CorePointe Capital Finance, LLC, as assignee of Chrysler Financial Services Americas, LLC, as successor in interest to DaimlerChrysler Services North America, LLC and DaimlerChrysler Financial Services Americas, LLC, creditor, Respondent, vs. Dennis E. Hecker, debtor, Respondent, Fourth Judicial District Court Administrator, garnishee, Respondent, Tamitha D. Hecker, intervenor, Appellant.
This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2010).
STATE OF MINNESOTA
IN COURT OF APPEALS
CorePointe Capital Finance, LLC, as assignee of
Chrysler Financial Services Americas, LLC,
as successor in interest to DaimlerChrysler Services
North America, LLC and DaimlerChrysler
Financial Services Americas, LLC, creditor,
Dennis E. Hecker, debtor,
Fourth Judicial District Court Administrator, garnishee,
Tamitha D. Hecker, intervenor,
Filed February 6, 2012
Hennepin County District Court
File No. 27-CV-09-2152
Nicholas N. Nierengarten, Stephen F. Grinnell, Gray Plant Mooty Mooty & Bennett,
P.A., Minneapolis, Minnesota (for respondent CorePoint Capital Finance, LLC)
Edward F. Rooney, Minneapolis, Minnesota (for appellant)
Considered and decided by Halbrooks, Presiding Judge; Peterson, Judge; and
Appellant Tamitha Hecker challenges the district court’s grant of respondent
Chrysler Financial Services Americas, LLC’s motion, directing respondent Fourth
Judicial District Court Administrator to release funds to Chrysler that respondent Dennis
Hecker was ordered to place with the district court administrator in order to purge a
contempt charge. Appellant argues that the funds held by the district court administrator
are not susceptible to garnishment or attachment by Chrysler in its capacity as Dennis
Hecker’s judgment creditor because they are held in custodia legis or, in the alternative,
because Dennis Hecker never had possession of the funds. We conclude that the funds
are garnishable because the principle of in custodia legis is not applicable and because
Dennis Hecker maintained constructive possession of the funds. We affirm.
The facts leading to this appeal arose in the context of two separate but related
district court proceedings: a claim by Chrysler against Dennis Hecker and the marital
dissolution between Tamitha Hecker and Dennis Hecker.
Chrysler Financial Services v. Dennis Hecker
Between 2002 and 2007, Dennis Hecker obtained loans totaling approximately
$477 million from Chrysler. When Dennis Hecker defaulted, Chrysler accelerated the
loans and demanded full and immediate repayment. The district court found that Dennis
Hecker owed Chrysler $476,925,874.60, and entered judgment for Chrysler in April
Dennis Hecker filed for bankruptcy on June 4, 2009.
After making partial
payments to Chrysler, Dennis Hecker owed Chrysler $239,852,226.72 as of June 1, 2010.
Tamitha Hecker v. Dennis Hecker
Tamitha Hecker initiated marriage-dissolution proceedings against Dennis Hecker
in April 2008.
During the contentious dissolution, Dennis Hecker disclosed two
retirement accounts held in his name that included a Pershing 401(k) worth $125,155.74
and a UBS IRA worth an estimated $96,000.
Because the funds were retirement
accounts, they were by statute beyond the reach of creditors. And as marital property,
these accounts were subject to the temporary restraining provisions of Minn. Stat.
§ 518.091 (2010), preventing either party from disposing of marital assets. Nevertheless,
in September 2009, Dennis Hecker liquidated and spent the proceeds from the Pershing
account. When this conduct was discovered, the family court found Dennis Hecker to be
in constructive civil contempt of court and ordered him to restore the amount that he had
liquidated within 30 days. The family court also ordered Dennis Hecker to transfer the
UBS IRA account in trust to Tamitha Hecker’s attorney, stating that the family court was
“not willing to allow that account to continue to be controlled by [Dennis] Hecker.”
In February 2010, a friend of Dennis Hecker sent a wire transfer of $125,000 to
Dennis Hecker’s attorney to be used to purge the contempt charge. Dennis Hecker was
unable to replace the money in the Pershing 401(k) account, because the account was
closed when he removed the funds from it. By an order dated February 26, 2010, the
family court ordered Dennis Hecker to deposit the $125,155.74 with the district court
administrator. Dennis Hecker’s attorney wrote a check for the required amount, payable
to Hennepin County district court. The family court subsequently authorized Dennis
Hecker to withdraw $30,000 and Tamitha Hecker to withdraw $22,943.30 for their
respective attorney fees, leaving a balance of $72,212.44 in the account held by the
district court administrator.
Chrysler garnishes the account
On May 3, 2010, Chrysler served the district court administrator with a
garnishment summons for the remaining $72,212.44, providing notice to Dennis Hecker.
On May 11, 2010, Tamitha Hecker and Dennis Hecker entered into a handwritten
agreement concerning the division of their assets. Under the terms of the agreement,
Tamitha Hecker (who was unaware of Chrysler’s garnishment summons) was to receive
the assets remaining in the account held by the district court administrator and Dennis
Hecker was to receive approximately $96,000 from the UBS IRA.
When Tamitha Hecker learned that Chrysler was seeking to garnish the
$72,212.44 held by the district court administrator, she moved to rescind the May 11
dissolution stipulation. She argued that it was unfair because Dennis Hecker had not
informed her of Chrysler’s garnishment while Dennis Hecker’s funds remained exempt
from his creditors. The family court denied Tamitha Hecker’s request to rescind the May
11 stipulation, but modified the dissolution agreement as follows:
[Tamitha Hecker] is awarded the remaining funds on
deposit with the Clerk of Court (approx. $72,500.00).
[Dennis Hecker] is awarded the UBS retirement
account (est. value of $96,000.00).
$96,000.00, [Dennis Hecker] has already been awarded
$15,000.00 pursuant to this Court’s order dated May
12, 2010. The approximate balance of said account,
therefore, is in the sum of approximately $81,000.00.
Of the present balance in said UBS IRA Account No.
. . ., [Dennis Hecker] is hereby awarded and is hereby
allowed to withdraw one-half of the balance and by
way of presentation of this order, the custodian of said
funds shall release one-half of the current balance of
said account to [Dennis Hecker] or his assigns.
The remaining balance in the UBS IRA Account No.
. . . is hereby frozen pending a final disposition of the
funds of approximately $72,500.00 presently on
deposit with the Hennepin County District Court
The above-referenced settlement is contingent upon
receipt of an affidavit of the anonymous donor
confirming he/she gave [Dennis Hecker] $125,000.00
for the purpose of replenishing the Pershing 401(k),
that the transaction was a loan/gift, that the funds were
his/hers and his/hers alone to give/loan and that he/she
has received nothing of monetary value from [Dennis
Hecker] during the past 36 months which would make
the funds subject to a claim by the bankruptcy trustee,
and, further, contingent upon [Dennis Hecker]
confirming that payment to the Clerk of Court was
funded with the monies he received from the
The family court referred the resolution of Chrysler’s garnishment claim to the
remaining $72,212.44 to the district court that issued Chrysler’s underlying $477 million
judgment. The district court granted Tamitha Hecker’s request to intervene.
Tamitha Hecker argued that the funds are marital property and that her rights are
superior to Chrysler under the dissolution stipulation. She also argued that because the
funds are held in custodia legis by the district court administrator, Chrysler is prevented
from garnishing them. Dennis Hecker asserted similar arguments, in addition to his
contention that he never had possession of the $125,000 that he received from his friend.
The district court determined that the funds held by the district court administrator
are nonmarital property because the gift or loan was not received during the existence of
the marriage. That determination is not challenged on appeal. The district court also
rejected Tamitha Hecker’s in custodia legis argument, finding that the funds were
transferred to allow Dennis Hecker to purge his contempt, not to protect them from
creditors. The district court also rejected the argument that Dennis Hecker never had
possession of the funds. The district court ordered the district court administrator to
disburse the sum of $72,212.44, plus accrued interest, to Chrysler. Tamitha Hecker now
Tamitha Hecker contends that the $72,212.44 held by the district court
administrator is not subject to garnishment by Chrysler because the money is held in
custodia legis. We review the district court’s application of the law de novo. In re
Collier, 726 N.W.2d 799, 803 (Minn. 2007). The phrase in custodia legis is translated as
“in the custody of the law.” In re Telesports Prods., Inc., 476 N.W.2d 798, 800 (Minn.
App. 1991). While Minnesota case law does not define the term explicitly, “[t]he phrase
is traditionally used in reference to property taken into the court’s charge during pending
litigation.” Black’s Law Dictionary 836 (9th ed. 2009). “Creditors have no right to
interfere with property held [in] custodia legis or acquire liens upon it which if enforced
would affect the rights of those acquiring title under the receiver’s distribution with the
authority of the court.” Telesports, 476 N.W.2d at 800; see also Wheaton v. Spooner, 52
Minn. 417, 422, 54 N.W. 372, 373 (1893) (holding that when property is in custodia
legis, a judgment cannot be enforced against the receiver “in any such manner as to
interfere with the possession of the receiver or the discharge of his duties as such”).
In Minnesota, the doctrine was developed in the context of a district court’s
appointment of a receiver to act for the court by taking possession of and preserving
property during the pendency of bankruptcy cases, business dissolutions, and sheriff’s
sales. See Barnes v. Verry, 154 Minn. 252, 257, 191 N.W. 589, 591 (1923) (sheriff’s
sale); Manter v. Petrie, 123 Minn. 333, 336, 143 N.W. 907, 908 (1913) (sheriff seizing
property); Gray v. Merriman, 56 Minn. 171, 176, 57 N.W. 463, 464 (1894) (dissolution
of a business); Watkins v. Minn. Thresher Mfg. Co., 41 Minn. 150, 151, 42 N.W. 862,
863 (1889) (selling property of insolvent corporation). Court-appointed receivers do not
simply hold the property; they exercise control and dominion over it. Compare Sibley
Cnty. Bank of Henderson v. Crescent Milling Co., 161 Minn. 360, 361-63, 201 N.W. 618,
619 (1925) (explaining that “[s]ince it is not practicable for the court to do the physical
work in connection with taking possession and preserving the property, the court appoints
the receiver to act,” which prevents creditors from garnishing that property), with Marine
Nat’l Bank of Duluth v. Whiteman Paper Mills, 49 Minn. 133, 138-39, 51 N.W. 665, 665
(1892) (reasoning that when a party gives the court property to hold that is not pursuant
to a court order, the money is subject to garnishment).
The rule that property held in custodia legis cannot be garnished by creditors
furthers the policy of encouraging the efficient administration of assets. A receiver acts
as the “right arm of the court” for the purpose of “administering the property.” Henning
v. Raymond, 35 Minn. 303, 305, 29 N.W. 132, 133 (1886). The prohibition against
creditors garnishing or taking a lien on the property ensures the most expeditious disposal
of property—putting it back into the market and in the control of private individuals as
opposed to it remaining in the possession of the court. That policy is not served by
application of the doctrine here.
Based on the administrator’s level of control or dominion over the money, the role
of the district court administrator in this case can be distinguished from that of a receiver
who holds property in custodia legis. While it is not necessary for us to adopt a brightline rule concerning the degree of control or dominion necessary to trigger application of
the doctrine, the facts in this case demonstrate that neither the type nor the degree of
control exercised by the district court administrator is sufficient to prevent garnishment.
The family court’s order directing the transfer of the funds to the district court
administrator did not limit the rights of creditors, establish a distribution priority for
disbursing the funds, establish the exclusive jurisdiction of the court over the funds, or
otherwise state that distribution could occur upon satisfaction of the statutory criteria
relevant to funds held in custodia legis and set forth in Minn. Stat. §§ 302A.751-.755
(2010). The district court administrator’s function is simply to hold the funds and to
distribute them as directed by the district court. There is no suggestion, and Tamitha
Hecker does not argue, that the funds were deposited into the district court to protect
them from creditors; rather, the placement was a mechanism for Dennis Hecker to purge
his contempt offense and to prevent him from further dissipating the funds. This differs
fundamentally from a receiver who holds funds in custodia legis and must make business
decisions involving the liquidation, disposal, or investment of property or money.
Moreover, the family court expressly permitted Chrysler access to the sealed
family court file in this contentious divorce so that Chrysler could evaluate the facts
surrounding the transfer to the district court administrator and determine the viability of a
garnishment action. And once the garnishment and levy papers were served, the family
court approved an alternative property distribution for Tamitha Hecker in the event that
the lien and levy were enforced. These actions are entirely inconsistent with an intent to
shield the funds from garnishment.
While Tamitha Hecker and Dennis Hecker were the only parties with a legitimate
interest in the funds before their liquidation, when the funds were in the Pershing account
(and therefore statutorily exempt from creditors), Chrysler gained a legitimate interest
when the marital funds were dissipated by Dennis Hecker and replaced by the nonmarital
cash gift to him. There is no basis in law or the record before us to conclude that the
contested funds are being held in custodia legis. Accordingly, that doctrine does not
operate here to prevent Chrysler from garnishing the funds.
Tamitha Hecker contends that Dennis Hecker never possessed the funds under
Minn. Stat. § 571.73, subd. 3(2) (2010), and that they are therefore not susceptible to
garnishment by Chrysler. Whether Chrysler meets the statutory criteria to garnish the
funds presents a question of law, which we review de novo. Savig v. First Nat’l Bank of
Omaha, 781 N.W.2d 335, 338 (Minn. 2010). Minnesota statute provides that “all other
nonexempt indebtedness, money, or other property due or belonging to the debtor and
owing by the garnishee or in the possession or under the control of the garnishee at the
time of service of the garnishment summons, whether or not the same has become
payable,” is property that is attachable by garnishment. Minn. Stat. § 571.73, subd. 3(2).
The district court determined that Dennis Hecker possessed the money held by the
court administrator, stating:
Before liquidation by [Dennis] Hecker, the Pershing
401(k) was marital property, and was not subject to
attachment by garnishment. The cash received by [Dennis]
Hecker, upon liquidation, lost its exempt status but was
dissipated prior to any attachment by garnishment. The
$125,000 gift or loan made to [Dennis] Hecker became
[Dennis] Hecker’s unencumbered property which was then
transferred to the Court Administrator to purge his contempt.
Because the statute does not define “possession,” we examine the term’s meaning
under Minnesota property law.
“When a property owner intentionally gives direct
physical control of the property to another party for the purpose of having him do some
act for the owner, the owner retains constructive possession of the property.” Fin Ag,
Inc. v. Hufnagle, Inc., 700 N.W.2d 510, 517 (Minn. App. 2005), aff’d, 720 N.W.2d 579
(Minn. 2006). “And the party to whom bare physical control of the property has been
entrusted for the owner’s purpose does not have possession but only custody.” Id.
(quotation omitted). While “[a]ctual possession is possession in its ordinary or original
sense, . . . [c]onstructive possession . . . exists where the owner has intentionally given
the actual possession—namely, the direct physical control—of the property to another for
the purpose of having him do some act for the owner to or with the property.” Koecher v.
Koecher, 374 N.W.2d 542, 546 (Minn. App. 1985) (quotations omitted), review denied
(Minn. Nov. 26, 1985).
Here, Dennis Hecker maintained constructive possession of the $125,155.74 that
he used to purge his contempt. Because the district court administrator holds the funds
on behalf of Dennis Hecker, it only has custody. See Hufnagle, 700 N.W.2d at 517.
Tamitha Hecker also argues that Dennis Hecker’s ownership over the $125,155.74
was contingent because the funds are being held by the district court administrator
pending the district court’s determination as to how the funds should be disbursed. The
argument is rooted in statutory construction, which this court reviews de novo.
Nordstrom v. Eaton, 652 N.W.2d 79, 82 (Minn. App. 2002). Minn. Stat. § 571.73, subd.
4(1) (2010), provides, “The following property is not subject to attachment by
garnishment: . . . any indebtedness, money, or other property due to the debtor, unless at
the time of the garnishment summons the same is due absolutely or does not depend upon
The money held by the district court administrator does not satisfy the
requirements of the statute. In a similar circumstance, when a creditor obtained a levy on
the property of a debtor, the debtor did not lose complete possession, just immediate
possession and control. See Banker v. Caldwell, 3 Minn. 94, 105 (1859). Here, even
though Dennis Hecker may have lost the immediate possession and control of the money,
he still has constructive possession.
Therefore, the money was not “due” to him,
contingently or noncontingently, and Minn. Stat. § 571.73, subd. 4(1), does not apply.
The funds are subject to garnishment.