Garton v. Garton, 93-1940

• Decision Date: 21 June 1995
• Docket Number: No. 93-1940,93-1940
• Citation: 533 N.W.2d 828
• Parties: Cynthia GARTON, Appellant, v. Gilbert GARTON, Executor of the Estate of George R. Garton; Richard C. Garton; Security Bank of Kansas City; George R. Haydon, Jr., Personal Representative of the Estate of Edwin C. Borserine, Deceased, Appellees, and Alice Cockrell, Appellant.
• Court: Iowa Supreme Court

Page 828

533 N.W.2d 828

Cynthia GARTON, Appellant, v. Gilbert GARTON, Executor of the Estate of George R. Garton; Richard C. Garton; Security Bank of Kansas City; George R. Haydon, Jr., Personal Representative of the Estate of Edwin C. Borserine, Deceased, Appellees and Alice Cockrell, Appellant.

No. 93-1940.

Supreme Court of Iowa.

June 21, 1995.

Carlton G. Salmons of Austin, Gaudineer, Austin, Salmons & Swanson, Des Moines, for appellant Cynthia Garton.

Steven C. Jayne, Des Moines, for appellant Alice Cockrell.

Thomas M. Cunningham of Shearer, Templer, Pingel & Kaplan, P.C., West Des Moines, for appellee George R. Haydon, Jr.

James D. Meyer of the Meyer Law Firm, Chariton, for appellee Gilbert Garton.

John E. Orell, Jr., and Hugh J. Cain of Hopkins & Huebner, P.C., Des Moines, for appellee Security Bank.

Richard C. Garton, pro se, Pittsburg, Kansas.

Considered by LARSON, P.J., and LAVORATO, NEUMAN, SNELL, and TERNUS, JJ.

NEUMAN, Justice.

This is a dispute among creditors over their right to claim some portion of defendant Richard Garton's inheritance. Plaintiff Cynthia Garton, Richard's former wife, petitioned for a creditor's bill lien to enforce her judgment for unpaid spousal and child support. Ruling by way of summary judgment, the district court found that Cynthia's lien against Richard's beneficial interest was inferior to claims already established in the proceeds by Richard's other creditors, defendants George R. Haydon, Jr. and Security State Bank. We affirm.

I. Background Facts and Proceedings.

Cynthia and Richard Garton were formerly husband and wife. In October 1985, they borrowed $165,000 from Security Bank of Kansas City (hereinafter "Security Bank") secured by a deed of trust on jointly owned real estate. When the Gartons defaulted on the payments, Security Bank foreclosed the deed of trust and ultimately obtained a deficiency judgment against them in the sum of $110,000.

Richard Garton was also indebted to George R. Haydon, Jr., personal representative of the estate of Edwin C. Borserine, from whom Richard had borrowed $25,000. In May 1988, Haydon secured a judgment against Richard for the principal sum with interest. The judgment was registered in the Iowa District Court for Lucas County pursuant to the Iowa Uniform Enforcement of Foreign Judgments Act. See Iowa Code ch. 626A (1993).

Contemporaneously with these financial difficulties, the Gartons' marriage deteriorated. A Nebraska decree of divorce was filed January 8, 1990. Under the decree, Cynthia was awarded alimony and child support for the parties' two sons. Richard has not fulfilled this obligation, and at least $27,000 remains unpaid. The decree also ordered Richard to hold Cynthia harmless for the debts to Security Bank and Haydon.

Also in January 1990, Richard's father, Gordon Garton, died. As one of three heirs, Richard stood to inherit one-third of a gross estate totaling $900,000. He immediately negotiated a promissory note to the Hawkeye Bank in Chariton for a short-term loan of $125,000, giving as security an assignment of his beneficial interest in his father's estate.

Meanwhile, under a duly executed garnishment on Haydon's judgment, the sheriff of Lucas County, Iowa, garnished the executor of the Garton estate on April 20, 1990. Following notice to Richard and answer by the garnishee, the district court issued the following judgment and order condemning funds in the hands of the executor:

It is hereby ordered that so much of said funds or property of judgment debtor in the possession of garnishee as is necessary to and will pay the judgment herein in the amount of $25,000 with interest thereon at the per diem rate of $14.28 from the date below written is hereby condemned and appropriated for application on plaintiff's judgment. The garnishee is hereby ordered to turn over so much of said funds or property to the sheriff of Lucas County, Iowa, for delivery to the plaintiff/judgment creditor to satisfy said judgment in accordance with distribution schedules made by the Probate Court, and subject to the payment of federal and state taxes and expenses of administration.

When Security Bank learned of Richard's potential inheritance, it also sought to stake its claim. A settlement reached between Richard and the bank in August 1990 provided that the bank would release all claims against Richard and Cynthia upon the payment of $90,000. The payment would be made pursuant to a contemporaneous assignment of estate proceeds, executed by Richard, which included the executor's agreement to be bound by the assignment, "subject, however, to any superior claims of other creditors, or order of court directing the [executor] to do other than directed herein."

More than a year later, just days before the executor filed his final report seeking court approval of the foregoing distributions along with the expenses of administration, Cynthia Garton filed a petition for a creditor's bill lien. See Iowa Code §§ 630.16-.18. She sought a declaration that her Nebraska judgment for child support and alimony was entitled to full faith and credit in the Iowa district court; that she was entitled to a lien against Richard's undistributed share in his father's estate for the arrearage; and that her judgment was entitled to priority over those held by Richard's other creditors. Cynthia's mother, Alice Cockrell, filed a similar petition the following day based on a $30,000 judgment she had obtained against Richard on March 1, 1991.

After payment of taxes and administrative expense, Richard's anticipated share of the estate totaled no more than $120,000. Upon the agreement of all parties concerned, the district court entered an order delaying distribution until the priority of competing claims could be determined. Orders were entered permitting the necessary parties to be interpleaded. Various answers and cross-claims were filed. Discovery was undertaken and eventually motions for summary judgment were filed by Haydon and Security Bank. Following hearing, the district court granted the motions. It ordered distribution of available funds in this order: Haydon, Security Bank, Cynthia, and Alice Cockrell. This appeal by Cynthia, joined by Alice Cockrell, followed.

II. Scope of Review.

Because Cynthia's petition was filed in equity, our review would ordinarily be de novo. See Iowa R.App.P. 4. As between Cynthia and Haydon, however, the parties concede there are no disputed issues of material fact. Thus the question is whether the district court properly entered judgment for Haydon as a matter of law. Adam v. Mt. Pleasant Bank & Trust Co., 355 N.W.2d 868, 872 (Iowa 1984). As for the judgment favoring Security Bank, Cynthia claims the court's summary action was improper because a disputed fact issue exists over Cynthia's allegation of a fraudulent conveyance. Thus we review that claim in the light most favorable to Cynthia's resistance. The question is whether the alleged factual dispute is material and, if not, whether the district court properly applied the law. Ottumwa Hous. Auth. v. State Farm Fire & Casualty Co., 495 N.W.2d 723, 726 (Iowa 1993).

III. Issues on Appeal.

Cynthia attacks the district court's decision on three fronts. First, she claims Haydon's lien was not properly perfected, thus rendering the garnishment and subsequent order condemning funds inferior to her own lien. She next claims that disputed facts surrounding Security Bank's assignment from Richard preclude summary judgment for the bank as a matter of law. She concludes with a public policy argument that her unpaid judgment for spousal and child support should take precedence over all competing judgments. We shall consider the arguments in turn.

A. Haydon judgment. Cynthia begins by claiming that any attempt by Haydon to garnish Richard's distributive share in the estate is prohibited by statute and at common law. The claim is entirely without merit.

Iowa Code section 642.1 grants judgment creditors the right to garnish an executor "for money due from decedent." This court long ago interpreted this statute as repealing the rule of custodia legis, a doctrine that formerly protected money or property in the hands of an executor from garnishment. Boyer v. Hawkins, 86 Iowa 40, 42-43, 52 N.W. 659, 659-60 (1892). This court specifically held in Boyer that the legislature intended by this repeal to permit an executor to "be garnished as to a legacy or distributive share." Id. at 43, 52 N.W. at 660. The court reaffirmed Boyer in Geiger v. Gaige, 105 N.W. 1007 (Iowa 1907). There this court characterized as "well-settled" the right of a judgment creditor to garnish an executor for the distributive share of a beneficiary. Id. at 1008.

The authority upon which Cynthia relies pertains solely to attempts by creditors to garnish an executor's personal funds for a decedent's debts, or attempts to garnish an estate for debts owed by the decedent. See, e.g., Shepherd v. Bridenstine, 80 Iowa 225, 226-27, 45 N.W. 746, 747 (1890); Marion County Bank v. Smith, 205 Iowa 203, 204-09, 217 N.W. 857, 858-59 (1928). Likewise the statute upon which Cynthia relies, Iowa Code section 633.430, speaks to the question of levy and execution under any judgment "against a decedent or personal representative." It simply has no application to the garnishment of funds due a distributee.

Cynthia next contends that Richard's January 1990 assignment to Hawkeye Bank of "all right, title and interest" in the estate of George Garton effectively exhausted the funds available to Haydon for garnishment in April 1990. She rightly notes that garnishment is effective only to the extent of a person's interest in the property garnished. Van Maanen v. Van Maanen, 360 N.W.2d 758, 761 (Iowa 1985). But, by its terms, Richard's assignment encumbered his distributive share only to the extent of his indebtedness to Hawkeye Bank. At the time the security was given, Richard's undistributed share was anticipated to...