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Bank v. PS Business Parks, L.P.

Supreme Court of Virginia

October 27, 2016

SUNTRUST BANK
v.
PS BUSINESS PARKS, L.P.

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

          PRESENT: Lemons, C.J., Mims, McClanahan, Powell, Kelsey, and McCullough, JJ., and Koontz, S.J.

          OPINION

          WILLIAM C. MIMS, JUSTICE.

         In this appeal, we consider whether the circuit court erred by placing the burden of proof in a garnishment proceeding on SunTrust Bank, the garnishee, rather than on PS Business Parks, L.P. ("PS Business"), the judgment creditor. Additionally, we consider whether the circuit court erred by finding that SunTrust was indebted to Deutsch & Gilden, Inc. ("Deutsch"), the judgment debtor, in the amount of $1.2 million.

         I. BACKGROUND AND MATERIAL PROCEEDINGS

         PS Business leased a storefront to Family Furniture Centers, Inc. Deutsch guaranteed the lease. After Family Furniture Centers and Deutsch stopped paying rent, PS Business obtained a judgment against the companies in the amount of $664, 923.34 plus interest and attorney's fees. PS Business filed a garnishment summons, which named Deutsch as the judgment debtor and SunTrust as the garnishee, against "all accounts, including [the] account ending [in] 61663." The garnishment summons was served on SunTrust on March 5, 2013 with a return date of April 12, 2013.

         In response, SunTrust processed a $15, 050.11 legal order debit against an account titled to Deutsch ending in 95497 and filed a check in that amount with the circuit court. SunTrust also filed a check for $133, 656.69 drawn from an account ending in 61663, which was owned by G&D Furniture Holdings, Inc. ("G&D").

          G&D filed a motion to quash the garnishment of account 61663. PS Business filed a cross-motion to ascertain the funds held by SunTrust in accounts 61663 and 95497. At the hearing on the motions, Andrew Dolson, vice president and assistant general counsel for SunTrust, testified that accounts 61663 and 95497 were part of a "zero balance account arrangement." In such arrangements there is a master account and several subsidiary accounts. The funds in the subsidiary accounts are transferred daily into the master account. According to Dolson, this consolidation of available funds from the subsidiary accounts allows the master account owner to "put the cash to some good effective use." For example, the funds "might be invested overnight in some securities investment."

         Funds are transferred from the master account back to subsidiary accounts as needed to answer for demands presented against them such as paying checks, honoring automated clearing house debits, and performing wire transfers. Dolson indicated that account 61663 is the master account in the zero balance arrangement and account 95497 is a subsidiary account.

         When SunTrust receives a garnishment summons for an account that is a part of a zero balance arrangement, it typically severs the ties between the master and subsidiary accounts. This was not done when SunTrust received the garnishment summons for account 95497, which caused "funds to flow into [it] from the master [account]." Dolson testified that as a result the balances reflected on the account statements were "not just faulty . . . or unreliable" but "preposterously oversized amounts."

         The circuit court granted G&D's motion to quash the garnishment of account 61663. The court also ordered payment to PS Business of $15, 050.11, the amount of the check drawn on account 95497. PS Business appealed to this Court. We affirmed the circuit court's ruling with respect to the garnishment of account 61663:

In the absence of evidence regarding the contractual relationship between the Deutsch and G&D accounts, the periodic transfer of funds between those accounts does not establish a debtor relationship between SunTrust and Deutsch to the funds in G&D account 61663 that would subject those funds to a claim by a creditor with a judgment against Deutsch.

PS Business L.P. v. Deutsch & Gilden, Inc., 287 Va. 410, 417-18, 758 S.E.2d 508, 511 (2014).

         We reversed the order of payment from account 95497, however, finding that the statements showed that SunTrust's indebtedness to Deutsch exceeded $15, 050.11:

[A]ny funds that reached the account between March 5, 2013 and April 12, 2013, the garnishment period, were funds that Deutsch was entitled to and, consequently, ...

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