Firemans Fund Insurance v. Northwest Paving & Construction Co.

Citations: 77 Wash. App. 474; 891 P.2d 747Docket: No. 13650-7-III

Court: Court of Appeals of Washington; April 11, 1995; Washington; State Appellate Court

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Fireman’s Fund Insurance Company appeals a summary judgment that dismissed its garnishment of a joint bank account held by Kenneth and Geraldine Knapp, sole shareholders of Northwest Paving and Construction Company, Inc. Northwest Paving had a contract with the State of Washington for a highway construction project, supported by a performance bond from Fidelity and Deposit Company of Maryland, for which both the company and the Knapps indemnified Fidelity against losses. After Northwest Paving faced project difficulties leading to claims against the bond, Fidelity secured a temporary restraining order on asset disposal and a preliminary injunction requiring the sale of assets, with $250,000 deposited into a joint account with Fidelity.

Fireman’s Fund, having a judgment against Northwest Paving and the Knapps, garnished the account, asserting superior rights over the funds. Fidelity intervened, claiming a superior interest, which the trial court upheld, allowing garnishment only for the Knapps' residual interest after Fidelity's claims were satisfied and awarding attorney fees to Fidelity. Fireman’s Fund contends the court erred by determining Fidelity’s interest was superior, arguing the Knapps were the depositors under Washington's Financial Institution Individual Account Deposit Act, which defines "depositor" in two ways related to ownership and rights to payment. The statute presumes joint account funds belong to depositors proportionally to their deposits, and mere joint account status does not confer immediate ownership rights to non-depositing parties.

Funds in question are proceeds from the sale of the Knapps' property. Under RCW 30.22.090(2), the presumption of ownership can be challenged by the contract of deposit or clear evidence of contrary intent. The contract of deposit is represented by the bank’s account card signed by the Knapps and a Fidelity agent. The card includes an "Ownership of Account" provision, but it does not contradict the statutory presumption. The main issue is whether there is clear and convincing evidence that the Knapps intended to give Fidelity a superior ownership interest when the account was established.

Fireman’s Fund claims the account card is a fully integrated contract, invoking the parol evidence rule to exclude contrary evidence. However, a joint account involves two contracts: one with the bank and another between the depositors. The account card, typically created for the bank's use, may not represent the complete agreement among the depositors. Parol evidence can be admissible regarding their mutual agreement.

Evidence indicates both the Knapps and Northwest Paving needed to indemnify Fidelity against losses from a bond. A preliminary injunction allowed Northwest Paving to sell assets and deposit proceeds into a joint account with Fidelity, but it did not specify the Knapps’ assets. The planned sale of corporate assets failed due to liens, prompting the Knapps to sell their land, resulting in a $250,000 deposit into the account. Instruction documentation for the escrow agent specified that these proceeds were to be deposited in the Knapp/Fidelity joint account. Mrs. Knapp stated her belief that their interest in the account's funds was subordinate to Fidelity’s rights related to its bond obligations.

Overall, evidence supports the conclusion that the Knapps intended to grant Fidelity a superior interest in the funds at account creation. The trial court’s decision to quash the writ was upheld, and Fireman’s Fund's assertion regarding the Knapps’ withdrawal rights being subject to garnishment was deemed unnecessary to resolve. The writ restrained the bank from managing the Knapps' debts, and any right they held regarding account withdrawals was not within the bank's control, even if considered property. Fireman’s Fund's argument that the bank acted as a gatekeeper of that right was rejected.

The bank's right to the funds is distinct from the Knapps’ rights. The trial court's decision is upheld. Fireman’s Fund challenges the award of attorney fees to Fidelity, referencing RCW 6.27.230, which allows for attorney fees to the prevailing party when the answer is contested. This provision applies not only to the judgment debtor but also to intervening parties that prevail. Fidelity, as an intervenor, successfully countered the bank's response to the writ, protecting its interest in the account. Despite Fireman’s Fund's argument that the garnishment was not fully defeated, Fidelity's intervention was deemed successful, making it the prevailing party entitled to attorney fees at both the trial and appellate levels. The decision is affirmed, and Fidelity is awarded attorney fees for the appeal, with concurrence from Thompson, C.J. and Schultheis, J.