Kauth v. Hartford Ins. Co. of Illinois

• Decision Date: 19 July 1988
• Docket Number: No. 86-2953,86-2953
• Parties: Harold A. KAUTH, individually and as president and sole shareholder of Creative Environments, Inc., a dissolved Illinois corporation, Plaintiff-Appellant, v. HARTFORD INSURANCE COMPANY OF ILLINOIS, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 951

852 F.2d 951

Harold A. KAUTH, individually and as president and sole

shareholder of Creative Environments, Inc., a dissolved Illinois corporation, Plaintiff-Appellant, v. HARTFORD INSURANCE COMPANY OF ILLINOIS, et al., Defendants-Appellees.

No. 86-2953.

United States Court of Appeals,

Seventh Circuit.

Argued Feb. 12, 1988.

Decided July 19, 1988.

Armin Johnson, Jr., Mitchell, Williams, Holland & Rux, Chicago, Ill., for plaintiff-appellant.

Bonnie M. Wheaton, Wylie, Wheaton & Assoc., P.C., Patrick Bond, DuPage County State's Atty. Office, Wheaton, Ill., for defendants-appellees.

Before WOOD, Jr., FLAUM and KANNE, Circuit Judges.

HARLINGTON WOOD, Jr., Circuit Judge.

Plaintiff Harold Kauth brought suit in federal district court under 42 U.S.C. Sec. 1983, claiming that the defendants deprived him of his property without due process of law in violation of the fourteenth amendment. The district court granted the defendants' motion to dismiss and denied Kauth's motion to reconsider. We affirm in part and reverse in part.

I. FACTUAL BACKGROUND

Kauth and Jack L. Hays executed two notes payable to defendant Center Bank-Glen Ellyn (Center Bank). The notes were secured by the assets of Kauth, Hays, and Creative Environments, Inc., a corporation of which Kauth was the president and sole shareholder. On September 29, 1982, Center Bank filed a complaint against Kauth and Hays in the Circuit Court of Du Page County, Illinois, seeking a judgment of $19,223.36, an amount representing the principal and accrued interest due on the two notes. Center Bank also petitioned the court for a writ of attachment. On September 30, 1982, the court entered an ex parte order of attachment. Pursuant to that order, Center Bank posted an attachment bond for $38,500, twice the amount of the alleged debt.

On October 4, 1982, a Du Page County deputy sheriff executed the order of attachment. The deputy seized all of the inventory, equipment, and business records of Kauth, Hays, and Creative Environments, Inc. Defendant Thomas Hengels, a Center Bank vice-president, assisted the deputy.

The circuit court conducted a number of hearings regarding Center Bank's action and the attachment. Kauth challenged the attachment at a post-deprivation hearing. The court denied Kauth's motion to quash the order of attachment. On October 25, 1982, however, the court ordered defendant Richard P. Doria, Sheriff of Du Page County, to return Kauth's business records at Kauth's expense. ¹ In July 1983, the court granted summary judgment for Center Bank on its underlying claim.

On January 23, 1984, the court vacated and quashed the writ of attachment as to Kauth after the court discovered that the supporting affidavit of defendant Janice Kellenberger, a Center Bank vice-president, was not based upon personal knowledge. Nevertheless, the court did not order the sheriff to return the seized property to Kauth. ² The court apparently reasoned that because the property was jointly owned by Kauth and Hays and the writ of attachment was still valid as to Hays, the property was properly seized to satisfy Hays's debt.

On March 5, 1984, the court denied Kauth's motion to reconsider its earlier order granting summary judgment on the underlying claim in favor of Center Bank. At this time, the court also heard argument on and denied various motions to compel the defendants to return Kauth's property. On July 10, 1984, the items seized pursuant to the writ of attachment were turned over to defendant E.G. Hudson (U.K.) Limited (Hudson U.K.) ³ and subsequently sold at auction.

Kauth filed an action in federal district court under 42 U.S.C. Sec. 1983, alleging a violation of the due process clause of the fourteenth amendment. In Count I of his second amended complaint, Kauth seeks damages from defendant Hartford Insurance Company of Illinois (Hartford), the surety on the attachment bond. Hartford is a Connecticut corporation with its principal place of business in Illinois.

Count II of the complaint is essentially a malicious prosecution action against the sheriff and various other parties. Kauth seeks actual and punitive damages from several defendants who allegedly participated in the attachment, including Doria, Center Bank, Kellenberger, Hengels, Bonnie M. Wheaton, an attorney representing Center Bank, and Wheaton's law firm, Wylie, Wheaton and Associates, P.C. All the defendants named in Count II are Illinois citizens.

Finally, Count III alleges that Hudson U.K. knowingly converted Kauth's property when it accepted the goods from Center Bank and sold them at auction. Kauth claims damages of $17,000 for the value of the property, plus interest. Kauth also seeks $25,000 in punitive damages.

The district court granted the defendants' motion to dismiss and simultaneously denied Kauth's motion for partial summary judgment as to defendant Doria. Kauth then filed a motion for reconsideration. After hearing oral argument on the motion on November 5, 1987, the district court denied Kauth's motion. The district court found that it did not have subject matter jurisdiction over the case because the allegations in Kauth's complaint did not rise to the level of a federal constitutional violation. We have jurisdiction over this appeal under 28 U.S.C. Sec. 1291 (1982).

II. DISCUSSION

In Count I of his complaint, Kauth seeks to recover damages, under the bond that Center Bank posted, for the wrongful attachment of his property. Kauth's claim of wrongful attachment is based on state law. See Gale v. Transamerica Corp., 65 Ill.App.3d 553, 382 N.E.2d 412, 22 Ill.Dec. 92 (1st Dist.1978); Baird v. Liepelt, 62 Ill.App.2d 154, 210 N.E.2d 1 (2d Dist.1965). Likewise, Kauth's conversion claim in Count III is also purely a matter of state law. See generally de St. Aubin v. Johnson, 151 Ill.App.3d 184, 502 N.E.2d 360, 104 Ill.Dec. 97 (1st Dist.1986); A.T. Kearney, Inc. v. INCA Int'l, Inc., 132 Ill.App.3d 655, 477 N.E.2d 1326, 87 Ill.Dec. 798 (1st Dist.1985). A federal court may exercise pendent jurisdiction over state law claims in an appropriate case. To do so, however, the court must have an independent source of federal subject matter jurisdiction. See United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966). The district court dismissed Count II of Kauth's complaint because the court found that Kauth's federal constitutional allegations had no legal basis. The court then dismissed Counts I and III for lack of subject matter jurisdiction because the court found that those claims had no independent federal jurisdictional basis. We shall begin our analysis by considering whether Count II provided the court with federal subject matter jurisdiction.

A. Federal Question Jurisdiction

Kauth claims that he was denied his property without due process of law in violation of the fourteenth amendment. Kauth relies on both procedural and substantive due process. ⁴ At the outset, we will attempt to clarify Kauth's arguments. Kauth does not argue that the Illinois attachment scheme is unconstitutional. Nor does Kauth claim that the sheriff violated his constitutional rights by executing a facially valid writ of attachment, even though the state court later declared the writ void. Instead, Kauth argues that he was denied his property without due process of law when: (1) the sheriff ⁵ attached property allegedly worth over $100,000, far in excess of the underlying debt; (2) the sheriff attached property that is exempt under Illinois law and refused to comply with the state court's order to return the property to Kauth; (3) the sheriff refused to return the property to Kauth after the state court declared the attachment void; and (4) the sheriff released the property to be sold.

In reviewing the court's dismissal of Kauth's constitutional claims, we must presume the truth of Kauth's allegations, along with all reasonable inferences, viewing them in the light most favorable to Kauth. Moon v. Phillips, 854 F.2d 147, 149-50 (7th Cir.1988); Wolfolk v. Rivera, 729 F.2d 1114, 1116 (7th Cir.1984). See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957).

1. Procedural Due Process

Kauth relies on his right to procedural due process under the fourteenth amendment as a source of federal jurisdiction. The parties do not contest that Kauth was deprived of his property when the sheriff seized his business equipment, furnishings, and records. Nevertheless, even if Kauth was deprived of his property under color of state law, there is no constitutional violation if Kauth received due process. Parratt v. Taylor, 451 U.S. 527, 537, 101 S.Ct. 1908, 1913, 68 L.Ed.2d 420 (1981).

The Illinois attachment statute provides that a person whose property is attached is entitled to a prompt hearing. Ill.Rev.Stat. ch. 110, p 4-137 (1985). In fact, Kauth received several post-deprivation hearings ⁶ in state court. ⁷ In addition, Kauth admits that he could have sued the defendants for wrongful attachment or malicious prosecution in Illinois state court, but he chose not to pursue those state remedies. When the state provides adequate post-deprivation remedies, however, due process is satisfied. Parratt, 451 U.S. 527, 101 S.Ct. 1908. Kauth simply cannot refuse to pursue the available state remedies and then come into federal court complaining that he was not afforded due process. ⁸

Kauth does not claim that the available state remedies are constitutionally inadequate. The Supreme Court has clearly stated that if a state provides an adequate means of redressing a property deprivation, the victim of the deprivation has been accorded due process of law. Daniels v. Williams, 474 U.S. 327, 339-40, 106 S.Ct. 662, 678-79, 88 L.Ed.2d 662 (1986) (Stevens, J., concurring) ("[A] complaint does not state a valid procedural due process objection--and a valid Sec. 1983 claim--if it does not include a challenge to the fundamental fairness of the State's procedures.... [I]f a...