Aaron Ferer & Sons Co. v. Berman
Decision Date | 16 May 1977 |
Docket Number | Civ. No. 76-0-151. |
Citation | 431 F. Supp. 847 |
Parties | AARON FERER & SONS CO., Debtor and Debtor in Possession, Plaintiff, v. Aaron BERMAN, d/b/a Berman Steel Company, Defendant. |
Court | U.S. District Court — District of Nebraska |
Jerrold L. Strasheim, Steven C. Turner, Omaha, Neb., for plaintiff.
Waldine H. Olson, Omaha, Neb., for defendant.
This matter is before the Court upon the motion of defendant to dismiss this case for lack of quasi in rem jurisdiction and lack of in personam jurisdiction Filing # 46. The issue presented is whether the Nebraska prejudgment attachment statutes for acquiring quasi in rem jurisdiction violate the due process clause of the Fourteenth Amendment of the United States Constitution.
Plaintiff, Aaron Ferer & Sons Co., Debtor and Debtor in Possession hereinafter referred to as Ferer, instituted this action on April 14, 1976, seeking to recover the value of metals purchased from defendant, Aaron Berman, d/b/a Berman Steel Co. hereinafter referred to as Berman, and allegedly retaken from Ferer by Berman after the filing of Ferer's Chapter XI petition in Bankruptcy Court. Plaintiff's causes of action are founded upon Sections 60, 64a, 67, 70, and 342 of the Bankruptcy Act, 11 U.S.C. §§ 96, 104a, 107, 110 and 742, and breach of contract.
Initially, Ferer asserted personal jurisdiction over Berman under Nebraska's Long-Arm Statute, Neb.Rev.Stat. § 25-535. Berman contested jurisdiction, as did the defendants in six similar lawsuits instituted by Ferer in this Court. Although the Court ultimately found that it lacked personal jurisdiction in the other lawsuits brought by Ferer, Aaron Ferer & Sons v. Scrap Iron & Metal Co., 418 F.Supp. 674 (D.Neb.1976), decision on Berman's motion to dismiss was held in abeyance pending plaintiff's attempt to attach a debt owed by the United States National Bank of Omaha, Nebraska, to Berman for the purpose of securing quasi in rem jurisdiction pursuant to Neb.Rev. Stat. § 25-1001 et seq. (1975).1
Plaintiff filed the requisite pleadings to secure the garnishment of the debt on February 18, 1977, and an Order of Attachment was issued, without bond or security, by Senior Judge Richard E. Robinson upon the following conclusive affidavit of plaintiff's attorney:
Defendant, relying upon Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972); Mitchell v. W. T. Grant Co., 416 U.S. 600, 94 S.Ct. 1895, 40 L.Ed.2d 406 (1974), and North Georgia Finishing, Inc. v. Di-Chem, Inc., 419 U.S. 601, 95 S.Ct. 719, 42 L.Ed.2d 751 (1975) contends that the Nebraska Foreign attachment scheme is constitutionally deficient in the following aspects: (1) the attachment may issue upon conclusions, rather than facts; (2) the procedure does not require a judicial determination; (3) the creditor is not required to indemnify the defendant; and (4) the provision for a post-seizure hearing does not permit the court to review the validity of the underlying claim.
The Supreme Court in Fuentes held that, except in certain extraordinary situations, due process of law requires notice and a hearing when property is to be seized during the pendency of a lawsuit brought against the property owner. The Court then discussed the "extraordinary situations" exception:
These situations, however, must be truly unusual. Only in a few limited situations has this Court allowed outright seizure without opportunity for a prior hearing. First, in each case, the seizure has been directly necessary to secure an important governmental or general public interest. Second, there has been a special need for very prompt action. Third, the State has kept strict control over its monopoly of legitimate force: the person initiating the seizure has been a governmental official. 407 U.S. 90-91, 92 S.Ct. 1999.
Following Fuentes, the Court apparently retreated from Fuentes' explicit preference for prior notice and hearing when it approved the Louisiana sequestration procedures in Mitchell v. W. T. Grant Co., 416 U.S. 600, 94 S.Ct. 1895, 40 L.Ed.2d 406 (1974). The Court stated that the usual rule has been that 416 U.S. at 611, 94 S.Ct. 1902.
Plaintiff contends that Fuentes and its progeny should not be extended to garnishments obtained for the purpose of obtaining quasi in rem jurisdiction. The Court notes that authority may be found on both sides of this issue: The courts in Jonnet v. Dollar Savings Bank of City of New York, 530 F.2d 1123 (3rd Cir. 1976); In Re Law Research Services, Inc., 386 F.Supp. 749 (S.D. N.Y.1974); and U.S. Industries, Inc. v. Gregg, 348 F.Supp. 1004 (D.Del.1972), reversed on other grounds, 540 F.2d 142 (3rd Cir. 1976), construed Fuentes to apply in quasi in rem situations; the courts in Holtzman v. Holtzman, 401 F.Supp. 520 (S.D.N.Y. 1975); Merrill Lynch Government Securities, Inc. v. Fidelity Mutual Savings Bank, 396 F.Supp. 318 (S.D.N.Y.1975); Usdan v. Dunn Paper Company, 392 F.Supp. 953 (E.D.N.Y.1975) and Stanton v. Manufacturers Hanover Trust Co., 388 F.Supp. 1171 (S.D.N.Y.1975) declined to so extend Fuentes.3
The thrust of plaintiff's argument requires the Court to carefully evaluate the continuing validity of Ownbey v. Morgan, 256 U.S. 94, 41 S.Ct. 433, 65 L.Ed. 837 (1921). In Ownbey, Delaware plaintiffs attached a nonresident's shares in a Delaware corporation in order to establish quasi in rem jurisdiction. The writ of attachment issued automatically upon plaintiff's filing an affidavit with the court clerk and posting a bond. Although the challenge went only to the requirement that the defendant put up "special bail" in order to contest the attachment, the Court expressly approved the Delaware foreign attachment scheme. Plaintiff therefore vigorously argues that the Supreme Court's recent citations of Ownbey indicates continuing approval of the Delaware statutory scheme.4
The Court is unable to agree that recent citations of Ownbey indicate approval. Jonnet v. Dollar Savings Bank of City of New York, 530 F.2d at 1128.
The reasons for this Court's negative view of Ownbey's validity are several. First, to Justice Pitney the touchstone of due process lies in history.
A procedure customarily employed, long before the Revolution, in the Commercial Metropolis of England, and generally adopted by the States as suited to their circumstances and needs, cannot be deemed inconsistent with due process of law, even if it be taken with its ancient incident of requiring security from a defendant who after seizure of his property comes within the jurisdiction and seeks to interpose a defense. 256 U.S. at 111, 41 S.Ct. at 438.
As Judge Gibbons recognized in his concurring opinion in Jonnet v. Dollar Savings Bank of City of New York, supra, "the flaw in Justice Pitney's reasoning is that prior to 1868 the adoption of the procedure by the states had no due process significance." 530 F.2d at 1136. Moreover, it is clear that, under modern due process analysis, ancient lineage of a procedural rule is only one factor to be considered.
Joint Anti-fascist Committee v. McGrath, 341 U.S. 123, 162-163, 71 S.Ct. 624, 95 L.Ed. 817 (1951) (Frankfurter, J. concurring).
Ingraham v. Wright, ___ U.S. ___, 97 S.Ct. 1401, 1414, 51 L.Ed.2d 711 (1977).
Second In re Law Research Services, Inc., 386 F.Supp. at 753. In fact, the Court of Appeals for the Eighth Circuit has repudiated the holding of Ownbey, thereby recognizing its demise in modern law.
The bond requirement places a considerable impediment on any debtor who seeks to contest the attachment of any item of significant value, and to the extent that...
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