Hadassah v. Schwartz , 197 Ohio App. 3d 94 ( 2011 )

[Cite as Hadassah v. Schwartz, 197 Ohio App.3d 94, 2011-Ohio-5247.]
IN THE COURT OF APPEALS
FIRST APPELLATE DISTRICT OF OHIO
HAMILTON COUNTY, OHIO
HADASSAH, THE WOMEN’S : APPEAL NO. C-110046
ZIONIST ORGANIZATION OF TRIAL NO. EX-1000723
AMERICA, INC., :
Appellee, :
O P I N I O N.
v. :
SCHWARTZ, :
Appellant. :
:
Civil Appeal From: Hamilton County Court of Common Pleas
Judgment Appealed From Is: Affirmed
Date of Judgment Entry on Appeal: October 14, 2011
Ulmer & Berne, L.L.P., Christopher J. Mulvaney, and Bradley D. Kaplan, for
appellee.
Robert L. Schwartz, pro se.
Please note: This case has been removed from the accelerated calendar.
OHIO FIRST DISTRICT COURT OF APPEALS
FISCHER, Judge.
{¶1} Judgment debtor-appellant Robert L. Schwartz appeals the trial court’s
judgment denying his motion to quash and overruling his objections to a garnishment
order, which permitted garnishment of Schwartz’s property held in a law firm’s IOLTA
account to help satisfy a $2,292,469 judgment owed by Schwartz to judgment creditor-
appellee Hadassah, The Women’s Zionist Organization of America, Inc. (“Hadassah”).
For the reasons stated below, we determine that Schwartz’s appeal is without merit, and
we affirm the judgment of the trial court.
{¶2} Hadassah initiated this garnishment action in the Hamilton County
Common Pleas Court on August 18, 2010. In connection with the garnishment action,
Hadassah sent a notice of garnishment pursuant to R.C. 2716.13 to the law firm Bieser,
Greer & Landis, L.L.P. (“BG&L”), to collect $150,000 held in BG&L’s IOLTA account.
Hadassah knew that Schwartz, at its request, had placed $150,000 in trust with BG&L
during ongoing settlement talks between the parties, but settlement had not been reached.
{¶3} BG&L answered in the garnishment action and acknowledged that it held
$150,000 of Schwartz’s property in an IOLTA account. BG&L, on behalf of itself as
garnishee and on behalf of Schwartz, filed objections to the garnishment order and later
filed a motion to quash the order. BG&L and Schwartz argued that the funds in the
IOLTA account represented a retainer for ongoing legal services involving Schwartz and
that professional-conduct rules mandated that the funds stay in the account until
resolution of the dispute between Hadassah and Schwartz. BG&L and Schwartz further
argued that public policy forbade garnishment of the funds. Hadassah opposed the
motions, arguing that Schwartz’s funds were not exempt from garnishment.
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶4} After a hearing, the trial court overruled BG&L’s and Schwartz’s
objections. The trial court subsequently denied their motion to quash, and this appeal
from both rulings ensued.
{¶5} In his sole assignment of error, Schwartz contends that the trial court erred
by ordering garnishment of Schwartz’s funds in BG&L’s IOLTA account because those
funds had been designated as a retainer for legal services and were no longer being held
for settlement purposes.
{¶6} In a garnishment action, a creditor proceeds to satisfy a debt owed to that
creditor by collecting a debtor’s property in the possession of a third person, called the
garnishee. In re Estate of Mason, 109 Ohio St.3d 532, 2006-Ohio-3256, 849 N.E.2d 998,
¶ 18, citing Union Properties, Inc. v. Patterson (1944), 143 Ohio St. 192, 195, 54 N.E.2d
668. As explained in the garnishment statutes, R.C. 2716.01 et seq., “[a] person who
obtains a judgment against another person may garnish the property, other than personal
earnings, of the person against whom judgment was obtained, if the property is in the
possession of a person other than the person against whom judgment was obtained, only
through a proceeding in garnishment and only in accordance with this chapter.” R.C.
2716.01(B).
{¶7} A debtor’s funds generally are not exempt from garnishment merely
because the funds are placed with an attorney. Invest. Research Inst., Inc. v. Sherbank
Marketing, Inc. (1998), 134 Ohio App.3d 478, 483, 731 N.E.2d 690.
{¶8} Ohio law authorizes Hadassah to enforce its judgment against Schwartz by
collecting Schwartz’s property in the possession of BG&L. BG&L asserted in its answer
that the money Schwartz had paid to BG&L had been deposited in an IOLTA account
and that the funds served as a retainer for legal services. Neither BG&L nor Schwartz
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OHIO FIRST DISTRICT COURT OF APPEALS
produced the alleged retainer agreement, and nothing in the record indicates that BG&L
acquired an ownership interest in the retainer or that the retainer was nonrefundable.
{¶9} The Ohio Rules of Professional Conduct mandate that property belonging
to a client or third party be kept in a client’s trust account and that property belonging to
an attorney be kept separate from a client’s property. Prof.Cond.R. 1.15; Disciplinary
Counsel v. Miller, 126 Ohio St.3d 221, 2010-Ohio-3287, 932 N.E.2d 323, ¶ 8. BG&L
kept Schwartz’s $150,000 retainer in an IOLTA account, which indicates that, at that
specific point in time, Schwartz, and not BG&L, retained the ownership rights over the
$150,000 retainer. Therefore, the retainer was property subject to garnishment under
R.C. 2716.01.
{¶10} Property of a debtor otherwise subject to garnishment by creditors may be
exempt from garnishment as provided in R.C. 2329.66. If a debtor claims an exemption
from garnishment, the debtor must point to a specific statutory exemption. Ohio Bell Tel.
Co. v. Antonelli (1987), 29 Ohio St.3d 9, 11, 504 N.E.2d 717. Property in the form of an
attorney-fee retainer does not appear in the somewhat lengthy list of exempted property
in R.C. 2329.66. Therefore, Schwartz has not met his burden to show that the $150,000
retainer was exempt from garnishment by Hadassah.
{¶11} Even though none of the statutory exemptions from garnishment apply to
the attorney-fee retainer paid by Schwartz to BG&L, Schwartz makes several equitable
arguments in an attempt to avoid garnishment. Schwartz argues that “[p]arties should * *
* be able to prepare for protracted litigation by adequately funding their legal defense and
trusting that the funds will be secured as anticipated.” Schwartz contends that
garnishment of BG&L’s IOLTA account deprived him of representation and that this
deprivation was unfair in the absence of evidence that Schwartz had engaged in collusion
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OHIO FIRST DISTRICT COURT OF APPEALS
or concealment to avoid garnishment. Schwartz also argues that public policy forbids the
“gamesmanship” employed by Hadassah where, as Schwartz alleges, Hadassah had
demanded that Schwartz place $150,000 in BG&L’s custody during settlement
negotiations, with the intent that settlement would not take place.
{¶12} Schwartz’s equitable arguments fail. Schwartz’s accusation that Hadassah
engaged in bad-faith settlement tactics is without support in the record. As to the other
equitable arguments, garnishment is a purely statutory procedure, and we are not in the
position to create exemptions to the garnishment statute. See Ohio Bell Tel. Co., 29 Ohio
St.3d at 11, 504 N.E.2d 717 (“The legislature has the exclusive authority to declare what
property shall be exempt from the purview of collection laws”).
{¶13} Although we sympathize with Schwartz’s argument that garnishment of an
IOLTA account might deprive a client of legal representation, a client in Schwartz’s
position could avoid this result by reaching a representation agreement with the attorney
that gives the attorney an ownership interest in some or all of the legal fee upon receipt,
so long as the agreement was not used as a tool to evade garnishment and did not place
the attorney in the position of receiving an excessive fee. See Prof.Cond.R. 1.5. And if
the legislature wishes to add attorney-retainer fees to the list of exemptions under R.C.
2329.66, it can do so.
{¶14} Schwartz also relies on several provisions of Ohio’s Uniform Commercial
Code governing secured transactions to argue that BG&L had a superior interest to that of
the creditor Hadassah in the $150,000 retainer held in the IOLTA account. Secured-
transactions principles do not apply in this case, because neither BG&L nor Schwartz
produced the representation agreement, and so there is no evidence of a written document
creating a security interest in the funds. Thus, the record does not show that BG&L and
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OHIO FIRST DISTRICT COURT OF APPEALS
Schwartz created a security interest. See Silver Creek Supply v. Powell (1987), 36 Ohio
App.3d 140, 144, 521 N.E.2d 828 (“A security interest will be found to have been created
where there is a written document which sufficiently evidences the parties’ intent to
create a security interest”). Schwartz also admits that his secured-transaction argument
was not presented to the trial court. Schwartz cannot raise that argument for the first time
on appeal. See Effective Shareholder Solutions, Inc. v. Natl. City Bank, 1st Dist. Nos. C-
080451 and C-090117, 2009-Ohio-6200, 2009 WL 4269869, ¶ 18, citing Niskanen v.
Giant Eagle, Inc., 122 Ohio St.3d 486, 2009-Ohio-3626, 912 N.E.2d 595, ¶ 34.
{¶15} In conclusion, we determine that the trial court did not err in ordering
garnishment of Schwartz’s funds in BG&L’s IOLTA account. We overrule the
assignment of error, and we affirm the judgment of the trial court.
Judgment affirmed.
HENDON, P.J., and CUNNINGHAM, J., concur.
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