McLeod Denies Non-Party LLC Bank Account Garnishment
Plaintiff Richard McLeod obtained a default judgment of $62,640 in the U.S. District Court for the Intermediate District of Georgia against defendants Robert Bruce, Mark Nichols and Clint Nichols. Seeking to be paid on his judgment, McLeod sends garnishment summonses to three banks for all accounts held by the defendants. McLeod also filed a motion to enter a charging order against Robert Bruce’s farming business, which was Robert Bruce Land & Cattle, LLC. Even without getting the billing order actually issued, McLeod attempted to debit the LLC’s bank account at CNB, prompting CNB to deposit $1,000 found in the LLC’s bank account at the court office. A subsequent drawdown from the same account yielded an additional $20,456 which was also deposited by CNB in the court office.
Bruce then individually filed a motion to have the garnishment summons set aside. The LLC itself filed a motion to intervene, and when granted, it requested a temporary restraining order and dismissal of garnishment proceedings against its accounts. The court decided these motions in the order I will discuss next.
The court first noted that the LLC need not be a party to indictment proceedings, as the LLC itself has “no right or direct interest” that is affected by the indictment. . However, here McLeod withdrew directly from the LLC’s bank account, which made the LLC’s intervention permissible since the company’s own assets had been taken and not those of Robert Bruce individually.
Then the court pointed out that there were serious procedural flaws in the issuance of the garnishment order, so serious in fact that the garnishment of the funds was ipso facto invalid and the funds should be returned to the LLC. However, despite issuing McLeod “a strong warning against any attempt to circumvent the law in his mission to collect the default judgment”, the court did not grant a temporary restraining order. preventing McLeod from attempting further collection actions against Robert Bruce’s interest in the LLC, at least not yet anyway.
What makes this case interesting is not what specifically happened in this case, or even the court’s decision, but rather it illustrates a very common mistake by creditors. This error is simply to assume that an LLC of which a debtor is a member (or even the only member) can have its assets executed as if it were the debtor. Too many times to count, I’ve seen the exact same thing happen: the creditor takes money from the debtor’s LLC bank account, the LLC goes to court and complains, and then the court has to unravel the mess. This usually happens with low cost judgments, like here, but I have also seen it happen from time to time in larger value cases.
In our laws, there is what is called Moral people, that is, one who is respected as his, hers, or his own person in the eyes of the law. A corporation can sue or be sued in its own name and have its own rights separate from all others. An individual is a corporation, but a corporation, LLC, limited partnership, and general partnership (in some states) are also corporations. In contrast, a trust is not a body corporate but rather a fiduciary relationship, so you cannot sue a trust in its own name, but rather must sue the person of the trustee in their capacity as trustee as trustee. .
Here, McLeod has a judgment against the legal person of Robert Bruce, but not against the legal person of the LLC. McLeod can therefore enforce his judgment against Robert Bruce individually, but cannot enforce his judgment against the LLC because it is his own legal entity that is not the debtor. Instead, McLeod’s “exclusive remedy” under Georgia LLC statute is to take a lien against Robert Bruce’s distributing interest in the LLC, which is the subject of the injunction proceeding. Accused.
This all may sound very basic, but (again) even otherwise skilled litigants sometimes mess it up.
McLeod vs. Bruce2022 WL 731517 (MDGa., 10 March 2022).