Court Opinion

ID: 9670335
Source: CourtListenerOpinion
Date Created: 2023-08-24 03:19:08.863064+00
Date Added: 2024-06-11T18:16:03.993035
License: Public Domain

Lanphier, J.,
dissenting.
Davis Erection sought to garnish county funds held by Eriksen Construction allegedly due to Jorgensen for work performed by Jorgensen and its subcontractor Davis Erection. Davis Erection had obtained a default judgment against Jorgensen after Jorgensen failed to pay it under its contract with Davis. Eriksen Construction resisted the garnishment on the basis that it did not owe Jorgensen anything due to Jorgensen’s failure to perform.
Garnishment is a legal, not an equitable, remedy. The factual findings of a trial court in a law action tried without a jury have the effect of a finding by a jury and, on appeal, will not be set aside unless clearly wrong. Otoe Cty. Nat. Bank v. Froelich, 234 Neb. 1, 448 N.W.2d 917 (1989). The district court’s finding that the garnishee, Eriksen Construction, was not presently indebted to the judgment debtor, Jorgensen, should be upheld.
“Garnishment in aid of execution of a judgment is proper in Nebraska only when the garnishee has property of and is indebted to the judgment debtor.” Darr v. Long, 210 Neb. 57, 61, 313 N.W.2d 215, 217-18 (1981). See Neb. Rev. Stat. § 25-1056 (Reissue 1989). A judgment creditor’s claim in garnishment can rise no higher than that of his debtor. Action Heating & Air Cond. v. Petersen, 229 Neb. 796, 429 N.W.2d 1 (1988); Dorr v. Long, supra; Certain-teed Products Corp. v. Carlisle, 156 Neb. 185, 55 N.W.2d 489 (1952). If the debtor has a right of action in garnishment against the garnishee, so does the creditor, but not otherwise. Action Heating & Air Cond. v. Petersen, supra; Dorr v. Long, supra. A proceeding in *312garnishment is effectively an action by a debtor in the plaintiff-creditor’s name against the garnishee. Darr v. Long, supra. The test in determining liability of the garnishee to the garnishor-plaintiff is whether or not the facts would support a recovery by the principal defendant against the garnishee. Action Heating & Air Cond. v. Petersen, supra.
In this case, the garnishee had no present indebtedness to the judgment creditor which was subject to garnishment. Since Jorgensen was in default of its contract, the amount that Eriksen Constmction owed, if any, to Jorgensen was indeterminable. The trial court could not conclude that Eriksen Constmction was indebted to Jorgensen, and therefore the county funds held by Eriksen were not subject to garnishment.
In Certain-teed Products Corp. v. Carlisle, supra, we addressed the ability of a creditor to garnish the amounts allegedly due a debtor-subcontractor from a general contractor. The general contractor had paid the subcontractor some $20,000 pursuant to the contract calling for a total payment of approximately $24,000. The unpaid $4,000 was recorded as a credit balance on the general contractor’s books. The general contractor had not paid the remaining $4,000 pursuant to a contract term stating that it was not liable to the subcontractor for payment in excess of the amount which the contractor received from the owner. The general contractor had received only $20,000 from the owner. We held that the $4,000 credit balance did not represent a present indebtedness which the general contractor owed the subcontractor despite the fact that it was recorded on the books. The liability of the garnishee-general contractor to the subcontractor was contingent on the collection of money from the owner. Therefore, the debt was not subject to garnishment.
In Action Heating & Air Cond. v. Petersen, supra, a subcontractor attempted to garnish the unpaid balance that the project owner owed the general contractor. In their answers to the garnishment interrogatories, the project owners admitted $9,600 was due under the terms of the contract. However, the owners denied that there was any debt owing to the general contractor because the contractor had failed to perform. The contract required the general contractor to pay for labor and *313material costs, which he had failed to do. In fact, it was one of the unpaid subcontractors who attempted to garnish the unpaid balance. We held that since the general contractor had failed to comply with the contract, the garnishee-owners were not indebted to the general contractor. Therefore, the subcontractor was not entitled to garnish the funds held by the project owners.
As of July 28, 1992, the date Eriksen Construction was served with the garnishment summons, any amount it owed Jorgensen was uncertain and contingent. The county had yet to accept the project, liquidated damages were possible, backhoe rental was due, back charges were possible, etc. With these facts, the district court correctly held that there was no present debt owing Jorgensen that was subject to garnishment.
In its application to determine liability of the garnishee, appellant Davis Erection argued that Eriksen Construction had no right of setoff. The majority opinion accepts Davis Erection’s characterization of Eriksen Construction’s defense to the garnishment as the assertion of a right of setoff. The majority then analyzes the matter in terms of whether Eriksen Construction was entitled to a setoff against Jorgensen and whether it properly exercised that right.
As the cases cited by the majority correctly indicate, a setoff is a claim filed by a defendant against the plaintiff when sued and in which he seeks to cancel the amount due from him with a debt that the plaintiff owes the defendant. See, Weller v. Putnam, 184 Neb. 692, 171 N.W.2d 767 (1969); American Gas Construction Co. v. Lisco, 122 Neb. 607, 241 N.W. 89 (1932); Bank of Crab Orchard v. Myers, 120 Neb. 84, 231 N.W. 513 (1930); Gurske v. Kelpin, 61 Neb. 517, 85 N.W. 557 (1901); Simpson v. Jennings, 15 Neb. 671, 19 N.W. 473 (1884).
Eriksen Construction did not attempt to setoff a claim or debt that Jorgensen owed to it in order to cancel out any amount it owed Jorgensen. Eriksen Construction’s answer to the garnishment interrogatories did not assert any right to setoff. Its answer, and all of its subsequent pleadings and arguments, simply assert that there was no debt owed due to Jorgensen’s failure to perform. There is no setoff. Setoff should not be in issue.
The majority concludes that Eriksen Construction failed to *314prove that as of the time it was served with the summons in garnishment that it had exercised any right of setoff it might have had against Jorgensen. In light of the holdings of Action Heating & Air Cond. and Certain-teed Products Corp., the findings of the district court should be affirmed on the basis that no debt was owed, rather than be reversed using setoff principles which are inapplicable.