Sandler v. Gilliland

• Decision Date: 11 January 1993
• Docket Number: No. 02A05-9206-CV-208,02A05-9206-CV-208
• Citation: 605 N.E.2d 1174
• Parties: Neil F. SANDLER, Appellant-Defendant, v. Paul D. GILLILAND, Appellee-Defendant, and Anthony Wayne Bank, successor in interest by merger with Summit Bank, Appellee-Plaintiff.
• Court: Indiana Appellate Court

Page 1174

605 N.E.2d 1174

Neil F. SANDLER, Appellant-Defendant, v. Paul D. GILLILAND, Appellee-Defendant and Anthony Wayne Bank, successor in interest by merger with Summit Bank, Appellee-Plaintiff.

No. 02A05-9206-CV-208.

Court of Appeals of Indiana Fifth District.

Jan. 11, 1993.

Transfer Decided March 24, 1993.

Thomas J. Galanis, Beckman, Lawson, Sandler, Snyder & Federoff, Fort Wayne, for appellant-defendant.

A. Dale Bloom, Suzan L. Rutz, Bloom, Bloom, More and Miller, Fort Wayne, for appellee.

BARTEAU, Judge.

Neil Sandler appeals the trial court's garnishment order in favor of Anthony Wayne Bank (the "Bank"). Sandler raises two issues which we consolidate and restate as whether a judgment creditor of one spouse can attach and garnish marital assets held in an escrow account established by a trial court pending an order of property division in a marital dissolution action.

We affirm in part, reverse in part, and remand with instructions. ¹

FACTS

The Bank obtained a judgment in the Allen Superior Court against Paul Gilliland for payment of a note executed by him. On December 27, 1991, the Bank filed a petition for garnishment order naming Sandler as a garnishee defendant. Sandler is the trustee of an escrow account established by order of the Allen Superior Court, Family Relations Division ("Family Court"), pursuant to Gilliland's divorce proceedings in the Family Court. The escrow account was established to receive the proceeds from the sale of Gilliland's interest in FAB-Weld, Inc. Sandler was named as trustee of the escrow account and ordered to disburse funds from the account to Gilliland's wife as maintenance until final disposition of the marital assets. Sandler was also ordered to pay wife's attorney fees from the escrow account. It is undisputed that Gilliland's interest in FAB-Weld is a marital asset and that the judgment in favor of Bank was against Gilliland individually. The Family Court has not yet entered an order disposing of the marital property and while it is not clear from the record how much FAB-Weld still owes Gilliland, it is apparent that future payments are still to be made. At the time of these proceedings, the escrow account held about $30,000.00. On May 18, 1992, the Allen Superior Court granted Bank's order for garnishment against Sandler in the amount of $29,942.42.

DISCUSSION

Sandler first contends that the Allen Superior Court did not have jurisdiction over the escrow account because it is a marital asset under the exclusive jurisdiction of the Family Court. We agree that the Family Court is given exclusive jurisdiction over the rights in the marital assets of the parties to the dissolution proceeding. Anderson v. Anderson (1979), Ind.App., 399 N.E.2d 391. However, the case before us does not raise this concern because the Allen Superior Court did not attempt to invade the Family Court's jurisdiction over the division of marital assets between the Gillilands.

What is brought into question is whether the Allen Superior Court can interfere with the escrow account established by and in the custody of the Family Court. This is a situation similar to the conflict in jurisdiction between a federal and state court where one court has taken constructive possession of the res of a lawsuit. As between state and federal courts the court whose jurisdiction is first invoked by the filing of a suit is treated as having constructive jurisdiction of the res to the exclusion of other courts. Barrett v. International Underwriters, Inc. (7th Cir.1965), 346 F.2d 345. This does not mean, however, that all other courts are precluded from deciding every question which might concern the property involved. Id. Other courts are merely unable to render a judgment or decree which will interfere with the constructive possession of the court which first took jurisdiction. Id.

Thus, in Barrett the Seventh Circuit held that the federal district court properly declared that the judgment creditor's levy of execution created a lien on the funds owned by the judgment debtor and held by the garnishee defendant bank even though the judgment debtor was in liquidation proceedings in state court and the state court had ordered the Department of Insurance to take possession of the judgment debtor's assets. The creation of the lien did not interfere with the state court's jurisdiction over the assets because the federal court specifically recognized that the assets were subject to state court supervision and refused to grant relief to the judgment creditor beyond declaring the validity and time of attaching of the execution liens. Id.

Here, the Allen Superior Court went too far. As in Barrett the Allen Superior Court did not interfere with the Family Court's jurisdiction over the escrow account to the extent that the Superior Court declared a valid lien had attached to Gilliland's interest in the account. However, by ordering garnishment of the funds, the Allen Superior Court interfered with the Family Court's possession of the escrow account. The Family Court undoubtedly established the escrow account to ensure that the proceeds from FAB-Weld would be preserved as marital assets to be divided between the parties. Allowing another court to distribute funds from that escrow account would thwart the Family Court's purpose in establishing the account and would clearly impede the Family Court's jurisdiction. The Allen Superior Court therefore erred by ordering immediate garnishment of the funds held in the escrow account.

Sandler also argues that he was not subject to garnishment as trustee of the escrow account because he did not possess or have under his control any property of Gilliland's. Our research did not reveal any case, in Indiana or otherwise, addressing the precise issue whether a judgment creditor of one spouse could attach or garnish marital assets in an escrow account established by the court pending a marriage dissolution proceeding. Several courts have addressed the general issue whether an escrow account is subject to attachment or garnishment. Clearly, if the escrow account holds an interest belonging to the judgment debtor at the time the trustee or escrow agent is served notice, the escrow account is subject to attachment. See e.g., Malbin & Bullock, Inc. v. Hilton (1980), Ind.App., 401 N.E.2d 719; Clay v. Hamilton (1945), 116 Ind.App. 214, 63 N.E.2d 207. However, if the escrow account does not hold an interest belonging to the judgment debtor when notice is served, the account is not subject to attachment. See e.g., Terry v. Deitz (1874), 49 Ind. 293; First Central Coast Bank v. Cuesta Title Guarantee Co. (1983), 143 Cal.App.3d 12, 191 Cal.Rptr. 433.

At issue here is whether Sandler, as trustee of the escrow account, held an interest belonging to Gilliland, the judgment debtor. It has been said that a contingent or uncertain interest, where it is not clear that a debt is owing to the judgment debtor by the garnishee, is not subject to garnishment. See e.g., First Central, 191 Cal.Rptr. 433; Fico, Inc. v. Ghingher (1980), 287 Md. 150, 411 A.2d 430, 18 ALR4th 1077. On the other hand, an unmatured interest, where the uncertainty involves only the amount of the debt and not the liability itself, is subject to garnishment. First Central, 191 Cal.Rptr. 433; Fico, 411 A.2d 430.

In Fico, a judgment creditor attempted to attach an escrow account that had been established when the judgment debtor sold its business pursuant to the ...