Goralsky v. Taylor

H. Brown, J. For the reasons which follow, we hold that the bank was under no obligation to disclose the existence of the trust account, and reverse the finding of contempt. I A judgment creditor may collect the amount of the judgment owed from the personal property of the debtor other than earnings through a proceeding commenced by the filing of an affidavit as provided by R.C. 2716.11. A written notice of garnishment is then delivered to the garnishee pursuant to R.C. 2716.13(B). The garnishee is required by R.C. 2716.21(B) to answer this notice within five days, disclosing “* * * the amount owed by him to the judgment debtor, whether due or not * * *,” and may be held in contempt of court pursuant to R.C. 2716.21(E) for failure to answer satisfactorily. Thus, in order to decide if the finding of contempt was proper, we must determine if the trust account funds were owed by Huntington to the Taylors. We begin with an examination of the legal relationships involved. [198] II In a trust, the trustee (and not the beneficiary) holds legal title to the trust corpus. The beneficiary’s interest — sometimes called the “equitable title” — consists of a right to the beneficial enjoyment of the corpus enforceable against the trustee. Ulmer v. Fulton (1935), 129 Ohio St. 323, 339, 2 O.O. 326, 332, 195 N.E. 557, 564; Douglas v. Hubbard (1951), 91 Ohio App. 200, 204, 48 O.O. 308, 310, 107 N.E. 2d 884, 886, appeal dismissed (1952), 157 Ohio St. 94, 47 O.O. 85, 104 N.E. 2d 182; 1 Bogert & Bogert, The Law of Trusts and Trustees (2 Ed. 1984) 4-6, Section 1; 1 Scott & Fratcher, The Law of Trusts (4 Ed. 1987) 48, Section 2.6. The relationship between a bank and its depositor is a debtor-creditor relationship. “* * * [MJoney deposited in a bank becomes the property of the bank and is available for use by the bank in its business. The depositor becomes a creditor of the bank in the amount of the deposit with the right to have this debt repaid in whole or in part on demand,” 1 Natter, Schlichting, Rice & Cooper, Banking Law (1991) 9-19, Section 9.05, subject to the terms of the depositary agreement between the bank and the depositor, Fourth & Central Trust Co. v. Rowe (1930), 122 Ohio St. 1, 170 N.E. 439, paragraph two of the syllabus; Gall v. Central Trust Co. (1937), 57 Ohio App. 168, 25 Ohio Law Abs. 550, 10 O.O. 303, 12 N.E. 2d 782. Thus, where the depositor is a judgment debtor and the bank is a garnishee, the property being garnished is, strictly speaking, not the funds themselves, but the debtor’s contractual right to receive them. It follows that, where the trust corpus is money deposited in a bank by the trustee, it is the trustee, and not the beneficiary, who is the bank’s creditor. The trustee owns the right to have the deposit repaid. Under ordinary circumstances, the beneficiary cannot directly collect the deposit from the bank.1 Accordingly, we hold that, under R.C. 2716.21(B), a garnishee bank is not required to disclose the existence of a trust account established for the benefit of the judgment debtor where the debtor is not a depositor or otherwise able to demand payment of the sum deposited. Ill Applying this analysis to the instant case, it becomes clear that Huntington was not required to list the trust account in its answer. The depositors of the trust account funds were Donna Caputo and John Bever, the trustees, and not the Taylors. It was the trustees who owned the right to have the deposit repaid, not the Taylors. Since Huntington was not obligated by R.C. 2716.21(B) to report the trust account in its answer, the trial court erred in finding Huntington in contempt.2 [199] The judgment of the court below is reversed and the finding of contempt against Huntington is vacated. Judgment reversed. Moyer, C.J., Holmes, Wright and Resnick, JJ., concur. Sweeney and Douglas, JJ., dissent. Footnotes [1] Under R.C. 1107.07(A), where the trustee of a so-called Totten trust is deceased, the beneficiary may collect the amount of the deposit directly from the bank. Also, where the bank has knowingly aided the trustee in a breach of the trust, the bank is directly liable to the beneficiary for the amount of the loss. Schofield v. Cleveland Trust Co. (1948), 149 Ohio St. 133, 36 O.O. 477, 78 N.E. 2d 167. The instant case does not fall into either of these exceptions. [2] The courts below were, understandably, concerned with a judgment creditor’s ability to obtain full satisfaction in situations where most of the judgment debtor’s assets are in the possession of trustees. While a judgment debtor’s equitable in [199] terest in a trust is not subject "to garnishment, R.C. 2333.01 permits a creditor to execute upon an equitable interest by filing a “creditor’s bill.” However, it is often difficult for a creditor to discover these interests through reasonable investigation. Accordingly, the General Assembly may wish to consider legislation to address this problem.