530 F.2d 1123 (3rd Cir. 1976), 75--1529, Jonnet v. Dollar Sav. Bank of City of New York

Docket Nº:75--1529.
Citation:530 F.2d 1123
Party Name:Elmer J. JONNET et al., Appellants, v. DOLLAR SAVINGS BANK OF the CITY OF NEW YORK et al.
Case Date:January 27, 1976
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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530 F.2d 1123 (3rd Cir. 1976)

Elmer J. JONNET et al., Appellants,

v.

DOLLAR SAVINGS BANK OF the CITY OF NEW YORK et al.

No. 75--1529.

United States Court of Appeals, Third Circuit

January 27, 1976

Argued Dec. 9, 1975.

As Amended Feb. 9, 1976.

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Samuel M. Rosenzweig, Rosenzweig & Rosenzweig, John M. Feeney, Harrington, Feeney & Schweers, Pittsburgh, Pa., for appellants.

J. Tomlinson Fort, Eric P. Reif, Reed Smith Shaw & McClay, Pittsburgh, Pa., Dwight B. Demeritt, Jr., Joan H. Hillenbrand, Thacher, Proffitt & Wood, New York City, for appellee, Dollar Savings Bank of the City of New York.

Before SEITZ, Chief Judge, and GIBBONS and ROSENN, Circuit Judges.

OPINION

ROSENN, Circuit Judge.

Once again the constitutionality of Pennsylvania foreign attachment procedures 1 are before this court. Four years ago in Lebowitz v. Forbes Leasing & Finance Corp., 456 F.2d 979 (3d Cir. 1972), cert. denied, 409 U.S. 843, 93 S.Ct. 42, 34 L.Ed.2d 82, rehearing denied, 409 U.S. 1049, 93 S.Ct. 509, 34 L.Ed.2d 502 (1972), we sustained the constitutionality of these procedures against a procedural due process attack. Due process, however, is a dynamic concept; refinements are evolved from time to time. In light of the latest elaborations by the Supreme Court, we conclude that Lebowitz is no longer viable and that the Pennsylvania foreign attachment procedures must be declared unconstitutional.

I.

In Lebowitz, Chief Judge Seitz succinctly described Pennsylvania foreign attachment procedures as follows:

Pennsylvania foreign attachment procedures authorize the issuance of a writ by the prothonotary without notice to the defendant, without any hearing, without an affidavit of meritorious action, without the posting of a

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bond, and without intervention by a judicial officer. Indeed, the attachment may precede the filing of the complaint by as much as five days. Once the attachment becomes effective, it is not dissolved by the general appearance of the defendant. Rather, dissolution occurs only if, inter alia, the defendant posts an adequate bond or other acceptable security or the plaintiff fails to prosecute his case with due diligence. Also, provision is made that if the defendant can demonstrate that the amount of property attached is excessive when compared to the amount in controversy he may obtain a reduction. 456 F.2d at 980.

Only a few additional provisions need be mentioned. A foreign attachment can issue only against an individual who is a nonresident of the Commonwealth, a partnership or unincorporated association without a regular place of business in the Commonwealth, or a foreign corporation which is not registered in the Commonwealth. Pa.R.Civ.P. 1252. The action is commenced by filing with the prothonotary 2 a praecipe for a writ which shall direct the sheriff to attach stated property. 'The prothonotary shall immediately enter the attachment against the defendant in the judgment index.' Pa.R.Civ.P. 1255. The statute does not require that the defendant be served with the writ or complaint. Pa.R.Civ.P. 1265, 1267, 1269. The function of notifying the defendant is delegated to the garnishee. Pa.R.Civ.P. 1267.

Plaintiffs Elmer J. Jonnet, Jonnet Development Corporation, and Jonnel Enterprises, Inc., (collectively, Jonnet) invoked these procedures by filing 'Complaint in Assumpsit with Foreign Attachment,' alleging that Dollar Savings Bank of the City of New York (Dollar) wrongfully failed to honor a mortgage commitment for $1,100,000. 3 Several days later, plaintiffs filed a praecipe for writ of foreign attachment pursuant to Pa.R.Civ.P. 1255. 4 The writs were issued by the U.S. Clerk of Court and served by the U.S. Marshal on two corporate garnishees, who were indebted to Dollar in an aggregate amount over $1,300,000 and who were obliged to make monthly installment payments to Dollar in amounts totaling over $10,000. Monthly payments for August 1973 were not made to Dollar because of the attachments.

On August 20, 1973, the district court, acting on Dollar's motion and pursuant to Pa.R.Civ.P. 1272(c), dissolved the attachment and permitted Dollar to substitute security in the form of U.S. Treasury notes totaling $50,000. In its motion to dissolve the attachment, its answer, and subsequent motion filed October 11, 1974, Dollar challenged the constitutionality of the instant procedures. Judge Teitelbaum, in a carefully considered opinion, held the foreign attachment procedures unconstitutional and granted Dollar's motion to dismiss the action. This appeal followed. 5

II.

The basic issue before us is whether Pennsylvania summary procedures for jurisdictional attachment of property of

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a corporation not registered and having no regular place of business in the Commonwealth in a suit by a resident plaintiff comports with fundamental fairness, in the absence of notice to the defendant prior to attachment, an opportunity for prompt hearing to challenge the attachment, and other procedural safeguards against wrongful seizure.

Procedural due process issues have been the subject of much recent Supreme Court litigation. 6 None of these cases have specifically considered the issue before us, but several have analyzed prejudgment attachment procedures for debtor-creditor suits. The Supreme Court opinions have produced not only varying results, but differing analytical approaches to due process problems.

The earliest case in this line of decisions is Sniadach v. Family Finance Corporation, 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349 (1969), which held Wisconsin prejudgment garnishment procedures unconstitutional. That decision appeared to evince a particular concern for 'wages--a specialized type of property', 395 U.S. at 340, 89 S.Ct. 1820, and mandated that the affected individual receive notice and a hearing before garnishment.

Sniadach spawned two divergent lines of cases--one limiting Sniadach's predeprivation notice and hearing rule to wages or property of similar importance to the individual, the other invalidating prejudgment procedures generally. 7 The Supreme Court put its imprimatur on the latter line in Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972). The Court there held unconstitutional Florida and Pennsylvania prejudgment replevin procedures utilized to recover household goods purchased under conditional sales contracts and on which payments were allegedly overdue. The Court stated that even a temporary, non-final deprivation of property in which an individual had less than full title was sufficient to invoke due process protection. 407 U.S. at 84--87, 92 S.Ct. 1983. Furthermore, procedural guarantees were not limited to items of 'necessity.' 407 U.S. at 88--90, 92 S.Ct. 1983. The constitutional rule enunciated was that except in 'extraordinary situations,' 8 notice and hearing must precede any deprivation of property.

Two years later the Court seemingly interred Fuentes when it approved Louisiana sequestration procedures. Mitchell v. W. T. Grant Co., 416 U.S. 600, 94 S.Ct. 1895, 40 L.Ed.2d 406 (1974). The Court appeared to abandon the strict pre-seizure hearing rule of Fuentes and instead substitute a balancing of interests analysis. 9 The Court identified two policies behind the Louisiana procedures--(1) protecting from concealment, or waste,

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property in which the creditor, as well as the debtor, had a proprietary interest, 416 U.S. at 604--5, 94 S.Ct. 1895, and (2) averting self-help measures by the creditor, which could engender violence. 416 U.S. at 605, 94 S.Ct. 1895. In light of these policies, the debtor's concern with protecting his property interest from arbitrary or wrongful deprivation was adequately protected by sequestration procedures that: (1) required a creditor to file an affidavit stating 'specific facts' entitling him to sequestration; (2) mandated that the writ was issuable only by a judge; (3) required the creditor to file a bond to protect the debtor from all damages in the event the sequestration was shown to have been wrongful; (4) entitled the debtor to dissolve the sequestration by filing his own bond; and (5) entitled the debtor to an immediate hearing after seizure and to dissolution of the writ absent proof by the creditor of the grounds on which the writ was issued. 10

That the Fuentes analysis continued to retain some vitality was demonstrated by a decision filed two days after Mitchell. In Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 94 S.Ct. 2080, 40 L.Ed.2d 452 (1974), the Court sustained the constitutionality of Puerto Rican statutes providing for forfeiture, without prior notice or hearing, of vessels used for unlawful purposes, by applying the 'extraordinary situation' exception of Fuentes.

The requiem for Fuentes' 'demise' soon appeared to have been chanted prematurely. See North Georgia Finishing, Inc. v. Di-Chem, Inc., 419 U.S. 601, 608, 95 S.Ct. 719, 42 L.Ed.2d 751 (1975) (Stewart, J., concurring). The Court in Di-Chem not only again held a garnishment statute unconstitutional, but appeared, to some extent, to resuscitate Fuentes. See 419 U.S. at 609--614 (Powell, J., concurring). Procedural Due Process, note 5 supra, 88 Harv.L.Rev. at 1514. The Georgia procedures were held constitutionally insufficient because (1) they allowed a writ of garnishment to issue on affidavit by a creditor or his attorney containing only conclusory allegations; (2) the writ was issuable by the court clerk without participation by a judge; (3) the garnishment could be dissolved only by the filing of a bond, which continued to deprive defendant of the use of some property; and (4) there was no provision for an early hearing at which the creditor would be required to demonstrate at least probable cause for the...

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