MINNESOTA SUPREME COURT CLARIFIES GARNISHMENT OF JOINT ACCOUNTS
In Savig v. First National Bank of Omaha, --- N.W.2d ----, 2010 WL 1609734 (Minn. April 22, 2010) ("Savig"), the Minnesota Supreme Court issued an important ruling affecting the garnishment of funds held in joint accounts. The Court held that even though not all of the holders of a joint account are judgment debtors, a judgment creditor may nevertheless serve a garnishment summons on a garnishee such as a financial institution in which a joint account is held. Under Savig, the account holders bear the burden of establishing their net contributions to the account, with the judgment debtor initially, but rebuttably, presumed to own all of the funds in the joint account.
Background
Prior to Savig, uncertainty prevailed on the question of whether a creditor could garnish funds held in a joint account when not all of the account owners were debtors. This uncertainty was enhanced by the Minnesota Supreme Court’s interpretation of the Minnesota Multi-party Account Act in Enright v. Lehmann, 735 N.W.2d 326 (Minn. 2007) ("Enright"). In Enright, the court held that: "[u]nder the plain language of Minn. Stat. § 524.6-203, funds in a joint account may not be garnished to satisfy a judgment against a party who did not contribute the funds, unless the creditor provides clear and convincing evidence that the depositor intended the funds to belong to the debtor." It was argued by some that this language precluded a creditor from garnishing funds in a joint account unless the creditor first established by clear and convincing evidence that the funds were owned by the debtor. This issue has now been clarified.
In Savig, a creditor garnished Robert and Mona Savig’s joint checking and savings accounts after obtaining a default judgment against Mona Savig for failing to make credit card payments during a prior marriage. In response to receiving the garnishment summons, Midwest Bank retained the funds in the joint accounts and eventually remitted the money to the creditor. The Savigs did not object to the garnishment through the mechanism provided in the garnishment statutes, but instead commenced an action in federal court alleging violations of the Fair Debt Collection Practices Act. In their federal action, the Savigs contended that a portion of the funds held in the joint account belonged solely to a non-debtor (Robert Savig) and, therefore, could not be garnished. The federal court hearing the case determined that the law in the area was unclear and asked the Minnesota Supreme Court for guidance on whether a judgment creditor could garnish funds in a joint account when not all of the owners were judgment debtors, whether any presumptions regarding ownership of the funds applied, and whether it is the creditor or the account holders that bear the burden of establishing net contributions to the account during the garnishment proceeding.
After considering the Minnesota Multi-party Account Act, its previous decision in Enright, and Minnesota’s garnishment statutes, the Minnesota Supreme Court determined that creditors can garnish funds in joint accounts when not all of the owners are judgment debtors. The Court further held that: "for purposes of a creditor serving a garnishment summons and a garnishee initially retaining funds in a joint account, the debtor is initially, but rebuttably, presumed to own all of the funds in a joint account, but any account holder may rebut that presumption upon a preponderance of evidence of ownership." The Court noted that: "[i]f we were to place the burden on a party other than the account holders, as a practical matter, given the burden associated with attempting to prove ownership by another, it would be difficult, and perhaps impossible, to garnish a joint bank account."
What Savig Means for Creditors and Debtors
The Savig decision has important consequences for both creditors and debtors. Creditors should feel empowered to use garnishment to attach funds held in joint accounts. Once the funds in a joint account are garnished, debtors and other account holders now bear the initial burden of establishing net contributions to the account during the garnishment proceeding. This may not be the last word on this issue, however. The Court seemed to suggest that the statute may need clarification with respect to the issues addressed in the case. Accordingly, further legislative changes may be forth coming.
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