From Casetext: Smarter Legal Research

Tiefenthaler v. Citywide Ins., Inc.

NEBRASKA COURT OF APPEALS MEMORANDUM OPINION AND JUDGMENT ON APPEAL
Feb 14, 2012
No. A-10-845 (Neb. Ct. App. Feb. 14, 2012)

Opinion

No. A-10-845

02-14-2012

TAMMIE TIEFENTHALER, APPELLEE AND CROSS - APPELLANT, v. CITYWIDE INSURANCE, INC., APPELLEE, TAYLOR RUBY, INC., GARNISHEE-APPELLANT AND CROSS-APPELLEE, AND DAVID E. PAVEL LAW OFFICE, P.C., DOING BUSINESS AS DAVID E. PAVEL LAW OFFICE, GARNISHEE-APPELLEE AND CROSS-APPELLEE.

David E. Pavel, of David E. Pavel Law Offices, P.C., for garnishee-appellant. Terry J. Grennan, of Cassem, Tierney, Adams, Gotch & Douglas, for appellee Tammie Tiefenthaler.


TIEFENTHALER V. CLTYWIDE INS.

NOTICE: THIS OPINION IS NOT DESIGNATED FOR PERMANENT PUBLICATION AND MAY NOT BE CITED EXCEPT AS PROVIDED BY NEB. CT. R. APP. P. § 2-102(E).

Appeal from the District Court for Douglas County: LEIGH ANN RETELSDORF, Judge. Affirmed as modified.

David E. Pavel, of David E. Pavel Law Offices, P.C., for garnishee-appellant.

Terry J. Grennan, of Cassem, Tierney, Adams, Gotch & Douglas, for appellee Tammie Tiefenthaler.

INBODY, Chief Judge, and SIEVERS and CASSEL, Judges.

INBODY, Chief Judge.

INTRODUCTION

Appellee, Tammie Tiefenthaler, obtained a judgment against Citywide Insurance, Inc. (Citywide), and had a summons in garnishment served on appellant, Taylor Ruby, Inc., and the David E. Pavel Law Office, P.C. (Pavel Law), in an attempt to collect her judgment. Both parties filed negative answers to the garnishment interrogatories, and in response, Tiefenthaler filed an application to determine the liability of the garnishees. Trial was held on the matter, and the Douglas County District Court rendered a judgment against Taylor Ruby in the amount of $12,016.51. Taylor Ruby now appeals that judgment to this court, and Tiefenthaler cross-appeals.

BACKGROUND


PROCEDURAL HISTORY

On September 29, 2009, the Douglas County Court entered a judgment in favor of Tiefenthaler against Citywide in the amount of $34,401.62; $1,700.75 interest for March through September 2009; and court costs and postjudgment interest. On November 25, Tiefenthaler registered the judgment in district court. On December 3, a summons and order of garnishment, interrogatories, and notice to judgment debtor were served to Pavel Law as attorney for Taylor Ruby. A second summons was served to Taylor Ruby and its president, Raymond D. Sluyter, on December 7. Pavel Law answered on the interrogatories that the office did not have any property, credits, or moneys owed to Citywide. Sluyter also indicated that Taylor Ruby had no property, credits, or moneys belonging to Citywide.

On January 14, 2010, Tiefenthaler filed a motion, application, and order to determine garnishee liability asserting that All American Insurance, Inc. (All American), and Taylor Ruby had purchased Citywide assets and had not completed all of the payments due to Citywide under a purchase agreement. The evidence regarding All American and its role in this case is somewhat confusing as presented in the record before the court. The owner of Taylor Ruby indicated that All American is owned by another individual and that All American was also a copurchaser in the Citywide agreement, but testified that the sole reason for the inclusion of All American as a purchaser in the purchase agreement was because All American owned 30 percent of the Taylor Ruby agency or Taylor Ruby's All American book.

CITYWIDE AND TAYLOR RUBY'S HISTORY

On March 30, 2009, Citywide, Taylor Ruby, and All American entered into an asset purchase and sale agreement, whereby Taylor Ruby and All American purchased the assets and book of business for $160,000, plus Taylor Ruby and All American further agreed to pay Citywide 10 percent of all renewal commissions paid monthly or for the period of 48 months after closing. The agreement provided that the $160,000 was placed in a trust account to cover the secured debt of Citywide, to be paid out of the trust to secured creditors.

GARNISHEE LIABILITY HEARING

On January 20 and March 22, 2010, hearings were held on the issue of garnishee liability. David Pavel testified that he represented Taylor Ruby and All American with regard to the purchase agreement with Citywide and that as part of that purchase agreement, $160,000 was placed in his trust account for disbursement pursuant to the purchase agreement. Pavel testified that, on December 3, 2009, at the time of his receipt of the garnishment summons, the trust contained no moneys from the original $160,000 originally placed there within. At the time of closing, Pavel indicated that the parties understood that there were four secured creditors with respect to Citywide: Great Western Bank, TierOne Bank, Midwest Insurance Agency Alliance, and the Internal Revenue Service (IRS). The record indicates that, on April 17, 2009, a check to Midwest Insurance Agency Alliance cleared in the amount of $49,000; and on April 24, a check to Great Western Bank in the amount of $91,000 cleared. Pavel testified that the TierOne Bank and the IRS lien remained outstanding. Pavel testified that three additional checks were authorized from the trust from the $20,000 remaining: May 1 to All American for $8,385; June 15 to All American for $4,610.79; and December 3 to Taylor Ruby-All American for $7,003.23. Pavel testified that All American was not a secured creditor of Citywide, but the additional checks were issued to Taylor Ruby and All American as setoffs. Pavel explained that Taylor Ruby had filed a purchase money security interest to protect "the first position of Taylor Ruby."

Pavel testified that in March 2009, he notified Citywide that Taylor Ruby was claiming a setoff on the money in the trust and any money due to Citywide as a result of Citywide's alleged breach of contract. Pavel testified that no consent or objection was given to the issuance of the checks by any of the parties involved with the purchase agreement. Pavel testified that the final check was issued from the trust prior to his receipt of the garnishment summons and interrogatories on December 3. Pavel testified that he answered the garnishment interrogatories as if he had $0 in the trust account because as far as he was concerned, "I had zero with regard to this client."

Pavel also testified that Ruby Taylor was a secured creditor as a result of a purchase money security filed with the Nebraska Secretary of State. Pavel testified that even though the purchase agreement indicates that the $160,000 placed in trust was to take care of existing liens and assets, the money "was sitting in the trust accounts to be used for whatever."

Sluyter testified that he was the sole owner and president of Taylor Ruby and that, although, as previously indicated, All American was listed in the purchase agreement as a copurchaser of Citywide, he was the one who made the purchase because the owner of All American owned 30 percent of Sluyter's All American book. Sluyter testified that soon after he purchased Citywide, he began to experience difficulty with companies withholding commissions. Sluyter testified that there were several problems with Citywide's issuing insufficient funds checks and insurance not being provided. Sluyter testified that he contacted Pavel regarding what actions to take and that the two agreed Taylor Ruby should not make any further payment to Citywide. Taylor Ruby then notified Citywide's attorney by letter that Taylor Ruby would offset those funds. Sluyter testified that no lawsuits have been filed against Citywide or its agents. Sluyter admitted that he had done minimal research on Citywide's financials before he purchased it and that Citywide's former agents did not sign no-compete agreements. Sluyter testified that Taylor Ruby did not maintain a complete and reliable accounting of the 10-percent renewal commissions and that the amounts reached by Taylor Ruby for setoffs were not accurate and were overstated, but that Taylor Ruby had received at least $12,016.51 in renewal commissions from closing and the service of the garnishment summons.

Sluyter indicated that on December 3, 2009, he had personally picked up the check from Pavel's office because he and Pavel believed another individual was going to seize Taylor Ruby's accounts, and that it had nothing to do with receipt of the garnishment summons. Further, Sluyter indicated that on the garnishment interrogatories, he answered in the negative because he believed he had claimed an offset for the $12,016.51 as evidenced in exhibit 13.

Exhibit 13, submitted by Taylor Ruby and received over Tiefenthaler's objections for foundation, hearsay, and relevance, is a single-page document entitled "Recoupment (set-off) amounts taken by Taylor Ruby, Inc. and All American, Inc. due to the breach of contract actions of [Citywide] with regard to the Purchase Agreement entered into between [Citywide,] Taylor Ruby, Inc. and All American, Inc. as Buyers." Sluyter testified that he and his former business manager prepared the document to include calculations through December 2009. Sluyter testified that the document included a payment amount of $23,606.11 paid by All American for Citywide accounts accrued prior to closing and that Sluyter had utilized the remaining $20,000 from the escrow (trust) account to offset that amount. Sluyter also testified, as evidenced by paragraph 4 on exhibit 13, that there was an "Amount due Citywide from All American applied against offset amounts due (credit)" in the amount of $6,420.79.

The district court found that although a record of a claim for a purchase money security interest was received into evidence, that document alone did not establish that the purchase money security interest had been perfected by Taylor Ruby. The district court found that the money held in the trust was reserved for secured creditors and that the evidence indicated there were outstanding secured creditors who had not been paid and, thus, the trust funds were not an amount recovered or owed to Citywide and not subject to garnishment. The district court also found that there was no money in the trust when Pavel had been served with garnishment summons, and therefore, Pavel was not liable to Tiefenthaler.

As to Taylor Ruby, the district court determined that Taylor Ruby had not met its burden to prove a setoff because Taylor Ruby had not proved that a liquidated debt, due and owing from Citywide, was applied to the 10-percent renewal commissions earned in the amount of $12,016.51. The district court awarded Tiefenthaler a judgment for that amount against Taylor Ruby and found that Tiefenthaler was not entitled to the entire amount of the judgment as requested. It is from this order that Taylor Ruby has appealed and Tiefenthaler has cross-appealed.

ASSIGNMENTS OF ERROR

Taylor Ruby assigns, rephrased and consolidated, that the district court erred by determining that Taylor Ruby did not establish the existence of a purchase money security interest; that Taylor Ruby did not satisfy its burden of proving a setoff; that Taylor Ruby's losses were unrealized expected earnings and that any unanticipated debts had been satisfied by money paid out of the trust; that Taylor Ruby did not accurately answer the garnishment interrogatories; and that Taylor Ruby was liable for $12,016.51 to Tiefenthaler.

Tiefenthaler has cross-appealed and assigns that the district court erred by failing to grant a judgment in her favor against Pavel Law and/or Taylor Ruby for moneys in the Pavel Law trust account in the amount of $7,003.73 in addition to the $12,016.51 judgment awarded; by failing to award her the full amount of her judgment against Citywide against Taylor Ruby; and by admitting exhibit 13.

STANDARD OF REVIEW

Garnishment is a legal proceeding. To the extent factual issues are involved, the findings of the fact finder will not be set aside on appeal unless clearly wrong; however, to the extent issues of law are presented, an appellate court has an obligation to reach independent conclusions irrespective of the determinations made by the court below. Myers v. Christensen, 278 Neb. 989, 776 N.W.2d 201 (2009).

ANALYSIS

As indicated in the assignments of error, there are many issues argued by the parties as error in this case. Due to the intricate nature of those issues, we shall address each assignment of error as necessitated by the analysis below.

ADMISSION OF EXHIBIT 13

On cross-appeal, Tiefenthaler contends that the district court erred by admitting exhibit 13, Taylor Ruby's self-compiled list of purported "Recoupment (set-off) amounts" taken. Tiefenthaler argues in her brief that, pursuant to Crowder v. Aurora Co-op Elev. Co., 223 Neb. 704, 393 N.W.2d 250 (1986), exhibit 13 was not admissible. Taylor Ruby does not provide the court with any argument regarding the admission of the exhibit.

In Crowder v. Aurora Co-op Elev. Co., supra, the Nebraska Supreme Court analyzed the admission of a memorandum pursuant to hearsay objections and found that there were foundational deficiencies which rendered the memorandum inadmissible. The Crowder opinion also addressed the erroneous admission of two summaries as a result of a lack of underlying documentation to support the summaries and proper notice of the proposed summaries prior to trial. Although specifically unarticulated in her brief, it appears that Tiefenthaler is relying upon the hearsay rule in support of her argument, as was her objection at trial, in addition to relevancy and foundation. The district court did not articulate its decision to overrule Tiefenthaler's objections other than by indicating that the objection had been overruled.

In proceedings where the Nebraska Evidence Rules apply, the admissibility of evidence is controlled by such rules; judicial discretion is involved only when the rules make such discretion a factor in determining admissibility. Richardson v. Children's Hosp., 280 Neb. 396, 787 N.W.2d 235 (2010).

Neb. Rev. Stat. § 27-803(5) (Reissue 2008) provides an exception to the hearsay rule for business records kept in the ordinary course of business. Under § 27-803(5), the following items are not excluded by the hearsay rule:

A memorandum, report, record, or data compilation, in any form, of acts, events, or conditions, other than opinions or diagnoses, made at or near the time of such acts, events, or conditions, in the course of a regularly conducted activity, if it was the regular course of such activity to make such memorandum, report, record, or data compilation at the time of such act, event, or condition, or within a reasonable time thereafter, as shown by the testimony of the custodian or other qualified witness unless the source of the information or method or circumstances of preparation indicate a lack of trustworthiness.

The party seeking admission of a business record under this exception to the hearsay rule bears the burden of establishing the components of the following three-part test: First, the proponent must establish that the activity recorded is of a type that regularly occurs in the course of the business' day-to-day activities. Hoelck v. ICI Americas, Inc., 7 Neb. App. 622, 584 N.W.2d 52 (1998). Second, the proponent must establish that the record was made as part of a regular business practice at or near the time of the event recorded. Id. Finally, the proponent must authenticate the record by a custodian or other qualified witness. Id.

In the present case, exhibit 13, submitted by Taylor Ruby and received over Tiefenthaler's objections for foundation, hearsay, and relevance, is a single-page document entitled "Recoupment (set-off) amounts taken by Taylor Ruby, Inc. and All American, Inc. due to the breach of contract actions of [Citywide] with regard to the Purchase Agreement entered into between [Citywide,] Taylor Ruby, Inc. and All American, Inc. as Buyers." Sluyter testified that he and his former business manager prepared the document to include calculations regarding Citywide through December 2009. Sluyter also testified that his accounting for the business was inaccurate and that most of the numbers he testified to were based upon speculation and averages of possible income over a number of years for an insurance agency. No other evidence was submitted to support or substantiate any of the information contained within the document. Furthermore, given Sluyter's testimony regarding the inadequacy and inaccuracy of his recordkeeping, and that there was no other evidence submitted at trial, there is nothing in the record to indicate that this document was trustworthy. Therefore, we conclude that the district court erred in receiving the exhibit without sufficient foundation.

SETOFF

Taylor Ruby argues that the district court erred by determining that it did not satisfy its burden of proving the existence and the amount of a setoff taken from the 10-percent renewal commissions owed to Citywide pursuant to the purchase agreement.

The party who pleads a setoff bears the burden of proving it. Davis Erection Co. v. Jorgensen, 248 Neb. 297, 534 N.W.2d 746 (1995); Home Fed. Sav. & Loan v. McDermott & Miller, 243 Neb. 136, 497 N.W.2d 678 (1993). Three steps must be taken to maintain a setoff. There first must be an intent and decision to exercise the right to setoff, a subsequent action which completes the setoff, and finally a record which verifies that the action has been taken. United Seeds v. Eagle Green Corp., 223 Neb. 360, 389 N.W.2d 571 (1986). A mere declaration of intent to set off retrospectively does not establish a setoff. Id.

Usually, courts have prohibited setoff when the debt owed is immature, contingent, or unliquidated. Davis Erection Co. v. Jorgensen, supra. Generally, in order to be available as a setoff, a claim or demand of a garnishee against a judgment debtor must be due and owing the garnishee at the commencement of the action. Id.

At trial, Taylor Ruby submitted three letters into evidence, which letters were objected to on the basis of hearsay, foundation, and relevance, and were received by the court only for the limited purpose to show that the letters were sent and not for the truth of the content of the letters. The first letter, exhibit 10, was sent to Citywide's attorney on May 19, 2009. The second letter, exhibit 11, was sent to the previous owner of Citywide on August 27, and the third letter, exhibit 12, was sent to the IRS on December 3. Pavel testified that the August 27 letter was sent to give notice that Taylor Ruby was declaring a breach of contract and would be declaring an offset. Sluyter testified that he directed Pavel to draft both letters to Citywide's attorney and previous owner in order to give notice that Taylor Ruby would be claiming an offset. Sluyter testified that there were a number of issues regarding previous Citywide accounts which were causing Taylor Ruby to incur additional debt, such as Citywide checks being returned for insufficient funds, commissions being withheld, and various other issues. Taylor Ruby asserts that the steps recounted above are sufficient for it to maintain a valid setoff.

In Davis Erection Co. v. Jorgensen, supra, the Nebraska Supreme Court expanded the requirements for a setoff by extending the requirements for maintaining such as announced in both United Seeds v. Eagle Green Corp., supra, and the Sixth Circuit's holding in Baker v. National City Bank of Cleveland, 511 F.2d 1016 (6th Cir. 1975). Baker involved an attempted garnishment of a depositor's checking account to which the bank claimed a setoff for loan indebtedness, much like the facts of United Seeds. The trial court in Baker ordered the bank to rescind the setoff and credit the depositor's account, which the bank appealed. The Sixth Circuit held that the bank's nonjudicial setoff was ineffective because the bank had taken no affirmative steps to assert such as setoff as of the effective time of a court order enjoining such setoffs in a reorganization proceeding. Although the Baker opinion restricted its analysis to setoffs by banks, the Nebraska Supreme Court opined in Davis Erection Co. v. Jorgensen, 248 Neb. 297, 310, 534 N.W.2d 746, 754 (1995), that the reasoning regarding the need for affirmative attestation to exercise a setoff "is equally compelling within the general business community as it is to banks. In essence, a bank and depositor share the same debtor-creditor relationship as any other party indebted to another in other contexts." In its analysis, the court cited to the U.S. Supreme Court, which has broadly characterized a setoff as " ' "the right which one party has against another to use his claim in full or partial satisfaction of what he owes the other. That right is constantly exercised by business men in making book entries whereby one mutual debt is applied against another. . . ." ' " (Emphasis in original.) Davis Erection Co. v. Jorgensen, 248 Neb. at 310, 534 N.W.2d at 753, citing Studley v. Boylston Bank, 229 U.S. 523, 33 S. Ct. 806, 57 L. Ed. 1313 (1913).

In our review of the record to determine whether the setoff claimed by Taylor Ruby was valid, the evidence before us is essentially the conversations between Pavel and Sluyter that Citywide had allegedly breached the contract and that, in order to remedy that alleged breach, setoffs would be exercised. The record tells us that letters were sent to Citywide and its attorney, but the objection as to the content of those letters was sustained. The admitted evidence and testimony is insufficient to support a finding that Taylor Ruby met its burden to show a setoff as of the date Taylor Ruby and Pavel Law were served with garnishment summons. The record indicates that Taylor Ruby had the intent and had made a decision to exercise a right to setoff; however, there is nothing more to support that the setoff was maintained. This assignment of error is without merit.

UNREALIZED EXPECTED EARNINGS AND UNANTICIPATED DEBTS

Taylor Ruby asserts that the district court erred by determining that Taylor Ruby's claimed losses were unrealized expected earnings and that any unanticipated debts were satisfied by money disbursed from the trust. In support of this argument, Taylor Ruby relies upon the data compiled in exhibit 13. However, as we have discussed at length, the record contains nothing which substantiates any of the calculations set forth in that document or that would indicate that the document is at all trustworthy. Having determined that this exhibit was inadmissible, we are left with nothing to support the argument that the district court erred in its determinations. Thus, we find that the findings of the district court were not clearly wrong and that this assignment of error is wholly without merit.

PURCHASE MONEY SECURITY INTEREST

Taylor Ruby argues that it had a valid purchase money security interest in the assets Taylor Ruby and All American had purchased from Citywide and was, therefore, a secured creditor. The district court determined that there was no evidence, other than the copy of the filing with the Nebraska Secretary of State's office, to establish that a purchase money security interest was established. The filing indicates that Citywide is the named debtor and that Taylor Ruby is the named secured property holder attempting to secure an interest in the following property purchased from Citywide: accounts and books of business; all right, title and interest to telephone numbers; and furniture, fixtures, and supplies.

A security interest is an interest in personal property or fixtures which secures payment or performance of an obligation. See Neb. U.C.C. § 1-201(35) (Cum. Supp. 2010).

This argument presents a somewhat problematic position for Taylor Ruby, which is essentially claiming a security interest in property or fixtures for its own payment for performance of an obligation. Taylor Ruby placed the $160,000 into escrow, as set forth in the purchase agreement, and then took possession of the items listed in the filing. Citywide had no further obligation, and in fact, it was Taylor Ruby which had further obligation as a debtor to Citywide to pay 10 percent each month, for 48 months, for renewal commissions. There is nothing in the record to indicate that Taylor Ruby did not take possession of these items upon closing on the purchase agreement with Citywide. Taylor Ruby may have filed a Uniform Commercial Code financing statement, but there was no further payment or performance by Citywide due and thus, nothing to secure by Taylor Ruby. This assignment of error is without merit.

GARNISHEE LIABILITY

Taylor Ruby argues that the district court erred by finding it liable as a garnishee and entering judgment against it in the amount of $12,016.51. In Tiefenthaler's cross-appeal, she argues that the district court erred by not awarding her additional moneys, specifically the $7,003.73 disbursed to Ruby Taylor and All American on December 3, 2009, and/or in the alternative, the entire amount of the judgment Tiefenthaler was awarded against Citywide. Garnishment is a legal aid in the execution of a judgment; it is a method by which a judgment creditor can recover against a third party for a debt owed by a judgment debtor. See 38 C.J.S. Garnishment § 1 (2008). Under Nebraska's garnishment statutes, a judgment creditor may request that the court issue a summons of garnishment against any person or business which "has property of and is indebted to the judgment debtor." Neb. Rev. Stat. § 25-1056(1) (Reissue 2008). The garnishee then must answer the interrogatories and disclose "the property of every description and credits of the defendant in his possession or under his control" at the time of the garnishment. Neb. Rev. Stat. § 25-1026 (Reissue 2008). A garnishee can be discharged if he chooses to "pay the money owing to the defendant by him" into court. Neb. Rev. Stat. § 25-1027 (Reissue 2008). But if the garnishee does not pay the funds into court and the garnishor is not satisfied with the garnishee's answers to the interrogatories, the garnishor may file an application to determine the liability of the garnishee, and "may allege facts showing the existence of indebtedness of the garnishee to the defendant or of the property and credits of the defendant in the hands of the garnishee." Neb. Rev. Stat. § 25-1030 (Reissue 2008). After conducting an evidentiary hearing, the court may then find the garnishee liable if the garnishee was either "indebted to the defendant" or "had any property or credits of the defendant, in his possession or under his control at the time of being served with the notice of garnishment." Neb. Rev. Stat. § 25-1030.02 (Reissue 2008).

A garnishee's liability is to be determined as of the time the garnishment summons is served. Myers v. Christensen, 278 Neb. 989, 776 N.W.2d 201 (2009). See Spaghetti Ltd. Partnership v. Wolfe, 264 Neb. 365, 647 N.W.2d 615 (2002). The claim of a judgment creditor garnishor against a garnishee can rise no higher than the claim of the garnishor's judgment debtor against the garnishee. Myers v. Christensen, supra; Fokken v. Steichen, 274 Neb. 743, 744 N.W.2d 34 (2008). Accordingly, in determining the liability of a garnishee to a garnishor, the test is whether, as of the time the summons in garnishment was served, the facts would support a recovery by the garnishor's judgment debtor against the garnishee. Myers v. Christensen, supra; Davis Erection Co. v. Jorgensen, 248 Neb. 297, 534 N.W.2d 746 (1995).

In the preceding analysis, we determined that Taylor Ruby had not properly claimed any type of setoff for funds owed to Citywide, and, thus, it logically follows that, at the time the summons in garnishment was served, the record supports the district court's determination that Taylor Ruby was indebted to or holding property or credits of Citywide at the time of service of the garnishment summons, contrary to Pavel and Taylor Ruby's answers on the garnishment interrogatories. The record reveals that Taylor Ruby did not make any payments of 10 percent of the renewal commissions earned by Taylor Ruby owed to Citywide pursuant to the purchase agreement, which Sluyter testified equated to $12,016.51 from April through December 2009. Sluyter testified that he utilized $20,000 from the trust account to offset payments made for Citywide accounts and that there was a credit due to Citywide from All American, although he did not specifically testify as to what that amount of that credit was.

Thus, the record supports the district court's determination that Taylor Ruby was liable to Tiefenthaler. Based upon the testimony of Sluyter and Pavel, we find that Taylor Ruby was in possession of at least $32,016.51 from money due to Citywide for renewal commissions and for money improperly disbursed to Taylor Ruby and All American as setoffs. Therefore, we modify the district court's judgment from $12,016.51 to a total judgment of $32,016.51.

As to Tiefenthaler's second assignment of error regarding the judgment total, specifically, that she should be awarded the full judgment amount, there is nothing in the record to support that any additional money was available on the date the garnishment summons was served to fulfill the remainder of Tiefenthaler's total judgment against Citywide. This assignment of error on cross-appeal is without merit.

GARNISHMENT INTERROGATORIES

Taylor Ruby contends that the district court erred by finding that it had inaccurately answered the garnishment interrogatories.

Tiefenthaler issued two garnishment summons and interrogatories, the first to "Pavel Law Offices, P.C. d/b/a David E. Pavel Law Offices," and the second to "Taylor Ruby, Inc., Raymond D. Sluyter, Registered Agent." The district court determined that, as the first garnishee, Pavel had no liability because, on the date of service, there was not money in the trust account. As we know, the district court then determined that Taylor Ruby, as the second garnishee, was liable and, further, had "not accurately answered the garnishment interrogatories."

As a general rule, a garnishee owes a duty to act in good faith and answer fully and truthfully all proper interrogatories presented to him. See Petersen v. Central Park Properties, 275 Neb. 220, 745 N.W.2d 884 (2008); Western Smelting & Refining Co. v. First Nat. Bank, 150 Neb. 477, 35 N.W.2d 116 (1948). The garnishee is expected to, in some appropriate manner, properly disclose all relevant facts within his knowledge at the time of submitting an answer concerning his indebtedness to the judgment debtor or concerning money or property of the judgment debtor then in his possession. Id.

Both Pavel and Taylor Ruby indicated on their respective interrogatories that neither had "any property belonging to the judgment debtor, or credits or monies owed to the judgment debtor, whether due or not, other than the earnings described above." These answers are clearly not accurate for several reasons. First, Pavel testified that on the date that he received the garnishment summons, although before service, he issued a check to All American/Taylor Ruby for $7,003.73 and he answered the garnishment interrogatories as if he had $0 in the trust account because as far as he was concerned, "I had zero with regard to this client." Second, both Pavel and Sluyter were aware that moneys were being withheld from payment to Citywide, claimed as offsets, including the money due to Citywide pursuant to the purchase agreement that required,

ten percent (10%) of the renewal commissions paid monthly or for the period of forty-eight (48) months after closing, such amounts shall be paid on the 15th of each successive month beginning May 15, 2009 (for the month of April, 2009 and any portion of March, 2009), and for each successive month thereafter for a total period of forty-eight (48) months.

Pursuant to the purchase agreement, Taylor Ruby was to pay Citywide 10 percent of monthly renewal commissions and, therefore, would clearly have had "monies owed to the judgment debtor, whether due or not." Finally, Pavel had disbursed the remaining balance of the trust account (prior to the check written for $7,003.73) which Taylor Ruby had received as offsets. Therefore, we find that the district court was not clearly wrong by finding that Taylor Ruby had not correctly answered the garnishment interrogatory.

However, there is yet another troubling matter which arises in our review of this particular record. Pavel's role in this matter is concerning, and based upon the evidence and testimony in the record, we find that the district court was clearly wrong in determining that there was no money in the Pavel Law trust account on the date the summons were served and that Pavel Law was not liable at that time as a garnishee. It is obvious from Pavel's dismissive attitude throughout his testimony that Pavel felt he had done nothing wrong by disbursing the remaining funds from the trust account on the same day as he had received the garnishment summons and, further, by then not disclosing that information to the court in his answers to the garnishment interrogatories. Pavel had a duty to act in good faith and answer fully and truthfully all proper interrogatories presented to him. See Petersen v. Central Park Properties, supra; Western Smelting & Refining Co. v. First Nat. Bank, supra. Thus, while all of the money has been transferred to Taylor Ruby and is no longer in the possession of Pavel and/or the Pavel Law trust account, we nonetheless find that, at the time the garnishment interrogatories were served, Pavel did not accurately answer the interrogatories presented to him in this case.

CONCLUSION

In summary, we find that Taylor Ruby did not properly claim a setoff and was not a secured creditor of Citywide. The district court did not err by finding Taylor Ruby liable as a garnishee and by finding that Taylor Ruby's answers to the garnishment interrogatories were not accurate. Therefore, we modify the district court's award of $12,016.51 to include the $20,000 disbursed from the Pavel Law trust account to All American and Taylor Ruby as alleged offsets, increasing Tiefenthaler's judgment to $32,016.51.

AFFIRMED AS MODIFIED.


Summaries of

Tiefenthaler v. Citywide Ins., Inc.

NEBRASKA COURT OF APPEALS MEMORANDUM OPINION AND JUDGMENT ON APPEAL
Feb 14, 2012
No. A-10-845 (Neb. Ct. App. Feb. 14, 2012)
Case details for

Tiefenthaler v. Citywide Ins., Inc.

Case Details

Full title:TAMMIE TIEFENTHALER, APPELLEE AND CROSS - APPELLANT, v. CITYWIDE…

Court:NEBRASKA COURT OF APPEALS MEMORANDUM OPINION AND JUDGMENT ON APPEAL

Date published: Feb 14, 2012

Citations

No. A-10-845 (Neb. Ct. App. Feb. 14, 2012)