Prime Rate Premium Finance Corporation, Inc. v. Larson
2:14-cv-12397
E.D. Mich.Sep 20, 2019Background
- Prime Rate obtained a $300,000 default judgment against GP on February 28, 2019.
- Prime Rate served a Writ of Garnishment on Flagstar Bank; Flagstar first responded that no account existed, prompting a second writ.
- On the second writ Flagstar disclosed it held $23,067.65 (later supplemented by $2,633.38 for a total of $25,701.03) in accounts owned by GP, and amended to acknowledge the accounts existed at the time of the initial writ.
- GP objected, asserting (with an unauthenticated signature card) that the Flagstar account was a “client trust account” and therefore exempt from garnishment.
- Flagstar submitted a sworn affidavit stating its records do not designate GP’s accounts as trust accounts and that the signature card provided by GP appears altered.
- The magistrate judge found GP provided no admissible evidence the funds were client-trust monies, recommended overruling the objection, ordering release of $25,701.03, and declined to award sanctions or fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Flagstar account funds are exempt from garnishment as a client trust account | Funds are not exempt; writ properly directed and Flagstar disclosed the funds | Account is a client trust account and not GP’s money (supported only by an unauthenticated signature card) | Overruled objection: bank records and affidavit show account not designated a trust account; GP failed to prove exemption |
| Whether sanctions or attorney’s fees should be awarded based on the discrepancy in signature cards | No sanctions warranted; insufficient evidence of bad faith | GP’s submitted signature card discrepancy could warrant sanctions | Denied: magistrate found plausible business explanation and insufficient evidence to justify sanctions |
Key Cases Cited
- Thomas v. Arn, 474 U.S. 140 (1985) (failure to file specific objections to a magistrate judge’s report waives further appeal)
- Howard v. Secretary of HHS, 932 F.2d 505 (6th Cir. 1991) (objections to a magistrate judge’s report must be specific to preserve review)
- United States v. Walters, 638 F.2d 947 (6th Cir. 1981) (procedural standards for objections to magistrate reports)
- Willis v. Secretary of HHS, 931 F.2d 390 (6th Cir. 1991) (partial objections that omit issues do not preserve all objections)
- Smith v. Detroit Fed’n of Teachers Local 231, 829 F.2d 1370 (6th Cir. 1987) (requirements for preserving appellate review of district-court determinations)