February 21, 2018
from the Chancery Court for Shelby County No. CH-13-0100-2
Jim Kyle, Chancellor
garnishment case, a judgment creditor garnished funds from
the joint bank account of a non-debtor depositor and a
debtor. The trial court allowed the garnished funds to be
tendered to the judgment creditor because the account
agreement showed that the joint account was held with rights
of survivorship. Tennessee Code Annotated section
45-2-703(a), however, allows the non-debtor depositor to
prove his rights in the funds held in the joint account.
Because the non-debtor depositor provided sufficient evidence
to prove his rights to the funds in the joint account, the
judgment of the trial court is reversed.
R. App. P. 3 Appeal as of Right; Judgment of the Chancery
Court Reversed and Remanded
A. Cates and Lani D. Lester, Memphis, Tennessee, for the
appellant, James R. Maddox, Jr.
Jonathan S. Masters, Oxford, Mississippi, for the appellee,
Trustmark National Bank.
Steven Stafford, P.J., W.S., delivered the opinion of the
court, in which Frank G. Clement, P.J., M.S., and Brandon O.
Gibson, J., joined.
STEVEN STAFFORD, JUDGE.
appeal results from a bench trial, in which the facts are
largely undisputed. Intervenor/Appellant James Maddox formed
JMS Partners ("the Partnership") with Mark Johnson
and Thomas G. Stovall in 2007. The Partnership's purpose
was to "acquire, own, develop, lease, mortgage, and
manage real estate properties." The Partnership began
developing an office building located at 3249 W. Sarazens
Circle, Memphis, TN ("Sarazens Building"). In
September 2011, Mr. Maddox opened a deposit account, with
$250, 000.00 of his money, at First Citizens National Bank
("First Citizens") for the purpose of securing a
loan to the Partnership from First Citizens to complete the
Sarazens Building project.
about September 29, 2011, the Partnership obtained an $800,
000.00 loan from First Citizens to complete renovations on
the Sarazens Building. On the same day, First Citizens took,
as collateral for the loan, a lien on the Sarazens Building
and a security interest in $100, 000.00 of the $250, 000.00
that Mr. Maddox deposited into the First Citizens deposit
account. This $100, 000.00 would be released by First
Citizens when the second floor of the Sarazens Building
reached one-hundred percent occupancy. Additionally, the loan
agreement provided that of the $250, 000.00 in the account,
$150, 000.00 could be withdrawn for the sole purpose of
renovating the Sarazens Building. The expenses billed against
or checks written from this $150, 000.00 amount were subject
to the approval of Mr. Gene Bridges, Community President of
First Citizens. Use of money from the account for any purpose
other than renovations to the Sarazens Building would have
constituted a breach of the loan agreement.
with granting First Citizens the security interest in the
account, two account agreements were executed on the same
day; both are included in the record. One agreement lists Mr.
Maddox as the individual account holder. The other agreement
lists both Mr. Maddox and Mr. Johnson as account holders and
indicates that the ownership type is "joint with
survivorship." Mr. Maddox disputes as to how the account
agreement adding Mr. Johnson as an account holder was
prepared and how the ownership of the account was determined;
however, Mr. Maddox did state that he intended Mr. Johnson to
be able to write checks from the account for the sole purpose
of renovating the Sarazens Building. Although Mr. Maddox and
Mr. Johnson both had access to the account, the garnishment
was the first activity on the account and no checks were
written from the account until after the garnishment
occurred. After the garnishment, Mr. Maddox removed Mr.
Johnson from the account.
case arises from an action filed by Trustmark National Bank
("Trustmark") on January 24, 2013. In this
underlying action, Trustmark sought to enforce a promissory
note under which defendants, Sunshine Carwash #5 Partners,
Mark Johnson, and a John Doe Defendant, defaulted. Trustmark
was awarded a judgment against Mr. Johnson in the amount of
$47, 234.50, plus $9, 000 in attorney's fees and interest
on the judgment.
29, 2015, Trustmark issued a writ of garnishment to First
Citizens against all accounts held in Mr. Johnson's name
to collect on its judgment. First Citizens responded to the
notice of garnishment and transferred $59, 781.30 from Mr.
Maddox's and Mr. Johnson's joint account to the Clerk
and Master to satisfy the garnishment.
September 24, 2015, Mr. Maddox filed his motion to release
the garnished funds pursuant to Tennessee Code Annotated
section 45-2-703, arguing that the statute allowed him to
establish the rights he had in the garnished funds. On
October 13, 2015, Trustmark responded to Mr. Maddox's
motion arguing that it was procedurally improper because the
statute required Mr. Maddox to commence a separate action
against Trustmark, which Mr. Maddox failed to do. On November
10, 2015, the Chancery Court ordered Mr. Maddox and Trustmark
to begin discovery and, upon completion, it would permit the
parties to "request a ...