IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
April 22, 2010 Session
DEXTER RIDGE SHOPPING CENTER, LLC
v.
DAVID N. LITTLE, KAREN LITTLE AND LITTLE ANTIQUES, LLC, D/B/A
ANTIQUE MARKET OF CORDOVA
AND
AMERICAN NATIONAL PROPERTY & CASUALTY COMPANY
AND REID JONES D/B/A REID JONES INSURANCE AGENCY
An Appeal from the Chancery Court for Shelby County
No. CH-07-0172-3 Kenny W. Armstrong, Chancellor
_________________________________
No. W2009-01798-COA-R3-CV - Filed September 22, 2010
This appeal involves service of a garnishment. In the underlying action, the plaintiff
recovered a judgment against the defendant debtor. At the time, the judgment debtor was an
independent insurance agent located in Tennessee. In a discovery response, the debtor stated
that he worked for a Missouri insurance company, but he listed his Tennessee office as his
work address. The plaintiff issued a garnishment to the Missouri insurance company as the
garnishee, and had it served at the Tennessee address, where it was accepted by a front-desk
employee. The employee gave the garnishment to the debtor. Therefore, the garnishee did
not receive the garnishment and did not respond. The trial court issued a conditional
judgment and scheduled a hearing for the garnishee to appear and show cause why the
conditional judgment should not be made final. After the hearing, the trial court found that
the employees at the Tennessee insurance office were not agents of the garnishee Missouri
company, and that service of the garnishment was not effective. The trial court therefore
vacated the conditional judgment. The plaintiff-garnishor now appeals. We affirm and agree
with the trial court that service of the garnishment was not effective.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court is Affirmed
H OLLY M. K IRBY, J., delivered the opinion of the Court, in which A LAN E. H IGHERS, P.J.,
W.S., and J. S TEVEN S TAFFORD, J., joined.
Julie C. Bartholomew, Somerville, Tennessee, for the appellant, Dexter Ridge Shopping
Center, LLC
Don G. Owens, III, Memphis, Tennessee, for the appellees, American National Property and
Casualty Company and Reid Jones d/b/a Reid Jones Insurance Agency
OPINION
F ACTS AND P ROCEEDINGS B ELOW
Garnishment
Defendant David Little (“Debtor”) leased property from Plaintiff/Appellant Dexter Ridge
Shopping Center, LLC (“Garnishor”). Debtor operated an antique business on the property.1
In 2008, Garnishor filed a lawsuit against Debtor and his antique business for breach of the
lease agreement. In April 2008, Garnishor was awarded a judgment against the defendants
in the amount of $22,580.55 plus costs.2
Subsequently, to aid in execution of the judgment, Garnishor served interrogatories on
Debtor. One of the interrogatories asked Debtor to state his “occupation and identify your
employer or any business from which you receive any compensation for your services and
give the address for each, including street, number, city, state, zip code, and the name or title
of your position.” Debtor responded: “Insurance agent: ANPAC [American National
Property and Casualty Co.], 657 S. White Station Road, Memphis, Tennessee 38117.”
The White Station Road address listed in Debtor’s interrogatory response is not in fact the
address for ANPAC; it is actually the address for the Reid Jones Insurance Agency (also
called “the Agency”). Mr. Reid Jones is a general insurance agent for ANPAC, and Debtor
is a sub-agent for ANPAC, under Mr. Jones. Debtor rents office space from the Agency at
the White Station Road address. ANPAC is a corporation based in Springfield, Missouri.
The commission payments for Debtor and Mr. Jones are directly deposited into their
individual bank accounts from the Missouri ANPAC office.
On October 22, 2008, to execute on the judgment against Debtor, Garnishor issued a writ of
garnishment to ANPAC at the White Station Road address provided by Debtor. On October
1
The name of the business was Little Antiques, LLC, d/b/a Antique Market of Cordova.
2
Debtor’s wife was also named as a defendant in that lawsuit. She entered into an out-of-court settlement
with Garnishor before a final judgment was entered against Debtor and the antique business.
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28, 2008, counsel for Garnishor signed a Garnishor’s affidavit listing the garnishee as
“ANPAC 657 S. White Station Road Memphis, TN 38117.” On November 13, 2008, the
garnishment was served on ANPAC at that address. It was returned as being served upon
“Pamela Jones . . . Office Adm.” The person listed on the return, Pamela Jones (“Mrs.
Jones”), is the wife of Reid Jones; she is employed as the office administrator at the Reid
Jones Insurance Agency.
After Mrs. Jones received the garnishment, she telephoned Debtor to let him know. Mrs.
Jones also told Mr. Jones about the garnishment. Debtor came to the White Station Road
office, took the garnishment, and assured Mr. and Mrs. Jones that the garnishment was being
“taken care of.” Neither Mr. or Mrs. Jones took any further action on the garnishment, based
on Debtor’s assurance that he was handling the matter.
As of December 30, 2008, no answer to the writ of garnishment had been filed, and the time
for filing an answer had expired. On that date, Debtor filed in the trial court below a
“Motion to Set [Installment] Payments.”3 Under the applicable statute, the filing of a motion
to set payments operates as a stay on the execution of the garnishment, so long as the debtor
complies with the orders of the court. See T.C.A. § 26-2-216.
Scire Facias Proceedings
On January 13, 2009, before the Debtor’s motion to set payments had been heard, the trial
court entered a conditional judgment against ANPAC, as the garnishee, for the entire amount
of the garnishment. The order further issued a writ of scire facias,4 directing ANPAC to
appear at a hearing scheduled for February 18, 2009, to show cause why the conditional
judgment should not be made final. The order was served on ANPAC at the White Station
Road address.
On February 18, 2009, the trial court convened the scire facias hearing as scheduled, but the
only representative in attendance was counsel for Garnishor. The trial court judge had a
court employee telephone ANPAC at the White Station Road office, and she reached Reid
Jones. Mr. Jones called ANPAC at the Missouri office to inform them about the garnishment
and the scire facias hearing taking place that day. ANPAC then had local counsel meet Mr.
3
Debtor’s petition also requested that settlement proceeds received by Garnishor from Debtor’s wife be
applied toward the amount of the judgment. Issues involving the application of that settlement amount to
the judgment are not relevant to the issues in this appeal.
4
“Scire facias” is a Latin term meaning to “show cause.” BLACK ’S LAW DICTIONARY 1347 (7th ed. 1999).
In practice, it is “[a] writ requiring the person against whom it is issued to appear and show cause why some
matter of record should not be annulled or vacated . . . .” Id.
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Jones at the hearing before the trial court to represent ANPAC. After Mr. Jones and counsel
for ANPAC appeared, the trial court declined to enter a final judgment; it re-set the matter
for March 17, 2009.
On March 2, 2009, the trial court conducted a hearing on Debtor’s motion to set payments.
On April 6, 2009, the trial court entered an order requiring Debtor to begin making payments
of $300 per month on March 15, 2009.5
Meanwhile, on March 13, 2009, ANPAC filed a motion to set aside the conditional judgment
against it and to dismiss any application to make the judgment final, based on insufficiency
of service of process and lack of personal jurisdiction. Attached to the motion was the
affidavit of Stuart Paulson (“Paulson”), Vice-President/Deputy General Counsel and
Assistant Corporate Secretary for ANPAC. In his affidavit, Paulson stated that ANPAC is
a Missouri corporation licensed to do business in Tennessee, and that ANPAC’s registered
agent for service of process is either Billy Prestridge, 4515 Harding, Suite 310, Nashville,
Tennessee, 37205, or the Tennessee Commissioner of Insurance. Paulson averred that
ANPAC does not maintain offices in Tennessee, and that Pamela Jones was not authorized
to accept service of process on behalf of the company. Based on the information in Paulson’s
affidavit, ANPAC argued that it was not properly served with the garnishment, and that the
conditional judgment should be dismissed.
On March 17, 2009, the second scire facias hearing was held, at which counsel for Garnishor
and counsel for ANPAC were present. As of that date, ANPAC had not filed an answer to
the garnishment. ANPAC took the position that no answer was necessary because the
garnishment had not been properly served. The trial court nevertheless instructed ANPAC
and the Reid Jones Insurance Agency to each file an answer to the garnishment. The scire
facias hearing was again rescheduled for June 4, 2009.
On April 30, 2009, as instructed, the Reid Jones Insurance Agency filed an answer to the
garnishment. The answer stated that Pamela Jones is the office administrator for the Agency,
and she is not an agent for ANPAC. It also stated that Debtor was not an employee of the
Agency. The Agency’s answer asserted that “Reid Jones Insurance has made no payments
to [Debtor] for wages or any other compensation from the date of service of the Garnishment
. . . to date.”
5
The trial court also granted the Debtor’s motion to credit Debtor with the $15,000 received by Garnishor
from Debtor’s wife.
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On May 6, 2009, ANPAC filed its answer to the garnishment. In the answer, ANPAC set out
the amount of the funds paid to Debtor for each month from November 13, 2008, through
April 2009, a total of about $30,000.
Also on May 6, 2009, Garnishor filed a motion to reinstate the garnishment because Debtor
was not making the scheduled payments. On May 26, 2009, the trial court entered an order
setting a hearing date for the Garnishor’s motion to reinstate the garnishment. However, on
May 29, 2009, before the scheduled hearing, Debtor filed a petition in bankruptcy, which
stayed any further proceedings against Debtor.
On June 3, 2009, ANPAC filed a response to the order issuing a writ of scire facias, making
the same substantive arguments made in its motion to set aside the conditional judgment, in
particular that ANPAC was not properly served with the garnishment.
On the morning of the June 4, 2009 scire facias hearing, ANPAC filed a supplemental
response to the scire facias order, arguing that, in any event, it would have no obligation to
withhold payments from Debtor that were made after December 30, 2008, the date on which
Debtor filed his motion to set payments pursuant to Tennessee Code Annotated § 26-2-216.
ANPAC also filed a supplemental answer to the garnishment. Also on the same date, June
4, 2009, Reid Jones and the Agency filed a motion to quash the conditional judgment or, in
the alternative, to set aside the conditional judgment,6 arguing that their failure to answer the
garnishment before the conditional judgment was entered was due to mistake, inadvertence,
and/or excusable neglect. They also asserted that the garnishment was not properly served,
that it was stayed by the Debtor’s motion to set payments, and that the named garnishee was
ANPAC, not the Agency.
On June 4, 2009, the scire facias hearing was conducted as scheduled. Pamela Jones testified
that she is employed by the Reid Jones Insurance Agency. She said that, as the Agency’s
office administrator, she performs general duties such as answering the telephones, cleaning
the bathrooms, and managing office supplies. She also collects the mail, noting that others
collect the mail at times. Mrs. Jones was shown several items that had been mailed to the
Agency over the prior week; many of them were addressed in a way that included “ANPAC”
in the title, such as “ANPAC” or “Reid Jones Agency, American National.” This included
mail from the ANPAC Missouri office. Mrs. Jones identified a photograph of the brick
mailbox at the White Station Road address, which included an “American National” sign and
logo, as well as a sign advertising “Ca$hback from ANPAC,” with “Reid Jones — Multiple
Line General Agent” underneath. Mrs. Jones said that the Agency had been doing business
6
Though the motion is styled as one to quash the conditional order, it is apparent that it was intended to be
a motion to quash a subpoena duces tecum served on the Agency.
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with ANPAC for twenty-five years; the mailbox sign had been displayed for only five or six
years.
Mrs. Jones testified that she is paid directly by the Reid Jones Insurance Agency. In contrast,
the insurance agents who sell ANPAC policies receive their compensation directly from the
ANPAC Missouri office. She explained that Reid Jones, as the office manager, receives a
commission from all ANPAC insurance sales made in the office. However, the Agency did
not compensate its salespeople directly. Mrs. Jones said that she knew when she received
service of the garnishment that it had been issued to the wrong office, because her office did
not issue payments to the insurance agents. However, she did not act on this knowledge.
Mrs. Jones indicated that, after she received service of the garnishment, she told both Mr.
Jones and the Debtor about it. She said that Debtor took the garnishment and told her that
“he would give it to his attorney and they would take care of it.” She took no further action
on the garnishment because she assumed that Debtor had “taken care of” it. Mrs. Jones did
not recall getting a telephone call about the garnishment from counsel for Garnishor in
December 2008, and she did not remember receiving a copy of the conditional judgment at
the office.
Mr. Reid Jones also testified at the hearing. He has been affiliated with ANPAC for over
twenty-five years, with his office at the White Station Road location for about five years.
Mr. Jones testified that he is not an employee of ANPAC, but rather is an independent
contractor; he conducts business on behalf of ANPAC, and is compensated by ANPAC. Mr.
Jones said that he no longer personally sells insurance contracts, but instead he has sub-
agents, such as Debtor, who sell for him. Mr. Jones stated that he is authorized to sell
insurance for ANPAC, but he is not authorized to manage any business or accept service of
process for the company and has never held himself out as being authorized to accept service
of process on behalf of ANPAC.
Mr. Jones testified that Mrs. Jones told him about the garnishment when it was served, and
that he asked Debtor about it. Debtor assured Mr. Jones that the garnishment was in the
wrong amount, that some of it had already been paid, and that his attorney had taken care of
the matter. Therefore, Mr. Jones felt comfortable not taking any action on the garnishment.
He said that when he received a copy of the conditional judgment and writ of scire facias in
January 2009, he faxed the order directly to the ANPAC office in Missouri. Mr. Jones said
that he expected ANPAC’s counsel to attend the February 2008 hearing; ANPAC did not ask
him to appear.
Debtor testified at the hearing. He stated that Mrs. Jones called him after she received copies
of the garnishment in November 2008; he made copies of the garnishment and sent it to his
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attorney. Debtor acknowledged that he told Mr. and Mrs. Jones that he had taken care of the
garnishment by giving it to his attorney, and that the Reid Jones Insurance Agency need not
do anything more. Debtor did not discuss the garnishment with anyone at the ANPAC office
in Missouri. He called his attorney, who told him that he intended to have the garnishment
stayed. Debtor believed that his interrogatory answer, identifying the White Station address
as his place of employment, was accurate as answered. Debtor testified: “ANPAC is where
the compensation comes from,” explaining that ANPAC is in Missouri. He explained
further, “657 White Station Road is Re[i]d Jones Agency and I rent space in his office.”
ANPAC representative Stuart Paulson (“Paulson”) testified at the hearing. He explained that
ANPAC does not maintain an office at the White Station Road address, but has a contractual
relationship with the Reid Jones Insurance Agency. Paulson had never seen the ANPAC sign
on the mailbox of the Reid Jones Insurance Agency. He said that no one at the Reid Jones
Insurance Agency was an officer or managing agent of ANPAC, and no one at the Agency
was authorized to accept service of process for ANPAC. In fact, Paulson stated, there was
no person in Tennessee other than the designated agent for service of process who was either
expressly or impliedly authorized to accept service of process on behalf of ANPAC, and no
one had held themselves out to be so authorized.
Paulson testified that he was not aware of the November 2008 garnishment when it was
served; the first he had heard about it was when he received the telephone call from Reid
Jones in February 2009. At that point, Paulson obtained local counsel to respond to the
garnishment and conditional judgment, and from then on relied on counsel to handle the
matter.
Counsel for Garnishor testified as a witness regarding a telephone conversation she had with
Mrs. Jones in December 2008.7 During that conversation, she said, she advised Mrs. Jones
that she was the attorney for Garnishor and inquired as to whether an answer had been filed
to the garnishment. Mrs. Jones responded that no answer had been filed, and that she had
given the garnishment to Debtor. Counsel said that she informed Mrs. Jones that the
garnishment required an answer and advised that Mrs. Jones speak to her attorney. Counsel
for Garnishor testified that she did not ask anyone at the White Station Road address whether
they were officers of ANPAC before she had the garnishment issued.
7
An objection was initially made to the admission of the attorney’s testimony; that objection was later
withdrawn and the testimony was permitted.
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Trial Court’s Decision
At the conclusion of the hearing, the trial court vacated the conditional judgment, making an
oral finding that the garnishment was not properly served on ANPAC. The trial court found
that Mrs. Jones was not an employee or an agent of ANPAC, and that she was not authorized
to receive service of process for ANPAC. The trial court found no collusion between the
Reid Jones Insurance Agency and ANPAC to not honor the garnishment.
On July 28, 2009, the trial court entered a written order consistent with its oral ruling. The
order set forth the following findings:
(1) that there is no authority for entry of final judgment against a garnishee
whose untimely answer to the garnishment fails to reveal the debtor’s property,
debts, and effects under the control of any other person, although the garnishee
had such knowledge at the time of the garnishment;
(2) that entry of a final judgment against ANPAC/American National or
against Reid Jones Insurance Agency for an obligation owed by the judgment
debtor would be punitive and that the garnishment statute is not designed to be
punitive as to garnishees;
(3) that the proof does not support a finding of collusion on the part of
ANPAC and Reid Jones Insurance Agency to fail to honor the garnishment;
(4) that the garnishment which was issued to ANPAC was served upon Pamela
Jones, who was an employee of Reid Jones Insurance Agency, but was not an
employee or agent of ANPAC and was not authorized to accept service of
process on behalf of ANPAC and, and [sic] therefore, as to ANPAC/American
National, the Court finds that there is insufficient service of process, that the
Conditional Judgment should be vacated as to ANPAC/American National,
and that the application to make said conditional judgment final as to
ANPAC/American National should be denied;
(5) that the garnishment was issued to ANPAC, that Reid Jones Insurance
Agency is not ANPAC, is not an agent of ANPAC, and is not authorized to
receive service of process on behalf of ANPAC, and therefore, the Conditional
Judgment should be vacated as to Reid Jones Insurance Agency and the
application to make said Conditional Judgment final as to Reid Jones should
be denied.
Based on these findings, the trial court denied Garnishor’s application to make the
conditional judgment final and vacated the conditional judgment. From this order, Garnishor
now appeals.
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ISSUES ON A PPEAL AND S TANDARD OF R EVIEW
On appeal, Garnishor argues that the trial court erred in determining that the garnishment was
not properly served upon ANPAC by service upon the Reid Jones Insurance Agency through
Pamela Jones, office manager. In the alternative, it argues that the failure of either ANPAC
or its agent, Mr. Reid Jones, to comply with the garnishment statute amounted to gross
negligence, not simple negligence, and ANPAC and Reid Jones should be held liable for any
intentional conduct that caused Garnishor to lose garnished funds. Garnishor asks this Court
to remand the case to the trial court for a determination of damages.
Because this case was decided by the trial court without a jury, we review the trial court’s
findings of fact de novo on the record, presuming those facts to be correct unless the
evidence preponderates otherwise. Tenn. R. App. P. 13(d). The trial court’s conclusions of
law are to be reviewed de novo, with no such presumption of correctness. Reality Shop, Inc.
v. RR Westminster Holding, Inc., 7 S.W.3d 581, 596 (Tenn. Ct. App. 1999). Issues of
statutory construction are issues of law, which we review de novo. Leab v. S & H Mining
Co., 76 S.W.3d 344, 348 (Tenn. 2002).
A NALYSIS
As background:
Garnishment 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.
Meadows v. Meadows, No. 88-135-II, 1998 WL 116382, at *3 (Tenn. Ct. App. Nov. 2, 1988)
(citing Stonecipher v. Knoxville Savs. & Loan, 298 S.W.2d 785, 787 (Tenn. 1957)). Under
the applicable statutes, the attachment of a debtor’s property by garnishment is effected when
the garnishee is informed in writing that the debtor’s property in the possession of the
garnishee is being attached, and the garnishee must appear in court to answer questions
relating to the matter:
(a) Attachment by garnishment is effected by informing the debtor of the
defendant, or person holding the property of the defendant, that the property
in the defendant’s hands, or the hands of the person holding the property of the
defendant, is attached, and by leaving with the defendant or such other person
a written notice that the defendant or such other person is required to appear
at the return term of the attachment, or before a judge of the court of general
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sessions, at a time and place fixed, to answer such questions as may be asked
the defendant or such other person touching the property and effects of the
defendant.
T.C.A. § 29-7-103(a) (2000). “A copy of the notice served upon the garnishee should be
returned by the officer, with the attachment and levy, duly executed.” T.C.A. § 29-7-106
(2000). Under Tennessee Code Annotated § 26-2-216, if the garnishee is a corporation, the
person serving the garnishment must obtain a receipt acknowledging service of the summons
“signed by an officer, managing agent or designated agent for service of the employer
garnishee”:
(b)(1) It is the duty of the sheriff or other officer serving the garnishment
summons upon the employer garnishee to:
(A) Obtain a receipt acknowledging service of such summons
signed by the employer garnishee, if a person, or signed by an
officer, managing agent or designated agent for service of the
employer garnishee, if a corporation, company or business
entity; or
(B) Sign and return to the court a sworn statement to the effect
that the summons was duly served but such employer garnishee
or such officer, managing agent or designated agent of the
employer garnishee refused to sign a receipt acknowledging
service; and
(C) The garnishment summons served by the sheriff shall have
attached a notice to the employer that the employer is required
to withhold the garnishment amount from the employee’s wages,
that the employer is required to pay these moneys to the court,
and that the employer is liable for failure to withhold from the
garnishee’s wages and for failure to pay these moneys to the
court.
T.C.A. § 26-2-216 (Supp. 2009) (emphasis added).
If the garnishment is properly served, the garnishee must answer the garnishment, indicating
any assets the garnishee holds that belong to the debtor. “If the garnishee answers the
garnishment and admits a certain indebtedness to the judgment debtor, then a judgment
against the garnishee in the amount of the admitted debt may be entered.” Smith v. Smith,
165 S.W.3d 285, 293 (Tenn. Ct. App. 2004) (citing T.C.A. § 29-7-112). If there is any
dispute as to the amount of the garnishee’s indebtedness to the judgment debtor, or as to
whether there is any such indebtedness, the trial court may receive evidence on the
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indebtedness of the garnishee to the debtor. If, after proper service, the garnishee fails to
answer, there is a presumption that the garnishee is indebted to the debtor “to the full amount
of the plaintiff’s demand, and a conditional judgment shall be entered” against the garnishee.
T.C.A. § 29-7-114 (2000); see Meadows, 1988 WL 116382, at *3.
A conditional judgment has been described as a “peculiar remedy,” because it is similar to
a default judgment, but it does not establish any enforceable rights. See First Tenn. Bank
Nat’l Assn. v. Warner (In re Warner), 191 B.R. 705, 710 (Bankr. W.D. Tenn. 1996)
(applying Tennessee law in the context of a bankruptcy); see also Meadows, 1988 WL
116382, at *3-4. Rather, it is a threat of judgment, designed to induce the garnishee to
respond to the garnishment:
A conditional judgment is somewhat similar to a default judgment, but is not
identical. Both recognize a failure to respond to process. Both provide a
possible substitute for evidence. However, there are distinct differences. The
default judgment declares an admission of facts alleged in the complaint, but
leaves unliquidated damages for future proof. The conditional judgment is
what the name implies. It is a threat of final judgment if response should not
be forthcoming. It is a means of inducing a response and a threat of a penalty
for failure, but it is not a judgment establishing any rights.
The conditional judgment is a notification to the garnishee that if he does not
make timely answer, the Court will presume that he (the garnishee) is indebted
to the judgment in an amount sufficient to satisfy the judgment.
Meadows, 1988 WL 116382, at *4 (citing 49 C.J.S. Judgments § 73, p. 192); see also Smith,
165 S.W.3d at 293-94. The purpose of a conditional judgment is to give the garnishee
additional time or another opportunity to answer the garnishment. Meadows, 1988 WL
116382, at *4. As noted by the trial court below, the conditional judgment is not intended
to be punitive, but is intended to be an enforcement tool.
Upon the entry of a conditional judgment, “a scire facias shall issue to the garnishee . . . to
show cause why final judgment should not be entered against the garnishee.” T.C.A. § 29-7-
115 (2000); see In re Warner, 191 B.R. at 709. If, after proper service, the garnishee fails
to appear at the scire facias hearing, a final judgment for the debtor’s entire indebtedness
may be entered against the garnishee. See T.C.A. § 29-7-114. In sum, the garnishee is
“required to respond or risk total liability.” In re Warner, 191 B.R. at 709. “While these
procedures may yield harsh results as to the garnishee, the harshness is ameliorated by the
ease with which the garnishee may respond to the garnishment, including by a written
answer.” Id. (citing T.C.A. § 29-7-103(b)).
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Obviously, before these procedures apply, the garnishee must be given sufficient notice of
the garnishment. Id. In the absence of proper service, the plaintiff has no rights against the
garnishee:
Prior to proper service of the garnishment process on the garnishee, the
plaintiff does not have rights against the garnishee. The garnishee is bound
only from the time of the service of the writ. The fact that a someone knows
about an unsatisfied judgment or potential garnishment does not impose
liability. On the other hand, when service is effected, the garnishment renders
the garnishee liable for all property or money in the garnishee’s possession or
control owed to the principal defendant at the time of the service.
38 C.J.S. Garnishment § 214 (2010) (footnotes omitted). Due process requires that proper
notice be given before any final judgment is entered against a garnishee:
Throughout the entire garnishment process, due process demands that the
garnishee have proper notice of the efforts to obtain both conditional and final
judgments against the garnishee, and this Court should not enter a final
judgment against the garnishee until the Court is satisfied that the garnishee
has been properly served and has had an opportunity to be heard.
In re Warner, 191 B.R. at 711 (harmonizing Tennessee’s garnishment statutes with the
Bankruptcy Code).
In light of this legal framework, we consider the issues raised on appeal by Garnishor.
Waiver
At the outset, Garnishor argues that ANPAC waived any challenge to the service of the
garnishment. By appearing at the February 2008 hearing and failing to object to service at
that time, Garnishor contends, ANPAC made a voluntary general appearance, which waives
all defects in the garnishment summons or in its service. See Moody & Bigelow v. Alter,
Winston & Co., 59 Tenn. 142 (1873). ANPAC and the Reid Jones Insurance Agency
(collectively, “Appellees”) point out that there is no transcript of the February 18, 2008
hearing in the appellate record, so it cannot be determined whether either ANPAC or the
Reid Jones Insurance Agency made a general appearance at that hearing. They argue that the
first appearance by ANPAC on the record is ANPAC’s motion to set aside the conditional
judgment based on insufficiency of service of process filed on March 13, 2009. Therefore,
they argue, based on this record, this Court cannot conclude that a general appearance was
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made before any objection to service, or that any of ANPAC’s defenses were waived by such
an appearance.
We agree with ANPAC that the record is insufficient for this Court to find that it waived any
defenses to the garnishment by appearing at the February 2008 hearing. Moreover, the
appellate record does not reflect that Garnishor asserted waiver to the trial court during the
proceedings below. “It is axiomatic that parties will not be permitted to raise issues on
appeal that they did not first raise in the trial court.” Powell v. Cmty. Health Sys., Inc., 312
S.W.3d 496, 511 (Tenn. 2010). Therefore, we respectfully decline to adopt Garnishor’s
waiver argument because the record does not show a general appearance by ANPAC, and it
does not show that Garnishor raised the issue of waiver in the trial court below.
Reid Jones as “managing agent”
Garnishor next argues that the trial court erred in determining that Reid Jones8 was not a
“managing agent” of ANPAC under Tennessee Code Annotated § 26-2-216, which provides
that a garnishment on a corporation must be served upon “an officer, managing agent or
designated agent for service of the employer garnishee . . . .” T.C.A. § 26-2-216 (emphasis
added). It argues that the evidence preponderates in favor of a finding that Reid Jones was
a “managing agent” of ANPAC, relying on evidence that mail sent to the White Station Road
office was addressed to “ANPAC” or “American National,” that the insurance agents
working out of that address were ANPAC sales agents, and that the mailbox sign for the
office referred to “American National” and “ANPAC,” not to the “Reid Jones Insurance
Agency.” The Garnishor argues further that Pamela Jones, as an employee of Mr. Jones, was
a “sub-agent,” and that service of the garnishment on her constituted sufficient service under
the statute.
We disagree. The evidence in the trial court below established that Reid Jones is an
independent insurance agent selling and servicing ANPAC insurance policies out of his
White Station Road office. The fact that Reid Jones received mail as an ANPAC insurance
agent does not make him a “managing agent” for ANPAC’s corporate business. The
undisputed evidence showed that ANPAC is domiciled in Missouri, and that Debtor’s
commission payments were made from the Missouri office. Garnishor produced no evidence
that Mr. Jones “manages” anything for ANPAC or is otherwise authorized to accept service
of process on behalf of ANPAC. Moreover, as emphasized by ANPAC and Reid Jones on
appeal, service was not on Mr. Jones, it was on Mrs. Jones. Garnishor dubs Mrs. Jones a
8
The record indicates that Reid Jones Insurance Agency is a sole proprietorship, a “d/b/a” for Mr. Reid Jones.
Therefore, because the Agency is not a separate legal entity, we address only Mr. Reid Jones individually.
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“sub-agent” without any citation to authority for the assertion that service on an employee
of an alleged “managing agent” equates to service on the alleged managing agent.
Here, the evidence shows that service was made on a clerical employee of an independent
contractor for the Garnishee. This in no way amounts to service on “an officer, managing
agent or designated agent for service of process” of the Garnishee. T.C.A. § 26-2-216.
Apparent Authority
Garnishor next argues that service upon Pamela Jones at the Reid Jones Insurance Agency
must be deemed proper under the law of agency and apparent agency. It argues that whether
Reid Jones is an independent contractor is not determinative; rather, the primary focus in
determining whether a person or entity is an agent for an employer is the employer’s right
of control over the work done for the employer, whether or not that control was exercised.
Youngblood v. Wall, 815 S.W.2d 512, 517 (Tenn. Ct. App. 1991). Thus, even if Mr. Jones
is found to be an independent contractor, Garnishor argues, he can still be deemed an
apparent agent for ANPAC, and ANPAC can be bound by the acts of Mr. Jones performed
within the scope of his agency. See V.L. Nicholson Co. v. Transcon Inv. Fin. Ltd., 595
S.W.2d 474, 483 (Tenn. 1980).
Garnishor also claims that Reid Jones had the apparent authority of a managing agent for
ANPAC. Furthermore, Garnishor argues, when a sub-agent is employed to perform part of
the agent’s general duty, that sub-agent’s conduct is also binding upon the principal. Eve v.
Union Centr. Life Ins. Co., 167 S.W.2d 8, 12 (Tenn. Ct. App. 1942). Therefore, Garnishor
claims, the evidence shows that Reid Jones had either apparent or ostensible authority to
manage the affairs of ANPAC, and that Mrs. Jones was an apparent or ostensible sub-agent
of ANPAC who had authority to receive, handle, distribute, and remit to ANPAC business
documents and correspondence of ANPAC on a daily basis. Garnishor points to evidence that
the sign on the White Station Road address mailbox read “American National” and
“ANPAC,” and that the mail sent to that office was addressed to both “American National”
and “ANPAC.” Therefore, Garnishor contends, service of the garnishment on Mrs. Jones
constituted proper service on ANPAC.
Tennessee courts have defined apparent authority as “the power held by the putative agent
‘to affect a principal’s legal relations with third parties when a third party reasonably believes
the [putative agent] has authority to act on behalf of the principal and that belief is traceable
to the principal’s manifestations.’ ” Barbee v. Kindred Healthcare Operating, Inc., No.
W2007-00517-COA-R3-CV, 2008 WL 4615858, at *6 (Tenn. Ct. App. Oct. 20, 2008).
Apparent authority is created “where a person by words or conduct represents or permits it
to be represented that another person is his or her agent, when no actual agency exists.”
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Raspberry v. Campbell, No. W2006-01668-COA-R3-CV, 2007 WL 2471512, at *3 (Tenn.
Ct. App. Aug. 31, 2007) (quoting 2A C.J.S. Agency § 140 (2003)). In other words, “apparent
authority exists when a principal’s conduct clothes the agent with the appearance of
authority.” Id. (quoting Volunteer Concrete Walls, LLC v. Cmty. Trust & Banking Co., No.
E2006-00602-COA-R3-CV, 2006 WL 3497894, at *2 (Tenn. Ct. App. Dec. 4, 2006) (quoting
S. Ry. Co. v. Pickle, 197 S.W.2d 675, 677 (Tenn. 1917))). Apparent authority rests on
principles of estoppel. If a principal has cloaked an agent with apparent authority to act on
behalf of the principal, then the principal is estopped from denying liability for the acts of
the agent when the agent exercises that authority. Milliken Group, Inc. v. Hays Nissan,
Inc., 86 S.W.3d 564, 569 (Tenn. Ct. App. 2001). The principal will not be deemed
responsible for the acts of the putative agent where only the agent’s own conduct has created
the appearance of agency. Barbee, 2008 WL 4615858, at *7, *9.
Thus, the law on apparent and ostensible authority focuses on the principal’s actions in
creating the appearance that the putative agency has actual authority. In this case, Garnishor
points to no evidence indicating that ANPAC took actions or “permit[ted] it to be
represented” that Mr. Jones, Mrs. Jones, or any other person at the White Station Road
address had authority to manage ANPAC’s business or to accept service of process for
ANPAC. Raspberry, 2007 WL 2471512, at *3. As testified by ANPAC representative
Paulson, ANPAC has a specified designee for service of process in Tennessee, or the
corporation can be served through the Tennessee Commissioner of Insurance.
Even assuming arguendo that the inclusion of ANPAC on the sign on the mailbox at the Reid
Jones Insurance Agency could be seen as creating the appearance of agency to accept service
for ANPAC, ANPAC representative Paulson testified that he had never seen the sign before
the hearing, and there is no evidence that it was procured or approved by anyone at ANPAC.
Garnishor’s belief that the White Station Road address was correct was based on Debtor’s
interrogatory response, not on the sign or any representation of ANPAC or the Reid Jones
Insurance Agency. The fact that Reid Jones received mail addressed to ANPAC in Shelby
County does not indicate that he enjoyed any authority outside of his role as an insurance
agent who sells and services ANPAC policies in the county.
Most importantly, we emphasize again that the garnishment was served on Pamela Jones, not
Reid Jones. There is no evidence in the record that ANPAC engaged in conduct which
would “clothe [Mrs. Jones] with the appearance of authority” to accept service on behalf of
ANPAC. Volunteer Concrete, 2006 WL 3497894, at *2 (quoting S. Ry. Co., 197 S.W.2d
at 677). Therefore, we conclude that the evidence does not preponderate against the trial
court’s finding that neither Reid Jones nor Mrs. Jones had the apparent or ostensible authority
to accept service of the garnishment on behalf of ANPAC.
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Liability for Intentional Conduct and/or Gross Negligence
Finally, Garnishor argues that ANPAC, through the conduct of its agent, Reid Jones, as well
as Reid Jones individually, should be held liable for their intentional and/or grossly negligent
conduct in the manner in which the garnishment was handled. Garnishor cites to the
statutory scheme of the garnishment procedures and Tennessee Rule of Civil Procedure 69
in asserting that a garnishee must answer the garnishment within ten days of service, and that
the answer must include information regarding (1) whether the garnishee has or had in its
possession any of Debtor’s property, and (2) “[w]hether there are, to such garnishee’s
knowledge and belief, any and what property, debts, and effects in the possession or under
the control of any other, and what, person . . . .” T.C.A. § 26-2-204 (2000); see Tenn. R. Civ.
P. 69.05. Garnishor claims that the garnishment statutes impose strict liability on a garnishee
for failure to timely file an answer and to timely pay funds or property of the debtor into
court. Based on this premise, Garnishor argues that ANPAC, through the acts of Reid Jones,
as well as Reid Jones individually, acted intentionally and/or in a grossly negligent manner
in failing to timely answer the garnishment, failing to read the garnishment when it was
served, giving the garnishment to Debtor and not following up with Debtor to see that it was
“taken care of,” failing to file a timely and complete answer to the conditional judgment, and
failing to acknowledge property owned by Debtor in their possession and surrendering such
property in accordance with the garnishment laws. This dilatory conduct, Garnishor argues,
prejudiced Garnishor, because in the interim, Debtor filed a petition for bankruptcy, thus
precluding further recourse against Debtor and effectively preventing Garnishor from
proceeding with any further garnishment. Therefore, it argues, both ANPAC and Reid Jones
should be held liable to Garnishor to some extent, and the case should be remanded for a
determination of damages.9
Garnishor’s argument that ANPAC should be held liable because of the alleged misconduct
of Reid Jones presupposes that Reid Jones was ANPAC’s agent for the purpose of accepting
service of the garnishment. As discussed above, Mr. Jones was not ANPAC’s agent for this
purpose.
Moreover, the cases on which Garnishor relies involve garnishees who were properly served
with the garnishment. We have concluded that proper service of the garnishment on ANPAC
was not accomplished. The garnishor acquires no rights against the garnishee, here ANPAC,
until and unless the garnishment is properly served. “The garnishee is bound only from the
9
Garnishor claims that, if the conduct of ANPAC and Reid Jones is found to be intentional or grossly
negligent, they should be found liable for the full amount of Garnishor’s unpaid judgment. If their conduct
is found to be negligent, Garnishor claims, a final judgment should have been entered for the funds and
property held by ANPAC and Reid Jones, plus interest.
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time of the service of the writ.” 38 C.J.S. Garnishment § 214. Garnishor cites no authority
for holding a garnishee liable for any intentional or grossly negligent conduct in answering
the garnishment in the absence of proper service of the garnishment, and we have found
none. For these reasons, we reject Garnishor’s argument that ANPAC is liable for any
intentional/grossly negligent/negligently dilatory conduct in the manner in which Reid Jones
or his employees dealt with the garnishment.
As to Reid Jones individually, Garnishor argues that Debtor owned office furniture and other
furnishings at the Agency located at the White Station Road location, and that this property
was subject to garnishment. The Reid Jones Insurance Agency’s answer to the garnishment,
however, stated that it had no property belonging to Debtor. Therefore, Garnishor asserts,
the failure of the Reid Jones Insurance Agency’s answer “to include information known to
Reid Jones concerning the possession of the Debtor’s assets by ANPAC was a further
apparently intentional non-disclosure” that supports Garnishor’s claim for damages against
Mr. Reid Jones individually.
This might be a viable argument if either Reid Jones or the Agency were the named
garnishee. They were not. The garnishment in question was not issued to Mr. Reid Jones
or to the Reid Jones Insurance Agency; it was issued to ANPAC at the Agency’s address.
Garnishor has cited no authority that would hold a third party liable with respect to a
garnishment that was improvidently served on the third party, and we have found none.
Therefore, we find no basis for liability against Reid Jones or the Reid Jones Insurance
Agency resulting from its actions in answering the garnishment.
All other issues raised on appeal and not specifically addressed are pretermitted by our
holdings herein.
C ONCLUSION
The decision of the trial court is affirmed. Costs on appeal are to be taxed to Appellant
Dexter Ridge Shopping Center, LLC, and its surety, for which execution may issue, if
necessary.
_________________________________
HOLLY M. KIRBY, JUDGE
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