Title: First Interstate Bank of Greybull, N.A. v. Big Horn Federal Sav. & Loan

State: wyoming

Issuer: Wyoming Supreme Court

Document:

First Interstate Bank of Greybull, N.A. v. Big Horn Federal Sav. & Loan1989 WY 65770 P.2d 231Case Number: 88-295, 88-296Decided: 03/10/1989Supreme Court of Wyoming
FIRST 
INTERSTATE BANK OF GREYBULL, N.A., APPELLANT (PLAINTIFF),

 
 
v.

 
 
BIG HORN 
FEDERAL SAVINGS & LOAN, APPELLEE (DEFENDANT), RICKY BRYANT, ALICE W. BRYANT 
AND JAMES BRYANT, DEFENDANTS.

 
 
FIRST 
INTERSTATE BANK OF GREYBULL, N.A., APPELLANT (DEFENDANT),

 
 
v.

 
 
BIG HORN 
FEDERAL SAVINGS & LOAN, APPELLEE (PLAINTIFF),

 
 
KENNETH W. 
BRYANT, JAMES G. BRYANT,

 
 
THE ESTATE 
OF NEVA M. BRYANT, DECEASED, 
DEFENDANTS.

 
 
Appeal from 
the District Court of Big HornCounty, Gary P. Hartman, 
J.

 
 
M. Scott 
McColloch, Greybull, for 
appellant.

 
 
Nancy G. 
Hinckley of Hinckley & Hinckley, Basin, for appellee.

 
 
Before THOMAS, URBIGKIT, MACY and GOLDEN, JJ., and 
ROONEY, Retired J.

 
 

ROONEY, Retired 
Justice.

 
 

[¶1.]     Defendant James Bryant 
had an Individual Retirement Account (IRA) with appellant bank. Appellant 
foreclosed a mortgage held by it on property of defendants, and it obtained a 
deficiency judgment on January 6, 1987 for $92,205.58. On January 9, 1987, 
appellant garnisheed the IRA account held by it toward satisfaction of the 
judgment. Defendant James Bryant objected, and the funds were surrendered to the 
Clerk of the District Court.

 
 

[¶2.]     Appellee also 
foreclosed a mortgage held by it on separate property of defendants, and it 
obtained a deficiency judgment on September 28, 1987. On October 2, 1987, 
appellee issued garnishment of the Clerk of the District Court towards 
satisfaction of the judgment.

 
 

[¶3.]     In an opinion order 
filed January 12, 1988 in each of the two garnishment cases, the district court 
allowed joinder of them. This court recognized the joinder in its order of 
February 6, 1989 assigning the matter to the expedited 
docket.

 
 

[¶4.]     This appeal is from a 
judgment awarding the funds to appellee for the reason that appellant, as 
custodian of the IRA account, was precluded from garnisheeing 
them.

 
 

[¶5.]     We 
affirm.

 
 

[¶6.]     Although argued by 
appellant, we need not here concern ourselves with the priority of the claims,1 whether or not an IRA account is 
generally exempt from execution, and whether or not the fact that James Bryant 
could terminate the account at any time made it subject to execution. The 
garnishment by appellant was not on behalf of a third party. It was one by the 
trustee of the account on behalf of itself. Appellant held the account in a 
fiduciary capacity. 26 U.S.C. § 408 at 417 (Supp. IV 1986) (emphasis added) 
provides in pertinent part:

 
 
      "For purposes of 
this section, the term `individual retirement account' means a trust created or organized in the United 
States for the exclusive benefit of an individual or his beneficiaries, but only 
if the written governing instrument creating the trust meets the following 
requirements:

 
 
* * * * * 
*

 
 
     "(2) The trustee is a bank (as defined in 
subsection (n)) or such other person who demonstrates to the satisfaction of the 
Secretary that the manner in which such other person will administer the trust 
will be consistent with the requirements of this section.

 
 
     "(3) No part of the trust funds will be invested in life 
insurance contracts.

 
 
     "(4) The interest of an individual in the balance 
in his account is nonforfeitable.

 
 
     "(5) The assets of the 
trust will not be commingled with 
other property except in a common trust fund or common investment 
fund."

 
 

[¶7.]     In Gray v. Elliott, 36 
Wyo. 361, 255 P. 593, 594 (1927) (emphasis added), this court said:

 
 
"There are 
but two kinds of deposits, special and general - those where the bank becomes a 
trustee for a depositor by special 
agreement or under circumstances sufficient to create a trust, and general 
deposits, where the bank merely becomes the debtor of the 
depositor."

 
 

[¶8.]     In Masi v. Ford City 
Bank and Trust Co., 779 F.2d 397 (7th Cir. 1985), Masi had an IRA account with 
the Ford City Bank and Trust Company. He then signed a guaranty for a loan by 
the bank to a third person. When the third person defaulted on the loan, the 
bank applied Masi's IRA account monies to payment on the loan. In finding for 
Masi, the court held that "IRAs are not regular savings accounts. They clearly 
are special deposits that constitute a trust relationship wherein the Bank owes 
a fiduciary duty to the depositor." Id. at 401.

 
 

[¶9.]     The designation of the 
depositor's interest in IRA funds as "nonforfeitable" in 26 U.S.C. § 408 means 
that the bank cannot claim any interest in them. Accordingly, appellant's 
garnishment was not effective.

 
 

[¶10.]  AFFIRMED.

 
 
FOOTNOTES

 
 

1 Appellant's claim had 
priority over that of appellee since its writ of garnishment was served before 
that of appellee. L.C. Jones Trucking Co. v. Superior Oil Co., 68 Wyo. 384, 234 P.2d 802 
(1951).