Arnold, Matheny, P.A. v. First Am. Holdings

• Decision Date: 01 May 2008
• Docket Number: No. SC07-1136.,SC07-1136.
• Parties: ARNOLD, MATHENY AND EAGAN, P.A., Petitioner, v. FIRST AMERICAN HOLDINGS, INC., etc., et al., Respondents.
• Court: Florida Supreme Court

982 So.2d 628

ARNOLD, MATHENY AND EAGAN, P.A., Petitioner, v. FIRST AMERICAN HOLDINGS, INC., etc., et al., Respondents.

No. SC07-1136.

Supreme Court of Florida.

May 1, 2008.

John Calhoun Bales and John L. Mulvihill of John Bales Attorneys, St. Petersburg, FL, and Barbara A. Eagan of Broussard, Cullen, DeGailler, and Eagan, P.A., Orlando, FL, for Petitioner.

Geoffrey Todd Hodges of G.T. Hodges, P.A., Lutz, FL, for Respondent.

PARIENTE, J.

The issue before us involves the interpretation of Florida's garnishment statute and the obligations it imposes on third parties, including attorneys, who are served with writs of garnishment. In its decision in First American Holdings, Inc. v. Preclude, Inc., 955 So.2d 1231 (Fla. 2d DCA 2007), the Second District Court of Appeal ruled upon the following question, which the court certified to be of great public importance:

DOES AN ATTORNEY GARNISHEE HAVE A DUTY TO ISSUE A STOP PAYMENT ORDER FOR A CHECK DRAWN ON HIS OR HER TRUST ACCOUNT AND DELIVERED TO THE PAYEE PRIOR TO THE RECEIPT OF A WRIT OF GARNISHMENT IF THE SERVICE OF THAT WRIT OCCURS PRIOR TO THE PRESENTMENT OF THAT CHECK FOR PAYMENT TO THE ATTORNEY'S BANK?

Id. at 1236. We have jurisdiction. See art. V, § 3(b)(4), Fla. Const.

The Second District broadly concluded that "Florida does impose on both bank and nonbank garnishees the duty to retain funds held by the garnishee even after a check on those funds has been drawn by the garnishee and delivered to the payee." First American, 955 So.2d at 1235. In so holding, the Second District adopted a rule of law that applied equally to attorneys and other non-bank garnishees. Because we agree with this analysis, we answer the certified question in the affirmative and approve the decision of the Second District.

FACTUAL AND PROCEDURAL BACKGROUND

The law firm of Arnold, Matheny and Eagan, P.A. (AME) represented Preclude, Inc., in a lawsuit against Greenleaf Products, Inc., which resulted in AME obtaining a $50,000 settlement from Greenleaf for its client Preclude. The settlement reached on June 14, 2002, required Greenleaf to pay these funds into AME's trust account.

Prior to the time of the settlement between Greenleaf and Preclude, First American Holdings, Inc. (First American), sought to collect on a $26,000 judgment it had previously obtained in unrelated proceedings against Preclude. The precise details of both underlying lawsuits are not relevant to the issue before us.

On June 19, 2002, First American served AME with a writ of garnishment seeking to collect its $26,000 judgment from the Greenleaf settlement. At that time, AME had not yet received the settlement funds and answered the writ by stating that, although Greenleaf was indebted to Preclude, AME did not currently hold any funds belonging to Preclude. Two days later, on June 21, 2002, AME received the proceeds of the settlement and deposited the funds into its trust account. On that same date, AME issued two trust account checks. AME made the first check payable to its operating account in the amount of $26,736.24 for attorneys' fees and costs. That check is not in dispute. The other check for the balance of the funds was made payable to Preclude, which AME hand delivered to Preclude that same day.

Four days later, on June 25, 2002, First American served a second writ of garnishment on AME, again attempting to collect on the judgment against Preclude. Once again, AME answered the writ by denying that it was in possession or control of any funds that were the property of Preclude. Upon subsequent review of the records, however, First American determined that as of June 25, 2002, the funds represented by the check were still in AME's trust account and that the check was not presented to AME's bank for payment until June 28, 2002, several days after AME had answered the writ of garnishment denying possession of the funds.

First American then filed an action seeking to hold AME responsible for the funds represented by the trust account check issued to Preclude. First American contended that AME was liable because AME had possession and control of the funds until the check cleared. AME defended its actions by arguing that once the check was delivered to Preclude on June 21, 2002, it no longer had possession or control and therefore had no duty to stop payment. Alternatively, AME argued that any stop payment duty applied only to banks and thus was not applicable to AME as a non-bank garnishee. The trial court ruled in favor of AME, granting its motion for summary judgment and dissolving the second garnishment writ. First American, 955 So.2d at 1232-33.

First American appealed to the Second District. As stated previously, the court specifically rejected AME's argument that attorneys and their trust account checks should be treated differently for purposes of the garnishment law. Id. at 1235. Thus, the Second District reversed the trial courts ruling. Id. Consequently, AME filed a notice to invoke this Courts discretionary jurisdiction based on the certified question, requesting this Court to review the Second Districts decision.

ANALYSIS

The question in this case, which is one of first impression for this Court, is whether an attorney must issue a stop payment order on a check drawn from an attorney trust account and delivered to a client before the attorney is served with a garnishment writ, if the writ is received before the check has been presented for payment to the attorney's bank. Because the issue requires this Court to interpret the statutory provisions of Florida garnishment law, we apply a de novo standard of review. See Heart of Adoptions, Inc. v. J.A., 963 So.2d 189, 194 (Fla.2007).

In answering the certified question, we first provide an overview of the Florida garnishment statute, sections 77.01-77.28, Florida Statutes (2002). Next, we discuss the proper interpretation of "possession or control" as those terms are used in section 77.01. We then analyze whether the obligations of the garnishment statute apply equally to bank and non-bank garnishees. Next, we determine whether a different rule of law should apply to attorney trust accounts, which also requires us to review the obligations of attorneys toward their clients. Finally, we apply our analysis to the facts of this case.

A. The Garnishment Statute

Garnishment is a creature of statute, unknown at common law. Robinson v. Robinson, 154 Fla. 464, 18 So.2d 29, 31 (1944). It is authorized as a method of collecting a monetary judgment against a defendant. In Florida, the right to garnishment is created under section 77.01, which states in relevant part:

Every person or entity who has sued to recover a debt or has recovered judgment in any court against any person or entity has a right to a writ of garnishment, in the manner hereinafter provided, to subject any debt due to defendant by a third person or any debt not evidenced by a negotiable instrument that will become due absolutely through the passage of time only to the defendant by a third person, and any tangible or intangible personal property of defendant in the possession or control of a third person.

(Emphasis added.)

Once a garnishee receives the writ, the garnishee must answer the plaintiff within twenty days and state

whether he or she is indebted to defendant at the time of the answer, or was indebted at the time of service of the writ, or at any time between such times; and in what sum and what tangible or intangible personal property of defendant the garnishee has in his or her possession or control at the time of his or her answer, or had at the time of the service of the writ, or at any time between such times; and whether the garnishee knows of any other person indebted to defendant, or who may have any of the property of defendant in his or her possession or control.

§ 77.04, Fla. Stat. (2002). In addition to filing the answer, the garnishee is required to "retain ... any deposit, account, or tangible or intangible personal property in the possession or control of such garnishee" until disposition or dissolution of the writ. § 77.06(2), Fla. Stat. (2002). If a garnishee fails to retain the property of the defendant or otherwise comply with the writ, the plaintiff may obtain a monetary judgment against the garnishee. See § 77.081(1)-(2), Fla. Stat. (2002).

On the other hand, the Legislature, in recognizing the risk of liability for a garnishee, has provided immunity for any garnishee acting in good faith. Section 77.06(3), Florida Statutes (2002), states:

In any case where a garnishee in good faith is in doubt as to whether any indebtedness or property is required by law to be included in the garnishee's answer or retained by it, the garnishee may include and retain the same, subject to the provisions of s. 77.19[¹] and subject to disposition as provided in this chapter, and in such case the garnishee shall not be liable for so doing to the defendant or to any other person claiming the same or any interest therein or claiming to have sustained damage on account thereof.

(Emphasis added.) This section acts as a shield from liability for garnishees who have acted in good faith in accordance with their statutory responsibilities. Finally, Florida garnishment law provides for reimbursement of a garnishees attorneys fees, costs and expenses associated with complying with a garnishment writ. See § 77.28, Fla. Stat. (2002).

B. Statutory Construction

With this overview of Florida garnishment law in mind, we now discuss the interpretation of the garnishment statute. The actual issue before us is a narrow one concerning the obligations the statute imposes on attorneys under a specific set of circumstances; that is, where a trust account check has been written and delivered to the payee prior to receipt of the garnishment writ but before presentment of the check to the payor's bank. The specific determination we must make is whether an attorney is in "possession or...