Betts v. Tom

• Decision Date: 17 May 1977
• Docket Number: Civ. No. 76-0123.
• Citation: 431 F. Supp. 1369
• Parties: Patricia BETTS and Donald Musumeci, Individually and on behalf of all others similarly situated, Plaintiffs, v. Clayton K. O. TOM, and Helen Coltes, in her capacity as Clerk of the District Court, State of Hawaii, Individually and on behalf of all persons similarly situated, Defendants. RELIABLE COLLECTION AGENCY, LTD., a Hawaii Corporation, Individually and on behalf of all persons similarly situated, Defendant and Third-Party Plaintiff, v. Y. HIGA ENTERPRISES, LTD., a Hawaii Corporation, Third-Party Defendant.
• Court: U.S. District Court — District of Hawaii

431 F. Supp. 1369

Patricia BETTS and Donald Musumeci, Individually and on behalf of all others similarly situated, Plaintiffs, v. Clayton K. O. TOM, and Helen Coltes, in her capacity as Clerk of the District Court, State of Hawaii, Individually and on behalf of all persons similarly situated, Defendants.

RELIABLE COLLECTION AGENCY, LTD., a Hawaii Corporation, Individually and on behalf of all persons similarly situated, Defendant and Third-Party Plaintiff, v. Y. HIGA ENTERPRISES, LTD., a Hawaii Corporation, Third-Party Defendant.

Civ. No. 76-0123.

United States District Court, D. Hawaii.

May 17, 1977.

Paul Alston, Stanley E. Levin, Legal Aid Society of Hawaii, Honolulu, Hawaii, for plaintiff Betts.

James P. Dandar, Deputy Atty. Gen., Ronald Y. Amemiya, Atty. Gen., Honolulu, Hawaii, for defendant Coltes.

DECISION

SAMUEL P. KING, Chief Judge.

I. FACTS¹

In July of 1975, Clayton K. O. Tom filed an action against Patricia Betts, a divorced mother of four children, for alleged breach of a lease agreement. On August 8, 1975, a state court entered a default judgment against Ms. Betts for $768.30, a sum including interests, costs, and fees. Four weeks later, at the request of Mr. Tom, defendant Helen Coltes, a clerk of the state court, issued a garnishee summons against Ms. Betts pursuant to Haw.Rev.Stat. section 652-1(b) (Supp.1975).² The summons was directed to the Bank of Hawaii where Ms. Betts had a small bank account consisting solely of unexpended funds she had received as an Aid to Families with Dependent Children (AFDC) grant. Under Hawaiian law, money received as part of an AFDC grant is exempt from execution by judgment creditors.³ Despite this exemption, the garnishee bank froze Ms. Betts' account. She was unable to use her funds from the date of the garnishment, September 5, 1975, until October 1, 1975, almost four weeks later, when she was finally able to get a state court to quash the writ of garnishment. As a result of Ms. Betts' inability to use her AFDC grant during this four week period, she experienced great difficulty in supplying her family with the basic necessities of life. Indeed, she was forced to borrow from friends in order to survive.

Ms. Betts brought this action on behalf of herself and all those similarly situated⁴ challenging the constitutionality of Hawaii's post-judgment garnishment procedures. She seeks a declaration that Hawaii's garnishment procedure violates the due process clause of the Fourteenth Amendment.⁵ At this juncture, plaintiff Betts has moved for summary judgment on her constitutional claims.⁶ The State, seeking a declaration that the state statute and procedure is constitutional, has filed a cross-motion for summary judgment.

II. BACKGROUND OF THE PROBLEM

Plaintiff argues that the Hawaii statute violates the due process clause because it allowed her bank account to be garnished without prior notice to her and a judicial hearing on whether or not the account consisted of exempt assets. A number of courts around the country have recently considered the requirements of due process in the context of post-judgment execution.⁷ As one would expect with such an important question, these courts have not been in complete agreement. Although a few courts have held that due process does require notice and a pre-execution hearing,⁸ the majority of courts have concluded that a debtor has no right to a delay in the issuance of writs of execution after a valid judgment has been entered against him.⁹ The courts reaching the latter result have not been able to agree on any one reason for their conclusion.¹⁰ The only thing that almost all have agreed upon is that the starting point for any analysis of this question must be the Supreme Court's decision in Endicott Johnson Corp. v. Encyclopedia Press, Inc., 266 U.S. 285, 45 S.Ct. 61, 69 L.Ed. 288 (1924). The State of Hawaii has primarily rested its case on the basis of that decision, and thus it is to Endicott Johnson that I now turn.

In Endicott Johnson, the Supreme Court held that a New York statute which allowed the garnishment of 10% of a judgment debtor's wages was constitutional, even though there was no notice to the judgment debtor before the garnishment became effective. The Court took an historical approach, equating due process with the "rules and principles which have been established in our system of jurisprudence . . .." 266 U.S. 288, 45 S.Ct. 62. Since state courts had frequently held that no notice was necessary, the Court seemed to feel that such a procedure passed constitutional muster. Id. at 289, 45 S.Ct. 61. The Court supported its conclusion by reasoning that notice of the original proceeding provided sufficient "notice of what will follow." Id. at 288, 45 S.Ct. 61.

Although some courts have upheld all ex parte post-judgment garnishment because of Endicott Johnson,¹¹ many commentators have questioned the continuing authority of that case in light of the Supreme Court's decision in Griffin v. Griffin, 327 U.S. 220, 66 S.Ct. 556, 90 L.Ed. 635 (1946). See, e. g., Greenfield, A Constitutional Limitation on the Enforcement of Judgments — Due Process and Exemptions, 1975 Wash.U.L.Q. 877, 893. In Griffin, the petitioner and respondent had been divorced in New York in 1924. In 1926, in contested proceedings, the divorce decree was modified to provide for alimony and child support. In 1936, also in contested proceedings, the respondent obtained a judgment for past due alimony payments. In 1938, in an ex parte proceeding, the respondent obtained another judgment based on the amounts due under the 1936 decree and further amounts accruing after the 1936 decree. The Court held that this judgment, to the extent that it cut off any defenses petitioner might have raised after 1936, violated petitioner's due process rights because he had not received notice and a hearing before the judgment. The Court explained that:

While it is undoubtedly true that the 1926 decree, taken with the New York practice on the subject, gave petitioner notice at the time of its entry that further proceedings might be taken to docket in judgment form the obligation to pay installments accruing under the decree, we find in this no ground for saying that due process does not require further notice of the time and place of such further proceedings, inasmuch as they undertook substantially to affect his rights in ways in which the 1926 decree did not.

327 U.S. at 229, 66 S.Ct. at 561 (citations omitted). Thus, the Court seemed to have rejected the rationale which led to its holding in Endicott Johnson. This view of the import of Griffin was held by at least three members of the Court in 1967. Hanner v. De Marcus, dismissing cert. as improvidently granted, 390 U.S. 736, 741-42, 88 S.Ct. 1437, 20 L.Ed.2d 270 (1968) (Douglas, J., dissenting).¹²

One could argue that just as the petitioner in Griffin should have had an opportunity to raise defenses accruing after the 1936 judgment a judgment debtor should be entitled to raise exemption claims which do not need to be proven until there is a valid claim (a judgment) against the debtor. The Court in Griffin did not refer to Endicott, and thus it is difficult to determine just how much the later decision undermines the prior one. It appears to me, however, that Griffin did not completely overrule Endicott Johnson. The Griffin Court did not question the ex parte 1938 judgment to the extent that it merely "confirmed" prior established rights and liabilities. 327 U.S. at 233-34, 66 S.Ct. 556. Consequently, this court cannot ignore the Endicott Johnson decision solely because of Griffin. See also Brown v. Liberty Loan Corp. of Duval, 539 F.2d 1355, 1363-65 (5th Cir. 1976).

Leaving Griffin aside, a number of courts and scholars have noted several more compelling reasons why Endicott Johnson may not be good authority for the proposition that all post-judgment execution meets the requirements of due process, despite the lack of notice and a hearing.¹³ To begin with, the party challenging the garnishment procedure in Endicott Johnson was the garnishee, not the judgment debtor. Thus, the case might be distinguished as one only dealing with the garnishee's standing to assert a judgment debtor's right to notice and a hearing, despite the case's broad language.¹⁴ There was also no consideration of the judgment debtor's right to exemptions in Endicott Johnson. Hence, the case might also be distinguished on the grounds that it applies only when there is no arguably exempt property upon which levy will occur.

More importantly, the concept of procedural due process is flexible. Morrissey v. Brewer, 408 U.S. 471, 481, 92 S.Ct. 2593, 33 L.Ed.2d 484 (1972). Not only does it vary to meet the individual requirements of each situation but it also changes over time to reflect changes in society's valuation of various interests.¹⁵ Undoubtedly, the Endicott Johnson Court would have found that the "rules and principles which have been established in our system of jurisprudence" included ex parte pre-judgment attachment of defendants' assets. Beginning in 1969, however, the Court struck down a number of ex parte pre-judgment attachment statutes whenever those statutes, in the Court's judgment, did not properly balance the interests of society, plaintiffs, and defendants in determining whether or not notice and a hearing should precede the seizure. North Georgia Finishing, Inc. v. Di-Chem, Inc., 419 U.S. 601, 95 S.Ct. 719, 42 L.Ed.2d 751 (1975); Mitchell v. W. T. Grant Co., 416 U.S. 600, 94 S.Ct. 1895, 40 L.Ed.2d 406 (1974); Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972); Sniadach v. Family Finance Corp., 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349 (1969). With this line of cases, the Court indicated that there are no hard and fast rules in this area. All relevant interests must be carefully balanced before a court can conclude that a certain procedure does or does not comport with procedural due...