Baisch & Skinner, Inc. v. Jeffrey G. Bair d/b/a Grimm & Gorley, d/b/a J. Sent, Inc., and First Bank , 507 S.W.3d 627 ( 2016 )

In the Missouri Court of Appeals
Eastern District
DIVISION TWO
BAISCH & SKINNER, INC., ) No. ED104058
)
Respondent, )
) Appeal from the Circuit Court
) of St. Louis County
vs. ) Cause No. 12SL-AC17903-02
)
JEFFREY G. BAIR, D/B/A GRIMM & ) Honorable Mary E. Ott
GORLEY, D/B/A J. SENT INC., )
)
Defendant, )
)
and )
) Filed: December 20, 2016
FIRST BANK, )
)
Appellant. )
I. Introduction
First Bank (Appellant) appeals the trial court’s order and judgment holding that the laws
of the State of Missouri applied to the garnishment obtained by Baisch & Skinner, Inc.
(Respondent) against the property of Jeffrey G. Bair, Grimm & Gorley, and J. Sent Inc.
(Defendant). The parties are familiar with the facts and we will not recite them here.
Nonetheless, we will discuss the facts as they relate to the issues on appeal. We affirm the
decision of the trial court.
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II. Standard of Review
In a court-tried garnishment action, the standard of review is controlled by Rule 84.13(d)1
and Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976) (holding a trial court’s judgment will
be affirmed unless there is no substantial evidence to support it, it is against the weight of the
evidence, or it erroneously declares or applies the law); Cox v. Steck, 992 S.W.2d 221, 223-24
(Mo. App. E.D. 1999). Furthermore, the appellate court will sustain the judgment of the trial
court if the result was correct on any tenable basis. U.S. v. Brooks, 40 S.W.3d 411, 412 (Mo.
App. S.D. 2001).
As an initial matter, Missouri courts generally apply Missouri law in determining whether
a party’s debt is properly subject to garnishment actions. State ex rel. Government Employees
Ins. v. Lasky, 454 S.W.2d 942, 949-50 (Mo. App. E.D. 1970) (citing § 525.010 RSMo 1959). A
garnishment is a statutory remedy which enables a judgment creditor (the garnishor) to collect
the amount of the judgment by seizing the judgment debtor’s property when it is in the hands of
a third party (the garnishee). State ex rel. Eagle Bank & Trust v. Corcoran, 659 S.W.2d 775,
777 (Mo. banc 1983); Grissum v. Soldi, 108 S.W.3d 805, 808 (Mo. App. S.D. 2003).
In Missouri, garnishment actions are controlled by Chapter 5252 and Rule 90. Anani v.
Griep, 406 S.W.3d 478, 481 (Mo. App. E.D. 2013). Section 525.010 provides that:
All persons shall be subject to garnishment, on attachment or execution, who are
named as garnishees in the writ, or have in their possession goods, moneys or
effects of the defendant not actually seized by the officer, and all debtors of the
defendant, and such others as the plaintiff or his attorney shall direct to be
summoned as garnishees.
1
All references are to Missouri Court Rules 2015.
2
All references are to Mo. Rev. Stat. 2000 unless otherwise specified.
2
Under Rule 90.04 “[t]he service of the writ of garnishment and summons attaches the
property subject to garnishment in the garnishee’s possession…at the time the writ of
garnishment and summons is served[.]” Similarly, § 525.040 provides that:
Notice of garnishment, served as provided in sections 525.010 to 525.480 shall have
the effect of attaching all personal property, money, rights, credits, bonds, bills,
notes, drafts, checks, or other choses in action of the defendant in the garnishee’s
possession or charge, or under his control at the time the service of the garnishment,
or which may come into his possession or charge, or under his control, or be owing
to him, between that time and the time of filing his answer.
Together these rules “unequivocally provide that it is service of those documents that
attaches the subject property, i.e., jurisdiction over the res, and nothing else suffices.” Grissum,
108 S.W.3d at 809. “A garnishee is a mere stakeholder in the proceedings.” Id. “Whatever a
garnishee may do respecting his own rights, he is powerless to do anything which will affect the
rights of third persons[.]” Id. (internal quotations omitted). Creditors may reach funds in the bank
account of another if the funds actually belong to the debtor. Vaughn v. Spitz, 682 S.W.2d 847,
848 (Mo. App. S.D. 1984) (citing Hilke v. Bank of Washington, 251 S.W.2d 963, 966 (Mo. App.
E.D. 1952)). “A valid judgment and a valid execution are indispensable prerequisites to a valid
garnishment.” Dunn v. Bemor Petroleum, 737 S.W.2d 187, 189 (Mo. banc 1987).
III. Discussion
In the present case, Respondent brought a garnishment action against Defendant and
properly served notice of this garnishment on Appellant in Missouri. Appellant, or the garnishee,
applied the garnishment to the Defendant’s account and withheld the amount of funds that were
in the account on the day it was served with the garnishment, which was less than the full
amount of the judgment owed to Respondent by Defendant. Appellant is licensed to do business
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in both Missouri and Illinois and is incorporated under the laws of Missouri.3 Appellant failed to
follow the order of the Missouri court, which stated Appellant was to continue to withhold funds
from the account for the entire period of the garnishment until the judgment was satisfied.4
Instead, Appellant followed its own policies and the deposit account agreement between
Appellant and Defendant which stated:
Unless we notify you otherwise, and except as otherwise provided in this
agreement, this agreement and your account will be governed by Federal law and
the laws of the state where we opened your account, without regard to its choice of
law principles.
It is undisputed that Defendant opened an account with Appellant in Swansea, Illinois.
Illinois statute 12-707 provides that a garnishee bank is only required to withhold the amounts
deposited on the day of service of the garnishment and pay those amounts into the registry of the
court after the return date. See IL rs 12-707(a). Respondent sued to enforce the garnishment
action when it discovered Appellant had not continued to withhold funds from Defendant’s bank
account after the date Appellant was served. The trial court initially granted Respondent’s
motion when Appellant failed to appear, however Appellant filed a Motion to Set Aside the
Garnishment. In this motion Appellant argued: “There is no provision for a Motion to Enforce
Garnishment in either the Revised Statutes of Missouri or the Missouri Rules of Procedure, and,
therefore, both the Motion and Judgment/Order…were improper.” The court granted Appellant’s
motion to set aside the judgment and order on December 18, 2013. Respondent waited until after
the garnishment was due in January and re-filed its Motion to Enforce the Garnishment, arguing
3
Respondent submitted an Affidavit in Support of its Motion to Set Aside the Judgment in which it notarized that it
was a Missouri corporation.
4
Under § 525.040 garnishees are required to withhold funds from the date of service of the garnishment until the
date the garnishee files an answer in a non-wage garnishment action. Respondent alleged in its motion to enter
judgment against garnishee that between the date of service and the date Appellant filed its answer there were funds
placed into the account which would have been sufficient to satisfy the garnishment.
4
Missouri law applied. Appellant’s argument to the trial court on this second motion was that this
case presented a conflict of laws issue. Ultimately, on March 31, 2014, the trial court held that
Missouri law applied to the garnishment action.
On appeal, Appellant argues the trial court erred in its conflict of law analysis and that
the law of the state chosen by Defendant and Appellant in their deposit agreement—Illinois—
should control the applicable law in processing garnishments. Appellant concedes that it is a
Missouri corporation and is subject to the laws of this State. § 506.500.1(1). Additionally,
Appellant was served with the garnishment in Missouri. It is uncontested that service was proper
and the Missouri trial court had jurisdiction over the garnishment proceeding. “A forum state
applies its own procedural state laws, but it chooses the applicable substantive law based on its
own conflicts of law doctrines.” Zafer Chiropractic & Sports Injuries, P.A. v. Hermann, No. ED
103950, 2016 WL 6106851, at *2 (Mo. App. E.D. Oct. 18, 2016). “In answering the initial
conflict of laws question of substance versus procedure, we first note that Missouri law
recognizes that the local law of the forum determines the method of securing obedience to court
orders, as provided in § 130 of the Restatement (Second) of Conflict of Laws (1971).” Farmers
Exch. Bank v. Metro Contr. Servs., 107 S.W.3d 381, 391 (Mo. App. W.D. 2003).
On appeal, Appellant alleged that the trial court misapplied the conflicts of law analysis
laid out in Restatement (Second) of Conflicts of Laws, reasoning that the choice of law provision
in the deposit agreement between Appellant and Defendant should be controlling. Id. at 390-91.
Because we agree with the trial court’s privity analysis we do not need to address the merits of
Appellant’s conflict of laws argument. Respondent argues the trial court was correct in applying
Missouri law because the Appellant does business and is incorporated in Missouri, service
occurred in Missouri, and Appellant did not object to the court’s jurisdiction. Additionally,
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Respondent argues it is not bound to the deposit agreement’s terms, because it was not a party to
the agreement and no privity of contract existed between it and Appellant. We agree.
Generally, Missouri courts honor the choice of law provisions in actions between the
parties to the contract. Sturgeon v. Allied Prof’ls Ins. Co., 344 S.W.3d 205, 208 (Mo. App. E.D.
2011). Although the trial court found the agreement governed any disputes between Appellant
and Defendant, it held Respondent was not bound by the agreement. In order for a party to be
bound by a contract a court must find there was privity of contract. Privity of contract is the
relationship between the parties to a contract, which allows them to sue one another but prevents
a third party from doing so. Black’s Law Dictionary 1320 (9th Ed. 2009). “The doctrine of
privity means that a person cannot acquire rights or be subject to liabilities arising under a
contract to which he is not a party.” G.H. Treitel, The Law of Contract 538 (8th ed. 1991)
(emphasis in original). The doctrine is intended to shield contracting parties from unlimited
liability and to prevent encumbering parties with duties not voluntarily assumed. Captiva Lake
Invs., LLC v. Ameristructure, Inc., 436 S.W.3d 619, 626 (Mo. App. E.D. 2014). Missouri courts
follow 12 Am. Jur. § 273, which states “obligations arising out of a contract are due only to those
with whom it is made; a contract cannot be enforced by a person who is not a party to it or in
privity with it.” RGB2, Inc. v. Chestnut Plaza, Inc., 292 S.W.3d 409, 416 (Mo. App. S.D. 2009).
A garnishment action alone does not create a privity of contract between a garnishee and
a garnishor. Walkeen Lewis Millinery Co. v. Johnson, 109 S.W. 847, 849 (Mo. App. E.D. 1908)
(finding there was no privity of contract between a garnishee bank and the plaintiff who had
obtained a garnishment against a defendant with funds located at the bank). We agree with the
trial court’s conclusion that the choice of law clause in the deposit agreement is not binding upon
Respondent because privity of contract did not exist, as Respondent was not a party to the
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agreement. We find it was not error for the court to hold this State’s law applied to the
garnishment action and order the Appellant to withhold the judgment debt in accordance with
Missouri law.
IV. Conclusion
The decision of the trial court is affirmed.
_______________________________
Colleen Dolan, Judge
Sherri B. Sullivan, P.J., concurs.
Roy L. Richter, J., concurs.
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