First National Bank v. Hasty

• Decision Date: 22 March 1976
• Docket Number: Civ. A. No. 5-71484.
• Citation: 410 F. Supp. 482
• Parties: FIRST NATIONAL BANK, a National Banking Association of Elkhart, Indiana, Plaintiff, v. Jerry Noel HASTY (Principal) Defendant, v. BRA-MAR TOOL DIVISION, MWA COMPANY, a/k/a Bra-Mar Tool Division, MWA Corporation, a/k/a Bra-Mar Tool Division, Superior Hone Corporation, Garnishee Defendant.
• Court: U.S. District Court — Western District of Michigan

410 F. Supp. 482

FIRST NATIONAL BANK, a National Banking Association of Elkhart, Indiana, Plaintiff, v. Jerry Noel HASTY (Principal) Defendant, v. BRA-MAR TOOL DIVISION, MWA COMPANY, a/k/a Bra-Mar Tool Division, MWA Corporation, a/k/a Bra-Mar Tool Division, Superior Hone Corporation, Garnishee Defendant.

Civ. A. No. 5-71484.

United States District Court, E. D. Michigan, S. D.

March 22, 1976.

COPYRIGHT MATERIAL OMITTED

George E. Kuehn, Detroit, Mich., for plaintiff.

Geoffrey L. Smith, Detroit, Mich., for defendant.

MEMORANDUM OPINION AND ORDER DENYING DEFENDANT'S MOTION TO QUASH ALL WRITS OF GARNISHMENT ISSUED AFTER OCTOBER 1, 1975.

PHILIP PRATT, District Judge.

On October 16, 1974, plaintiff, the First National Bank of Elkhart, Indiana, obtained a judgment in the amount of $82,358.44 against defendant Jerry Noel Hasty, ("Hasty") in the United States District Court for the Northern District of Indiana. No appeal having been taken, the judgment, which represents monies due and owing upon certain fraudulently procured bank loans,¹ was registered in this court pursuant to 28 U.S.C. § 1963 on August 7, 1975. Subsequently, plaintiff caused this Court to issue a series of writs of garnishment directed to defendant's assets in the hands of the Bra-Mar Tool Division of MWA Company, the garnishee defendant. This Court has granted defendant Hasty's motion to quash the first two writs, dated August 7 and September 19, 1975, because service was defective.² Plaintiff then filed a motion for judgment against the garnishee defendant as to several of the remaining writs. In opposition to the motion, defendant Hasty filed a motion to quash all writs of garnishment issued after October 1, 1975,³ on the grounds that the post-judgment garnishment procedures of MCLA 600.4011 et seq. are violative of the due process clause of the Fourteenth Amendment. Hasty seeks an injunction against plaintiff Bank, restraining it from issuing further writs of garnishment.

As a preliminary matter, this Court must determine whether defendant's motion necessitates scrutiny by a three-judge court, pursuant to 28 U.S.C. § 2281, which provides:

"An interlocutory or permanent injunction restraining the enforcement, operation or execution of any State statute by restraining the action of any officer of such State in the enforcement or execution of such statute . . . shall not be granted by any district court or judge thereof upon the ground of the unconstitutionality of such statute unless the application therefor is heard and determined by a district court of three judges under section 2284 of this title."

Although defendant is seeking injunctive relief based upon a constitutional challenge to a statute and court rules of state-wide application, this Court concludes that a three-judge court need not be convened. The injunctive relief, if granted, will not run against a "state officer." (Wilentz v. Sovereign Camp, Woodmen of the World, 306 U.S. 573, 59 S.Ct. 709, 83 L.Ed. 994 (1939)). In the case at bar, the injunction is sought against the plaintiff Bank. As the Fifth Circuit explained with reference to a comparable injunctive request:

"Here the injunction is sought against the landlord. And, although he may be performing state functions for purpose of any state action requirement, this does not mean that he becomes a state officer for purposes of § 2281 . . . It seems apparent that the policy (of the Act) was also never intended to apply to situations, as here, where a private person, although performing a function traditionally performed by the state and `clothed with authority', who is acting essentially for his own benefit is to be restrained." (Hall v. Garson, 430 F.2d 430, 442-3 (5th Cir. 1970); See also Holman v. Bd. of Ed. of Flint, 388 F.Supp. 792 (E.D.Mich.1975)).

Inasmuch as all of the requisites for convening a three-judge court are not present, this Court may proceed to consider the merits of defendant's contentions.

Defendant poses a number of challenges to post-judgment, ex parte issuance of writs of garnishment by the Clerk of the Court. According to Michigan procedure, as utilized by this Court pursuant to F.R.C.P. 69, satisfaction of judgment may be obtained by judicial process from the personal property of the judgment debtor in the possession or control of a third person,

"only if a claim is taken in accordance with court rules promulgated to protect the parties and it is asserted that the plaintiff is justly apprehensive of the loss of his claim unless garnishment is issued." (M.C.L.A. § 600.4011).

GCR 738.2 provides that the clerk of the court shall issue a writ of garnishment when presented with an affidavit stating, inter alia, that,

"the plaintiff is justly apprehensive of the loss of his claim against the defendant unless a writ of garnishment is issued and setting forth the facts in support of his claim."

GCR 738.3 requires that the writ direct the garnishee to inform the principal defendant of the garnishment proceedings. The garnishee must then file a disclosure of liability (GCR 738.6), upon which the cause may be tried (GCR 738.10-.11).

Hasty argues that the procedure offends the Constitution in that: (1) there are no definite standards setting forth the facts necessary to constitute "just apprehension;" (2) there is no statutory mechanism by which a principal defendant may interpose objections; (3) there is inadequate opportunity for judicial scrutiny and hearing on the issues of "just apprehension" and garnishment of wages; (4) there is insufficient notice to the principal defendant; (5) there is no requirement that plaintiff post a bond; (6) the garnishee's ability to withhold 125% of the debt garnisheed violates due process; (7) the procedure imposes undue hardship on the employer. The Court will treat each claim separately.

(1) Standards Governing "Just Apprehension"

Defendant is correct in his assertion that neither the statute nor court rule contain specific guidelines concerning the quantum or nature of facts necessary to establish that plaintiff is "justly apprehensive of the loss of his claim." However, the rule does require presentation of "facts in support of this claim" (GCR 738.2(3)). Moreover, appropriate standards are developing in the case law context (See, e. g., Hosner v. Brown, 40 Mich.App. 515, 199 N.W.2d 295 (1972); Alco Construction Corp. v. H & S Electric, Inc., 49 Mich.App. 667, 212 N.W.2d 598 (1973)), and therefore the contention is without merit.

(2) Objections by Principal Defendant

Defendant's assertion that neither the statute nor court rule provides a mechanism for objection is also unconvincing. Aside from provision for dissolution of garnishment with and without bond (GCR 738.14-.16).⁴ the courts in this state regularly entertain petitions by defendants to quash garnishments.⁵ (See, e. g., Tsingos v. Michigan Packing Co., 272 Mich. 7, 260 N.W. 783 (1935); People's Wayne County Bank v. Scott, 246 Mich. 540, 224 N.W. 352 (1929)). In fact, the Michigan Court of Appeals has unequivocably rejected a plaintiff's argument that principal defendants have no recourse:

"There is no merit whatever to the plaintiff's position with reference to this third question . . . and we are of the opinion that the defendants would be entitled by the elementary dictates of justice to a legal remedy for the wrongful garnishment of their property in an unlawful fashion by the plaintiff." (Hosner v. Brown, supra, 40 Mich.App. at 524, 199 N.W.2d at 300).

Accordingly, this Court is persuaded by the practice engrafted onto the garnishment rules that defendant's challenge is without foundation.

(3) Judicial Scrutiny and Hearing

The existence and availability of the motion to quash after service of the writ obviates defendant's objection that there is no hearing or judicial scrutiny of the issuance of writs. Moreover, it is manifestly clear that wages are subject to garnishment post-judgment (M.C.L.A. § 600.4011). Therefore, the only viable question presented by defendant is whether due process dictates that a hearing or other judicial consideration of the question of "just apprehension"⁶ be provided prior to issuance of the writ.

The Court notes that garnishment, as opposed to other creditors' remedies, does entail state action necessary to invoke the strictures of the Fourteenth Amendment. It is well-recognized that pre-judgment garnishment is subject to due process (Sniadach v. Family Finance Corp., 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349 (1969); Douglas Research & Chemical, Inc., 388 F.Supp. 433 (E.D.Mich.1975, 3 J. Court)). Since there is no significant difference in the degree or type of state participation in pre and post-judgment garnishments, it would appear that post-judgment garnishment also involves state action. Moreover, garnishment is entirely statutory, and was unknown at common law (38 C.J.S. Garnishment § 1b; 13 MLP Garnishment § 1). Accordingly, the garnishment statute and rules cannot be considered to be a mere codification of a pre-existing common law remedy, hence insufficient to constitute state action (Northrip v. Federal Nat. Mortgage Assoc., 527 F.2d 23 (6th Cir. 1975)). Accordingly, the Court may proceed to consider the substance of defendant's argument.

A number of cases decided by the Supreme Court have set forth due process guidelines for the seizure of property pendente lite. In that context, it is clear that notice and an opportunity to be heard "at a meaningful time" are essential. (Fuentes v. Shevin, 407 U.S. 67, 80, 92 S.Ct. 1983, 1994, 32 L.Ed.2d 556, 569 (1972)). Thus, in Fuentes,the Court struck down Florida and Pennsylvania pre-judgment replevin statutes which did not require advance showing by applicants that the chattels in question were "wrongfully detained." Under the Florida procedure, a party could obtain a writ on a bare and conclusory assertion of entitlement and the filing of bond. Subsequent to the seizure, the defendant was entitled to an ...