Pacific First Federal Sav. and Loan Ass'n v. Flathead Properties, Inc.
| Decision Date | 28 July 1980 |
| Docket Number | No. 74-5641,74-5641 |
| Citation | 614 P.2d 1210,47 Or.App. 407 |
| Parties | PACIFIC FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION, Respondent, v. FLATHEAD PROPERTIES, INC., Eugene Schaudt et al., Defendants, and Schaudt, Stemm & Walter, Inc., Appellant. ; CA 15699. |
| Court | Oregon Court of Appeals |
Kay Kiner James, Eugene, argued the cause for appellant. With her on the briefs were Darst B. Atherly, and Thwing, Atherly & Butler, Eugene.
Harold D. Gillis, P. C., Eugene, argued the cause and filed the brief for respondent.
Before RICHARDSON, P. J., and THORNTON and BUTTLER, JJ.
The garnishee (Schaudt, Stemm and Walter, Inc.) appeals from the judgment of the trial court entered in favor of plaintiff/garnishor on allegations against the garnishee after two Notices of Garnishment were served in attempting to collect an outstanding judgment against defendant Schaudt. We affirm.
Schaudt was indebted to plaintiff as the result of a judgment entered against him and others in the Circuit Court for Lane County and which remained partially unsatisfied at the time of this proceeding. In attempting to reach funds to apply on that judgment plaintiff served Notices of Garnishment on the garnishee on August 26, 1977, and again on May 12, 1978. In response to both notices the garnishee stated that it had no property in its possession belonging or owing to Schaudt.
Garnishee is incorporated and has elected to be treated as a "subchapter S" corporation for tax purposes. Schaudt is the President of the company, owns 40% of the corporate stock and is employed by it as a structural engineer. Three other persons own various portions of the remaining 60% of the corporate stock. The financial arrangements of the corporation, because of its "subchapter S" status, are similar to those of a partnership.
On the morning of August 25, 1977, Schaudt approached the other shareholders and requested that a stockholders' meeting be held that day. The minutes of that meeting reflect that it began at 3:45 p. m. at the corporate office, and that Schaudt requested that he be given an advance on his August salary. Employees are normally paid on the first and 16th of each month for work performed to that time. Schaudt explained to the other shareholders, who were already aware of the outstanding judgment, that he had met with his attorney regarding efforts of plaintiff to collect the judgment and had been advised to request payment of his salary in advance. The other shareholders voted to make the advance, with Schaudt abstaining. In response to interrogatories the garnishee stated that its stockholders voted to make the salary advance to Schaudt in order to protect him from garnishment.
At the same meeting all of the stockholders voted to disburse as dividends the accumulated corporate profits on which the shareholders were required to pay income taxes because of their "subchapter S" election. The minutes state:
"After expressing his concern regarding income taxes the stockholders will be required to pay on this years corporate profits, Ray V. Walter made a motion that tomorrow, August 26th, the Corporation transfer $35,000.00 from the savings account to the checking account and that $40,000.00 then be disbursed to the stockholders to defray projected taxes."
The motion passed unanimously, whereupon the meeting adjourned at 4:25 p. m.
At 3:55 p. m. on the afternoon of the stockholders' meeting, only 10 minutes after the meeting began, the sheriff attempted to serve a Notice of Garnishment on the garnishee corporation at its office by serving Ray Walter, its Vice-President. The sheriff was told that Mr. Walter was not in the office. There was evidence that the regular receptionist was out that day and that a temporary receptionist, who was unfamiliar with the members of the firm, was the one who misinformed the sheriff. The sheriff returned the following morning, August 26, at 8:50 a. m. and affected service of the Notice of Garnishment.
The check for the salary advance was written and given to Schaudt following the meeting on August 25, 1977. The checks for the disbursement of the profits were also dated August 25, but the transfer of funds from the garnishee's savings account to the checking account was not accomplished until the next day. One employee stockholder testified that he believed the dividend checks had also been distributed to the stockholders following the meeting on the 25th, but with the understanding that they not be negotiated until the funds were transferred to the checking account. He was not certain, however, when the dividends were received. None of the other members of the firm, including Schaudt, could remember when they received the checks, but three of the checks were deposited on August 26, and Schaudt's check was deposited on August 30, 1977.
The garnishee stated in answers to Interrogatories that on September 1, 1977, an oral agreement with Schaudt was reached whereby he would continue to be paid in advance, and he was paid in advance up to the time of trial.
In its allegations against the garnishee, plaintiff contested the responses which stated that the garnishee had no property in its possession belonging to Schaudt. After trial to the court, a general finding was made in favor of plaintiff for $16,229.78 on the August 26, 1977, garnishment and for $179.28 on the May 12, 1978, garnishment. 1
Garnishee contends on appeal that it is not liable for the salary advances to Schaudt because they were made for a bona fide business reason: to keep Schaudt in the firm. The garnishee contends it had reasons to believe that Schaudt would have left the company had a garnishment of his salary taken place. As to the dividend, the garnishee argues that there was no evidence that it was still in possession of the dividend check when the notice of garnishment was served. It further argues that the distribution of the dividend was solely for tax reasons, and that whatever the motive for issuing the dividend at that time, it does not effect the validity of the payment once it was made. It contends that the only issue is whether, in fact, it had funds owing to Schaudt at the time the Notice was served, and relies on the prior delivery of the check to establish that it had no such funds.
A garnishment is an action at law. Case v. Noyes, 16 Or. 329, 19 P. 104 (1888); Argonaut Ins. Co. v. Ketchen, 243 Or. 376, 413 P.2d 613, 19 A.L.R.3d 1386 (1966); and see Redwine v. Cedco Co., Inc., 235 Or. 76, 382 P.2d 855 (1963). We cannot set aside the general finding of the trial court if it is supported by any substantial evidence or any reasonable inferences that may be drawn therefrom. Montgomery v. Wadsworth Plumbing, 278 Or. 455, 564 P.2d 703 (1977). On review we look at the evidence in the light most favorable to the prevailing party, in this case the plaintiff. See Hall v. Gordon, 284 Or. 49, 584 P.2d 1374 (1978).
A garnishee is required, pursuant to ORS 29.280, to furnish the sheriff "with a certificate, designating the amount and description of any property in his possession belonging to the defendant, or any debt owing to the defendant * * *." The garnishee is held liable to the plaintiff for the value of any property of defendant in its possession at the time the Notice was served. ORS 29.360.
We address first the issue of the dividend distributed by the garnishee. Assuming that delivery of the checks is the critical event, as the issue is drawn here, the trial court, in finding generally for the plaintiff, could reasonably have inferred from the evidence that the dividend checks were not distributed until August 26, 1977, after the funds were...
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Arnold, Matheny, P.A. v. First Am. Holdings
...an assignment of funds and holding that the check was still subject to garnishment); Pacific First Fed. Sav. & Loan Ass'n v. Flathead Properties, Inc., 47 Or.App. 407, 614 P.2d 1210, 1213 n. 2. (1980) (declining to decide the issue but noting that where a check was delivered but not paid un......