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Creditor Had Proof Burden in Garnishment Action

In this dispute over SunTrust bank’s response to a garnishment summons to cover a judgment obtained by a land­lord against a furniture store and its guarantor on the lease, a circuit court erred by placing the burden of proof in the garnishment proceeding on the bank as garnishee, rather than on the land­lord, as judgment creditor; the Supreme Court of Virginia reverses and remands the case.

Multiple accounts

PS Business leased a storefront to Family Furniture Centers Inc. (FFC) Deutsch & Gilden Inc. guaranteed the lease. After FFC and Deutsch stopped paying rent, PS Business obtained a judgment against the companies for $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 an account ending in 61663. The garnishment summons was served on SunTrust on March 5, 2013, with a return date of April 12, 2013.

SunTrust processed a $15,050.11 le­gal order debit against an account ti­tled to Deutsch ending in 95495 and filed a check in that amount with the 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 moved 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.

A SunTrust assistant general counsel testified that accounts 61663 and 95497 were part of a zero balance account ar­rangement, in which funds are trans­ferred from the master account to sub­sidiary accounts as needed; 61663 was the master account in the arrangement and 95497 was the subsidiary account. The bank typically severs the ties be­tween master and subsidiary accounts when it receives a garnishment sum­mons for one of the accounts, but this was not done with the summons for ac­count 94597.

The circuit court quashed the garnish­ment of account 61663 and ordered pay­ment to PS Business of $15,050.11, for the check drawn on account 95497. PS Business appealed to this court, which affirmed the ruling on account 61663 and reversed the order of payment from account 95497, and remanded the mat­ter. On remand, the circuit court ordered a payment of $706,755.17 to PS Busi­ness. This order found that Deutsch was indebted to PS Business for this amount and that SunTrust was indebted to Deutsch in the sum of $1.2 million. The court entered judgment against Sun­Trust pursuant to Va. Code § 8.01-516.1 for $706,755.15 plus interest.

Burden of proof

On appeal, SunTrust argues that the circuit court erred by placing the burden of proof on it, the garnishee, instead of on PS Business, the judgment creditor. We must consider whether the extent of SunTrust’s liability to Deutsch consti­tutes a prima facie element of PS Busi­ness’ claim or is an affirmative defense.

As we implied in our prior opinion, the extent of SunTrust’s liability constitutes an element of PS Business’ claim, and therefore PS Business bears the burden of persuasion on this element. Although the burden of production frequently “passes” between the parties, the bur­den of persuasion as to an element of the plaintiff ’s claim never shifts.

PS Business made a prima facie case by entering the account statements into evidence. The burden of production passed to SunTrust, and it presented the assistant general counsel’s testimony to contest the extent of its indebtedness. PS Business, however, always retained the burden of persuasion as to the ex­tent of SunTrust’s indebtedness. If the account statements failed to reveal the actual indebtedness or were inconclu­sive, PS Business failed to carry its bur­den of persuasion, and the circuit court was required to find against it.

The circuit court improperly shifted the burden of persuasion to SunTrust. The circuit court approached the pro­ceeding on remand as one to dismiss the garnishment. This likely contributed to its erroneous decision to place the bur­den of persuasion on SunTrust. We did not hold that SunTrust would bear the burden of persuasion on remand.

The circuit court’s finding that Sun­Trust was indebted to Deutsch for $1.2 million during the garnishment period is plainly wrong and without eviden­tiary support. The account statements fail to establish that the zero balance credits created a debtor relationship between SunTrust and Deutsch. Sun­Trust’s administrative error in failing to sever the accounts is the sole cause of the zero balance credits. Deutsch was not “entitled to” funds in the master ac­count until they “reached” its subsidiary account to satisfy such demands. The zero balance credits were not the result of a demand. The record contains no ev­idence to suggest the administrative er­ror gave Deutsch an ownership interest in these funds that it did not otherwise have. Without the error the funds would have remained in the master account, beyond the garnishment’s reach.

The account statements also revealed outside deposits of funds into account 95497 resulting from operations of the furniture business. These deposits were reachable under the garnishment be­cause they created a creditor-debtor relationship between Deutsch and Sun­Trust. The overwhelming majority of the funds that reached account 95497, however, were the zero balance cred­its. When those credits are removed, the sum of the outside deposits is the amount subject to garnishment.

The extent to which the outside de­posits exceed the $15,050.11 SunTrust originally admitted to owing is yet to be determined by the circuit court. On remand, the circuit court shall calculate the sum of these deposits and order this amount, in addition to the $15,050.11 already submitted into the circuit court, be paid to PS Business.

Reversed and remanded.

SunTrust Bank v. PS Business Parks LP (Mims) No. 151935, Oct. 27, 2016; Fairfax Cir.Ct. (Smith) Mary C. Zinsner, S. Mohsin Reza for appellant; A. Charles Dean, Jeffrey S. Romanick for appellee. VLW 016-6-078, 12 pp.

VLW 016-6-078