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Trustmark National Bank v. Carwash

Court of Appeals of Tennessee, Jackson

April 5, 2018


         Session February 21, 2018

          Appeal from the Chancery Court for Shelby County No. CH-13-0100-2 Jim Kyle, Chancellor

         In this 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.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed and Remanded

          Taylor 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.

          J. 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.




         This 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.

         On or 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.

         Contemporaneous 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.

         Procedural History

         This 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.

         On July 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.

         On 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 ...

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