Branch Banking & Trust Co. v. Crystal Ctr., LLC, Case No. 8:15-cv-1462-T-30AAS

• Decision Date: 04 October 2018
• Docket Number: Case No. 8:15-cv-1462-T-30AAS
• Parties: BRANCH BANKING AND TRUST COMPANY, Plaintiff, v. CRYSTAL CENTRE, LLC, et al., Defendants.
• Court: U.S. District Court — Middle District of Florida

BRANCH BANKING AND TRUST COMPANY, Plaintiff,
v.
CRYSTAL CENTRE, LLC, et al., Defendants.

Case No. 8:15-cv-1462-T-30AAS

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION

October 4, 2018

ORDER

Oswald Carrerou moves for an order directing that Branch Banking and Trust Company (BB&T) is entitled to receive the net value of Mr. Carrerou's individual Pershing accounts after deductions for tax liability and other fees. (Doc. 383). BB&T opposes Mr. Carrerou's motion. (Doc. 386). Pershing's liability under Section 77.06, Florida Statutes, which attached when Pershing answered BB&T's writ of garnishment, is independent and legally separate from the tax liability and any other fees associated with Mr. Carrerou's individual accounts. Mr. Carrerou will incur no fees or tax liability associated with liquidating Mr. Carrerou's individual accounts at Pershing because his counsel (possibly to be reimbursed by his counsel's malpractice insurance carrier) will pay BB&T the value of his individual accounts in lieu of Pershing liquidating the accounts. Therefore, Carrerou's motion (Doc. 383) is GRANTED-IN-PART and DENIED-IN-PART.

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I. BACKGROUND¹

BB&T initiated this cause of action against Crystal Centre, LLC, and Messrs. Carrerou and Donald K. Stephens claiming the defendants defaulted on a promissory note and guaranties. (Doc. 1). The Clerk entered judgment against Crystal Centre and Mr. Carrerou for $927,149.53 plus post-judgment interest. (Doc. 45). The Clerk also entered an award of attorney's fees in costs against Crystal Centre and Mr. Carrerou for $64,918.35. (Doc. 103). BB&T then began collection efforts.

The court issued a writ of garnishment against Pershing, LLC. (Doc. 65). Pershing answered the writ and stated Mr. Carrerou held three accounts at Pershing—one joint account with his wife Leah Carrerou and two individual retirement accounts (IRAs) in Mr. Carrerou's name. (Doc. 128, p. 5). Pershing's answer stated the following:

Pershing Account; Number	Account Title	Balance/Value a/o; response date; 09/16/2016
***0607	Oswald P. Carrerou; Leah J. Carrerou JT TEN; P.O. Box 334; Winter Haven, FL 33882-; 0334	$5,074.78
***0698	IRA FBO Oswald P.; Carrerou; Pershing LLC as; Custodian; P.O. Box 334; Winter Haven, FL 33882-; 0334	$11,877.04

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***0631
SEP FBO Oswald P.
Carrerou
Pershing LLC as
Custodian
P.O. Box 334
Winter Haven, FL 33882-
0334
$174,919.91

(Doc. 128, p. 5). BB&T moved for final judgment in garnishment against Mr. Carrerou's IRAs at Pershing. (Doc. 260). The undersigned recommended granting BB&T's motion and the court entered judgment in garnishment in BB&T's favor against Mr. Carrerou's IRAs at Pershing for $11,877.04 (account ending in ***0698) and $174,919.91 (account ending in ***0631). (Docs. 290, 300).

The parties jointly stipulated to dissolve the writ of garnishment against Mr. Carrorou's joint account (ending in ***0607) with Mrs. Carrerou. (Doc. 375). Therefore, only issues associated with the funds from Mr. Carrerou's IRAs (accounts ending in ***0698 and ***0631) remain.

II. ANALYSIS

Mr. Carrerou argues BB&T should receive no more from his IRAs than he would take if he were to liquidate his accounts at this time. (Doc. 383, pp. 9-11). According to Mr. Carrerou, because he would incur a tax liability and other brokerage and transaction fees if he were to liquidate his IRAs, BB&T should receive the value of his IRAs less the tax liability and other fees he would incur. (Id. at 12-13). Mr. Carrerou claims that, in wage garnishments under Florida law, the garnishor, or

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judgment creditor, can only receive twenty-five percent of the debtor's disposable income after federal income tax and other withholdings. (Doc. 383, p. 14). Mr. Carrerou argues the same practice from wage garnishment cases should apply here to disbursements from his IRAs. (Id.). Therefore, according to Mr. Carrerou, "if the value of the IRA account is allocated to BB&T, and such disbursement is accompanied by tax liability and penalties, the court should consider such resulting tax liability, and BB&T should bear such liability since it is the recipient of such assets." (Id.).

BB&T advances several reasons why the court should deny Mr. Carrerou's motion. (Doc. 386, pp. 5-14). First, BB&T argues Mr. Carrerou impermissibly seeks to amend the court's judgment on his IRAs at Pershing. (Id. at 5). Second, BB&T claims Mr. Carrerou waived the issue of withholding money from his Pershing IRAs because he did not object on this ground to the Report and Recommendation on his Pershing IRAs. (Id. at 6). Third, BB&T claims federal taxes should not be withheld from Mr. Carrerou's Pershing IRAs because tax withholdings are not mandatory. (Id. at 6-7).

If Mr. Carrerou is entitled to tax withholding on his Pershing IRAs, BB&T claims he would be entitled to ten-percent withholding at most. (Id. at 7-9). BB&T similarly argues Mr. Carrerou is not entitled to withholding for additional fees, like brokerage fees. (Id. at 12-13). BB&T last argues it is entitled to attorney's fees and costs incurred for responding to Mr. Carrerou's motion. (Id. at 13-14).

The undersigned will analyze the parties' contentions by addressing Mr.

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Carrerou's claims about his tax liability first and his claims about brokerage and other fees second.

A. Tax Liability

The law of the state in which a federal court is located governs the procedure for enforcing a judgment by writ of execution. Fed. R. Civ. P. 69(a)(1). The law in Florida governing garnishment is Chapter 77, Florida Statutes.

When a judgment holder serves a writ of garnishment on a garnishee (an entity who owes money to the defendant or judgment debtor), the garnishee becomes "liable for all debts due by [it] to defendant and for any tangible or intangible personal property of defendant in the garnishee's possession or control at the time of the service of the writ or at any time between the service and the time of the garnishee's answer." Fla. Stat. § 77.06. Section 77.06, Florida Statutes further states: "Service of the writ creates a lien in or upon any such debts or property at the time of service or at the time such debts or property come into the garnishee's possession or control."

Florida's garnishment statute requires the garnishee to retain any property of the judgment debtor in its possession until disposition or dissolution of the writ. Arnold, Matheny and Eagan, P.A. v. First Am. Holdings, Inc., 982 So. 2d 628, 632 (Fla. 2008) (citation omitted). The garnishee then becomes the trustee of the defendant's funds. Reaves v. Domestic Fin. Co., 152 So. 718, 720 (Fla. 1934); In re Masvidal, 10 F.3d 761, 764 (11th Cir. 1993) (quotation and citation omitted). If the garnishee fails to retain the judgment debtor's property—as disclosed in its answer

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to the writ of garnishment—the judgment holder may obtain monetary judgment against the garnishee. See Arnold, Matheny and Eagan, P.A., 982 So. 2d at 632 (discussing Section 77.081). "This potential liability that may attach to the garnishee under the garnishment statute arises independently of the underlying debt, and it is legally separate from any liability that the underlying judgment debtor may have to the plaintiff." Daniels v. Sorriso Dental Studio, LLC, 164 So. 3d 778, 781 (Fla. 2d Dist. Ct. App. 2015).

When Pershing answered BB&T's writ of garnishment, Pershing stated it owed Mr. Carrerou $11,877.04 for the account ending in ***0698 and $174,919.91 for the account ending in ***0631. (Doc. 128, p. 5). Pershing did not state it owed Mr. Carrerou $11,877.04 less Mr. Carrerou's federal tax liability. Nor did Pershing state it owed Mr. Carrerou $174,919.91 less Mr. Carrerou's federal tax liability. So, when Pershing answered BB&T writ of garnishment, it became trustee of $11,877.04 and $174,919.91, respectively. Pershing's failure to retain those funds would have resulted in a judgment in BB&T's favor against Pershing for $11,877.04 and $174,919.91. Any tax liability associated with the Pershing accounts is therefore independent and legally separate from the garnishment judgment BB&T has against Mr. Carrerou's IRAs at Pershing. As a result, Mr. Carrerou's motion for an order directing Pershing to withhold an amount for Mr. Carrerou's tax liability when it disburses his individual accounts is denied.

Although factually dissimilar, the reasoning from Daniels is informative. In

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Daniels, the plaintiff obtained a judgment against an individual and then served a writ of garnishment on the individual's employer to garnish wages owed to the individual...