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Eagle Bank & Trust Company and Bid Central, Inc. v. Raynor Manufacturing Co.

Court of Appeals of Arkansas, Division IV

March 13, 2019

EAGLE BANK & TRUST COMPANY AND BID CENTRAL, INC., D/B/A BCI MANAGEMENT COMPANY APPELLANTS
v.
RAYNOR MANUFACTURING COMPANY APPELLEE

          APPEAL FROM THE FAULKNER COUNTY CIRCUIT COURT [NO. 23CV-17-677] HONORABLE CHRIS CARNAHAN, JUDGE

          Quattlebaum, Grooms & Tull PLLC, by: Mary-Tipton Thalheimer, for appellant.

          The Key Firm, PLLC, by: Shawn Key, for appellee.

          BRANDON J. HARRISON, JUDGE.

         Eagle Bank & Trust Company appeals a $66, 569.58 judgment entered against it in the Faulkner County Circuit Court. The bank argues that Arkansas Code Annotated section 4-4-303-a provision in the Uniform Commercial Code for banking-gives a bank like it a "reasonable time" to comply with a writ of garnishment. The circuit court decided that the statute did not apply. Although the bank presents a novel argument, we hold that the circuit court did not err in finding that the bank is liable to Raynor Manufacturing Company. The statutory "reasonable time" period conflicts with specific garnishment statutes and Arkansas Supreme Court case law that has held a garnishee's potential liability starts when the writ of garnishment is served. E.g., J.B. Hunt, LLC v. Thornton, 2014 Ark. 62, at 7, 432 S.W.3d 8, 12 (stating that "the effect of the service of a writ of garnishment is to impound all property in the hands of the third-party garnishee that belongs to the judgment debtor at the time of the service") (emphasis added).

         I.

         This case is about an effort by Raynor to collect a judgment from Bid Central, Inc. (doing business as BCI Management Company). On 1 August 2017, Raynor obtained a default judgment against Bid Central for $102, 905 in the Faulkner County Circuit Court. On August 3 at approximately 2:20 p.m., Raynor served Eagle Bank with a writ of garnishment, by certified mail, to the office of Eagle Bank's registered agent in Little Rock. The writ directed the bank to lien on all money belonging to Bid Central. The writ contained five interrogatories.

         The parties do not dispute that the bank held no money belonging to Bid Central when the writ was served on August 3. This was because on 31 July 2017, the day before the default judgment was entered against Bid Central, Eagle Bank had guaranteed a cashier's check. The cashier's check was for 100 percent of the account balance. Consequently, on August 3, Bid Central's deposit account at the bank was closed.

         On August 4 at approximately 8:45 a.m., an agent for Bid Central deposited the cashier's check ($66, 569.58) at an Eagle Bank branch in Vilonia, Arkansas. The teller deposited the check into Bid Central's closed deposit account. The deposit reopened the account. In less than two hours, however, the money was wired out of the account and to a creditor, minus a $15 transaction fee. The deposit account was then closed, again.

         On August 10, Michelle Garth, an Eagle Bank customer-service manager, filed an unsworn written statement in the circuit court responding to the writ's five interrogatories. On September 5, Raynor filed more interrogatories and requests for document production in the circuit court; one month later the bank filed responses to Raynor's requests.

         Raynor moved for judgment against the bank in November 2017. The circuit court convened a hearing in May 2018 on Raynor's motion. The sole witness was Michelle Schrodt, an Eagle Bank employee and twenty-seven-year banking veteran who runs all the bank's branches.

         Schrodt explained that when the bank receives a writ of garnishment it checks whether a relevant account exists and then places a "hold" on the account. She explained that there is a "two-day research period" in the garnishment training and testified that "the State said there's two days" to see if there are any federal benefits in the account that cannot be garnished because those benefits are "protected funds." When asked if safeguards were in place to ensure that nonprotected funds are captured if the accountholder makes a deposit during the two-day research period, Schrodt replied "yes." She said that the account would be flagged, signifying that a writ had been received.

         Schrodt said that the writ in this case was delivered after 2:00 p.m. on August 3 and the bank closed at 5:00 p.m., including the Shackleford branch in Little Rock. According to Schrodt, after the bank received the writ it started a review to see if there was a relevant open account. The review revealed that Bid Central's account was closed July 31. So on the date the writ was served on the bank, Bid Central's deposit account was closed. Schrodt agreed that the bank had no process in place to flag a closed account. Only open and active accounts are flagged. Schrodt said that it was not a routine or frequent occurrence for a former account holder to reopen an account after it had been closed.

         Schrodt conceded that the bank possessed $66, 569.58 that belonged to Bid Central for a two-hour window of time, or until approximately 10:47 a.m. on August 4. When the account reopened no steps were taken to assess whether there was a pending garnishment on the reopened account. Schrodt said it is not the bank's standard practice to inquire whether a garnishment issue existed on a closed account. The transaction was discovered when Michelle Garth pulled up the account the afternoon of August 4 while preparing to answer the writ's interrogatories. No other account activity occurred ...


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