Schwerdt, Grace & Niemackl v. Speedway Festivals, Inc.

• Court: Kansas Court of Appeals
• Writing for the Court: Before HOLMES, Justice Presiding, MEYER, J., and HARRY G. MILLER; MEYER
• Citation: Schwerdt, Grace & Niemackl v. Speedway Festivals, Inc., 637 P.2d 477, 7 Kan.App.2d 40 (Kan. App. 1981)
• Decision Date: 10 December 1981
• Docket Number: No. 52726,52726
• Parties: SCHWERDT, GRACE & NIEMACKL, Plaintiffs-Appellees, v. SPEEDWAY FESTIVALS, INC., Defendant, and Board of County Commissioners of Shawnee County, Kansas, Garnishee-Appellant.

Page 477

637 P.2d 477

7 Kan.App.2d 40

SCHWERDT, GRACE & NIEMACKL, Plaintiffs-Appellees, v. SPEEDWAY FESTIVALS, INC., Defendant and Board of County Commissioners of Shawnee County, Kansas Garnishee-Appellant.

No. 52726.

Court of Appeals of Kansas.

Dec. 10, 1981.

Syllabus by the Court

1. An answer to a garnishment which is signed but not verified, and contains the words "No Money" in the lower corner, while not meeting all of the requirements of K.S.A. 61-2006 for an answer, is sufficient to constitute an appearance by the garnishee.

2. Whenever a garnishee makes an appearance in an action, the fact that the answer does not meet certain requirements of K.S.A. 61-2006 is not sufficient grounds for judgment against the garnishee. Rather the garnishee should be given an opportunity to defend on the merits.

3. An order of garnishment shall have the effect of attaching all credits and indebtedness becoming due to the defendant between the time of the serving of the order of garnishment and the time of the filing of the answer of the garnishee, and such garnishee shall be prohibited from paying over to the defendant any of such property or funds until so ordered by the court from which said order of garnishment was issued.

4. The general rules of garnishment are that payment by check suspends the judgment debtor's remedy against the garnishee and, as long as the check is not dishonored, defeats a subsequent garnishment; and the garnishee-drawer of the check released from his control has no duty or obligation to stop payment thereon for the benefit of the garnishor.

5. Where a check is negotiated to a holder in due course before garnishment, since the payee could not have recovered against the drawer, the creditor of payee, having no greater right, could not succeed in his garnishment.

6. There is no rule of law that requires a bank or anyone else to withhold funds owed by them to another person upon the ground that they have knowledge of the fact that someone else has an unsatisfied judgment against such other person.

7. Where a garnishee had issued a check in payment of a debt to a judgment debtor, which check had passed to a holder in due course prior to issuance of a garnishment, there was no indebtedness due the judgment debtor from the garnishee and the trial court erred in holding the garnishee liable to the garnishor.

Donna Voth, Asst. Shawnee County counselor, Topeka, for garnishee-appellant.

George D. Wagstaff, Topeka, for plaintiffs-appellees.

Before HOLMES, Justice Presiding, MEYER, J., and HARRY G. MILLER, District Judge Retired, Assigned.

MEYER, Judge:

This case involves garnishment proceedings.

Schwerdt, Grace & Niemackl, garnishors-appellees (garnishors herein), obtained judgment against Speedway Festivals, Inc., for $3,000.00 on August 25, 1976. On June 24, 1980, Shawnee County, garnishee-appellant (garnishee herein), became indebted to Speedway Festivals, Inc., for $40,000.00, by reason of settlement of a lawsuit between Speedway Festivals, Inc. and Shawnee County.

Immediately upon approval of the settlement by the Board of County Commissioners of Shawnee County, a special request was given to the county clerk's office to issue a check in the amount of $40,000.00 to Speedway Festivals, Inc. Said check was delivered to Speedway Festivals, Inc., before noon on June 24, 1980. That same day, the check was presented by the payees for payment at the State Bank of Carbondale. Upon presentment and indorsement by the payees, the check was cashed by the State Bank of Carbondale. The State Bank of Carbondale accepted the check for payment in good faith and without notice of any defenses against or claims to it.

On June 25, 1980, an order of garnishment was requested by the garnishor and said garnishment was received by the clerk of Shawnee County on June 25, 1980, at 9:10 a. m.

The afternoon of June 25, 1980, at the request of another judgment creditor of Speedway Festivals, Inc., the Shawnee County sheriff's office served an order of attachment for said check on the drawee, First National Bank of Topeka. Said funds were attached at the First National Bank from June 25, 1980, to June 27, 1980.

On June 25, 1980, the State Bank of Carbondale sent the check to First National Bank for payment and the check was received by First National Bank the evening of June 25, 1980.

On June 26, 1980, because of the attachment order, First National Bank denied payment of the check and returned it to the State Bank of Carbondale. On June 27, 1980, the State Bank of Carbondale again presented said check to First National Bank of Topeka and First National Bank of Topeka paid the State Bank of Carbondale for it.

On July 3, 1980, the garnishee filed its answer to the garnishment. The alleged "answer" was a form used in garnishments, but none of the blanks were filled in. The "answer" was signed by Winifred L. Kingman by A.B., but was not verified. In the lower right hand corner, the form contained the words, "No Money."

After a hearing to the trial court, the court ruled that the garnishee filed no document which could be construed as an answer since it did not answer the garnishment as provided by law. The court further ruled that the garnishee had funds in its possession belonging to Speedway Festivals, Inc., at the time of receiving the order of garnishment. The court found that the check did not relieve the garnishee from liability and that the garnishee had a duty to stop payment of the check.

The garnishee brings this appeal.

The garnishee contends the court erred in finding that it failed to answer the garnishment.

K.S.A. 61-2006 sets out the requirements for an answer of a garnishee:

"Within ten (10) days after service upon him or her of an order of garnishment issued for the purpose of attaching any property, funds, credits or indebtedness belonging to or owing the defendant, other than earnings, and within thirty (30) days after service upon him or her of an order of garnishment issued for the purpose of attaching any earnings due and owing the defendant, the garnishee shall file his or her verified answer thereto with the clerk of the court stating the facts with respect to the demands of the order: Provided, That where the office or principal place of business of the garnishee is outside the county where said court is situated, said garnishee shall file an answer within thirty (30) days. The answer of the garnishee may be on the appropriate form prescribed in the appendix to this act, but in no event shall the garnishee's answer contain less than that so prescribed in said form."

Further, the statute sets out the procedure in case a garnishee fails to answer in the time and manner specified:

"If the garnishee fails to answer within the time and manner herein specified, the court may grant judgment against garnishee for the amount of the plaintiff's judgment or claim against the defendant, but if the claim of the plaintiff has not been reduced to judgment, the liability of the garnishee shall be limited to the judgment ultimately rendered against the defendant: Provided, however, Said judgment may be taken only upon written motion and notice given in accordance with subsection (d) of K.S.A. 60-206."

The court in McCreery v. McCreery, 210 Kan. 99, 102-3, 499 [7 Kan.App.2d 43] P.2d 1118 (1972), interpreted the similar statute, K.S.A. 60-718, as follows:

"We can see justification for a judgment in favor of the plaintiff when the garnishee completely ignores the garnishment order as occurred in Buzbee v. Allen County State Bank, 191 Kan. 112, 379 P.2d 250 (1963). We can see no justification for employing the harsh results of substituting one debtor for another after a garnishee has submitted himself to the jurisdiction of the court. In this situation, even though a garnishee fails to supply information of a material nature to the interests of the plaintiff, the plaintiff has remedies and the court has jurisdiction to enforce those remedies." (Emphasis added.)

The court further added:

"(A)s long as a garnishee submits himself to the jurisdiction of the court the discovery provisions of the code give ample tools to the plaintiff to protect and enforce all rights intended to be provided to support his interests. Whenever a garnishee makes an appearance in an action no judgment should be entered against him without providing an opportunity to fully answer and present his defenses." 210 Kan. at 104, 499 P.2d 1118.

In Jones v. Main, 196 Kan. 91, 410 P.2d 303 (1966), a garnishee made a note on the garnishee's summons that he had no money due the principal defendant, and filed it with the clerk. It was therein held that this constituted an appearance and the entering of default judgment by the trial court was error. The following are excerpts from Jones:

"On August 3, 1964, Perfecto filed with the clerk of the court his copy of the garnishment summons, on the bottom of which the following notation was inscribed:

" 'I received this Summons in Garnishment on the 23 day of July A.D. 1964. As of this day, J. H. Main does not have any money due him from me.'

"The foregoing notation was neither verified nor signed, and it is said in appellees' brief that it was typewritten. However, the entire document, notation and all, was stamped and filed by the clerk and plaintiffs' attorney had knowledge to such effect." 196 Kan. at 92, 410 P.2d 303.

Further, the court stated:

"We deem it unnecessary to decide the question of whether the somewhat unorthodox pleading filed by Perfecto, apparently pro se, fulfills all the requirements of the answer which the statute directs is to be filed by a party who has been garnisheed. Assuming, for the sake of argument, that the instrument under scrutiny in this case does lack certain statutory essentials, we believe it is nonetheless sufficient to constitute an appearance...." 196 Kan. at 92, 410 P.2d 303.

We conclude the meaning of both Jones and McCreery is...