Britton v. Howard Sav. Bank

• Decision Date: 23 January 1984
• Docket Number: No. 83-5216,83-5216
• Citation: 727 F.2d 315
• Parties: John F. BRITTON v. The HOWARD SAVINGS BANK, a New Jersey Banking Corporation, Joseph Rascio, individually and trading as Agents Auto Recovery Service, a proprietorship, Joseph Rascio and Mary Lou Rascio, a/k/a Mary Lou De Iesso, individually and trading as Agents Auto Recovery Service. Appeal of The HOWARD SAVINGS BANK. . Submitted Under Third Circuit Rule 12(6) on
• Court: U.S. Court of Appeals — Third Circuit

Page 315

727 F.2d 315

John F. BRITTON v. The HOWARD SAVINGS BANK, a New Jersey Banking Corporation Joseph Rascio, individually and trading as Agents Auto Recovery Service, a proprietorship, Joseph Rascio and Mary Lou Rascio, a/k/a Mary Lou De Iesso, individually and trading as Agents Auto Recovery Service Appeal of The HOWARD SAVINGS BANK.

No. 83-5216.

United States Court of Appeals, Third Circuit.

Submitted Under Third Circuit Rule 12(6)

on Jan. 23, 1984.

Decided Feb. 9, 1984.

Crummy, Del Deo, Dolan & Purcell, Newark, N.J., John A. Ridely, Newark, N.J., of counsel; Frederick C. Kentz, III, Faith A. Hamstra, Newark, N.J., on brief, for The Howard Sav. Bank.

Philip M. Saginario, Paterson, N.J., for Agents Auto Recovery Service, Joseph Rascio and Mary Lou Rascio, a/k/a Mary Lou De Iesso.

Before GIBBONS and BECKER, Circuit Judges and ATKINS, District Judge ^*.

OPINION OF THE COURT

GIBBONS, Circuit Judge:

The Howard Savings Bank (Howard) appeals from an order, in an action still pending in the district court, denying its motion to vacate a stay of proceedings so as to permit it to move for a writ of attachment. Howard, a defendant in the pending action, sought the writ to attach property of Joseph Rascio and Mary Lou Rascio, against whom it asserts a cross-claim. This court granted an injunction pending appeal preventing the Rascios from removing from the district of New Jersey the property sought to be attached. The Rascios have moved before this court to dissolve that injunction. We deny that motion, and we reverse the district court's order.

I.

Agents Auto Recovery Service, a firm operated by Joseph and Mary Lou Rascio, repossesses automobiles financed by lenders such as Howard. The firm repossessed an automobile operated by John Britton. Britton filed a diversity action in the United States District Court for the District of New Jersey charging Howard with conversion, false imprisonment, and assault and battery in connection with that repossession. Because Agents Auto had undertaken by contract to defend and indemnify Howard, and to carry comprehensive liability insurance against claims arising out of its repossession business, Howard cross-claimed against the Rascios. Prior to the filing of Britton's diversity suit, however, Howard had already commenced suit in the Superior Court of New Jersey to enforce the terms of a settlement agreement between Britton and Howard. On January 24, 1983, the district court stayed the diversity action except for the limited purpose of discovery to ascertain the citizenship of the Rascios.

After entry of the January 24 stay order, Howard sought unsuccessfully to serve process on the Rascios. While they were avoiding process, and avoiding negotiations with Howard's representatives, Howard became aware that it had issued four certificates of deposit in the name of Mary Lou DeIesso, and that Mary Lou DeIesso and Mary Lou Rascio were one and the same. Fearing that the Rascios were about to remove themselves and their property from the State of New Jersey, Howard moved on March 22, 1983 for a writ of attachment, and for an order lifting the stay of proceedings, for the limited purpose of permitting the attachment of the four certificates of deposit.

The district court denied these motions, expressing "serious doubts" about the validity of New Jersey's attachment statutes in light of Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977). This appeal, and the injunction pending appeal, followed.

II.

New Jersey law provides two statutory grounds for attachment pertinent to Howard's cross-claim: ¹

a. Where the facts would entitle plaintiff to an order of arrest before judgment in a civil action ...; or

b. Where the defendant absconds or is a nonresident of this state, and a summons cannot be served on him in this state ....

N.J.Stat.Ann. Sec. 2A:26-2(a), (b) (West 1952). An order of arrest (or capias ad respondendum ) "shall issue in an action founded on a contract, express or implied ... when the proof establishes ... [t]hat defendant is about to remove any of his property out of the jurisdiction of the court ... with intent to defraud his creditors; or ... [t]hat defendant fraudulently contracted the debt or incurred the demand." N.J.Stat.Ann. Sec. 2A:15-42(a), (d) (West 1952).

A. Howard Would be Entitled to an Order of Arrest

The record on which the district court acted consisted of the pleadings and four affidavits, which establish two bases on which Howard would be entitled to a capias ad respondendum.

1. Removal of assets with intent to defraud

A process server employed by Howard attested that he had attempted to serve Joseph and Mary Lou Rascio on five occasions, each time unsuccessfully, at the address identified in Howard's records as their residence. On the fifth occasion he learned that a new tenant occupied the apartment. Britton's attorney also attested to difficulties in serving Agents Auto by mail.

A Howard loan officer attested that Joseph Rascio had informed him that Rascio "and his wife expected to be leaving New Jersey shortly to operate their business on the west coast and in the midwest." App. at 32. The loan officer attested further that Rascio informed him that one of his employees "had already left and was working in California," that Agents Auto "was no longer in the business of auto repossession," and that Agents Auto "had absolutely no comprehensive liability insurance." App. at 33.

Another Howard employee attested that Mary Lou DeIesso spoke to her at the Bank "and indicated that she would be withdrawing the monies upon maturity of the Certificates of Deposit." App. at 46. This same employee attested that Joseph Rascio and Mary Lou DeIesso had sought a mortgage from Howard under the name Agents Auto Recovery Service, leading her to believe that Joseph Rascio and Mary Lou DeIesso are the principals in the business conducted under that trade name.

Aside from these four affidavits, there was no other record evidence before the district court. ² They establish prima facie that the Rascios, faced with a lawsuit for which they should have planned by obtaining comprehensive liability insurance, sought to remove assets from New Jersey with intent to defraud Howard. N.J.Stat.Ann. Sec. 2A:15-42(a) (West 1952).

2. Fraudulent contract

There is also uncontradicted record evidence that in order to induce Howard to hire Agents Auto to repossess motor vehicles, the Rascios undertook to keep in full force and effect comprehensive general liability insurance of not less than $1 million and to indemnify and hold harmless Howard from all liability arising from the actions of Agents Auto. The contract expressly provided that the liability insurance "will include protection for the indemnity provisions of this contract." App. at 38. Prima facie, the Racios induced Howard to give Agents Auto the task of repossessing the automobile operated by Britton by virtue of Howard's reliance on the existence of insurance coverage that Agents did not obtain. Thus, Howard's moving papers also satisfied N.J.Stat.Ann. Sec. 2A:15-42(d) (West 1952).

B. Howard Was Entitled to Attach Property of an Absconding Debtor

A separate ground for a writ of attachment is provided under New Jersey law for the property of an absconding debtor. An "absconding debtor" is one who, "with intent to defeat or delay the demands of his creditors, conceals or withdraws himself from his usual place of residence beyond the reach of process." Doughnut Corp. v. Tsakirides, 121 N.J.L. 136, 137, 1 A.2d 467, 469 (1938), quoting Stafford v. Gaiser, 57 N.J.L. 574, 578, 32 A. 7, 8 (1894). The debtor need not leave the state:

It is not necessary that [the debtor] depart from the limits of the state in which he has resided.... [A]ll the law requires, in order to constitute an absconding debtor, is that he shall put himself in such a position that he can and does successfully evade the service of process.

Stafford v. Gaiser, 57 N.J.L. at 578, 32 A. at 8. There is in the affidavits referred to a prima facie case of successful evasion of service of process, both of Britton and of Howard. Thus, Howard's moving papers establish its entitlement to a writ of attachment under N.J.Stat.Ann. Sec. 2A:26-2(b) (West 1952) as well.

C. Howard's Moving Papers Satisfied the New Jersey Court Rules Respecting Attachments

While the substantive grounds for attachment in New Jersey are statutory, the procedural requirements are specified in New Jersey Court Rule 4:60. In response to the decision in Fuentes v. Shevin, 407 U.S. 67, 97, 92 S.Ct. 1983, 2002, 32 L.Ed.2d 556 (1972), requiring an adjudication establishing the probable validity of an underlying claim before a debtor's property may be attached, the New Jersey Supreme Court amended Rule 4:60-5(a) to provide that a writ of attachment shall issue upon a court order.

The motion shall be granted only upon the court's finding, based on the moving papers, any opposing affidavits which may have been filed, and any testimony taken ... that (1) there is a probability that final judgment will be rendered in favor of the plaintiff; (2) there are statutory grounds for issuance of the writ; and (3) there is real or personal property of the defendant at a specific location within this state which is subject to attachment.

N.J.Ct.R. 4:60-5(a). The rule contemplates three days notice, except that:

An order for issuance of writ of attachment without notice to the defendant may be entered by the court ... if the defendant is about to abscond or if the court finds from specific facts shown by affidavit or verified complaint that the giving of such notice is likely to defeat the execution of the writ.

N.J.Ct.R. 4:60-5(b).

Howard's moving papers establish that the Rascios were about to abscond, that there are statutory grounds for issuance of the writ, and that there is property in New Jersey subject to attachment. ³ The only remaining requirement is a showing...