Opinion ID: 2589940
Heading Depth: 2
Heading Rank: 2

Heading: prejudgment interest against garnishees

Text: ¶ 15 On cross-appeal, Whitney argues that the trial court improperly failed to award prejudgment interest against Renee. Whitney asserts that a garnishee who unlawfully withholds funds properly subject to garnishment is liable to the garnishor for prejudgment interest. Renee counters that requiring her to pay prejudgment interest allows Whitney to collect interest upon interest by accruing post-judgment interest on the Faulkner judgment while simultaneously accruing prejudgment interest on the garnishment amount. We hold that although garnishors are not always entitled to prejudgment interest on garnishment amounts, it may be awarded in certain circumstances at the discretion of the trial court and does not represent interest upon interest for the garnishor. ¶ 16 In support of his argument for prejudgment interest, Whitney asserts that Utah Code section 15-1-1 and the case of Wasatch Mining Co. v. Crescent Mining Co., 7 Utah 8, 24 P. 586 (Utah 1890), entitle garnishors to prejudgment interest against garnishees who wrongfully withhold garnished funds. However, neither these authorities nor the policy underlying garnishment proceedings supports such a categorical rule. ¶ 17 Section 15-1-1 of the Utah Code provides that parties to a contract may agree to any rate of interest and that the absence of a contractually defined rate will result in imposition of the statutory rate of ten percent. Utah Code Ann. § 15-1-1 (2001). However, section 15-1-1 does not provide for the payment of interest outside of the contract setting, although Wasatch Mining does. Despite the age of the opinion, the principle announced in Wasatch Mining remains correct; interest on overdue debts is allowed, even in the absence of a contract or statute providing for it. 24 P. at 587; see also Bd. of Educ. v. Salt Lake County, 659 P.2d 1030, 1036 (Utah 1983) (citing Wasatch Mining, 24 P. at 587). Thus, even if the statute does not entitle Whitney to interest because the parties had no contract, Whitney asserts that Wasatch Mining requires an award of prejudgment interest. However, a garnishee's obligations under rule 64D of the Utah Rules of Civil Procedure are simply not the same as those incurred by the type of debtor contemplated by the rule of Wasatch Mining. Any recovery of prejudgment interest from Renee must, therefore, be premised upon some other authority. We have not yet had the opportunity to elucidate the principles governing the award of prejudgment interest to garnishors. We take this opportunity to do so. ¶ 18 Garnishment allows a judgment creditor to satisfy a judgment by reaching property owed to the judgment debtor by a third party. Utah R. Civ. P. 64D(a)(I), (iii); see also 38 C.J.S. Garnishment § 2 (1996). Through garnishment proceedings, the garnishee's debt to the judgment debtor becomes due to the judgment creditor. In this scenario, the garnishee is typically a neutral party to the garnishment proceedings, such as a bank, and merely holds the subject property until a court establishes whether the judgment creditor is entitled to it. However, sometimes a garnishee departs from a neutral position to assert its own claim to the property, which may be proper. See, e.g., Utah R. Civ. P. 64D(d)(ii)(4) (requiring garnishee's answers to interrogatories to identify any setoff claimed by the garnishee). Rule 64D of the Utah Rules of Civil Procedure establishes a process for resolving competing claims to the property made by the judgment creditor, judgment debtor, and garnishee. Id. 64D(h) to (i). Ordinarily, when a garnishee departs from a neutral position to assert its own competing claim to the property, its availment of rule 64D's process will not subject it to a claim for prejudgment interest. [2] Some other departures from neutrality, however, are not proper. ¶ 19 Although rule 64D is designed to facilitate collection and should not be used to place undue burdens or risks on garnishees, a trial court has the discretion to award prejudgment interest when a garnishee becomes unduly partisan, or otherwise obstructs the process. A garnishee's improper conduct, including its collusive support of either the judgment creditor or judgment debtor's position, may lead a trial court to assess prejudgment interest against it. Additionally, [i]f the garnishee ... interposes obstacles to plaintiff's recovery against him by filing dilatory [pleadings], or by making difficulties and himself producing unreasonable delay, he will be charged with interest. 38 C.J.S. Garnishment § 197 (1996) (citations omitted). Contrary to Faulkner's view, such an award of prejudgment interest does not represent a double recovery of interest. Instead of the judgment creditor obtaining interest on both the underlying judgment and the garnishment amount during the pendency of the garnishment proceedings, the award of prejudgment interest offsets the interest due on the underlying judgment. Thus, the interest awarded in the garnishment proceedings is retroactively applied to the underlying judgment to reduce the amount owed. In short, the award of prejudgment interest in garnishment matters may be proper and does not constitute double recovery. ¶ 20 In this case, the trial court denied Whitney's motion for the assessment of prejudgment interest against Renee, but the record is insufficient to evaluate its decision in light of the principles here outlined. The trial court's decision was made in telephone conference and there is no indication of what standard the trial court utilized when it denied the motion. Because there are circumstances where an assessment of prejudgment interest against a garnishee is appropriate and there is no evidence in the record suggesting that the trial court considered those circumstances, we reverse the denial of Whitney's motion and remand the case to the trial court for reconsideration. On reconsideration, the court should be mindful that, pursuant to its July 5, 2001 order, the contested funds were maintained in an interest-bearing bank account pending resolution of this matter. The accrued interest on that account was awarded to Whitney and therefore must be considered by the trial court in determining the propriety of allowing additional interest for that same period of time. We express no opinion about the outcome of the motion upon reconsideration, which is left to the sound discretion of the trial court.