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PS Business Parks, L.P. v. Deutsch & Gilden, Inc.

Supreme Court of Virginia

April 17, 2014

PS BUSINESS PARKS, L.P.
v.
DEUTSCH & GILDEN, INC., ET AL

FROM THE CIRCUIT COURT OF FAIRFAX COUNTY. Robert J. Smith, Judge.

A. Charles Dean (Edward Gross; Jeffrey S. Romanick; Christopher J. DeSimone; Gross & Romanick, on briefs), for appellant.

Casey J. McKinnon (Robert D. Windus; Moore & Lee, on brief), for appellee G& D Furniture Holdings, Inc.

No briefs filed by appellees Deutsch & Gilden, Inc., and SunTrust Banks, Inc.

Present: Kinser, C.J., Lemons, Millette, Mims, McClanahan, and Powell, JJ., and Lacy, S.J. OPINION BY JUSTICE LEROY F. MILLETTE, JR. JUSTICE McCLANAHAN, concurring in part and dissenting in part.

OPINION

Page 509

[287 Va. 414] LEROY F. MILLETTE, JR., JUSTICE.

In this appeal we consider two issues related to the garnishment of bank accounts. First, we consider whether a judgment creditor is entitled to funds held in an account not titled to the judgment debtor when that account is a master account participating in a " treasury management service" which, in a " zero balance account arrangement," draws money each day from the judgment debtor's account into the master account at issue, and moves funds from that master account to the judgment debtor's account on an as-needed basis to accomplish desired transactions. Second, we determine whether the circuit court erred in not considering evidence of funds in the judgment debtor's account during the period of time between service on the garnishee of the garnishment summons and its return date.

I. Facts and Proceedings

PS Business Parks, LP, (" PS Business" ) rented a storefront to Family Furniture Centers, Inc. Deutsch & Gilden, Inc. (" Deutsch" ) guaranteed the lease. When Family Furniture Centers, Inc. and Deutsch stopped paying the lease, PS Business obtained a judgment against the companies in the amount of $664,923.34 plus interest and attorneys' fees.

Page 510

PS Business, naming Deutsch as debtor, filed a garnishment summons naming SunTrust Bank as garnishee against " some other debt due or property of the judgment debtor, specifically all accounts, including account ending 61663." The garnishment was served on SunTrust on March 5, 2013, and the return date on the garnishment [287 Va. 415] summons was April 12, 2013. SunTrust, in response to the garnishment summons, filed two separate checks with the Circuit Court of Fairfax County. SunTrust filed the first check on April 10, 2013. The check was in the amount of $15,050.11, and was drawn from an account ending in 95497, which was titled to Deutsch. On April 12, 2013, SunTrust filed a check in the amount of $133,656.69, drawn from an account ending in 61663, which was titled to G& D Furniture Holdings, Inc. (" G& D" ).

G& D filed a motion to quash the garnishment of G& D account 61663, arguing that the account was in its name, that it is a separate and distinct entity from Deutsch, and that it is not a party to the underlying action. G& D also submitted to the court a letter from SunTrust which indicated that G& D account 61663 belonged solely to G& D, and that Deutsch had two other separate accounts, one ending in 95497 and the other ending in 13869. In response to G& D's motion to quash, PS Business opposed that motion and filed a cross-motion for further proceedings to ascertain the funds held by SunTrust in G& D account 61663 and the accounts titled in Deutsch's name. SunTrust subsequently filed an amended answer stating that the amount submitted to the court from account 61663 was erroneous and asserted that once the correct figure was determined its answer would be amended again.

At a hearing on the motion to quash, which was joined with PS Business's cross-motion for further proceedings, Andrew Dolson, vice president and assistant general counsel for SunTrust, testified on behalf of PS Business and confirmed that G& D is the title holder of the 61663 account. Dolson testified that the 61663 account was the " master account" in a " treasury management service" with a " zero balance account arrangement" with several associated subsidiary accounts, two of which were held by Deutsch. He further stated that as a part of the " treasury management service," the balance in the subsidiary accounts was drawn into the master account on a daily basis " to put the cash to some good[,] effective use." According to Dolson, " funds are brought back out of the master to the subsidiary accounts, . . . to answer for needs; to pay checks that are presented on that subsidiary account, to honor automated clearing house debits, to perform wire transfers, [and] other sorts of desired transactions in the subsidiary accounts."

On cross-examination, Dolson indicated that he had no knowledge of any contractual arrangements between G& D and Deutsch. [287 Va. 416] Dolson then explained that while the bank typically severs all ties between master and subsidiary accounts when it is served with a garnishment summons, SunTrust had not done so to all of the accounts in the present case. As a result, Dolson testified, the garnishment caused " the subsidiary accounts to be overdrawn or to have negative posted balances which caused funds to flow into them from the master [account]." Dolson indicated that he could not " represent that the bank's been able to make proper sense of [the account statements during the garnishment period, and] there are echoes and echoes upon echoes that happened of transactions." He explained, " transactions piled on transactions and resulted in . . . what the bank believes are not just faulty balance amounts or unreliable ones, but preposterously oversized amounts."

During the hearing, PS Business entered into evidence account statements for Deutsch account 95497 and a document showing the balance in G& D account 61663 on the April 2013 date when SunTrust filed its answer. The March 2013 bank statement for Deutsch account 95497 lists deposits in excess of $1.3 million, and withdrawals in excess of $1.2 million. The April 2013 bank statement for Deutsch account 95497 lists deposits in excess of $1.4 million, and withdrawals in excess of $1.5 million. A majority, but not all, of the deposits into Deutsch account 95497 in both monthly statements are listed as " zero balance credit[s] from [G& D] acct . . .

Page 511

61663," and a majority, but not all, of the withdrawals from Deutsch account 95497 are listed as " paid item[s]" to G& D account 61663.

At the conclusion of the hearing on the motion to quash, the circuit court granted G& D's motion to quash the garnishment of G& D account 61663. The court ordered payment to PS Business of $15,050.11, the amount from Deutsch account 95497 which was unchallenged. The court further ordered that the balance of the funds withheld by SunTrust and submitted to the court, " be ...


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