First Bank of Whiting v. Samocki Bros. Trucking Co.
Citation | 509 N.E.2d 187 |
Decision Date | 17 June 1987 |
Docket Number | No. 4-585,4-585 |
Parties | The FIRST BANK OF WHITING, Appellant (Garnishee-Defendant Below), v. SAMOCKI BROTHERS TRUCKING COMPANY, Appellee (Plaintiff Below). A 131. |
Court | Court of Appeals of Indiana |
Robert E. Stochel, John M. O'Drobinak, P.C., Crown Point, for appellant.
David K. Ranich, East Chicago, for appellee.
The First Bank of Whiting (Bank) brings this appeal from a trial court judgment in proceedings supplemental in favor of Samocki Brothers Trucking Co. (Samocki). The trial court had initially granted judgment for Samocki against Region Construction Co. (Region) and James Hough on a promissory note and personal guaranty. During the course of its efforts to collect the judgment, Samocki served an order to appear, notice of adverse claim, and interrogatories upon Bank, as Region's depository bank. Bank failed to appear at hearing, filed its interrogatories two and a half months after service, honored numerous Region checks despite the adverse claim notice, and set off the remaining balances of Region's accounts to pay off notes held by Bank. Bank finally appeared before the trial court in response to a second verified motion whereupon the court entered judgment against it in the sum of $27,551.70 for Samocki's judgment against Region and accrued interest. Bank argues judgment was inappropriate 1) because Samocki's order and notice only froze Region's accounts for 60 days and it failed to obtain a second appropriate order pursuant to Ind.Code 28-1-20-1.1(a)(4) when 60 days expired, and 2) because Bank had a prior and superior right to Region's accounts pursuant to a security interest therein securing payment of Region's promissory notes. After a careful review of the relevant authority, it is our belief the trial court's decision was correct, and we affirm.
Rephrased, Bank's issues on appeal are:
1. Whether the trial court's judgment is contrary to law because Samocki lost any 2. Whether the trial court's judgment is contrary to law because the Bank had rights in Region's bank accounts prior and superior to Samocki's judgment. 2
claim to Region's bank accounts when it failed to comply with Indiana's adverse claim statute;
In June, 1982, Samocki filed a complaint against Region and Hough to collect monies due and owing under the terms of a promissory note and personal guaranty. On April 18, 1983, the trial court entered judgment against Region and Hough pursuant to stipulation and agreement of the parties for the sum of $16,836.16 principal, $2,873.84 accrued interest, and $3,000.00 attorney's fees. The judgment remained unpaid despite Region and Hough's agreement to make installment payments thereon.
On May 9, 1984, Samocki instituted proceedings supplemental to collect the judgment by filing a verified motion and serving summons, an order to appear and interrogatories upon Bank as garnishee-defendant. The court's order set the matter for hearing on June 11, and contained the following warning to Bank:
At the time Bank was served on May 9, Region had two demand accounts with Bank, Account Nos. 17-648-6 and 18-558-2. During the month of May, Region Account No. 17-648-6 showed a beginning balance of -$16,410.53 and reflected credits and deposits totalling $181,359.33. After May 9, Bank also honored 27 checks written on the account in the sum of $30,947.24. At the end of May, the account's balance was -$27,564.69 although the only other check paid was for $2,000.00. In June, that same account had deposits and credits of $112,695.69, no checks honored, and a concluding balance of -$24,038.13.
Account No. 18-558-2, on the other hand, began the month of May with -$14,712.32 followed by $88,000.00 in deposits and credits. During May, Bank honored 38 checks totalling $19,509.30, at least $2,567.91 of which were honored after service of Samocki's summons. The May ending balance was calculated at -$11,223.02. In June, Account No. 18-558-2 showed deposits and credits of $89,624.05 and, as with No. 17-648-6, no checks honored. Again, June ended with a negative balance of -$19,722.51. Although there is no direct testimony on the matter, there is evidence in the record that these negative balances were caused by Bank's direct application of the remainder of Region's deposits to debts owing to Bank and that any checks were paid by the accounts only with the express approval and at the direction of Bank. In summary, during the month of May when the garnishment order was in force, Bank honored over $30,000 worth of checks while taking in deposits and credits well over $250,000. Thus, there can be no doubt that the accounts had sufficient funds, despite the withdrawals, to cover Samocki's judgment but for Bank's exercise of an offset.
The trial court held the initial hearing as scheduled on June 11, but Bank neither appeared nor filed its answers to the interrogatories despite Samocki's counsel's efforts to contact Bank and its representatives the week before. After examination of Hough on assets available for execution, the court ordered the cause continued. Again, counsel attempted to get Bank to cooperate, this time by letter to Bank's attorney, to no avail. Finally, on July 17, more than 60 days after service, Bank filed its answers to interrogatories with the court.
The interrogatories, reputedly completed in May, 3 were answered under oath as follows:
* * *
* * *
4. What sums of money are held in each of the accounts on deposit with you?
ANSWER: # 17-648-6 $6,344.63--
# 18-558-2 $9,783.41--
5. To your knowledge, are there any other liens on these accounts?
ANSWER: NO."
On August 13, Samocki's counsel once more corresponded with Bank's counsel regarding the interrogatories and the status of Region's accounts in May and June. Counsel then made demand for Bank to pay the judgment due from Region pursuant to the proceedings supplemental. Counsel followed up with further correspondence on September 27, and upon Bank's failure to respond, filed a second Hearing was held on November 8, at which time Bank appeared by counsel and Anthony Carollo, vice-president of loan administration. At that time, Bank's counsel declared Bank did not oppose Samocki's exhibits as filed with its second Verified Motion insofar as they represented the status of Region's accounts. Instead, Bank's defense rested upon Carollo's testimony with respect to Region's debts owing to Bank. In this regard, Bank introduced without objection copies of three notes executed by Hough, as president of Region, in favor of Bank.
Verified Motion to Enforce Judgment by Proceedings Supplemental to Execution on October 24, naming Bank as garnishee-defendant.
Record, pp. 99, 101, 104. (There was no testimony whether these security agreements were properly perfected.) Each note further provided the following:
"The Bank may, without notice or demand of any kind, appropriate and apply toward the payment of such of the Liabilities (whether before or after any of the Liabilities shall become due and payable), and in such order of application as the Bank may from time to time elect, any balances, credits, deposits, accounts or moneys which constitute Collateral hereunder."
Id. Bank formally demanded payment for these notes on or about June 22, 1984.
During examination of Carollo, counsel for both parties elicited various bits of information regarding Region and Bank's relationship: At the time of the November 8 hearing, Region owed $795,000 principal and approximately $125,000 interest on all its outstanding indebtedness to Bank, included in which were the negative...
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