Cocco v. Merchants Mortgage Co.

JAMES S. GETTY, Judge, (retired), Specially Assigned. In this case of first impression, A.E. Coceo, M.D., appeals from the entry of summary judgment by the Circuit Court for Baltimore City which established that he owed the sum of $3,648.84 to Merchants Mortgage Company, Leroy E. Hoffberger and Morton J. Hollander. The facts of the case are not in dispute. The appellees are the holders of a partially unsatisfied judgment against Eugene J. Silverman, an attorney specializing in collection work.

Silverman represented Dr. Coceo in collecting overdue accounts. Beginning in March, 1984, by mutual agreement Silverman received payment for his services by deducting from the amount of money he collected his fifty percent contingent fee and forwarding the remainder to the Doctor. On October 23,1984, the appellees filed a writ of garnishment, tracking Md.Rule 2-645(e), directed to Dr. Coceo demanding that he admit or deny that he was either indebted to, or was in possession of, property belonging to Silver-man. Dr. Coceo answered the writ denying that he owed ⁷⁰ any debt to Silverman, or that he had possession of any property belonging to Silverman.

Silverman, meanwhile, filed a voluntary petition in the United States Bankruptcy Court for the District of Maryland on March 6, 1985. Neither he nor the trustee in bankruptcy participated in appellees’ garnishment action against Dr. Coceo. In replying to Dr. Cocco’s plea of Nulla Bona, the appellees alleged that they were entitled to recover from Dr. Coceo the sum of $3,645.84, representing the amount of legal fees received by Silverman, in the manner agreed to by Dr. Coceo, between the date of service of the writ and the date Silverman filed for bankruptcy. Both parties moved for summary judgment.

The trial judge, following an earlier ruling he issued in an identical garnishment action involving Silverman and Household Bank, granted appellees’ motion and entered judgment against Dr. Coceo for the amount claimed. This appeal followed. The trial judge based his decision upon the holding of the Missouri Court of Appeals in Buckner v. Western Life Insurance Co., 382 S.W.2d 12 (1964). The facts in that case establish that the garnishee, Western Life Insurance Company, authorized an agent collecting premiums to deduct his commission from each collection and to remit to the company the net remaining portion of the premium.

A judgment creditor of the agent summoned Western Life Insurance Company as garnishee to obtain the amounts due and owing the agent. The garnishee argued, as in the present case, that it had no property belonging to the debtor by reason of the established practice of allowing the agent to deduct his commission before remitting the balance to the company. The Missouri Court rejected this argument and held that where a policy holder paid a premium to the agent and received from him the Company’s authorized receipt therefor, it was in law and in fact a payment to the Company of a debt due the Company. Payment to the authorized agent of ⁷¹ a creditor by the debtor, the court reasoned, is equivalent to direct payment to the creditor.

The money collected by the agent, therefore, was in the Company’s possession, because the agent’s possession is possession by the principal. An opposite result was reached by the Supreme Court of Alabama in Escambia Chemical Corporation v. United Insurance Co. of America, 396 So.2d 66 (1981). The uncontroverted facts in the Alabama case are virtually indistinguishable from those in Buckner, supra. The insurance debit agent of the garnishee, United Insurance Company, collected premiums and remitted to his principal the net amount due the company after deducting his commissions.

The Alabama Court rejected the notion that the premiums were constructively under the control of United. The Court held: “There is no liability on the part of the garnishee to the defendant (agent) Kirkland, that would enable Kirkland to maintain an action at law against the garnishee and recover a judgment ... Kirkland’s commissions never came under the control of United so that they could be sued upon in debt or indebitatus assumpsit. It has long been the law in this state that only such debts as could be sued upon in debt or indebitatus assumpsit can be subject to garnishment.” While the precise question posed by this appeal has not been addressed by our appellate courts, several cases involving garnishment proceedings set forth the settled case law applicable to garnishment.

A writ of garnishment is designed to prevent the garnishee from prematurely disposing of any assets belonging to the judgment debtor that come into the garnishee’s hands at anytime prior to the resolution of the garnishment proceeding. Fico, Inc., v. Ghinger, 287 Md. 150 , 411 A.2d 430 (1980). The garnishee, furthermore, need not have actual possession of the assets in order to be obligated to preserve them, providing he has a right of possession and control of the assets. Glenn v. Boston & Sandwich Glass Co., 7