
    DEPOSIT GUARANTY NATIONAL BANK v. Dr. Joseph L. PETE and Mary L. Pete.
    No. 07-CA-59422.
    Supreme Court of Mississippi.
    June 19, 1991.
    
      H. Brand Henley, Jr., Henley Lotterhos & Henley, Jackson, for appellant.
    Steve Younger, Jackson, for appellee.
    Before HAWKINS, P.J., and PRATHER and ROBERTSON, JJ.
   HAWKINS, Presiding Justice,

for the Court:

Deposit Guaranty appeals from a judgment against it in the First Judicial District of the Hinds County Circuit Court in the amount of $8,322.25 for failure to withhold the funds of the garnishee.

We are not persuaded by the bank’s contention that the garnishee had no interest in these funds, and affirm.

FACTS

Mr. and Mrs. Art Washington contracted with William E. Jones in November, 1986, to construct a house, agreeing to pay him $70,000, and making a down payment of $2,000. Deposit Guaranty loaned the Washingtons $65,000 in January, 1987, secured by a deed of trust on the house in progress and lot. On January 14, Washington opened a joint construction account in the bank in his and Jones’s names, and in which he deposited funds to pay labor and materials furnished in construction. Jones wrote the checks from this account.

On February 6 Joseph L. and Mary L. Pete got a judgment against Jones in the amount of $22,755. On March 10 Deposit Guaranty was served with a writ of garnishment directed to Jones’s assets. On April 10 the bank answered, stating that it was not indebted to Jones, had none of his effects, and knew of no other person who was indebted to Jones. This answer was contested.

From March 10-April 10, approximately $17,000 was deposited in the account, from which Jones wrote 43 checks. Most of the checks were made payable to laborers and materialmen, but some were to himself. Jones wrote checks to cash, to his business, and one for repairs on his truck, all totaling $8,322.25. In May Jones filed for bankruptcy.

At trial Washington and Jones both testified the funds did not belong to Jones, but to Washington. Jones explained one check to himself for $4,500 during this period as paying for framing and air conditioning, that many laborers did not have drivers’ licenses or other credentials, so he paid them in cash. He had no receipts. Nor did he have receipts for $3,822.25 in checks written to cash to himself to support any allegations that the money went into the Washington house.

One or more officers of the bank made an in-house determination that Jones had no interest in the account, and so advised their counsel who prepared the answer to the writ.

In entering a judgment for $8,322.25 in favor of the Petes against Deposit Guaranty, the county judge made the following ruling:

... The Bank was fully aware of the contract between Washington and Jones and was aware that Washington was indebted to Jones pursuant to the contract.
The Court is of the opinion that when the Bank took it upon itself to make the determination that the Petes were entitled to none of the funds in the account in question, it did so at its own peril. If the Bank had been correct in its belief that Jones did not “own” any of the money in the account, then no harm would have been done and the Plaintiffs’ contest of its answer would fail.
However, it is apparent that Jones would have been entitled to the full amount of his contract price upon his successful completion of the construction of the house for the Washingtons without regard to the amount he actually expended in the construction. The Bank has taken the position that money in the account was used to pay for the materials and labor in the construction of the house and not to pay Jones for any profit. However, the exhibits clearly show that the sum of $8,322.25 went directly to Jones. Jones claims that said money was used to pay laborers directly in cash. He was unable to offer any receipt or other evidence for the payment of said money other than his testimony. In considering the evidence as a whole and the demeanor of the witness, the Court finds that the Plaintiffs have sustained their burden of proof against the Defendant, Deposit Guaranty National Bank, and are entitled to judgment against the Bank for the amount of funds paid by the Bank directly to the Defendant, William E. Jones, Jr. When the Bank cashed checks made out to Jones on the Jones or Washington account or made to cash signed by Jones on the Jones or Washington account, it had, if only for a brief moment, funds belonging to the Defendant, Jones, which it should have held and paid over to Dr. and Mrs. Pete. The Court finds that the remainder of the funds in the Washington or Jones account belonged to the Washingtons.

(C.P. 116-117)

Deposit Guaranty appeals to us via an affirmance in the circuit court.

LAW

Deposit Guaranty makes six assignments of error, supported by strenuous argument and citations. The sum of the argument, however, is that the money in the joint account belonged to Washington, not Jones, and the county court violated law and equity in rendering its judgment. We are charmed, but not seduced.

This account was clearly one from which Jones was free to write checks as he pleased, and he determined whether or not each check should be written. That it was not a true trust account is shown by the fact that one check Jones wrote was for repairs to his truck, and others were unsupported by receipts or other documentation as to where the proceeds went beyond Jones’s pocket.

An interesting parallel to this case was Cupit v. Brooks, 237 Miss. 61, 112 So.2d 813 (1959), in which Cupit and his second wife held a joint checking account of $334.67. This money came from a restaurant owned by the second wife, but where Cupit worked and was paid a salary of $150 a month. The first wife garnished this account for unpaid child support previously adjudged by the chancery court to be due her in the amount of $1,715.33.

Cupit had upon occasion drawn checks on the account for payment of bills and in making child support payments to his first wife. We held the chancellor did not err in ordering the entire account to be applied on the amount due the first wife. No doubt the second wife considered this entire account her money, yet the indicia of ownership of the husband in writing checks from it, and paying support for his children were sufficient for the chancellor to direct payment of the entire account to the judgment of the first wife.

While a husband and wife relationship is much closer than the relationship between Jones and Washington, 11 A.L.R.3rd 1465, 1469, 1479-1490, the withdrawal by Jones to himself shows it more than a simple trust account. Jones’ actions were indicia of a claim in the funds, and not those of a mere stakeholder or nakéd trustee. We would have an entirely different matter if Jones had scrupulously documented every check and proceeds therefrom going to laborers or materialmen for the house. Jones obviously considered he “owned” some of this money, because he wrote checks to pay his own debts.

Finally, Deposit Guaranty faces an insuperable logical hurdle. The county court gave judgment in favor of the Petes in the identical sum of the checks Jones had written himself. It makes no sense to claim that the money Jones wrote himself was the property of the Washingtons.

Deposit Guaranty knew that the entire construction account was subject to garnishment, and when it was served with the writ, the law presumed the entire account belonged to Jones until evidence was adduced to the contrary. Delta Fertilizer v. Weaver, 547 So.2d 800 (Miss.1989); Miss. Code Ann. 11-35-41 (1972). Yet the Bank on its own did nothing to protect itself or the Petes. Clearly, there was no error in the county court’s holding that the $8,322.25 Jones paid to himself was subject to execution.

AFFIRMED.

ROY NOBLE LEE, C.J., DAN M. LEE, P.J., and PRATHER, SULLIVAN, PITTMAN, BANKS and McRAE, JJ., join this opinion.

ROBERTSON, J., concurs with separate written opinion.

SULLIVAN, J., ROY NOBLE LEE, C.J., and BANKS, J., concur with separate written opinion.

ROBERTSON, Justice,

concurring:

I concur in the result we reach and in the judgment wé affirm. I write separately because I think common sense and common law demand a more formalistic focus upon the depository bank’s duties when served with a writ of garnishment. No doubt garnisheed joint accounts are troublesome. I think the obligations of the bank so served are measured by its contract with its depositor(s). The bank is obliged the same as when a holder presents a check drawn by the judgment debtor.

First, a few basics. Garnishment is a right and a process grounded in statute. Miss.Code Ann. § 11-35-23 (1972) provides, with certain exceptions not relevant here, that a judgment debtor may cause a writ of garnishment to be served upon a third person and thereby bind

[a]ll property in the hands of the garnishee belonging to the defendant at the time of the service of the writ_

The garnishment binds as well after acquired property, that is, judgment debtor’s property coming into the garnishee’s hands after service of the writ and until the writ be finally dissolved, and Miss.Code Ann. § ll-35-25(l)(b) (Supp.1987) requires the garnishee to answer and identify all property of the defendant he held at the time the writ was served or “has had since, in his possession or under his control[.]”

It is common to think of the writ reaching only the defendant’s property, but no one has ever thought its power limited to seizure only of that in which the defendant held an unfettered title. It is enough that the garnishee is answerable upon defendant’s demand for the property and the statutory “belonging to the defendant” does not mean much more. And so we find Cupit v. Brooks, 237 Miss. 61, 112 So.2d 813 (1959), holding a writ of garnishment, served on a bank holding a deposit in a joint account, sufficient to seize the deposit, even though the evidence showed that vis-á-vis his co-account holder the judgment debtor/joint account holder may not have owned the funds.

We are concerned here with a garden variety joint checking account. Arie Washington and William E. (Bill) Jones, Jr. were each authorized to draw checks on this account. Not one word before us suggests Deposit Guaranty National Bank had any authority to dishonor a check Jones may have drawn on grounds other than (un)availability of funds. Without question, the Bank’s construction loan to the Washingtons was the source of funds. I do not doubt for a minute the Washingtons had a substantial ownership interest in advances the Bank made and deposited in the account, nor do I doubt that on these facts Jones may be liable in an action for conversion. By the same token, the law afforded the Washingtons more than one pre-gar-nishment facility adequate to protect their funds. The Washingtons could have limited the Bank’s authority to honor Jones’ checks. They could have contracted with the Bank and Jones so that the Bank would have had no authority to honor any check not directed toward some purchase or expense incident to the construction. A co-signature requirement may have been a more practicable expedient. The Washing-tons did nothing and may not complain now.

The view I take is well put by the Supreme Court of Minnesota in Park Enterprises, Inc. v. Track, 233 Minn. 467, 47 N.W.2d 194 (1951), from which I quote extensively.

By the deposit agreement here involved, each depositor has given the other depositor in the account complete and absolute authority over it and unconditional power to withdraw all or any part of the account. By the terms of the agreement, the bank is likewise obliged to pay any part or all of the account to either depositor upon demand.
Since in purpose and legal effect a garnishment proceeding is virtually an action brought by defendant in plaintiff’s name against the garnishee, resulting in the subrogation of the plaintiff to the right of the defendant against the garnishee, we have concluded that plaintiff here may not only garnishee this joint account, but also that it would be entitled to recover judgment against the garnishee for the entire amount of the account if its judgment against defendant were sufficient to exhaust it. Defendant is entitled to withdraw any part or all of the account, and plaintiff, in effect, is subrogated to that right.

Park Enterprises, 233 Minn, at 470, 47 N.W.2d at 196. The Court discussed Empire Fertilizers Ltd. v. Cioci [1934] 4 D.L.R. 804, a Canadian case to like effect, then resumed:

Intervener [Washington], having agreed to allow defendant [Jones] to treat the funds in their joint account as his individual property, is in no position to assert that creditors [the Petes], subrogated to his rights, may not treat them as if they were his individual property. Intervener assumed the risk that defendant would pay these creditors voluntarily, and we fail to see why an involuntary payment stands upon a different footing. If inter-vener assumed the risk that her husband would voluntarily honor his debts out of this account, we see no meritorious reason why she should be legally entitled to eschew the risk that he will be compelled to do so. The law should not hedge intervener’s risk at the exact instant when the degree of her risk rests upon a point of honor. We shall not assume that intervener took the risk that her husband would honor his debts out of this account merely because she thought he could not be compelled to do so.
The peculiar features of a joint bank account, such as this case presents, make it difficult, if not impossible, in most cases, to determine what portion of the account belongs to each depositor. A long series of deposits which cannot be traced to their source, and a similar series of withdrawals which cannot be traced to their destination, are normally involved. This defect is inherent in the severalty feature of such bank accounts wherein each depositor is allowed to treat joint property as if it were entirely his own. Like any loose system of dealing with money, joint bank accounts sacrifice precision to convenience and becloud the respective rights of the depositors. The courts should not encourage parties to do their bookkeeping in court when, by their private contrac-,, they have virtually declared that they do not wish to be inconvenienced by any strict accountability as between themselves. A joint bank account of this kind is a creature of contract between parties avowedly indifferent to the exact percentage of ownership between themselves. The law should take them at their word and give effect to their contract without making detailed and belated evidentiary inquiries to establish factual ownership. Any presumption, whether conclusive or rebut-table, that part or all of these joint accounts are immune from garnishment has the effect of either creating or tending to create a nonstatutory exemption for the parties using them, and any attempt to base the extent of garnishment upon the respective amounts of the account owned by each depositor will compel courts and juries to grope with problems which the depositors themselves have declared to be of no consequence. Let them abide the results which flow from their own declared purposes.

Park Enterprises, 233 Minn, at 470-72, 47 N.W.2d at 196-97.

Cupit v. Brooks, supra, cited by the majority, is wholly consistent with these principles. Delta Fertilizer v. Weaver, 547 So.2d 800 (Miss.1989), fuzzies things up, and without profit, but this is nothing new. See Staley v. Brown, 251 Miss. 316, 169 So.2d 475 (1964); Collins v. General Electric Company, 239 Miss. 825, 123 So.2d 609 (1960).

Hypothesize that in early April, 1987, Jones drew a check payable to Joseph L. and Mary Pete for $8,322.25, or for whatever sum. The Washingtons had no legal power to prevent the Bank’s honoring such a check. I know of no legally defensible premise upon which the Bank may have refused to pay such a check, save only availability of funds in the account (and, of course, the Bank’s obligation to the Wash-ingtons to advance funds to the account). Of course, Jones will have robbed Peter to pay Paul (or more precisely, Arie to pay Joseph), but I know of no view on which Paul’s and Joseph’s equities might be thought less than Peter’s and Arie’s. If anything, they are greater, for Arie neglected, if not ignored, pre-garnishment facilities that likely would have prevented his loss.

When the Petes had the Bank served with the writ of garnishment on March 10, the Bank’s obligation was to examine its books, records, and accounts to see if it held any assets belonging to Jones. When it ascertained that indeed it held funds in a joint account payable upon the order of either Washington or Jones, the Bank was legally obligated to withhold any disbursements therefrom without court approval. This obligation continued as to funds which came into the account after March 10 and until such time as the court ordered the lien of the writ of garnishment dissolved. Ironically, on March 10, the Washington-Jones account showed a balance of a mere $46.58. On that date the Sheriff served the writ of garnishment on the Bank, and over the course of the next month, for reasons I cannot fathom, the Bank proceeded to advance and deposit into the account some $16,994.75, during which time Jones drew some forty-three checks. Nothing before us suggests that the Bank inquired whether Jones or Washington “owned” the funds before honoring any of the forty-three checks, nor does the Bank suggest any basis upon which it may have had the legal right to inquire regarding ownership.

Because the Bank held funds subject to Jones’ order, and not because Jones “owned” the funds, I would affirm. I think it likely the Petes were entitled to more than $8,322.25 on their garnishment action against the Bank, but they make no cross-appeal to that effect.

Of course, in a matter such as this, if the Bank, upon receipt and service of a writ of garnishment, is in doubt, our law provides an adequate procedural remedy. All the Bank has to do is interplead the funds into the Court, have process served on all concerned, and retire from the scene. Miss. Code Ann. § 11-35-43 (1972); Rules 22 and 81(a), Miss.R.Civ.P.

SULLIVAN, Justice,

concurring:

I concur in all that is decided in the majority’s opinion. I write separately because I disagree with the conclusion reached in Justice Robertson’s concurring opinion to the extent that it suggests that an entire joint bank account may be garnished by a creditor of only one of the joint depositors, despite evidence that the funds are equitably owned by the innocent depositor and the other depositor’s interest in the account is limited.

Justice Robertson cites Park Enterprises, Inc. v. Track, 233 Minn. 467, 47 N.W.2d 194 (1951), in support of his proposition that Mr. Jones, the contractor, “owned” the entire funds in the account. I find Park Enterprises to be the clear minority view, and one which this Court should not endorse.

Moreover, Park Enterprises is distinguishable from the instant case. In Park Enterprises, the Minnesota Supreme Court found that an entire “joint and several” bank account could be garnished by a creditor of one of the depositors because each depositor was entitled to withdraw all or any part of the account. Park Enterprises, 233 Minn, at 470, 47 N.W.2d at 196. A relevant factor noted by the court in reaching this conclusion, however, was the near impossibility of determining which portion of the account belonged to each depositor, who had contributed funds into the account over a long period of time and occasionally withdrew funds for family and individual purposes. Id,., 233 Minn, at 468 & 471, 47 N.W.2d at 195-96. There is no such problem in the instant case.

Justice Robertson also states that Delta Fertilizer, Inc. v. Weaver, 547 So.2d 800 (Miss.1989), “fuzzies things up, and without profit....” I find our analysis and language in Delta Fertilizer to be quite clear.

We first observed the different views in other states, noting that in the majority of states, an “entire [joint] account is vulnerable [to garnishment], but evidence is permitted to show the respective ownership of each depositor.” Delta Fertilizer, 547 So.2d at 802 (numerous foreign cites omitted). Then, we reaffirmed the rule followed in Cupit v. Brooks, 237 Miss. 61, 64-65, 112 So.2d 813 (1959), which is that a “joint account should be garnishable only in proportion to the debtor’s ownership of the funds, as to which parol evidence is admissible to show the respective contributions of each depositor, as well as any intent of one to make a gift to the other.” Delta Fertilizer, 547 So.2d at 803 [citing Hayden v. Gardner, 238 Ark. 351, 352, 381 S.W.2d 752, 753-54, 11 A.L.R.3d 1461, 1463-64 (1964)].

In the instant case, Jones, the contractor, was given authority to withdraw funds from the joint account. However, the Washingtons contributed the entire amount of the deposit, and Jones by agreement was only entitled to withdraw the amount due for labor and materials furnished in the construction of the Washingtons’ home. Applying Cupit, supra, and Delta Fertilizer, supra, with these circumstances in mind, I would find that should the Petes have counterclaimed on appeal for entitlement to the entire amount of the judgment against Jones, the Washingtons would be entitled to put on evidence to prove their ownership to funds they had deposited and which had not yet flowed into the hands of Jones.

ROY NOBLE LEE, C.J., and BANKS, J., join this opinion. 
      
      . Curiously, neither party saw fit to place the joint account agreement with the bank into the record.
     