)
- Mich Carpenters’ Council Pension Fund v Smith & Andrews Construction Co, 681 F Supp 1252 (E.D. Mich. 1988) (required exercise of setoff; record of exercise)
- Buckenhizer v Times Publishing Co, 267 Mich 393 (1934) (setoff rights and recovery limits)
- Baker v Nat’l City Bank of Cleveland, 511 F2d 1016 (CA 6th Cir. 1975) (effective time of setoff; requirement to actually exercise)
- Blow v Blow, 134 Mich App 408 (1984) (setoff priorities and collateral rights)