Indiana Banks, As Garnishee Defendants, Need Not Restrict Withdrawal Of Subsequently-Deposited Funds

From time to time, the enforcement of secured loans will evolve into the collection of  deficiency judgments.  One of the available collection tools is a garnishment order.  The Indiana Court of Appeals in JPMorgan Chase v. Brown, 2008 Ind. App. LEXIS 1029 (Ind. Ct. App. 2008) (Chase.pdf) recently interpreted Ind. Code § 28-9-4-2 and addressed the question of whether a depository financial institution, which has received notice of garnishment proceedings, is required to restrict withdrawal of funds that are subsequently deposited into the account.  Surprisingly, the answer is no.

What happened.  Collection agency filed a motion for proceedings supplemental naming Chase as a garnishee defendant and asserting that Chase possessed deposit accounts in which the defendant/judgment debtor had an interest.  (A “garnishee” essentially is an entity, like a bank, that has money in its possession belonging to a defendant.)  In answers to interrogatories, Chase confirmed that the judgment debtor maintained an account with the bank that had a balance, as of March 5, 2007, of $20.61.  Furthermore, the bank confirmed that it immediately restricted the withdrawal of those funds.  Later, the judgment debtor made four deposits totaling over $1,000 to the account.  Because the collection agency sought about $2,200, the court signed an order requiring Chase to pay over to the clerk approximately $2,200 from the account.  Chase did not do so, however, and only restricted the account balance of $20.61.  The trial court thereafter found Chase in contempt and entered a judgment against Chase for $1,045.99, the balance of the account that included the subsequent deposits.  

Chase’s position.  On appeal, Chase argued that it only was required to restrict withdrawal of funds “in an amount equal to the balance of  [judgment debtor’s] account at the time [Chase] received notice of the garnishment proceedings.”  Chase based its contention on a 1998 amendment to the operative statute.

The statute.  I.C. § 28-9-4-2 provides in part that a depository financial institution shall restrict deposit account withdrawals in an amount equal to “the balance in the account at the time of receipt of the documents in process . . ..”  I.C. § 28-9-4-2(a)(2)(B).  The pre-1998 version of the statute specifically provided for restriction of additional funds “subsequently deposited into” the account.  When the legislature amended the statute, it deleted those words. 

When courts interpret statutes, their goal is to determine and give effect to the intent of the legislature.  In this case, the Court would “not simply re-read language into a statute that the legislature has deleted.”  The Court therefore held:

In light of the legislature’s amendment to I.C. § 28-9-4-2, we agree with [Chase] that the statute only required it to restrict withdrawal of the balance in [judgment debtor’s] account at the time it received the documents and process required by I.C. § 28-9-3-4(d).  The legislature’s decision to omit the words “or subsequently deposited into” from I.C. § 28-9-4-2 is irrefutable and, as required by the rules of statutory construction, we will not reinsert the omitted language into the statute when construing the statute.  Thus, we agree with [Chase] that the trial court erred by finding it in contempt for failing to restrict withdrawal of funds that were subsequently deposited into [judgment debtor’s] account. 

Odd result.  The Indiana Court of Appeals clearly did the right thing in this case.  The question for me is whether Indiana’s General Assembly did the right thing when, in 1998, it deleted from the operative statutory section the words “or subsequently deposited into” from the law.  The statutory amendment means that lenders attempting to collect deficiency judgments through the garnishment of judgment debtors’ bank accounts may need to issue multiple garnishment requests to the same bank.  Otherwise, the bank only is compelled to restrict the withdrawal of funds in the account at the time of a particular request.  While there may have been good reasons for the 1998 statutory amendment, the consequences for debt collectors – whether intended or not – appear to be unfavorable and impractical.