Opinion ID: 767986
Heading Depth: 2
Heading Rank: 1

Heading: Introduction and Facts

Text: 7 This is an action to enforce a judgment. Plaintiff-Appellant McMahan & Co.(McMahan) appeals the district court's grant of summary judgment for Defendant-Appellees Po Folks, Inc. (Po Folks) and Montgomery Traders Bank & Trust Co., now known as Traditional Bank, Inc. (Bank).
8 On February 28, 1995, McMahan obtained a default judgment in the United States District Court of Delaware against Po Folks for failure to pay on a promissory note given to McMahan. The judgment, in the amount of $288,763.14 (including interest), was registered in the United States District Court for the Eastern District of Kentucky on April 3, 1995. McMahan thereafter attempted to enforce its judgment through more than twenty garnishment orders issued to the Bank, at which Po Folks maintained accounts. However, McMahan's efforts were largely unsuccessful, with less than $12,000 being remitted to McMahan by the Bank. 9 McMahan therefore moved for a writ of execution, attachment and/or sequestration against Po Folks' property held by the Bank, as is the standard procedure to challenge a bank's garnishment disclosure in Kentucky. See Ky. Rev. Stat. Ann. § 425.526; see also Fed. R. Civ. P. 69 (a) (federal garnishments are to proceed according to the laws of the state in which the federal court sits). The district court denied McMahan's motion, finding that the Bank did not possess any Po Folks property on the date and the time the garnishment orders were received 1 . On appeal, we reversed the district court's decision and ordered that discovery be conducted. McMahan & Co. v. Po Folks, Inc. 1997 WL 78497 (6th Cir. Feb. 24, 1997). 10 On remand, discovery revealed that the reason the Bank did not satisfy the garnishment orders served by McMahan was because of the internal procedures of the Bank, and the structure of Po Folks' accounts. Po Folks had several accounts with the Bank, specifically, a general account and 5 independent, named accounts. The named accounts were zero balance accounts, which meant that at the close of business every day, the account funds would be swept into the general account, leaving a zero balance. Po Folks paid the Bank a monthly fee to allow Po Folks to significantly overdraw on its general account. 2 When a garnishment order was served, the Bank's policy was to check the balance of the account by computer, which only reflected the account balances as of the close of business the previous day and did not show any deposits or withdrawals made during the day the garnishment orders were served. Thus, since all of Po Folks' accounts were either zero balance accounts, or overdrawn as of the close of business the preceding day, whenever a garnishment order was served the Bank would respond that no monies were in Po Folks' account, even if deposits had been made the day that the garnishment order was served, and particularly that part of the day preceding the exact time the garnishment order was served.
11 Following the completion of discovery, McMahan again moved for writs of execution, attachment and/or sequestration against Po Folks' property, an order of contempt against the Bank, and summary judgment. The district court found that due to the Bank's procedures and the structure of Po Folks' accounts, the Bank did not hold property belonging to Po Folks as of the dates and times the garnishment orders were served, and further,that the Bank did not intentionally manipulate the account balances in order to assist Po Folks in defeating garnishment orders. The district court additionally held that it would be too burdensome on Kentucky banks to take steps outside of the ordinary course of business to facilitate the determination of whether they are in possession of garnished property as of the dates and times the garnishment orders were served. Accordingly, it denied McMahan's motion for a writ of execution and, in turn, denied as moot both parties' summary judgment motions.