Court Opinion

ID: 4541743
Source: CourtListenerOpinion
Date Created: 2020-06-16 17:12:29.389891+00
Date Added: 2024-06-11T12:46:46.958773
License: Public Domain

06/16/2020
               IN THE COURT OF APPEALS OF TENNESSEE
                          AT KNOXVILLE
                           Assigned on Briefs April 2, 2020

                 FIRST CENTURY BANK v. EDWARD DUYOS

                 Appeal from the Circuit Court for Claiborne County
                     No. 09-CV-285       John D. McAfee, Judge
                      ___________________________________

                           No. E2019-01441-COA-R3-CV
                       ___________________________________

This appeal arises from a writ of garnishment issued by a Tennessee court against a
Florida resident, garnishing wages he earned in Florida while working for an Ohio
corporation that is registered to do business in Tennessee. The writ of garnishment was
served on the employer’s registered agent for service of process in Tennessee, and the
employer answered the writ without objection. The debtor timely filed a motion to
terminate the garnishment, asserting that Florida law exempted his wages from
collection. Following a hearing, the trial court concluded, sua sponte, that it lacked
“jurisdiction” to issue a garnishment order because the debtor “lives in Florida and works
full time in Florida.” This appeal followed. We have determined that the debtor waived
the issue of personal jurisdiction by consenting to the court’s authority. We have also
determined that the trial court has the authority to issue the garnishment order against the
nonresident debtor’s employer with respect to a debt owed to the nonresident debtor
because the employer is authorized to do business in Tennessee and has an agent upon
whom process may be served. Therefore, we reverse the judgment of the trial court and
remand this matter with instructions for the trial court to determine, inter alia, whether
the debtor is entitled to an exemption under Florida or Tennessee law, and if so, to what
extent, and to enter judgment accordingly.

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

FRANK G. CLEMENT JR., P.J., M.S., delivered the opinion of the Court, in which JOHN W.
MCCLARTY and ARNOLD B. GOLDIN, JJ., joined.

Maybern Ellen Wall, Knoxville, Tennessee, for the appellant, First Century Bank.

James Lee Deaton, Tazewell, Tennessee, for the appellee, Edward Duyos.
                                             OPINION

       First Century Bank (“Creditor”) instituted this action in 2009 against Florida
resident Edward T. Duyos Jr. (“Debtor”), seeking a deficiency judgment after foreclosing
on Debtor’s real property in Union County, Tennessee. Debtor was duly served with
process, but because he took no action in response to the complaint, a Motion for Default
Judgment was filed on August 24, 2009. Debtor was noticed for the hearing on the
motion but failed to appear or file a response. As a consequence, the trial court entered a
default judgment against Debtor in the amount of $11,756.64 plus interest and costs in
September 2009. Debtor did not appeal the judgment and has never sought relief from the
judgment.

       Eight years later, in March 2017, Creditor served a writ of garnishment on the
registered agent for service of process in Tennessee for Debtor’s employer, Sherwin-
Williams Company (“Employer”). Employer answered the garnishment by providing
Debtor’s wage information and calculating the maximum earnings subject to
garnishment.1 According to Employer’s answer, Debtor’s gross pay was $2,768.94 for
the two-week period between March 19 and April 1, 2017, and the maximum amount of
Debtor’s wages that could be garnished under Tennessee law was $524.53.2

       Shortly after Employer filed its answer, Debtor filed a Motion to Terminate Wage
Garnishment. Debtor asserted that the entire amount of his wages was exempt from
garnishment under Florida Statute Annotated § 222.11 because he was a Florida resident
and provided more than half of the support for his children.3 Accordingly, Debtor
requested the court to terminate the garnishment and order any funds held to be returned

       1
          Aside from answering the garnishment, Employer did not participate in the trial court
proceedings, and it is not a party to this appeal.
       2
           Tennessee Code Annotated § 26-2-106(a) exempts 75% of a debtor’s weekly disposable
earnings from garnishment:

       (a) The maximum part of the aggregate disposable earnings of an individual for any
              workweek which is subjected to garnishment may not exceed:
           (1) Twenty-five percent (25%) of the disposable earnings for that week; or
       (2) The amount by which the disposable earnings for that week exceed thirty (30) times
               the federal minimum hourly wage at the time the earnings for any pay period
               become due and payable, whichever is less.
       3
         Florida Statutes Annotated § 222.11(2)(b) provides, “Disposable earnings of a head of a family,
which are greater than $750 a week, may not be attached or garnished unless such person has agreed
otherwise in writing.”

                                                 -2-
to Debtor. Significantly, Debtor did not challenge the authority of the Tennessee court to
rule on the merits of the garnishment proceedings or its jurisdiction over him.

       Debtor’s motion was not set for hearing until September 2018. When neither
Debtor nor his counsel appeared at the hearing, the court denied the motion and reinstated
the garnishment. Debtor promptly filed a Motion to Set Aside the court’s ruling, asserting
that his counsel never received notice of the hearing because it was sent to the wrong
address. No order was entered on the Motion to Set Aside, but Debtor proceeded to file a
second Motion to Terminate in April 2019.4

       Debtor’s second Motion to Terminate was heard on June 21, 2019. The trial court
granted the motion, finding it lacked jurisdiction:

       Upon hearing of Defendant’s Motion to Terminate Garnishment on
       21 June 2019[,] this Court finds the defendant lives in Florida and works
       full time in Florida. Therefore[,] this Court lacks jurisdiction to issue an
       order of garnishment. The garnishment is terminated[,] and all funds held
       by the garnishee shall be returned to the defendant.

       This appeal followed.
                                                 ISSUES

       Creditor raises several issues on appeal.5 Briefly summarized, Creditor contends
the trial court erred in terminating the garnishment based on a purported lack of

       4
          In April 2019, Creditor moved to extend its judgment under Tenn. R. Civ. P. 69.04. The trial
court granted the extension on June 21, 2019.
       5
            Creditor’s issues read as follows:

       I.     The trial court erred in terminating the garnishment of Defendant’s wages based on a
                 purported lack of jurisdiction over the Defendant.
              A. The trial court does not need personal jurisdiction over Defendant to enforce the
                 garnishment because a garnishment action is an ancillary, postjudgment
                 collection action against the Garnishee and not the debtor.
              B. Defendant lacks standing to challenge the trial court’s exercise of personal
                 jurisdiction over the Garnishee.
       II. Even if the trial court does require personal jurisdiction over Defendant to enforce the
           garnishment, which is denied, it has such jurisdiction.
              A. The personal jurisdiction established by the trial court in the original action
                 survives to the garnishment action.

                                                   -3-
jurisdiction over Debtor because a garnishment action is an ancillary, postjudgment
collection action against Employer and not Debtor. Creditor also contends the personal
jurisdiction established by the trial court in the original deficiency action survives to the
garnishment action and, if it did not, Debtor waived his right to challenge personal
jurisdiction by failing to properly raise it in the trial court

       Debtor’s only identified issue reads as follows, “The trial court was correct in
finding that Florida was the proper jurisdiction to litigate issues of protection from
garnishment.”

       We have determined the dispositive issue is whether the trial court erred in
terminating the garnishment of Debtor’s wages based on a purported lack of jurisdiction
to issue a garnishment order.

                                  STANDARD OF REVIEW

      A trial court’s “decision regarding the exercise of personal jurisdiction over a
defendant involves a question of law.” Gordon v. Greenview Hosp., Inc., 300 S.W.3d
635, 645 (Tenn. 2009). Accordingly, we review the court’s decision de novo with no
presumption of correctness. Id.

                                         ANALYSIS

                        I. PERSONAL JURISDICTION OVER DEBTOR

        Creditor contends the trial court erred in terminating the garnishment of Debtor’s
wages based on a purported lack of “jurisdiction.” It contends the court obtained personal
jurisdiction over Debtor in 2009, and he remains subject to the continuing jurisdiction of
the court to enforce the garnishment. Furthermore, it contends a garnishment action is an
ancillary, postjudgment collection action against Employer and not Debtor. Creditor also
contends Debtor waived his right to challenge personal jurisdiction by failing to properly
raise it in the trial court.

       Although he did not expressly raise the issue of personal jurisdiction in the trial
court, on appeal Debtor insists the trial court properly terminated the garnishment
because the court lacked jurisdiction and that his “pleadings were sufficient to establish a
challenge to the jurisdiction of a Tennessee Court to issue a valid order because they
sought protection under the jurisdiction of Florida laws.”

          B. Defendant waived his right to challenge personal jurisdiction by failing to
             properly raise it in the trial court.

                                            -4-
       The question of whether a court has jurisdiction over a party is distinct from the
question of what law the court should apply. When deciding whether it has jurisdiction
over a party, a court must “ascertain whether it is ‘fair and substantially just to both
parties to have the case tried in the state where the plaintiff has chosen to bring the
action.’” First Cmty. Bank, N.A. v. First Tennessee Bank, N.A., 489 S.W.3d 369, 383
(Tenn. 2015) (quoting Gordon, 300 S.W.3d at 646). In contrast, when deciding what law
to apply, a court must determine whether the conflicting laws are substantive or
procedural. See Boswell v. RFD–TV the Theater, LLC, 498 S.W.3d 550, 556 (Tenn. Ct.
App. 2016). Further, a defendant waives his right to contest the court’s jurisdiction over
him by recognizing “the proper pendency of the cause by making a motion that goes to
the merits or by filing an answer, without challenging personal jurisdiction.” Landers v.
Jones, 872 S.W.2d 674, 677 (Tenn. 1994).

       In this case, the trial court entered a deficiency judgment against Debtor in 2009
after he failed to file an answer. The events giving rise to the current litigation
commenced on March 22, 2017, when Creditor pursued collection on the judgment
through a writ of garnishment that was served on Employer’s registered agent in
Tennessee. Upon learning of the Tennessee garnishment proceedings, Debtor made an
appearance by filing his Motion to Terminate Garnishment. In his motion, Debtor neither
contested the jurisdiction of the court nor otherwise challenged the validity of the default
judgment. Instead, Debtor asserted that his wages were exempt from garnishment under a
Florida exemption statute:

       Comes the [Debtor], through counsel and moves this court to terminate the
       wage garnishment issued to [Employer]. In support of [his] motion[,]
       movant would show[:]

       1. D[ebtor] is currently a resident of Florida and has been his entire life.

       2. The wages being garnished are earned in Florida.

       3. [Debtor] provides more than half of the support for his four children,
          . . . . Therefore[, Debtor] qualifies as “head of household” under Florida
          Statutes 222.11[.]

       4. As “head of household” under Florida Statutes 222.11[,] [Debtor’s]
          wages earned in Florida are exempt from garnishment.

       Thus, Debtor’s motion did not make an argument as to whether it was “fair and
substantially just” to have the case tried in Tennessee. See First Cmty. Bank, N.A., 489
S.W.3d at 383. Rather, the motion asserted the application of Florida’s exemption law
over Tennessee’s exemption law, which had already been applied. Accordingly, we find
Debtor manifested an implied consent to submit to the jurisdiction of Tennessee courts—
even if he was contesting the application of Tennessee law. See id. (stating that a party

                                            -5-
may expressly or impliedly consent to jurisdiction by submitting to the authority of the
court).6

        Although the record does not expressly identify the type of jurisdiction the court
purportedly lacked to issue an order of garnishment,7 we have determined the trial court
had personal jurisdiction over Debtor. Therefore, if and to the extent the determination
that the trial court lacked jurisdiction to issue an order of garnishment was based on the
belief the court lacked personal jurisdiction over Debtor, that decision is reversed.

                      II. GARNISHING WAGES EARNED IN ANOTHER STATE

       Having resolved the question of whether the trial court had personal jurisdiction
over Debtor, we shall now focus on what we believe to be the dispositive issue in this
appeal. That issue is whether the trial court has jurisdiction and the authority to issue a
garnishment order against a nonresident debtor’s employer with respect to a debt the
employer owes the nonresident debtor when the employer is authorized to do business in
Tennessee and has an agent upon whom process may be served. Our Supreme Court
considered that exact issue in Burnett v. Simmons, 135 S.W.2d 452 (Tenn. 1940), and
answered it in the affirmative.8

       Although the contention was not raised in the trial court, Debtor contends in his
brief that the trial court lacked jurisdiction to garnish his wages from Employer in
Tennessee because Employer could not “maintain an action against [Debtor] in
Tennessee over wages he earned in another state.” This contention is principally based on

        6
          Because Debtor waived the issue of personal jurisdiction, we need not decide whether the
Tennessee court retained personal jurisdiction over Debtor as it pertained to the ancillary proceedings to
execute on the judgment via garnishment proceedings.
        7
         Its final order simply reads in pertinent part: “this Court finds the defendant lives in Florida and
works full time in Florida. Therefore[,] this Court lacks jurisdiction to issue an order of garnishment.”
        8
        Similar to the facts and issue presented here, the relevant facts and issue presented in Burnett
were summarized by the Court as follows:

        The question presented in this case is whether money due to a nonresident for services
        rendered out of the State to a foreign corporation can be subjected to attachment and
        garnishment in the hands of that corporation in Tennessee by a local creditor of the
        nonresident, when the foreign corporation has an office or agency in this State and is
        amenable to process here. The trial judge answered this question in the negative and . . .
        we think he erred.
135 S.W.2d at 453.

                                                   -6-
the holding in Williams v. Williams, 621 S.W.2d 567 (Tenn. Ct. App. 1981). In its reply
brief, however, Creditor correctly notes that Williams is distinguishable from the present
case because the facts in Williams are inapposite to the facts at bar, and the controlling
authority is set forth in Burnett, 135 S.W.2d at 453 and Davenport v. State Farm Mut.
Auto. Ins. Co., 756 S.W.2d 678 (Tenn. 1988).

       We begin our analysis of this issue by noting that “[a] garnishment proceeding to
enforce a judgment debt is an ancillary legal proceeding against the third party garnishee
and must be brought where jurisdiction can be obtained over the third party.” Millard v.
United States, 916 F.2d 1, 3 (Fed. Cir. 1990) (citing Harris v. Balk, 198 U.S. 215, 222
(1905)). Stated another way a “[g]arnishment is in the nature of an attachment of a debt
due the judgment debtor from the garnishee; and, service 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 Court.”9 Smith v. Smith, 165 S.W.3d 285,
293 (Tenn. Ct. App. 2004) (quoting Meadows v. Meadows, No. 88-135-II, 1988 WL
116382, at *3 (Tenn. Ct. App. Nov. 2, 1988)).

       Our Supreme Court explained in Burnett that “a foreign corporation may be
charged as garnishee in all cases where an original action might be maintained against it
for the recovery of the property or credit in respect to which the garnishment is served.”
135 S.W.2d at 453 (quoting Mobile & O.R. Co. v. Barnhill, 19 S.W. 21, 22 (Tenn.
1892)). Thus, “a foreign corporation is subject to garnishment in a state in which it is
authorized to do business, and in which it has an agent upon whom process may be
served, in respect of an indebtedness due to a nonresident, even if it did not arise out of
business in the state.” Id. (quoting 27 A.L.R. 1396, 1399); see also Williams, 621 S.W.2d
at 568, overruled on other grounds by Davenport, 756 S.W.2d 678. The Court reasoned
that the indebtedness due to the nonresident was no different than any other debt of a
general nature:

        Like other debts, of a general nature, [a debt for unpaid wages] would
        follow the [employer] . . . and might be sued for wherever the [employer]
        could be personally served with process. And if the [employer] could be
        sued in this State for the debt, it would be subject to have the debt reached,
        under the laws of this State, by a creditor of its creditor.

Burnett, 135 S.W.2d at 453 (quoting Holland v. Mobile & O. R. Co., 84 Tenn. 414, 417
(1886)); see also Dickson v. Simpson, 113 S.W.2d 1190, 1193 (Tenn. 1938) (jurisdiction

        9
           “Garnishment is a legal proceeding brought by a creditor (garnishor) of a person (the debtor)
against a third party (garnishee) to obtain property of the debtor in the hands of the third party to satisfy
the debt owed to the garnishor.” Millard, 916 F.2d at 2 (citing Harris, 198 U.S. at 226).

                                                   -7-
may be acquired over garnishee when “the debt so impounded [is] such that an action
could be maintained thereon in that jurisdiction by the nonresident defendant against his
debtor, the garnishee”).

       The foregoing notwithstanding, Debtor contends the trial court lacked personal
jurisdiction over him because Employer could not “maintain an action against [Debtor] in
Tennessee over wages he earned in another state.” This contention reveals that Debtor
misconstrues the requirements articulated in Barnett. Whether or not Employer could
maintain an action against Debtor in Tennessee is irrelevant. “[G]arnishment proceedings
serve to subrogate the [creditor] to rights of the defendant debtor against the garnishee.”
Williams, 621 S.W.2d at 568 (emphasis added). Thus, the relevant question is whether
Debtor could maintain an action against Employer in Tennessee for unpaid wages.

       As explained, a party may expressly or impliedly consent to a court’s jurisdiction.
See First Cmty. Bank, N.A., 489 S.W.3d at 383. It is undisputed that Employer could be
served with process in Tennessee because it maintained an agent for service of process in
Tennessee. Additionally, if Debtor were to file an action in Tennessee against Employer
for unpaid wages, Debtor would be consenting to the jurisdiction of Tennessee courts.

        Thus, Creditor correctly summarized the law as applied to the facts of this case in
its reply brief:

       The law is clear that “a writ of garnishment is simply a direction to the
       garnishee” rather than an entirely new action against the debtor in which
       personal jurisdiction must be established. [United States v.] Morton, 467
       U.S. [822,] 829 [(1984)]; see also McPherson v. Social Sec. Admin.,
       No. 1:09-0063, 2010 WL 1609975, at *2 (M.D. Tenn. Mar. 5, 2010)
       (noting same). The trial court undisputedly obtained personal jurisdiction
       over Garnishee based upon Garnishee’s contacts with Tennessee and its
       compliance with the writ of garnishment. Consequently, “due process does
       not require a renewal of [Debtor’s contacts] with this state” in order for
       Plaintiff to pursue the money it is owed. Levi Strauss [& Co. v. Crockett
       Motor Sales, Inc.], 739 S.W.2d [157,] 159 [(Ark. 1987)]. Personal
       jurisdiction over [Debtor] as to the garnishment is therefore inapposite . . . .

      Based on the foregoing, we find the trial court had jurisdiction over Employer and
Debtor for the purpose of garnishing Debtor’s wages.

       Having determined that the trial court has jurisdiction over the parties concerning
the issues raised in the trial court proceedings, we remand this matter to the trial court for
further proceedings. On remand, the trial court should determine, inter alia, whether and
to what extent Debtor is entitled to an exemption under Florida or Tennessee law.

                                            -8-
                                    IN CONCLUSION

       Based on the foregoing, we reverse the judgment of the trial court and remand this
matter for further proceedings consistent with this opinion. Costs of appeal are assessed
against Debtor, Edward Duyos.

                                                 ________________________________
                                                 FRANK G. CLEMENT JR., P.J., M.S.

                                          -9-