KENNETH JOHNSON v. DUTCH MILL DAIRY, INC., AND ANOTHER. STATE BANK OF LORETTO, GARNISHEE.
No. 35,716.
Supreme Court of Minnesota
May 29, 1952.
117 Minn. 117 | 54 N.W.2d 1
Irving Juster, for respondent.
CHRISTIANSON, JUSTICE.
This is аn appeal from a judgment for plaintiff entered against the garnishee, State Bank of Loretto, hereinafter referred to as the bank.1
On July 19, 1949, plaintiff, having instituted an action against defendant, also garnished the bank. The bank disclosed the sum of $2,615.11 owing to defendant at the time of such garnishment. On July 20, 1949, plaintiff again garnished the bank, but it is clear that the amount disclosed as due defendant at that time was of the funds garnished the day before, and plaintiff makes no claim on appeal to the sum disclosed pursuant to that garnishment. Subsequent to plaintiff‘s second garnishment on July 20, 1949, the bank again permitted defendant to draw upon its account and make new deposits. Between that day and August 9, 1949, when plaintiff again served a gаrnishment summons on the bank, defendant‘s entire account had, at one point, been withdrawn. However, new deposits brought the account up to $639.37 at the time plaintiff‘s third garnishment was run, and that sum was disclosed by the bank as then due defendant.
In its disclosures the bank claimed a right of setoff with respect to each of plaintiff‘s three garnishments by virtue of the $2,770.42 Gartner garnishment served on October 14, 1948. Thereafter, pursuant to
On September 23, 1950, Gartner Refrigeration Company secured a judgment against defendant Dutch Mill Dairy, Inc., for $1,725.03, and had execution issued therеon. On the same day, the Hennepin county sheriff levied on the garnishee bank and collected the full amount of said judgment. On the same date, plaintiff obtained and entered judgment against defendant for $8,200, but because of pаyments defendant subsequently made there was a balance of $5,330 remaining unpaid thereon when the present proceedings came on for trial before the referee designated by the district court.
The refereе, before whom the matter was heard, concluded that the bank, in permitting defendant to withdraw the entire sum originally garnished under the Gartner garnishment, had no right of setoff against plaintiff by reason thereof, and that plaintiff‘s first garnishment impounded the entire balance of $2,615.11 in defendant‘s account on July 19, 1949, free from any claim by the bank. The second garnishment served on July 20, 1949, was found to have impounded nothing, inasmuch as the credits of that date were the same as thоse plaintiff impounded the day before. However, since defendant‘s account was again entirely withdrawn and new deposits made before plaintiff‘s third garnishment was served, the referee found that it impounded the $639.37 which the bаnk disclosed as being due defendant on August 9, 1949. The referee‘s findings and conclusions were approved and confirmed by the district court, and thereafter both the bank and plaintiff moved in the alternative for amended findings or a new trial. Both motions were denied by the referee, and his orders denying the same were confirmed by the district court. Judgment thereafter was entered against the bank pursuant to the referee‘s findings in the respective amounts disclosed under the first and third garnishments, totaling the sum of $3,254.48, together with interest and costs. The bank alone appeals from the judgment.
The bank argues that the Gartner garnishment was entitled to priority and that it gave the bank a right of setoff against рlaintiff‘s
The questions presented for decision are (1) whether the Gartner garnishment was entitled to priority, and (2) whether the bаnk acquired a right of setoff against plaintiff‘s subsequent garnishments by reason of the Gartner garnishment and its release of the garnished funds.
“* * * service of the garnishee summons upon the garnishee shall attach and bind, to respond to final judgmеnt in the action, * * * all indebtedness owing by him to the defendant at the time of such service.”2 (Italics supplied.)
Thus, this court has described a garnishment as a “judicial warning to the garnishee” not to pay or restore property to the defendant, with the admonition that if he does so he may subject himself to judgment. Watson v. Goldstein, 176 Minn. 18, 25, 222 N. W. 509, 511.
In the instant case, the bank disregarded the judicial warning given in the Watson case. It did not impound the garnished funds until final judgment, as the statute requires, but rather it permitted defendant to withdraw all the credits which had been attached by the Gartner garnishment and by plaintiff‘s first gar
The bank‘s contentiоn that the Gartner garnishment had a priority over plaintiff‘s subsequent garnishments must fall, in view of the well-settled principle that a garnishment impounds only those assets in possession of the garnishee at the time of the service of the gаrnishment summons. It does not reach assets subsequently acquired by the garnishee. Gilloley v. Sampson, 203 Minn. 233, 238, 281 N. W. 3, 5; 3 Dunnell, Dig. & Supp. § 3957;
It is clear from the language of
Likewise, we find no merit in the bank‘s contention that it acquired a right of setoff against plaintiff‘s subsequent garnishments by reason of the Gartner garnishment. When the bank paid out the garnished funds to defendant‘s order, it did so at its peril and became a contingent debtor of Gartner, depending upon whether Gartner ultimately secured a judgment in the main action against defendant and the judgment was not otherwise satisfied.
In hоlding that the bank acquired no right of setoff on account of the Gartner garnishment, we intimate no opinion as to what our conclusion would be if the Gartner judgment had been obtained and paid by the bank before plaintiff‘s garnishments. Likewise, since it does not appear that defendant was insolvent at the time plaintiff‘s garnishments were served, the question of what effect insolvency may have on a bank‘s right of setoff against its depositor‘s accоunt need not be considered. See, Wunderlich v. Merchants Nat. Bank, 109 Minn. 468, 124 N. W. 223, 27 L.R.A. (N.S.) 811.
We conclude, therefore, that plaintiff by his garnishment of July 19, 1949, established his right to the $2,615.11 disclosed by the garnishee bank as due defendant on that date. The garnishment of July 20, 1949, impounded nothing, because thе funds disclosed that day were those impounded by plaintiff‘s first garnishment. However, because the bank permitted defendant‘s account to be entirely withdrawn between July 20, 1949, and August 9, 1949, the garnishment of the latter date impounded the balance of $639.37 in the account on that date. Therefore, since in our opinion plaintiff was entitled to judgment against the bank for the full amount entered, the judgment of the district court should be affirmed.
Affirmed.
I concur in the result.
I am in full agreement with what has been said in the first subdivision of the majority opinion. I also agree with that part of the second subdivision holding that there is no right of setoff; but I cannot agree that the reason there is no setoff is due to the fact that the bank‘s claim is based on a contingent or unmatured claim against defendant.
If defendant desired to withdraw the money impounded by the Gartner garnishment,
When the Gartner garnishment was served, the garnishee became a stakeholder of the money impounded. It was supposed to stand indifferent as to who should have the money or property, its obligation being to pay it out as directed by the court. 5 Am. Jur., Attachment and Garnishment, § 659; 38 C. J. S., Garnishment, § 185; Midland Loan Finance Co. v. Kisor, 206 Minn. 134, 287 N. W. 869. Theoretically, the bank, as stakeholder, still held the funds impounded by the Gartner garnishment to the extent required to pay the Gartner judgment when plaintiff served its garnishment summons and impounded new funds of defendant. Had the bank retained this money, as it was legally obligated to do, or obtained a bond, as the statute permits it to do, it would have no occasion to claim a setoff against the funds impounded by plaintiff. It cannot be permitted to acquire a setoff to the prejudice of plaintiff‘s rights by its illegal act in paying the money out to the depositor after such money was impounded by service of the Gartner garnishment.