IN SUPREME COURT
Court of Appeals
Anderson, G. Barry, J.
Ronald Enright, as attorney-in-fact for S.E., et al.,
Filed: July 19, 2007
Office of Appellate Courts
Robert H. Lehmann,
Lehmann Engineering, Inc.,
S Y L L A B U S
1. Under the Multi-Party Accounts Act, Minn. Stat. § 524.6-203(a) (2006), a creditor may not garnish funds in a joint account not contributed by the debtor, unless the creditor proves by clear and convincing evidence that the depositor intended to confer ownership of the funds on the debtor.
Statutes § 524.6-203 abrogates the rule of Park Enterprises v. Trach, 233
3. A joint account holder’s unlimited power of withdrawal does not mean that funds he did not contribute are “due” him within the meaning of Minn. Stat. § 571.73, subd. 3(2) (2006).
Reversed and remanded.
Heard, considered, and decided by the court en banc.
O P I N I O N
ANDERSON, G. Barry, Justice.
challenges the garnishment of funds deposited by his wife in their joint bank
account to satisfy a judgment entered against him. The district court and court of appeals,
relying on Park Enterprises v. Trach,
In 1999, appellant Robert H. Lehmann,
d/b/a Lehmann Engineering, Inc., entered into a lease for commercial property
with respondents S.E. and Marlys Enright, d/b/a Pride-One Co. (“Enright”). In 2005, Enright sued both Lehmann and the
engineering corporation for rents due. Lehmann served a pro se answer denying
liability on the grounds that the corporation, not Lehmann, was party to the
lease. The corporation did not
answer. Enright obtained a default
judgment against the corporation and continued the litigation against Lehmann
individually. Enright served discovery
on both the corporation and Lehmann, but neither answered Enright’s discovery
requests or a later district court order compelling responses. Lehmann also did not file his answer with the
court. Ultimately, the court struck
Lehmann’s answer, granted a default judgment against him for rent due and
attorney fees, and awarded judgment against him for attorney fees for his
discovery violations. Lehmann has
explained that illness prevented him from understanding or participating in the
lawsuit, but the district court and court of appeals rejected this
explanation. Enright v. Lehmann, 724 N.W.2d 546, 550-51 (
To satisfy the judgments, Enright garnished two joint bank accounts held in the names of Lehmann and his wife, Zandra Lehmann. Lehmann asserts, and Enright agrees, that Zandra deposited all the money in the joint accounts. Lehmann claimed that the accounts could not be garnished because the funds in those accounts belonged to Zandra, and he moved for an order staying execution of the judgments, dissolving the garnishments, reinstating his answer, and allowing him to amend his answer to assert a counterclaim. The district court denied these motions. The court of appeals, relying on Park Enterprises, affirmed and held that Enright was subrogated to Lehmann’s unlimited right of withdrawal of the funds in the joint accounts. Enright, 724 N.W.2d at 549.
In this appeal, Lehmann claims the funds at issue were not subject to garnishment because those funds were the property of his wife alone. At no time has Enright attempted to show that Zandra intended to confer ownership of the funds on her husband by placing them in the joint accounts; rather, Enright has taken the position that Zandra owns the funds but their location in the joint bank accounts renders them attachable by garnishment for Lehmann’s debt.
As a threshold matter, Enright argues
that Lehmann lacks standing to challenge the garnishment of the accounts. Although appellate review was neither
requested nor granted on this issue, standing is essential to our exercise of
Enright argues that Lehmann lacks standing to challenge the garnishment because the funds belong to Lehmann’s wife. This argument is without merit. According to the terms of the account contract, Lehmann possesses the power to withdraw and use the funds in the account regardless of the original source of the deposit. We conclude that, as an invasion of this interest, garnishment of the funds causes him an injury-in-fact and vests him with standing to challenge the garnishment.
Enright also argues that this case is
moot because the bank paid the garnished funds to Enright’s attorney, who—despite
the fact that the funds were the subject of ongoing litigation—gave them to
Enright rather than depositing them in his client trust account. An issue is moot if a court is unable to
grant effectual relief. In re Schmidt, 443 N.W.2d 824, 826 (
Lehmann and amicus curiae Probate and Trust Law Section of the Minnesota State Bar Association argue that because the Multi-Party Accounts Act (MPAA) states that Lehmann does not own funds contributed by his wife to a joint account, those funds cannot be garnished to satisfy his debt. They also argue that by enacting the MPAA, the legislature abrogated Park Enterprises and any common law based on it. Enright responds that Park Enterprises is still good law and that the garnishment statute, Minn. Stat. § 571.73 (2006), grants him power to garnish the funds.
Construction of a statute on appeal
is a legal question subject to de novo review.
Lewis-Miller v. Ross, 710
N.W.2d 565, 568 (
A. The Multi-Party Accounts Act
Section 4 of the MPAA, titled
“Ownership During Lifetime,” provides that “[a] joint account
belongs, during the lifetime of all parties, to the parties in proportion to
the net contributionsby
each to the sums on deposit,
unless there is clear and convincing evidence of a different intent.”
The language of the MPAA is unambiguous. In a controversy between parties to a multi-party account and their creditors, funds in a joint account belong to the parties in proportion to their net contributions. A party’s net contribution is the amount of money deposited by or for him, less withdrawals made by or for him. Therefore, we hold that where one party has contributed all the money in a joint account, a creditor cannot garnish the account to satisfy a debt belonging to a non-contributing party unless the creditor provides clear and convincing evidence that the depositor intended to confer ownership of the funds on the debtor.
Enright asserts that in
enacting the MPAA the legislature must not have intended to abrogate Park Enterprises (which allowed
garnishment of part or all of the funds in a joint account to satisfy to debt
of one of the depositors) because there is no mention in the statute of
creditor rights except the statement that sections 6-203 to 6-205 are “relevant
only to controversies between these persons and their creditors and other
Although our holding does not require
us to look beyond the plain language of Minn. Stat. §§ 524.6-202 to -203,
a brief review of the policy behind the enactment of the MPAA is
illuminating. At common law,
jurisdictions applied four different theories to determine ownership of funds
in joint accounts: contract theory, gift theory, trust theory, and joint
tenancy theory. Note, The “Poor Man’s Will” Gains Respectability:
Perhaps in response to this uncertainty in the
law of joint accounts,
the legislature intervened by enacting the MPAA, which establishes a clear
standard for determining ownership of funds and provides some measure of
protection for assets in a joint bank account from creditors of either
party. A joint account with a right of
survivorship provides a “simple, inexpensive method of passing funds in the
account from a deceased joint owner to the surviving joint owner, avoiding the
necessity of probate proceedings.” Deutsch, Larrimore & Farnish, P.C. v.
Johnson, 848 A.2d 137, 142-43 (
If the creator of the joint account, whose intent is usually testamentary in nature, could be impoverished by the acts of the joint tenant over which the creator has no control, such as attempts of the other joint tenant or her creditors to reach the funds, there is great risk to the creator of the joint account. It may be these evils that [the Multi-Party Accounts Act] was intended to limit, lending stability and security to the creation of joint bank accounts.
Deutsch, 848 A.2d at 143; accord Browning & Herdrich Oil Co. v. Hall, 489 N.E.2d 988, 991-92 (Ind. Ct. App. 1986); In re Estate of Maxfield, 856 P.2d 1056, 1059 (Utah 1993).
Pennsylvania Supreme Court in Deutsch quoted
from the official comments to Pennsylvania’s version of the MPAA: “‘[A] person
who deposits funds in a multiple-party account normally does not intend to make
an irrevocable gift of all or any part of the funds represented by the
deposit. Rather, he [or she] usually
intends no present change of beneficial ownership.’” 848 A.2d at 143 (quoting Official Comment to
B. Other jurisdictions
One of the purposes of
the Uniform Probate Code is to “make uniform the law among the various
C. The court of appeals decision
The court of appeals held that the
MPAA did not apply and instead followed the rule of our 1951 decision in Park Enterprises. In that case, we affirmed garnishment of a
joint account without regard to how much the debtor had actually contributed to
the account. Park Enters., 233
The court of appeals declined to apply Minn. Stat. § 524.6-203 because it is part of the Probate Code, which according to the court “does not purport to govern relationships or rights of anyone other than decedents, missing or incapacitated persons, or minors.” 724 N.W.2d at 549. The problem with this interpretation is that Minn. Stat. §§ 524.6-202 to -203, by their terms, govern the relationships of living joint account holders and their creditors. Furthermore, Minn. Stat. § 524.1-301 (2006), which defines the “territorial application” of chapters 524 and 525, states that “[e]xcept as otherwise provided in this chapter, this chapter and chapter 525 apply to (1) the affairs and estates of decedents, missing persons, and persons to be protected * * *.” (Emphasis added.) The Probate Code explicitly leaves open the possibility that certain sections in chapters 524 and 525 apply to persons other than decedents, missing or incapacitated persons, and minors.
court of appeals also reasoned that article 6 of the Probate Code, of which Minn.
Stat. § 524.6-203 is a part, is entitled “Nonprobate Transfers on Death”
and therefore applies only to “issues arising after the death of a joint
depositor of an applicable bank account.”
724 N.W.2d at 549 (citing Minn. Stat. §§ 524.6-201 to -214 (2004)).
But “[t]he headnotes printed in boldface
type before sections and subdivisions in editions of Minnesota Statutes are
mere catchwords to indicate the contents of the section or subdivision and are
not part of the statute.”
concedes that the MPAA applies during the lifetime of parties to a joint
account. In addition to his argument
that the MPAA is hopelessly vague, which we address above, he argues that Park Enterprises is still the law and seems
to suggest that if the legislature wished the MPAA to abrogate Park Enterprises, it was required to
mention the case by name. Enright is
incorrect, because the legislature may abrogate common law doctrines “by
express wording or necessary implication.”
Wirig v. Kinney Shoe Corp.,
461 N.W.2d 374, 377-78 (
Minn. Stat. § 524.6-203 provides that funds in a joint account belong to
the parties in proportion to their net contributions, Minn. Stat.
§ 524.6-202 provides that the account contract defines the parties’ power
to withdraw funds. Enright argues that
Lehmann had the right under the account contract to withdraw all of the money
in the joint accounts and that Enright became subrogated to that right. In common law subrogation, a subrogee stands
in the shoes of a subrogor and obtains the rights of the subrogor. Employers
Mut. Cas. Co. v. A.C.C.T., Inc., 580 N.W.2d 490, 493 (
Enright also argues that he has a
right to garnish all funds in the joint account under Minn. Stat. § 571.73,
subd. 3(2). That section provides that
all “money, or other property due or belonging to the debtor and owing by the
garnishee or in the possession or under the control of the garnishee” is
attachable by garnishment. As we have
explained, funds deposited by Lehmann’s wife do not “belong” to Lehmann. The statute does not define, and we have not defined,
what money is “due” a debtor within the meaning of section 571.73, subd. 3(2). If we were to construe all funds in a joint
account as “due” to any party to the account and therefore attachable by
garnishment to satisfy a debt, section 571.73 would negate section
524.6-203. We note that section 571.73
is a general procedural statute describing the process by which creditors in
Under 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 is undisputed that Lehmann did not contribute any of the funds in the two joint accounts sought to be garnished, and Enright has offered no evidence that Lehmann’s wife, who did deposit the funds, intended to confer ownership on Lehmann. Enright, therefore, may not garnish those funds to satisfy his judgment against Lehmann.
Reversed and remanded for entry of an order that the garnished funds be redeposited.
Account’ means an account so designated, and any account payable on request to
one or more of two or more parties and to the survivor of them.”
Contribution’ of a party to a joint account as of any given time is the sum of
all deposits thereto made by or for the party, less all withdrawals made by or
for the party which have not been paid to or applied to the use of any other
party * * * .”
 “‘Sums on deposit’ means the balance payable on a multiple-party account including interest, dividends and, in addition, any deposit life insurance proceeds added to the account by reason of the death of a party.” Minn. Stat. § 524.6-201, subd. 13 (2006).
uncertainty was not confined to
 See, e.g., Lamb v. Thalimer Enters., Inc., 386 S.E.2d 912, 914 (Ga. Ct. App. 1989) (applying Georgia’s MPAA and holding that, in the absence of evidence of a different intent, proceeds from the sale of a couple’s home deposited in a joint account should be divided in half); Browning & Herdrich, 489 N.E.2d at 990 (holding that under the MPAA, a debtor had insufficient interest in funds deposited by his mother in their joint account to make them subject to garnishment for a judgment against him alone); Brown v. Commonwealth, 40 S.W.3d 873, 880-82 (Ky. Ct. App. 1999) (distinguishing Park Enterprises and remanding for findings on the ownership of the funds in a joint account); Szelenyi v. Miller, 564 A.2d 768, 771 (Me. 1989) (holding that under the Uniform Probate Code, funds deposited into a joint account entirely by a physician sued for malpractice were available to satisfy a judgment against him where no clear and convincing evidence showed that he intended the funds to be a gift to his wife); Craig v. Hastings State Bank, 380 N.W.2d 618, 623 (Neb. 1986) (“[I]f it is established that a nondebtor party to the account has funded all or part of the beneficial interest in an account, a bank has no right of setoff against the beneficial interest contributed by the nondebtor depositor.”); Deutsch, 848 A.2d at 144 (holding that a non-contributing owner had no ownership interest in a joint account and thus the account assets were not subject to execution to satisfy her debt); RepublicBank Dallas v. Nat’l Bank of Daingerfield, 705 S.W.2d 310, 312 (Tex. App. 1986) (holding that a debtor held only “bare legal title” to the funds in a joint account and that the “equitable interest” in the funds was in the other account holders, so the funds were not subject to garnishment); Vaughn v. Bernhardt, 547 S.E.2d 869, 870 (S.C. 2001) (holding that a widower who withdrew funds deposited into a joint account by his wife before her death was not entitled to keep the funds because they belonged to the wife during her lifetime); Estate of Maxfield, 856 P.2d at 1058-59 (reviewing case law and holding that a judgment creditor can reach only those funds in a joint account that the judgment debtor contributed unless the other joint tenant intended to make a gift to the debtor).
note, as a side matter, that subrogation stems from the equitable powers of the
court, which must give due regard to the legal and equitable rights of
others. United Carolina Bank v. Beesley, 663 A.2d 574, 576 (