Hoffman Chevrolet, Inc. v. Washington County Nat. Sav. Bank

• Decision Date: 23 November 1983
• Docket Number: No. 13,13
• Citation: 467 A.2d 758,297 Md. 691
• Parties: HOFFMAN CHEVROLET, INC. v. WASHINGTON COUNTY NATIONAL SAVINGS BANK.
• Court: Maryland Court of Appeals

Page 691

297 Md. 691

467 A.2d 758

HOFFMAN CHEVROLET, INC. v. WASHINGTON COUNTY NATIONAL SAVINGS BANK.

No. 13.

Court of Appeals of Maryland.

Nov. 23, 1983.

Donald E. Beachley (Miller, Miller & Oliver, on brief), Hagerstown, for appellant.

David K. Poole, Jr., Hagerstown, for appellee.

Argued before MURPHY, C.J., and SMITH, ELDRIDGE, COLE, DAVIDSON and RODOWSKY, JJ.

COLE, Judge.

In this case, we must determine whether a check from a retirement trust payable to a debtor was properly garnished from the debtor's former employer to whom the check had been mailed. We also are called upon to determine whether the trial judge properly granted summary judgment in favor of the garnishor, attaching the check and funds the garnishee owed the debtor, despite claims that the garnishee was entitled to offset these funds against its obligation as surety for the debtor's obligation to another bank.

Washington County National Savings Bank (Washington Bank) held two notes issued by Victor McSherry, formerly an employee of Hoffman Chevrolet, Inc. The notes being in default, Washington Bank entered two confessed judgments in the Circuit Court for Washington County against McSherry. Washington Bank also requested that the clerk "issue an attachment by way of execution on the rights and credits of Victor H. McSherry, Jr., in the hands of Hoffman Chevrolet Inc., 101 S. Edgewood Drive, Hagerstown, Maryland." On November 28, 1979, the clerk issued this writ commanding Hoffman Chevrolet "to attach, seize, take and safe keep, the lands, tenements, goods, chattels, and credits" of McSherry. An identical attachment was issued on February 7, 1980. Hoffman Chevrolet, as garnishee, filed answers to both attachments. In response to the first writ, it asserted that McSherry's last pay check had been applied to an outstanding indebtedness to the Hagerstown Trust Company on which Hoffman Chevrolet and McSherry were jointly and severally liable. The answer to the second writ stated that Hoffman Chevrolet had applied all McSherry's funds to satisfy McSherry's debt to Hoffman.

Washington Bank served interrogatories on McSherry and took the deposition of John W. Martin, Hoffman Chevrolet's office manager. The deposition disclosed that Hoffman Chevrolet held $677.84 in McSherry's undrawn commissions and $206.70 in earmarked pension deductions not yet sent to the National Automobile Dealers Association (NADA) Retirement Trust. The deposition also revealed that after the termination of McSherry's employment at Hoffman Chevrolet, McSherry applied to the NADA Retirement Trust requesting payment of benefits to which he was entitled. ¹ The NADA Retirement Trust mailed a check, payable to McSherry, in the amount of $8,736.63 to Hoffman Chevrolet.

Martin also elaborated on the indebtedness to which Hoffman's answers to the writs of attachment referred. On June 29, 1979, Hoffman Chevrolet apparently co-signed with Mr. and Mrs. McSherry a security agreement with the Hagerstown Trust Company in the original amount of $22,347.60, the stated collateral being a 1979 Winnebago Motor Home. Martin testified that when McSherry applied for the funds from the Retirement Trust, he stated that he would apply the money to this note. He agreed to meet Martin at the bank and sign over the check. Although McSherry missed this meeting, Hoffman Chevrolet turned the check over to the Hagerstown Trust representative who took it to McSherry's new place of employment and got him to sign it over to reduce the balance on the Hagerstown Trust loan.

Washington Bank filed a motion for summary judgment. Hoffman Chevrolet answered, alleging that McSherry was indebted to the garnishee in an amount exceeding the unpaid commissions and unremitted pension deductions and that McSherry's retirement plan benefits were not even attachable. The trial court granted summary judgment in favor of Washington Bank for $9,621.17 (the sum of all disputed amounts). On appeal, the Court of Special Appeals rejected Hoffman Chevrolet's arguments that: (1) the spendthrift provisions of the NADA Retirement Trust protected the check issued to McSherry from attachment by ordinary creditors until actually received by McSherry, and (2) there was sufficient evidence in the record to create a genuine dispute as to Hoffman Chevrolet's setoff claim. See Hoffman Chev. v. Wash. Co. Nat'l Sav., 50 Md.App. 594, 439 A.2d 50 (1982). We granted certiorari to consider whether the check was attachable and whether summary judgment was properly granted as to any of the amounts attached. Because the amounts at issue raise different legal issues, we shall address them separately.

I

The threshold question regarding the $8,736.63 NADA Retirement Trust check is whether this check was even attachable. The check did not represent any debt the garnishee owed McSherry, and Hoffman Chevrolet had no real interest in the check. Hoffman Chevrolet simply was acting as a mail drop for the convenience of its former employee and the Retirement Trust. On the surface, this is not the typical garnishment situation. We look then to the relevant statutes and case law to determine whether the check was attachable under Maryland law.

A garnishment proceeding is simply an attachment against defendant's property, or a right thereto, held by a third person--the garnishee. See Fico, Inc. v. Ghingher, 287 Md. 150, 159, 411 A.2d 430 (1980); see generally 6 Am.Jur.2d Attachment and Garnishment §§ 2-3 (1963). The relevant Maryland statutes and rules state that a court may issue an attachment against a debtor's (1) property or (2) credit, matured or unmatured. See Md.Code (1974, 1980 Repl.Vol.), §§ 3-301 and 3-305 of the Courts and Judicial Proceedings Article; Md.Rules 622(a) and 623. Therefore, the check must qualify under one of these categories in order to be attachable.

The Court of Special Appeals concluded that "[t]he check in the instant case constituted a credit in the hands of the garnishee belonging to McSherry and was, therefore, subject to attachment." Hoffman Chev. v. Wash. Co. Nat'l Sav., supra, 50 Md.App. at 598, 439 A.2d 50. However, our examination of the meaning of the term credit as used in this statute indicates that this conclusion was incorrect.

Although this Court previously has not specifically defined a credit, we note that we have examined cases in which credits have been attached. For instance, in Northwestern N. Ins. v. Wetherall, 267 Md. 378, 298 A.2d 1 (1972), Wetherall laid a writ of attachment in the hands of Northwestern. Subsequently, the debtor filed suit against Northwestern to obtain payment under a fire insurance policy. The Court observed "there can be no doubt that monies owed by the garnishee on a judgment are subject to attachment as 'credits....' " Id. at 385. We believe that this language suggested the proper meaning of the term credit as it is used in the attachment statute--a monetary obligation that the garnishee owes the debtor. Other sources agree that "credits" is "[a] term of universal application to obligations due and to become due." Black's Law Dictionary 333 (5th ed. 1979) citing Colbert v. Superior Confection Co., 154 Okl. 28, 6 P.2d 791, 793 (1931); see also State v. Woodman, 26 Mont. 348, 67 P. 1118, 1120 (1902). In fact, "credits" and "debts" are correlative. See McCollum v. Hamilton Nat. Bank, 303 U.S. 245, 58 S.Ct. 568, 82 L.Ed. 819 (1938); Libby v. Hopkins, 104 U.S. 303, 26 L.Ed. 769 (1881); Kansas City Life Ins. Co. v. Hammett, 177 La. 930, 149 So. 525 (1933); Wilde v. Mahaney, 183 Mass. 455, 67 N.E. 337 (1903). Thus, an attachable "credit" is a monetary obligation that the garnishee owes the debtor. For instance, in this case, Hoffman Chevrolet held $677.84 in McSherry's undrawn commissions--a debt the garnishee owed the underlying debtor. These funds were garnishable credits. However, the check was not a credit, because it did not represent an obligation that the garnishee owed the debtor. Rather the check was a representation of an obligation owed by the NADA Retirement Trust to McSherry. Washington Bank could not reach this obligation by the writ of attachment laid in the hands of Hoffman Chevrolet.

Cases from other jurisdictions support this conclusion. In Morse v. Stevens, 95 Vt. 465, 115 A. 697 (1922), promissory notes payable to the defendant or bearer had been transferred by the defendant to a third person. The defendant's creditor laid a writ of attachment in that person's hands and asserted that the notes were attachable "goods, effects or credits." The court concluded that the notes were not attachable credits and that the garnishee would not be charged "on the ground of having in his hands mere securities for money belonging to the principal debtor." Id. at 697. These notes represented the obligations of another--not the garnishee. See also Hancock v. Colyer, 99 Mass. 187 (1868).

Although the check did not qualify as an attachable credit, we must, nevertheless, determine if the check was otherwise attachable. The Court of Special Appeals did not consider whether the check was the debtor's property and thus whether it qualified under that aspect of the attachment statute. We pause then to examine the history of Maryland attachment law and the common understanding of certain terms in resolving this issue.

In the Acts of Assembly, of the Province of Maryland for the year 1715 appears "An Act directing the Manner of Suing out Attachments in this Province, and limiting the Extent of them." This Act permitted attachment of the defendant's "Goods, Chattels, and Credits." This provision was expanded in 1732 when Parliament enacted the Statute of 5 Geo. 2 Ch. 7, "An Act for the more easy Recovery of Debts in his Majesty's Plantations and Colonies in America," which added the defendant's "Houses, lands, ... and Real Estates towards the satisfaction of such Debts...." Therefore, real property was made "subject to the same remedies, proceedings and process in any Court of...