Garnishment

In troubled economic times it is necessary that construction industry people become familiar with garnishments, particularly as they relate to subcontractors. Otherwise, they may suffer unnecessary losses.

Garnishment is a legal procedure used to collect a court judgment from those who owe money or have property belonging to the judgment debtor (the guy who lost the case). To collect, the judgment creditor (the victor) may serve a writ of garnishment on anyone who he believes might owe his debtor money or who may have property belonging to his debtor.

The writ of garnishment itself contains a number of interrogatories (questions) which are required to be answered by the person served (the garnishee) within a fixed period of time. The answers must then be filed with the court. Failure to file can result in a default judgment being entered against an otherwise innocent garnishee.

Rule #1, therefore, is answer the garnishment on time. That is: answer the garnishment on time!

Naturally, the answer must be truthful and sworn to under oath. It must speak as of the date and time when the garnishment papers were served on the garnishee.

Thus, if the garnishee will owe something to the judgment debtor sometime later than the date upon which he was served, he should answer appropriately-that he owed nothing at the time the garnishment papers were served.

If the garnishee’s answer states that he owes something to the judgment debtor, his answer to that effect will usually result in a later court order requiring him to pay that money over to the judgment creditor.

Rule #2: it is essential that the amount disclosed as being owed the judgment debtor be withheld and not paid to him.

Construction-related garnishments may have special problems, particularly for general contractors. If, for instance, a general contractor receives garnishment papers pertaining to one of his subcontractors who is the judgment debtor, careful thought and attention is required.

Although the general contractor may owe that subcontractor a progress payment at the time the garnishment papers are served, if the subcontractor has not yet fully and satisfactorily completed his work or paid for his materials, labor or subcontract work, problems might arise if the general contractor garnishee simply answers acknowledging that the amount of the progress payment is due the subcontractor-judgment debtor.

The problem lies with the possibility that the subcontractor, probably already under financial strain as evidenced by the garnishment itself, may not complete or may not pay for all of his labor, materials or the like used on his work. If that happens, the general contractor could be stuck – either by virtue of mechanic’s liens or bond claims, or perhaps both.

Accordingly, prudent general contractors, when served with garnishment papers relating to a subcontractor, should:

…bear in mind that any retainages withheld from the subcontractor’s progress payments are not due and payable until the subcontractor has fully completed his work and paid for all of the labor, material, services and other lienable items and perhaps also not until the general contractor has been fully paid by the owner (all naturally depending upon the particular subcontract provisions involved),

…answer the garnishment stating, if such be the case, that the subcontractor has not fully completed its work and that, accordingly, the general contractor may have claims itself against any monies due the subcontractor if it defaults,

…answer to only the circumstances existing at the time the garnishment papers were served and not what may later become due the subcontractor. Accordingly, if there was any reason why payment would not have been made to the subcontractor right at the time of service, the answer should so state,

…remember, if money was due at the time of service, don’t pay the subcontractor and do expect to get a court order directing you to pay that money over to the judgment creditor, instead,

…file the answers to the garnishment interrogatories in the proper court before expiration of the deadline,

…get competent legal assistance if any questions remain.

Careful attention to garnishments could very well save substantial difficulty or loss. Paying attention is cheaper than paying twice!