Morgan Stanley & Co. v. Andrews

• Decision Date: 01 October 2015
• Docket Number: No. 935, Sept. Term, 2014.,935, Sept. Term, 2014.
• Parties: MORGAN STANLEY & CO., INC. v. John D. ANDREWS, Jr.
• Court: Court of Special Appeals of Maryland

225 Md.App. 181

123 A.3d 640

MORGAN STANLEY & CO., INC.

v.John D. ANDREWS, Jr.

No. 935, Sept. Term, 2014.

Court of Special Appeals of Maryland.

Oct. 1, 2015.

Mark Edelson (Sarah A. Norton, Goldman PA, on the brief), Lutherville, MD, for appellant.

Fredric J. Einhorn, Rockville, MD, for appellee.

Panel: MEREDITH, BERGER, and LEAHY, JJ.

Opinion

BERGER, J.

In this appeal, we address the extent to which a creditor of one joint account holder may garnish funds in a joint account when another joint account holder is a non-debtor. We shall hold that there is a rebuttable presumption that joint account holders own the funds in an account, but that the presumption of joint ownership can be rebutted by clear and convincing evidence to the contrary.

In the present case, Morgan Stanley & Co., Inc. (“Morgan Stanley”), appellant, obtained a judgment against John Andrews, appellee (“Son”). Morgan Stanley moved to garnish the funds held in a joint bank account owned by both Son and his father, Don D. Andrews (“Father”). Father subsequently moved to assert his claim to the garnished funds, arguing that all of the funds in the joint account were Father's sole property. The circuit court ruled in favor of Father, finding that Father successfully rebutted the presumption and established, by clear and convincing evidence, that he was the equitable owner of the funds within the account. We shall affirm.

FACTS AND PROCEEDINGS

On September 1, 2011, Morgan Stanley obtained a judgment in the Circuit Court for Montgomery County for $196,477.16 against Son.¹ On December 5, 2011, Morgan Stanley requested that the circuit court issue a writ of garnishment for Son's bank accounts with PNC Bank, National Association (“PNC”). The court issued a writ of garnishment on December 12, 2011. On December 27, 2011, PNC filed an answer to the writ of garnishment for an account jointly titled in both Father and Son's names (“the joint account”). On December 29, 2011, Morgan Stanley filed a request for judgment against PNC.

On January 17, 2012, Father filed a motion pursuant to Maryland Rules 2–645(i)² and 2–643(e),³ asserting his claim to the garnished property and requesting a hearing. Father filed an amended motion on January 30, 2012. On February 14, 2012, the circuit court denied Father's motion and amended motion without a hearing. On February 22, 2012, Father filed a motion to vacate the court's February 14, 2012 order, arguing that he had been improperly denied a hearing. Father filed an amended motion to vacate on February 24, 2012, arguing that the trial court erred by failing to conduct a required hearing. Father further argued that the trial court erred in denying Father's motion asserting claim to garnished property. Both motions were denied on March 21, 2012.

Father noted a timely appeal to this court, and, in an unreported opinion, we reversed the judgment of the circuit court. Don D. Andrews, Jr. v. Morgan Stanley & Co., Inc., No. 85, September Term 2012 (filed May 16, 2013). We held that the trial court erred by denying Father's claim without a hearing and remanded the case for further proceedings. We expressly took “no position on the merits of [Father's] claim of sole ownership.” Id., slip op. at 7.

Following the remand, the circuit court held an evidentiary hearing on June 13, 2014. Father presented three witnesses: PNC branch manager Lori McConnaughey (“McConnaughey”), Son, and Father. The parties stipulated to the admission of the PNC records for the joint account. Notably, the parties further stipulated that Father was the original source of all of the funds in the joint account.

McConnaughey testified that she assisted Father with establishing the joint account. She explained that Father “wanted to make sure that [Son] could write checks if something happened.”⁴ Son testified that he wrote checks from the joint account to “help my father out.” Son testified that he did not pay any of his personal expenses from the joint account and that all of the checks he signed were to pay for Father's expenses. Son further testified that he did not deposit any of his own funds into the joint account, and that none of the funds in the joint account belonged to him. Son identified each transaction on the PNC records for the joint account and explained how each transaction was for the benefit of Father.

Father's testimony was consistent with that of Son. Father explained that he established the joint account because he wanted Son to be able to “ handle the remodeling” of Father's vacation home. Father further explained that his health was an additional motivation behind the establishment of the account, commenting that he “was coming off having pneumonia

in both lungs” which “can be a killer” for “people [Father's] age.” When asked about the source of the funds within the joint account, Father testified that he “worked for the county government for 25 years” and had saved “about a half million dollars.” Father explained that all of the funds held in the joint account “ [a]bsolutely” came from accounts titled in Father's name.

Father testified that various individuals performing renovation work at the vacation home were paid from the joint account, explaining the arrangement between Father and Son as follows:

[E]very time [Son] wanted the check or something, [Son] would call me, or I would send some down with his mother, maybe two or three checks. And I was very careful not to give him a lot of checks on hand. Not that I didn't trust him, but I just wanted to make sure that everything was, you know, perfect, I mean.

Father did not give Son the checkbook “[b]ecause [Father] wanted to have control over it.” Father explained that he had no concerns about what might happen if Son had control over the account, commenting that Son was “[v]ery trustworthy.” Father testified that Son only wrote checks for Father's benefit.

Counsel for Father argued that the evidence established that the money in the joint account belonged to Father. Morgan Stanley argued that all of the funds in the joint account were subject to garnishment because both Father's and Son's names appeared on the account. Morgan Stanley explained that its “position under Maryland [l]aw is that once the account is created in a certain way, and the funds hit that account, the—where the source of the funds came from doesn't matter, because they have chosen to put funds into a jointly owned account that either of them can use.” Morgan Stanley further argued that Son obtained a benefit from the funds because he was permitted to use Father's vacation home.

The circuit court ruled in favor of Father, concluding that Father had established by clear and convincing evidence that all of the funds in the joint account belonged solely to him. The court found “that the sole source of funds for the PNC Bank account at issue in this case [was] the sole property of [Father]” and that “at no time did [Father] deposit any funds belonging to Son in the account.” The circuit court further explained its ruling as follows:

I find that, except for some incidental withdrawals, which I find to be immaterial in the scope of the account, each and every expenditure from the account was for the benefit, legally, I find, of [Father], and not [Son].

* * *

The counsel for [Father] is correct that the Court of Special Appeals is quite clear that under Maryland law, if a bank account has been garnished, or attached, there is an opportunity for a party who claims to be the owner to come in and make an evidentiary showing satisfactory to the trial court that the money is, in fact, theirs, and it's not that of the judgment debtor. I find that—it's not clear to me necessarily who has the burden of proof, but even if I assigned it to [Father], I find—and they don't say whether it's preponderance [or] clear and convincing. Folks, even if the standard were clear and convincing evidence, I find that [Father] has jumped that hurdle. There's no doubt in my head that all this money is [Father's]. All the expenditures were for the benefit of the father. So whatever further articulation the appellate courts want to do about the procedures, the steps, the burdens, the shifting, that's fine. But frankly, unless they make it beyond a reasonable doubt, in my mind, I have no doubt that all this money, at all times, belonged to [Father], and therefore, my earlier orders denying his request are erroneous and are vacated, and if counsel will draft an order consistent with this ruling, directing the judgment creditor to pay over the amount in question, I will sign it.

(Emphasis added.) The circuit court's oral ruling was memorialized in a written order dated June 17, 2014. This timely appeal followed.

STANDARD OF REVIEW

We recently reiterated the standard applied by this Court when reviewing a case tried before a court, explaining as follows:

Our review of a judgment in a case that was tried to the court is governed by Rule 8–131(c). We “review the case on both the law and the evidence” and “will not set aside the judgment of the trial court on the evidence unless clearly erroneous” with “due regard to the opportunity of the trial court to judge the credibility of the witnesses.” Md. Rule 8–131(c). “The deference shown to the trial court's factual findings under the clearly erroneous standard does not, of course, apply to legal conclusions.” Griffin v. Bierman, 403 Md. 186, 195, 941 A.2d 475 (2008) (quoting Nesbit v. Gov't Employees Ins. Co., 382 Md. 65, 72, 854 A.2d 879 (2004) ). “We review de novo the circuit court's application of the law to the undisputed facts before it.” PNC Bank, Nat'l Ass'n v. Braddock Props., 215 Md.App. 315, 322, 81 A.3d 501 (2013).

Montgomery Cnty. v. Fraternal Order of Police, 222 Md.App. 278, 294, 112 A.3d 1052 (2015).

DISCUSSION

Morgan Stanley avers that funds held in the joint account were per se subject to garnishment because they were held in a joint account upon which Son was a named owner and authorized signatory. As such, Morgan Stanley...