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“I received a garnishment…”
By Pauli D. Loeffler
Receipt of a garnishment summons means the bank is potentially liable: a) to the customer if it freezes funds when it shouldn’t or b) to the creditor if it fails to freeze funds when it should. For that reason, I get a lot of calls and emails regarding garnishments, and it seems like I’m getting more of them lately, particularly ones with “problems.” The problems range from name or Tax Identification Number mismatches to receiving the wrong type of summons or not all of the forms, as well as when the bank has simply “dropped the ball.” This article will cover some of those situations on what to look for, ways to avoid problems, and how to fix what is fixable. Note that this article will not deal with the federal rule on Garnishment of Accounts Containing Federal Benefit Payments which has been covered in several prior OBA Legal Briefs.
First things first
What court issued the garnishment? If the garnishment came from a state court other than an Oklahoma one, and the bank does not have branches in that state, then the court of the other state has no jurisdiction over the bank even if the customer resides or is located in the other state. Do NOT freeze the funds! The creditor must file the judgment with an Oklahoma court and have the Oklahoma court issue the garnishment in order for there to be jurisdiction to enforce the garnishment. If the bank freezes the funds when there is no jurisdiction, it may be liable to its customer.
Who is the judgment debtor? Be sure and READ the garnishment Affidavit and Summons. Usually, the judgment debtor is the defendant, BUT this is NOT ALWAYS true. Sometimes the defendant has filed a counterclaim against the plaintiff and has prevailed against the plaintiff or has been awarded attorneys fees or costs owed to him. Or there may be multiple defendants, but the case caption reads Jerry Lewis v. Gracie Allen, et al. and George Burns is the judgment debtor named in the Affidavit and Summons. If the bank just assumes the judgment debtor is Gracie Allen since she is the named defendant without realizing that George Burns is one of the other defendants but included in et al. (Latin for “and others” – law uses a lot of Latin terms), and Gracie has one or more accounts that arenn’t frozen, the bank will be liable to the creditor for whatever funds were in the judgment debtor’s account at the time the garnishment was served.
What type of garnishment is it? The vast majority of garnishments received are general garnishments rather than garnishments on earnings. Generally, the bank is searching its records for accounts and safe deposit boxes (yes, a garnishment reaches safe deposit boxes which must be sealed for 30 days), and the occasional earnings garnishment summons may fall through the cracks or the answer may not be timely made with remittance since the time frame to answer and remit is different than that for a general garnishment.
Name issues
The basic rule is that if the bank has a reasonable belief that the person named in the Affidavit and Garnishment Summons are one and the same, it needs to freeze the funds. Misspellings and near misses (e.g., Kathie or Kathy instead of Cathy or Frank instead of Francis) are fairly common. Did the creditor provide a truncated SSN that matches? If so, you have a reasonable belief that the customer and the judgment debtor are one and the same persons, and the bank should freeze the funds
Let’s say you get a garnishment with the named judgment debtor as Robert Brown. You have an account styled Robert Brown d/b/a Bob’s Welding Service (a sole proprietorship). The garnishment reaches Robert’s sole proprietorship account. Why? “d/b/a Bob’s Welding Service” is a name and nothing more; it is NOT a separate legal entity and does not exist separate and apart from Robert Brown. On the other hand, if Robert was the sole and only member of Bob’s Welding Service, LLC and is able to use his SSN because he does not have employees nor pay excise taxes, the garnishment will NOT reach the account because it is a separate legal entity even though it is using Robert’s SSN.
Another name problem occurs when the bank gets a garnishment summons and the judgment debtor is, let’s say Tedine’s Fashion Sense, Inc. or Sammy’s Salon LLC, but its records show Tedine Smith d/b/a Fashion Sense or Sam Jones d/b/a Sammy’s Salon. It is not unknown for a customer to incorporate or form an LLC and fail to update its records with the bank. The bank can check for the entity name on the Oklahoma Secretary of State’s website doing a business name search (https://www.sos.ok.gov/corp/corpInquiryFind.aspx). It is possible the judgment was rendered in the state where the entity was formed and filed with the Oklahoma court in order to issue the garnishment. It is also possible to do similar searches on the websites of other states, but you would need to know the state where the entity was formed. For some Oklahoma counties, you can ascertain this by viewing the actual court filings online, but in others, you would need to contact the creditor’s attorney/creditor in order to determine in which state the entity was formed. It is not uncommon for the bank to first learn that the form of the business has changed or is different from the one it has on it system. In most cases, the bank will need to freeze the funds and get the customer in with the required documents.
A unique situation recently encountered was a garnishment using the judgment debtor’s maiden name and a truncated SSN was provided. The name did not match any account holders, and this bank was unable to search by partial SSN. No funds were frozen. This was a very small bank, and when the garnishment was reviewed in an internal audit, the auditor knew the judgment debtor, who happened to be an employee of the bank, and had known her by her by her maiden name when she was hired some years earlier. Unfortunately, the person processing the garnishment apparently did not have the same knowledge and reported no accounts. Keep in mind that there is absolutely NO LEGAL REQUIREMENT the garnishor/creditor even give the bank the judgment debtor’s SSN (or EIN) at all, and while credit card and lenders will have this information, other judgment creditors will not. Should the bank have contacted the creditor for the full SSN or the address of the judgment debtor? Probably, but this is a topic that the bank needs to discuss with its attorney since s/he will be representing the bank if the creditor takes exception to the Garnishee’s Answer or issues interrogatories to the bank.
The TIN doesn’t match the one the bank has
Most of the time when the truncated Tax Identification Number doesn’t match, it is off by one number, or two of the numbers may have been interposed. In this situation, if the name matches, the bank needs to freeze the funds and should take steps to confirm that it has the correct number for its records by contacting the customer and requesting a copy of the social security card, the letter from the IRS assigning the EIN or a copy of the Form SS-4 used to apply for the EIN. If the customer applied online for the EIN and printed the page assigning the EIN, this can be used since I have never known the number to change between application and receipt of the letter from the IRS. The bank may wish to check information regarding the address where the judgment debtor was served with the petition in the law suit. In some counties, this is available online, or you can call the creditor’s attorney/the creditor for this information.
Another situation where this can occur is when a sole proprietorship obtains an EIN because s/he has employees or is required to pay excise taxes, and the bank has the account under the EIN rather than the sole proprietor’s SSN despite the fact the instructions to the Form W-9 specifically state the IRS prefers such account be under the SSN and the EIN used solely for making tax payments. The customer IS the named judgment debtor, and there is no excuse for not freezing the funds.
Other situations.
The creditor sent the wrong forms or did not include a required form. If the creditor sends an earnings garnishment summons, and the judgment debtor is not an employee nor a contract worker (e.g., janitorial, landscaper/mowing, etc.), but has a deposit account or a lease on a safe deposit box with the bank, the bank should NOT freeze any deposited or report the safe deposit box. Conversely, if the bank is served with a general garnishment, and the judgment debtor does not have an account or a lease on a safe deposit box but is an employee or contract laborer, the bank should not withhold funds due to the employee/contract laborer. There are different forms for both general garnishment summonses and for earnings garnishment summonses, but unfortunately, the garnishee’s answer for general garnishment and for garnishment of earnings is combined in a single form promulgated by statute by the Oklahoma Administrator of the Courts. However, just because the garnishee’s answer form covers multiple types of summonses does not mean the bank should respond (and remit funds). The answer should ONLY be with regard to the specific summons served upon the bank.
Sometimes the garnishor will fail to include the garnishee’s answer form (or will send an outdated one) or fail to include the Claim for Exemption & Request for Hearing form (required to be attached to the summons by the court clerk and mailed or delivered to the judgment debtor by the garnishee per statute). If the answer form is not provided or is outdated, or the Claim for Exemption & Request for Hearing form is not provided, these are available for download in Word, WordPerfect and PDF formats at this site: http://www.oscn.net/static/forms/aoc_forms/garnishment.asp.
The garnishment summons was sent to a branch rather than the main bank. Most small banks process garnishments at only one location, generally at the main bank. There is no requirement under Oklahoma law that the garnishment summons be served at the main bank, and the bank must have procedures in place to quickly communicate receipt of the summons and freeze any accounts owned by the judgment debtor to prevent liability to the creditor.
The person who handles our garnishments was out or had left for the day. Just as serving the garnishment at a branch will not avoid liability to a creditor if the bank fails to promptly freeze funds of the judgment debtor, the fact that the employee who handles garnishments is gone at the time the garnishment is received is not an excuse. The bank needs to have one or more persons who are trained to handle garnishments when the employee who has primary responsibility is on vacation or otherwise unavailable.
Claims for exemption on behalf of the judgment debtor — IRA. While protected federal benefits subject Garnishment of Accounts Containing Federal Benefit Payments federal rule requires the garnishee bank protect certain funds, Oklahoma law does not require the garnishee bank to claim an exemption on behalf of the customer. My advice is not to take on the responsibility and possible liability beyond the requirements under the federal rule. However, when an IRA or other exempt retirement account is involved, this is the sole exception to that position. The reason I feel the bank should respond noting the IRA and claiming the exemption is because of the horrendous tax consequences to the customer if s/he fails to claim the exemption or is tardy in doing so and misses the 60 (calendar) day period to redeposit the funds in the IRA or other exempt retirement account.