In Brooksby v. Nevada State Bank, 129 Nev. Adv. Op. 82 (Nov. 7, 2013), Nevada State Bank obtained a deficiency judgment against the guarantor of a commercial loan and then garnished funds contained in bank accounts jointly held by the judgment debtor and her nondebtor children. The nondebtor children challenged the garnishment by alleging that it was improper because all of the funds belonged to them rather than their mother, the judgment debtor. The lower court denied the nondebtor children’s claims and upheld the garnishment. The nondebtor children then appealed the decision to the Nevada Supreme Court.
The Nevada Supreme Court reversed, initially stating that: “[a] judgment creditor may garnish only a debtor’s funds that are held in a joint bank account, not the funds in the account owned solely by the nondebtor.” To reach this conclusion, it reasoned that “[o]nly property owned by the judgement debtor is subject to garnishment.” The Nevada Supreme Court then remanded the matter for an evidentiary hearing to determine who owned the funds in the garnished accounts. The Nevada Supreme Court noted, however, that “all funds in joint bank accounts are presumptively subject to garnishment by the judgment creditor of one of the account holders, but the account holders may rebut that presumption in an evidentiary hearing by showing that the nondebtor actually owns some or all of the funds.” This clearly places the burden of proof on the nondebtor account holder to demonstrate that it rather than the debtor owns the funds in the account.
Brooksby will undoubtedly affect judgment collections in Nevada. It is likely that there will be a substantial increase in the number of nondebtor account holders that will challenge garnishments on the basis that they own the garnished funds rather than the judgment debtor.