IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

August 16, 2005 Session

LIPMAN BROTHERS, INC. v. ARETE AGENCIES, INC.

Direct Appeal from the Chancery Court for Davidson County

No. 99-1557-II Carol McCoy, Chancellor

No. M2004-02073-COA-R3-CV- Filed December 7, 2005

Plaintiff Lipman Brothers, Inc. purchased 1,156 cases of French wine and hired Italia Di

Navigazione, S.p.A. (“Italia”) to ship the wine to the United States from France. Italia subsequently

hired Defendant Arete Agencies, Inc. (“Arete”) to transport the wine to Plaintiff’s Nashville

warehouses. Arete placed the wine on a train bound for Nashville but, after reaching its destination,

the wine was never delivered to Plaintiff and ultimately spoiled after sitting outside in the summer

heat for thirty-six days. Arete’s insurance provider, The Hartford Insurance Company (“Hartford”),

denied coverage for the incident. Plaintiff later obtained a judgment against Arete and, after learning

that Arete was unable to pay, issued a writ of garnishment against Hartford. The trial court

subsequently quashed Plaintiff’s writ after concluding that the debt was “contingent” because

Plaintiff failed to first institute a declaratory judgment action to interpret the disputed insurance

contract before seeking garnishment. We reverse.

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

Remanded

DAVID R.FARMER,J., delivered the opinion of the court, in which W.FRANK CRAWFORD,P.J.,W.S.,

and WILLIAM H. INMAN, SP. J., joined.

Eugene N. Bulso, Jr. and Barbara Hawley Smith, Nashville, Tennessee, for the appellant, Lipman

Brothers, Inc.

Thomas I. Carlton, Jr. and Ben M. Rose, Nashville, Tennessee, for the appellee, The Hartford

Insurance Company.

OPINION

Factual Background and Procedural History

This case arises from the spoiling of 1,156 cases of wine. Lipman Brothers, Inc.

(“Plaintiff”) is a wine distributor based in Nashville, Tennessee. On April 30, 1998, Plaintiff
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contracted with Italia Di Navigazione, S.p.A. (“Italia”) to ship 1,156 cases of wine from Les Vins

Georges Duboeuf in La-Chappelle-De Guinchay, France, to Lipman’s warehouse located in

Nashville, Tennessee. Italia shipped the wine overseas from France to Savannah, Georgia, and

subcontracted with Arete Agencies, Inc. (“Arete”) to transport the wine from Savannah to

Plaintiff’s Nashville warehouses. On June 5, 1998, Arete placed the wine on a railroad car for

immediate transport to Nashville. The wine arrived in Nashville on June 8, 1998, but Plaintiff

did not receive it until July 15, 1998. During this thirty-six day period, the wine remained

outside in the railyard unprotected from the summer heat and elements. As a result of this

exposure, the wine spoiled. Plaintiff subsequently filed suit against Arete on June 2, 1999, to

recover damages resulting from the spoiling of the wine. 

At all times relevant to this matter, Arete had insurance coverage under a commercial

general liability policy issued by The Hartford Insurance Company (“Hartford”). Arete

submitted a claim to Hartford for Plaintiff’s loss and asked Hartford to defend and indemnify

Arete with respect to Plaintiff’s complaint. However, Hartford denied coverage for Arete’s claim

on July 15, 1999, due to a “care, custody, or control” exclusion in the policy. Specifically, in a

letter to Arete, Hartford stated:

The Hartford Insurance Company issued Policy No. 22 SBA EK7130 to Arete

Transportation with a policy period from 1/27/98 through 1/27/99. The limits of

liability are $1M per occurrence for all bodily injury or property damage. The

pertinent coverage form is the SS 00 08 0698, the Business Liability endorsement. 

This form indicates under the insuring agreement that we will pay all the sums

that the insured becomes legally obligated to pay as damages because of bodily

injury, property damage, personal injury or advertising injury to which this

insurance applies. A review of the exclusions in this form indicate under

Exclusion K. 4 that this policy would not apply to property damages to property in

care, custody or control of the insured. Since [Plaintiff’s] Complaint indicates

that the property damage occurred while in the care and control of Arete, we must

respectfully disclaim coverage for this loss based on this exclusion. 

After Hartford refused to defend the case, Arete filed an answer to Plaintiff’s complaint. Arete

subsequently dissolved on December 14, 1999. On April 28, 2000, the court granted judgment

for Plaintiff against Arete in the amount $52,032.28. 

Due to Arete’s inability to pay the court’s judgment, Plaintiff executed a non-wage

garnishment against Hartford seeking payment of the $52,032.28 award. Hartford responded by

arguing that the insurance policy did not provide coverage for the allegations made in Plaintiff’s

original complaint or for the damages claimed therein. Hartford subsequently filed a Motion to

Quash Plaintiff’s Writ of Execution and Garnishment asserting, among other things, that any

obligation owed by Hartford was contingent and thus not subject to garnishment. In support of

this argument, Hartford cited the Tennessee Supreme Court’s decision in Overman v. Overman,

570 S.W.2d 857 (Tenn. 1978) for the proposition that “[w]hile obligations that are certain,
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although not presently due, are subject to garnishment under Tennessee law, obligations that are

contingent, in that they may never become due[,] are not.” Hartford argued that since Plaintiff

had not first sought a declaratory judgment action interpreting the insurance contract, any amount

potentially due under the contract was contingent. Plaintiff filed a Motion for Conditional

Judgment on June 25, 2004. The trial court granted Hartford’s Motion to Quash from the Bench

on July 23, 2004. In so ruling, the trial judge made the following findings:

The statute under which [Plaintiff] has issued a garnishment against

[Hartford] is [Tenn. Code Ann. §] 26-2-202. . . .

 

. . . .

. . . The statute that I referenced says that all property, debts[,] and effects of

the defendant in the possession or under the control of the garnishee shall be liable

to satisfy the plaintiff’s judgment from the service of the notice or from the time they

came into the plaintiff’s hands if acquired subsequent to the service of the notice and

before judgment.

The little notes cite the cases that have been referenced here. [Overman].

They make a distinction between property that’s subject to the garnishment. . . . 

. . . .

The question is whether or not Hartford has property that is subject to

garnishment so as to satisfy [Plaintiff’s] judgment. [Hartford has] come forward and

said, [“]We have no obligation to pay the judgment because the contract has an

exclusion, and the provision of the exclusion appears in a form called the “Business

Liability Coverage Form.”

. . . .

[Garnishment applies] to insurance companies when it’s clear that they have

an obligation to pay. . . . [Hartford denies] any obligation or any liability to Arete.

I have looked at the contract.

. . . .

The burden on the insurance company to show that they have no liability to

Arete by case law is a heavy burden. To come out from under an insurance policy,

that’s generally a heavy burden. That’s not the same burden that exists in denying

obligations under a garnishment. It’s a different burden.
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That doesn’t mean that Lipman cannot pursue Hartford. But it has to be in

a more proper form. . . . I think that the issue will really focus on what was

Hartford’s obligation under the contract that they had with Arete, that Lipman steps

into the shoes of Arete for the purposes of construing this contract as the judgment

creditor.

Hartford denied that it had liability when a demand was made early on. . . .

And the garnishment statute[,] as I construe it[,] was not to attach an

insurance policy. It was to attach property, debts[,] and effects of the defendant in

the possession or under the control of the garnishee. Right now, there is no showing

that Hartford has any property, debts[,] or affects of the defendant in its possession

or under its control.

That’s what we’re looking at. And while, [Plaintiff argues] that there’s an

obligation, the chose in action must be one that the Court can recognize as

constituting property. And that is not what we have here. We have a denial of

coverage. And that’s what makes it contingent. I can’t do that in these proceedings.

Plaintiff subsequently filed a Motion to Reconsider which the trial court denied. The trial court

entered a final written order quashing Plaintiff’s Writ of Execution and Garnishment on August

20, 2004. Plaintiff appealed.

Issues Presented

We find the issue in this case to be whether the trial court erred in quashing Plaintiff’s

Writ of Garnishment. For the reasons stated below, we reverse.

Standard of Review

The issues presented in this appeal are issues of law. The standard of review for this

Court on issues of law is de novo, with no presumption of correctness afforded to the conclusions

of the court below. Bowden v. Ward, 27 S.W.3d 913, 916 (Tenn. 2000); Tenn R. App. P. 13(d)

(2005).

Analysis

In this case, Plaintiff filed a Writ of Garnishment against proceeds allegedly owed to

judgment debtor Arete under a policy issued by Arete’s insurer, Hartford. Hartford denied

coverage. The trial court subsequently quashed Plaintiff’s writ after finding that any debt owed

by Hartford to Arete was contingent since a legal dispute existed as to whether the insurance

contract provided coverage. The trial court further refused to address the dispute because it
As we discuss below, a denial of insurance coverage by a garnishee insurance company alone does not make 1

alleged debt contingent for the purposes of garnishment.

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concluded that it was improper for a court to interpret a disputed insurance contract in a

garnishment proceeding. We disagree with both holdings.

This Court has previously defined a garnishment as “an attachment of a debt due the

judgment debtor from the garnishee.” Smith v. Smith, 165 S.W.3d 285, 293 (Tenn. Ct. App.

2004) (citations omitted). “[S]ervice of the garnishment upon the garnishee is a warning to the

garnishee not to pay the debt but to answer the garnishment and hold the fund subject to the

orders of the [c]ourt.” Id. Tennessee law allows for garnishment of proceeds from commercial

general liability insurance policies when “a defendant has actually suffered the damages of the

kind contemplated by the contract.” Gray v. Houck, 68 S.W.2d 117, 118 (Tenn. 1930). 

However, “Tenn. Code Ann. § 29-7-112 (2002) provides that a final garnishment judgment may

be entered against a garnishee only where ‘it appears that the garnishee is indebted to the

[principal judgment debtor] defendant.’ ” Tenn. Indus. Mach. Co. v. Accuride Corp., 139

S.W.3d 290, 294 (Tenn. Ct. App. 2004). Such indebtedness must be actual and vested, not

contingent upon some future action or event. Overman v. Overman, 570 S.W.2d 857, 858 1

(Tenn. 1978).

When a debt is disputed in a garnishment action, 

[i]t falls upon the trial court . . . to determine the indebtedness of the garnishee

before entering judgment. Meadows v. Meadows, No. 88-135-II, 1988 WL

116382, at *2 (Tenn. Ct. App. 1988) (citing Cheatham v. Trotter, 7 Tenn. (1 Peck)

198 (1823)). As the court makes this determination, it must bear in mind the

general rule that a “plaintiff is not to be placed in any better position, nor the

garnishee in any worse position, than he would be if defendant himself was

enforcing his claim.” Gray v. Houck, 167 Tenn. 233, 68 S.W.2d 117, 118 (1934)

(citation omitted). This is because, “the plaintiff in garnishment is, in his relation

to the garnishee, substituted merely to the rights of his own debtor, and can

enforce no demand against the garnishee which the debtor himself, if suing, would

not be entitled to recover.” Id.

Accuride, 139 S.W.3d at 294.

In the case at bar, the trial court relied upon the Tennessee Supreme Court’s holding in

Overman v. Overman, 570 S.W.2d 857 (Tenn. 1978), in finding that any debt owed from

Hartford to Arete was contingent and thus not subject to garnishment. However, we find

Overman inapplicable to the facts in this case. In Overman, the plaintiff sought to garnish rights

held by the defendant in two annuity agreements which were not yet mature. Id. at 857. In

holding that the plaintiff could not garnish the annuities, the Tennessee Supreme Court found

that 
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this obligation, whether it is characterized as a debt or as a chose in action, is not

subject to garnishment because it is contingent on a future event[–the defendant’s]

survival until the dates of maturity. If he should die before the contracts mature,

the respondents will never be indebted to [the defendant] in any amount. While

obligations that are certain, although not presently due, are subject to garnishment,

obligations that are contingent, in that they may never become due, are not. 

Id. at 858 (citations omitted). 

In this case, the alleged debt owed by Hartford to Arete under the insurance policy is not

contingent upon some future event. Rather, we find that any such debt accrued at the time an

event allegedly covered under the policy occurred. In so ruling, we adopt the reasoning set forth

in Zimek v. Ill. Nat. Cas. Co., 19 N.E.2d 620 (Ill. 1939), where the Illinois Supreme Court held:

In the present case it is said the claim is contingent because the casualty company

denies that it is liable to Zimek under the terms of the policy of insurance. But

defendant misconceives the nature of the contingency contemplated by the rule. A

contingent claim is one where liability hinges upon some future event, which may or

may not occur; it is dependent on some condition as yet unperformed. Grand Lodge,

I. O. O. F. v. Troutman, 80 Kan. 441, 103 P. 94. Here, whatever right Zimek has

against the company has vested; all the events which can fix the garnishee with

liability have taken place. It only remains to be determined whether those events

make the casualty company liable to Zimek. . . . Thus, the denial of liabilit[y] by the

garnishee does not create a contingency which will prevent garnishment. If we held

otherwise, garnishment process by a creditor could be defeated in every case by the

garnishee’s denial of indebtedness to the judgment debtor.

Zimek, 19 N.E.2d at 623.

Since we have held that the alleged debt in this case is not contingent, the only issue

remaining is whether Hartford’s insurance contract provided coverage to Arete for losses

suffered by Plaintiff. As previously noted, in garnishment proceedings “[i]t falls upon the trial

court . . . to determine the indebtedness of the garnishee before entering judgment.” Accuride,

139 S.W.3d at 294 (citations omitted). As a result, we remand this case to the trial court for the

purpose of determining coverage under the insurance policy between Hartford and Arete.
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Conclusion

Based upon the foregoing, we hereby reverse the chancery court and remand this case for

further proceedings as outlined above. Costs of this appeal are taxed to Appellee, The Hartford

Insurance Company for which execution may issue of necessary.

___________________________________ 

DAVID R. FARMER, JUDGE